<PAGE>
- ------------------------------------------------------------
- --------------------
ANNUAL REPORT
- ------------------------------------------------------------
- --------------------
1995
1995 [ART WORK APPEARS HERE]
1995
1995
1995
Smith Barney
World Funds, Inc.
International Equity
Portfolio
------------------------------------
- --------------------
October 31, 1995
[LOGO OF SMITH BARNEY MUTUAL FUNDS APPEARS
HERE]
Investing for your future.
Every day.
<PAGE>
- ------------------------------------------------------------
- --------------------
International Equity Portfolio
- ------------------------------------------------------------
- --------------------
Dear Shareholder:
We are pleased to present the annual report and audited
financial statements for
the Smith Barney World Funds, Inc. -- International Equity
Portfolio. For your
convenience, we have summarized this period's prevailing
economic and market
conditions below and outlined our portfolio strategy during
this time. A more
detailed summary of performance and current holdings can be
found in the
appropriate sections that follow in the annual report.
Performance Overview
As of October 31, 1995, the Portfolio's assets were invested
in the equity
markets of 31 countries, which is consistent with our focus
on broad market
diversification. For the one-year period ended October 31,
1995, the
International Equity Portfolio generated a total return of -
7.44% for Class A
shares.
Market Conditions and Portfolio Review
The international equity markets have been roiled over the
past twelve months by
economic and political uncertainties. While many countries
have enjoyed a
cyclical economic recovery during 1995, the rate of growth
has abated during the
year and new concerns of global economic slowdown have
increased. In addition,
the Mexican peso devaluation in late 1994 and specific
corporate disappointments
have led to a sharp correction in many emerging markets.
The International Equity Portfolio's largest allocation is
Europe at 51% of
assets. Europe was a safe haven for the Portfolio during
1995, given the flight
from emerging markets after the Mexican peso devaluation. In
our view, there is
much in favor of a major commitment to Europe. Companies are
restructuring in
Europe, undergoing a process of self-evaluation, and
improving their profits,
which is similar to what U.S. companies have undergone for
nearly a decade.
European economic growth, while slowing, should be in the 2%
to 3% range for
1996, an environment providing reasonable revenue growth
opportunities for many
industries, yet capping concerns of a possible re-
acceleration of inflation. Our
major holdings are concentrated in Ireland, Sweden, the
United Kingdom, Austria,
the Netherlands and Italy.
We have 35% of the Portfolio invested in the Pacific Rim
markets in 1995. In the
short term, these markets have been subject to concerns
regarding the dynamics
of the Japanese economic recovery, perceived deterioration
in macroeconomic
fundamentals, and, in some instances, rising short-term
interest rates and other
government measures to subdue inflationary
1
<PAGE>
pressures. In our view, the potential underlying growth
rates of the Pacific Rim
economies justify omitting a portion of the Portfolio's
assets to the region.
The Pacific Rim markets are now valued at levels not seen in
many years and, in
our view, these markets are attractively valued compared to
many other equity
markets.
A relatively modest 8% of the Portfolio is invested in the
Americas, including
Canada. The Mexican crisis had a ripple effect on several
Latin economies and
markets. We felt these events provided buying opportunities
in certain markets,
and, as a result, increased our presence during the year in
Chile (which is our
largest Latin America holding). In our opinion, confidence
in policy decisions
and financial stability, as well as a resumption of
institutional reform, are
critical for higher equity prices in the Latin American
markets. Given the
attractive opportunities we have found in other
international markets, our
commitment to Latin America is somewhat reduced from years
past.
During 1995, we have established new positions in two
exciting emerging markets:
South Africa and Israel. The South African economy is
recovering from years of
international sanctions. We believe South African companies
have an enormous
opportunity to participate in the revitalization of the
economy and the
empowerment of a majority of the country's population who
remain economically
disenfranchised.
The Israeli market is home to many attractive technology
companies as well as
other companies who will participate in a turnaround of
Israel's economy. In
closing, while we are aware of the risks inherent in
investing in the emerging
markets as evidenced by the events of the last twelve
months, we remain
committed to the dynamic growth stocks of the emerging
markets.
The Portfolio's team has consistently maintained a
significant emerging market
exposure, which has bolstered our long-term returns while
detracting from our
performance over the past year. In our view, exposure to
some of the most
rapidly industrializing economies is prudent, especially in
the context of a
broadly diversified international equity portfolio.
In summary, we believe that the international equity markets
represent a
significant opportunity over the next twelve months.
Valuations are demonstrably
lower than in the U.S., while earnings momentum in 1996
should be at a premium
to U.S. corporate earnings growth. Real interest rates and
apparently dormant
inflation in many economies leaves room for more interest
rate reductions. This
set of circumstances may provide the markets with an
important liquidity boost.
Because the psychology of most investors today is negative
towards the emerging
markets, we believe this may be a sign of a possible market
upturn rather than a
peaking out of opportunities.
2
<PAGE>
At this time, we would like to thank you for your continued
participation in the
International Equity Portfolio and for your ongoing
confidence in our investment
management approach.
Sincerely,
/s/ Heath B. McLendon /s/ James B.
Conheady
Heath B. McLendon James B.
Conheady
Chairman and Vice President
Chief Executive Officer
/s/ Jeffrey J. Russell
Jeffrey J. Russell
Vice President
November 29, 1995
3
<PAGE>
Smith Barney World Funds, Inc.
International Equity Portfolio
- ------------------------------------------------------------
- --------------------
Historical Performance -- Class A Shares
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Net Asset
Value
------------
- ---------
Beginning
End Income Capital Gain Total
Year Ended of Year
of Year Dividends Distributions Returns/(1)/
============================================================
==========================================================
<S> <C>
<C> <C> <C> <C>
10/31/95 $18.79
$17.15 $0.12 $0.10 (7.44)%
- ------------------------------------------------------------
- ----------------------------------------------------------
10/31/94[+] 18.71
18.79 0.00 0.00 0.43+
- ------------------------------------------------------------
- ----------------------------------------------------------
12/31/93 12.35
18.71 0.00 0.16 52.78
- ------------------------------------------------------------
- ----------------------------------------------------------
12/31/92 12.31
12.35 0.02 0.00 0.49
- ------------------------------------------------------------
- ----------------------------------------------------------
Inception*-12/31/91 11.94
12.31 0.00 0.00 3.10+
============================================================
==========================================================
Total
$0.14 $0.26
============================================================
==========================================================
</TABLE>
- ------------------------------------------------------------
- --------------------
Historical Performance -- Class B Shares
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Net Asset
Value
------------
- ---------
Beginning
End Income Capital Gain Total
Year Ended of Year
of Year Dividends Distributions Returns/(1)/
============================================================
==========================================================
<S> <C>
<C> <C> <C> <C>
Inception*-10/31/95 $18.38
$17.17 $0.00 $0.10 (6.00)%+
============================================================
==========================================================
</TABLE>
- ------------------------------------------------------------
- --------------------
Historical Performance -- Class C Shares
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Net Asset
Value
------------
- ---------
Beginning
End Income Capital Gain Total
Year Ended of Year
of Year Dividends Distributions Returns/(1)/
============================================================
==========================================================
<S> <C>
<C> <C> <C> <C>
10/31/95 $18.54
$16.93 $0.00 $0.10 (8.11)%
- ------------------------------------------------------------
- ----------------------------------------------------------
10/31/94[+] 18.58
18.54 0.00 0.00 (0.22)+
- ------------------------------------------------------------
- ----------------------------------------------------------
Inception*-12/31/93 12.35
18.58 0.00 0.16 51.73+
- ------------------------------------------------------------
- ----------------------------------------------------------
Total
$0.00 $0.26
============================================================
==========================================================
</TABLE>
4
<PAGE>
Smith Barney World Funds, Inc.
International Equity Portfolio
- ------------------------------------------------------------
- --------------------
Historical Performance -- Class Y Shares
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Net Asset
Value
------------
- ---------
Beginning
End Income Capital Gain Total
Year Ended of Year
of Year Dividends Distributions Returns/(1)/
============================================================
==========================================================
<S> <C>
<C> <C> <C> <C>
10/31/95 $18.80
$17.13 $0.17 $0.10 (7.11)%
- ------------------------------------------------------------
- ----------------------------------------------------------
Inception*-10/31/94[+] 17.64
18.80 0.00 0.00 (6.58)+
- ------------------------------------------------------------
- ----------------------------------------------------------
Total
$0.17 $0.10
============================================================
==========================================================
</TABLE>
- ------------------------------------------------------------
- --------------------
Historical Performance -- Class Z Shares
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Net Asset
Value
------------
- ---------
Beginning
End Income Capital Gain Total
Year Ended of Year
of Year Dividends Distributions Returns/(1)/
============================================================
==========================================================
<S> <C>
<C> <C> <C> <C>
Inception*-10/31/95 $18.38
$17.12 $0.17 $0.10 (5.01)%+
============================================================
==========================================================
</TABLE>
It is the Fund's policy to distribute dividends and capital
gains, if any,
annually.
