SMITH BARNEY FUNDAMENTAL VALUE FUND INC.
SMITH BARNEY WORLD FUNDS, INC.- INTERNATIONAL
EQUITY PORTFOLIO
SMITH BARNEY FUNDS, INC. - INCOME RETURN
ACCOUNT PORTFOLIO
Supplement dated June 22, 1995 to
Prospectuses*
Effective June 22, 1995 purchases of Class A
shares of the above-mentioned Portfolios by
Section 403(b) or Section 401(a) or (k)
accounts associated with Copeland Retirement
Programs may be made at net asset value
without a sales charge.
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* Prospectuses dated:
SMITH BARNEY FUNDAMENTAL VALUE FUND INC.
2/1/95
SMITH BARNEY WORLD FUNDS, INC.-
INTERNATIONAL EQUITY PORTFOLIO
2/28/95
SMITH BARNEY FUNDS, INC. -
INCOME RETURN ACCOUNT PORTFOLIO
4/28/95
FD 0962 F5
PROSPECTUS
Smith
Barney
World Funds,
Inc.
International
Equity
Portfolio
FEBRUARY 28,
1995
Prospectus begins on page
one
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.
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Smith Barney World Funds, Inc. --
International Equity Portfolio
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Prospectus
February 28, 1995
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388 Greenwich Street
New York, New York 10013
(212) 723-9218
The International Equity Portfolio (the
"Portfolio") is one of
the
investment portfolios that currently comprise
Smith Barney World
Funds, Inc.
(the "Fund"). The Portfolio seeks a total
return on its assets from
growth of
capital and income. The Portfolio seeks to
achieve its objective by
investing at
least 65% of its assets in a diversified
portfolio of equity
securities of
established non-United States issuers. The
Portfolio may borrow for
investment
purposes, which involves certain risk
considerations; see
"Leverage."
This Prospectus sets forth concisely
certain information about
the Fund and
the Portfolio, including sales charges,
distribution and service
fees and
expenses, that 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
Portfolio is contained in a
Statement of
Additional Information dated February 28,
1995, as amended or
supplemented from
time to time, that 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 a Smith Barney 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 INC.
Distributor
SMITH BARNEY MUTUAL FUNDS MANAGEMENT INC.
Investment Manager
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE
SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE
SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED
UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE
CONTRARY IS A
CRIMINAL OFFENSE.
1
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Smith Barney World Funds, Inc. --
International Equity Portfolio
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Table of Contents
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Prospectus Summary
3
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Financial Highlights
10
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Investment Objective and Management Policies
11
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Valuation of Shares
18
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Dividends, Distributions and Taxes
20
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Purchase of Shares
22
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Exchange Privilege
32
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Redemption of Shares
36
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Minimum Account Size
37
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Performance
37
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Management of the Fund
38
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Distributor
40
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Additional Information
41
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=============================================
====================
===============
No person has been authorized to give any
information or to
make any
representation in connection with this
offering other than those
contained in
this Prospectus and, if given or made, such
other information and
representations must not be relied upon as
having been authorized
by the Fund or
the Distributor. This Prospectus does not
constitute an offer by
the Fund or the
Distributor to sell or a solicitation of an
offer to buy any of the
securities
offered hereby in any jurisdiction to any
person to whom it is
unlawful to make
such offer or solicitation in such
jurisdiction.
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2
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Smith Barney World Funds, Inc. --
International Equity Portfolio
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Prospectus Summary
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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."
INVESTMENT OBJECTIVE The Portfolio is an
open-end, management
investment
company whose investment objective is to seek
a total return on its
assets from
growth of capital and income. The Portfolio
seeks to achieve its
objective by
investing at least 65% of its assets in a
diversified portfolio of
equity
securities of established non-United States
issuers. See
"Investment Objective
and Management Policies."
ALTERNATIVE PURCHASE ARRANGEMENTS The
Portfolio offers several
classes of
shares ("Classes") to investors designed to
provide them with the
flexibility of
selecting an investment best suited to their
needs. The general
public is
offered three Classes of shares: Class A
shares, Class B shares and
Class C
shares, which differ principally in terms of
sales charges and rate
of expenses
to which they are subject. A fourth Class of
shares, Class Y
shares, is offered
only to investors meeting an initial
investment minimum of
$5,000,000. In
addition, a fifth Class, Class Z shares, which
is offered pursuant
to a separate
prospectus, is offered exclusively to
tax-exempt employee benefit
and retirement
plans of Smith Barney Inc. ("Smith Barney")
and its affiliates. See
"Purchase of
Shares" and "Redemption of Shares."
Class A Shares. Class A shares are sold
at net asset value
plus an initial
sales charge of up to 5.00% and are subject to
an annual service
fee of 0.25% of
the average daily net assets of the Class. The
initial sales charge
may be
reduced or waived for certain purchases.
Purchases of Class A
shares, which when
combined with current holdings of Class A
shares offered with a
sales charge
equal or exceed $500,000 in the aggregate,
will be made at net
asset value with
no initial sales charge, but will be subject
to a contingent
deferred sales
charge ("CDSC") of 1.00% on redemptions made
within 12 months of
purchase. See
"Prospectus Summary -- Reduced or No Initial
Sales Charge."
Class B Shares. Class B shares are
offered at net asset value
subject to a
maximum CDSC of 5.00% of redemption proceeds,
declining by 1.00%
each year after
the date of purchase to zero. This CDSC may be
waived for certain
redemptions.
Class B shares are subject to an annual
service fee of 0.25% and an
annual
distribution fee of 0.75% of the average daily
net assets of the
Class. The
Class B shares' distribution fee may cause
that Class to have
higher expenses
and pay lower dividends than Class A shares.
Class B Shares Conversion Feature. Class
B shares will convert
automatically to Class A shares, based on
relative net asset value,
eight years
3
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Smith Barney World Funds, Inc. --
International Equity Portfolio
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Prospectus Summary (continued)
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after the date of the original purchase. Upon
conversion, these
shares will no
longer be subject to an annual distribution
fee. In addition, a
certain portion
of Class B shares that have been acquired
through the reinvestment
of dividends
and distributions ("Class B Dividend Shares")
will be converted at
that time.
See "Purchase of Shares -- Deferred Sales
Change Alternatives."
Class C Shares. Class C shares are sold
at net asset value
with no initial
sales charge. They are subject to an annual
service fee of 0.25%
and an annual
distribution fee of 0.75% of the average daily
net assets of the
Class C shares,
and investors pay a CDSC of 1.00% if they
redeem Class C shares
within 12 months
of purchase. The CDSC may be waived for
certain redemptions. The
Class C shares'
distribution fee may cause that Class to have
higher expenses and
pay lower
dividends than Class A shares. Purchases of
Class C shares, which
when combined
with current holdings of Class C shares of the
Portfolio equal or
exceed
$500,000 in the aggregate, should be made in
Class A shares at net
asset value
with no sales charge, and will be subject to a
CDSC of 1.00% on
redemptions made
within 12 months of purchase.
Class Y Shares. Class Y shares are
available only to investors
meeting an
initial investment minimum of $5,000,000.
Class Y shares are sold
at net asset
value with no initial sales charge or CDSC.
They are not subject to
any service
or distribution fees.
In deciding which Class of Portfolio
shares to purchase,
investors should
consider the following factors, as well as any
other relevant facts
and
circumstances:
Intended Holding Period. The decision as
to which Class of
shares is more
beneficial to an investor depends on the
amount and intended length
of his or
her investment. Shareholders who are planning
to establish a
program of regular
investment may wish to consider Class A
shares; as the investment
accumulates
shareholders may qualify for reduced sales
charges and the shares
are subject to
lower ongoing expenses over the term of the
investment. As an
alternative, Class
B and Class C shares are sold without any
initial sales charge so
the entire
purchase price is immediately invested in the
Portfolio. Any
investment return
on these additional invested amounts may
partially or wholly offset
the higher
annual expenses of these Classes. Because the
Portfolio's future
return cannot
be predicted, however, there can be no
assurance that this would be
the case.
Finally, investors should consider the
effect of the CDSC
period and any
conversion rights of the Classes in the
context of their own
investment time
frame. For example, while Class C shares have
a shorter CDSC period
than Class B
shares, they do not have a conversion feature,
and therefore, are
subject to an
4
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Smith Barney World Funds, Inc. --
International Equity Portfolio
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Prospectus Summary (continued)
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ongoing distribution fee. Thus, Class B shares
may be more
attractive than Class
C shares to investors with longer term
investment outlooks.
Investors investing a minimum of
$5,000,000 must purchase
Class Y shares,
which are not subject to an initial sales
charge, CDSC or service
or
distribution fees. The maximum purchase amount
for Class A shares
is $4,999,999,
Class B shares is $249,999 and Class C shares
is $499,999. There is
no maximum
purchase amount for Class Y shares.
Reduced or No Initial Sales Charge. The
initial sales charge
on Class A
shares may be waived for certain eligible
purchasers, and the
entire purchase
price will be immediately invested in the
Portfolio. In addition,
Class A share
purchases, which when combined with current
holdings of Class A
shares offered
with a sales charge equal or exceed $500,000
in the aggregate, will
be made at
net asset value with no initial sales charge,
but will be subject
to a CDSC of
1.00% on redemptions made within 12 months of
purchase. The
$500,000 aggregate
investment may be met by adding the purchase
to the net asset value
of all Class
A shares offered with a sales charge held in
funds sponsored by
Smith Barney
listed under "Exchange Privilege." Class A
share purchases also may
be eligible
for a reduced initial sales charge. See
"Purchase of Shares."
Because the
ongoing expenses of Class A shares may be
lower than those for
Class B and Class
C shares, purchasers eligible to purchase
Class A shares at net
asset value or
at a reduced sales charge should consider
doing so.
Smith Barney Financial Consultants may
receive different
compensation for
selling each Class of shares. Investors should
understand that the
purpose of
the CDSC on the Class B and Class C shares is
the same as that of
the initial
sales charge on the Class A shares.
See "Purchase of Shares" and "Management
of the Fund" for a
complete
description of the sales charges and service
and distribution fees
for each
Class of shares and "Valuation of Shares,"
"Dividends,
Distributions and Taxes"
and "Exchange Privilege" for other differences
between the Classes
of shares.
SMITH BARNEY 401(k) PROGRAM Investors may
be eligible to
participate in the
Smith Barney 401(k) Program, which is
generally designed to assist
plan sponsors
in the creation and operation of retirement
plans under Section
401(a) of the
Internal Revenue Code of 1986, as amended (the
"Code"), as well as
other types
of participant directed, tax-qualified
employee benefit plans
(collectively,
"Participating Plans"). Class A, Class B,
Class C and Class Y
shares are
available as investment alternatives for
Participating Plans. See
"Purchase of
Shares -- Smith Barney 401(k) Program."
5
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Smith Barney World Funds, Inc. --
International Equity Portfolio
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Prospectus Summary (continued)
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PURCHASE OF SHARES Shares may be
purchased through the
Portfolio's
distributor, Smith Barney, a broker that
clears securities
transactions through
Smith Barney on a fully disclosed basis (an
"Introducing Broker")
or an
investment dealer in the selling group. 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 in Class A,
Class B and Class C
shares may
open an account by making an initial
investment of at least $1,000
for each
account, or $250 for an individual retirement
account ("IRA") or a
Self-Employed
Retirement Plan. Investors in Class Y shares
may open an account
for an initial
investment of $5,000,000. Subsequent
investments of at least $50
may be made for
all Classes. For participants in retirement
plans qualified under
Section
403(b)(7) or Section 401(a) of the Code, the
minimum initial
investment
requirement for Class A, Class B and Class C
shares and the
subsequent
investment requirement for all Classes is $25.
The minimum initial
investment
requirement for Class A, Class B and Class C
shares and the
subsequent
investment requirement for all Classes through
the Systematic
Investment Plan
described below is $50. See "Purchase of
Shares."
SYSTEMATIC INVESTMENT PLAN The Portfolio
offers shareholders
a Systematic
Investment Plan under which they may authorize
the automatic
placement of a
purchase order each month or quarter for
Portfolio shares in an
amount of at
least $50. 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.
See "Purchase of
Shares" and
"Redemption of Shares."
MANAGEMENT OF THE PORTFOLIO Smith Barney
Mutual Funds
Management Inc.
(formerly, Smith, Barney Advisers, Inc.) (the
"Manager") serves as
the
Portfolio's investment manager. The Manager is
a wholly owned
subsidiary of
Smith Barney Holdings Inc. ("Holdings").
Holdings is a wholly owned
subsidiary
of The Travelers Inc. ("Travelers"), a
diversified financial
services holding
company engaged, through its subsidiaries,
principally in four
business
segments: Investment Services, Consumer
Finance Services, Life
Insurance
Services and Property & Casualty Insurance
Services. See
"Management of the
Fund."
