Registration No. 33-37750
811-6219
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 7 X
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 X
Amendment No. 9 X
SMITH BARNEY SHEARSON WORLDWIDE PRIME ASSETS FUND
(Exact name of Registrant as Specified in Charter)
Two World Trade Center, New York, New York 10048
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code
(212) 720-9218
Francis J. McNamara, III
Secretary
Smith Barney Shearson Worldwide Prime Assets Fund
One Boston Place
Boston, Massachusetts 02108
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering:
As soon as possible after this Post-Effective Amendment
becomes effective.
It is proposed that this filing will become effective:
_____ immediately upon filing pursuant to Rule 485(b)
X on April 1, 1994 pursuant to Rule 485(b)
_____ 60 days after filing pursuant to Rule 485(a)
on _____________ pursuant to Rule 485(a)
______________________________________________________________________________
______
The Registrant has previously filed a declaration of indefinite registration
of its shares pursuant to Rule 24f-2 under the Investment Company Act of 1940,
as amended. Registrant's Rule 24f-2 Notice for the fiscal year ended
November 30, 1993 was filed on January 31, 1994.
SMITH BARNEY SHEARSON WORLDWIDE PRIME ASSETS FUND
FORM N-1A
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(a)
Part A
Item No.
Prospectus Caption
1. Cover Page
Cover Page
2. Synopsis
Prospectus Summary
3. Condensed Financial
Information
Financial Highlights; The Fund's
Performance
4. General Description of
Registrant
Cover Page; Prospectus Summary;
Variable Pricing System;
Investment Objective and
Management Policies; Distributor;
Additional Information
5. Management of the Fund
Management of the Fund;
Distributor; Additional
Information; Annual Report
6. Capital Stock and Other
Securities
Variable Pricing System;
Dividends, Distributions, and
Taxes; Additional Information
7. Purchase of Securities Being
Offered
Variable Pricing System; Purchase
of Shares; Valuation of Shares;
Redemption of Shares; Exchange
Privilege: Additional Information
8 Redemption or Repurchase
Variable Pricing System; Purchase
of Shares; Redemption of Shares
9. Legal Proceedings
Not Applicable
Part B
Item No.
Statement of
Additional Information Caption
10. Cover Page
Cover page
11. Table of Contents
Contents
12. General Information and
History
Distributor
13. Investment Objectives and
Policies
Investment Objective and
Management Policies
14. Management of the Fund
Management of the Fund;
Distributor
15. Control Persons and Principal
Holders
of Securities
Management of the Fund
16. Investment Advisory and Other
Services
Management of the Fund;
Distributor; Custodian
and Transfer Agent
17. Brokerage Allocation
Investment Objective and
Management Policies
18. Capital Stock and Other
Securities
Purchase of Shares; Taxes
19. Purchase, Redemption and
Pricing
of Securities Offered
Purchase of Shares; Redemption of
Shares; Valuation of Shares;
Exchange Privilege
20. Tax Status
Taxes
21. Underwriters
Distributor
22. Calculation of Performance
Data
Performance Data
23. Financial Statements
Financial Statements
<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
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
(CONTINUED FROM PAGE 1)
ALTHOUGH IT INVESTS 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
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- ---------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUMMARY 4
-------------------------------------------------------------
FINANCIAL HIGHLIGHTS 10
-------------------------------------------------------------
VARIABLE PRICING SYSTEM 12
-------------------------------------------------------------
THE FUND'S PERFORMANCE 13
-------------------------------------------------------------
MANAGEMENT OF THE FUND 15
-------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES 16
-------------------------------------------------------------
PURCHASE OF SHARES 31
-------------------------------------------------------------
REDEMPTION OF SHARES 35
-------------------------------------------------------------
VALUATION OF SHARES 39
-------------------------------------------------------------
EXCHANGE PRIVILEGE 40
-------------------------------------------------------------
DISTRIBUTOR 47
-------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES 48
-------------------------------------------------------------
ADDITIONAL INFORMATION 50
-------------------------------------------------------------
</TABLE>
3
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- ---------------------------------------------------------------------------
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:
- - Ownership in a professionally managed portfolio consisting primarily of
high-quality, short-term debt securities providing investment variation
otherwise beyond the means of many individual investors.
- - 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 Shearson 401(k) Program (the "401(k)
Program"). The offering of multiple
4
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
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 through the 401(k) Program 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
through
the 401(k) Program 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
<PAGE>
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"), a subsidiary of First Data Corporation. 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
<PAGE>
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. 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."
7
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
THE FUND'S EXPENSES The following expense table lists the costs and expenses
an
investor will incur either directly or indirectly as a shareholder of the
Fund,
based on the maximum applicable CDSC that may be incurred at the time of
redemption and 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 paid 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
8
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
services for which the Fund pays management fees is described under
"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.
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 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>
9
<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 YEAR:
<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 year $ 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
administrator for the years ended November 30, 1993, 1992 and 1991, were
$0.04,
$0.10, $0.13.
+Annualized operating expense ratios before waiver of fees by investment
adviser and
administrator 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>
10
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A CLASS B SHARE OUTSTANDING THROUGHOUT EACH YEAR:
<TABLE>
<CAPTION>
YEAR
ENDED
11/30/93*#
<S> <C>
Net Asset Value, beginning of year $ 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 year $ 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 administrator for the fiscal
year ended November 30, 1993 was $0.01.
+Annualized operating expense ratios before waiver of fees
by 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 per share data for the year since use of the
undistributed method did not accord with the results of
operations.
</TABLE>
11
<PAGE>
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
through the 401(k) Program 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 "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 the
shareholder, which percentage is equal to the ratio of the total number
12
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
VARIABLE PRICING SYSTEM (CONTINUED)
of Class B shares 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. Average annual 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. Average annual total return figures for Class B shares include
any applicable CDSC. These figures also take into account the distribution
fees,
if any, payable with respect to the Classes.
Average annual 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
13
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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.
14
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SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- --------------------------------------------------------------------
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 February 28, 1994, in excess of $2.1 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.
15
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SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
MANAGEMENT OF THE FUND (CONTINUED)
PORTFOLIO MANAGEMENT
Alan J. Brown, Chief Investment Officer of PanAgora U.K. 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, and additional performance
information regarding the Fund during the fiscal year ended November 30, 1993
is
included in the Fund's Annual Report dated November 30, 1993. A copy of the
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 February 28, 1994,
in
excess of $92.5 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.
- --------------------------------------------------------------------
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
16
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SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
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
17
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SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
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
18
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SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
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 AAA or AA by Standard &
Poor's Corporation ("S&P"), or Aaa 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 AAA or AA by
S&P
or, Aaa 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 unrated, issued by domestic or foreign companies having
outstanding
debt securities rated AAA by S&P, or Aaa 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,
19
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SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
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
20
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SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
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.
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
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
21
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SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- ---------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
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*******************************
******************************************************************************
***************************************************************************
*****************************************************************************
****************************************************************************
******************************************************************************
******************************************************************************
**
********** 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 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
22
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SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- --------------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
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 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,
23
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SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- --------------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
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 Deposit and Trust Company ("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. 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 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
24
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SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- --------------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
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.
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 domestic 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
25
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SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- --------------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
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 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. To
the
extent the Fund invests 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.
26
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- --------------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
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 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
above
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
27
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- --------------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
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
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."
28
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- --------------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
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 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 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.
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
29
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- --------------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
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 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
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
30
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- --------------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
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 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 (the "settlement date") after the
trade 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 asset 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
31
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
PURCHASE OF SHARES (CONTINUED)
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 The Travelers Inc., formerly known as Primerica
Corporation ("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.
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.
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."
32
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
PURCHASE OF SHARES (CONTINUED)
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.
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.
33
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
PURCHASE OF SHARES (CONTINUED)
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 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
34
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
PURCHASE OF SHARES (CONTINUED)
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 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
35
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
REDEMPTION OF SHARES (CONTINUED)
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:
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
36
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
REDEMPTION OF SHARES (CONTINUED)
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.
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
37
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- ---------------------------------------------------------------------------
REDEMPTION OF SHARES (CONTINUED)
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 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
38
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- --------------------------------------------------------------------
REDEMPTION OF SHARES (CONTINUED)
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 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
39
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
VALUATION OF SHARES (CONTINUED)
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.
- --------------------------------------------------------------------
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.
</TABLE>
40
<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 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.
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.
</TABLE>
41
<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 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 U.S. 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.
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.
</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 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.
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.
</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 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.
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.
</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>
*** 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 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
45
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
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.
Shareholders of the funds in the Smith Barney Shearson Group of Funds who
wish
to exchange all or a portion of their Class A 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. 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
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. 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 shareholders.
In this event, PanAgora U.K. 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.
46
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
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. 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
a
wholly owned subsidiary of Smith Barney Shearson Holdings Inc. ("Holdings").
Holdings is a wholly owned subsidiary of Travelers, a diversified financial
services holding company principally engaged in the business of providing
investment, consumer finance and insurance services. 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 provide support services in connection with the
distribution of shares of the Fund; and payments to Smith Barney Shearson
47
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
DISTRIBUTOR (CONTINUED)
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 subject to
a
4% nondeductible excise tax measured with respect to certain undistributed
amounts of net investment income and capital gains. The Fund
48
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES (CONTINUED)
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
(1) 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 (2) 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 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 be taxable to
shareholders as long-term capital gain, regardless of how long shareholders
have
held their Fund shares and whether such distributions are
49
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES (CONTINUED)
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 and
distributions of net realized capital gains paid by the Fund 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 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.
50
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
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.
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
51
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
- -------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
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.
52
<PAGE>
SMITH BARNEY SHEARSON
WORLDWIDE
PRIME ASSETS
FUND
Two World Trade Center
New York, New York 10048
Fund 139
FD0244 C4
Smith Barney Shearson
WORLDWIDE PRIME ASSETS FUND
Two World Trade Center
New York, New York 10048
(212) 720-9218
STATEMENT OF ADDITIONAL INFORMATION APRIL 1, 1994
This Statement of Additional Information expands upon and supplements the
information contained in the current Prospectus of Smith Barney Shearson
Worldwide Prime Assets Fund (the "Fund"), dated April 1, 1994, as amended
or supplemented from time to time, and should be read in conjunction with
the Prospectus. The Prospectus may be obtained from your Smith Barney
Shearson Financial Consultant or by writing or calling the Fund at the ad-
dress or telephone number listed above. This Statement of Additional In-
formation, although not in itself a prospectus, is incorporated by refer-
ence into the Prospectus in its entirety.
