<PAGE>
APRIL 1, 1994
SMITH BARNEY SHEARSON
WORLDWIDE
PRIME ASSETS
FUND
PROSPECTUS BEGINS
ON PAGE ONE.
[LOGO]
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- ---------------------------------------------------------------------------
PROSPECTUS April 1, 1994
Two World Trade Center
New York, New York 10048
(212) 720-9218
Smith Barney Shearson Worldwide Prime Assets Fund (the "Fund") is a
non-diversified, open-end management investment company that seeks to maximize
current income consistent with protection of principal and relative stability of
net asset value per share by investing in a managed portfolio of high-quality
debt securities that may be denominated in U.S. dollars or selected foreign
currencies and have remaining maturities of not more than three years and an
average weighted maturity of not more than 18 months. The Fund will at all times
maintain at least 30% of its net assets in U.S. dollar-denominated securities
and, under normal circumstances, at least 20% of its net assets in securities
denominated in the currencies of countries participating in the European
Monetary System (the "EMS") or denominated in European Currency Units ("ECUs").
(CONTINUED ON PAGE 2)
This Prospectus sets forth concisely certain information about the Fund,
including distribution and service fees and expenses, which prospective
investors will find helpful in making an investment decision. Investors are
encouraged to read this Prospectus carefully and retain it for future reference.
Additional information about the Fund is contained in a Statement of
Additional Information dated April 1, 1994, as amended or supplemented from time
to time, which is available upon request and without charge by calling or
writing the Fund at the telephone number or address set forth above or by
contacting your Smith Barney Shearson Financial Consultant. The Statement of
Additional Information has been filed with the Securities and Exchange
Commission (the "SEC") and is incorporated by reference into this Prospectus in
its entirety.
SMITH BARNEY SHEARSON INC.
Distributor
PANAGORA ASSET MANAGEMENT LIMITED
Investment Adviser
THE BOSTON COMPANY ADVISORS, INC.
Administrator
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
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SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
(CONTINUED FROM PAGE 1)
ALTHOUGH IT WILL INVEST SIGNIFICANTLY IN MONEY MARKET INSTRUMENTS, THE FUND IS
NOT A MONEY MARKET FUND AND, THEREFORE, ITS INVESTMENT PORTFOLIO CAN BE EXPECTED
TO EXPERIENCE GREATER VOLATILITY THAN THAT OF A MONEY MARKET FUND AND ITS NET
ASSET VALUE PER SHARE WILL FLUCTUATE DEPENDING ON A COMBINATION OF FACTORS SUCH
AS THE VALUE OF THE CURRENCIES IN WHICH THE FUND'S PORTFOLIO SECURITIES ARE
DENOMINATED IN RELATION TO THE U.S. DOLLAR, CURRENT MARKET INTEREST RATES AND
THE CREDITWORTHINESS OF THE ISSUERS IN WHOSE SECURITIES THE FUND INVESTS.
2
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SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
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TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUMMARY 4
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FINANCIAL HIGHLIGHTS 11
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VARIABLE PRICING SYSTEM 13
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THE FUND'S PERFORMANCE 14
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MANAGEMENT OF THE FUND 16
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES 17
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PURCHASE OF SHARES 32
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REDEMPTION OF SHARES 36
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VALUATION OF SHARES 40
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EXCHANGE PRIVILEGE 42
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DISTRIBUTOR 48
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DIVIDENDS, DISTRIBUTIONS AND TAXES 49
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ADDITIONAL INFORMATION 51
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</TABLE>
3
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SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
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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 PROSPECTUS.
SEE "TABLE OF CONTENTS."
BENEFITS TO INVESTORS THE FUND OFFERS INVESTORS SEVERAL IMPORTANT BENEFITS:
- - A professionally managed portfolio consisting primarily of high-quality,
short-term debt securities providing investment variation otherwise beyond
the means of many individual investors.
- - Ownership of a selected portfolio of debt securities.
- - Investment liquidity at current net asset value, through convenient purchase
and redemption procedures.
- - A convenient way to invest without the administrative and recordkeeping
burdens normally associated with the direct ownership of securities.
- - Different methods for purchasing shares that allow investment flexibility and
a wider range of investment alternatives.
- - Automatic dividend reinvestment feature, plus exchange privilege within the
same class of shares of most other funds in the Smith Barney Shearson Group
of Funds.
INVESTMENT OBJECTIVE The Fund is an open-end, non-diversified, management
investment company that seeks to maximize current income consistent with
protection of principal and relative stability of net asset value per share by
investing in a managed portfolio of high-quality debt securities that may be
denominated in U.S. dollars or selected foreign currencies and have remaining
maturities of not more than three years. See "Investment Objective and
Management Policies."
VARIABLE PRICING SYSTEM The Fund offers two classes of shares ("Classes"): Class
A shares, which are available for direct purchases and Class B shares, which are
available only through exchanges. Class A shares are offered without a sales
charge. Class B shares are not offered to the general public for direct
purchases but may be acquired through exchanges with Class B shares of other
funds in the Smith Barney Shearson Group of Funds and may be acquired directly
by participants in the Smith Barney
4
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SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
Shearson 401(k) Program (the "401(k) Program"). Shares of both Classes are
offered subject to a distribution fee of .90% of the value of average daily net
assets of the respective Class. The offering of multiple Classes of shares
facilitates exchange privileges for investors choosing to own Class A or Class B
shares of other funds in the Smith Barney Shearson Group of Funds. See "Variable
Pricing System."
CLASS A SHARES These shares are offered at net asset value per share. The Fund
pays an annual distribution fee of .90% of the value of average daily net assets
of this Class. See "Purchase of Shares."
CLASS B SHARES These shares may be acquired only through exchanges with Class B
shares of other funds in the Smith Barney Shearson Group of Funds and are
subject to the highest contingent deferred sales charge ("CDSC"), if any, of the
shares from which the exchange or any preceding exchange was made, except that
participants in the 401(k) Program may purchase Class B shares directly at net
asset value. Class B shares purchased directly and not subsequently exchanged
are not subject to any CDSC. The Fund pays an annual distribution fee of .90% of
the value of average daily net assets of this Class. See "Purchase of Shares."
CLASS B CONVERSION FEATURE Class B shares will convert automatically to Class A
shares, based on relative net asset value, eight years after the date of
original purchase. The first of these conversions will commence on or about
September 30, 1994. See "Variable Pricing System -- Class B Shares."
401(K) PROGRAM Investors may be eligible to participate in the 401(k) Program,
which is generally designed to assist employers or 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 (collectively, "Participating
Plans"). Either Class A or Class B shares may be available as investment
alternatives for Participating Plans. Class B shares purchased directly by
Participating Plans and not subsequently exchanged are not subject to any CDSC.
See "Purchase of Shares -- Smith Barney Shearson 401(k) Program."
PURCHASE OF SHARES Class A shares may be purchased through the Fund's
distributor, Smith Barney Shearson Inc. ("Smith Barney Shearson"), or a broker
that clears securities transactions through Smith Barney Shearson on
5
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SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
a fully disclosed basis (an "Introducing Broker"). Direct purchases by certain
retirement plans may be made through the Fund's transfer agent, The Shareholder
Services Group, Inc. ("TSSG"). See "Purchase of Shares."
INVESTMENT MINIMUMS Investors are subject to a minimum initial investment
requirement of $2,500 and a minimum subsequent investment requirement of $1,000.
However, for Individual Retirement Accounts ("IRAs") and Self-Employed
Retirement Plans, the minimum initial investment requirement is $250 and the
minimum subsequent investment requirement is $100 and for certain qualified
retirement plans, the minimum initial and subsequent investment requirements are
both $25. See "Purchase of Shares."
SYSTEMATIC INVESTMENT PLAN The Fund offers shareholders a Systematic Investment
Plan under which they may authorize the automatic placement of a purchase order
each month or quarter for Fund shares in an amount not less than $100. See
"Purchase of Shares."
REDEMPTION OF SHARES Shares may be redeemed on each day the New York Stock
Exchange, Inc. ("NYSE") is open for business. Class A shares are redeemable at
net asset value and Class B shares are redeemable at net asset value less any
applicable CDSC. See "Redemption of Shares."
MANAGEMENT OF THE FUND PanAgora Asset Management Limited ("PanAgora U.K."),
serves as the Fund's investment adviser. 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. ("Lehman Brothers").
The Boston Company Advisors, Inc. ("Boston Advisors") serves as the Fund's
administrator. Boston Advisors is a wholly owned subsidiary of The Boston
Company, Inc. ("TBC"), a financial services holding company which in turn is a
wholly owned subsidiary of Mellon Bank Corporation ("Mellon"). See "Management
of the Fund."
EXCHANGE PRIVILEGE Shares of a Class may be exchanged for shares of the same
Class of certain other funds in the Smith Barney Shearson Group of Funds.
Certain exchanges may be subject to a sales charge differential. See "Exchange
Privilege."
6
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SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
VALUATION OF SHARES Net asset value of each Class is quoted daily in the
financial section of most newspapers and is also available from your Smith
Barney Shearson Financial Consultant. See "Valuation of Shares."
DIVIDENDS AND DISTRIBUTIONS Dividends are declared daily and paid monthly from
net investment income. Distributions of net realized capital gains are paid
annually. 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 reinvestment will not be subject to any sales
charge or CDSC. Class B shares acquired through dividend and distribution
reinvestment will become eligible for conversion to Class A shares on a pro rata
basis. See "Dividends, Distributions and Taxes" and "Variable Pricing System."
RISK FACTORS AND SPECIAL CONSIDERATIONS There is no assurance that the Fund will
achieve its investment objective. Because a substantial portion of the Fund's
assets may be held in securities denominated in foreign currencies, the Fund
will bear the risk that such currencies may lose value in relation to the U.S.
dollar. The Fund may, from time to time, use investment techniques and
strategies that entail certain risks, such as entering into futures contracts
and options on futures contracts, entering into options on foreign currencies,
entering into forward currency contracts, lending portfolio securities and
entering into repurchase agreements. In addition, certain of the Fund's
policies, such as its investing in foreign securities, its operating as a
non-diversified company within the meaning of the Investment Company Act of
1940, as amended (the "1940 Act"), and its concentrating its investments in the
banking industry, involve special considerations. See "Investment Objective and
Management Policies."
THE FUND'S EXPENSES The following expense table lists the costs and expenses an
investor will incur either directly or indirectly as a shareholder
7
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SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
of the Fund, based on the maximum applicable CDSC that may be incurred at the
time of redemption and an estimate of the Fund's current operating expenses:
<TABLE>
<CAPTION>
CLASS CLASS
A B
<S> <C> <C>
-------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
Maximum CDSC*
(as a percentage of redemption proceeds) -- 5.00%
-------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fees (net of waivers) 0.37% 0.37%
12b-1 fees 0.90% 0.90%
Other expenses** (net of fee waivers) 0.48% 0.72%
-------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 1.75% 1.99%
-------------------------------------------------------------------------
<FN>
*Except under the 401(k) Program, Class B shares may be acquired only
through exchanges and are subject to the highest CDSC, if any, of the
shares from which the exchange or any preceding exchange was made.
Class B shares purchased and not subsequently exchanged by
Participating Plans in the 401(k) Program are not subject to a CDSC.
Participating Plans acquiring Class B shares through an exchange may be
subject to a 3% CDSC upon certain redemptions.
**All expenses are based on data for the Fund's fiscal year ended
November 30, 1993.