- ------------------------------------------------------------
- --------------------
Average Annual Total Return
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Without Sales Charge/(1)/
-----------
- ----------------------------------------------------
Class A
Class B Class C Class Y Class Z
============================================================
====================================================
<S> <C>
<C> <C> <C> <C>
Year Ended 10/31/95 (7.44)%
N/A (8.11)% (7.11)% N/A
- ------------------------------------------------------------
- ----------------------------------------------------
Five Years Ended 10/31/95 N/A
N/A N/A N/A N/A
- ------------------------------------------------------------
- ----------------------------------------------------
Inception* through 10/31/95 10.29
(6.00)% 12.41 (0.73) (5.01)%
============================================================
====================================================
<CAPTION>
With Sales Charge/(2)/
-----------
- ----------------------------------------------------
Class A
Class B Class C Class Y Class Z
============================================================
====================================================
<S> <C>
<C> <C> <C> <C>
Year Ended 10/31/95 (12.13)%
N/A (9.02)% (7.11)% N/A
- ------------------------------------------------------------
- ----------------------------------------------------
Five Years Ended 10/31/95 N/A
N/A N/A N/A N/A
- ------------------------------------------------------------
- ----------------------------------------------------
Inception* through 10/31/95 8.87
(10.70)% 12.41 (0.73) (5.01)%
============================================================
====================================================
</TABLE>
5
<PAGE>
Smith Barney World Funds, Inc.
International Equity Portfolio
- ------------------------------------------------------------
- --------------------
Cumulative Total Return
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Without
Sales Charge/(1)/
============================================================
====================
<S>
<C>
Class A (Inception* through 10/31/95)
47.14%
- ------------------------------------------------------------
- --------------------
Class B (Inception* through 10/31/95)
(6.00)
- ------------------------------------------------------------
- --------------------
Class C (Inception* through 10/31/95)
39.13
- ------------------------------------------------------------
- --------------------
Class Y (Inception* through 10/31/95)
(1.00)
- ------------------------------------------------------------
- --------------------
Class Z (Inception* through 10/31/95)
(5.01)
============================================================
====================
</TABLE>
(1) Assumes reinvestment of all dividends and capital gain
distributions, if
any, at net asset value and does not reflect deduction
of the applicable
sales charge with respect to Class A shares or the
applicable contingent
deferred sales charges ("CDSC") with respect to Class B
and C shares.
(2) Assumes reinvestment of all dividends and capital gain
distributions, if
any, at net asset value. In addition, Class A shares
reflect the deduction
of the maximum initial sales charge of 5.00%; Class B
shares reflect the
deduction of a 5.00% CDSC, which applies if shares are
redeemed less than
one year from initial purchase and declines thereafter
by 1.00% per year
until no CDSC is incurred. Class C shares reflect the
deduction of a 1.00%
CDSC, which applies if shares are redeemed within the
first year of
purchase.
[+] For the period from January 1, 1994 to October 31, 1994,
which reflects a
change in the fiscal year end of the Portfolio.
+ Total return is not annualized, as it may not be
representative of the
total return for the year.
* Inception dates for Class A, B, C, Y and Z shares are
November 22, 1991,
November 7, 1994, January 4, 1993, June 16, 1994 and
November 7, 1994,
respectively.
6
<PAGE>
Smith Barney World Funds, Inc.
International Equity Portfolio
- ------------------------------------------------------------
- --------------------
Historical Performance
- ------------------------------------------------------------
- --------------------
Growth of $10,000 Invested in Class A Shares
of
the International Equity Portfolio vs.
MSCI EAFE-GDP Weighted Index+
(unaudited)
- ------------------------------------------------------------
- --------------------
November 1991 -- October 1995
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
International Equity MSCI
EAFE-GDP Index
<S> <C> <C>
11/22/91 9,552.00
10,000.00
12/92 9,896.00
9,577.00
12/93 15,119.00
12,732.00
10/94 15,183.60
14,263.44
10/95 14,054.70
14,256.33
</TABLE>
+ Hypothetical illustration of $10,000 invested in Class A
shares at inception
on November 22, 1991, assuming deduction of the maximum
4.50% sales charge at
the time of investment and the reinvestment of dividends
and capital gains, if
any, at net asset value through October 31, 1995. The
Morgan Stanley Capital
International EAFE-GDP Weighted Index is a composite
portfolio consisting of
equity total returns for the countries of Europe,
Australia, New Zealand and
countries in the Far East, weighted based on each
country's gross domestic
product. The index is unmanaged and is not subject to the
same management and
trading expenses of a mutual fund. The performance of the
Portfolio's other
classes may be greater or less than the Class A shares'
performance indicated
on this chart, depending on whether greater or lesser
sales charges and fees
were incurred by shareholders investing in the other
classes.
All figures represent past performance and are not a
guarantee of future
results. Investment returns and principal value will
fluctuate, and redemption
values may be more or less than the original cost. No
adjustment has been made
for shareholder tax liability on dividends or capital
gains.
7
<PAGE>
Smith Barney World Funds, Inc.
International Equity Portfolio
- ------------------------------------------------------------
- --------------------
Schedule of Investments
October 31, 1995
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
============================================================
===========================================
<C> <S>
<C>
STOCKS -- 98.9%
Argentina -- 0.6%
375,000 Quilmes Industrial S.A.
$ 6,600,000
- ------------------------------------------------------------
- -------------------------------------------
Australia -- 2.1%
3,107,545 Burns Philip & Co. Ltd.
6,949,889
1,620,134 Coca Cola Amatil Ltd.
12,521,536
405,033 Coca Cola Amatil Ltd.-New
2,891,596
- ------------------------------------------------------------
- -------------------------------------------
22,363,021
- ------------------------------------------------------------
- -------------------------------------------
Austria -- 5.8%
200,000 Austria Mikro Systeme International AG
19,442,090
105,000 Baumax AG Preferred
8,133,035
40,000 Burgenland Holding AG
6,084,640
150,000 Bewckiser Wasser Tecknik AG
4,863,676
60,000 VA Technologie AG
6,950,415
65,833 Vae Eisenbahn AG
5,885,657
45,000 Wienerberger Baustoffinds AG
9,036,145
- ------------------------------------------------------------
- -------------------------------------------
60,395,658
- ------------------------------------------------------------
- -------------------------------------------
Belgium -- 0.3%
30,000 Barco N.V.
3,380,384
- ------------------------------------------------------------
- -------------------------------------------
Canada -- 1.6%
50,000 Loewen Group Inc.
1,998,141
250,000 Loewen Group Inc. Foreign
9,990,707
689,000 Videotron Group Ltd. Subord. Voting
5,122,677
- ------------------------------------------------------------
- -------------------------------------------
17,111,525
- ------------------------------------------------------------
- -------------------------------------------
Chile -- 2.7%
110,000 Chilectra S.A. ADR[++]
5,039,980
350,000 Embotelladora Andina S.A. ADR
11,637,500
300,000 Madeco S.A. ADR
7,462,500
190,000 Provida ADR
4,655,000
- ------------------------------------------------------------
- -------------------------------------------
28,794,980
- ------------------------------------------------------------
- -------------------------------------------
Denmark -- 0.1%
45,000 Scandinavian Mobility
1,070,155
- ------------------------------------------------------------
- -------------------------------------------
Finland -- 3.2%
80,000 Nokia Corp. ADR Preferred
4,460,000
500,000 Nokia OY AB Shares A
28,607,756
- ------------------------------------------------------------
- -------------------------------------------
33,067,756
- ------------------------------------------------------------
- -------------------------------------------
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
Smith Barney World Funds, Inc.
International Equity Portfolio
- ------------------------------------------------------------
- --------------------
Schedule of Investments (continued)
October 31, 1995
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
============================================================
===========================================
<C> <S>
<C>
France -- 2.9%
66,916 Castorama Dubois Investment
$ 10,845,289
8,839 Cie Europeene De Gestion Et De Placment
281,813
50,000 Ecco S.A.
7,745,918
80,000 Incom (a)
1,357,068
30,000 Sidel S.A.
10,411,004
- ------------------------------------------------------------
- -------------------------------------------
30,641,092
- ------------------------------------------------------------
- -------------------------------------------
Germany -- 3.2%
20,845 Bayerische Motoren Werke AG
11,138,154
45,000 Mannesmann AG
14,762,480
111,000 SGL Carbon AG ORD
7,274,941
- ------------------------------------------------------------
- -------------------------------------------
33,175,575
- ------------------------------------------------------------
- -------------------------------------------
Greece -- 0.2%
500,000 Flour Mills Loulis
2,004,829
- ------------------------------------------------------------
- -------------------------------------------
Hong Kong -- 5.1%
2,000,000 Cheung Kong Holdings Ltd.
11,278,098
2,000,000 Guoco Group Ltd.
9,260,457
4,200,000 Hong Kong & China Gas Co. Ltd.
6,817,300
4,000,000 Hutchison Whampoa Ltd.