CONTENTS
For ease of reference, the same section headings are used in both the Pro-
spectus and this Statement of Additional Information except where shown
below:
<TABLE>
<S>
<C>
Management of the Fund
1
Investment Objective and Management Policies
5
Purchase of Shares
15
Redemption of Shares
15
Distributor
16
Valuation of Shares
17
Exchange Privilege
17
Performance Data (See in the Prospectus "The Fund's Performance")
18
Taxes (See in the Prospectus "Dividends, Distributions and Taxes")
20
Custodian and Transfer Agent
21
Financial Statements
22
Appendix: Description of S&P and Moody's Ratings A-
1
</TABLE>
MANAGEMENT OF THE FUND
The executive officers of the Fund are employees of certain of the organi-
zations that provide services to the Fund. These organizations are the
following:
<TABLE>
<CAPTION>
NAME SERVICE
<S> <C>
Smith Barney Shearson Inc.
("Smith Barney Shearson") Distributor
PanAgora Asset Management Limited
("PanAgora U.K.") Investment Adviser
The Boston Company Advisors, Inc.
("Boston Advisors") Administrator
Boston Safe Deposit and Trust Company
("Boston Safe") Custodian
The Shareholder Services Group, Inc.
("TSSG"), a subsidiary of First Data Corporation Transfer Agent
</TABLE>
These organizations and the functions they perform for the Fund are dis-
cussed in the Prospectus and in this Statement of Additional Information.
TRUSTEES AND EXECUTIVE OFFICERS OF THE FUND
The Trustees and the executive officers of the Fund, together with infor-
mation as to their principal business occupations during the past five
years, are set forth below. Each Trustee who is an "interested person" of
the Fund, as defined in the Investment Company Act of 1940, as amended
(the "1940 Act"), is indicated by an asterisk.
Paul R. Ades, Trustee. Partner in the law firm of Murov & Ades. His ad-
dress is 272 South Wellwood Avenue, P.O. Box 504, Lindenhurst, New York
11757.
Herbert Barg, Trustee. Private Investor. His address is 273 Montgomery Av-
enue, Bala Cynwyd, Pennsylvania 19004.
Allan R. Johnson, Trustee. Retired, former Chairman, Retail Division of
BATUS, Inc., and Chairman and Chief Executive Officer of Saks Fifth Ave-
nue, Inc. His address is 2 Sutton Place South, New York, New York 10022.
*Heath B. McLendon, Chairman of the Board and Investment Officer. Execu-
tive Vice President of Smith Barney Shearson; Chairman of Smith Barney
Shearson Strategy Advisers Inc.; prior to July 1993, Senior Executive Vice
President of Shearson Lehman Brothers Inc. ("Shearson Lehman Brothers");
Vice Chairman of Shearson Asset Management, a member of Asset Management
Group of Shearson Lehman Brothers; a Director of PanAgora Asset Manage-
ment, Inc. and PanAgora U.K. His address is Two World Trade Center, New
York, New York 10048.
Ken Miller, Trustee. President of Young Stuff Apparel Group, Inc. His ad-
dress is 1407 Broadway, 6th Floor, New York, New York 10018.
John F. White, Trustee. President Emeritus of The Cooper Union for the Ad-
vancement of Science and Art; Special Assistant to the President of the
Aspen Institute. His address is 97 Sunset Drive, Sarasota, Florida 34236.
Stephen J. Treadway, President. Executive Vice President and Director of
Smith Barney Shearson; Director and President of Mutual Management Corp.
and Smith, Barney Advisers, Inc. and Trustee of Corporate Realty Income
Trust I. His address is 1345 Avenue of the Americas, New York, New York
10105.
Richard P. Roelofs, Executive Vice President. Managing Director of Smith
Barney Shearson and President of Smith Barney Shearson Strategy Advisers
Inc.; prior to July 1993, Senior Vice President of Shearson Lehman Broth-
ers; Vice President of Shearson Lehman Investment Strategy Advisors Inc.,
an investment advisory affiliate of Shearson Lehman Brothers. His address
is Two World Trade Center, New York, New York 10048.
Alan J. Brown, Vice President and Investment Officer. Chief Investment Of-
ficer of PanAgora U.K. His address is 3 Finsbury Avenue, London, England
EC2M 2PA.
Paul F. Duncombe, Vice President and Investment Officer. Senior Investment
Manager of PanAgora U.K. His address is 3 Finsbury Avenue, London, England
EC2M 2PA.
Vincent Nave, Treasurer. Senior Vice President of Boston Advisors and Bos-
ton Safe. His address is One Boston Place, Boston, Massachusetts 02108.
Francis J. McNamara, III, Secretary. Senior Vice President and General
Counsel of Boston Advisors; prior to June 1989, Vice President and General
Counsel of Boston Advisors. His address is One Boston Place, Boston, Mas-
sachusetts 02108.
Each Trustee also serves as a trustee, general partner and/or director of
certain other mutual funds for which Smith Barney Shearson serves as dis-
tributor. As of February 28, 1994, the Trustees and officers of the Fund,
as a group, owned less than 1% of the outstanding shares of beneficial in-
terest of the Fund.
No director, officer or employee of Smith Barney Shearson, PanAgora U.K.
or Boston Advisors or any of their affiliates receives any compensation
from the Fund for serving as an officer or Trustee of the Fund. The Fund
pays each Trustee who is not a director, officer or employee of Smith Bar-
ney Shearson, PanAgora U.K. or Boston Advisors or any of their affiliates
a fee of $2,000 per annum plus $500 per meeting attended and reimburses
them for travel and out-of-pocket expenses. For the fiscal year ended No-
vember 30, 1993, such fees and expenses totalled $22,957.
INVESTMENT ADVISER -- PANAGORA U.K.
ADMINISTRATOR -- BOSTON ADVISORS
PanAgora U.K. serves as investment adviser to the Fund pursuant to a writ-
ten agreement (the "Advisory Agreement") dated January 28, 1991, which was
most recently approved by the Fund's Board of Trustees, including a major-
ity of the Trustees who are not "interested persons" of the Fund or PanAg-
ora U.K. or Smith Barney Shearson, on July 15, 1993. Fifty percent of the
outstanding voting stock of PanAgora U.K. is owned by Nippon Life Insur-
ance Company and fifty percent is owned by Lehman Brothers Inc., which is
a wholly owned subsidiary of Lehman Brothers Holdings Inc. ("Lehman Hold-
ings"). American Express Company 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. bears all expenses in connection with the performance of its ser-
vices. As compensation for PanAgora U.K.'s services rendered to the Fund,
the Fund pays a fee computed daily and payable monthly at the annual rate
of .45% of the value of the Fund's average daily net assets. For the fis-
cal period ended November 30, 1991 and for the fiscal years ended November
30, 1992 and 1993, the Fund incurred $2,415,879, $1,988,473 and $601,334,
respectively, in investment advisory fees. PanAgora U.K. voluntarily
waived investment advisory fees for the same periods in the amount of
$163,358, $163,857 and $253,897, respectively.
Boston Advisors serves as administrator to the Fund pursuant to a written
agreement (the "Administration Agreement") dated May 21, 1993, which was
most recently approved by the Board of Trustees, including a majority of
the Trustees who are not "interested persons" of the Fund or Boston Advi-
sors, on July 15, 1993. Prior to May 21, 1993, Boston Advisors acted in
the capacity as the Fund's sub-investment adviser and administrator. Bos-
ton Advisors is a wholly owned subsidiary of The Boston Company, Inc.
("TBC"), a financial services holding company, which is in turn a wholly
owned subsidiary of Mellon Bank Corporation ("Mellon").
Certain services provided to the Fund by Boston Advisors pursuant to the
Administration Agreement are described in the Prospectus under "Management
of the Fund." In addition to those services, Boston Advisors pays the sal-
aries of all officers and employees who are employed by both it and the
Fund, maintains office facilities for the Fund, furnishes the Fund with
statistical and research data, clerical help and accounting, data process-
ing, bookkeeping, internal auditing and legal services and certain other
services required by the Fund, prepares reports for the Fund's sharehold-
ers and prepares tax returns, reports to and filings with the Securities
and Exchange Commission (the "SEC"), and state blue sky authorities. Bos-
ton Advisors bears all expenses in connection with the performance of its
services.
As compensation for Boston Advisors' services rendered to the Fund, the
Fund pays a fee computed daily and payable monthly at the annual rate of
.20% of the value of the Fund's average daily net assets. For the fiscal
period ended November 30, 1991 and for the fiscal years ended November 30,
1992 and 1993, the Fund incurred $1,074,058, $883,766 and $267,259, re-
spectively, in sub-investment advisory and administration fees. Boston Ad-
visors voluntarily waived sub-investment advisory and/or administration
fees for the same periods in the amount of $72,627, $73,215 and $113,585,
respectively.
The Fund bears expenses incurred in its operations, including taxes, in-
terest, brokerage fees and commissions, if any; fees of Trustees who are
not officers, directors, shareholders or employees of Smith Barney Shear-
son, PanAgora U.K. or Boston Advisors; SEC fees and state blue sky quali-
fication fees; charges of custodians; transfer and dividend disbursing
agents' fees; certain insurance premiums; outside auditing and legal ex-
penses; investor services (including allocated telephone and personnel ex-
penses), and costs of preparation and printing of prospectuses for regula-
tory purposes and for distribution to existing shareholders; costs of
shareholders' reports and corporate meetings; and any extraordinary ex-
penses.