EXCHANGE PRIVILEGE Shares of a Class may
be exchanged for
shares of the
same Class of certain other funds of the Smith
Barney Mutual Funds
at the
respective net asset values next determined,
plus any applicable
sales charge
differential. See "Exchange Privilege."
6
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Smith Barney World Funds, Inc. --
International Equity Portfolio
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Prospectus Summary (continued)
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VALUATION OF SHARES Net asset value of
the Portfolio for the
prior day
generally is quoted daily in the financial
section of most
newspapers and is
also available from a Smith Barney Financial
Consultant. See
"Valuation of
Shares."
DIVIDENDS AND DISTRIBUTIONS Dividends
from net investment
income and
distributions of net realized capital gains,
if any, are declared
and 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
reinvestments will not
be subject
to any sales charge or CDSC. Class B shares
acquired through
dividend and
distribution reinvestments will become
eligible for conversion to
Class A shares
on a pro rata basis. See "Dividends,
Distributions and Taxes."
RISK FACTORS AND SPECIAL CONSIDERATIONS
There can be no
assurance that the
Portfolio's investment objective will be
achieved. The value of the
Portfolio's
investments, and thus the net asset value of
the Portfolio's
shares, will
fluctuate in response to changes in market and
economic conditions,
as well as
the financial condition and prospects of
issuers in which the
Portfolio invests.
The Portfolio will invest in foreign
securities. Investments in
foreign
securities incur higher costs than investments
in U.S. securities,
including
higher costs in making securities transactions
as well as foreign
government
taxes which may reduce the investment return
of the Portfolio. In
addition,
foreign investments may include additional
risks associated with
currency
exchange rates, less complete financial
information about
individual companies,
less market liquidity and political
instability. See "Investment
Objective and
Management Policies."
7
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Smith Barney World Funds, Inc. --
International Equity Portfolio
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Prospectus Summary (continued)
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THE PORTFOLIO'S EXPENSES The following
expense table lists the
costs and
expenses an investor will incur either
directly or indirectly as a
shareholder
of the Portfolio, based on the maximum sales
charge or maximum CDSC
that may be
incurred at the time of purchase or
redemption:
<TABLE>
<CAPTION>
Class A Class B
Class C Class Y
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<S>
<C> <C> <C>
<C>
Shareholder Transaction Expenses
Maximum sales charge imposed on purchases
(as a percentage of offering price)
.................................. 5.00%
None
None None
Maximum CDSC (as a percentage of original
cost or
redemption proceeds, whichever is lower)
............................. None*
5.00%
1.00% None
Annual Portfolio Operating Expenses
(as a percentage of average net assets)
Management fees
.............................................
........... 0.85%
0.85% 0.85% 0.85%
12b-1 fees**
.............................................
..............
0.25 1.00 1.00
- --
Other expenses***
.............................................
......... 0.25
0.25 0.25 0.24
---- ----
- ---- ----
Total Portfolio Operating Expenses
........................................
1.35% 2.10%
2.10% 1.09%
==== ====
==== ====
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</TABLE>
*Purchases of Class A shares, which when
combined with current
holdings of
Class A shares offered with a sales charge
equal or exceed $500,000
in the
aggregate, will be made at net asset value
with no sales charge,
but will be
subject to a CDSC of 1.00% on redemptions made
within 12 months.
**Upon conversion of Class B shares to
Class A shares, such
shares will no
longer be subject to a distribution fee. Class
C shares do not have
a conversion
feature and, therefore, are subject to an
ongoing distribution fee.
As a result,
long-term shareholders of Class C shares may
pay more than the
economic
equivalent of the maximum front-end sales
charge permitted by the
National
Association of Securities Dealers, Inc.
***These expenses for Classes A, C and Y
are based on amounts
for the
fiscal year ended October 31, 1994. These
amounts for Class B are
based on
estimated amounts for the fiscal year ending
October 31, 1995.
The sales charge and CDSC set forth in
the above table are the
maximum
charges imposed on purchases or redemptions of
Portfolio shares and
investors
may actually pay lower or no charges,
depending on the amount
purchased and, in
the case of Class B, Class C and certain Class
A shares, the length
of time the
shares are held and whether the shares are
held through the Smith
Barney 401(k)
Program. See "Purchase of Shares" and
"Redemption of Shares." Smith
Barney
receives an annual 12b-1 service fee of 0.25%
of the value of
average daily net
assets of Class A shares. Smith Barney also
receives with respect
to Class B and
Class C shares an annual 12b-1 fee of 1.00% of
the value of average
daily net
assets of the respective Classes, consisting
of a 0.75%
distribution fee and a
0.25% service fee. "Other expenses" in the
above table include fees
for
shareholder services, custodial fees, legal
and accounting fees,
printing costs
and registration fees.
8
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Smith Barney World Funds, Inc. --
International Equity Portfolio
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Prospectus Summary (continued)
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Example
The following example is intended to
assist an investor in
understanding
the various costs that an investor in the
Portfolio will bear
directly or
indirectly. The example assumes payment by the
Portfolio of
operating expenses
at the levels set forth in the table above.
See "Purchase of
Shares,"
"Redemption of Shares" and "Management of the
Fund."
<TABLE>
<CAPTION>
1 Year
3 Years 5 Years 10 Years*
An investor would pay the following expenses
on a $1,000
investment, assuming (1) 5.00% annual return
and
(2) redemption at the end of each time
period:
<S>
<C>
<C> <C> <C>
Class A
...........................................
$63
$91 $120 $204
Class B
...........................................
71
96 123 224
Class C
...........................................
31
66 113 243
Class Y
...........................................
11
35 60 133
An investor would pay the following expenses
on
the same investment, assuming the same
annual return and no redemption:
Class A
...........................................
$63
$91 $120 $204
Class B
...........................................
21
66 113 224
Class C
...........................................
21
66 113 243
Class Y
...........................................
11
35 60 133
</TABLE>
*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.
The example also provides a means for the
investor to compare
expense
levels of funds with different fee structures
over varying
investment periods.
To facilitate such comparison, all funds are
required to utilize a
5.00% annual
return assumption. However, the Portfolio's
actual return will vary
and may be
greater or less than 5.00%. This example
should not be considered
a
representation of past or future expenses and
actual expenses may
be greater or
less than those shown.
9
<PAGE>
Smith Barney World Funds, Inc. --
International Equity Portfolio
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Financial Highlights
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The following schedule of the
International Equity Portfolio
of Smith
Barney World Funds, Inc. for the three periods
ended December 31,
1993 and for
the period ended October 31, 1994 has been
audited in conjunction
with the
annual audits of the financial statements of
Smith Barney World
Funds, Inc. by
KPMG Peat Marwick LLP, independent auditors.
The 1994 financial
statements and
the independent auditors' report thereon
appear in the October 31,
1994 Annual
Report to Shareholders. No information is
presented for Class B
shares, which
were not available for purchase until November
7, 1994.
For a share of capital stock outstanding
throughout each
period:
<TABLE>
<CAPTION>
Class A Class C*
Class Y*
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1994(a) 1993
1992 1991(b) 1994(a)
1993(c) 1994(d)
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- ----------------------
<S> <C>
<C>
<C> <C> <C> <C>
<C>
Net Asset Value, Beginning
of Period
$18.71 $12.35
$12.31 $11.94 $18.58 $12.35
$17.64
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- ----------------------
Income From Investment Operations:
Net Investment Income (Loss)
(0.01) (0.01)
0.02 (0.01) (0.11) (0.14)
0.01
Net Realized and Unrealized
Gain on Investment
0.09 6.53
0.04 0.38 0.07 6.53
1.15
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- ----------------------
Total Income (loss) from Investment
Operations
0.08 6.52
0.06 0.37 (0.04) 6.39
1.16
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- ----------------------
Less Distributions:
Dividends from Net Investment
Income
-- --
(0.02) -- -- --
--
Distributions from Net Realized
Gains(1)
-- (0.16)
-- -- -- (0.16)
--
- ---------------------------------------------
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- ---------------------------------------------
- ----------------------
Total Distributions
-- (0.16)
(0.02) -- -- (0.16)
--
- ---------------------------------------------
- --------------------
- ---------------------------------------------
- ----------------------
Net Asset Value, End
of Period
$18.79 $18.71
$12.35 $12.31 $18.54 $18.58
$18.80
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- ----------------------
Total Return**
0.43%++ 52.78%
0.49% 3.10%++ (0.22)%++
51.73%++ 6.58%++
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- ----------------------
Net Assets End of
Period (000)'s
$591,598 $355,926
$122,605 $54,958 $287,458 $114,951
$48,765
- ---------------------------------------------
- --------------------
- ---------------------------------------------
- ----------------------
Ratios to Average Net Assets:
Expenses
1.35%+ 1.35%
1.56% 1.73%+ 2.10%+
2.14%+ 1.09%+
Net Investment Income (loss)
(0.05)+ (0.10)
0.24 0.75+ (0.77)+
(1.08)+ 0.29+
- ---------------------------------------------
- --------------------
- ---------------------------------------------
- ----------------------
Portfolio Turnover Rate
34.75% 26.75%
20.11% 1.85% 34.75% 26.75%
34.75%
- ---------------------------------------------
- --------------------
- ---------------------------------------------
- ----------------------
</TABLE>
(a) For the period from January 1, 1994 to
October 31, 1994.
Effective October
1, 1994, the Fund changed its fiscal year
end to October 31.
(b) For the period from November 22, 1991
(date of transfer of net
assets of
Fenimore International Fund, Inc.) to
December 31, 1991.
(c) For the period from January 4, 1993
(inception date) to
December 31, 1993.
(d) For the period from June 16, 1994
(inception date) to October
31, 1994.
(1) Net short term gains, if any, are
included and reported as
ordinary income
for income tax purposes.
+ Annualized.
++ Not annualized as it may not be
representative of the total
return for the
year.
** Total returns do not reflect sales loads
or contingent
deferred sales
charges.
* Prior to November 7, 1994 Class C shares
and Class Y shares
were designated
as Class B shares and Class D shares,
respectively.
10
<PAGE>
Smith Barney World Funds, Inc. --
International Equity Portfolio
- ---------------------------------------------
- --------------------
- ---------------
Investment Objective and Management Policies
- ---------------------------------------------
- --------------------
- ---------------
The investment objective of the Portfolio
is to provide a
total return on
its assets from growth of capital and income.
The Portfolio seeks
to achieve its
objective by investing at least 65% of its
assets in a diversified
portfolio of
equity securities of established non-United
States issuers. There
can be no
assurance that the investment objective of the
Portfolio will be
achieved.
Under normal market conditions, the
Portfolio invests at least
65% of its
assets in a diversified portfolio of equity
securities consisting
of dividend
and non-dividend paying common stock,
preferred stock, convertible
debt and
rights and warrants to such securities and up
to 35% of the
Portfolio's assets
in bonds, notes and debt securities
(consisting of securities
issued in the
Eurocurrency markets or obligations of the
United States or foreign
governments
and their political subdivisions) of
established non-United States
issuers.
Investments may be made for capital
appreciation or for income or
any
combination of both for the purpose of
achieving a higher overall
return than
might otherwise be obtained solely from
investing for growth of
capital or for
income. There is no limitation on the percent
or amount of the
Portfolio's
assets which may be invested for growth or
income and, therefore,
from time to
time the investment emphasis may be placed
solely or primarily on
growth of
capital or solely or primarily on income.
In seeking to achieve its objective, the
Portfolio presently
expects to
invest its assets primarily in common stocks
of established
non-United States
companies which in the opinion of the
investment adviser have
potential for
growth of capital. However, there is no
requirement that the
Portfolio invest
exclusively in common stocks or other equity
securities and, if
deemed
advisable, the Portfolio may invest up to 35%
of its assets in
bonds, notes and
other debt securities (including securities
issued in the
Eurocurrency markets
or obligations of the United States or foreign
governments and
their political
subdivisions). When the investment adviser
believes that the return
on debt
securities will equal or exceed the return on
common stocks, the
Portfolio may,
in seeking its objective of total return,
substantially increase
its holdings
(up to a maximum of 35% of its assets) in such
debt securities. In
determining
whether the Portfolio will be invested for
capital appreciation or
for income or
any combination of both, the investment
adviser regularly analyzes
a broad range
of international equity and fixed income
markets in order to assess
the degree
of risk and level of return that can be
expected from each market.