22,038,853
3,500,000 Shaw Brothers
4,413,591
- ------------------------------------------------------------
- -------------------------------------------
53,808,299
- ------------------------------------------------------------
- -------------------------------------------
India -- 1.6%
20,000 India Magnum Fund N.V. A Restricted
980,000
535,000 Larsen & Toubro Ltd. ADR[++]
9,763,750
394,527 Mahindra & Mahindra Ltd. GDR[++]
4,586,376
100,000 Mahindra & Mahindra Ltd. GDR
1,165,000
- ------------------------------------------------------------
- -------------------------------------------
16,495,126
- ------------------------------------------------------------
- -------------------------------------------
Indonesia -- 0.5%
150,000 PT Indonesian Satellite Corp. ADR
4,968,750
- ------------------------------------------------------------
- -------------------------------------------
Ireland -- 7.4%
1,800,931 Bank of Ireland
11,975,321
1,500,000 CRH PLC
9,901,471
1,582,778 Grafton Group PLC
10,755,177
1,276,849 Greencore
10,328,989
2,641,614 Independent Newspapers PLC
15,813,185
1,253,612 Irish Continental Group PLC
9,633,964
3,500,000 Jefferson Smurfit
9,399,926
- ------------------------------------------------------------
- -------------------------------------------
77,808,033
- ------------------------------------------------------------
- -------------------------------------------
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
Smith Barney World Funds, Inc.
International Equity Portfolio
- ------------------------------------------------------------
- --------------------
Schedule of Investments (continued)
October 31, 1995
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
============================================================
===========================================
<C> <S>
<C>
Israel -- 1.7%
418,629 Blue Square Chain Stores Properties
Investment $ 2,770,126
350,000 Comverse Technology
7,819,000
175,000 ECI Telecom ORD
3,325,000
100,000 Teva Pharmaceutical Industries Ltd. ADR
3,925,000
- ------------------------------------------------------------
- -------------------------------------------
17,839,126
- ------------------------------------------------------------
- -------------------------------------------
Italy -- 4.8%
1,410,083 Alleanza Assicurazioni di Risp
9,774,122
1 Alleanza Svg Assi General Warrants, expire
2/26/96+ 0
210,000 Industrie Natuzzi S.p.A. ADR
8,400,000
350,000 IMA
2,441,426
5,000,000 Parmalat Finanziera S.p.A.
3,951,949
250,000 Parmalat Finanziaria S.p.A. To Subs ORD
Warrants,
expire 12/31/99+
122,322
1,000,000 Stet di Risp NC
2,179,845
4,500,000 Telecom Italia S.p.A.
6,831,227
6,250,000 Telecom Italia Mobile S.p.A.
10,487,564
1,095,000 Trenno S.p.A.
1,724,085
1,453,000 Unicem Union Cem S.p.A. di Risp NC
4,374,996
- ------------------------------------------------------------
- -------------------------------------------
50,287,536
- ------------------------------------------------------------
- -------------------------------------------
Japan -- 8.7%
209,300 Bunkyodo Co. Ltd.
4,728,671
671,000 Canon Inc.
11,484,669
740,000 Hitachi Ltd.
7,599,394
280,000 Ishikawajima Construction Materials Co. Ltd.
2,984,987
952,000 Itochu Corp. Ltd.
5,642,447
75,000 Japan Associated Finance Co. Ltd.
7,298,645
1,120,000 Kajima Corp
10,340,652
330,000 Matsushita Electric Ind. Co. Ltd.
4,679,935
247,000 Mitsubishi Bank Ltd.
4,831,532
383,000 Mitsubishi Estate Ltd.
4,083,036
2,800 NIC Corp.
39,982
800 Nippon Denwa Shisetsu Co. Ltd.
6,627
183,000 Rohm Co.
11,114,773
235,410 Sato Corp.
4,835,063
68,000 Secom Co.
4,429,361
43,000 Shohkoh Fund & Co. Ltd.
7,485,941
- ------------------------------------------------------------
- -------------------------------------------
91,585,715
- ------------------------------------------------------------
- -------------------------------------------
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
Smith Barney World Funds, Inc.
International Equity Portfolio
- ------------------------------------------------------------
- --------------------
Schedule of Investments (continued)
October 31, 1995
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
============================================================
===========================================
<C> <S>
<C>
Korea -- 3.0%
116,400 Chosun Brewery Co.
$ 4,525,171
6,676 Chosun Brewery Co. First Issue
248,220
207,000 Korea Electric Power
9,004,764
33,330 Pohang Iron & Steel
3,307,256
60,000 Samsung Electronics
13,700,843
744 Samsung Electronics Third Issue
168,461
- ------------------------------------------------------------
- -------------------------------------------
30,954,715
- ------------------------------------------------------------
- -------------------------------------------
Malaysia -- 4.4%
1,750,000 Arab Malaysia Corp. Bhd.
5,883,799
306,666 Arab Malaysia Finance Bhd. Foreign
1,073,271
2,916,666 Leader Universal Holdings Bhd.
7,856,532
4,000,000 Renong Bhd.
6,103,028
806,000 Road Builders Holdings Bhd.
2,488,046
250,000 Sungei Way Holdings Bhd.
8,573,535
2,550,000 Sungei Way Holdings Bhd. Warrants, expire
6/29/99+ 294,927
2,000,000 Technology Resorces Industries Bhd.
5,072,749
1,200,000 Telekom Malaysia Bhd.
8,588,282
- ------------------------------------------------------------
- -------------------------------------------
45,934,169
- ------------------------------------------------------------
- -------------------------------------------
Mexico -- 2.3%
5,250,000 Conductores Latincasa S.A. de C.V. A
301,471
1,000,000 Fomento Economico Mexicano S.A. Femsa Series
B 2,067,227
1,497,560 Gruma S.A. de C.V. B
4,276,645
732,077 Grupo Industrial Bimbo S.A. de C.V. A
2,804,245
4,026,923 Herdez S.A. de C.V. B
1,060,310
1,100,000 Jugos del Valle B
1,907,283
500,000 Kimberly Clark A NPV
6,505,602
200,000 Telefonos de Mexico S.A. de C.V. ADR Series
L 5,500,000
- ------------------------------------------------------------
- -------------------------------------------
24,422,783
- ------------------------------------------------------------
- -------------------------------------------
Netherlands -- 4.1%
107,500 Heineken N.V.
19,049,427
400,000 IHC Caland N.V.
11,366,369
200,000 Randstad Holdings
9,012,088
9,725 Royal Dutch Petroleum Co.
1,205,701
15,275 Royal Dutch Petroleum ADR
1,886,462
- ------------------------------------------------------------
- -------------------------------------------
42,520,047
- ------------------------------------------------------------
- -------------------------------------------
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
Smith Barney World Funds, Inc.
International Equity Portfolio
- ------------------------------------------------------------
- --------------------
Schedule of Investments (continued)
October 31, 1995
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
============================================================
===========================================
<C> <S>
<C>
Norway -- 0.8%
450,000 Petroleum Geo Services AS
$ 8,524,643
- ------------------------------------------------------------
- -------------------------------------------
Panama -- 0.5%
200,000 Panamerican Beverages Inc. ADR
5,475,000
- ------------------------------------------------------------
- -------------------------------------------
Philippines -- 0.1%
3,588,375 International Container Services
Incorporated 1,517,575
- ------------------------------------------------------------
- -------------------------------------------
Singapore -- 6.3%
1,800,000 Cerebos Pacific
11,197,512
5,000,000 DBS Land Ltd.
14,774,495
700,000 Fraser & Neave Ltd.
8,263,820
589,000 Fraser & Neave Ltd. Warrants, expire
5/27/98+ 3,122,791
1,000,000 Jurong Shipyard Ltd.
6,644,988
806,000 Overseas Union Bank Ltd. Foreign Registered
5,013,997
3,500,000 QAF Ltd.
4,230,878
800,000 QAF Ltd. Warrants, expire 11/14/98+
562,703
2,000,000 Sembawang Maritime Ltd.
6,758,094
640,000 Total Access Communications
3,872,000
540,792 United Overseas Bank Ltd. Warrants, expire
6/17/97+ 2,054,826
- ------------------------------------------------------------
- -------------------------------------------
66,496,104
- ------------------------------------------------------------
- -------------------------------------------
South Africa -- 3.3%
1,100,000 Barlow Ltd.
14,176,813
378,000 Investec Holding
6,167,325
1,493,000 Malbak Ltd.
9,927,951
368,000 Pepkor Ltd. ADR++
4,404,224
- ------------------------------------------------------------
- -------------------------------------------
34,676,313
- ------------------------------------------------------------
- -------------------------------------------
Spain -- 1.9%
90,750 Acerinox S.A. ORD
9,546,380
200,000 Corporacion Mapfre S.A.
10,224,949
- ------------------------------------------------------------
- -------------------------------------------
19,771,329
- ------------------------------------------------------------
- -------------------------------------------
Sweden -- 8.5%
453,570 Astra AB Series A
16,658,300
160,000 Ericsson Tel AB LM Series B ADR
3,417,440
1,144,000 Ericsson Tel AB LM Series B Free
24,279,607
200,000 Getinge Industrier AB Series B Free
8,519,477
170,000 Hennes Mauritz Series B Free
11,105,425
250,000 Hoganas AB Series B
6,735,806
389,700 Iro AB
4,780,623
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
Smith Barney World Funds, Inc.