PanAgora U.K. and Boston Advisors have each agreed that if in any fiscal
year the aggregate expenses of the Fund (including fees payable pursuant
to the Advisory Agreement and the Administration Agreement, but excluding
interest, taxes, brokerage, distribution fees paid pursuant to the Fund's
plan of distribution and, if permitted by the relevant state securities
commission, extraordinary expenses) exceed the expense limitation of any
state having jurisdiction over the Fund, PanAgora U.K. and Boston Advisors
will, to the extent required by state law, reduce their management fees by
the amount of such excess expenses, such amount to be allocated between
them in the proportion that their respective fees bear to the aggregate of
the fees paid the Fund. Such fee reduction, if any, will be estimated and
reconciled on a monthly basis. The most restrictive state expense limita-
tion applicable to the Fund would require PanAgora U.K. and Boston Advi-
sors to reduce their fees in any year that such expenses exceed 2.5% of
the first $30 million of average daily net assets, 2% of the next $70 mil-
lion of average daily net assets and 1.5% of the remaining average daily
net assets. No fee reduction was required for the fiscal period ended No-
vember 30, 1991 and for the fiscal years ended November 30, 1992 and 1993.
COUNSEL AND AUDITORS
Willkie Farr & Gallagher serves as counsel to the Fund. The Trustees who
are not interested persons of the Fund have selected Stroock & Stroock &
Lavan to serve as their counsel.
Coopers & Lybrand, independent accountants, One Post Office Square, Bos-
ton, Massachusetts 02109, serve as auditors of the Fund and render an
opinion on the Fund's financial statements annually.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The Prospectus discusses the Fund's investment objective and the policies
it employs to achieve its objective. Supplemental information is set out
below concerning the types of securities and other instruments in which
the Fund may invest, the investment policies and strategies the Fund may
utilize and certain risks attendant to those investments, policies and
strategies.
UNITED STATES GOVERNMENT SECURITIES
United States government securities include debt obligations of varying
maturities issued or guaranteed by the United States government, its agen-
cies or instumentalities ("U.S. government securities"). Direct obliga-
tions of the United States Treasury include a variety of securities that
differ in their interest rates, maturities and dates of issuance.
U.S. government securities include not only direct obligations of the
United States Treasury, but also include securities issued or guaranteed
by the Federal Housing Administration, Federal Financing Bank, Export-
Import Bank of the United States, Small Business Administration, Govern-
ment National Mortgage Association, General Services Administration, Fed-
eral Home Loan Banks, Federal Home Loan Mortgage Corporation, Federal Na-
tional Mortgage Association, Maritime Administration, Tennessee Valley
Authority, Resolution Trust Corporation, District of Columbia Armory
Board, Student Loan Marketing Association and various institutions that
previously were or currently are part of the Farm Credit System (which has
been undergoing a reorganization since 1987). Because the United States
government is not obligated by law to provide support to an instrumental-
ity that it sponsors, the Fund will invest in obligations issued by such
an instrumentality only if PanAgora U.K. determines that the credit risk
with respect to the instrumentality does not make its securities unsuit-
able for investment by the Fund.
FUTURES CONTRACTS
The Fund may enter into contracts for the purchase or sale for future de-
livery of fixed-income securities or foreign currencies that otherwise
meet the Fund's investment policies, to the extent permitted by the Com-
modity Futures Trading Commission (the "CFTC"). U.S. futures contracts
have been designed by exchanges that have been designated "contract mar-
kets" by the CFTC, and must be executed through a futures commission mer-
chant, or brokerage firm, which is a member of the relevant contract mar-
ket. Futures contracts trade on a number of contract markets, and, through
their clearing corporations, the exchanges guarantee performance of the
contracts as between the clearing members of the exchange. The Fund will
enter into futures contracts that are based on debt securities backed by
the full faith and credit of the United States government, such as Trea-
sury notes, Government National Mortgage Association modified pass-through
mortgage-backed securities and three-month U.S. Treasury Bills. The Fund
may also enter into futures contracts that are based on non-U.S. govern-
ment bonds.
An interest rate futures contract provides for the future sale by one
party and the purchase by the other party of a certain amount of a spe-
cific interest rate-sensitive financial instrument at a specified price,
date, time and place. A foreign currency futures contract provides for the
future sale by one party and the purchase by the other party of a certain
amount of a specified foreign currency at a specified price, date, time
and place.
The Fund may not enter into futures transactions if the sum of the amount
of initial margin deposits on its existing futures contracts and premiums
paid for unexpired options on futures contracts, to establish such posi-
tions that are not bona fide hedging positions (as defined by the CFTC),
would exceed 5% of the fair market value of the Fund's total assets, after
taking into account unrealized profits and unrealized losses on commodity
contracts it has entered into. The Fund will not use leverage when it en-
ters into long futures or options contracts and for each such long posi-
tion the Fund will deposit as collateral with its custodian in a segre-
gated account, cash or cash equivalents, such as U.S. government securi-
ties or high-grade debt obligations, having a value equal to the
underlying commodity value of the contract.
The purpose of entering into a futures contract is to protect the Fund
from fluctuations in the value of its portfolio securities without its
necessarily buying or selling the securities. Of course, because the value
of portfolio securities will far exceed the value of the futures contracts
sold by the Fund, an increase in the value of the futures contracts could
only mitigate, but not totally offset, the decline in the value of the
Fund's assets. No consideration is paid or received by the Fund upon en-
tering into a futures contract. Upon entering into a futures contract, the
Fund will be required to deposit in a segregated account with its custo-
dian an amount of cash or cash equivalents, such as U.S. government secu-
rities or high-grade debt obligations, equal to approximately 1% to 10% of
the contract amount (this amount is subject to change by the exchange on
which the contract is traded and brokers may charge a higher amount). This
amount is known as "initial margin" and is in the nature of a performance
bond or good faith deposit on the contract that is returned to the Fund
upon termination of the futures contract, assuming that all contractual
obligations have been satisfied. The broker will have access to amounts in
the margin account if the Fund fails to meet its contractual obligations.
Subsequent payments to and from the broker, known as "variation margin,"
will be made daily as the price of the currency or securities underlying
the futures contract fluctuates, making the long and short positions in
the futures contract more or less valuable, a process known as "marking-
to-market." At any time prior to the expiration of a futures contract, the
Fund may elect to close the position by taking an opposite position, which
will operate to terminate the Fund's existing position in the contract.
The use of futures contracts as a hedging device involves several risks.
Successful use of futures contracts is subject to the ability of PanAgora
U.K. to predict correctly movements in the price of the securities or cur-
rencies underlying the particular hedge. These predictions and, thus, the
use of futures contracts, involve skills and techniques that are different
from those involved in the management of the portfolio securities being
hedged. In addition, there can be no assurance that there will be a corre-
lation between movements in the price of the underlying securities or cur-
rencies and movements in the price of the securities that are the subject
of the hedge. A decision concerning whether, when and how to hedge in-
volves the exercise of skill and judgment and even a well-conceived hedge
may be unsuccessful to some degree because of unexpected market behavior
or trends in interest rates or currency values.
Positions in futures contracts and options on futures contracts may be
closed out only on the exchange on which they were entered into (or
through a linked exchange). No secondary market for such contracts exists.
Although the Fund intends to enter into futures contracts only if there is
an active market for such contracts, there is no assurance that an active
market will exist for the contracts at any particular time. Most futures
exchanges limit the amount of fluctuation permitted in futures contract
prices during a single trading day. Once the daily limit has been reached
in a particular contract, no trades may be made on that day at a price be-
yond that limit. It is possible that prices for futures contracts could
move to the daily limit for several consecutive trading days with little
or no trading, thereby preventing prompt liquidation of futures positions
and subjecting the Fund to substantial losses. In that case, and in the
event of adverse price movements, the Fund would be required to make daily
cash payments of variation margin. In such circumstances, an increase in
the value of the portion of the Fund's securities being hedged, if any,
may partially or completely offset losses on the futures contract. How-
ever, as described above, there is no assurance that the price of the se-
curities being hedged will, in fact, correlate with the price movements in
a futures contract and thus provide an offset to losses on the futures
contract.
If the Fund has hedged against the possibility of an event adversely af-
fecting the value of securities held in its portfolio and that event does
not occur, the Fund will lose part or all of the benefit of the increased
value of securities that it has hedged because it will have offsetting
losses in its futures positions. Losses incurred in hedging transactions
and the costs of these transactions will affect the Fund's performance. In
addition, in such situations, if the Fund had insufficient cash, it might
have to sell securities to meet daily variation margin requirements at a
time when it would be disadvantageous to do so. These sales of securities
could, but will not necessarily, be at increased prices that reflect the
change in interest rates or currency values.
OPTIONS ON FUTURES CONTRACTS
The Fund may purchase and write put and call options on interest rate and
foreign currency contracts that are traded on a domestic exchange or board
of trade or a foreign exchange, to the extent permitted by the CFTC, as a
hedge against changes in interest rates and market conditions, and may
enter into closing transactions with respect to such options to terminate
existing positions. No assurance can be given that such closing transac-
tions can be effected.
An option on an interest rate or foreign currency futures contract, as
contrasted with the direct investment in such a contract, gives the pur-
chaser the right, in return for the premium paid, to assume a position in
an interest rate or foreign currency contract at a specified exercise
price at any time prior to the expiration date of the option. Upon exer-
cise of an option, the delivery of the futures position by the writer of
the option to the holder of the option will be accompanied by delivery of
the accumulated balance in the writer's futures margin account, which rep-
resents the amount by which the market price of the futures contract ex-
ceeds, in the case of a call, or is less than, in the case of a put, the
exercise price of the option on the futures contract. The potential loss
related to the purchase of an option on a futures contract is limited to
the premium paid for the option (plus transaction costs). Because the
value of the option is fixed at the point of sale, there are no daily cash
payments to reflect changes in the value of the underlying contract; how-
ever, the value of the option does change daily and that change would be
reflected in the net asset value of the Fund.
Options on futures contracts involve several risks. The ability to estab-
lish and close out positions on such options will be subject to the exist-
ence of a liquid market. In addition, the purchase of put or call options
will be based upon predictions as to anticipated trends in interest rates
and securities markets and in currency values by PanAgora U.K., which
could prove to be incorrect. Even if PanAgora U.K.'s expectations are cor-
rect, an imperfect correlation may exist between the change in the value
of the options and of the portfolio securities hedged.