</TABLE>
The CDSC set forth in the above table is the maximum CDSC imposed by any of
the funds participating in the Smith Barney Shearson Group of Funds exchange
program. Investors may pay actual charges of less than 5% depending on the CDSC
of the shares with which the exchange was made, the length of time the shares
are held and whether the shares were purchased through the 401(k) Program. See
"Purchase of Shares" and "Redemption of Shares." Management fees payable by the
Fund include investment advisory fees computed daily and payable monthly to
PanAgora U.K. at the annual rate of .45% of the Fund's average daily net assets,
and administration fees computed daily and payable monthly to Boston Advisors at
the annual rate of .20% of the Fund's average daily net assets. The fees and
expenses shown above reflect a voluntary agreement currently in effect between
PanAgora U.K. and Boston Advisors to waive certain management fees. If this
agreement were not in effect, total operating expenses would be 2.03% for Class
A shares and 2.27% for Class B shares. The nature of the services for which the
Fund pays management fees is described under
8
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SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
"Management of the Fund." Smith Barney Shearson receives with respect to each of
Class A and Class B shares an annual 12b-1 distribution fee of .90% of the value
of average daily net assets of the respective Classes, of which .65% is used by
Smith Barney Shearson to cover expenses that are primarily intended to result
in, or that are primarily attributable to, the sale of shares, and of which .25%
is used by Smith Barney Shearson to provide compensation for ongoing servicing
and/or maintenance of shareholder accounts. "Other expenses" in the above table
include fees for shareholder services, custodial fees, legal and accounting
fees, printing costs and registration fees. PanAgora U.K., and Boston Advisors
voluntarily waived a portion of their investment advisory and administration
fees in an aggregate amount equal to .07% and .28% of the value of average daily
net assets of the Fund's Class A shares for the fiscal year ended November 30,
1992 and for the fiscal year ended November 30, 1993, respectively. This had the
effect of lowering the Fund's total operating expenses and increasing returns
available to investors. If PanAgora U.K., Boston Advisors, Boston Safe and TSSG
had not elected to waive these fees, the total operating expenses of the Fund's
Class A shares for the fiscal year ended November 30, 1992 and for the fiscal
year ended November 30, 1993 would have been 1.87% and 2.03%, respectively, of
average daily net assets of the Class A shares.
EXAMPLE
The following example demonstrates the projected dollar amount of total
cumulative expenses that would be incurred over various periods with respect to
a hypothetical $1,000 investment in the Fund assuming a 5% annual return. THE
EXAMPLE ASSUMES PAYMENT BY THE FUND OF OPERATING EXPENSES AT THE LEVELS SET
FORTH IN THE TABLE ABOVE. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION
OF PAST OR FUTURE EXPENSES AND ACTUAL
9
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SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. MOREOVER, WHILE THIS EXAMPLE
ASSUMES A 5% ANNUAL RETURN, THE FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY
RESULT IN AN ACTUAL RETURN GREATER OR LESS THAN 5%.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS*
<S> <C> <C> <C> <C>
--------------------------------------------------------------------------------
Class A shares $18 $ 55 $ 95 $206
Class B shares:
Assumes complete redemption at end
of each time period** $70 $112 $157 $282
Assumes no redemption $20 $ 62 $107 $232
--------------------------------------------------------------------------------
<FN>
*Ten-year figures assume conversion of Class B shares to Class A shares at the
end of the eighth year following the date of purchase.
**Assumes deduction at the time of redemption of 5.00% which is the maximum CDSC
imposed by any of the funds participating in the Smith Barney Shearson Group
of Funds exchange program. Investors may be subject to a lower CDSC.
</TABLE>
10
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- --------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
THE FOLLOWING INFORMATION HAS BEEN AUDITED BY COOPERS & LYBRAND, INDEPENDENT
ACCOUNTANTS, WHOSE REPORT THEREON APPEARS IN THE FUND'S ANNUAL REPORT DATED
NOVEMBER 30, 1993. THIS INFORMATION SHOULD BE READ IN CONJUNCTION WITH THE
FINANCIAL STATEMENTS AND RELATED NOTES THAT ALSO APPEAR IN THE FUND'S ANNUAL
REPORT, WHICH IS INCORPORATED BY REFERENCE INTO THE STATEMENT OF ADDITIONAL
INFORMATION.
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
11/30/93# 11/30/92 11/30/91*
<S> <C> <C> <C>
Net Asset Value, beginning of period $ 1.81 $ 1.94 $ 2.00
- -------------------------------------------------------------------------------------
Income from investment operations:
Net investment income*** 0.05 0.10 0.13
Net realized and unrealized loss on securities (0.06) (0.14) (0.06)
- -------------------------------------------------------------------------------------
Total from investment operations (0.01) (0.04) 0.07
Less distributions:
Dividends from net investment income -- (0.09) (0.13)
Distributions in excess of realized gains (0.00)+++
Distributions from capital (0.07)
Net Asset Value, end of period $ 1.73 $ 1.81 $ 1.94
- -------------------------------------------------------------------------------------
Total return++ (0.78)% (2.03)% 3.43%
- -------------------------------------------------------------------------------------
Ratios to average net assets/supplemental data:
Net assets, end of year (in 000's) $81,639 $224,845 $658,607
Ratio of expenses to average net assets+ 1.75% 1.80% 1.74%**
Ratio of net investment income to average net
assets 2.63% 4.89 7.34%**
- -------------------------------------------------------------------------------------
<FN>
*The Fund commenced operations on January 14, 1991. Those shares outstanding prior to
November 6, 1992, were designated as Class A shares.
**Annualized.
***Net investment income before waiver of fees and expenses by investment adviser
and/or subinvestment adviser and administrator for the years ended November 30, 1993
were $0.04, $0.10, $0.13.
+Annualized operating expense ratios before waiver of fees by investment adviser,
sub-investment adviser and administrator, and/or transfer agent, custodian and
distributor for the years ended November 30, 1993, 1992, and 1991, were 2.03%, 1.87%
and 1.82%, respectively.
++Total return represents aggregate total return for the periods indicated and does
not reflect any applicable sales charges.
+++This amount represents less than $.01.
#The per share amounts have been calculated using the monthly average shares method,
which more appropriately presents per share data for the year since use of the
undistributed method did not accord with the results of operations.
</TABLE>
11
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SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
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FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A CLASS B SHARE OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
YEAR
ENDED
11/30/93**
<S> <C>
Net Asset Value, beginning of period $ 1.80
- ------------------------------------------------------------
Income from investment operations:
Net investment income** 0.02
Net realized and unrealized loss on securities (0.05)
- ------------------------------------------------------------
Total from investment operations (0.03)
Less distributions:
Distributions in excess of realized gains (0.00)+++
Distributions from capital (0.04)
- ------------------------------------------------------------
Net Asset Value, end of period $ 1.73
- ------------------------------------------------------------
Total return++ (1.60)%
- ------------------------------------------------------------
Ratios to average net assets/supplemental data:
Net assets, end of year $ 1.73
Ratio of expenses to average net assets+ 1.99%
Ratio of net investment income to average net
assets 2.38%
- ------------------------------------------------------------
<FN>
*The Fund commenced selling Class B shares on November 6,
1992. On November 30, 1992 there was one Class B share
outstanding; however, no income or expenses were allocated
to this share for the period ended November 30, 1992.
**Net investment income before waiver of fees and expenses
by investment adviser, and/or sub-investment adviser and
administrator for the fiscal year ended November 30, 1993
was $0.01.
+Annualized operating expense ratios before waiver of fees
by investment adviser, sub-investment adviser and
administrator was 2.27% for the year ended November 30,
1993.
++Total return represents aggregate total return for the
period indicated and does not reflect any applicable
sales charges.
+++This amount represents less than $0.01.
+++The per share amounts have been calculated using the
monthly average share method, which more appropriately
presents the per share data for the year since use of the
undistributed method did not accord with the results of
operations.
</TABLE>
12
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SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- --------------------------------------------------------------------
VARIABLE PRICING SYSTEM
The Fund offers individual investors two methods of purchasing shares, thus
enabling investors to choose the Class of shares that best suits their needs,
given the amount of purchase and intended length of investment.
CLASS A SHARES. Class A shares are sold at net asset value per share and are
subject to an annual distribution fee of .90% of the value of the Fund's average
daily net assets attributable to the Class. The distribution fee paid with
respect to Class A shares is used by Smith Barney Shearson to compensate its
Financial Consultants for ongoing services provided to shareholders and
compensates Smith Barney Shearson for expenses incurred in selling the shares,
including expenses such as sales commissions, Smith Barney Shearson's branch
office overhead expenses and marketing costs associated with Class A shares such
as preparation of sales literature, advertising and printing and distributing
prospectuses, statements of additional information and other materials to
prospective investors in Class A shares. See "Purchase of Shares."
CLASS B SHARES. Except for purchases made through the 401(k) Program, Class B
shares may be acquired only through exchanges with Class B shares of other funds
in the Smith Barney Shearson Group of Funds and are subject to the highest CDSC,
if any, of the shares from which the exchange was made. Class B shares purchased
directly by Participating Plans and not subsequently exchanged are not subject
to any CDSC. Class B shares are subject to an annual distribution fee of .90% of
the value of the Fund's average daily net assets attributable to the Class which
is used for the same purposes as the distribution fee applicable to Class A
shares. See "Class A Shares" above. See also "Purchase of Shares," "Redemption
of Shares" and "Exchange Privilege." A Financial Consultant may receive
different levels of compensation for selling different Classes of shares. Class
B shares are subject to a higher transfer agency fee than Class A shares which,
in turn, will cause Class B shares to have a higher expense ratio and pay lower
dividends than Class A shares.
Eight years after the date of purchase, Class B shares will convert
automatically to Class A shares, based on the relative net asset value of shares
of each Class. In addition, a certain portion of Class B shares that have been
acquired through the reinvestment of dividends and distributions ("Class B
Dividend Shares") will be converted at that time. That portion will be a
percentage of the total number of Class B Dividend Shares owned by
13
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SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
VARIABLE PRICING SYSTEM (CONTINUED)
the shareholder, which percentage is equal to the ratio of the total number of
Class B shares owned by the shareholder converting at the time to the total
number of Class B shares (other than Class B Dividend Shares) owned by the
shareholder. The first of these conversions will commence on or about September
30, 1994. The conversion of Class B shares into Class A shares is subject to the
continuing availability of an opinion of counsel to the effect that such
conversions will not constitute taxable events for Federal income tax purposes.
- --------------------------------------------------------------------
THE FUND'S PERFORMANCE
TOTAL RETURN
From time to time, the Fund may advertise the "average annual total return"
over various periods of time for each Class. Total return figures show the
average percentage change in the value of an investment in the Class from the
beginning date of the measuring period to the end of the measuring period. These
figures reflect changes in the price of the Class' shares and assume that any
income dividends and/or capital gains distributions made by the Fund with
respect to the Class during the period were reinvested in shares of the same
Class. Class B total return figures include any applicable CDSC. These figures
also take into account the distribution fees, if any, payable with respect to
the Classes.
Total return figures will be given for the recent one-, five- and ten-year
periods, or for the life of a Class to the extent it has not been in existence
for any such periods, and may be given for other periods as well (such as from
commencement of the Fund's operations, or on a year-by-year basis). When
considering average annual total return figures for periods longer than one
year, investors should note that the total return for any one year in the period
might have been greater or less than the average for the entire period.
"Aggregate total return" figures may be used for various periods, representing
the cumulative change in value of an investment in a Class for the specific
period (again reflecting changes in share prices and assuming reinvestment of
dividends and distributions). Aggregate total return for Class B shares may be
calculated either with or without the effect of a maximum applicable CDSC of 5%
and may be shown by means of
14
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SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
THE FUND'S PERFORMANCE (CONTINUED)
schedules, charts or graphs, and may indicate subtotals of the various
components of total return (that is, the change in value of initial investment,
income dividends and capital gains distributions). Because of the possibility
that a CDSC may be imposed on Class B shares, the performance for each Class
will differ.
YIELD
From time to time, the Fund may advertise the 30-day "yield." The yield of the
Fund refers to the income generated by an investment in the Fund over the 30-day
period identified in the advertisement, and is computed by dividing the net
investment income per share earned by the Fund during the period by the public
offering price on the last day of the period. This income is "annualized" by
assuming that the amount of income is generated each month over a one-year
period and is compounded semi-annually. The annualized income is then shown as a
percentage of the net asset value.