International Equity Portfolio
- ------------------------------------------------------------
- --------------------
Schedule of Investments (continued)
October 31, 1995
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
============================================================
===========================================
<C> <S>
<C>
Sweden -- 8.5% (continued)
600,000 Volvo AB Series B Free
$ 13,501,716
- ------------------------------------------------------------
- -------------------------------------------
88,998,394
- ------------------------------------------------------------
- -------------------------------------------
Switzerland -- 2.4%
10,000 Nestle AG Cham Registered
10,470,744
2,000 Roche Holdings AG
14,518,258
- ------------------------------------------------------------
- -------------------------------------------
24,989,002
- ------------------------------------------------------------
- -------------------------------------------
Taiwan -- 0.4%
315,000 Formosa Growth Fund Ltd. Series 1
4,252,500
- ------------------------------------------------------------
- -------------------------------------------
Thailand -- 2.3%
200,000 Alphatec Electronic++
2,527,822
5,366,666 Bangkok Metropolitan Bank Public Co. Ltd.
Foreign Registered 5,332,538
750,000 Central Pattana Public
2,682,830
1,307,800 Finance One Public Co. Foreign Registered
8,056,796
36,360 Finance One Public Co. Ltd. Foreign
Warrants, expire 3/15/99+ 237,005
250,000 Land & House Public Co. Ltd. Foreign
Registered 4,034,181
31 Saha Pathana Inter Holding Public Co. Ltd.
Foreign Registered 60
100,000 United Communication Ind. Foreign Registered
1,255,962
- ------------------------------------------------------------
- -------------------------------------------
24,127,194
- ------------------------------------------------------------
- -------------------------------------------
Turkey -- 0.6%
2,700,000 Migros Turkey
3,103,751
8,316,000 Netas
2,875,967
- ------------------------------------------------------------
- -------------------------------------------
5,979,718
- ------------------------------------------------------------
- -------------------------------------------
United Kingdom -- 5.5%
1,019,445 BAA PLC
7,914,271
2,239 Cable & Wireless PLC
14,626
450,000 Ewart PLC
355,030
1,100,000 Flextech
8,244,576
659,815 Independent Insurance PLC
3,737,650
590,000 Misys PLC
5,576,489
2,000,000 Rentokil Group
9,940,828
150,000 Reuters Holdings PLC ADR B
8,325,000
325,000 Vodafone Group PLC ADR
13,284,375
- ------------------------------------------------------------
- -------------------------------------------
57,392,845
- ------------------------------------------------------------
- -------------------------------------------
TOTAL STOCKS
(Cost -- $901,027,440)
1,037,429,891
============================================================
===========================================
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
Smith Barney World Funds, Inc.
International Equity Portfolio
- ------------------------------------------------------------
- --------------------
Schedule of Investments (continued)
October 31, 1995
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY
VALUE
============================================================
===========================================
<C> <S>
<C>
BONDS -- 1.1%
Japan -- 0.3%
$ 3,000,000 Mitsubishi Bank Convertible, 3.000% due
11/30/02 $ 3,172,500
- ------------------------------------------------------------
- -------------------------------------------
Malaysia -- 0.0%
106,666[+] Arab Malaysian Finance Bhd. Unsecured Loan
Stock,
7.500% due 11/20/99
70,887
- ------------------------------------------------------------
- -------------------------------------------
Singapore -- 0.1%
400,000[+] QAF Ltd. Loan Stock, 2.000% due 11/14/98
248,834
500,000[+] Sembawang Maritime Ltd. Culas Loan Stock,
1.500% due 12/31/98
583,204
- ------------------------------------------------------------
- -------------------------------------------
832,038
- ------------------------------------------------------------
- -------------------------------------------
Sweden -- 0.7%
30,250,000[+] Kinnevick AB Convertible Sub., 10.500% due
7/21/97 7,558,402
- ------------------------------------------------------------
- -------------------------------------------
Thailand -- 0.0%
3,636,000[+] Finance One Public Co. Ltd. Unsecured Debt,
3.750% due 3/15/01
144,514
- ------------------------------------------------------------
- -------------------------------------------
TOTAL BONDS
(Cost -- $10,646,522)
11,778,341
============================================================
===========================================
TOTAL INVESTMENTS -- 100%
(Cost -- $911,673,962)[++]
$1,049,208,232
============================================================
===========================================
</TABLE>
(a) Restricted security (See Note 6).
+ Non-income producing security.
++ Security exempt from registration under Rule 144A of
the Securities Act of
1933. These securities may be resold in transactions
exempt from
registration, generally to qualified institutional
buyers.
[+] Represents local currency.
[++] Aggregate cost for Federal income tax purposes is
$923,603,212.
See Notes to Financial Statements.
14
<PAGE>
Smith Barney World Funds, Inc.
International Equity Portfolio
<TABLE>
<CAPTION>
- ------------------------------------------------------------
- --------------------------
Statement of Assets and Liabilities
October 31, 1995
- ------------------------------------------------------------
- --------------------------
<S>
<C>
ASSETS:
Investments, at value (Cost -- $911,673,962)
$1,049,208,232
Foreign currency (Cost -- $8,289,556)
8,284,200
Cash
2,529,062
Receivable for Fund shares sold
1,462,533
Receivable for securities sold
73,344
Dividends and interest receivable
439,035
Other assets
195,580
- ------------------------------------------------------------
- --------------------------
Total Assets
1,062,191,986
- ------------------------------------------------------------
- --------------------------
LIABILITIES:
Payable for securities purchased
3,602,496
Payable for Fund shares purchased
7,634,061
Management fees payable
778,671
Distribution fees payable
649,568
Payable for open forward foreign currency contracts
70,335
Accrued expenses
2,139,898
Other liabilities
4,082
- ------------------------------------------------------------
- --------------------------
Total Liabilities
14,879,111
- ------------------------------------------------------------
- --------------------------
Total Net Assets
$1,047,312,875
============================================================
==========================
NET ASSETS:
Par value of capital shares
$ 61,252
Capital paid in excess of par value
995,526,457
Overdistributed net investment income
(5,133,662)
Accumulated net realized loss on investments
(80,616,780)
Net unrealized appreciation of investments and foreign
currencies 137,475,608
- ------------------------------------------------------------
- --------------------------
Total Net Assets
$1,047,312,875
============================================================
==========================
Shares Outstanding:
Class A
28,536,918
---------------------------------------------------------
- --------------------------
Class B
7,349,892
---------------------------------------------------------
- --------------------------
Class C
14,183,208
---------------------------------------------------------
- --------------------------
Class Y
5,668,475
---------------------------------------------------------
- --------------------------
Class Z
5,513,169
---------------------------------------------------------
- --------------------------
Net Asset Value:
Class A (and redemption price)
$17.15
---------------------------------------------------------
- --------------------------
Class B *
$17.17
---------------------------------------------------------
- --------------------------
Class C **
$16.93
---------------------------------------------------------
- --------------------------
Class Y (and redemption price)
$17.13
---------------------------------------------------------
- --------------------------
Class Z (and redemption price)
$17.12
---------------------------------------------------------
- --------------------------
Class A Maximum Public Offering Price Per Share
(net asset value plus 5.26% of net asset value per share)
$18.05
============================================================
==========================
</TABLE>
* Redemption price is NAV of Class B shares reduced by a
5.00% CDSC if shares
are redeemed less than one year from initial purchase
(See Note 2).
** Redemption price is NAV of Class C shares reduced by a
1.00% CDSC if shares
are redeemed within the first year of purchase.
See Notes to Financial Statements.
15
<PAGE>
Smith Barney World Funds, Inc.
International Equity Portfolio
<TABLE>
<CAPTION>
- ------------------------------------------------------------
- --------------------
Statement of Operations For the Year
Ended October 31, 1995
- ------------------------------------------------------------
- --------------------
<S>
<C>
INVESTMENT INCOME:
Dividends
$ 19,766,099
Interest
1,049,852
Less: Foreign withholding tax
(2,062,745)
- ------------------------------------------------------------
- --------------------
Total Investment Income
18,753,206
- ------------------------------------------------------------
- --------------------
EXPENSES:
Management fees (Note 2)
8,452,273
Distribution fees (Note 2)
4,500,383
Shareholder and system servicing fees
1,220,000
Custody
797,459
Registration fees
260,000
Shareholder communications
123,000
Directors' fees
114,300
Audit and legal
73,000
Pricing service fees
30,000
Other
18,042
- ------------------------------------------------------------
- --------------------
Total Expenses
15,588,457
Less: Custody earnings credit (Note 1)
(797,459)
- ------------------------------------------------------------
- --------------------
Net Expenses
14,790,998
- ------------------------------------------------------------
- --------------------
Net Investment Income
3,962,208
- ------------------------------------------------------------
- --------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES (NOTE 3):
Realized Loss From:
Security transactions (excluding short-term
securities) (79,527,557)
Foreign currency transactions
(473,769)
- ------------------------------------------------------------
- --------------------
Net Realized Loss
(80,001,326)
- ------------------------------------------------------------
- --------------------
Change in Net Unrealized Appreciation
of Investments and Foreign Currencies:
Beginning of year
122,985,551
End of year
137,475,608
- ------------------------------------------------------------
- --------------------
Increase in Net Unrealized Appreciation
14,490,057
Less: Net unrealized appreciation related to the
transfer of Smith Barney Global Opportunities
Fund's net assets (Note 9)
(1,382,587)
- ------------------------------------------------------------
- --------------------
Increase in Net Unrealized Appreciation After Transfer
13,107,470
- ------------------------------------------------------------
- --------------------
Net Loss on Investments and Foreign Currencies
(66,893,856)
- ------------------------------------------------------------
- --------------------
Decrease in Net Assets From Operations
$(62,931,648)
============================================================
====================
</TABLE>
See Notes to Financial Statements.