OPTIONS ON FOREIGN CURRENCIES
The Fund may purchase and write options on foreign currencies for hedging
purposes in a manner similar to that in which futures contracts on foreign
currencies, or forward contracts, will be utilized. A decline in the dol-
lar value of a foreign currency in which securities are denominated, for
example, will reduce the dollar value of such securities, even if their
value in the foreign currency remains constant. In order to protect
against diminutions in the value of its portfolio securities, the Fund may
purchase put options on the foreign currency. If the value of the currency
does decline, the Fund will have the right to sell such currency for a
fixed amount in dollars and will thereby offset, in whole or in part, the
adverse effect on its portfolio that otherwise would have resulted. Con-
versely, when an increase in the dollar value of a currency in which secu-
rities to be acquired are denominated is projected, thereby increasing the
cost of such securities, the Fund may purchase call options thereon. The
purchase of such options could offset, at least partially, the effects of
the adverse movements in exchange rates. As in the case of other types of
options, however, the benefit to the Fund deriving from purchases of for-
eign currency options will be reduced by the amount of the premium and re-
lated transaction costs. In addition, when currency exchange rates do not
move in the direction or to the extent anticipated, the Fund could sustain
losses on transactions in foreign currency options that would require it
to forego a portion or all of the benefits of advantageous changes in such
rates.
The Fund may write options on foreign currencies for the types of hedging
purposes described above. For example, when the Fund anticipates a decline
in the dollar value of foreign currency-denominated securities due to ad-
verse fluctuations in exchange rates, it could, instead of purchasing a
put option, write a call option on the relevant currency. If the expected
decline occurs, the option will most likely not be exercised, and the dim-
inution in the value of portfolio securities will be offset by the amount
of the premium received.
Similarly, instead of purchasing a call option to hedge against an antici-
pated increase in the dollar cost of securities to be acquired, the Fund
could write a put option on the relevant currency which, if rates move in
the manner projected, will expire unexercised and allow the Fund to hedge
such increased cost up to the amount of the premium. As in the case of
other types of options, however, the writing of a foreign currency option
will constitute only a partial hedge up to the amount of the premium, and
only if rates move in the expected direction. If this does not occur, the
option may be exercised and the Fund would be required to purchase or sell
the underlying currency at a loss that may not be offset by the amount of
the premium. Through the writing of options on foreign currencies, the
Fund also may be required to forego all or a portion of the benefits that
might otherwise have been obtained from favorable movements in exchange
rates.
The Fund may write covered call options on foreign currencies. A call op-
tion written on a foreign currency by the Fund is "covered" if the Fund
owns the underlying foreign currency covered by the call or has an abso-
lute and immediate right to acquire that foreign currency without addi-
tional cash consideration (or for additional cash consideration held in a
segregated account by Boston Safe, or by a designated sub-custodian) upon
conversion or exchange of other foreign currency held in its portfolio. A
call option also is covered if the Fund has a call on the same foreign
currency and in the same principal amount as the call written when the ex-
ercise price of the call held (a) is equal to or less than the exercise
price of the call written or (b) is greater than the exercise price of the
call written if the difference is maintained by the Fund in cash, U.S.
government securities and other high-grade liquid debt securities in a
segregated account with Boston Safe or with a designated sub-custodian.
The Fund may write call options on foreign currencies that are not covered
for cross-hedging purposes. A call option on a foreign currency written
for these purposes would be designed to provide a hedge against a decline,
due to an adverse change in exchange rates, in the U.S. dollar value of a
security, denominated in the currency underlying the option, that the Fund
owns or has the right to acquire. In such circumstances, the Fund will
collateralize the option by maintaining in a segregated account with Bos-
ton Safe, or with a designated sub-custodian, cash or U.S. government se-
curities in an amount not less than the value of the underlying foreign
currency in U.S. dollars marked-to-market daily. To the extent a segre-
gated account consisting of cash or U.S. government securities is main-
tained by the Fund to collateralize the writing of call options on foreign
currencies, the Fund will limit the collateralization to 50% of the Fund's
net assets.
FORWARD CURRENCY CONTRACTS
As noted in the Prospectus, if the Fund enters into a position-hedging
transaction, cash or liquid high-grade debt securities will be placed in a
segregated account in an amount equal to the value of the Fund's total as-
sets committed to the consummation of the forward currency contract. If
the value of the securities placed in the segregated account declines, ad-
ditional cash or securities will be placed in the account so that the
value of the account will equal the amount of the Fund's commitment with
respect to the contract. Hedging transactions may be made from any foreign
currency into U.S. dollars or into other appropriate currencies.
At or before the maturity of a forward currency contract, the Fund may ei-
ther sell a portfolio security and make delivery of the currency, or re-
tain the security and offset its contractual obligation to deliver the
currency by purchasing a second contract pursuant to which the Fund will
obtain, on the same maturity date, the same amount of the currency that it
is obligated to deliver. If the Fund retains the portfolio security and
engages in an offsetting transaction, the Fund, at the time of execution
of the offsetting transaction, will incur a gain or a loss to the extent
movement has occurred in forward currency contract prices. Should forward
prices decline during the period between the Fund's entering into a for-
ward currency contract for the sale of a currency and the date it enters
into an offsetting contract for the purchase of the currency, the Fund
will realize a gain to the extent the price of the currency it has agreed
to sell exceeds the price of the currency it has agreed to purchase.
Should forward prices increase, the Fund will suffer a loss to the extent
the price of the currency it has agreed to purchase exceeds the price of
the currency it has agreed to sell.
The cost to the Fund of engaging in currency transactions varies with fac-
tors such as the currency involved, the length of the contract period and
the market conditions then prevailing. Because transactions in currency
exchange contracts are usually conducted on a principal basis, no fees or
commissions are involved. The use of forward currency contracts does not
eliminate fluctuations in the underlying prices of the securities, but it
does establish a rate of exchange that can be achieved in the future. In
addition, although forward currency contracts limit the risk of loss due
to a decline in the value of the hedged currency, at the same time, they
limit any potential gain that might result should the value of the cur-
rency increase.
If a devaluation is generally anticipated, the Fund may not be able to
contract to sell the currency at a price above the devaluation level it
anticipates. The Fund will not enter into a currency transaction if, as a
result, it will fail to qualify as a regulated investment company under
the Internal Revenue Code of 1986, as amended (the "Code"), for a given
year.
ADDITIONAL RISKS OF OPTIONS ON FUTURES CONTRACTS, FORWARD CURRENCY
CONTRACTS AND OPTIONS ON FOREIGN CURRENCIES
Certain futures contracts, options on foreign currencies and forward cur-
rency contracts are not traded on contract markets regulated by the CFTC,
and forward currency contracts are not regulated by the SEC. Instead, for-
ward currency contracts are traded through financial institutions acting
as market-makers. In the forward currency market there are no daily price
fluctuation limits, and adverse market movements could therefore continue
to an unlimited extent over a period of time. Moreover, a trader of for-
ward currency contracts could lose amounts substantially in excess of its
initial investments, due to the collateral requirements associated with
such positions.
Options on foreign currencies traded on national securities exchanges are
within the jurisdiction of the SEC, as are other securities traded on such
exchanges. As a result, many of the protections provided to traders on or-
ganized exchanges will be available with respect to such transactions. In
particular, all foreign currency option positions entered into on a na-
tional securities exchange are cleared and guaranteed by the Options
Clearing Corporation (the "OCC"), thereby reducing the risk of counter-
party default. Further, a liquid secondary market in options traded on a
national securities exchange may exist, potentially permitting the Fund to
liquidate open positions at a profit prior to their exercise or expira-
tion, or to limit losses in the event of adverse market movements.
The purchase and sale of exchange-traded foreign currency options, how-
ever, are subject to the risks of the availability of a liquid secondary
market described above, as well as the risks regarding adverse market
movements, margining of options written, the nature of the foreign cur-
rency market, possible intervention by governmental authorities and the
effects of other political and economic events. In addition, exercise and
settlement of such options must be made exclusively through the OCC, which
has established banking relationships in applicable foreign countries for
this purpose. As a result, the OCC may, if it determines that foreign gov-
ernmental restrictions or taxes would prevent the orderly settlement of
foreign currency option exercises, or would result in undue burdens on the
OCC or its clearing member, impose special procedures on exercise and set-
tlement, such as technical changes in the mechanics of delivery of cur-
rency, the fixing of dollar settlement prices or prohibitions on exercise.
Futures contracts, options on futures contracts, forward currency con-
tracts and options on foreign currencies may be traded on foreign ex-
changes, to the extent permitted by the CFTC. These transactions are sub-
ject to the risk of governmental actions affecting trading in, or the
prices of, foreign currencies or securities. The value of such positions
also could be adversely affected by (a) other complex foreign political
and economic factors, (b) lesser availability than in the United States of
data on which to make trading decisions, (c) delays in the Fund's ability
to act upon economic events occurring in foreign markets during non-
business hours in the United States and the United Kingdom, (d) the impo-
sition of different exercise and settlement terms and procedures and mar-
gin requirements than in the United States and (e) lesser trading volume.
LENDING PORTFOLIO SECURITIES
The Fund may lend securities to brokers, dealers and other financial orga-
nizations. These loans, if and when made, may not exceed 20% of the value
of the Fund's total assets. The Fund will not lend securities to Smith
Barney Shearson or its affiliates unless the Fund has applied for and re-
ceived specific authority to do so from the SEC. The Fund's loans of secu-
rities will be collateralized by cash, letters of credit or U.S. govern-
ment 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 a designated sub-custodian, in an amount at least equal to
the current market value of the loaned securities. From time to time, the
Fund may pay a part of the interest earned from the investment of collat-
eral received for securities loaned to: (a) the borrower; and/or (b) a
third party that is unaffiliated with the Fund and is acting as a
"finder."
By lending its securities, the Fund can increase its income by continuing
to receive interest on the loaned securities as well as by either invest-
ing the cash collateral in short-term instruments or obtaining yield in
the form of interest paid by the borrower when U.S. government securities
are used as collateral. The Fund will comply with the following conditions
whenever it loans securities: (a) the Fund must receive at least 100% cash
collateral or equivalent securities from the borrower; (b) the borrower
must increase the collateral whenever the market value of the securities
loaned rises above the level of the collateral; (c) the Fund must be able
to terminate the loan at any time; (d) the Fund must receive reasonable
interest on the loan, as well as any dividends, interest or other distri-
butions on the loaned securities, and any increase in market value; (e)
the Fund may pay only reasonable custodian fees in connection with the
loan; and (f) voting rights on the loaned securities may pass to the bor-
rower except that, if a material event adversely affecting the investment
in the loaned securities occurs, the Fund's Board of Trustees must termi-
nate the loan and regain the right to vote the securities.