In reports or other communications to shareholders or in advertising material,
performance of the Classes may be compared with that of other mutual funds or
classes of shares of the funds as listed in the rankings prepared by Lipper
Analytical Services, Inc. or similar independent services that monitor the
performance of mutual funds, or other industry or financial publications such as
BARRON'S, BUSINESS WEEK, CDA INVESTMENT TECHNOLOGIES, INC., FORBES, FORTUNE,
INSTITUTIONAL INVESTOR, INVESTORS DAILY, KIPLINGER'S PERSONAL FINANCE, MONEY,
MORNINGSTAR MUTUAL FUND VALUES, THE NEW YORK TIMES, THE WALL STREET JOURNAL and
USA TODAY. It is important to note that yield and total return figures are based
on historical earnings and are not intended to indicate future performance. To
the extent any advertisement or sales literature of the Fund describes the
expenses or performance of a Class, it will also disclose such information for
the other Class. The Statement of Additional Information contains a description
of the methods used to determine performance. Performance figures may be
obtained from your Smith Barney Shearson Financial Consultant.
15
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SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
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MANAGEMENT OF THE FUND
BOARD OF TRUSTEES
Overall responsibility for management and supervision of the Fund rests with
the Fund's Board of Trustees. The Trustees approve all significant agreements
between the Fund and the companies that furnish services to the Fund, including
agreements with the Fund's distributor, investment adviser, administrator,
custodian and transfer agent. The day-to-day operations of the Fund are
delegated to PanAgora U.K. and Boston Advisors. The Statement of Additional
Information contains general background information regarding each Trustee and
executive officer of the Fund.
INVESTMENT ADVISER--PANAGORA U.K.
PanAgora U.K., located at 3 Finsbury Avenue, London EC2M 2PA, serves as the
Fund's investment adviser. 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, which is a wholly owned subsidiary of Lehman Brothers
Holding Inc. ("Lehman Holdings"). American Express Company ("American Express")
owns 100% of Lehman Holdings' issued and outstanding common stock, which
represents approximately 92% of Lehman Holdings' issued and outstanding voting
stock. The remainder of Lehman Holdings' voting stock is owned by Nippon Life
Insurance Company. PanAgora U.K. was formed in 1989 and is an investment adviser
registered under the Investment Advisers Act of 1940. PanAgora U.K. offers
multi-currency equity, fixed-income and currency investment products and
provides global asset allocation services to clients and had aggregate assets
under management, as of December 31, 1993, in excess of $ billion.
Subject to the supervision and direction of the Fund's Board of Trustees,
PanAgora U.K. manages the Fund's portfolio in accordance with the Fund's stated
investment objective and policies, makes investment decisions for the Fund,
places orders to purchase and sell securities and employs professional portfolio
managers and securities analysts who provide research services to the Fund. For
the fiscal year ended November 30, 1993, the Fund paid PanAgora U.K. investment
advisory fees in an amount equal to .26% of the value of the average daily net
assets of the Fund. PanAgora U.K. waived investment advisory fees in an amount
equal to .19% of the value of the Fund's average daily net assets.
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MANAGEMENT OF THE FUND (CONTINUED)
PORTFOLIO MANAGEMENT
Alan J. Brown, Chief Investment Officer of PanAgora U.K., prior to April 1989,
Managing Director of Posthorn Global Asset Management Ltd., London, England, has
served as Vice President and Investment Officer of the Fund since it commenced
operations on January 14, 1991 and manages the day-to-day operations of the
Fund, including making all investment decisions.
Mr. Brown's management discussion and analysis of the Fund's performance
during the fiscal year ended November 30, 1993 (including a line graph comparing
the Fund's performance to the Index) is included in the Fund's Annual Report to
shareholders dated November 30, 1993. The Fund's Annual Report may be obtained
upon request without charge from your Smith Barney Shearson Financial Consultant
or by writing or calling the Fund at the address or phone number listed on page
one of this Prospectus.
ADMINISTRATOR--BOSTON ADVISORS
Boston Advisors, located at One Boston Place, Boston, Massachusetts 02108,
serves as the Fund's administrator. Boston Advisors provides investment
management, investment advisory and/or administrative services to investment
companies that had aggregate assets under management as of December 31, 1993, in
excess of $ billion.
Boston Advisors calculates the net asset value of the Fund's shares and
generally manages all aspects of the Fund's administration and operation. For
the fiscal year ended November 30, 1993, the Fund paid administration fees to
Boston Advisors in an amount equal to .11% of the value of the average daily net
assets of the Fund. Boston Advisors waived administration fees in an amount
equal to .09% of the Fund's average daily net assets.
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The investment objective of the Fund is to maximize current income consistent
with protection of principal and relative stability of net asset value per
share. The Fund's investment objective may be changed only with the approval of
a majority of the Fund's outstanding voting securities. There
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
can be no assurance that the Fund's investment objective will be achieved, or,
in particular, that the Fund will be able to maintain relative stability of net
asset value per share.
In investing the assets of the Fund, PanAgora U.K. seeks to identify and
invest in a managed portfolio of high-quality debt securities that may be
denominated in U.S. dollars or selected foreign currencies and have remaining
maturities of not more than three years and an average weighted maturity of not
more than 18 months. The Fund will at all times maintain at least 30% of its net
assets in U.S. dollar-denominated securities and under normal circumstances, at
least 20% of its net assets in securities denominated in the currencies of the
countries participating in the EMS or denominated in ECUs. Under normal
circumstances, the Fund will invest at least 65% of its assets in securities of
issuers domiciled in at least three different countries, one of which will be
the United States.
In pursuing the Fund's investment objective, PanAgora U.K. will seek to
minimize credit risk and fluctuations in net asset value per share by limiting
the Fund's securities investments to short-term, high quality debt instruments.
The Fund will be actively managed by PanAgora U.K. in accordance with a
multi-market investment strategy contemplating investments denominated in a
number of currencies and investments in different types of debt securities. The
Fund's exposure to each currency will be adjusted based on PanAgora U.K.'s
perception of the most favorable markets and issuers. The percentage of assets
invested in securities of issuers located in a particular country or denominated
in a particular currency will vary in accordance with PanAgora U.K.'s assessment
of the relative yield of such securities and the relationship of a country's
currency to the U.S. dollar. The Fund will not invest more than 15% of its total
assets in debt securities denominated in a single currency other than the U.S.
dollar.
Fundamental economic strength, credit quality and interest rate trends will be
the principal factors considered by PanAgora U.K. in determining whether to
increase or decrease the emphasis placed upon a particular type of security or
industry sector within the Fund's investment portfolio. Foreign short-term
interest rates are often higher than U.S. short-term rates because prevailing
economic conditions and central bank policies in foreign countries differ from
those in the United States. Historically, U.S. short-term interest
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
rates have been near the middle of the range of short-term interest rates
available worldwide. Occasionally, however, U.S. short-term interest rates are
at the high end of global short-term interest rates.
The Fund will generally invest in debt securities denominated in the
currencies of countries whose governments are considered by PanAgora U.K. to be
stable; the Fund will invest in securities issued by a government of a country
considered unstable or underdeveloped only when PanAgora U.K. believes that the
risk of a decline in the country's currency can be substantially hedged.
Currencies, other than the U.S. dollar, in which the Fund's securities will be
denominated include, among others, the Australian dollar, Austrian schilling,
Belgian franc, British pound sterling, Canadian dollar, Danish krone, Dutch
guilder, French franc, German mark, Irish punt, Italian lira, Japanese yen, New
Zealand dollar, Spanish peseta, Swedish krona and Swiss franc. The Fund will not
invest in debt securities denominated in the currencies of countries located in
Eastern Europe. An issuer of debt securities purchased by the Fund may be
domiciled in a country other than the country in whose currency the instrument
is denominated.
Under normal circumstances, the Fund will maintain at least 20% of its net
assets in securities denominated in the currencies of countries participating in
the EMS or denominated in ECUs. The EMS represents the commitments of certain
member states of the European Union (the "EU"), an organization engaged in
cooperative economic activities, to manage the exchange rates of their
currencies jointly with the goal of promoting the harmonization and integration
of the economies of the member states through exchange-rate stability.
The ECU is a "basket" consisting of specified amounts of the currencies of
certain of the EU states. The specific amounts of currencies comprising the ECU
may be adjusted by the EU's Council of Ministers to reflect changes in relative
values of the underlying currencies. PanAgora U.K. believes that the adjustments
will not adversely affect holders of ECU-denominated obligations or the
marketability of such securities. European governments and, in particular,
supranational organizations issue ECU-denominated obligations.
PanAgora U.K. will seek to minimize the market risk of the Fund's investments
in securities by limiting those investments to debt securities of
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
high quality, including: (a) debt securities issued or guaranteed by the United
States government, its agencies or instrumentalities ("U.S. government
securities"); (b) obligations issued or guaranteed by a foreign government or
any of its political subdivisions, authorities, agencies, or instrumentalities,
or by supranational entities, all of which are rated AA by Standard & Poor's
Corporation ("S&P") or Aa by Moody's Investors Service, Inc. ("Moody's") ("High
Quality Ratings") or, if unrated, determined by PanAgora U.K. to be of
equivalent quality; (c) obligations issued or guaranteed by supranational
organizations and corporate debt securities rated AA by S&P or Aa by Moody's or,
if unrated, determined by PanAgora U.K. to be of equivalent quality; (d)
certificates of deposit and bankers' acceptances issued or guaranteed by, or
time deposits maintained at, banks (including foreign branches of domestic banks
or domestic or foreign branches of foreign banks) having total assets of more
than $1 billion and determined by PanAgora U.K. to be of high quality; and (e)
commercial paper rated A-1 by S&P, Prime-1 by Moody's, Fitch-1 by Fitch
Investors Service, Inc., or Duff-1 by Duff & Phelps Inc. or, if not rated,
issued by domestic or foreign companies having outstanding debt securities rated
AA by S&P or Aa by Moody's and determined by PanAgora U.K. to be of high
quality.
Supranational organizations in whose debt securities the Fund may invest
include the World Bank, which was chartered to finance development projects in
developing member countries; the EU; the European Coal and Steel Community,
which is an economic union of various European nations' steel and coal
industries; and the Asian Development Bank, which is an international
development bank established to lend funds, promote investment and provide
technical assistance to member nations in the Asian and Pacific regions.
The Fund will not invest in illiquid securities if immediately after such
investment more than 10% of the value of the Fund's total net assets (taken at
market value) would be invested in such securities. For this purpose, illiquid
securities include (a) securities for which no readily available market exists
(because, for example, the securities are subject to legal or contractual
restrictions on resale, trading in the securities is suspended or, in the case
of unlisted securities, market makers do not exist or will not entertain bids or
offers for the securities), (b) options purchased by the Fund over-the-counter
and the cover for options written by the Fund over-the-counter,
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
(c) repurchase agreements not maturing within seven days and (d) time deposits
with maturities in excess of seven days. See "Investment Objective and
Management Policies -- Investment Techniques and Strategies."
The Fund is classified as a "non-diversified" investment company under the
1940 Act, which means that the Fund is not limited by the 1940 Act in the
proportion of its assets that it may invest in the securities of a single
issuer. The Fund intends, however, to conduct its operations so as to qualify as
a "regulated investment company" for purposes of the Code. See "Dividends,
Distributions and Taxes -- Taxes." In order to qualify as a regulated investment
company for Federal income tax purposes, the Fund will limit its investments so
that, at the close of each quarter of the taxable year, (a) not more than 25% of
the market value of the Fund's total assets is invested in the securities (other
than U.S. government securities) of a single issuer and (b) at least 50% of the
market value of the Fund's total assets is represented by (i) cash and cash
items, (ii) U.S. government securities and (iii) other securities limited in
respect of any one issuer to an amount not greater in value than 5% of the
market value of the Fund's total assets and to not more than 10% of the
outstanding voting securities of such issuer. The Fund being so qualified and
its meeting certain distribution requirements will relieve the Fund of any
liability for Federal income tax to the extent its earnings are distributed to
shareholders.