The Portfolio will generally invest its
assets broadly among
countries and
will normally have represented in the
portfolio business activities
in not less
than three different countries. Except as
stated below, the
Portfolio will
invest at least 65% of its assets in companies
organized or
governments located
in any area of the world other than the United
States, such as the
Far East
11
<PAGE>
Smith Barney World Funds, Inc. --
International Equity Portfolio
- ---------------------------------------------
- --------------------
- ---------------
Investment Objective and Management Policies
(continued)
- ---------------------------------------------
- --------------------
- ---------------
(e.g., Japan, Hong Kong, Singapore, Malaysia),
Western Europe
(e.g., United
Kingdom, Germany, the Netherlands, France,
Italy, Switzerland),
Eastern Europe
(e.g., Hungary, Poland, The Czech Republic and
the countries of the
former
Soviet Union), Central and South America
(e.g., Mexico, Chile and
Venezuela),
Australia, Canada and such other areas and
countries as the
investment adviser
may determine from time to time. However,
under unusual economic or
market
conditions as determined by the investment
adviser, for defensive
purposes the
Portfolio may temporarily invest all or a
major portion of its
assets in U.S.
government securities or in debt or equity
securities of companies
incorporated
in and having their principal business
activities in the United
States. To the
extent the Portfolio's assets are invested for
temporary defensive
purposes,
such assets will not be invested in a manner
designed to achieve
the Portfolio's
investment objective.
In determining the appropriate
distribution of investments
among various
countries and geographic regions, the
investment adviser ordinarily
considers
the following factors: prospects for relative
economic growth
between countries;
expected levels of inflation; government
policies influencing
business
conditions; the outlook for currency
relationships; and the range
of individual
investment opportunities available to
international investors. In
the future, if
any other relevant factors arise they will
also be considered. In
analyzing
companies for investment, the investment
adviser ordinarily looks
for one or
more of the following characteristics: an
above-average earnings
growth per
share; high return on invested capital;
healthy balance sheet;
sound financial
and accounting policies and overall financial
strength; strong
competitive
advantages; effective research and product
development and
marketing; efficient
service; pricing flexibility; strength of
management; and general
operating
characteristics which will enable the company
to compete
successfully in its
market place. Ordinarily, the investment
adviser will not view a
company as
being sufficiently well established to be
considered for inclusion
in the
Portfolio unless the company, together with
any predecessors, has
been operating
for at least three fiscal years.
It is expected that Portfolio securities
will ordinarily be
traded on a
stock exchange or other market in the country
in which the issuer
is principally
based, but may also be traded on markets in
other countries
including, in many
cases, the United States securities exchanges
and over-the-counter
markets.
To the extent that the Portfolio's assets
are not otherwise
invested as
described above, the assets may be held in
cash, in any currency,
or invested in
U.S. as well as foreign high quality money
market instruments and
equivalents.
12
<PAGE>
Smith Barney World Funds, Inc. --
International Equity Portfolio
- ---------------------------------------------
- --------------------
- ---------------
Investment Objective and Management Policies
(continued)
- ---------------------------------------------
- --------------------
- ---------------
The Portfolio's investment objective may
be changed only by
the "vote of a
majority of the outstanding securities" as
defined in the
Investment Company Act
of 1940 (the "1940 Act"). Certain of the
Portfolio's investment
policies are
non-fundamental and, as such, may be changed
by the Board of
Directors, provided
such change is not prohibited by the
investment restrictions (which
are set
forth in the Statement of Additional
Information) or applicable
law, and any
such change will first be disclosed in the
then current prospectus.
INVESTMENT PRACTICES
The Portfolio may utilize from time to
time one or more of the
investment
practices described below to assist it in
reaching its investment
objective.
These practices involve potential risks which
are summarized below.
In addition,
the Statement of Additional Information
contains more detailed or
additional
information about certain of these practices,
the potential risks
and/or the
limitations adopted by the Portfolio to reduce
such risks.
In order to protect the dollar equivalent
value of its
portfolio securities
against declines resulting from currency value
fluctuations and
changes in
interest rate or other market changes, the
Portfolio may enter into
the
following hedging transactions: forward
foreign currency contracts,
interest
rate and currency swaps and financial
instrument and market index
futures
contracts and related options contracts. The
Portfolio may also use
leverage,
enter into repurchase transactions and lend
its portfolio
securities.
Currency Transactions. The Portfolio will
enter into various
currency
transactions, i.e., forward foreign currency
contracts, currency
swaps, foreign
currency or currency index futures contracts
and put and call
options on such
contracts or on currencies. A forward foreign
currency contract
involves an
obligation to purchase or sell a specific
currency for a set price
at a future
date. A currency swap is an arrangement
whereby each party
exchanges one
currency for another on a particular date and
agrees to reverse the
exchange on
a later date at a specific exchange rate.
Forward foreign currency
contracts and
currency swaps are established in the
interbank market conducted
directly
between currency traders (usually large
commercial banks or other
financial
institutions) on behalf of their customers.
Futures contracts are
similar to
forward contracts except that they are traded
on an organized
exchange and the
obligations thereunder may be offset by taking
an equal but
opposite position to
the original contract, with profit or loss
determined by the
relative prices
between the opening and offsetting positions.
The Portfolio may
enter into these
currency contracts and swaps in primarily the
following
circumstances: to "lock
in" the U.S. dollar equivalent price of a
security the Portfolio is
13
<PAGE>
Smith Barney World Funds, Inc. --
International Equity Portfolio
- ---------------------------------------------
- --------------------
- ---------------
Investment Objective and Management Policies
(continued)
- ---------------------------------------------
- --------------------
- ---------------
contemplating to buy or sell that is
denominated in a non-U.S.
currency; or to
protect against a decline against the U.S.
dollar of the currency
of a
particular country to which the Portfolio has
exposure. The
Portfolio may seek
to achieve the same economic result by
utilizing from time to time
for such
hedging a currency different from the one of
the given portfolio
security as
long as, in the view of the investment
adviser, such currency is
essentially
correlated to the currency of the relevant
portfolio security based
on historic
and expected exchange rate patterns.
Interest Rate Transactions. The Portfolio
will enter into
various interest
rate transactions, i.e., futures contracts in
various financial
instruments and
interest rate related indices, put and call
options on such futures
contracts
and on such financial instruments and interest
rate swaps. The
Portfolio will
enter into these transactions primarily to
"lock in" a return or
spread on a
particular investment or portion of its
portfolio and to protect
against any
increase in the price of securities the
Portfolio anticipates
purchasing at a
later date. Interest rate swaps involve the
exchange by the
Portfolio with
another party of their respective commitment
to pay or receive
interest, e.g.,
an exchange of floating-rate payments for
fixed-rate payments. The
Portfolio
will not enter into an interest rate swap
transaction in which its
interest
commitment is greater or measured differently
than the interest
receivable on
specific portfolio securities. Interest rate
swaps may be combined
with currency
swaps to take advantage of rate differentials
in different markets
on the same
or similar securities.
The Portfolio may enter into futures
contracts and options on
futures
contracts for non-hedging purposes, subject to
applicable law.
Market Index Transactions. The Portfolio
may also enter into
various market
index contracts, i.e., index futures contracts
on particular
non-U.S. securities
markets or industry segments and related put
and call options.
These contracts
are used primarily to protect the value of the
Portfolio's
securities against a
decline in a particular market or industry in
which it is invested.
General. The Portfolio will engage in the
foregoing
transactions primarily
as a means to hedge risks associated with
management of its
portfolio.
Investment in these contracts requires the
Portfolio to deposit
with the
applicable exchange or other specified
financial intermediary as a
good faith
deposit for its obligations an amount of cash
or specified debt
securities which
initially is 1-5% of the face amount of the
contract and which
thereafter
fluctuates on a periodic basis as the value of
the contract
fluctuates.
Risks. All of the foregoing transactions
present certain
risks. In
particular, the variable degree of correlation
between price
movements of
futures contracts and dollar equivalent price
movements in the
currency or
security being hedged creates the possibility
that losses on the
hedge may be
14
<PAGE>
Smith Barney World Funds, Inc. --
International Equity Portfolio
- ---------------------------------------------
- --------------------
- ---------------
Investment Objective and Management Policies
(continued)
- ---------------------------------------------
- --------------------
- ---------------
greater than gains in the value of the
Portfolio's securities. In
addition,
these instruments may not be liquid in all
circumstances and are
generally
closed out by entering into offsetting
transactions rather than by
disposing of
the Portfolio's obligations. As a result, in
volatile markets, the
Portfolio may
not be able to close out a transaction without
incurring losses.
Although the
contemplated use of these contracts should
tend to minimize the
risk of loss due
to a decline in the value of the hedged
currency or security, at
the same time
they tend to limit any potential gain which
might result from an
increase in the
value of such currency or security. The
successful use of futures
and options is
dependent upon the ability of the investment
adviser to predict
changes in
interest rates. Finally, the daily deposit
requirements in futures
contracts
create an ongoing greater potential financial
risk than do option
purchase
transactions, where the exposure is limited to
the cost of the
premium for the
option. Transactions in futures and options on
futures for
non-hedging purposes
involve greater risks and could result in
losses which are not
offset by gains
on other portfolio assets.
With respect to interest rate swaps, the
Portfolio recognizes
that such
arrangements are relatively illiquid and will
include the principal
amount of
the obligations owed to it under a swap as an
illiquid security for
purposes of
the Portfolio's investment restrictions except
to the extent a
third party (such
as a large commercial bank) has guaranteed the
Portfolio's ability
to offset the
swap at any time.
Options. The Portfolio may purchase put
and call options on
securities
which are traded on an exchange in other
markets, on currencies
and, as
developed from time to time, various futures
contracts on market
indexes and
other instruments. Purchasing options may
increase investment
flexibility and
improve total return, but also risks loss of
the option premium if
an asset the
Portfolio has the option to buy declines in
value or if an asset
the Portfolio
has the option to sell increases in value. In
order to assure that
the Portfolio
will not be deemed to be a "commodity pool"
for purposes of the
Commodity
Exchange Act, regulations of the Commodity
Futures Trading
Commission ("CFTC")
require that the Portfolio enter into
transactions in futures
contracts and
options on futures contracts only (i) for bona
fide hedging
purposes (as defined
in CFTC regulations), or (ii) for non-hedging
purposes, provided
that the
aggregate initial margin and premiums on such
non-hedging positions
does not
exceed 5% of the liquidation value of the
Portfolio's assets.
Leverage. The Portfolio may borrow from
banks, on a secured or
unsecured
basis, up to 25% of the value of its assets.
If the Portfolio
borrows and uses
the proceeds to make additional investments,
income and
appreciation from such
15
<PAGE>
Smith Barney World Funds, Inc. --
International Equity Portfolio
- ---------------------------------------------
- --------------------
- ---------------
Investment Objective and Management Policies
(continued)
- ---------------------------------------------
- --------------------
- ---------------
investments will improve its performance if
they exceed the
associated borrowing
costs but impair its performance if they are
less than such
borrowing costs.
This speculative factor is known as
"leverage."
Leverage creates an opportunity for
increased returns to
shareholders of
the Portfolio but, at the same time, creates
special risk
considerations. For
example, leverage may exaggerate changes in
the net asset value of
the
Portfolio's shares and in the Portfolio's
yield. Although the
principal or
stated value of such borrowings will be fixed,
the Portfolio assets
may change
in value during the time the borrowing is
outstanding. Leverage
will create
interest or dividend expenses for the
Portfolio which can exceed
the income from
the assets retained. To the extent the income
or other gain derived
from
securities purchased with borrowed funds
exceeds the interest or
dividends the
Portfolio will have to pay in respect thereof,
the Portfolio's net
income or
other gain will be greater than if leverage
had not been used.
Conversely, if
the income or other gain from the incremental
assets is not
sufficient to cover
the cost of leverage, the net income or other
gain of the Portfolio
will be less
than if leverage had not been used. If the
amount of income from
the incremental
securities is insufficient to cover the cost
of borrowing,
securities might have
to be liquidated to obtain required funds.
Depending on market or
other
conditions, such liquidations could be
disadvantageous to the
Portfolio.
Repurchase Agreements and Lending
Securities. The Portfolio
may enter into
repurchase agreements up to 25% of its assets
and may lend for a
fee portfolio
securities amounting up to 15% of its assets.
These transactions
must be fully
collateralized at all times, and the
investment adviser will
monitor the value
of the collateral, which will be marked to the
market daily, to
determine that
the value is at least 100% of the agreed upon
sum to be paid to the
Portfolio.
Repurchase agreements and lending of portfolio
securities involve
some credit
risk to the Portfolio, if the other party
defaults on its
obligations, since the
Portfolio could be delayed or prevented from
recovering the
collateral. The
Portfolio currently does not expect that it
will enter into
repurchase
agreements on more than 5% of its assets.
PORTFOLIO TRANSACTIONS AND TURNOVER
Purchases and sales of securities,
futures or options on
futures on an
exchange (including a board of trade), and
options on securities
may be effected
through securities brokers or futures
commission merchants that
charge a
commission for their services. Orders may be
directed to any broker
including,
to the extent and in the manner permitted by
applicable law, Smith
Barney. In
order for Smith Barney to effect any such
transaction for the Fund,
the
commissions, fees or other remuneration
received by Smith Barney
must be
reasonable and fair compared to the
commissions, fees or other
remuneration paid
16
<PAGE>
Smith Barney World Funds, Inc. --
International Equity Portfolio
- ---------------------------------------------
- --------------------
- ---------------
Investment Objective and Management Policies
(continued)
- ---------------------------------------------
- --------------------
- ---------------
to other brokers in connection with comparable
transactions
involving similar
securities, futures or options on futures
being purchased or sold
on an exchange
during a comparable period of time. This
standard would allow Smith
Barney to
receive no more than the remuneration that
would be expected to be
received by
an unaffiliated broker in a commensurate
arms-length transaction.