REPURCHASE AGREEMENTS
The Fund may engage in repurchase agreement transactions with certain mem-
ber 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. Repurchase agreements are contracts
under which the buyer of a security simultaneously commits to resell the
security to the seller at an agreed-upon price and date. Under each repur-
chase agreement, the selling institution is required to maintain the value
of the securities subject to the repurchase agreement at not less than
their repurchase price. Repurchase agreements involve certain risks in the
event of default or insolvency of the other party, including possible de-
lays or restrictions upon the Fund's ability to dispose of the underlying
securities. PanAgora U.K. or Boston Advisors, acting under the supervision
of the Fund's Board of Trustees, reviews, on an ongoing basis to evaluate
potential risks, the value of the collateral and the creditworthiness of
those banks and dealers with which the Fund enters into repurchase agree-
ments.
WHEN-ISSUED SECURITIES
When the Fund agrees to purchase when-issued securities, Boston Safe, or a
designated sub-custodian, will set aside cash, U.S. government securities
or high-grade debt obligations equal to the amount of the commitment in a
segregated account. Normally, Boston Safe or the designated sub-custodian
will set aside securities held by the Fund to satisfy a purchase commit-
ment, and in such case, the Fund may be required subsequently to place ad-
ditional assets in the segregated account to ensure that the value of the
account remains equal to the amount of the Fund's commitment. The Fund's
net assets may be expected to fluctuate to a greater degree when it sets
aside securities held by the Fund to cover its purchase commitments than
when it sets aside cash. When the Fund engages in when-issued securities
transactions, it relies on the other party to consummate the trade. Fail-
ure of the seller to do so may result in the Fund's incurring a loss or
missing an opportunity to obtain a price considered to be advantageous.
INVESTMENT RESTRICTIONS
The investment restrictions numbered 1 through 13 below have been adopted
by the Fund as fundamental policies. Under the 1940 Act, a fundamental
policy may not be changed without the vote of a majority of the outstand-
ing voting securities of the Fund, as defined in the 1940 Act. Majority is
defined in the 1940 Act as the lesser of (a) 67% or more of the shares
present at a Fund meeting, if the holders of more than 50% of the out-
standing shares of the Fund are present or represented by proxy, or (b)
more than 50% of the outstanding shares of the Fund. Investment restric-
tions numbered 14 through 16 may be changed by a vote of a majority of the
Fund's Board of Trustees at any time.
Under the investment policies adopted by the Fund, the Fund will not:
1. Invest more than 25% of the value of its total assets in securi-
ties of issuers in any one industry, other than the banking industry,
except that this limitation is not applicable to the Fund's invest-
ments in U.S. government securities. For purposes of this restriction,
the Fund will treat securities issued by a foreign government or a su-
pranational organization and the agencies and instrumentalities of
that foreign government or supranational organization to be securities
issued by issuers in a single industry.
2. Borrow money, except that the Fund may borrow from banks for tem-
porary or emergency (not leveraging) purposes, including the meeting
of redemption requests that might otherwise require the untimely dis-
position 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 (in-
cluding 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 as-
sets, the Fund will not make any additional investments.
3. Pledge, hypothecate, mortgage or otherwise encumber its assets, ex-
cept to secure permitted borrowings.
4. Lend any funds or other assets, except through purchasing obliga-
tions, lending portfolio securities and entering into repurchase
agreements consistent with the Fund's investment objective and poli-
cies.
5. Purchase securities on margin, except that the Fund may obtain any
short-term credits necessary for the clearance of purchases and sales
of securities.
6. Make short sales of securities or maintain a short position, unless
at all times when a short position is open it owns an equal amount of
such securities or securities convertible into or exchangeable for,
without payment of any further consideration, securities of the same
issue as, and equal in amount to, the securities sold short ("short
sales against the box"), and unless not more than 10% of the Fund's
net assets (taken at market value) is held as collateral for such
sales at any one time (it is the Fund's present intention to make such
sales only for the purpose of deferring realization of gain or loss
for Federal income tax purposes).
7. Purchase or sell real estate or real estate limited partnership in-
terests, except that it may purchase and sell securities of companies
that deal in real estate or interests therein.
8. Purchase or sell commodities or commodity contracts (except curren-
cies, futures contracts on currencies, securities indices and fixed-
income securities and related options, spot and forward foreign cur-
rency contracts and other similar contracts).
9. Invest in oil, gas or other mineral leases or exploration or de-
velopment programs.
10. Act as an underwriter of securities, except that the Fund may ac-
quire securities under circumstances in which, if the securities were
sold, the Fund might be deemed to be an underwriter for purposes of
the Securities Act of 1933, as amended.
11. Purchase any security if as a result (unless the security is ac-
quired pursuant to a plan of reorganization or an offer of exchange)
the Fund would own any securities of an open-end investment company or
more than 3% of the total outstanding voting stock of any closed-end
investment company or more than 5% of the value of the Fund's total
assets would be invested in securities of any one or more closed-end
investment companies.
12. Participate on a joint or joint-and-several basis in any securi-
ties trading account.
13. Make investments for the purpose of exercising control of manage-
ment.
14. Purchase more than 10% of the voting securities of any one is-
suer.
15. Purchase any security if as a result the Fund would then have
more than 5% of its total assets invested in securities of companies
(including predecessors) that have been in continuous operation for
fewer than three years.
16. Purchase or retain securities of any company if, to the knowledge
of the Fund, any of the Fund's officers or Trustees or any officer or
director of PanAgora U.K. individually owns more than 1/2 of 1% of the
outstanding securities of the company and together they own benefi-
cially more than 5% of the securities.
The Fund may make commitments more restrictive than the restrictions
listed above so as to permit the sale of shares of the Fund in certain
states. Should the Fund determine that a commitment is no longer in the
best interests of the Fund and its shareholders, the Fund will revoke the
commitment by terminating the sale of shares of the Fund in the state in-
volved. The percentage limitations contained in the restrictions listed
above apply at the time of purchases of securities.
PORTFOLIO TRANSACTIONS
Decisions to buy and sell securities for the Fund are made by PanAgora
U.K., subject to the overall review of the Fund's Board of Trustees. Al-
though investment decisions for the Fund are made independently from those
of the other accounts managed by PanAgora U.K., investments of the type
the Fund may make also may be made by those other accounts. When the Fund
and one or more other accounts managed by PanAgora U.K. are prepared to
invest in, or desire to dispose of, the same security, available invest-
ments or opportunities for sales will be allocated in a manner believed by
PanAgora U.K. to be equitable to each. In some cases, this procedure may
adversely affect the price paid or received by the Fund or the size of the
position obtained or disposed of by the Fund.
Transactions on domestic stock exchanges and some foreign stock exchanges
involve the payment of negotiated brokerage commissions. On exchanges on
which commissions are negotiated, the cost of transactions may vary among
different brokers. On most foreign exchanges, commissions are generally
fixed. No stated commission is generally applicable to securities traded
in domestic over-the-counter markets, but the prices of those securities
include undisclosed commissions or markups. Over-the-counter purchases and
sales by the Fund are transacted directly with principal market makers ex-
cept in those cases in which better prices and executions may be obtained
elsewhere. The cost of securities purchased from underwriters includes an
underwriting commission or concession, and the prices at which securities
are purchased from and sold to dealers include a dealer's mark-up or mark-
down. U.S. government securities are generally purchased from underwriters
or dealers, although certain newly issued U.S. government securities may
be purchased directly from the United States Treasury or from the issuing
agency or instrumentality.
In selecting brokers or dealers to execute securities transactions on be-
half of the Fund, PanAgora U.K. seeks the best overall terms available. In
assessing the best overall terms available for any transaction, PanAgora
U.K. will consider the factors it deems relevant, including the breadth of
the market in the security, the price of the security, the financial con-
dition and execution capability of the broker or dealer and the reason-
ableness of the commission, if any, for the specific transaction and on a
continuing basis. In addition, the Advisory Agreement authorizes PanAgora
U.K., in selecting brokers or dealers to execute a particular transaction,
and in evaluating the best overall terms available, to consider the bro-
kerage and research services (as those terms are defined in Section 28(e)
of the Securities Exchange Act of 1934) provided to the Fund and/or other
accounts over which PanAgora U.K. or its affiliates exercise investment
discretion. The fees under the Advisory Agreement are not reduced by rea-
son of PanAgora U.K. receiving brokerage and research services. The Fund's
Board of Trustees periodically will review the commissions paid by the
Fund to determine if the commissions paid over representative periods of
time were reasonable in relation to the benefits inuring to the Fund. For
the fiscal period ended November 30, 1991 and the fiscal years ended No-
vember 30, 1992 and 1993, the Fund did not pay any brokerage commissions.
To the extent consistent with applicable provisions of the 1940 Act and
the rules and exemptions adopted by the SEC under the 1940 Act, the Fund's
Board of Trustees has determined that transactions for the Fund may be ex-
ecuted through Smith Barney Shearson and other affiliated broker-dealers
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 as
those of other qualified broker-dealers, and if, in the transaction, the
affiliated broker-dealer charges the Fund a fair and reasonable rate con-
sistent with that charged to comparable unaffiliated customers in similar
transactions. In addition, under rules recently adopted by the SEC, Smith
Barney Shearson may directly execute such transactions for the Fund on the
floor of any national securities exchange, provided: (a) the Board of
Trustees has expressly authorized Smith Barney Shearson to effect such
transactions; and (b) Smith Barney Shearson annually advises the Fund of
the aggregate compensation it earned on such transactions.
The Fund will not purchase any security, including U.S. government securi-
ties, during the existence of any underwriting or selling group relating
to the security of which Smith Barney Shearson is a member, except to the
extent permitted under rules, interpretations or exemptions of the SEC.
PURCHASE OF SHARES
DETERMINATION OF PUBLIC OFFERING PRICE
Shares of the Fund are offered to the public on a continuous basis. The
public offering price per Class A share of the Fund is equal to the net
asset value per share at the time of purchase. Class B shares are offered
for exchange with Class B shares of other funds in the Smith Barney Shear-
son Group of Funds and for purchase by participants in the Smith Barney
Shearson 401(k) Program directly at net asset value. Class B shares may be
subject to the contingent deferred sales charge ("CDSC"), if any, of the
shares with which the exchange is made.