Under normal market conditions, and as a matter of fundamental policy, the
Fund will "concentrate" at least 25% of its assets in debt instruments issued by
domestic and foreign companies engaged in the banking industry, including bank
holding companies. These investments may include certificates of deposit, time
deposits, bankers' acceptances and obligations issued by bank holding companies,
as well as repurchase agreements entered into with banks (as distinct from
non-bank dealers) in accordance with the policies set forth under "Investment
Objective and Management Policies -- Investment Techniques and Strategies --
Repurchase Agreements" below. During periods when PanAgora U.K. determines that
market conditions warrant adoption of a temporary defensive position, the Fund
may invest less than 25% of its total assets in the banking industry; during
such times, the Fund's assets will be invested in accordance with the Fund's
other investment policies. PanAgora U.K. may determine that the adoption of a
temporary defensive position with respect to issuers in the banking industry
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
is appropriate on the basis of such factors as political, economic, market or
regulatory developments adversely affecting that industry as compared to the
industries of other issuers of securities available for investment by the Fund.
RISK FACTORS AND SPECIAL CONSIDERATIONS
Investing in the Fund involves special considerations and risks, such as those
described below:
INTEREST RATE RISK. The Fund's portfolio will be affected by general changes
in interest rates which will result in increases or decreases in the market
value of the obligations held by the Fund. The market value of the obligations
in the Fund's portfolio can be expected to vary inversely to changes in
prevailing interest rates. Investors should recognize that, in periods of
declining interest rates, the Fund's yield will tend to be somewhat higher than
prevailing market rates, and in periods of rising interest rates, the Fund's
yield will tend to be somewhat lower. Also, when interest rates are falling, the
inflow of net new money to the Fund from the continuous sale of its shares will
likely be invested in portfolio instruments producing lower yields than the
balance of its portfolio, thereby reducing the Fund's current yield. In periods
of rising interest rates, the opposite result can be expected to occur. To the
extent that U.S. interest rates are higher than foreign interest rates, the
Fund's yield may not be higher than that of a money market fund.
INVESTMENT IN FOREIGN SECURITIES. Investing in securities issued by foreign
governments and companies involves considerations and potential risks not
typically associated with investing in obligations issued by the United States
government and domestic corporations. Less information may be available about
foreign companies than about domestic companies, and foreign companies generally
are not subject to uniform accounting, auditing and financial reporting
standards or to other regulatory practices and requirements comparable to those
applicable to domestic companies. The values of foreign investments are affected
by changes in currency rates or exchange control regulations, restrictions or
prohibitions on the repatriation of foreign currencies, application of foreign
tax laws, including withholding taxes, changes in governmental administration or
economic or monetary policy (in the United States or abroad) or changed
circumstances in dealings between nations. Costs are incurred in connection with
conversions between various
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
currencies. In addition, foreign brokerage commissions are generally higher than
in the United States, and foreign securities markets may be less liquid, more
volatile and less subject to governmental supervision than in the United States.
Investments in foreign countries could be affected by other factors not present
in the United States, including expropriation, confiscatory taxation, lack of
uniform accounting and auditing standards and potential difficulties in
enforcing contractual obligations and could be subject to extended settlement
periods.
INVESTMENT IN EMS CURRENCY-DENOMINATED AND ECU-DENOMINATED SECURITIES. In
normally investing at least 20% of its net assets in securities denominated in
EMS currencies or in ECUs, the Fund will be subject to the risks associated with
focusing investments in a particular region such as Western Europe. The
economies and markets of a region, for example, tend to be interrelated and may
be adversely affected by political, economic and other events in a similar
manner.
CURRENCY EXCHANGE RATES. The Fund's share value may change significantly when
the currencies, other than the U.S. dollar, in which its portfolio investments
are denominated strengthen or weaken against the U.S. dollar. Currency exchange
rates generally are determined by the forces of supply and demand in the foreign
exchange markets and the relative merits of investments in different countries
as seen from an international perspective. Currency exchange rates can also be
affected unpredictably by intervention by United States or foreign governments
or central banks or by currency controls or political developments in the United
States or abroad.
NON-DIVERSIFICATION. The Fund, as a non-diversified investment company, may
invest in a smaller number of individual issuers than a diversified investment
company. Thus, an investment in the Fund may, due to changes in the financial
condition or in the market's assessment of those issuers, present greater risk
to an investor than an investment in a diversified investment company.
INDUSTRY CONCENTRATION. To the extent the Fund's investments are concentrated
in the banking industry, the Fund will have correspondingly greater exposure to
the risk factors that are characteristic of such investments. Sustained
increases in interest rates can adversely affect the availability and cost of
capital funds for a bank's lending activities, and a deterioration in general
economic conditions could increase the exposure to credit losses. In
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
addition, the value of, and the investment return on, the Fund's shares will be
affected by economic or regulatory developments in or related to the banking
industry. The banking industry is also subject to the effects of the
concentration of loan portfolios in leveraged transactions and in particular
businesses, such as real estate, lesser-developed nation debt and competition
within the banking industry as well as with other types of financial
institutions. As discussed above, however, the Fund seeks to minimize its
exposure to such risks by investing only in debt securities that are determined
to be of high quality.
FUTURES CONTRACTS, OPTIONS AND FORWARD CURRENCY CONTRACTS. In entering into
futures contracts, in purchasing and writing put and call options on foreign
currencies, and in entering into foreign currency contracts, as described below
under "Investment Objective and Management Policies -- Investment Techniques and
Strategies -- Future Contracts and Options on Futures Contracts," "-- Options on
Foreign Currencies," and "-- Forward Currency Contracts," the Fund will be
subject to a number of risks and special considerations. Many of the securities
held by the Fund will be denominated in currencies for which no, or only a
highly illiquid, futures or option market exists. Moreover, the market for
forward currency contracts may be limited with respect to certain currencies.
These factors will restrict the Fund's ability to hedge against the risk of
devaluation of currencies in which the Fund holds a substantial quantity of
securities and are unrelated to the qualitative rating that may be assigned to
any particular security. Where available, the successful use of futures
contracts, options on futures contracts, options on foreign currencies and
forward currency contracts as hedging techniques draws upon PanAgora U.K.'s
special skills and experience with respect to such instruments and usually
depends on PanAgora U.K.'s ability to forecast interest rate and currency
exchange rate movements correctly. Should interest or exchange rates move in an
unexpected manner, the Fund may not achieve the anticipated benefits of futures
contracts, options or forward currency contracts or may realize losses and thus
be in a worse position than if those strategies had not been used. Unlike many
exchange-traded futures contracts and options on futures contracts, options on
currencies and forward currency contracts are subject to no daily price
fluctuation limits so that adverse market movements could continue with respect
to those instruments to an unlimited extent over a period of time. In
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
addition, the correlation between movements in the prices of such instruments
and movements in the price of the securities and currencies hedged or used for
cover will not be perfect.
The Fund's ability to dispose of its positions in futures contracts, options
and forward currency contracts will depend on the availability of active markets
in such instruments. Markets in options and futures with respect to a number of
fixed-income securities and currencies are relatively new and still developing.
PanAgora U.K. cannot predict the amount of trading interest that may exist in
various types of futures contracts, options and forward currency contracts.
Futures and options may be closed out only on the exchange on which the contract
was entered into (or a linked exchange). Forward foreign currency contracts may
be closed out only by the parties entering into an offsetting contract.
Therefore, no assurance can be given that the Fund will be able to utilize these
instruments effectively for the purposes set forth above. Furthermore, although
the Fund anticipates that its options and futures transactions will not prevent
the Fund from qualifying as a "regulated investment company" for Federal income
tax purposes, the Fund's ability to engage in options and futures transactions
may be limited by this tax consideration. See "Dividends, Distributions and
Taxes --Taxes." In writing options, the Fund will be subject to the risk of loss
resulting from the difference between the premium received for the option and
the price of the futures contract or foreign currency underlying the option that
the Fund must purchase or deliver upon exercise of the option.
LENDING PORTFOLIO SECURITIES. The risks associated with lending portfolio
securities, as with other extensions of secured credit, consist of possible
delays in receiving additional collateral or in the recovery of the securities
or possible loss of rights in the collateral should the borrower fail
financially. Loans will be made to firms deemed by PanAgora U.K. to be of good
standing and will not be made unless, in the judgment of PanAgora U.K., the
consideration to be earned from such loans would justify the risk. See
"Investment Objective and Management Policies -- Investment Techniques and
Strategies -- Lending Portfolio Securities."
REPURCHASE AGREEMENTS. The Fund bears a risk of loss in the event that the
other party to a repurchase agreement defaults on its obligations and the Fund
is delayed or prevented from exercising its rights to dispose of the underlying
securities, including the risk of a possible decline in the value of
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
the underlying securities during the period in which the Fund seeks to assert
its rights to them, the risk of incurring expenses associated with asserting
those rights and the risk of losing all or a part of the income from the
agreement.
WHEN-ISSUED SECURITIES. Securities purchased on a when-issued basis may expose
the Fund to risk because the securities may experience fluctuations in value
prior to their actual delivery. The Fund will not accrue income with respect to
a when-issued security prior to its stated delivery date. Purchasing securities
on a when-issued basis can involve the additional risk that the yield available
in the market when the delivery takes place actually may be higher than that
obtained in the transaction itself.
INVESTMENT TECHNIQUES AND STRATEGIES
The Fund is authorized to engage in any one or more of the specialized
investment techniques and strategies described below:
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. The Fund may enter into
futures contracts for the sale or purchase, for a set price on a future date, of
fixed-income securities or foreign currencies which otherwise meet the Fund's
investment policies, to the extent permitted under rules and interpretations of
the Commodity Futures Trading Commission (the "CFTC"), and may purchase and
write put and call options on futures contracts. A "sale" of a futures contract
on debt securities or foreign currency entails the incurrence of a contractual
obligation to deliver the securities or foreign currencies called for by the
contract at a specified price on a specified date. A "purchase" of a futures
contract entails the incurrence of a contractual obligation to acquire the
securities or foreign currencies called for by the contract at a specified price
on a specified date. Options on futures contracts to be written or purchased by
the Fund will be traded on domestic and foreign exchanges, to the extent
permitted under rules and interpretations of the CFTC.
The investment techniques will be used only to hedge against anticipated
future changes in interest or exchange rates which otherwise might either
adversely affect the value of the Fund's portfolio securities or adversely
affect the prices of securities which the Fund intends to purchase at a later
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
date. See the Fund's Statement of Additional Information for further discussion
of the use, risks and costs of futures contracts and options on futures
contracts.
The Fund will not (a) enter into any futures contracts or options on futures
contracts if immediately thereafter, the aggregate initial margin deposits on
all of the Fund's outstanding futures contracts and premiums paid on outstanding
options on futures contracts, to establish such positions that are not bonafide
hedging positions (as defined by the CFTC), would exceed 5% of the market value
of the total assets of the Fund or (b) enter into any futures contracts or
options on futures contracts if the aggregate of the market value of the Fund's
outstanding futures contracts and the market value of the currencies and futures
contracts subject to outstanding options written by the Fund would exceed 50% of
the market value of the total assets of the Fund. Each short position in a
futures or options contract entered into by the Fund will be covered by the
Fund's ownership of the underlying commodity or, in the case of a currency,
securities denominated in the currency. The Fund will not use leverage when it
enters into long futures or options contracts and for each such long position
the Fund will deposit cash or cash equivalents, such as U.S. government
securities or high-grade debt obligations, having a value equal to the
underlying commodity value of the contract, as collateral with its custodian, or
with a designated sub-custodian, in a segregated account to be marked-to-market
daily.