16
<PAGE>
Smith Barney World Funds, Inc.
International Equity Portfolio
- ------------------------------------------------------------
- --------------------
Statements of Changes in Net Assets
- ------------------------------------------------------------
- --------------------
For the Year Ended October 31, 1995 and
the Period Ended October 31, 1994
<TABLE>
<CAPTION>
1995 1994(a)
============================================================
===========================================
<S>
<C> <C>
OPERATIONS:
Net investment income (loss)
$ 3,962,208 $ (1,613,430)
Net realized gain (loss)
(80,001,326) 5,015,205
Increase in net unrealized appreciation
13,107,470 4,417,014
- ------------------------------------------------------------
- -------------------------------------------
Increase (Decrease) in
Net Assets From Operations
(62,931,648) 7,818,789
- ------------------------------------------------------------
- -------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
(5,701,557) --
Net realized gains
(5,853,998) --
- ------------------------------------------------------------
- -------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders
(11,555,555) --
- ------------------------------------------------------------
- -------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 7):
Net proceeds from sale of shares
839,540,327 613,695,273
Net asset value of shares
issued in connection with
the transfer of the Smith
Barney Global Opportunities
Fund's net assets (Note 9)
93,380,401 --
Net asset value of shares issued
for reinvestment of dividends
11,124,277 --
Cost of shares reacquired
(750,066,019) (207,606,766)
- ------------------------------------------------------------
- -------------------------------------------
Increase in Net Assets From
Fund Share Transactions
193,978,986 406,088,507
- ------------------------------------------------------------
- -------------------------------------------
Increase in Net Assets
119,491,783 413,907,296
NET ASSETS:
Beginning of year
927,821,092 513,913,796
- ------------------------------------------------------------
- -------------------------------------------
End of year*
$1,047,312,875 $927,821,092
============================================================
===========================================
* Includes overdistributed net
investment income of:
$ (5,133,662) $ (2,920,544)
============================================================
===========================================
</TABLE>
(a) For the period from January 1, 1994 to October 31, 1994.
See Notes to Financial Statements.
17
<PAGE>
Smith Barney World Funds, Inc.
International Equity Portfolio
- ------------------------------------------------------------
- --------------------
Notes to Financial Statements
- ------------------------------------------------------------
- --------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The International Equity Portfolio ("Portfolio") is a
separate investment
portfolio of the Smith Barney World Funds, Inc. ("Fund").
The Fund, a Maryland
corporation, is registered under the Investment Company Act
of 1940, as amended,
as an open-end investment company and consists of this
Portfolio and five other
separate investment portfolios: European, Pacific,
International Balanced,
Global Government Bond and Emerging Markets Portfolios. The
financial statements
and financial highlights for the other portfolios are
presented in separate
annual reports.
The significant accounting policies consistently
followed by the Portfolio
are: (a) security transactions are accounted for on trade
date; (b) securities
traded in national securities markets are valued at the
closing prices in the
primary exchange on which they are traded; securities listed
or traded on
certain foreign exchanges or other markets whose operations
are similar to the
U.S. over-the-counter market (including securities listed on
exchanges where the
primary market is believed to be over-the-counter) and
listed securities for
which no sale was reported on that date are valued at the
mean between the bid
and ask prices. Securities which are listed or traded on
more than one exchange
or market are valued at the quotations on the exchange or
market determined to
be the primary market for such securities; (c) short-term
securities maturing
within 60 days are valued at cost plus accreted discount, or
minus amortized
premium, as applicable; (d) gains or losses on the sale of
securities are
calculated by using the specific identification method; (e)
interest income,
adjusted for amortization of premiums and accretion of
discount, is recorded on
the accrual basis; (f) dividend income is recorded on the ex-
dividend date
except that certain dividends from foreign securities are
recorded as soon as
the Fund is informed of the ex-dividend date; (g) direct
expenses are charged to
each portfolio and class; management fees and general
expenses are allocated on
the basis of relative net assets; (h) foreign currencies
(and receivables and
payables for unsettled foreign securities transactions) are
translated into U.S.
dollars based on the rate of exchange of such currencies
against U.S. dollars on
the date of valuation. Translation gains or losses resulting
from changes in the
exchange rate and realized gains and losses on the
settlement of foreign
currency transactions are reported in the statement of
operations; (i) the
Portfolio intends to comply with the applicable provisions
of the Internal
Revenue Code of 1986, as amended, pertaining to regulated
investment companies
and make distributions of taxable
18
<PAGE>
Smith Barney World Funds, Inc.
International Equity Portfolio
- ------------------------------------------------------------
- --------------------
Notes to Financial Statements (continued)
- ------------------------------------------------------------
- --------------------
income sufficient to relieve it from substantially all
Federal income and excise
taxes; and (j) certain prior year numbers have been restated
to reflect current
year's presentation. Net investment income, net realized
gains, and net assets
were not affected by this change.
The Portfolio has an arrangement with its custodian,
Morgan Guaranty Trust
Company of New York, where it earns custody earnings credits
on available cash
balances. These credits offset custody fees which may be
charged to the
Portfolio during the current year. These credits totalled
$797,459 for the year
ended October 31, 1995.
In addition, the Portfolio may enter into forward
exchange contracts in
order to hedge against foreign currency risk. These
contracts are marked to
market daily, by recognizing the difference between the
contract exchange rate
and the current market rate as an unrealized gain or loss.
Realized gains or
losses are recognized when contracts are settled.
2. MANAGEMENT AGREEMENT AND OTHER TRANSACTIONS
Smith Barney Mutual Funds Management Inc. ("SBMFM"), a
subsidiary of Smith
Barney Holdings Inc. ("SBH"), acts as investment manager of
the Fund. The
Portfolio pays SBMFM a management fee calculated at the
annual rate of 0.85% of
average daily net assets. This fee is calculated daily and
paid monthly.
Smith Barney Inc. ("SB"), another subsidiary of SBH,
acts as distributor of
the Portfolio's shares. For the year ended October 31, 1995,
SB received
brokerage commissions of $36,894 and sales charges of
approximately $1,608,000
on sales of the Portfolio's Class A shares.
There is a contingent deferred sales charge ("CDSC") of
5.00% on Class B
shares, which applies if redemption occurs less than one
year from initial
purchase and declines thereafter by 1.00% per year until no
CDSC is incurred.
Class C shares have a 1.00% CDSC, which applies if
redemption occurs within the
first year of purchase. For the year ended October 31, 1995,
CDSCs of
approximately $263,000 were paid to SB.
Pursuant to a Distribution Plan, the Portfolio pays a
service fee with
respect to Class A, B and C shares calculated at the annual
rate of 0.25% of the
average daily net assets of each respective class' shares.
The Portfolio also
pays a distribution fee with respect to Class B and C shares
calculated at the
annual rate of 0.75% of the average daily net assets for
19
<PAGE>
Smith Barney World Funds, Inc.
International Equity Portfolio
- ------------------------------------------------------------
- --------------------
Notes to Financial Statements (continued)
- ------------------------------------------------------------
- --------------------
each respective class. For the year ended October 31, 1995,
total Distribution
Plan fees incurred were:
<TABLE>
<CAPTION>
Class A
Class B Class C
============================================================
=======================
<S> <C>
<C> <C>
Distribution Plan Fees $1,242,420
$725,837 $2,532,126
============================================================
=======================
</TABLE>
All officers and three Directors of the Fund are
employees of SB.
3. INVESTMENTS
During the year ended October 31, 1995, the aggregate
cost of purchases and
proceeds from sales of investments (including maturities,
but excluding short-
term securities) were as follows:
<TABLE>
============================================================
=======================
<S>
<C>
Purchases
$514,316,629
- ------------------------------------------------------------
- -----------------------
Sales
400,136,652
============================================================
=======================
</TABLE>
At October 31, 1995, the aggregate gross unrealized
appreciation and
depreciation of investments for tax purposes were as
follows:
<TABLE>
============================================================
=======================
<S>
<C>
Gross unrealized appreciation
$188,674,034
Gross unrealized depreciation
(63,069,014)
- ------------------------------------------------------------
- -----------------------
Net unrealized appreciation
$125,605,020
============================================================
=======================
</TABLE>
4. CAPITAL LOSS CARRYFORWARDS
At October 31, 1995, the Fund had for Federal tax
purposes approximately
$79,528,000 of unused capital loss carryforwards, available
to offset future
realized capital gains through 2003. To the extent that
these carryforward
losses are used to offset capital gains, it is probable that
the gains so offset
will not be distributed.