REDEMPTION OF SHARES
The right of redemption of shares of the Fund may be suspended or the date
of payment postponed (a) for any period during which the New York Stock
Exchange, Inc. is closed (other than for customary weekend and holiday
closings), (b) when trading in the markets the Fund normally utilizes is
restricted, or an emergency, as defined by the rules and regulations of
the SEC, exists making disposal of the Fund's investments or determination
of net asset value not reasonably practicable or (c) for such other peri-
ods as the SEC by order may permit for the protection of the Fund's share-
holders.
DISTRIBUTIONS IN KIND
If the Fund's Board of Trustees determines that it would be detrimental to
the best interests of the remaining shareholders of the Fund to make a re-
demption payment wholly in cash, the Fund may pay, in accordance with
rules adopted by the SEC, any portion of a redemption in excess of the
lesser of $250,000 or 1% of the Fund's net assets by a distribution in
kind of portfolio securities in lieu of cash. Portfolio securities issued
in a distribution in kind will be readily marketable, although sharehold-
ers receiving distributions in kind may incur brokerage commissions when
subsequently disposing of those securities.
AUTOMATIC CASH WITHDRAWAL PLAN
An automatic cash withdrawal plan (the "Withdrawal Plan") is available to
shareholders who own shares of the Fund with a value of at least $10,000
($5,000 for retirement plan accounts) and who wish to receive specific
amounts of cash periodically. Withdrawals of at least $50 monthly may be
made under the Withdrawal Plan by redeeming as many shares of the Fund as
may be necessary to cover the stipulated withdrawal payment. Any applica-
ble CDSC will not be waived on amounts withdrawn by shareholders that ex-
ceed 2% per month of the value of a shareholder's shares at the time the
Withdrawal Plan commences. To the extent withdrawals exceed dividends,
distributions and appreciation of a shareholder's investment in the Fund,
there will be a reduction in the value of the shareholder's investment and
continued withdrawal payments will reduce the shareholder's investment and
may ultimately exhaust it. Withdrawal payments should not be considered as
income from investment in the Fund. Furthermore, as it generally would not
be advantageous to a shareholder to make additional investments in the
Fund at the same time he or she is participating in the Withdrawal Plan,
purchases by such shareholders in amounts of less than $5,000 will not or-
dinarily be permitted.
Shareholders who wish to participate in the Withdrawal Plan and who hold
their shares in certificate form must deposit their share certificates
with TSSG as agent for Withdrawal Plan members. All dividends and distri-
butions on shares in the Withdrawal Plan are reinvested automatically at
net asset value in additional shares of the Fund. All applications for
participation in the Withdrawal Plan must be reviewed by TSSG as With-
drawal Plan agent no later than the eighth day of the month to be eligible
for participation beginning with that month's withdrawal. The Withdrawal
Plan will not be carried over on exchanges between funds or classes of the
Fund ("Classes"). A new Withdrawal Plan application is required to estab-
lish the Withdrawal Plan in the new fund or Class. For additional informa-
tion regarding the Withdrawal Plan, shareholders should contact their
Smith Barney Shearson Financial Consultants.
DISTRIBUTOR
Smith Barney Shearson serves as the Fund's distributor on a best efforts
basis pursuant to a written agreement (the "Distribution Agreement"),
dated July 30, 1993, which was first approved by the Fund's Board of
Trustees on April 7, 1993.
Smith Barney Shearson forwards the investor's funds for the purchase of
shares five business days after placement of purchase order (the "settle-
ment date"). When payment is made by the investor before the settlement
date, unless otherwise directed by the investor, the funds will be held as
a free credit balance in the investor's brokerage account, and Smith Bar-
ney Shearson may benefit from the temporary use of the funds. The investor
may designate another use for the funds prior to settlement date, such as
investment in a money market fund (other than Smith Barney Shearson Money
Market Fund) in the Smith Barney Shearson Group of Funds. If the investor
instructs Smith Barney Shearson to invest the funds in a money market fund
in the Smith Barney Shearson Group of Funds, the amount of the investment
will be included as part of the average daily net assets of both the Fund
and the money market fund and affiliates of Smith Barney Shearson that
serve the funds in an investment advisory capacity will benefit from re-
ceiving fees from both such investment companies for managing these assets
computed on the basis of their average daily net assets. The Fund's Board
of Trustees has been advised of the benefits to Smith Barney Shearson re-
sulting from five-day settlement procedures and will take such benefits
into consideration when reviewing the Advisory and Distribution Agreements
for continuance.
DISTRIBUTION ARRANGEMENTS
To compensate Smith Barney Shearson for the services it provides and for
the expenses it bears under the Distribution Agreement, the Fund has
adopted a distribution plan (the "Plan") pursuant to Rule 12b-1 under the
1940 Act. Under the Plan, the Fund pays Smith Barney Shearson an annual
distribution fee of .90% of the value of the Fund's average daily net as-
sets attributable to Class A shares and Class B shares. The distribution
fee is accrued daily and paid monthly with respect to each Class. For the
fiscal period ended November 30, 1991 and for the fiscal years ended No-
vember 30, 1992 and 1993, Class A shares incurred distribution expenses
under the Plan totalling $4,840,034, $3,976,966 and $1,202,580, respec-
tively. For the fiscal period ended November 30, 1992 and for the fiscal
year ended November 30, 1993, Class B shares incurred distribution ex-
penses totalling $0 and $34, respectively.
Under its terms, the Plan continues from year to year, provided such con-
tinuance is approved annually by vote of the Fund's Board of Trustees, in-
cluding a majority of the Trustees who are not interested persons of the
Fund and who have no direct or indirect financial interest in the opera-
tion of the Plan or any agreement related to the Plan (the "Independent
Trustees"). The Plan may not be amended to increase the amount of the dis-
tribution fee without shareholder approval, and all material amendments of
the Plan also must be approved by the Trustees in the manner described
above. The Plan may be terminated with respect to a Class at any time,
without penalty, by vote of a majority of the Independent Trustees or by a
vote of a majority of the outstanding voting securities of the Class (as
defined in the 1940 Act). Pursuant to the Plan, Smith Barney Shearson will
provide the Fund's Board of Trustees with periodic reports of amounts ex-
pended under the Plan and the purpose for which such expenditures were
made.
VALUATION OF SHARES
As noted in the Prospectus, the Fund will not calculate its net asset
value on certain holidays. On those days, securities held by the Fund may
nevertheless be actively traded, and the value of the Fund's shares could
be significantly affected. Because of the differences in Class-specific
expenses, the per share net asset value of each Class will differ.
The Fund may invest in foreign securities and, as a result, the calcula-
tion of the Fund's net asset value may not take place contemporaneously
with the determination of the prices of certain of the portfolio securi-
ties used in the calculation. A security that is listed or traded on more
than one exchange is valued for purposes of calculating the Fund's net
asset value at the quotation on the exchange determined to be the primary
market for the security. All assets and liabilities initially expressed in
foreign currency values will be converted into U.S. dollar values at the
mean between the bid and offered quotations of the currencies against U.S.
dollars as last quoted by any recognized dealer. If the bid and offered
quotations are not available, the rate of exchange will be 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 (the "Pricing Service") retained by the Fund.
Debt securities of U.S. issuers (other than U.S. government securities and
short-term investments) are valued by Boston Advisors after consultation
with the Pricing Service. When, in the judgment of the Pricing Service,
quoted bid prices for investments are readily available and are represen-
tative of the bid side of the market, these investments are valued at the
mean between the quoted bid prices and asked prices. Investments for
which, in the judgment of the Pricing Service, no readily obtainable mar-
ket quotations are available, are carried at fair value as determined by
the Pricing Service. The procedures of the Pricing Service are reviewed
periodically by the officers of the Fund under the general supervision and
responsibility of the Board of Trustees.
EXCHANGE PRIVILEGE
Except as noted below, shareholders of any fund in the Smith Barney Shear-
son Group of Funds may exchange all or a portion of their shares for
shares of the same Class of other funds in the Smith Barney Shearson Group
of Funds, to the extent such shares are offered for sale in the sharehold-
er's state of residence, on the basis of relative net asset value per
share at the time of exchange as follows:
A. Class A shares of any fund purchased with a sales charge may be
exchanged for Class A shares of any of the other funds, and the sales
charge differential, if any, will be applied. Class A shares of any
fund may be exchanged without a sales charge for shares of the funds
that are offered without a sales charge. Class A shares of any fund
purchased without a sales charge may be exchanged for shares sold with
a sales charge, and the appropriate sales charge differential will be
applied.
B. Class A shares of any fund acquired by a previous exchange of
shares purchased with a sales charge may be exchanged for Class A
shares of any of the other funds, and the sales charge differential,
if any, will be applied.
C. Class B shares of any fund may be exchanged without a sales
charge. Class B shares of the Fund exchanged for Class B shares of an-
other fund will be subject to the higher applicable CDSC and, for pur-
poses of calculating CDSC rates and conversion periods, will be deemed
to have been held since the date the shares being exchanged (or any
predecessor of those shares) were purchased.
Dealers other than Smith Barney Shearson must notify TSSG of the inves-
tor's prior ownership of Class A shares of Smith Barney Shearson High In-
come Fund and the account number in order to accomplish an exchange of the
shares of High Income Fund under paragraph B above.
The exchange privilege enables shareholders to acquire shares of the same
class in a fund with different investment objectives when they believe
that a shift between funds is an appropriate investment decision. This
privilege is available to shareholders residing in any state in which the
fund shares being acquired may legally be sold. Prior to any exchange, the
shareholder should obtain and review a copy of the current prospectus of
each fund into which an exchange is being considered. Prospectuses may be
obtained from your Smith Barney Shearson Financial Consultant.
Upon receipt of proper instructions and all necessary supporting docu-
ments, shares submitted for exchange are redeemed at the then-current net
asset value and, subject to any applicable CDSC, the proceeds immediately
invested, at a price as described above, in shares of the fund being ac-
quired. 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.
PERFORMANCE DATA
From time to time, the Fund may quote the yield or total return of the
Classes in advertisements or in reports and other communications to share-
holders. To the extent any of the Fund's advertisement or sales literature
describes the expenses or performance of a Class, it will also disclose
such information for the other Class.