OPTIONS ON FOREIGN CURRENCIES. The Fund may purchase and write put and call
options on foreign currencies for the purpose of hedging against declines in the
U.S. dollar value of foreign currency-denominated portfolio securities and
against increases in the U.S. dollar cost of such securities to be acquired. As
in the case of other kinds of options, however, the writing of an option on a
foreign currency constitutes only a partial hedge, up to the amount of the
premium received, and the Fund could be required to purchase or sell foreign
currencies at disadvantageous exchange rates, thereby incurring losses. The
purchase of an option on a foreign currency may constitute an effective hedge
against fluctuations in exchange rates although, in the event of rate movements
adverse to the Fund's position, it may forfeit the entire amount of the premium
plus related transaction costs. Options on foreign currencies to be written or
purchased by the Fund are traded on domestic exchanges. The Fund may not
purchase or sell over-the-counter options on foreign currencies. No specific
percentage limitation will
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
apply to the Fund's investments in options on foreign currencies. See the Fund's
Statement of Additional Information for further discussion of the use, risks and
costs of options on foreign currencies.
FORWARD CURRENCY CONTRACTS. Forward currency contracts are agreements to
exchange one currency for another -- for example, to exchange a certain amount
of U.S. dollars for a certain amount of Japanese yen -- at a future date. The
date (which may be any agreed upon fixed number of days in the future), the
amount of currency to be exchanged and the price at which the exchange will take
place will be negotiated and fixed for the term of the contract when the Fund
enters into the contract. Forward currency contracts are (a) traded in an
interbank market conducted directly between currency traders (typically,
commercial banks or other financial institutions) and their customers, (b)
generally have no deposit requirements and (c) are consummated without payment
of any commissions. The Fund, however, may enter into forward currency contracts
containing either or both deposit requirements and commissions. In order to
assure that the Fund's forward currency contracts are not used to achieve
investment leverage, the Fund will segregate cash or readily marketable
securities in an amount at all times equal to or exceeding the Fund's commitment
with respect to these contracts.
Upon maturity of a forward currency contract, the Fund may (a) pay for and
receive the underlying currency, (b) negotiate with the dealer to roll over the
contract into a new forward currency contract with a new future settlement date
or (c) negotiate with the dealer to terminate the forward contract by entering
into an offset with the currency trader whereby the Fund pays or receives the
difference between the exchange rate fixed in the contract and the then-current
exchange rate. The Fund also may be able to negotiate such an offset prior to
maturity of the original forward contract. There can be no assurance that new
forward contracts or offsets will always be available to the Fund.
The Fund will use investment techniques involving forward currency contracts
only to hedge against anticipated future changes in interest or exchange rates
which otherwise might either adversely affect the value of the Fund's portfolio
securities or the price of securities which the Fund intends to purchase at a
later date. In hedging specific portfolio positions, the Fund may enter into a
forward contract with respect to either the currency in
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
which the positions are denominated or another currency deemed appropriate by
PanAgora U.K. The amount that the Fund may invest in forward currency contracts
is limited to the amount of the Fund's aggregate investments in foreign
currencies. See the Fund's Statement of Additional Information for further
discussion of the use, risks and costs of forward currency contracts.
LENDING PORTFOLIO SECURITIES. To generate income, the Fund may lend portfolio
securities to brokers, dealers and other financial organizations. These loans,
if and when made, may not exceed 20% of the Fund's assets taken at value. The
Fund's loans of securities will be collateralized by cash, letters of credit or
U.S. government securities. The cash or instruments collateralizing the Fund's
loans of securities will be maintained at all times in a segregated account with
Boston Safe, or with a designated sub-custodian, in an amount at least equal to
the current market value of the loaned securities.
REPURCHASE AGREEMENTS. The Fund may engage in repurchase agreement
transactions only with respect to instruments in which the Fund is authorized to
invest. While there is no limitation on the amount of the Fund's assets that may
be invested in repurchase agreements terminable in less than seven days,
repurchase agreements maturing in more than seven days -- together with other
illiquid securities -- will not exceed 10% of the Fund's total net assets. The
Fund may engage in repurchase agreement transactions with certain member banks
which are the issuers of instruments acceptable for purchase by the Fund and
with certain dealers on the Federal Reserve Bank of New York's list of reporting
dealers. Under the terms of a typical repurchase agreement, the Fund acquires an
underlying debt obligation for a relatively short period (usually not more than
seven days) 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 period. The value of the securities will be monitored on an ongoing
basis by PanAgora U.K. or Boston Advisors to ensure that the value is at least
equal at all times to the total amount of the repurchase obligation, including
interest. PanAgora U.K. or Boston Advisors also monitors on an
29
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- --------------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
ongoing basis the collateral and creditworthiness of those banks and dealers
with which the Fund enters into repurchase agreements to evaluate potential
risks.
WHEN-ISSUED SECURITIES. The Fund may purchase securities on a when-issued
basis, in which case payment for the securities typically occurs within 30 to 45
days after the purchase. The Fund will not enter into a when-issued securities
transaction for the purpose of leverage, but may sell the right to acquire a
when-issued security prior to its acquisition if PanAgora U.K. deems it
advantageous to do so. The payment obligation and the interest rate that will be
received in when-issued securities transactions are fixed at the time the buyer
enters into the commitment. Because of fluctuations in the value of securities
purchased on a when-issued basis, the yields obtained on the securities may be
higher or lower than the yields available in the market on the dates when the
investments are actually delivered to the buyers. When-issued securities may
include securities purchased on a "when, as and if issued" basis under which the
issuance of the security depends on the occurrence of a subsequent event, such
as approval of a merger, corporate reorganization or debt restructuring. The
Fund will establish with Boston Safe, or with a designated sub-custodian, a
segregated account consisting of cash, U.S. government securities or other
liquid high-grade debt obligations in an amount equal to the amount of its
when-issued securities purchase commitments.
INVESTMENT RESTRICTIONS
The Fund has adopted certain fundamental investment restrictions that may not
be changed without approval of a majority of the Fund's outstanding voting
securities. Included among those fundamental restrictions are the following:
1. The Fund will invest no more than 25% of the value of its total assets in
securities of issuers in any one industry other than the banking industry,
except that this limitation is not applicable to the Fund's investments in
U.S. government securities. For purposes of this restriction, the Fund will
treat securities issued by a foreign government or a supranational
organization and the agencies and instrumentalities of that foreign
government or supranational organization to be securities issued by issuers
in a single industry.
30
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- --------------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
2. The Fund will not borrow money, except that the Fund may borrow from banks
for temporary or emergency (not leveraging) purposes, including the meeting
of redemption requests that might otherwise require the untimely
disposition of securities, in an amount not to exceed 15% (or 5%, in the
event that such borrowing is made for purposes other than the meeting of
redemption requests) of the value of the Fund's total assets (including the
amount borrowed) valued at market less liabilities (not including the
amount borrowed) at the time the borrowing is made. Whenever the Fund's
borrowings exceed 5% of the value of its total assets, the Fund will not
make any additional investments.
3. The Fund will not pledge, hypothecate, mortgage or otherwise encumber its
assets, except to secure permitted borrowings.
4. The Fund will not lend any funds or other assets, except through purchasing
obligations, lending portfolio securities and entering into repurchase
agreements, in each case consistent with the Fund's investment objective
and policies.
Certain other investment restrictions adopted by the Fund are described in the
Statement of Additional Information.
PORTFOLIO TRANSACTIONS AND TURNOVER
The Fund's Board of Trustees has determined that, to the extent consistent
with applicable provisions of the 1940 Act and rules and exemptions adopted by
the SEC under the 1940 Act, transactions for the Fund may be executed through
Smith Barney Shearson or a Smith Barney Shearson affiliated broker if, in the
judgment of PanAgora U.K., the use of an affiliated broker-dealer is likely to
result in price and execution at least as favorable to the Fund as those
obtainable through other qualified broker-dealers, and if, in the transaction,
the affiliated broker-dealer charges the Fund a fair and reasonable rate
consistent with that charged to comparable unaffiliated customers in similar
transactions.
The Fund may engage in active short-term trading to benefit from yield
disparities among different issues of securities, to seek short-term profits
during periods of fluctuating interest rates or for other reasons. See
"Investment Objective and Management Policies -- Risk Factors and Special
31
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- --------------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
Considerations -- Futures Contracts, Options and Forward Currency Contracts" and
"Dividends, Distributions and Taxes -- Taxes" for tax considerations associated
with active short-term trading. Such trading will increase the Fund's rate of
portfolio turnover, certain transaction expenses and the incidence of short-term
capital gain taxable as ordinary income. The Fund cannot accurately predict its
portfolio turnover rate, but anticipates that its annual portfolio turnover rate
will not exceed 150%. An annual portfolio turnover rate of 150% would occur, for
example, when all of the long-term securities in the Fund's portfolio are
replaced one-and-a-half times during a period of one year. The Fund will not
consider portfolio turnover rate a limiting factor in making investment
decisions consistent with its investment objective and management policies.
- --------------------------------------------------------------------
PURCHASE OF SHARES
Purchases of Fund shares must be made through a brokerage account maintained
with Smith Barney Shearson or with an Introducing Broker, except that investors
purchasing shares of the Fund through a qualified retirement plan may do so
directly through the Fund's transfer agent. When purchasing shares of the Fund
through the 401(k) Program, investors must specify whether the purchase is for
Class A or Class B shares. No maintenance fee will be charged in connection with
a brokerage account through which an investor purchases or holds shares.
Purchases are effected at the net asset value per share next determined after a
purchase order is received by Smith Barney Shearson or an Introducing Broker
(the "trade date"). Payment is generally due to Smith Barney Shearson or an
Introducing Broker on the fifth business day after the trade date (the
"settlement date"). Investors who make payment prior to the settlement date may
permit the payment to be held in their brokerage accounts or may designate a
temporary investment (such as a money market fund in the Smith Barney Shearson
Group of Funds) for the payment until the settlement date. The Fund reserves the
right to reject any purchase order and to suspend the offering of shares for a
period of time.
Purchase orders received by Smith Barney Shearson or an Introducing Broker
prior to the close of regular trading on the NYSE, currently 4:00 p.m., New York
time, on any day that the Fund calculates its net assets
32
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
PURCHASE OF SHARES (CONTINUED)
value, are priced according to the net asset value determined on that day.
Purchase orders received after the close of regular trading on the NYSE are
priced as of the time the net asset value per share is next determined. See
"Valuation of Shares."
SYSTEMATIC INVESTMENT PLAN. The Fund offers shareholders a Systematic
Investment Plan under which shareholders may authorize Smith Barney Shearson or
an Introducing Broker to place a purchase order each month or quarter for Fund
shares in an amount not less than $100. The purchase price is paid automatically
from cash held in the shareholder's Smith Barney Shearson brokerage account or
through the automatic redemption of the shareholder's shares of a Smith Barney
Shearson money market fund. For further information regarding the Systematic
Investment Plan, shareholders should contact their Smith Barney Shearson
Financial Consultants.
MINIMUM INVESTMENT. The minimum initial investment in the Fund is $2,500 and
the minimum subsequent investment is $1,000, except that for purchases through
(a) IRAs and Self-Employed Retirement Plans, the minimum initial and subsequent
investment in the Fund are $250 and $100, respectively, (b) retirement plans
qualified under Section 403(b)(7) or Section 401(a) of the Code, the minimum
initial and subsequent investment in the Fund are both $25 and (c) purchases
through the Fund's Systematic Investment Plan, the minimum initial and
subsequent investment are each $100. No minimum investment requirements are
imposed on employees of Travelers, Inc. ("Travelers") and its subsidiaries,
including Smith Barney Shearson. The Fund reserves the right at any time to vary
the initial and subsequent investment minimums. Certificates for Fund shares are
issued upon a written request to the Fund's transfer agent, TSSG, a subsidiary
of First Data Corporation.
CLASS A SHARES
The public offering price for Class A shares is the per share net asset value
of that Class. No initial sales charge or CDSC is imposed on Class A shares.
Class A shares are offered for sale directly to the general public as well as to
Participating Plans, as described below.
33
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
PURCHASE OF SHARES (CONTINUED)
CLASS B SHARES
Class B shares may be acquired only through exchanges with Class B shares of
other funds in the Smith Barney Shearson Group of Funds and are subject to the
highest CDSC, if any, of the shares from which the exchange or any preceding
exchange was made, except that Participating Plans may purchase Class B shares
directly at net asset value. Class B shares purchased directly and not
subsequently exchanged are not subject to a CDSC. See "Redemption of Shares --
Contingent Deferred Sales Charge -- Class B Shares" and "Exchange Privilege".