Furthermore,
the Board of Directors of the Fund, including
a majority of the
Directors who
are not "interested" Directors, has adopted
procedures that are
reasonably
designed to provide that any commissions, fees
or other
remuneration paid to
Smith Barney are consistent with the foregoing
standard. Brokerage
transactions
with Smith Barney are also subject to such
fiduciary standards as
may be imposed
upon Smith Barney by applicable law.
Although it is anticipated that most
investments of the
Portfolio will be
long-term in nature, the rate of portfolio
turnover will depend
upon market and
other conditions, and it will not be a
limiting factor when the
investment
adviser believes that portfolio changes are
appropriate. It is
expected that the
Portfolio's annual turnover rate will not
exceed 100% in normal
circumstances.
Investors should realize that risk of loss is
inherent in the
ownership of any
securities and that shares of the Portfolio
will fluctuate with the
market value
of its securities.
RISK FACTORS
Non-U.S. Securities. Investments in
securities of non-U.S.
issuers involve
certain risks not ordinarily associated with
investments in securit
ies of
domestic issuers. Such risks include
fluctuations in foreign
exchange rates,
future political and economic developments,
and the possible
imposition of
exchange controls or other foreign
governmental laws or
restrictions. Since the
Portfolio will invest heavily in securities
denominated or quoted
in currencies
other than the U.S. dollar, changes in foreign
currency exchange
rates will, to
the extent the Portfolio does not adequately
hedge against such
fluctuations,
affect the value of securities in its
portfolio and the unrealized
appreciation
or depreciation of investments so far as U.S.
investors are
concerned. In
addition, with respect to certain countries,
there is the
possibility of
expropriation of assets, confiscatory
taxation, political or social
instability
or diplomatic developments which could
adversely affect investments
in those
countries.
There may be less publicly available
information about a
foreign company
than about a U.S. company, and foreign
companies may not be subject
to
accounting, auditing, and financial reporting
standards and
requirements
comparable to or as uniform as those of U.S.
companies. Non-U.S.
securities
markets, while growing in volume, have, for
the most part,
substantially less
volume than U.S. markets, and securities of
many foreign companies
are less
liquid and their prices more volatile than
securities of comparable
U.S.
17
<PAGE>
Smith Barney World Funds, Inc. --
International Equity Portfolio
- ---------------------------------------------
- --------------------
- ---------------
Investment Objective and Management Policies
(continued)
- ---------------------------------------------
- --------------------
- ---------------
companies. Transaction costs on non-U.S.
securities markets are
generally higher
than in the U.S. There is generally less
government supervision and
regulation
of exchanges, brokers and issuers than there
is in the U.S. The
Fund might have
greater difficulty taking appropriate legal
action in non-U.S.
courts.
Dividend and interest income from
non-U.S. securities will
generally be
subject to withholding taxes by the country in
which the issuer is
located and
may not be recoverable by the Portfolio or the
investors.
Securities of Developing Countries. A
developing country
generally is
considered to be a country that is in the
initial stages of its
industrialization cycle. Investing in the
equity and fixed-income
markets of
developing countries involves exposure to
economic structures that
are generally
less diverse and mature, and to political
systems that can be
expected to have
less stability, than those of developed
countries. Historical
experience
indicates that the markets of developing
countries have been more
volatile than
the markets of the more mature economies of
developed countries;
however, such
markets often have provided higher rates of
return to investors.
One or more of the risks discussed above
could affect
adversely the economy
of a developing market or the Portfolio's
investments in such a
market. In
Eastern Europe, for example, upon the
accession to power of
Communist regimes in
the past, the governments of a number of
Eastern European countries
expropriated
a large amount of property. The claims of many
property owners
against those of
governments were never finally settled. There
can be no assurance
that any
investments that the Portfolio might make in
such emerging markets
would not be
expropriated, nationalized or otherwise
confiscated at some time in
the future.
In such an event, the Portfolio could lose its
entire investment in
the market
involved. Moreover, changes in the leadership
of policies of such
markets could
halt the expansion or reverse the
liberalization of foreign
investment policies
now occurring in certain of these markets and
adversely affect
existing
investment opportunities.
- ---------------------------------------------
- --------------------
- ---------------
Valuation of Shares
- ---------------------------------------------
- --------------------
- ---------------
The Portfolio's net asset value per share
is determined as of
the close of
regular trading on the NYSE on each day that
the NYSE is open, by
dividing the
value of the Portfolio's net assets
attributable to each Class by
the total
number of shares of the Class outstanding.
18
<PAGE>
Smith Barney World Funds, Inc. --
International Equity Portfolio
- ---------------------------------------------
- --------------------
- ---------------
Valuation of Shares (continued)
- ---------------------------------------------
- --------------------
- ---------------
Securities owned by the Portfolio for
which market quotations
are readily
available are valued at current market value
or, in their absence,
at fair
value. Securities traded on an exchange are
valued at last sales
prices on the
principal exchange on which each such security
is traded, or if
there were no
sales on that exchange on the valuation date,
the last quoted sale,
up to the
time of valuation, on the other exchanges. If
instead there were no
sales on the
valuation date with respect to these
securities, such securities
are valued at
the mean of the latest published closing bid
and asked prices.
Over-the-counter
securities are valued at last sales price or,
if there were no
sales that day,
at the mean between the bid and asked prices.
Options, futures
contracts and
options thereon that are traded on exchanges
are also valued at
last sales
prices as of the close of the principal
exchange on which each is
listed or if
there were no such sale on the valuation date,
the last quoted
sale, up to the
time of valuation, on the other exchanges. In
the absence of any
sales on the
valuation date, valuation shall be the mean of
the latest closing
bid and asked
prices. Securities with a remaining maturity
of 60 days or less are
valued at
amortized cost where the Board has determined
that amortized cost
is fair value.
Premiums received on the sale of call options
will be included in
the
Portfolio's net assets, and current market
value of such options
sold by the
Portfolio will be subtracted from the
Portfolio's net assets. Any
other
investments of the Portfolio, including
restricted securities and
listed
securities for which there is a thin market or
that trade
infrequently (i.e.,
securities for which prices are not readily
available), are valued
at a fair
value determined by the Board of Directors in
good faith. This
value generally
is determined as the amount that the Portfolio
could reasonably
expect to
receive from an orderly disposition of these
assets over a
reasonable period of
time but in no event more than seven days. The
value of any
security or
commodity denominated in a currency other than
U.S. dollars will be
converted
into U.S. dollars at the prevailing market
rate as determined by
the investment
manager.
Foreign securities trading may not take
place on all days on
which the NYSE
is open. Further, trading takes place in
various foreign markets on
days on
which the NYSE is not open. Accordingly, the
determination of the
net asset
value of the Portfolio may not take place
contemporaneously with
the
determination of the prices of investments
held by such Portfolio.
Events
affecting the values of investments that occur
between the time
their prices are
determined and 4:00 P.M. on each day that the
NYSE is open will not
be reflected
in the Portfolio's net asset value unless the
investment manager,
under the
supervision of the Fund's Board of Directors,
determines that the
particular
event would materially affect net asset value.
As a result, the
Portfolio's net
asset value may be significantly affected by
such trading on days
when a
shareholder has no access to the Portfolio.
19
<PAGE>
Smith Barney World Funds, Inc. --
International Equity Portfolio
- ---------------------------------------------
- --------------------
- ---------------
Dividends, Distributions and Taxes
- ---------------------------------------------
- --------------------
- ---------------
DIVIDENDS AND DISTRIBUTIONS
The Fund declares and pays income
dividends at least annually
on shares of
the Portfolio and makes annual distributions
of capital gains, if
any, on such
shares.
If a shareholder does not otherwise
instruct, dividends and
capital gain
distributions will be reinvested automatically
in additional shares
of the same
Class at net asset value, subject to no sales
charge or CDSC.
Income dividends and capital gain
distributions that are
invested are
credited to shareholders' accounts in
additional shares at the net
asset value
as of the close of business on the payment
date. A shareholder may
change the
option at any time by notifying his or her
Smith Barney Financial
Consultant.
Retirement Plans held directly by TSSG should
notify TSSG in
writing at least
five business days prior to the payment date
to permit the change
to be entered
in the shareholder's account.
The per share dividends on Class B and
Class C shares of the
Portfolio may
be lower than the per share dividends on Class
A and Class Y shares
principally
as a result of the distribution fee applicable
with respect to
Class B and Class
C shares. The per share dividends on Class A
shares of the
Portfolio may be
lower than the per share dividends on Class Y
shares principally as
a result of
the service fee applicable to Class A shares.
Distributions of
capital gains, if
any, will be in the same amount for Class A,
Class B, Class C and
Class Y
shares.
TAXES
The Portfolio intends to qualify as a
regulated investment
company under
Subchapter M of the Code to be relieved of
Federal income tax on
that part of
its net investment income and realized capital
gains which it pays
out to its
shareholders. To qualify, the Portfolio must
meet certain tests,
including
distributing at least 90% of its investment
company taxable income,
and deriving
less than 30% of its gross income from the
sale or other
disposition of certain
investments held for less than three months.
Dividends from net investment income and
distributions of
realized
short-term capital gains on the sale of
securities, whether paid in
cash or
automatically invested in additional shares of
the Portfolio, are
taxable to
shareholders as ordinary income. The
Portfolio's dividends will not
qualify for
the dividends received deduction for
corporations. Dividends and
distributions
declared by the Portfolio may also be subject
to state and local
taxes.
Distributions out of net long-term capital
gains (i.e., net
long-term capital
gains in excess of net short-term capital
losses) are taxable to
shareholders as
long-term capital gains. Information as to the
tax status of
dividends paid or
deemed paid in each calendar year will be
mailed to shareholders as
early in the
20
<PAGE>
Smith Barney World Funds, Inc. --
International Equity Portfolio
- ---------------------------------------------
- --------------------
- ---------------
Dividends, Distributions and Taxes (continued)
- ---------------------------------------------
- --------------------
- ---------------
succeeding year as practical but not later
than January 31.
Income received by the Portfolio from
sources within foreign
countries may
be subject to withholding and other taxes
imposed by such
countries. Tax
conventions between certain countries and the
United States may
reduce or
eliminate such taxes. It is impossible to
determine the rate of
foreign tax in
advance since the amount of the Portfolio's
assets to be invested
in various
countries is not known. Such foreign taxes
would reduce the income
of the
Portfolio distributed to shareholders.
If, at the end of the Portfolio's taxable
year, more than 50%
of the value
of the Portfolio's total assets consists of
stock or securities of
foreign
corporations, the Portfolio may make an
election pursuant to which
foreign
income taxes paid by it will be treated as
paid directly by its
shareholders.
The Portfolio will make this election only if
it deems the election
to be in the
best interests of shareholders, and will
notify shareholders in
writing each
year if it makes the election and the amount
of foreign taxes to be
treated as
paid by the shareholders. If the Portfolio
makes such an election,
the amount of
such foreign taxes would be included in the
income of shareholders,
and a
shareholder other than a foreign corporation
or non-resident alien
individual
could claim either a credit or, provided the
shareholder itemizes
deductions, a
deduction for U.S. federal income tax purposes
for such foreign
taxes.
Shareholders who choose to utilize a credit
(rather than a
deduction) for
foreign taxes will be subject to the
limitation that the credit may
not exceed
the shareholders' U.S. tax (determined without
regard to the
availability of the
credit) attributable to their total foreign
source taxable income.
For this
purpose, the portion of dividends and
distributions paid by the
Portfolio from
its foreign source income will be treated as
foreign source income.
The
Portfolio's gains and losses from the sale of
securities and from
certain
foreign currency gains and losses will
generally be treated as
derived from U.S.
sources. The limitation on the foreign tax
credit is applied
separately to
foreign source "passive income," such as the
portion of dividends
received from
the Portfolio that qualifies as foreign source
income. In addition,
the foreign
tax credit is allowed to offset only 90% of
the alternative minimum
tax imposed
on corporations and individuals. Because of
these limitations,
shareholders may
be unable to claim a credit for the full
amount of their
proportionate share of
the foreign income taxes paid by the
Portfolio.
In determining gain or loss, a
shareholder who redeems or
exchanges shares
in the Portfolio within 90 days of the
acquisition of such shares
will not be
entitled to include in tax basis the sales
charges incurred in
acquiring such
shares to the extent of any subsequent
reduction in sales charges
for investing
in the Portfolio or a different Portfolio of
the Fund, such as
pursuant to the
rights discussed in "Exchange Privilege."