YIELD
The 30-day yield figure of each Class is calculated according to a formula
prescribed by the SEC. The formula can be expressed as follows:
YIELD = 2[(a-b/cd +1)6 -1]
Where: a =dividends and interest earned during the period.
b =expenses accrued for the period (net of reimbursement).
c =the average daily number of shares outstanding during the pe-
riod that were entitled to receive dividends.
d =the maximum offering price per share on the last day of the
period.
For the purpose of determining the interest earned (variable "a" in the
formula) on debt obligations purchased by the Fund at a discount or pre-
mium, the formula generally calls for amortization of the discount or pre-
mium; the amortization schedule will be adjusted monthly to reflect
changes in the market values of the debt obligations.
Class A's yield for the 30-day period ended November 30, 1993 was 4.24%.
If PanAgora U.K., Boston Advisors, Boston Safe and Smith Barney Shearson
(or its predecessor) had not partially waived investment advisory, admin-
istration, custody and distribution fees, the yield for the same period
would have been 3.96%.
At November 30, 1993, there was one outstanding Class B share in exist-
ence, and therefore no relevant performance data is presented for that
class.
Investors should recognize that in periods of declining interest rates,
yield will tend to be somewhat higher than prevailing market rates, and in
periods of rising interest rates yield will tend to be somewhat lower. In
addition, 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 port-
folio of securities, thereby reducing the current yield of the Classes. In
periods of rising interest rates, the opposite result can be expected to
occur.
AVERAGE ANNUAL TOTAL RETURN
The "average annual total return" is computed according to a formula pre-
scribed by the SEC. The formula can be expressed as follows:
P(1+T)n = ERV
Where: P =a hypothetical initial payment of $1,000.
T =average annual total return.
n =number of years.
ERV =Ending Redeemable Value of a hypothetical $1,000 investment
made at the beginning of a 1-, 5- or 10-year period at the
end of the 1-, 5- or 10-year period (or fractional portion
thereof), assuming reinvestment of all dividends and distri-
butions.
Class A's average annual total returns were as follows for the periods in-
dicated: (.78)% for the one-year period beginning December 1, 1992 through
November 30, 1993; and .19% per annum during the period from the Fund's
commencement of operations on January 14, 1991 through November 30, 1993.
Had the investment advisory, administration, custody, and distribution
fees not been partially waived, Class A's average annual total returns for
the same periods would have been (1.35)% and (.01)%, respectively.
At November 30, 1993, there was one outstanding Class B share in exist-
ence, and therefore no relevant performance data is presented for that
class.
AGGREGATE TOTAL RETURN
The "aggregate total return" represents the cumulative change in the value
of an investment in the Class for the specified period and is computed by
the following formula:
ERV-P / P
Where: P =a hypothetical initial payment of $10,000.
ERV =Ending Redeemable Value of a hypothetical $10,000 investment
made at the beginning of a 1-, 5- or 10-year period at the
end of the 1-, 5- or 10-year period (or fractional portion
thereof), assuming reinvestment of all dividends and distri-
butions.
Class A's aggregate total returns were as follows for the periods indi-
cated: (.78)% for the one-year period beginning December 1, 1992 through
November 30, 1993; and .54% for the period from the Fund's commencement of
operations on January 14, 1991 through November 30, 1993.
Class B's aggregate total returns were as follows for the periods indi-
cated: $(1.60) for the one-year period beginning December 1, 1992 through
November 30, 1993; and (1.60)% for the period beginning November 6, 1992
through November 30, 1993.
Aggregate total return figures calculated in accordance with the above
formula assume that the maximum applicable CDSC has been deducted from the
investment at the time of redemption. If the maximum applicable CDSC had
not been deducted at the time of redemption, Class B's aggregate total re-
turns would have been (1.60)% and (1.60)%, respectively, for the same pe-
riods. Had the investment advisory, administration, custody, and distribu-
tion fees not been partially waived, the Class A's aggregate total return
would have been (1.35)% and (.04)%, respectively, for the same periods and
Class B's aggregate total return would have been (2.17)% and (2.17)%, re-
spectively, for the same periods.
Performance will vary from time to time depending upon market conditions,
the composition of the Fund's portfolio, the Fund's operating expenses and
the expenses exclusively attributable to a Class. Consequently, any given
performance quotation should not be considered representative of a Class'
performance for any specified period in the future. Because performance
will vary, it may not provide a basis for comparing an investment in a
Class with certain bank deposits or other investments that pay a fixed
yield for a stated period of time. Investors comparing the performance of
a Class with that of other mutual funds or classes of mutual funds should
give consideration to the quality and maturity of the portfolio securities
of the funds or classes.
It is important to note that yield and total return figures are based on
historical earnings and are not intended to indicate future performance.
TAXES
Set forth below is a summary of certain income tax considerations gener-
ally affecting the Fund and its shareholders. The summary is not intended
as a substitute for individual tax planning, and shareholders are urged to
consult their tax advisors with specific reference to their own specific
tax situations.
The Fund has qualified and intends to qualify each year as a "regulated
investment company" under the Code. Provided that the Fund (a) is a regu-
lated investment company and (b) distributes to its shareholders at least
90% of its net investment income (including for this purpose its net real-
ized short-term capital gains), the Fund will not be liable for Federal
income taxes to the extent its net investment income and its net realized
long-term and short-term capital gains, if any, are distributed to its
shareholders.
The Fund's transactions in foreign currencies, forward currency contracts,
options and futures contracts (including options and futures on foreign
currencies) will be subject to special provisions of the Code that, among
other things, may affect the character of gains and losses realized by the
Fund (that is, may affect whether gains or losses are ordinary or capi-
tal), accelerate recognition of income to the Fund and defer Fund losses.
These rules could therefore affect the character, amount and timing of
distributions to shareholders of the Fund. These provisions also (a) will
require the Fund to mark to market certain types of the positions in its
portfolio (that is, treat them as if they were closed out) and (b) may
cause the Fund to recognize income without receiving cash with which to
make distributions in amounts necessary to satisfy the distribution re-
quirements for avoiding income and excise taxes described above and in the
Prospectus. The Fund will monitor its transactions, will make the appro-
priate tax elections and will make the appropriate entries in its books
and records when it acquires any foreign currency, forward currency con-
tract, option, futures contract or hedged investment in order to mitigate
the effect of these rules and prevent disqualification of the Fund as a
regulated investment company.
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. The gain or loss will be a
short-term capital gain or loss if the shareholder has held the shares for
one year or less.
The Fund's net realized long-term capital gains will be distributed as de-
scribed in the Fund's Prospectus. The distributions ("capital gain divi-
dends"), if any, will be taxable to a shareholder as long-term capital
gains, regardless of how long the shareholder has held Fund shares, and
will be designated as capital gain dividends in a written notice mailed by
the Fund to the shareholder after the close of the Fund's prior taxable
year. If a shareholder receives a capital gain dividend with respect to
any share, and if the share has been held by the shareholder for six
months or less, then any loss on the sale or exchange of the share, to the
extent of the capital gain dividend, will be treated as a long-term capi-
tal loss.
Investors considering buying Fund shares on or just prior to the record
date for a taxable dividend or capital gain distribution should be aware
that the amount of the forthcoming dividend or distribution payment will
be a taxable dividend or distribution payment.
If a shareholder fails to furnish a correct taxpayer identification num-
ber, fails to report fully dividend or interest income, or fails to cer-
tify that he or she has provided a correct taxpayer identification number
and that he or she is not subject to "backup withholding," then the share-
holder may be subject to a 31% "backup withholding" tax with respect to
(a) taxable dividends and distributions from the Fund and (b) the proceeds
of any redemptions of Fund shares. An individual's taxpayer identification
number is his or her social security number. The backup withholding tax is
not an additional tax and may be credited against a taxpayer's regular
Federal income tax liability.
CUSTODIAN AND TRANSFER AGENT
Boston Safe, a wholly owned subsidiary of TBC, is located at One Boston
Place, Boston, Massachusetts 02108, and serves as the custodian of the
Fund. Under its agreement with the Fund, Boston Safe holds the Fund's
portfolio securities and keeps all necessary accounts and records. For its
services, Boston Safe receives a monthly fee based upon the month-end mar-
ket value of securities held in custody and also receives securities
transaction charges. Boston Safe is authorized to establish separate ac-
counts for foreign securities owned by the Fund to be held with foreign
branches of other domestic banks as well as with certain foreign banks and
securities depositories. The assets of the Fund are held under bank custo-
dianship in compliance with the 1940 Act.
TSSG is located at Exchange Place, Boston, Massachusetts 02109, and serves
as the Fund's transfer agent. Under its agreement with the Fund, TSSG
maintains the shareholder account records for the Fund, handles certain
communications between shareholders and the Fund and distributes dividends
and distributions payable by the Fund. For these services, TSSG receives a
monthly fee computed on the basis of the number of shareholder accounts it
maintains for the Fund during the month and is reimbursed for out-of-
pocket expenses.
FINANCIAL STATEMENTS
The Fund's Annual Report for the fiscal year ended November 30, 1993 is
incorporated herein by reference in its entirety.
APPENDIX
DESCRIPTION OF S&P AND MOODY'S RATINGS
Description of corporate bond ratings of Standard & Poor's Corporation
("S&P"):
AAA
Bonds rated AAA have the highest rating assigned by S&P to a debt obliga-
tion. Capacity to pay interest and repay principal is extremely strong.
AA
Bonds rated AA have a very strong capacity to pay interest and repay prin-
cipal and differ from the highest rated issues only in small degree.
The AA rating may be modified by the addition of a plus or minus sign to
show relative standing within the major rating categories.
DESCRIPTION OF CORPORATE BOND RATINGS OF MOODY'S INVESTORS SERVICE, INC.
("MOODY'S"):
Aaa
Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an excep-
tionally stable margin and principal is secure. While the various protec-
tive elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa
Bonds which are rated Aa are judged to be of high quality by all stan-
dards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because mar-
gins of protection may not be as large as in Aaa securities or fluctua-
tions of protective elements may be of greater amplitude or there may be
other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
Moody's applies the numerical modifiers 1, 2 and 3 to the Aa generic rat-
ing classification. The modifier 1 indicates that the security ranks in
the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the issue ranks in
the lower end of its generic rating category.