SMITH BARNEY SHEARSON 401(K) PROGRAM
Investors may be eligible to participate in the 401(k) Program, which is
generally designed to assist employers or plan sponsors in the creation and
operation of retirement plans under Section 401(a) of the Code. To the extent
applicable, the same terms and conditions are offered to all Participating Plans
which include both 401(k) plans and other types of participant directed,
tax-qualified employee benefit plans.
Under the 401(k) Program, a Participating Plan can invest in Class A and Class
B shares. Both Classes of shares acquired through the 401(k) Program are subject
to the same distribution fee as shares acquired by other investors. Class A
shares acquired by Participating Plans are not subject to any CDSC while Class B
shares may become subject to a CDSC upon certain redemptions.
It is anticipated that Participating Plans will purchase shares of the Fund as
part of a multi-fund investment program. Once a Participating Plan has made an
initial investment in shares of the Fund or other funds in the Smith Barney
Shearson Group of Funds, all of its subsequent investments in the Fund must be
made in the same Class of shares. Participating Plans will be eligible to
acquire shares of the Fund so long as they acquire the same Class of shares of
the Fund as shares acquired of other funds in the Plan's multi-fund investment
program.
If the Participating Plan's initial purchase is only in shares of the Fund,
the availability of Class A and Class B shares of the Fund will be determined by
the criteria set forth below.
34
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
PURCHASE OF SHARES (CONTINUED)
CLASS A SHARES. Class A shares are offered without a sales charge or CDSC to
any Participating Plan that: (a) purchases $750,000 or more of Class A shares of
the Fund or one or more funds in the Smith Barney Shearson Group of Funds that
offer one or more Classes sold subject to either an initial sales charge or
CDSC; (b) has 250 or more employees eligible to participate in the Participating
Plan at the time of initial investment in the Fund; or (c) currently holds Class
A shares in the Fund that were received as a result of an exchange of Class B
shares as described below.
CLASS B SHARES. Class B shares are offered to Participating Plans that: (a)
purchase less than $250,000 of Class B shares of the Fund or one or more funds
in the Smith Barney Shearson Group of Funds that offer one or more Classes sold
subject to either an initial sales charge or CDSC; and (b) have less than 100
employees eligible to participate in the Participating Plan at the time of
initial investment in the Fund. Class B shares of the Fund may be acquired
directly or through an exchange by Participating Plans at net asset value per
share without the imposition of a CDSC. However, if a shareholder exchanges
Class B shares of the Fund with Class B shares of another fund in the Smith
Barney Shearson Group of Funds, the shares acquired through the exchange may be
subject to a CDSC of 3% of redemption proceeds, if redeemed within eight years
of the date the Participating Plan first purchased Class B shares. No CDSC is
imposed to the extent that the net asset value of the Class B shares redeemed
does not exceed (a) the current net asset value of Class B shares purchased
through reinvestment of dividends or capital gains distributions, plus (b) the
current net asset value of Class B shares purchased more than eight years prior
to the redemption, plus (c) increases in the net asset value of the
shareholder's Class B shares above the purchase payments made during the
preceding eight years. The CDSC applicable to a Participating Plan depends on
the number of years since the Participating Plan first became a holder of Class
B shares, unlike the CDSC applicable to other Class B shareholders, which
depends on the number of years since those shareholders made the purchase
payment from which the amount is being redeemed. See "Redemption of Shares --
Contingent Deferred Sales Charge -- Class B Shares."
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
35
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
PURCHASE OF SHARES (CONTINUED)
termination 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 Class B shares in connection with a loan made
by the Participating Plan to an employee.
Eight years after the date a Participating Plan acquired its first Class B
share, it will be offered the opportunity to exchange all of its Class B shares
for Class A shares of the Fund. Such Plans will be notified of the pending
exchange in writing approximately 90 days before the eighth anniversary of the
purchase 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 additional
Class B shares of the Fund but instead may acquire Class A shares of the Fund.
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 feature as Class B shares held by other investors. See "Variable
Pricing System -- Class B Shares."
Participating Plans wishing to acquire shares of the Fund through the 401(k)
Program must purchase shares from the Fund's transfer agent. For further
information regarding the 401(k) Program, investors should contact their Smith
Barney Shearson Financial Consultants.
- --------------------------------------------------------------------
REDEMPTION OF SHARES
Shareholders may redeem their shares on any day on which the Fund calculates
its net asset value. See "Valuation of Shares." Redemption requests received in
proper form prior to the close of regular trading on the NYSE will be effected
at the net asset value per share determined on that day. Redemption requests
received after the close of regular trading on the NYSE will be effected at the
net asset value as next determined. If a shareholder holds shares in more than
one Class, any request for redemption must specify the Class being redeemed. In
the event of a failure to specify which Class, or if the investor owns fewer
shares of the Class than specified, the
36
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
REDEMPTION OF SHARES (CONTINUED)
redemption request will be delayed until the Fund's transfer agent receives
further instructions from Smith Barney Shearson, or if the shareholder's account
is not with Smith Barney Shearson, from the shareholder directly.
The Fund normally transmits redemption proceeds for credit to the
shareholder's account at Smith Barney Shearson or an Introducing Broker at no
charge (other than any applicable CDSC) within seven days after receipt of a
redemption request. Generally, these funds will not be invested for the
shareholder's benefit without specific instruction and Smith Barney Shearson
will benefit from the use of temporarily uninvested funds. A shareholder who
pays for Fund shares by personal check will be credited with the proceeds of a
redemption of those shares only after the purchase check has been collected,
which may take up to 10 days or more. Shareholders who anticipate the need for
more immediate access to their investment should purchase shares with Federal
funds, a bank wire or by a certified or cashier's check.
A Fund account that is reduced by a shareholder to a value of $500 or less may
be subject to redemption by the Fund, but only after the shareholder has been
given at least 30 days in which to increase the account balance to more than
$500.
Shares may be redeemed in one of the following ways:
REDEMPTIONS THROUGH SMITH BARNEY SHEARSON
Redemption requests may be made through Smith Barney Shearson or an
Introducing Broker. A shareholder desiring to redeem shares represented by share
certificates also must present the certificates to Smith Barney Shearson or an
Introducing Broker endorsed for transfer (or accompanied by a stock power),
endorsed exactly as the shares are registered. Redemption requests involving
shares represented by certificates will not be deemed to have been submitted
until the certificates are received by the Fund's transfer agent in proper form.
REDEMPTION BY MAIL
Shares may be redeemed by submitting a written request for redemption to:
37
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
REDEMPTION OF SHARES (CONTINUED)
Smith Barney Shearson Worldwide Prime Assets Fund
Class A or B (please specify)
c/o The Shareholder Services Group, Inc.
P.O. Box 9134
Boston, Massachusetts 02205-9134
A written redemption request to TSSG or your Smith Barney Shearson Financial
Consultant 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 registered. If the shares to be
redeemed were issued in certificate form, the certificates must be endorsed for
transfer (or be accompanied by an endorsed stock power) and must be submitted to
TSSG together with the redemption request. Any signature appearing on a
redemption request, share certificate or stock power must be guaranteed by 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.
TSSG 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 TSSG receives all required
documents in proper form.
AUTOMATIC CASH WITHDRAWAL PLAN
The Fund offers shareholders an automatic cash withdrawal plan under which
shareholders who own shares of the Fund with a value of at least $10,000 may
elect to receive periodic cash payments of at least $50 monthly. Retirement plan
accounts are eligible for the automatic cash withdrawal plan only where the
shareholder is eligible to receive qualified distributions and has an account
value of at least $5,000. Any applicable CDSC will be waived on amounts
withdrawn by a shareholder that do not exceed 2% 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 their Smith Barney Shearson Financial Consultants.
38
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
REDEMPTION OF SHARES (CONTINUED)
CONTINGENT DEFERRED SALES CHARGE -- CLASS B SHARES
Class B shares acquired only upon an exchange with another fund in the Smith
Barney Shearson Group of Funds are subject upon redemption to the highest CDSC
(if any) of the shares from which the exchange or any preceding exchange was
made. Under the 401(k) Program, except in the case of redemptions of shares
purchased directly or indirectly and not subsequently exchanged by Participating
Plans, a CDSC payable to Smith Barney Shearson is imposed on the redemption of
Class B shares that causes the current value of a shareholder's account to fall
below the dollar amount of all payments by the shareholder for the Class B
shares (or any predecessor of those shares) that were exchanged for Class B
shares of the Fund ("purchase payments") during the preceding five years. No
charge is imposed to the extent the net asset value of the Class B shares
redeemed does not exceed (a) the current net asset value of Class B shares
purchased through reinvestment of dividends or capital gains distributions, plus
(b) the current net asset value of Class B shares purchased more than five years
prior to the redemption, plus (c) increases in the net asset value of the
shareholder's Class B shares above the purchase payments made during the
preceding five years.
In circumstances in which the CDSC is imposed, the amount of the charge will
depend on: (a) the CDSC schedule applicable to the shares of the fund that were
exchanged for the shares being redeemed; and (b) the number of years since the
shareholder made the purchase payment from which the amount is being redeemed. A
redemption of shares acquired in exchange for shares that had been the subject
of two or more exchanges among funds with differing CDSC schedules will be
subject to the highest applicable CDSC schedule. See "Exchange Privilege."
Solely for purposes of determining the number of years since a purchase payment,
all purchase payments during a month will be aggregated and deemed to have been
made on the last day of the preceding Smith Barney Shearson statement month. The
purchase payment from which a redemption is made is assumed to be the earliest
purchase payment from which a full redemption has not already been effected.
Class B shares will automatically convert to Class A shares eight years after
the date they were purchased. For this purpose, the date of purchase of Class B
shares of the Fund refers to the purchase date of the shares given in
39
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- ---------------------------------------------------------------------------
REDEMPTION OF SHARES (CONTINUED)
exchange for the Class B shares of the Fund. The first of these conversions will
commence on or about September 30, 1994. See "Variable Pricing System -- Class B
Shares."
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 2%
per month of the value of the shareholder's shares at the time the withdrawal
plan commences (see above); (c) redemptions of shares following the death or
disability of the shareholder; (d) in connection with certain post-retirement
distributions and withdrawals from retirement plans or IRAs; (e) involuntary
redemptions; (f) redemption proceeds from other funds in the Smith Barney
Shearson Group of Funds that are reinvested within 30 days of the redemption;
(g) redemptions of shares in connection with a combination of any investment
company with the Fund by merger, acquisition of assets or otherwise; and (h)
certain redemptions of shares of the Fund in connection with lump-sum or other
distributions made by a Participating Plan. See "Purchase of Shares -- Smith
Barney Shearson 401(k) Program."
- --------------------------------------------------------------------
VALUATION OF SHARES
Each Class' net asset value per share is calculated on each day, Monday
through Friday, except days on which the NYSE is closed. The NYSE currently is
scheduled to be closed on New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving and Christmas, and on the
preceding Friday or subsequent Monday when one of these holidays falls on a
Saturday or Sunday, respectively.
The net asset value per share of a given Class is determined as of the close
of regular trading on the NYSE and is computed by dividing the value of the
Fund's net assets attributable to that Class by the total number of shares of
that Class outstanding. Generally, the Fund's investments are valued at market
value or, in the absence of a market value with respect to any securities, at
fair value as determined by or under the direction of the Fund's Board of
Trustees. Portfolio securities that are traded primarily on foreign exchanges
generally are valued at the preceding closing values of the securities on their
respective exchanges, except that when an occurrence subsequent to the time a
value was so established is likely to have changed
40
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
VALUATION OF SHARES (CONTINUED)
that value, then the fair market value of those securities will be determined by
consideration of other factors by or under the direction of the Fund's Board of
Trustees or its delegates. A security that is traded primarily on a domestic or
foreign exchange 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. Debt securities
(other than U.S. government securities and short-term obligations) are valued by
Boston Advisors after consultation with independent pricing services approved by
the Fund's Board of Trustees. Investments in U.S. government securities (other
than short-term securities) are valued at the average 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 amortized cost whenever the Fund's Board of
Trustees determines that amortized cost reflects fair value of those
investments. An option that is written by the Fund generally is valued at the
last sale price or, in the absence of the last sale price, the last offer price.