21
<PAGE>
Smith Barney World Funds, Inc. --
International Equity Portfolio
- ---------------------------------------------
- --------------------
- ---------------
Dividends, Distributions and Taxes (continued)
- ---------------------------------------------
- --------------------
- ---------------
The Fund is required to withhold and
remit to the U.S.
Treasury 31% of
dividends, distributions and redemption
proceeds to shareholders
who fail to
provide a correct taxpayer identification
number (the Social
Security number in
the case of an individual) or to make the
required certifications,
or who have
been notified by the Internal Revenue Service
that they are subject
to backup
withholding and who are not otherwise exempt.
The 31% withholding
tax is not an
additional tax, but is creditable against a
shareholder's federal
income tax
liability.
Prior to investing in shares of the
Portfolio, investors
should consult
with their tax advisors concerning the
federal, state and local tax
consequences
of such an investment.
- ---------------------------------------------
- --------------------
- ---------------
Purchase of Shares
- ---------------------------------------------
- --------------------
- ---------------
GENERAL
The Portfolio offers five Classes of
shares. Class A shares
are sold to
investors with an initial sales charge and
Class B and Class C
shares are sold
without an initial sales charge but are
subject to a CDSC payable
upon certain
redemptions. Class Y shares are sold without
an initial sales
charge or CDSC and
are available only to investors investing a
minimum of $5,000,000.
Class Z
shares are offered without a sales charge,
CDSC, service fee or
distribution
fee, exclusively to tax-exempt employee
benefit and retirement
plans of Smith
Barney and its affiliates. Investors meeting
these criteria who are
interested
in acquiring Class Z shares should contact a
Smith Barney Financial
Consultant
for a Class Z Prospectus. See "Prospectus
Summary -- Alternative
Purchase
Arrangements" for a discussion of factors to
consider in selecting
which Class
of shares to purchase.
Purchases of Portfolio shares must be
made through a brokerage
account
maintained with Smith Barney, an Introducing
Broker or an
investment dealer in
the selling group, except for investors
purchasing shares of the
Portfolio
through a qualified retirement plan who may do
so directly through
TSSG. When
purchasing shares of the Portfolio, investors
must specify whether
the purchase
is for Class A, Class B, Class C or Class Y
shares. No maintenance
fee will be
charged by the Fund in connection with a
brokerage account through
which an
investor purchases or holds shares.
Investors in Class A, Class B and Class C
shares may open an
account by
making an initial investment of at least
$1,000 for each account,
or $250 for an
IRA or a Self-Employed Retirement Plan in the
Portfolio. Investors
in Class Y
shares may open an account by making an
initial investment of
$5,000,000.
22
<PAGE>
Smith Barney World Funds, Inc. --
International Equity Portfolio
- ---------------------------------------------
- --------------------
- ---------------
Purchase of Shares (continued)
- ---------------------------------------------
- --------------------
- ---------------
Subsequent investments of at least $50 may be
made for all Classes.
For
participants in retirement plans qualified
under Section 403(b)(7)
or Section
401(a) of the Code, the minimum initial
investment requirement for
Class A,
Class B and Class C shares and the subsequent
investment
requirement for all
Classes in the Portfolio is $25. For the
Portfolio's Systematic
Investment Plan,
the minimum initial investment requirement for
Class A, Class B and
Class C
shares and the subsequent investment
requirement for all Classes is
$100. There
are no minimum investment requirements in
Class A shares for
employees of
Travelers and its subsidiaries, including
Smith Barney, Directors
of the Fund,
and their spouses and children. The Fund
reserves the right to
waive or change
minimums, to decline any order to purchase its
shares and to
suspend the
offering of shares from time to time. Shares
purchased will be held
in the
shareholder's account by the Fund's transfer
agent, TSSG. Share
certificates are
issued only upon a shareholder's written
request to TSSG.
Purchase orders received by Smith Barney
prior to the close of
regular
trading on the NYSE, on any day the Portfolio
calculates its net
asset value,
are priced according to the net asset value
determined on that day
(the "trade
date"). Orders received by dealers or
Introducing Brokers prior to
the close of
regular trading on the NYSE on any day the
Portfolio calculates its
net asset
value, are priced according to the net asset
value determined on
that day,
provided the order is received by Smith Barney
prior to Smith
Barney's close of
business. Currently, payment for Portfolio
shares is due on the
fifth business
day (the "settlement date") after the trade
date. The Portfolio
anticipates
that, in accordance with regulatory changes,
beginning on or about
June 1, 1995,
the settlement date will be the third business
day after the trade
date.
SYSTEMATIC INVESTMENT PLAN
Shareholders may make additions to their
accounts at any time
by purchasing
shares through a service known as the
Systematic Investment Plan.
Under the
Systematic Investment Plan, Smith Barney or
TSSG is authorized
through
preauthorized transfers of $50 or more to
charge the regular bank
account or
other financial institution indicated by the
shareholder on a
monthly or
quarterly basis to provide systematic
additions to the
shareholder's Portfolio
account. A shareholder who has insufficient
funds to complete the
transfer will
be charged a fee of up to $25 by Smith Barney
or TSSG. The
Systematic Investment
Plan also authorizes Smith Barney to apply
cash held in the
shareholder's Smith
Barney brokerage account or redeem the
shareholder's shares of a
Smith Barney
money market fund to make additions to the
account. Additional
information is
available from the Fund or a Smith Barney
Financial Consultant.
23
<PAGE>
Smith Barney World Funds, Inc. --
International Equity Portfolio
- ---------------------------------------------
- --------------------
- ---------------
Purchase of Shares (continued)
- ---------------------------------------------
- --------------------
- ---------------
INITIAL SALES CHARGE ALTERNATIVE - CLASS
A SHARES
The sales charges applicable to purchases
of Class A shares of
the
Portfolio are as follows:
Dealers'
Sales Charge
Sales Charge
Reallowance
% of
as % of
as % of
Amount of Investment Offering Price
Amount Invested
Offering Price
- ---------------------------------------------
- --------------------
- ---------------
Less than $ 25,000 5.00%
5.26%
4.50%
$ 25,000 - 49,999 4.00
4.17
3.60
50,000 - 99,999 3.50
3.63
3.15
100,000 - 249,999 3.00
3.09
2.70
250,000 - 499,999 2.00
2.04
1.80
500,000 and over *
*
*
- ---------------------------------------------
- --------------------
- ---------------
*Purchases of Class A shares, which when
combined with current
holdings of Class
A shares offered with a sales charge equal or
exceed $500,000 in
the aggregate,
will be made at net asset value without any
initial sales charge,
but will be
subject to a CDSC of 1.00% on redemptions made
within 12 months of
purchase. The
CDSC on Class A shares is payable to Smith
Barney, which
compensates Smith
Barney Financial Consultants and other dealers
whose clients make
purchases of
$500,000 or more. The CDSC is waived in the
same circumstances in
which the CDSC
applicable to Class B and Class C shares is
waived. See "Deferred
Sales Charge
Alternatives" and "Waivers of CDSC."
Members of the selling group may receive
up to 90% of the
sales charge and
may be deemed to be underwriters of the Fund
as defined in the
Securities Act of
1933, as amended.
The reduced sales charges shown above
apply to the aggregate
of purchases
of Class A shares of the Portfolio made at one
time by "any
person," which
includes an individual, his or her spouse and
children, or a
trustee or other
fiduciary of a single trust estate or single
fiduciary account. The
reduced
sales charge minimums may also be met by
aggregating the purchase
with the net
asset value of all Class A shares offered with
a sales charge held
in funds
sponsored by Smith Barney listed under
"Exchange Privilege."
INITIAL SALES CHARGE WAIVERS
Purchases of Class A shares may be made
at net asset value
without a sales
charge in the following circumstances: (a)
sales of Class A shares
to Directors
of the Fund and employees of Travelers and its
subsidiaries, or to
the spouse
and children of such persons (including the
surviving spouse of a
deceased
Director or employee, and retired Directors or
employees), or sales
to any
trust, pension, profit-sharing or other
benefit plan for such
persons provided
24
<PAGE>
Smith Barney World Funds, Inc. --
International Equity Portfolio
- ---------------------------------------------
- --------------------
- ---------------
Purchase of Shares (continued)
- ---------------------------------------------
- --------------------
- ---------------
such sales are made upon the assurance of the
purchaser that the
purchase is
made for investment purposes and that the
securities will not be
resold except
through redemption or repurchase; (b) offers
of Class A shares to
any other
investment company in connection with the
combination of such
company with the
Portfolio by merger, acquisition of assets or
otherwise; (c)
purchases of Class
A shares by any client of a newly employed
Smith Barney Financial
Consultant
(for a period up to 90 days from the
commencement of the Financial
Consultant's
employment with Smith Barney), on the
condition the purchase of
Class A shares
is made with the proceeds of the redemption of
shares of a mutual
fund which (i)
was sponsored by the Financial Consultant's
prior employer, (ii)
was sold to the
client by the Financial Consultant and (iii)
was subject to a sales
charge; (d)
shareholders who have redeemed Class A shares
in the Portfolio (or
Class A
shares of another fund of the Smith Barney
Mutual Funds that are
sold with a
maximum 5.00% sales charge) and who wish to
reinvest their
redemption proceeds
in the Portfolio, provided the reinvestment is
made within 60
calendar days of
the redemption; and (e) accounts managed by
registered investment
advisory
subsidiaries of Travelers. In order to obtain
such discounts, the
purchaser must
provide sufficient information at the time of
purchase to permit
verification
that the purchase would qualify for the
elimination of the sales
charge.
RIGHT OF ACCUMULATION
Class A shares of the Portfolio may be
purchased by "any
person" (as
defined above) at a reduced sales charge or at
net asset value
determined by
aggregating the dollar amount of the new
purchase and the total net
asset value
of all Class A shares of the Portfolio and of
funds sponsored by
Smith Barney
that are offered with a sales charge listed
under "Exchange
Privilege" then held
by such person and applying the sales charge
applicable to such
aggregate. In
order to obtain such discount, the purchaser
must provide
sufficient information
at the time of purchase to permit verification
that the purchase
qualifies for
the reduced sales charge. The right of
accumulation is subject to
modification
or discontinuance at any time with respect to
all shares purchased
thereafter.
GROUP PURCHASES
Upon completion of certain automated
systems, a reduced sales
charge or
purchase at net asset value will also be
available to employees
(and partners)
of the same employer purchasing as a group,
provided each
participant makes the
minimum initial investment required. The sales
charge applicable to
purchases by
each member of such a group will be determined
by the table set
forth above
25
<PAGE>
Smith Barney World Funds, Inc. --
International Equity Portfolio
- ---------------------------------------------
- --------------------
- ---------------
Purchase of Shares (continued)
- ---------------------------------------------
- --------------------
- ---------------
under "Initial Sales Charge Alternative --
Class A Shares," and
will be based
upon the aggregate sales of Class A shares of
Smith Barney Mutual
Funds offered
with a sales charge to, and share holdings of,
all members of the
group. To be
eligible for such reduced sales charges or to
purchase at net asset
value, all
purchases must be pursuant to an employer- or
partnership-sanctioned plan
meeting certain requirements. One such
requirement is that the plan
must be open
to specified partners or employees of the
employer and its
subsidiaries, if any.
Such plan may, but is not required to, provide
for payroll
deductions, IRAs or
investments pursuant to retirement plans under
Sections 401 or 408
of the Code.
Smith Barney may also offer a reduced sales
charge or net asset
value purchase
for aggregating related fiduciary accounts
under such conditions
that Smith
Barney will realize economies of sales efforts
and sales related
expenses. An
individual who is a member of a qualified
group may also purchase
Class A shares
at the reduced sales charge applicable to the
group as a whole. The
sales charge
is based upon the aggregate dollar value of
Class A shares offered
with a sales
charge that have been previously purchased and
are still owned by
the group,
plus the amount of the current purchase. A
"qualified group" is one
which (a)
has been in existence for more than six
months, (b) has a purpose
other than
acquiring Portfolio shares at a discount and
(c) satisfies uniform
criteria
which enable Smith Barney to realize economies
of scale in its
costs of
distributing shares. A qualified group must
have more than 10
members, must be
available to arrange for group meetings
between representatives of
the Portfolio
and the members, and must agree to include
sales and other
materials related to
the Portfolio in its publications and mailings
to members at no
cost to Smith
Barney. In order to obtain such reduced sales
charge or to purchase
at net asset
value, the purchaser must provide sufficient
information at the
time of purchase
to permit verification that the purchase
qualifies for the reduced
sales charge.
Approval of group purchase reduced sales
charge plans is subject to
the
discretion of Smith Barney.