5. FORWARD FOREIGN CURRENCY CONTRACTS
At October 31, 1995, the International Equity Portfolio
had open forward
foreign currency contracts as described below. The Portfolio
bears the market
risk that arises from changes in foreign currency exchange
rates. The unrealized
gain (loss) of the contracts reflected in the accompanying
financial statements
are as follows:
<TABLE>
<CAPTION>
Local Market
Settlement Unrealized
Foreign Currency Currency Value
Date Gain (Loss)
============================================================
=======================
<S> <C> <C>
<C> <C>
To Sell:
Italian Lira 8,768,833,638 $5,176,394
11/1/95 $(60,612)
Philippines Peso 796,370 30,650
11/3/95 15
- ------------------------------------------------------------
- -----------------------
5,207,044
(60,597)
- ------------------------------------------------------------
- -----------------------
</TABLE>
20
<PAGE>
Smith Barney World Funds, Inc.
International Equity Portfolio
- ------------------------------------------------------------
- --------------------
Notes to Financial Statements (continued)
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Local Market
Settlement Unrealized
Foreign Currency Currency Value
Date Gain (Loss)
============================================================
===================
<S> <C> <C> <C>
<C>
To Buy:
Danish Krone 5,307,233 $ 973,284
11/1/95 $ (8,628)
British Pound 557,376 879,488
11/1/95 (1,110)
- ------------------------------------------------------------
- -------------------
1,852,772
(9,738)
- ------------------------------------------------------------
- -------------------
Total Market Value and
Unrealized Loss on Forward
Foreign Currency Contracts $7,059,816
$(70,335)
============================================================
===================
</TABLE>
6. PORTFOLIO CONCENTRATION
The Portfolio's investments in foreign securities may
involve risks not
present in domestic investments. Since securities may be
denominated in a
foreign currency and may require settlement in foreign
currencies and pay
interest or dividends in foreign currencies, changes in the
relationship of
these foreign currencies to the U.S. dollar can
significantly affect the value
of the investments and earnings of the Portfolio. Foreign
investments may also
subject the Portfolio to foreign government exchange
restrictions,
expropriation, taxation or other political, social or
economic developments, all
of which could affect the market and/or credit risk of the
investments.
In addition to the risks described above, risks may
arise from forward
foreign currency contracts with respect to the potential
inability of counter
parties to meet the terms of their contracts.
7. CAPITAL SHARES
At October 31, 1995, the Fund had two billion shares of
$0.001 par value
capital stock authorized. The Portfolio has the ability to
issue multiple
classes of shares. Each share of a class represents an
identical legal interest
in the Portfolio and has the same rights, except that each
class bears certain
expenses specifically related to the distribution of its
shares. Effective
November 7, 1994, the Portfolio adopted a new class
structure, renaming the
existing Class B and D shares as Class C and Y shares,
respectively. At October
31, 1995, total paid-in capital amounted to the following
for each class:
<TABLE>
<CAPTION>
Class A Class
B Class C Class Y Class Z
============================================================
=====================================================
<S> <C> <C>
<C> <C> <C>
Total Paid-in Capital $424,915,512
$122,987,809 $249,936,248 $102,227,451
$95,520,689
============================================================
=====================================================
</TABLE>
21
<PAGE>
Smith Barney World Funds, Inc.
International Equity Portfolio
- ------------------------------------------------------------
- --------------------
Notes to Financial Statements (continued)
- ------------------------------------------------------------
- --------------------
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Year Ended Period Ended
October 31, 1995* October 31, 1994**
--------
- ----------------------- -------------------------------
Shares Amount Shares
Amount
============================================================
============================================================
<S> <C>
<C> <C> <C>
Class A+
Shares sold
27,052,101 $ 456,819,952 15,652,201
$288,105,584
Net asset value of shares
issued in connection
with the transfer of the
Smith Barney Global
Opportunities Fund's
net assets (Note 9)
2,644,564 42,841,936 --
- --
Shares issued on reinvestment
381,728 6,459,617 --
- --
Shares redeemed
(33,032,842) (563,944,315) (3,180,807)
(57,723,002)
- ------------------------------------------------------------
- ------------------------------------------------------------
Net Increase (Decrease)
(2,954,449) $ (57,823,229) 12,471,394
$230,382,582
============================================================
============================================================
Class B
Shares sold
8,253,070 $ 141,165,360 --
- --
Net asset value of shares
issued in connection
with the transfer of the
Smith Barney Global
Opportunities Fund's
net assets (Note 9)
2,530,152 41,165,567 --
- --
Shares issued on reinvestment
10,057 170,775 --
- --
Shares redeemed
(3,443,387) (58,904,930) --
- --
- ------------------------------------------------------------
- ------------------------------------------------------------
Net Increase
7,349,892 $ 123,597,392 --
- --
============================================================
============================================================
Class C++
Shares sold
4,075,720 $ 68,114,061 11,333,295
$206,379,344
Net asset value of shares
issued in connection
with the transfer of the
Smith Barney Global
Opportunities Fund's
net assets (Note 9)
45,583 731,143 --
- --
Shares issued on reinvestment
95,745 1,596,967 --
- --
Shares redeemed
(5,541,907) (92,568,298) (2,012,143)
(36,089,627)
- ------------------------------------------------------------
- ------------------------------------------------------------
Net Increase (Decrease)
(1,324,859) $ (22,126,176) 9,321,152
$170,289,717
============================================================
============================================================
</TABLE>
22
<PAGE>
Smith Barney World Funds, Inc.
International Equity Portfolio
- ------------------------------------------------------------
- --------------------
Notes to Financial Statements (continued)
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Year Ended Period Ended
October 31, 1995* October 31, 1994**
---------
- ------------------------ -------------------------------
Shares Amount Shares
Amount
============================================================
============================================================
<S> <C>
<C> <C> <C>
Class Y[+]
Shares sold
4,490,914 $ 78,396,629 2,594,032 $
47,545,030
Shares issued on reinvestment
90,293 1,615,451 --
- --
Shares redeemed
(1,506,764) (25,329,659) --
- --
- ------------------------------------------------------------
- ------------------------------------------------------------
Net Increase
3,074,443 $ 54,682,421 2,594,032 $
47,545,030
============================================================
============================================================
Class Z
Shares sold
5,456,298 $ 95,044,325 --
- --
Net asset value of shares
issued in connection
with the transfer of the
Smith Barney Global
Opportunities Fund's
net assets (Note 9)
534,101 8,641,755 --
- --
Shares issued on reinvestment
74,959 1,281,467 --
- --
Shares redeemed
(552,189) (9,318,817) --
- --
- ------------------------------------------------------------
- ------------------------------------------------------------
Net Increase
5,513,169 $ 95,648,578 --
- --
============================================================
============================================================
</TABLE>
* For Class B and Z shares, transactions are for the
period from November 7,
1994 (inception date) to October 31, 1995.
** For the period from January 1, 1994 to October 31,
1994.
+ On October 10, 1994, the former Class C shares were
exchanged into Class A
shares; therefore Class C share activity for the period
from January 1,
1994 to October 9, 1994 is included with Class A share
activity.
++ On November 7, 1994, the former Class B shares were
renamed Class C shares.
[+] On November 7, 1994, the former Class D shares were
renamed Class Y shares.
23
<PAGE>
Smith Barney World Funds, Inc.
International Equity Portfolio
- ------------------------------------------------------------
- --------------------
Notes to Financial Statements (continued)
- ------------------------------------------------------------
- --------------------
8. RESTRICTED SECURITIES
The Portfolio's investment in the following security is
restricted as to
resale and is valued under the direction of the Portfolio's
Board of Directors
in good faith, at fair value, taking into consideration the
appropriate
economic, financial and other pertinent available
information pertaining to
restricted securities. At October 31, 1995, the Portfolio
held the following
restricted security:
Acquisition
% of
Security Date Shares
Price Net Assets
============================================================
===============================
INCOM Common Stock 5/13/86 80,000
83.0 FF* 0.13%
============================================================
===============================
*FF = French Franc
9. TRANSFER OF NET ASSETS
On April 21, 1995, the Portfolio acquired the assets
and certain
liabilities of the Smith Barney Global Opportunities Fund
Inc. ("SBGO"),
pursuant to a plan of reorganization approved by SBGO
shareholders on April 20,
1995. Total shares issued by the Portfolio and the total net
assets of SBGO and
the Portfolio on the date of the merger were:
Total Net
Shares Assets of
Total Net
Acquired Issued by Acquired
Assets of
Fund the Portfolio Fund
the Portfolio
============================================================
=============================
SBGO 5,754,400
$93,380,401 $914,449,443
============================================================
=============================
The total net assets of SBGO before acquisition
included unrealized
appreciation of $1,382,587. The transaction was structured
for tax purposes to
qualify as a tax-free reorganization under the Internal
Revenue Code.
24
<PAGE>
Smith Barney World Funds, Inc.