An option that is purchased by the Fund generally is valued at the last sale
price or, in the absence of the last sale price, the last bid price. The value
of a futures contract equals the unrealized gain or loss on the contract that is
determined by marking the contract to the current settlement price for a like
contract on the valuation date of the futures contract. A settlement price may
not be used if the market makes a limit move with respect to a particular
futures contract or if the securities underlying the futures contract experience
significant price fluctuations after the determination of the settlement price.
When a settlement price cannot be used, futures contracts will be valued at
their fair market value as determined by or under the direction of the Fund's
Board of Trustees. For purposes of calculating the Fund's net asset value per
share, assets and liabilities initially expressed in foreign currency values
will be converted into U.S. dollar values based on a formula prescribed by the
Fund or, if the information required by the formula is unavailable, as
determined in good faith by the Fund's Board of Trustees. In carrying out the
Board's valuation policies, Boston Advisors, as administrator, may consult with
an independent pricing service retained by the Fund. Further information
regarding the Fund's valuation policies is contained in the Statement of
Additional Information.
41
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- --------------------------------------------------------------------
EXCHANGE PRIVILEGE
Shares of each Class may be exchanged for shares of the same class in the
following funds in the Smith Barney Shearson Group of Funds, to the extent
shares are offered for sale in the shareholder's state of residence:
<TABLE>
<CAPTION>
EXCHANGEABLE
WITH SHARES
OF THE
FOLLOWING
CLASSES: FUND NAME AND INVESTMENT OBJECTIVE:
<S> <C>
---------------------------------------------------------------------------
MUNICIPAL BOND FUNDS
A* SMITH BARNEY SHEARSON LIMITED MATURITY MUNICIPALS FUND, an
intermediate-term municipal bond fund investing in investment
grade obligations.
A*, B* SMITH BARNEY SHEARSON MANAGED MUNICIPALS FUND INC., an
intermediate- and long-term municipal bond fund.
A*, B* SMITH BARNEY SHEARSON TAX-EXEMPT INCOME FUND, an intermediate-
and long-term municipal securities bond fund investing in
medium- and lower-rated securities.
A*, B* SMITH BARNEY SHEARSON ARIZONA MUNICIPALS FUND INC., an
intermediate- and long-term municipal bond fund designed for
Arizona investors.
A* SMITH BARNEY SHEARSON INTERMEDIATE MATURITY CALIFORNIA
MUNICIPALS FUND, an intermediate-term municipal bond fund
designed for California investors.
A*, B* SMITH BARNEY SHEARSON CALIFORNIA MUNICIPALS FUND INC., an
intermediate- and long-term municipal bond fund designed for
California investors.
A*, B* SMITH BARNEY SHEARSON FLORIDA MUNICIPALS FUND, an
intermediate- and long-term municipal bond fund designed for
Florida investors.
A*, B* SMITH BARNEY SHEARSON MASSACHUSETTS MUNICIPALS FUND, an
intermediate- and long-term municipal bond fund designed for
Massachusetts investors.
</TABLE>
42
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
<TABLE>
<CAPTION>
EXCHANGEABLE
WITH SHARES
OF THE
FOLLOWING
CLASSES: FUND NAME AND INVESTMENT OBJECTIVE:
---------------------------------------------------------------------------
<S> <C>
A*, B* SMITH BARNEY SHEARSON NEW JERSEY MUNICIPALS FUND INC., an
intermediate- and long-term municipal bond fund designed for
New Jersey investors.
A* SMITH BARNEY SHEARSON INTERMEDIATE MATURITY NEW YORK
MUNICIPALS FUND, an intermediate-term bond fund designed for
New York investors.
A*, B* SMITH BARNEY SHEARSON NEW YORK MUNICIPALS FUND INC., an
intermediate- and long-term municipal bond fund designed for
New York investors.
INCOME FUNDS
A*, B* SMITH BARNEY SHEARSON ADJUSTABLE RATE GOVERNMENT INCOME FUND,
seeks high current income while limiting the degree of
fluctuation in net asset value resulting from movement in
interest rates.
A*, B* SMITH BARNEY SHEARSON SHORT-TERM WORLD INCOME FUND, invests in
high quality, short-term debt securities denominated in U.S.
dollars as well as a range of foreign currencies.
A* SMITH BARNEY SHEARSON LIMITED MATURITY TREASURY FUND, invests
exclusively in securities issued by the United States Treasury
and other United States government securities.
A*, B* SMITH BARNEY SHEARSON DIVERSIFIED STRATEGIC INCOME FUND, seeks
high current income primarily by allocating and reallocating
its assets among various types of fixed-income securities.
A*, B* SMITH BARNEY SHEARSON MANAGED GOVERNMENTS FUND INC., invests
in obligations issued or guaranteed by the United States
government and its agencies and instrumentalities with
emphasis on mortgage-backed government securities.
</TABLE>
43
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
<TABLE>
<CAPTION>
EXCHANGEABLE
WITH SHARES
OF THE
FOLLOWING
CLASSES: FUND NAME AND INVESTMENT OBJECTIVE:
---------------------------------------------------------------------------
<S> <C>
A*, B* SMITH BARNEY SHEARSON GOVERNMENT SECURITIES FUND, seeks a high
current return by investing in U.S. government securities.
A*, B* SMITH BARNEY SHEARSON INVESTMENT GRADE BOND FUND, seeks
maximum current income consistent with prudent investment
management and preservation of capital by investing in
corporate bonds.
A*, B* SMITH BARNEY SHEARSON HIGH INCOME FUND, seeks high current
income by investing in high-yielding corporate bonds,
debentures and notes.
A*, B* SMITH BARNEY SHEARSON GLOBAL BOND FUND, seeks current income
and capital appreciation by investing in bonds, debentures and
notes of foreign and domestic issuers.
GROWTH AND INCOME FUNDS
A*, B* SMITH BARNEY SHEARSON CONVERTIBLE FUND, seeks current income
and capital appreciation by investing in convertible
securities.
A*, B* SMITH BARNEY SHEARSON UTILITIES FUND, seeks total return by
investing in equity and debt securities of utilities
companies.
A*, B* SMITH BARNEY SHEARSON STRATEGIC INVESTORS FUND, seeks high
total return consisting of current income and capital
appreciation by investing in a combination of equity, fixed-
income and money market securities.
A*, B* SMITH BARNEY SHEARSON PREMIUM TOTAL RETURN FUND, seeks total
return by investing in dividend-paying common stocks.
A*, B* SMITH BARNEY SHEARSON GROWTH AND INCOME FUND, seeks income and
long-term capital growth by investing in income-producing
equity securities.
</TABLE>
44
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
<TABLE>
<CAPTION>
EXCHANGEABLE
WITH SHARES
OF THE
FOLLOWING
CLASSES: FUND NAME AND INVESTMENT OBJECTIVE:
---------------------------------------------------------------------------
<S> <C>
GROWTH FUNDS
A*, B* SMITH BARNEY SHEARSON APPRECIATION FUND INC., seeks long-term
appreciation of capital.
A*, B* SMITH BARNEY SHEARSON FUNDAMENTAL VALUE FUND INC., seeks
long-term capital growth with current income as a secondary
objective.
A*, B* SMITH BARNEY SHEARSON SECTOR ANALYSIS FUND, seeks capital
appreciation by following a sector strategy.
A*, B* SMITH BARNEY SHEARSON TELECOMMUNICATIONS GROWTH FUND, seeks
capital appreciation, with income as a secondary
consideration.
A*, B* SMITH BARNEY SHEARSON AGGRESSIVE GROWTH FUND INC., seeks
above-average capital growth.
A*, B* SMITH BARNEY SHEARSON SPECIAL EQUITIES FUND, seeks long-term
capital appreciation by investing in equity securities
primarily of emerging growth companies.
A*, B* SMITH BARNEY SHEARSON GLOBAL OPPORTUNITIES FUND, seeks
long-term capital growth by investing principally in the
common stocks of foreign and domestic issuers.
A*, B* SMITH BARNEY SHEARSON EUROPEAN FUND, seeks long-term capital
appreciation by investing primarily in securities of issuers
based in European countries.
A*, B* SMITH BARNEY SHEARSON PRECIOUS METALS AND MINERALS FUND INC.,
seeks long-term capital appreciation by investing primarily in
precious metal- and mineral-related companies and gold
bullion.
</TABLE>
45
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
<TABLE>
<CAPTION>
EXCHANGEABLE
WITH SHARES
OF THE
FOLLOWING
CLASSES: FUND NAME AND INVESTMENT OBJECTIVE:
---------------------------------------------------------------------------
<S> <C>
MONEY MARKET FUNDS
** SMITH BARNEY SHEARSON MONEY MARKET FUND, invests in a
diversified portfolio of high quality money market
instruments.
*** SMITH BARNEY SHEARSON DAILY DIVIDEND FUND INC., invests in a
diversified portfolio of high quality money market
instruments.
*** SMITH BARNEY SHEARSON GOVERNMENT AND AGENCIES FUND INC.,
invests in short-term United States government and agency
securities.
*** SMITH BARNEY SHEARSON MUNICIPAL MONEY MARKET FUND INC.,
invests in short-term high quality municipal obligations.
*** SMITH BARNEY SHEARSON CALIFORNIA MUNICIPAL MONEY MARKET FUND,
invests in short-term, high quality California municipal
obligations.
*** SMITH BARNEY SHEARSON NEW YORK MUNICIPAL MONEY MARKET FUND,
invests in short-term, high quality New York municipal
obligations.
---------------------------------------------------------------------------
<FN>
*Shares of this fund are subject to a sales charge or CDSC.
**Shares of this money market fund may be exchanged for Class B shares of the
Fund.
***Shares of this money market fund may be exchanged for Class A shares of the
Fund.
</TABLE>
TAX EFFECT. The exchange of shares of one fund for shares of another fund is
treated for Federal income tax purposes as a sale of the shares given in
exchange by the shareholder. Therefore, an exchanging shareholder may realize a
taxable gain or loss in connection with an exchange.
CLASS A EXCHANGES. Shareholders of the Fund who wish to exchange all or a
portion of their Class A shares in the Fund for Class A shares in other funds of
the Smith Barney Shearson Group of Funds listed above may do so subject to the
payment of an appropriate "sales charge differential" upon the exchange. The
"sales charge differential" is limited to a percentage rate no
46
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
greater than the excess of the sales charge rate applicable to purchases of
shares of the mutual fund being acquired in the exchange over the sales charge
rate(s) actually paid on the mutual fund shares relinquished in the exchange and
on any predecessor of those shares. For purposes of the exchange privilege,
shares obtained through automatic reinvestment of dividends, as described below,
are treated as having paid the same sales charges applicable to the shares on
which the dividends were paid. However, except in the case of the 401(k)
program, if no sales charge was imposed upon the initial purchase of the shares
(as in the case of Class A shares of the Fund), any shares obtained through
automatic reinvestment will be subject to a sales charge differential upon
exchange.
Class A shareholders of the funds in the Smith Barney Shearson Group of Funds
who wish to exchange all or a portion of their shares for Class A shares of the
Fund may do so without imposition of any sales charge or exchange fee and will
be subject to the distribution fee applicable to Class A shares of the Fund upon
the exchange.
CLASS B EXCHANGES. Class B shareholders of the Fund who wish to exchange all
or a portion of their Class B shares for Class B shares in any of the funds
identified above may do so without imposition of an exchange fee. In the event
Class B shareholders of the Fund wish to exchange all or a portion of their
shares for Class B shares in any of these funds imposing a higher CDSC than that
imposed by the Fund, 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 Fund (or any
predecessor of those shares) that have been exchanged.