LETTER OF INTENT
A Letter of Intent for amounts of $50,000
or more provides an
opportunity
for an investor to obtain a reduced sales
charge by aggregating
investments over
a 13 month period, provided that the investor
refers to such Letter
when placing
orders. For purposes of a Letter of Intent,
the "Amount of
Investment" as
referred to in the preceding sales charge
table includes purchases
of all Class
A shares of the Portfolio and other funds of
the Smith Barney
Mutual Funds
offered with a sales charge over the 13 month
period based on the
total amount
of intended purchases plus the value of all
Class A shares
previously purchased
26
<PAGE>
Smith Barney World Funds, Inc. --
International Equity Portfolio
- ---------------------------------------------
- --------------------
- ---------------
Purchase of Shares (continued)
- ---------------------------------------------
- --------------------
- ---------------
and still owned. An alternative is to compute
the 13 month period
starting up to
90 days before the date of execution of a
Letter of Intent. Each
investment made
during the period receives the reduced sales
charge applicable to
the total
amount of the investment goal. If the goal is
not achieved within
the period,
the investor must pay the difference between
the sales charges
applicable to the
purchases made and the charges previously
paid, or an appropriate
number of
escrowed shares will be redeemed. Please
contact a Smith Barney
Financial
Consultant or TSSG to obtain a Letter of
Intent application.
DEFERRED SALES CHARGE ALTERNATIVES
CDSC Shares are sold at net asset value
next determined
without an initial
sales charge so that the full amount of an
investor's purchase
payment may be
immediately invested in the Portfolio. A CDSC,
however, may be
imposed on
certain redemptions of these shares. "CDSC
Shares" are: (a) Class
B shares; (b)
Class C shares; and (c) Class A shares which
when combined with
Class A shares
offered with a sales charge currently held by
an investor equal or
exceed
$500,000 in the aggregate.
Any applicable CDSC will be assessed on
an amount equal to the
lesser of
the cost of the shares being redeemed or their
net asset value at
the time of
redemption. CDSC Shares that are redeemed will
not be subject to a
CDSC to the
extent that the value of such shares
represents: (a) capital
appreciation of
Portfolio assets; (b) reinvestment of
dividends or capital gain
distributions;
(c) with respect to Class B shares, shares
redeemed more than five
years after
their purchase; or (d) with respect to Class C
shares and Class A
shares that
are CDSC Shares, shares redeemed more than 12
months after their
purchase.
Class C shares and Class A shares that
are CDSC Shares are
subject to a
1.00% CDSC if redeemed within 12 months of
purchase. In
circumstances in which
the CDSC is imposed on Class B shares, the
amount of the charge
will depend on
the number of years since the shareholder made
the purchase payment
from which
the amount is being redeemed. Solely for
purposes of determining
the number of
years since a purchase payment, all purchase
payments made during
a month will
be aggregated and deemed to have been made on
the last day of the
preceding
Smith Barney statement month. The following
table sets forth the
rates of the
charge for redemptions of Class B shares by
shareholders, except in
the case of
purchases by Participating Plans, as described
below. See "Purchase
of Shares --
Smith Barney 401(k) Program."
27
<PAGE>
Smith Barney World Funds, Inc. --
International Equity Portfolio
- ---------------------------------------------
- --------------------
- ---------------
Purchase of Shares (continued)
- ---------------------------------------------
- --------------------
- ---------------
Year Since Purchase
Payment Was Made
CDSC
- ---------------------------------------------
- --------------------
- ---------------
First
5.00%
Second
4.00
Third
3.00
Fourth
2.00
Fifth
1.00
Sixth
0.00
Seventh
0.00
Eighth
0.00
=============================================
====================
===============
Class B shares will convert automatically
to Class A shares
eight years
after the date on which they were purchased
and thereafter will no
longer be
subject to any distribution fees. There will
also be converted at
that time such
proportion of Class B Dividend Shares owned by
the shareholder as
the total
number of his or her Class B shares converting
at the time bears to
the total
number of outstanding Class B shares (other
than Class B Dividend
Shares) owned
by the shareholder. Shareholders who held
Class B shares of Smith
Barney
Shearson Short-Term World Income Fund (the
"Short-Term World Income
Fund") on
July 15, 1994 and who subsequently exchange
those shares for Class
B shares of
the Portfolio will be offered the opportunity
to exchange all such
Class B
shares for Class A shares of the Portfolio
four years after the
date on which
those shares were deemed to have been
purchased. Holders of such
Class B shares
will be notified of the pending exchange in
writing approximately
30 days before
the fourth anniversary of the purchase date
and, unless the
exchange has been
rejected in writing, the exchange will occur
on or about the fourth
anniversary
date. See "Prospectus Summary -- Alternative
Purchase Arrangements
- -- Class B
Shares Conversion Feature."
In determining the applicability of any
CDSC, it will be
assumed that a
redemption is made first of shares
representing capital
appreciation, next of
shares representing the reinvestment of
dividends and capital gain
distributions
and finally of other shares held by the
shareholder for the longest
period of
time. The length of time that CDSC Shares
acquired through an
exchange have been
held will be calculated from the date that the
shares exchanged
were initially
acquired in one of the other Smith Barney
Mutual Funds, and
Portfolio shares
being redeemed will be considered to
represent, as applicable,
capital
appreciation or dividend and capital gain
distribution
reinvestments in such
other funds. For Federal income tax purposes,
the amount of the
CDSC will reduce
the gain or increase the loss, as the case may
be, on the amount
realized on
redemption. The amount of any CDSC will be
paid to Smith Barney.
28
<PAGE>
Smith Barney World Funds, Inc. --
International Equity Portfolio
- ---------------------------------------------
- --------------------
- ---------------
Purchase of Shares (continued)
- ---------------------------------------------
- --------------------
- ---------------
To provide an example, assume an investor
purchased 100 Class
B shares at
$10 per share for a cost of $1,000.
Subsequently, the investor
acquired 5
additional shares through dividend
reinvestment. During the
fifteenth month
after the purchase, the investor decided to
redeem $500 of his or
her
investment. Assuming at the time of the
redemption the net asset
value had
appreciated to $12 per share, the value of the
investor's shares
would be $1,260
(105 shares at $12 per share). The CDSC would
not be applied to the
amount which
represents appreciation ($200) and the value
of the reinvested
dividend shares
($60). Therefore, $240 of the $500 redemption
proceeds ($500 minus
$260) would
be charged at a rate of 4.00% (the applicable
rate for Class B
shares) for a
total deferred sales charge of $9.60.
WAIVERS OF CDSC
The CDSC will be waived on: (a) exchanges
(see "Exchange
Privilege"); (b)
automatic cash withdrawals in amounts equal to
or less than 1.00%
per month of
the value of the shareholder's shares at the
time the withdrawal
plan commences
(see "Automatic Cash Withdrawal Plan")
(provided, however, that
automatic cash
withdrawals in amounts equal to or less than
2.00% per month of the
value of the
shareholder's shares will be permitted for
withdrawal plans that
were
established prior to November 7, 1994); (c)
redemptions of shares
within twelve
months following the death or disability of
the shareholder; (d)
redemption of
shares made in connection with qualified
distributions from
retirement plans or
IRAs upon the attainment of age 59 1/2; (e)
involuntary
redemptions; and (f)
redemptions of shares in connection with a
combination of the
Portfolio with any
investment company by merger, acquisition of
assets or otherwise.
In addition, a
shareholder who has redeemed shares from other
funds of the Smith
Barney Mutual
Funds may, under certain circumstances,
reinvest all or part of the
redemption
proceeds within 60 days and receive pro rata
credit for any CDSC
imposed on the
prior redemption.
CDSC waivers will be granted subject to
confirmation (by Smith
Barney in
the case of shareholders who are also Smith
Barney clients or by
TSSG in the
case of all other shareholders) of the
shareholder's status or
holdings, as the
case may be.
SMITH BARNEY 401(k) PROGRAM
Investors may be eligible to participate
in the Smith Barney
401(k)
Program, which is generally designed to assist
plan sponsors in the
creation and
operation of retirement plans under Section
401(a) of the Code. To
the extent
applicable, the same terms and conditions are
offered to all
Participating Plans
in the Smith Barney 401(k) Program.
29
<PAGE>
Smith Barney World Funds, Inc. --
International Equity Portfolio
- ---------------------------------------------
- --------------------
- ---------------
Purchase of Shares (continued)
- ---------------------------------------------
- --------------------
- ---------------
The Portfolio offers to Participating
Plans Class A, Class B,
Class C and
Class Y shares as investment alternatives
under the Smith Barney
401(k) Program.
Class A, Class B and Class C shares acquired
through the Smith
Barney 401(k)
Program are subject to the same service and/or
distribution fees
as, but
different sales charge and CDSC schedules
than, the Class A, Class
B and Class C
shares acquired by other investors. Similar to
those shares
available to other
investors, Class Y shares acquired through the
Smith Barney 401(k)
Program are
not subject to any service or distribution
fees or any initial
sales charge or
CDSC. Once a Participating Plan has made an
initial investment in
the Portfolio,
all of its subsequent investments in the
Portfolio must be in the
same Class of
shares, except as otherwise described below.
Class A Shares. Class A shares of the
Portfolio are offered
without any
sales charge to any Participating Plan that
purchases from $500,000
to
$4,999,999 of Class A shares of one or more
funds of the Smith
Barney Mutual
Funds. Class A shares acquired through the
Smith Barney 401(k)
Program after
November 7, 1994 are subject to a CDSC of
1.00% of redemption
proceeds, if the
Participating Plan terminates within four
years of the date the
Participating
Plan first enrolled in the Smith Barney 401(k)
Program.
Class B Shares. Class B shares of the
Portfolio are offered to
any
Participating Plan that purchases less than
$250,000 of one or more
funds of the
Smith Barney Mutual Funds. Class B shares
acquired through the
Smith Barney
401(k) Program are subject to a CDSC of 3.00%
of redemption
proceeds, if the
Participating Plan terminates within eight
years of the date the
Participating
Plan first enrolled in the Smith Barney 401(k)
Program.
Eight years after the date the
Participating Plan enrolled in
the Smith
Barney 401(k) Program, it will be offered the
opportunity to
exchange all of its
Class B shares for Class A shares of the
Portfolio. Such Plans will
be notified
of the pending exchange in writing
approximately 60 days before the
eighth
anniversary of the enrollment date and, unless
the exchange has
been rejected in
writing, the exchange will occur on or about
the eighth anniversary
date. Once
the exchange has occurred, a Participating
Plan will not be
eligible to acquire
additional Class B shares of the Portfolio but
instead may acquire
Class A
shares of the Portfolio. If the Participating
Plan elects not to
exchange all of
its Class B shares at that time, each Class B
shares held by the
Participating
Plan will have the same conversion feature as
Class B shares held
by other
investors. See "Purchase of Shares -- Deferred
Sales Charge
Alternatives."
Class C Shares. Class C shares of the
Portfolio are offered to
any
Participating Plan that purchases from
$250,000 to $499,999 of one
or more funds
30
<PAGE>
Smith Barney World Funds, Inc. --
International Equity Portfolio
- ---------------------------------------------
- --------------------
- ---------------
Purchase of Shares (continued)
- ---------------------------------------------
- --------------------
- ---------------
of the Smith Barney Mutual Funds. Class C
shares acquired through
the Smith
Barney 401(k) Program after November 7, 1994
are subject to a CDSC
of 1.00% of
redemption proceeds, if the Participating Plan
terminates within
four years of
the date the Participating Plan first enrolled
in the Smith Barney
401(k)
Program. Each year after the date a
Participating Plan enrolled in
the Smith
Barney 401(k) Program, if its total Class C
holdings equal at least
$500,000 as
of the calendar year-end, the Participating
Plan will be offered
the opportunity
to exchange all of its Class C shares for
Class A shares of the
Portfolio. Such
Plans will be notified in writing within 30
days after the last
business day of
the calendar year, and unless the exchange
offer has been rejected
in writing,
the exchange will occur on or about the last
business day of the
following
March. Once the exchange has occurred, a
Participating Plan will
not be eligible
to acquire Class C shares of the Portfolio but
instead may acquire
Class A
shares of the Portfolio. Any Class C shares
not converted will
continue to be
subject to the distribution fee.
Class Y Shares. Class Y shares of the
Portfolio are offered
without any
service or distribution fees, sales charge or
CDSC to any
Participating Plan
that purchases $5,000,000 or more of Class Y
shares of one or more
funds of the
Smith Barney Mutual Funds.
No CDSC is imposed on redemptions of CDSC
Shares to the extent
that the net
asset value of the shares redeemed does not
exceed the current net
asset value
of the shares purchased through reinvestment
of dividends or
capital gain
distributions, plus (a) with respect to Class
A and Class C shares,
the current
net asset value of such shares purchased more
than one year prior
to redemption
and, with respect to Class B shares, the
current net asset value of
Class B
shares purchased more than eight years prior
to the redemption,
plus (b) with
respect to Class A and Class C shares,
increases in the net asset
value of the
shareholder's Class A or Class C shares above
the purchase payments
made during
the preceding year and, with respect to Class
B shares, increases
in the net
asset value of the shareholder's Class B
shares above the purchase
payments made
during the preceding eight years. Whether or
not the CDSC applies
to a
Participating Plan depends on the number of
years since the
Participating Plan
first became enrolled in the Smith Barney
401(k) Program, unlike
the
applicability of the CDSC to other
shareholders, which depends on
the number of
years since those shareholders made the
purchase payment from which
the amount
is being redeemed.