International Equity Portfolio
- ------------------------------------------------------------
- --------------------
Financial Highlights
- ------------------------------------------------------------
- --------------------
FOR A SHARE OF EACH CLASS OF CAPITAL STOCK OUTSTANDING
THROUGHOUT EACH YEAR:
<TABLE>
<CAPTION>
Class A Shares(1)
1995 1994(2) 1993 1992
1991(3)
============================================================
============================================================
=====
<S> <C>
<C> <C> <C> <C>
Net Asset Value, Beginning of Year
$18.79 $18.71 $12.35 $12.31
$11.94
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----
Income (Loss) From Operations:
Net investment income (loss) ++
0.08 (0.01) (0.01) 0.02
(0.01)
Net realized and unrealized gain (loss)
(1.50) 0.09 6.53 0.04
0.38
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----
Total Income (Loss) From Operations
(1.42) 0.08 6.52 0.06
0.37
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----
Less Distributions From:
Net investment income
(0.12) -- -- (0.02)
- --
Net realized gains(4)
(0.10) -- (0.16) --
- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----
Total Distributions
(0.22) -- (0.16) (0.02)
- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----
Net Asset Value, End of Year
$17.15 $18.79 $18.71 $12.35
$12.31
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----
Total Return
(7.44)% 0.43%[+] 52.78% 0.49%
3.10%[+]
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----
Net Assets, End of Year (000s)
$489,533 $591,598 $355,926 $122,605
$54,958
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----
Ratios to Average Net Assets:
Expenses(5)
1.36% 1.35%+ 1.35% 1.56%
1.73%+
Net investment income (loss)
0.50 (0.05)+ (0.10) 0.24
0.75+
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----
Portfolio Turnover Rate
42.10% 34.75% 26.75% 20.11%
1.85%
============================================================
============================================================
=====
Average commissions paid on
equity security transactions(6)
$0.01 -- -- --
- --
============================================================
============================================================
=====
</TABLE>
(1) On October 10, 1994 the former Class C shares were
exchanged into Class A
shares; therefore Class C share activity for the period
from January 1,
1994 to October 9, 1994 is included with Class A share
activity.
(2) For the period from January 1, 1994 to October 31,
1994.
(3) For the period from November 22, 1991 (inception date)
to
December 31, 1991.
(4) Net short term gains, if any, are included and reported
as ordinary income
for income tax purposes.
(5) During the year ended October 31, 1995, the Portfolio
has earned credits
from the custodian which reduce service fees incurred.
If the credits are
taken into consideration, the ratio of expenses to
average net assets for
Class A would be 1.28%; prior year numbers have not
been restated to
reflect these credits.
(6) Due to new SEC disclosure guidelines, average
commissions per share are
calculated only for the current year and not for the
prior periods.
++ Includes realized gains and losses from foreign currency
transactions.
[+] Total return is not annualized, as it may not be
representative of the
total return for the year.
+ Annualized.
25
<PAGE>
Smith Barney World Funds, Inc.
International Equity Portfolio
- ------------------------------------------------------------
- --------------------
Financial Highlights (continued)
- ------------------------------------------------------------
- --------------------
FOR A SHARE OF EACH CLASS OF CAPITAL STOCK OUTSTANDING
THROUGHOUT EACH YEAR:
<TABLE>
<CAPTION>
Class B Class C(1)
-----
- ---- --------------------------------------
1995(2) 1995 1994(3) 1993(4)
============================================================
===================================================
<S> <C>
<C> <C> <C>
Net Asset Value, Beginning of Year
$18.38 $18.54 $18.58 $12.35
- ------------------------------------------------------------
- ---------------------------------------------------
Income (Loss) From Operations:
Net investment loss++
0.06 (0.06) (0.11) 0.14
Net realized and unrealized gain (loss)
(1.17) (1.45) 0.07 6.25
- ------------------------------------------------------------
- ---------------------------------------------------
Total Income (Loss) From Operations
(1.11) (1.51) (0.04) 6.39
- ------------------------------------------------------------
- ---------------------------------------------------
Less Distributions From:
Net investment income
- -- -- -- --
Net realized gains(5)
(0.10) (0.10) -- (0.16)
- ------------------------------------------------------------
- ---------------------------------------------------
Total Distributions
(0.10) (0.10) -- (0.16)
- ------------------------------------------------------------
- ---------------------------------------------------
Net Asset Value, End of Year
$17.17 $16.93 $18.54 $18.58
- ------------------------------------------------------------
- ---------------------------------------------------
Total Return
(6.00)%[+] (8.11)% (0.22)%[+] 51.73%[+]
- ------------------------------------------------------------
- ---------------------------------------------------
Net Assets, End of Year (000s)
$126,171 $240,090 $287,458 $114,951
- ------------------------------------------------------------
- ---------------------------------------------------
Ratios to Average Net Assets:
Expenses(6)
2.12%+ 2.16% 2.10%+ 2.14%+
Net investment income (loss)
0.34+ (0.34) (0.77)+ (1.08)+
- ------------------------------------------------------------
- ---------------------------------------------------
Portfolio Turnover Rate
42.10% 42.10% 34.75% 26.75%
============================================================
===================================================
Average commissions paid on
equity security transactions(7)
$0.01 $0.01 -- --
============================================================
===================================================
</TABLE>
(1) On November 7, 1994, the former Class B shares were
renamed Class C shares.
(2) For the period from November 7, 1994 (inception date)
to October 31, 1995.
(3) For the period from January 1, 1994 to October 31,
1994.
(4) For the period from January 4, 1993 (inception date) to
December 31, 1993.
(5) Net short term gains, if any, are included and reported
as ordinary income
for income tax purposes.
(6) During the period ended October 31, 1995, the Portfolio
has earned credits
from the custodian which reduce service fees incurred.
If the credits are
taken into consideration, the ratios of expenses to
average net assets for
Class B and C would be 2.04%+ and 2.08%, respectively;
prior year numbers
have not been restated to reflect these credits.
(7) Due to new SEC disclosure guidelines, average
commissions per share are
calculated only for the current year and not for the
prior periods.
++ Includes realized gains and losses from foreign
currency transactions.
[+] Total return is not annualized, as it may not be
representative of the
total return for the year.
+ Annualized.
26
<PAGE>
Smith Barney World Funds, Inc.
International Equity Portfolio
- ------------------------------------------------------------
- --------------------
Financial Highlights (continued)
- ------------------------------------------------------------
- --------------------
FOR A SHARE OF EACH CLASS OF CAPITAL STOCK OUTSTANDING
THROUGHOUT EACH YEAR:
<TABLE>
<CAPTION>
Class Y(1) Class Z
---
- -------------------- -----------
1995 1994(2) 1995(3)
============================================================
=====================================
<S> <C>
<C> <C>
Net Asset Value, Beginning of Year
$18.80 $17.64 $18.38
- ------------------------------------------------------------
- -------------------------------------
Income (Loss) From Operations:
Net investment income
0.10 0.01 0.13
Net realized and unrealized gain (loss)
(1.50) 1.15 (1.12)
- ------------------------------------------------------------
- -------------------------------------
Total Income (Loss) From Operations
(1.40) 1.16 (0.99)
- ------------------------------------------------------------
- -------------------------------------
Less Distributions From:
Net investment income
(0.17) -- (0.17)
Net realized gains(4)
(0.10) -- (0.10)
- ------------------------------------------------------------
- -------------------------------------
Total Distributions
(0.27) -- (0.27)
- ------------------------------------------------------------
- -------------------------------------
Net Asset Value, End of Year
$17.13 $18.80 $17.12
- ------------------------------------------------------------
- -------------------------------------
Total Return
(7.11)% (6.58)%[+] (5.01)%[+]
- ------------------------------------------------------------
- -------------------------------------
Net Assets, End of Year (000s)
$97,132 $48,765 $94,387
- ------------------------------------------------------------
- -------------------------------------
Ratios to Average Net Assets:
Expenses(5)
1.06% 1.09%+ 1.11%+
Net investment income
0.91 0.29+ 1.06+
- ------------------------------------------------------------
- -------------------------------------
Portfolio Turnover Rate
42.10% 34.75% 42.10%
============================================================
=====================================
Average commissions paid on
equity security transactions(6)
$0.01 -- $0.01
============================================================
=====================================
</TABLE>
(1) On November 7, 1994, the Class D shares were renamed
Class Y shares.
(2) For the period from June 16, 1994 (inception date) to
October 31, 1994.
(3) For the period from November 7, 1994 (inception date)
to October 31, 1995.
(4) Net short term gains, if any, are included and reported
as ordinary income
for income tax purposes.
(5) During the period ended October 31, 1995, the Portfolio
has earned credits
from the custodian which reduce service fees incurred.
If the credits are
taken into consideration, the ratios of expenses to
average net assets for
Class Y and Z are 0.98% and 1.02%+, respectively; prior
year numbers have
not been restated to reflect these credits.
(6) Due to new SEC disclosure guidelines, average
commissions per share are
calculated only for the current year and not for the
prior periods.
++ Includes realized gains and losses from foreign
currency transactions.
[+] Not annualized as it may not be representative of the
total return for the
year.
+ Annualized.