DESCRIPTION OF S&P COMMERCIAL PAPER RATINGS:
Commercial paper rated A-1 by S&P indicates that the degree of safety re-
garding timely payment is either overwhelming or very strong. Those issues
determined to possess overwhelming safety characteristics are denoted
A-1+.
DESCRIPTION OF MOODY'S COMMERCIAL PAPER RATINGS:
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's. Issuers rated Prime-1 (or related supporting institutions) are
considered to have a superior capacity for repayment of short-term promis-
sory obligations.
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
Two World Trade Center
New York, New York 10048 Fund 139
Smith Barney Shearson
WORLDWIDE PRIME
ASSETS FUND
STATEMENT OF
ADDITIONAL INFORMATION
APRIL 1, 1994
SMITH BARNEY SHEARSON WORLDWIDE PRIME ASSETS FUND
PART C
Item 24. Financial Statements and Exhibits
(a) Financial Statements
Included in Part A
Financial Highlights
Included in Part B
The Registrant's Annual Report for the fiscal year ended November 30, 1993 and
the Report of Independent Accountants dated January 7, 1994 are incorporated
by reference to the Definitive 30b2-1 filed on January 27, 1994 as Accession
#0000053798-94-000038.
Included in Part C:
Consent of Independent Accountants
(b) Exhibits
All references are to the Registrant's registration statement on Form N-1A as
filed with the Securities and Exchange Commission on November 30, 1990, File
Nos. 33-37750 and 811-6219 (the "Registration Statement").
(1) Registrant's Amended and Restated Master Trust Agreement dated
November 5, 1992 and Amendment No. 1 to the Master Trust Agreement dated July
30, 1993 is incorporated by referenced to Post-Effective Amendment No. 6
("Post Effective Amendment No. 6").
(2) Registrant's By-Laws are incorporated by reference to the Registration
Statement.
(3) Not Applicable.
(4) Registrant's form of stock certificate for Class A and Class B shares is
incorporated by reference to Post-Effective Amendment No. 4.
(5) Investment Advisory Agreement between the Registrant and PanAgora Asset
Management Limited ("PanAgora U.K.") is incorporated by reference to Post-
Effective Amendment No. 1 to the Registration Statement filed on July 31, 1991
("Post-Effective Amendment No.1).
(6) Distribution Agreement between the Registrant and Smith Barney Shearson
Inc. ("Smith Barney Shearson") is incorporated by reference to Post-
Effective Amendment No. 6.
(7) Not Applicable.
(8) Custody Agreement between the Registrant and Boston Safe Deposit and
Trust Company ("Boston Safe") is incorporated by reference to Post-Effective
Amendment No. 1.
(9)(a) Administration Agreement between the Registrant and The Boston
Advisors, Inc. dated May 21, 1993 is incorporated by reference to Post-
Effective Amendment No. 6.
(b) Transfer Agency Agreement between the Registrant and The
Shareholder Services Group, Inc. dated August 2, 1993 is incorporated by
reference to Post-Effective Amendment No. 6.
(10) Not Applicable.
(11) Consent of Independent Accountants is incorporated by reference
to Post Effective Amendment No. 6.
(12) Not Applicable.
(13) Purchase Agreement between the Registrant and Shearson Lehman Brothers
Inc. is incorporated by reference to Pre-Effective Amendment No. 1.
(14) Not Applicable.
(15) Amended and Restated Services and Distribution Plan pursuant to
Rule 12b-1 between the Registrant and Smith Barney Shearson is incorporated
by reference to Post-Effective Amendment No. 6.
(16) Performance Data is incorporated by reference to Post-Effective
Amendment No. 1.
Item 25. Persons Controlled by or Under Common Control with Registrant
None
Item 26. Number of Holders of Securities
(1) (2)
Number of Record
Title of Class Holders by Class as of February 11, 1993
Beneficial Interest Class A- 4,093
par value $.001 per Class B- 1
share
Item 27. Indemnification
The response to this item is incorporated by reference to Pre-Effective
Amendment No. 2.
Item 28(a). Business and Other Connections of Investment Adviser
Investment Adviser - - PanAgora Asset Management Limited
PanAgora Asset Management Limited ("PanAgora Management") is the product of a
joint venture between Lehman Brothers Inc., which is a wholly owned subsidiary
of Lehman Brothers Holdings Inc. ("Lehman Holdings"), all of the common stock
(which represents 92% of the voting stock of Lehman Holdings) of which is held
by American Express Company. The remaining voting stock of Lehman Holdings is
held by Nippon Life Insurance Company. PanAgora Management is an investment
adviser registered under the Investment Advisers Act of 1940 (the "Advisers
Act") and offers multi-currency equity, fixed income and currency investment
products, and provides global asset allocation services to institutional
clients.
The list required by this Item 28 of officers and directors of PanAgora
Management, together with information as to any other business, profession,
vocation or employment of a substantial nature engaged in by such officers and
directors during the past two years, is incorporated by reference to Schedules
A and D FORM ADV filed by PanAgora Management pursuant to the Advisers Act
(SEC File No. 801-35200).
8/23/93
Item 29. Principal Underwriters
Smith Barney Shearson Inc. ("Smith Barney Shearson") currently acts as
distributor for Smith Barney Shearson Managed Municipals Fund Inc., Smith
Barney Shearson New York Municipals Fund Inc., Smith Barney Shearson
California Municipals Fund Inc., Smith Barney Shearson Massachusetts
Municipals Fund, Smith Barney Shearson Global Opportunities Fund, Smith Barney
Shearson Aggressive Growth Fund Inc., Smith Barney Shearson Appreciation Fund
Inc., Smith Barney Shearson Worldwide Prime Assets Fund, Smith Barney
Shearson Short-Term World Income Fund, Smith Barney Shearson Principal Return
Fund, Smith Barney Shearson Municipal Money Market Fund Inc., Smith Barney
Shearson Daily Dividend Fund Inc., Smith Barney Shearson Government and
Agencies Fund Inc., Smith Barney Shearson Managed Governments Fund Inc., Smith
Barney Shearson New York Municipal Money Market Fund, Smith Barney Shearson
California Municipal Money Market Fund, Smith Barney Shearson Income Funds,
Smith Barney Shearson Equity Funds, Smith Barney Shearson Investment Funds
Inc., Smith Barney Shearson Precious Metals and Minerals Fund Inc., Smith
Barney Shearson Telecommunications Trust, Smith Barney Shearson Arizona
Municipals Fund Inc., Smith Barney Shearson New Jersey Municipals Fund Inc.,
The USA High Yield Fund N.V., Garzarelli Sector Analysis Portfolio N.V., The
Advisors Fund L.P., Smith Barney Shearson Fundamental Value Fund Inc., Smith
Barney Shearson Series Fund, The Trust for TRAK Investments, Smith Barney
Shearson Income Trust, Smith Barney Shearson FMA R Trust, Smith Barney
Shearson Adjustable Rate Government Income Fund, Smith Barney Shearson Florida
Municipals Fund, Smith Barney Funds, Inc., Smith Barney Muni Funds, Smith
Barney World Funds, Inc., Smith Barney Money Funds, Inc., Smith Barney Tax
Free Money Fund, Inc., Smith Barney Variable Account Funds, Smith Barney U.S.
Dollar Reserve Fund (Cayman), Worldwide Special Fund, N.V., Worldwide
Securities Limited, (Bermuda), Smith Barney International Fund (Luxembourg)
and various series of unit investment trusts.
Smith Barney Shearson is a wholly owned subsidiary of Smith Barney
Shearson Holdings Inc., which in turn is a wholly owned subsidiary of The
Travelers Inc. (formerly known as Primerica Corporation) ("Travelers"). The
information required by this Item 29 with respect to each director, officer
and partner of Smith Barney Shearson is incorporated by reference to Schedule
A of FORM BD filed by Smith Barney Shearson pursuant to the Securities
Exchange Act of 1934 (SEC File No. 812-8510).
3/15/94
Item 30. Location of Accounts and Records
(1) Smith Barney Shearson
Worldwide Prime Assets Fund
Two World Trade Center
New York, New York 10048
(2) PanAgora Management Limited
Three Finsbury Avenue
London, England EC2M 2PA
(3) The Boston Company Advisors, Inc.
One Boston Place
Boston, Massachusetts 02108
(4) Boston Safe Deposit and Trust Company
One Boston Place
Boston, Massachusetts 02108
(5) The Shareholder Services Group, Inc.
One Exchange Place
Boston, Massachusetts 02109
Item 31. Management Services
Not Applicable
Item 32. Undertakings
Response to this item is incorporated by reference to Post-
Effective
Amendment No. 4.
485(b) Certification
The Registrant hereby certifies that it meets all requirements for
effectiveness pursuant to Rule 485(b) under the Securities Act of 1933, as
amended.
The Registrant further represents pursuant to Rule 485(b)(2)(iv)
that the resignation of Thomas A. Belshe' as Trustee of the Registrant
was not due to any disagreement with the Registrant on any matter
relating to its operation, policies or practices. Mr. Belshe' resigned
his position with the Fund due to a move to the other side of the
country restricting him from performing his obligations to the Fund.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940, the Registrant, SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND, has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of New York, State of New York on
the 28th day of March, 1994.
SMITH BARNEY SHEARSON
WORLDWIDE PRIME ASSETS FUND
By: /s/ Heath B.
McLendon*
Heath B. McLendon, Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
Signature Title Date
/s/ Heath B. McLendon* Chairman of the Board 3/28/94
Heath B. McLendon (Chief Executive Officer)
/s/ Vincent Nave* Treasurer (Chief Financial
3/28/94
Vincent Nave and Accounting Officer)
/s/ Paul R. Ades* Trustee
3/28/94
Paul R. Ades
/s/ Herbert Barg* Trustee
3/28/94
Herbert Barg
/s/ Allan R. Johnson* Trustee
3/28/94
Allan R. Johnson
/s/ Ken Miller* Trustee 3/28/94
Ken Miller
/s/ John White* Trustee
3/28/94
John F. White
* Signed by Lee D. Augsburger, their
duly authorized attorney-in-fact, pursuant
power of attorney dated January 27, 1993.
/s/ Lee D. Augsburger
Lee D. Augsburger
g/domestic/general/signpage