The CDSC will be waived on redemptions of
Class A, Class B and
Class C
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
31
<PAGE>
Smith Barney World Funds, Inc. --
International Equity Portfolio
- ---------------------------------------------
- --------------------
- ---------------
Purchase of Shares (continued)
- ---------------------------------------------
- --------------------
- ---------------
Participating Plan; (d) the attainment of age
59 1/2 by an employee
in the
Participating Plan; (e) hardship of an
employee in the
Participating Plan to the
extent permitted under Section 401(k) of the
Code; or (f)
redemptions of shares
in connection with a loan made by the
Participating Plan to an
employee.
Participating Plans wishing to acquire
shares of the Portfolio
through the
Smith Barney 401(k) Program must purchase such
shares directly from
TSSG. For
further information regarding the Smith Barney
401(k) Program,
investors should
contact a Smith Barney Financial Consultant.
- ---------------------------------------------
- --------------------
- ---------------
Exchange Privilege
- ---------------------------------------------
- --------------------
- ---------------
Except as otherwise noted below, shares
of each Class may be
exchanged for
shares of the same Class in the following
funds of the Smith Barney
Mutual
Funds, to the extent shares are offered for
sale in the
shareholder's state of
residence. Exchanges of Class A, Class B and
Class C shares are
subject to
minimum investment requirements and all shares
are subject to the
other
requirements of the fund into which exchanges
are made and a sales
charge
differential may apply.
FUND NAME
- ---------------------------------------------
- --------------------
- ---------------
Growth Funds
Smith Barney Aggressive Growth Fund Inc.
Smith Barney Appreciation Fund Inc.
Smith Barney Fundamental Value Fund Inc.
Smith Barney Special Equities Fund
Smith Barney Telecommunications Growth
Fund
Growth and Income Funds
Smith Barney Convertible Fund
Smith Barney Funds, Inc. -- Income and
Growth Portfolio
Smith Barney Funds, Inc. -- Utility
Portfolio
Smith Barney Growth and Income Fund
Smith Barney Premium Total Return Fund
Smith Barney Strategic Investors Fund
Smith Barney Utilities Fund
32
<PAGE>
Smith Barney World Funds, Inc. --
International Equity Portfolio
- ---------------------------------------------
- --------------------
- ---------------
Exchange Privilege (continued)
- ---------------------------------------------
- --------------------
- ---------------
Taxable Fixed-Income Funds
** Smith Barney Adjustable Rate Government
Income Fund
Smith Barney Diversified Strategic
Income Fund
* Smith Barney Funds, Inc. -- Income
Return Account Portfolio
Smith Barney Funds, Inc. -- Monthly
Payment Government
Portfolio
+++ Smith Barney Funds, Inc. -- Short-Term
U.S. Treasury
Securities Portfolio
Smith Barney Funds, Inc. -- U.S.
Government Securities
Portfolio
Smith Barney Government Securities Fund
Smith Barney High Income Fund
Smith Barney Investment Grade Bond Fund
Smith Barney Managed Governments Fund
Inc.
Tax-Exempt Funds
Smith Barney Arizona Municipals Fund
Inc.
Smith Barney California Municipals Fund
Inc.
Smith Barney Florida Municipals Fund
* Smith Barney Intermediate Maturity
California Municipals Fund
* Smith Barney Intermediate Maturity New
York Municipals Fund
* Smith Barney Limited Maturity Municipals
Fund
Smith Barney Managed Municipals Fund
Inc.
Smith Barney Massachusetts Municipals
Fund
Smith Barney Muni Funds -- California
Portfolio
* Smith Barney Muni Funds -- Florida
Limited Term Portfolio
Smith Barney Muni Funds -- Florida
Portfolio
Smith Barney Muni Funds -- Georgia
Portfolio
* Smith Barney Muni Funds -- Limited Term
Portfolio
Smith Barney Muni Funds -- National
Portfolio
Smith Barney Muni Funds -- New Jersey
Portfolio
Smith Barney Muni Funds -- New York
Portfolio
Smith Barney Muni Funds -- Ohio
Portfolio
Smith Barney Muni Funds -- Pennsylvania
Portfolio
Smith Barney New Jersey Municipals Fund
Inc.
Smith Barney New York Municipals Fund
Inc.
Smith Barney Oregon Municipals Fund
Smith Barney Tax-Exempt Income Fund
International Funds
Smith Barney World Funds, Inc. --
European Portfolio
Smith Barney World Funds, Inc. -- Global
Government Bond
Portfolio
Smith Barney World Funds, Inc. --
International Balanced
Portfolio
33
<PAGE>
Smith Barney World Funds, Inc. --
International Equity Portfolio
- ---------------------------------------------
- --------------------
- ---------------
Exchange Privilege (continued)
- ---------------------------------------------
- --------------------
- ---------------
Smith Barney World Funds, Inc. --
Pacific Portfolio
Smith Barney Precious Metals and
Minerals Fund Inc.
Money Market Funds
+ Smith Barney Exchange Reserve Fund
++ Smith Barney Money Funds, Inc. -- Cash
Portfolio
++ Smith Barney Money Funds, Inc. --
Government Portfolio
*** Smith Barney Money Funds, Inc. --
Retirement Portfolio
+++ Smith Barney Municipal Money Market
Fund, Inc.
+++ Smith Barney Muni Funds -- California
Money Market Portfolio
+++ Smith Barney Muni Funds -- New York
Money Market Portfolio
=============================================
====================
===============
* Available for exchange with Class A,
Class C and Class Y
shares of the
Portfolio.
** Available for exchange with Class A,
Class B and Class Y
shares of the
Portfolio. In addition, shareholders who
own Class C shares of
the
Portfolio through the Smith Barney 401(k)
Program may exchange
those shares
for Class C shares of this fund.
*** Available for exchange with Class A
shares of the Portfolio.
+ Available for exchange with Class B and
Class C shares of the
Portfolio.
++ Available for exchange with Class A and
Class Y shares of the
Portfolio. In
addition, shareholders who own Class C
shares of the Portfolio
through the
Smith Barney 401(k) Program may exchange
those shares for
Class C shares of
this fund.
+++ Available for exchange with Class A and
Class Y shares of the
Portfolio.
Class A Exchanges. Class A shares of
Smith Barney Mutual Funds
sold without
a sales charge or with a maximum sales charge
of less than the
maximum charged
by other Smith Barney Mutual Funds will be
subject to the
appropriate "sales
charge differential" upon the exchange of such
shares for Class A
shares of a
fund sold with a higher sales charge. 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 and capital gain
distributions are
treated as having
paid the same sales charges applicable to the
shares on which the
dividends or
distributions were paid; however, except in
the case of the Smith
Barney 401(k)
Program, if no sales charge was imposed upon
the initial purchase
of the shares,
any shares obtained through automatic
reinvestment will be subject
to a sales
charge differential upon exchange. Class A
shares held in the
Portfolio prior to
November 7, 1994 that are subsequently
exchanged for shares of
other funds of
the Smith Barney Mutual Funds will not be
subject to a sales charge
differential.
34
<PAGE>
Smith Barney World Funds, Inc. --
International Equity Portfolio
- ---------------------------------------------
- --------------------
- ---------------
Exchange Privilege (continued)
- ---------------------------------------------
- --------------------
- ---------------
Class B Exchanges. In the event a Class B
shareholder (unless
such
shareholder was a Class B shareholder of the
Short-Term World
Income Fund on
July 15, 1994) wishes to exchange all or a
portion of his or her
shares in any
of the funds imposing a CDSC higher than that
imposed by the
Portfolio, the
exchanged Class B shares will be subject to
the higher applicable
CDSC. Upon an
exchange, the new Class B shares will be
deemed to have been
purchased on the
same date as the Class B shares of the
Portfolio that have been
exchanged.
Class C Exchanges. Upon an exchange, the
new Class C shares
will be deemed
to have been purchased on the same date as the
Class C shares of
the Portfolio
that have been exchanged.
Class Y Exchanges. Class Y shareholders
of the Portfolio who
wish to
exchange all or a portion of their Class Y
shares for Class Y
shares in any of
the funds identified above may do so without
imposition of any
charge.
Additional Information Regarding the
Exchange Privilege.
Although the
exchange privilege is an important benefit,
excessive exchange
transactions can
be detrimental to the Portfolio's performance
and its shareholders.
The Manager
may determine that a pattern of frequent
exchanges is excessive and
contrary to
the best interests of the Portfolio's other
shareholders. In this
event, the
Manager will notify Smith Barney and Smith
Barney may, at its
discretion, decide
to limit additional purchases and/or exchanges
by the shareholder.
Upon such a
determination, Smith Barney will provide
notice in writing or by
telephone to
the shareholder at least 15 days prior to
suspending the exchange
privilege and
during the 15 day period the shareholder will
be required to (a)
redeem his or
her shares in the Portfolio or (b) remain
invested in the Portfolio
or exchange
into any of the funds of the Smith Barney
Mutual Funds ordinarily
available,
which position the shareholder would be
expected to maintain for a
significant
period of time. All relevant factors will be
considered in
determining what
constitutes an abusive pattern of exchanges.
Exchanges will be processed at the net
asset value next
determined, plus
any applicable sales charge differential.
Redemption procedures
discussed below
are also applicable for exchanging shares, and
exchanges will be
made upon
receipt of all supporting documents in proper
form. If the account
registration
of the shares of the fund being acquired is
identical to the
registration of the
shares of the fund exchanged, no signature
guarantee is required.
A capital gain
or loss for tax purposes will be realized upon
the exchange,
depending upon the
cost or other basis of shares redeemed. Before
exchanging shares,
investors
should read the current prospectus describing
the shares to be
acquired. The
Portfolio reserves the right to modify or
discontinue exchange
privileges upon
60 days' prior notice to shareholders.
35
<PAGE>
Smith Barney World Funds, Inc. --
International Equity Portfolio
- ---------------------------------------------
- --------------------
- ---------------
Redemption of Shares
- ---------------------------------------------
- --------------------
- ---------------
The Fund is required to redeem the shares
of the Portfolio
tendered to it,
as described below, at a redemption price
equal to their net asset
value per
share next determined after receipt of a
written request in proper
form at no
charge other than any applicable CDSC.
Redemption requests received
after the
close of regular trading on the NYSE are
priced at the net asset
value next
determined. If a shareholder holds shares in
more than one Class,
any 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, or if the
shareholder's
account is not with Smith Barney, from the
shareholder directly.
The redemption
proceeds will be remitted on or before the
seventh day following
receipt of
proper tender, except on any days on which the
NYSE is closed or as
permitted
under the 1940 Act in extraordinary
circumstances. The Fund
anticipates that, in
accordance with regulatory changes, beginning
on or about June 1,
1995, payment
will be made on the third business day after
receipt of proper
tender.
Generally, if the redemption proceeds are
remitted to a Smith
Barney brokerage
account, these funds will not be invested for
the shareholder's
benefit without
specific instruction and Smith Barney will
benefit from the use of
temporarily
uninvested funds. Redemption proceeds for
shares purchased by
check, other than
a certified or official bank check, will be
remitted upon clearance
of the
check, which may take up to ten days or more.
Shares held by Smith Barney as custodian
must be redeemed by
submitting a
written request to a Smith Barney Financial
Consultant. Shares
other than those
held by Smith Barney as custodian may be
redeemed through an
investor's
Financial Consultant, Introducing Broker or
dealer in the selling
group or by
submitting a written request for redemption
to:
Smith Barney World Funds,
Inc./International Equity Portfolio
Class A,B,C or Y (please specify)
c/o The Shareholder Services Group, Inc.
P.O. Box 9134
Boston, Massachusetts 02205-9134
A written redemption request must (a)
state the Class and
number or dollar
amount of shares to be redeemed, (b) identify
the shareholder's
account number
and (c) be signed by each registered owner
exactly as the shares
are registered.
If the shares to be redeemed were issued in
certificate form, the
certificates
must be endorsed for transfer (or be
accompanied by an endorsed
stock power) and
must be submitted to TSSG together with the
redemption request. Any
signature
appearing on a redemption request, share
certificate or stock power
must be
guaranteed by an eligible guarantor
institution, such as a domestic
bank,
36
<PAGE>
Smith Barney World Funds, Inc. --
International Equity Portfolio
- ---------------------------------------------
- --------------------
- ---------------
Redemption of Shares (continued)
- ---------------------------------------------
- --------------------
- ---------------
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 Portfolio offers shareholders an
automatic cash withdrawal
plan, under
which shareholders who own shares with a value
of at least $10,000
may elect to
receive cash payments of at least $50 monthly
or quarterly.