ADDITIONAL INFORMATION REGARDING THE EXCHANGE PRIVILEGE. Shareholders
exercising the exchange privilege with any of the other funds in the Smith
Barney Shearson Group of Funds should review the prospectus of that fund
carefully prior to making an exchange. Smith Barney Shearson reserves the right
to reject any exchange request. The exchange privilege may be modified or
terminated at any time after written notice to shareholders. Although the
exchange privilege is an important benefit, excessive exchange transactions can
be detrimental to the Fund's performance and its shareholders. The Fund's
investment adviser may determine that a pattern of frequent exchanges is
excessive and contrary to the best interests of the Fund's other
47
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
shareholders. In this event, the Fund's investment adviser will notify Smith
Barney Shearson, and Smith Barney Shearson may, at its discretion, decide to
limit additional purchases and/or exchanges by the shareholder. Upon such a
determination, Smith Barney Shearson 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 Fund or (b) remain invested in the Fund or
exchange into any of the funds in the Smith Barney Shearson Group of Funds
ordinarily available, which position the shareholder would expect to maintain
for a significant period of time. All relevant factors will be considered in
determining what constitutes an abusive pattern of exchanges. For further
information regarding the exchange privilege or to obtain the current
prospectuses for members of the Smith Barney Shearson Group of Funds, investors
should contact their Smith Barney Shearson Financial Consultants.
- --------------------------------------------------------------------
DISTRIBUTOR
Smith Barney Shearson is located at 388 Greenwich Street, New York, New York
10013 and serves as distributor of the Fund's shares. Smith Barney Shearson is
paid an annual distribution fee with respect to Class A and Class B shares at
the rate of .90% of the value of the average daily net assets attributable to
the respective Class. The fee is authorized pursuant to a services and
distribution plan (the "Plan") adopted by the Fund pursuant to Rule 12b-1 under
the 1940 Act. Under the Plan, a portion of the fee, calculated at the annual
rate of .65% of the value of the average daily net assets of each Class, is used
by Smith Barney Shearson to cover expenses that are primarily intended to result
in, or that are primarily attributable to, the sale of the shares of the Class
("Selling Expenses"), and the remaining portion of the fee, calculated at the
annual rate of .25% of the value of the average daily net assets of each Class,
is used by Smith Barney Shearson to provide compensation for ongoing servicing
and/or maintenance of shareholder accounts with the Fund ("Servicing Costs").
Selling Expenses include: costs of printing and distributing the Fund's
Prospectus, Statement of Additional Information and sales literature to
prospective investors; an allocation of overhead and other of Smith Barney
Shearson's branch office distribution-related expenses; payments to, and
expenses of, persons who
48
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
DISTRIBUTOR (CONTINUED)
provide support services in connection with the distribution of shares of the
Fund; and payments to Smith Barney Shearson Financial Consultants who have sold
shares of the Fund. Servicing Costs include payments made to persons, including
Smith Barney Shearson Financial Consultants, who respond to inquiries of
shareholders of the Fund regarding their ownership of shares or their accounts
with the Fund or who provide other similar services not otherwise required to be
provided by the Fund's administrator or transfer agent. The payments to Smith
Barney Shearson Financial Consultants for selling shares of a Class include a
commission paid at the time of sale and a continuing fee for servicing
shareholder accounts for as long as a shareholder remains a holder of that
Class, which is credited at the rate of .25% of the value of the average daily
net assets of the Class that remain invested in the Fund. Smith Barney Shearson
Financial Consultants may receive different levels of compensation for selling
one Class over another.
Payments under the Plan are not tied exclusively to the distribution expenses
actually incurred by Smith Barney Shearson and the payments may exceed
distribution expenses actually incurred. The Fund's Board of Trustees will
evaluate the appropriateness of the Plan and its payment terms on a continuing
basis and in so doing will consider all relevant factors, including expenses
borne by Smith Barney Shearson, amounts received under the Plan and proceeds of
any CDSC.
- --------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
The Fund's policy is to declare daily and distribute monthly substantially all
of its net investment income (that is, its income other than its net realized
capital gains) and declare and distribute its net realized gains, if any, once a
year, normally at the end of the year in which earned or at the beginning of the
next year. Unless the shareholder instructs the Fund to pay dividends and
capital gains distributions on shares of any Class in cash and to credit the
shareholder's account at Smith Barney Shearson, dividends and capital gains
distributions will be reinvested automatically in additional shares of the Class
at net asset value, subject to no sales charge or CDSC. The Fund is
49
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES (CONTINUED)
subject to a 4% nondeductible excise tax measured with respect to certain
undistributed amounts of net investment income and capital gains. The Fund
expects to declare and pay dividends of its net investment income and
distributions of its net capital gains more frequently, if necessary, to avoid
the application of this tax.
TAXES
The Fund has qualified and intends to qualify each year as a regulated
investment company under the Code. To qualify as a regulated investment company
for Federal income tax purposes, the Fund will limit its income and investments
so that (a) less than 30% of its gross income is derived from the sale or
disposition of stocks, securities and certain financial instruments (including
certain options, futures contracts and forward contracts) that were held for
less than three months and (b) at the close of each quarter of the taxable year
(i) not more than 25% of the market value of the Fund's total assets is invested
in the securities (other than U.S. government securities) of a single issuer or
of two or more issuers controlled by the Fund that are engaged in the same or
similar trades or businesses or in related trades or businesses and (ii) at
least 50% of the market value of the Fund's total assets is represented by (1)
cash and cash items, (2) U.S. government securities and (3) other securities
limited in respect of any one issuer to an amount not greater in value than 5%
of the market value of the Fund's total assets and to not more than 10% of the
outstanding voting securities of the issuer. The requirements for qualification
may cause the Fund to restrict the degree to which it sells or otherwise
disposes of stocks, securities and certain financial instruments held for less
than three months. See "Investment Objective and Management Policies --
Portfolio Transactions and Turnover" and "-- Risk Factors and Special
Considerations -- Futures Contracts, Options and Forward Currency Contracts." If
the Fund qualifies as a regulated investment company and meets certain
distribution requirements, the Fund will not be subject to Federal income tax on
its net investment income and net realized capital gains that it distributes to
its shareholders.
Dividends paid by the Fund out of net investment income and distributions of
net realized short-term capital gains will be taxable to shareholders as
ordinary income, whether received in cash or reinvested in additional shares.
Distributions of net realized long-term capital gains will
50
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES (CONTINUED)
be taxable to shareholders as long-term capital gain, regardless of how long
shareholders have held their Fund shares and whether such distributions are
received in cash or reinvested in additional Fund shares. Furthermore, as a
general rule, a shareholder's gain or loss on a sale or redemption of Fund
shares will be a long-term capital gain or loss if the shareholder has held the
shares for more than one year and will be a short-term capital gain or loss if
the shareholder has held the shares for one year or less. The per share
dividends and distributions on Class A shares will be higher than the per share
dividends and distributions on Class B shares as a result of lower transfer
agency fees applicable to the Class A shares. See "Variable Pricing System."
Because the Fund will invest primarily in debt securities, dividends paid by the
Fund generally will not qualify for the Federal dividends-received deduction for
corporate shareholders; distributions by the Fund of net realized capital gains
will not qualify for the Federal dividends-received deduction for corporate
shareholders.
Income received by the Fund from sources within foreign countries may be
subject to withholding and other foreign taxes. The payment of such taxes will
reduce the amount of dividends and distributions paid to the Fund's
shareholders.
Statements as to the tax status of each shareholder's dividends and
distributions are mailed annually. Each shareholder also will receive, if
appropriate, various written notices after the close of the Fund's prior taxable
year with respect to certain dividends and distributions which were received
from the Fund during the Fund's prior taxable year.
Shareholders are urged to consult their tax advisors regarding the application
of Federal, state and local tax laws to their specific situation before
investing in the Fund.
- --------------------------------------------------------------------
ADDITIONAL INFORMATION
The Fund was organized on November 15, 1990 under the laws of the Commonwealth
of Massachusetts and is a business entity commonly known as a "Massachusetts
business trust." On July 30, 1993 the Fund changed its
51
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
name from Shearson Lehman Brothers Worldwide Prime Assets Fund to its current
name. The Fund offers shares of beneficial interest, par value $.001 per share,
for sale to the public.
Each Class represents an identical interest in the Fund's investment
portfolio. As a result, the Classes have the same rights, privileges and
preferences, except with respect to: (a) the designation of each Class; (b) the
effect of the respective sales charges, if any, for each Class; (c) the
distribution and/or service fees borne by each Class; (d) the expenses allocable
exclusively to each Class; (e) voting rights on matters exclusively affecting a
single Class; (f) the exchange privileges of each Class; and (g) the conversion
feature of the Class B shares. The Fund's Board of Trustees does not anticipate
that there will be any conflicts among the interests of the holders of the
different Classes. The Trustees, on an ongoing basis will consider whether such
conflict exists and, if so, take appropriate action.
The Fund does not hold annual shareholder meetings. There normally will be no
meeting of shareholders for the purpose of electing Trustees unless and until
such time as less than a majority of the Trustees holding office have been
elected by shareholders. The Trustees will call a meeting for any purpose upon
written request of shareholders holding at least 10% of the Fund's outstanding
shares. Shareholders of record owning no less than two-thirds of the outstanding
shares of the Fund may remove a Trustee through a declaration in writing or by
vote cast in person or by proxy at a meeting called for that purpose. In
addition, shareholders who meet certain criteria will be assisted by the Fund in
communicating with other shareholders in seeking the holding of such a meeting.
When matters are submitted for shareholder vote, shareholders of each Class will
have one vote for each full share owned and a proportionate, fractional vote for
any fractional share held of that Class. Generally, shares of the Fund will be
voted on a Fund-wide basis except on matters affecting only the interests of one
or more of the Classes.
Massachusetts law provides that shareholders of the Fund can, under certain
circumstances, be held personally liable for the obligations of the Fund. The
Fund has been structured, and will be operated in such a way, so as to ensure as
much as possible, that shareholders will not be liable for
52
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
obligations of the Fund. A more complete discussion of potential liability of
shareholders of the Fund under Massachusetts law is contained in the Statement
of Additional Information.
Boston Safe, a wholly owned subsidiary of TBC, is located at One Boston Place,
Boston, Massachusetts 02108, and serves as custodian of the Fund's investments.
TSSG is located at Exchange Place, Boston, Massachusetts 02109 and serves as
the Fund's transfer agent.
The Fund sends to each of its shareholders a semi-annual report and an audited
annual report, which include a list of the investment securities held by the
Fund at the end of the period covered. In an effort to reduce the Fund's
printing and mailing costs, the Fund 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. In addition, the Fund also plans to
consolidate the mailing of its Prospectus so that a shareholder having multiple
accounts (that is individual, IRA and/or Self-Employed Retirement Plan account)
will receive a single Prospectus annually. Any shareholder who does not want
this consolidation to apply to his or her account should contact his or her
Smith Barney Shearson Financial Consultants or TSSG. Shareholders may direct
inquiries regarding the Fund to their Smith Barney Shearson Financial
Consultants.
-------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE STATEMENT OF
ADDITIONAL INFORMATION AND/OR THE OFFICIAL SALES LITERATURE IN CONNECTION WITH
THE OFFERING OF THE FUND'S SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO
ANY PERSON TO WHOM, SUCH OFFER MAY NOT LAWFULLY BE MADE.
53
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
TRUSTEES
Paul R. Ades
Herbert Barg
Allan R. Johnson
Heath B. McLendon
Kenneth Miller
John F. White
OFFICERS
Heath B. McLendon
CHAIRMAN OF THE BOARD AND
INVESTMENT OFFICER
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
Vincent Nave
TREASURER
Francis J. McNamara, III
SECRETARY
DISTRIBUTOR
Smith Barney Shearson Inc.
388 Greenwich Street
New York, New York 10013
INVESTMENT ADVISER
PanAgora Asset Management
Limited
3 Finsbury Avenue
London, England EC2M 2PA
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
54
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE
PRIME ASSETS
FUND
Two World Trade Center
New York, New York 10048
Fund 139
FD0244 A4