Retirement plan
accounts are eligible for automatic cash
withdrawal plans only
where the
shareholder is eligible to receive qualified
distributions and has
an account
value of at least $5,000. The withdrawal plan
will be carried over
on exchanges
between funds or Classes of the Portfolio. Any
applicable CDSC will
not be
waived on amounts withdrawn by a shareholder
that exceed 1.00% per
month of the
value of the shareholder's shares subject to
the CDSC at the time
the withdrawal
plan commences. (With respect to withdrawal
plans in effect prior
to November 7,
1994, any applicable CDSC will be waived on
amounts withdrawn that
do not exceed
2.00% per month of the value of the
shareholder's shares subject to
the CDSC.)
For further information regarding the
automatic cash withdrawal
plan,
shareholders should contact a Smith Barney
Financial Consultant.
- ---------------------------------------------
- --------------------
- ---------------
Minimum Account Size
- ---------------------------------------------
- --------------------
- ---------------
The Fund reserves the right to
involuntarily liquidate any
shareholder's
account in the Portfolio if the aggregate net
asset value of the
shares held in
the Portfolio account is less than $500. (If a
shareholder has more
than one
account in this Portfolio, each account must
satisfy the minimum
account size.)
The Fund, however, will not redeem shares
based solely on market
reductions in
net asset value. Before the Fund exercises
such right, shareholders
will receive
written notice and will be permitted 60 days
to bring accounts up
to the minimum
to avoid automatic liquidation.
- ---------------------------------------------
- --------------------
- ---------------
Performance
- ---------------------------------------------
- --------------------
- ---------------
From time to time the Fund may advertise
the Portfolio's total
return and
average annual total return in advertisements.
In addition, in
other types of
sales literature the Fund may include the
Portfolio's current
dividend return.
These figures are computed separately for
Class A, Class B, Class
C and Class Y
37
<PAGE>
Smith Barney World Funds, Inc. --
International Equity Portfolio
- ---------------------------------------------
- --------------------
- ---------------
Performance (continued)
- ---------------------------------------------
- --------------------
- ---------------
shares of the Portfolio. These figures are
based on historical
earnings and are
not intended to indicate future performance.
Total return is
computed for a
specified period of time assuming deduction of
the maximum sales
charge from the
initial amount invested and reinvestment of
all income dividends
and capital
gain distributions on the reinvestment dates
at prices calculated
as stated in
this Prospectus, then dividing the value of
the investment at the
end of the
period so calculated by the initial amount
invested and subtracting
100%. The
standard average annual total return, as
prescribed by the SEC is
derived from
this total return, which provides the ending
redeemable value. Such
standard
total return information may also be
accompanied with nonstandard
total return
information for differing periods computed in
the same manner but
without
annualizing the total return or taking sales
charges into account.
The Portfolio
calculates current dividend return for each
Class by dividing the
current
dividend by the net asset value or the maximum
public offering
price (including
sales charge) on the last day of the period
for which current
dividend return is
presented. The current dividend return for
each Class may vary from
time to time
depending on market conditions, the
composition of the investment
portfolio and
operating expenses. These factors and possible
differences in the
methods used
in calculating current dividend return should
be considered when
comparing a
Class' current return to yields published for
other investment
companies and
other investment vehicles. The Portfolio may
also include
comparative
performance information in advertising or
marketing its shares.
Such performance
information may include data from Lipper
Analytical Services, Inc.
and other
financial publications. The Portfolio will
include performance data
for Class A,
Class B, Class C and Class Y shares in any
advertisement or
information
including performance data of the Portfolio.
- ---------------------------------------------
- --------------------
- ---------------
Management of the Fund
- ---------------------------------------------
- --------------------
- ---------------
BOARD OF DIRECTORS
Overall responsibility for management and
supervision of the
Fund rests
with the Fund's Board of Directors. The
Directors approve all
significant
agreements between the Fund and the companies
that furnish services
to the Fund
and the Portfolio, including agreements with
the Fund's
distributor, investment
manager, custodian and transfer agent. The
day-to-day operations of
the
Portfolio are delegated to the Portfolio's
investment manager. The
Statement of
Additional Information contains background
information regarding
each Director
and executive officer of the Fund.
38
<PAGE>
Smith Barney World Funds, Inc. --
International Equity Portfolio
- ---------------------------------------------
- --------------------
- ---------------
Management of the Fund (continued)
- ---------------------------------------------
- --------------------
- ---------------
MANAGER
Smith Barney Mutual Funds Management Inc.
(the "Manager")
manages the
day-to-day operations of the Portfolio
pursuant to a management
agreement
entered into by the Fund on behalf of the
Portfolio under which the
Manager
offers the Portfolio advice and assistance
with respect to the
acquisition,
holding or disposal of securities and
recommendations with respect
to other
aspects and affairs of the Portfolio and
furnishes the Portfolio
with
bookkeeping, accounting and administrative
services, office space
and equipment,
and the services of the officers and employees
of the Fund. By
written agreement
Research and other departments and staff of
Smith Barney furnish
the Manager
with information, advice and assistance and
are available for
consultation on
the Fund's Portfolios, thus Smith Barney may
also be considered an
investment
adviser to the Fund. Smith Barney's services
are paid for by the
Manager on the
basis of direct and indirect costs to Smith
Barney of performing
such services;
there is no charge to the Fund for such
services. For the
Portfolio's last
fiscal year the management fee was 0.85% of
the Portfolio's average
net assets
and the total expenses were 1.35% for Class A
shares; 2.10% for
Class C shares;
and 1.09% for Class Y shares.
The Manager was incorporated on March 12,
1968 under the laws
of Delaware.
As of January 31, 1995 the Manager had
aggregate assets under
management of
approximately $55 billion. The Manager, Smith
Barney and Holdings
are each
located at 388 Greenwich Street, New York, New
York 10013. The term
"Smith
Barney" in the title of the Fund has been
adopted by permission of
Smith Barney
and is subject to the right of Smith Barney to
elect that the Fund
stop using
the term in any form or combination of its
name.
PORTFOLIO MANAGEMENT
The Portfolio is managed by Maurits E.
Edersheim and a team of
seasoned
international equity portfolio managers, who
collectively have over
120 years of
experience and who are responsible for the day
to day operations of
the
Portfolio, including making all investment
decisions. Mr. Edersheim
is Chairman
and Advisory Director of the Fund and is
Deputy Chairman of Smith
Barney
International Incorporated. Prior to joining
Smith Barney in 1990,
Mr. Edersheim
was Deputy Chairman and Director of Drexel
Burnham Lambert
Incorporated ("Drexel
Burnham"). Mr. James Conheady, Mr. Rein Van
der Does and Mr.
Jeffrey Russell,
all Vice Presidents of the Portfolio and
Managing Directors of
Smith Barney, are
members of the international equity team.
Together, Mr. Conheady,
Mr. Van der
Does and Mr. Russell currently manage in
excess of $1.5 billion of
global equity
assets for other investment companies and
managed accounts. Prior
to joining
Smith Barney in February 1990, Mr. Conheady
was a First Vice
President and Mr.
Russell and Mr. Van der Does were Vice
Presidents of Drexel
Burnham.
39
<PAGE>
Smith Barney World Funds, Inc. --
International Equity Portfolio
- ---------------------------------------------
- --------------------
- ---------------
Management of the Fund (continued)
- ---------------------------------------------
- --------------------
- ---------------
Management's discussion and analysis, and
additional
performance
information regarding the Portfolio during the
fiscal year ended
October 31,
1994 is included in the Annual Report dated
October 31, 1994. A
copy of the
Annual Report may be obtained upon request and
without charge from
a Smith
Barney Financial Consultant or by writing or
calling the Fund at
the address or
phone number listed on page one of this
Prospectus.
- ---------------------------------------------
- --------------------
- ---------------
Distributor
- ---------------------------------------------
- --------------------
- ---------------
Smith Barney distributes shares of the
Portfolio as principal
underwriter
and as such conducts a continuous offering
pursuant to a "best
efforts"
arrangement requiring Smith Barney to take and
pay for only such
securities as
may be sold to the public. Pursuant to a plan
of distribution
adopted by the
Portfolio under Rule 12b-1 under the 1940 Act
(the "Plan"), Smith
Barney is paid
a service fee with respect to Class A, Class B
and Class C shares
of the
Portfolio at the annual rate of 0.25% of the
average daily net
assets
attributable to these Classes. Smith Barney is
also paid a
distribution fee with
respect to Class B and Class C shares at the
annual rate of 0.75%
of the average
daily net assets attributable to these
Classes. Class B shares that
automatically convert to Class A shares eight
years after the date
of original
purchase will no longer be subject to a
distribution fee. The fees
are used by
Smith Barney to pay its Financial Consultants
for servicing
shareholder accounts
and, in the case of Class B and Class C
shares, to cover expenses
primarily
intended to result in the sale of those
shares. These expenses
include:
advertising expenses; the cost of printing and
mailing prospectuses
to potential
investors; payments to and expenses of Smith
Barney Financial
Consultants and
other persons who provide support services in
connection with the
distribution
of shares; interest and/or carrying charges;
and indirect and
overhead costs of
Smith Barney associated with the sale of
Portfolio shares,
including lease,
utility, communications and sales promotion
expenses.
The payments to Smith Barney Financial
Consultants for selling
shares of a
Class include a commission or fee paid by the
investor or Smith
Barney at the
time of sale and, with respect to Class A,
Class B and Class C
shares, a
continuing fee for servicing shareholder
accounts for as long as a
shareholder
remains a holder of that Class. Smith Barney
Financial Consultants
may receive
different levels of compensation for selling
different Classes of
shares.
Actual distribution expenses for Class B
and Class C shares of
the
Portfolio for any given year may exceed the
fees received pursuant
to the Plan
and will be carried forward and paid by the
Portfolio in future
years so long as
the Plan is in effect.
40
<PAGE>
Smith Barney World Funds, Inc. --
International Equity Portfolio
- ---------------------------------------------
- --------------------
- ---------------
Distributor (continued)
- ---------------------------------------------
- --------------------
- ---------------
Interest is accrued monthly on such
carryforward amounts at a rate
comparable to
that paid by Smith Barney for bank borrowings.
- ---------------------------------------------
- --------------------
- ---------------
Additional Information
- ---------------------------------------------
- --------------------
- ---------------
The Fund, an open-end investment company,
was incorporated in
Maryland on
March 22, 1991. The Fund has an authorized
capital of 1,000,000,000
shares with
a par value of $.001 per share. The Board of
Directors has
authorized the
issuance of six series of shares, each
representing shares in one
of six
separate Portfolios and may authorize the
issuance of additional
series of
shares in the future. The assets of each
Portfolio are segregated
and separately
managed and a shareholder's interest is in the
assets of the
Portfolio in which
he or she holds shares. Class A, Class B,
Class C, Class Y and
Class Z shares of
the Portfolio represent interests in the
assets of the Portfolio
and have
identical voting, dividend, liquidation and
other rights on the
same terms and
conditions except that expenses related to the
distribution of each
Class of
shares are borne solely by each class and each
Class of shares has
exclusive
voting rights with respect to provisions of
the Fund's Rule 12b-1
distribution
plan which pertains to a particular Class. As
described under
"Voting" in the
Statement of Additional Information, the Fund
ordinarily will not
hold meetings
of shareholders annually; however,
shareholders have the right to
call a meeting
upon a vote of 10% of the Fund's outstanding
shares for the purpose
of voting to
remove directors, and the Fund will assist
shareholders in calling
such a
meeting as required by the 1940 Act. Shares do
not have cumulative
voting rights
or preemptive rights and are fully paid,
transferable and
nonassessable when
issued for payment as described in this
Prospectus.
Morgan Guaranty Trust Company of New
York, located at 60 Wall
Street, New
York 10260, serves as custodian of the
Portfolio's investments.
TSSG, located at Exchange Place, Boston,
Massachusetts 02109,
serves as the
Fund's transfer agent.
The Fund sends its shareholders a
semi-annual report and an
audited annual
report, which include listings of the
investment securities held by
the Fund at
the end of the period covered. In an effort to
reduce the Fund's
printing and
mailing costs, the Fund plans to consolidate
the mailing of its
semi-annual and
annual reports by household. This
consolidation means that a
household having
multiple accounts with the identical address
of record will receive
a single
copy of each report. In addition, the Fund
also plans to
consolidate the mailing
of its Prospectus so that a shareholder having
multiple accounts
(that is,
individual, IRA and/or Self-Employed
Retirement Plan accounts) will
receive a
single Prospectus annually. Shareholders who
do not want this
consolidation to
apply to their account should contact their
Smith Barney Financial
Consultant or
the Fund's transfer agent.
41
<PAGE>
SMITH
BARNEY
A Member of Travelers Group
[LOGO]
SMITH
BARNEY
WORLD FUNDS,
INC.
International
Equity
Portfolio
388 Greenwich
Street
New York, New York
10013
FD 0667
C5