- ------------------------------------------------------------
- --------------------
Tax Information (unaudited)
- ------------------------------------------------------------
- --------------------
During the fiscal year ended October 31, 1995,
$5,688,117 of long-term
capital gains were paid to Fund shareholders.
27
<PAGE>
Smith Barney World Funds, Inc.
International Equity Portfolio
- ------------------------------------------------------------
- --------------------
Independent Auditors' Report
- ------------------------------------------------------------
- --------------------
The Shareholders and Board of Directors of
Smith Barney World Funds, Inc.:
We have audited the accompanying statement of assets and
liabilities, including
the schedule of investments, of the International Equity
Portfolio of Smith
Barney World Funds, Inc. as of October 31, 1995, the related
statement of
operations for the year then ended, the statements of
changes in net assets for
the year then ended and for the period from January 1, 1994
to October 31, 1994,
and the financial highlights for the year then ended, the
period from January 1,
1994 to October 31, 1994, the two-years ended October 31,
1993 and for the
period from November 22, 1991 (date of transfer of net
assets of Fenimore
International Fund, Inc.) to December 31, 1991. These
financial statements and
financial highlights are the responsibility of the Fund's
management. Our
responsibility is to express an opinion on these financial
statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing
standards. Those standards require that we plan and perform
the audit to obtain
reasonable assurance about whether the financial statements
and financial
highlights are free of material misstatement. An audit
includes examining, on a
test basis, evidence supporting the amounts and disclosures
in the financial
statements. Our procedures included confirmation of
securities owned as of
October 31, 1995, by correspondence with the custodian. An
audit also includes
assessing the accounting principles used and significant
estimates made by
management, as well as evaluating the overall financial
statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial
highlights referred to
above present fairly, in all material respects, the
financial position of the
International Equity Portfolio of Smith Barney World Funds,
Inc. as of
October 31, 1995, the results of its operations for the year
then ended, and the
statements of changes in its net assets for the year then
ended and for the
period from January 1, 1994 to October 31, 1994, and the
financial highlights
for the year then ended, the period from January 1, 1994 to
October 31, 1994,
the two-years ended October 31, 1993 and for the period from
November 22, 1991
(date of transfer of net assets of Fenimore International
Fund, Inc.) to
December 31, 1991, in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
New York, New York
December 28, 1995
28
<PAGE>
Smith Barney
World Funds, Inc.
DIRECTORS
Victor Atkins
Robert A. Belfer
Jessica M. Bibliowicz
Alger B. Chapman
Robert A. Frankel
Rainer Greeven
Susan M. Heilbron
Heath B. McLendon, Chairman
Bruce D. Sargent
James M. Shuart
OFFICERS
Maurits E. Edersheim
Chairman of the Fund
& Advisory Director
Heath B. McLendon
Chief Executive Officer
Jessica M. Bibliowicz
President
Lewis E. Daidone
Senior Vice President
and Treasurer
James B. Conheady
Vice President
Victor S. Filatov
Vice President
Simon R. Hildreth
Vice President
Denis P. Mangan
Vice President
Jeffrey J. Russell
Vice President
Bruce D. Sargent
Vice President
Rein W. van der Does
Vice President
Irving P. David
Controller
Christina T. Sydor
Secretary
Smith Barney
------------
[LOGO OF TRAVELERS GROUP APPEARS HERE]
INVESTMENT MANAGER
Smith Barney Mutual Funds
Management Inc.
DISTRIBUTOR
Smith Barney Inc.
CUSTODIAN
Morgan Guaranty Trust Company
of New York
SHAREHOLDER
SERVICING AGENT
First Data Investor Services Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is submitted for the general information of the
shareholders of
Smith Barney World Funds, Inc.--International Equity
Portfolio. It is not
authorized for distribution to prospective investors unless
accompanied or
preceded by a current Prospectus for the Portfolio, which
contains information
concerning the Portfolio's investment policies and expenses
as well as other
pertinent information.
SMITH BARNEY
WORLD FUNDS, INC.
388 Greenwich Street
New York, New York 10013
FD01047 12/95
<PAGE>
- ------------------------------------------------------------
- --------------------
ANNUAL REPORT
- ------------------------------------------------------------
- --------------------
1995
1995
1995 [ARTWORK APPEARS HERE]
1995
1995
Smith Barney
World Funds, Inc.
Global Government
Bond Portfolio
------------------------------------
- --------------------
October 31, 1995
[LOGO APPEARS HERE] Smith Barney Mutual Funds
Investing for your future.
Every day.
<PAGE>
- ------------------------------------------------------------
- --------------------
Global Government Bond Portfolio
- ------------------------------------------------------------
- --------------------
Dear Shareholder:
We are pleased to provide you with the annual report for the
Smith Barney World
Funds, Inc. -- Global Government Bond Portfolio for the year
ended October 31,
1995. For your convenience, we have summarized the year's
prevailing economic
and market conditions below and outlined the portfolio
strategies during this
time. A more detailed summary of performance and current
holdings can be found
in the appropriate sections that follow in the annual
report.
For the year ended October 31, 1995, the Global Government
Bond Portfolio had a
total return of 12.40% for Class A Shares. In sharp contrast
to the turbulent
conditions that had unsettled the world's financial markets
and undermined the
performance of bonds during 1994, the global economic
environment improved
markedly in the early months of 1995. In the U.S., the
threat of inflationary
pressure that had prompted the Federal Reserve to tighten
monetary policy and
resulted in a rise in interest rates, appeared to be
dissipating as we
approached summer. Indeed, at the time of this annual
report, it would seem that
the Federal Reserve has achieved a "soft landing" for the
U.S. economy with
moderate growth and relatively low inflation.
Against this background, the U.S. government bond market
performed strongly
throughout the year to date. Yields on benchmark 10-year
bonds fell from
approximately 7.80% at the beginning of 1995 to nearly 6.00%
at the end of
October 1995, almost recouping all of the rise in yields
seen the previous year.
In Europe, the bond markets generally mirrored the
performance of their U.S.
counterparts, although intermittent political uncertainties
- -- notably in Italy
and the United Kingdom -- led to periodic underperformance.
In Germany, signs of a slowdown in economic activity and a
sharp fall in the
rate of growth in the money supply led the Bundesbank to
reduce interest rates
progressively during the course of the year. This provided a
firm underpinning
for the bond markets within the core European economies and
helped to alleviate
pressure on currency exchange rates within the European
monetary system. For
most of the year, the French government bond market
underperformed as investors
sought clarification of the new French government's
commitment to eventual
currency union.
The Japanese economy remained subdued throughout the period
and their financial
system remains very fragile. This fragility, combined with
the seemingly ever-
strengthening yen, compelled the Bank of Japan to cut
interest rates to
extremely low levels. The yields on Japanese government
bonds fell to historic
lows during the summer, however holdings of these types of
assets
1
<PAGE>
were minimal in the Global Government Bond Portfolio. (The
yield was deemed too
low to meet the Portfolio's income objectives.)
Another major factor that impacted the return on global
bonds during this time
period was the behavior of the U.S. dollar on foreign
exchanges. In the first
three months of 1995, the U.S. dollar continued to weaken
against both the
German deutschmark and Japanese yen. In particular,
confidence in the U.S.
dollar was undermined by the increasingly acrimonious nature
of U.S.-Japan talks
regarding bilateral trade liberalization. However, from
April onwards, sentiment
started to improve towards the U.S. dollar, aided by an
apparent breakthrough in
trade negotiations and by heavy central bank intervention.
Looking forward into 1996, we expect a benign economic
environment for the
world's major bond markets. Although yields have fallen a
considerable way
during the course of the year through now, real yields
(i.e., inflation-adjusted
yields) are still at attractive levels by historic
standards. We expect global
bonds to provide healthy returns over the upcoming 12-month
period.
In keeping with Smith Barney's investment philosophy, the
Portfolio retained its
broad asset diversification across both individual countries
and individual
regions while simultaneously focusing on the most
creditworthy bond issuers. As
the U.S. dollar showed signs of stability on the foreign
exchange market, we
modified our currency hedging policy, effectively protecting
the U.S. dollar
value of the Portfolio's non-dollar denominated bond
holdings. At the end of
October 1995, the Portfolio was fully hedged back into the
U.S. currency.
At this time, we would like to thank you for your continued
participation in the
Global Government Bond Portfolio and for your ongoing
confidence in our
investment management approach.
Sincerely,
/s/ Heath B. McLendon /s/ Victor S.
Filatov
Heath B. McLendon Victor S.
Filatov
Chairman and Vice President
Chief Executive Officer
October 31, 1995
2
<PAGE>
Smith Barney World Funds, Inc.
Global Government Bond Portfolio
- ------------------------------------------------------------
- --------------------
Historical Performance -- Class A Shares
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Net Asset Value
----------------------
Beginning End
Income Capital Gain Return Total
Year Ended of Year of Year
Dividends Distributions of Capital Returns/(1)/
============================================================
============================================================
<S> <C> <C>
<C> <C> <C> <C>
10/31/95 $11.68 $12.30
$0.78 $0.00 $0.00 12.40%
- ------------------------------------------------------------
- ------------------------------------------------------------
10/31/94[+] 12.92 11.68
0.23 0.00 0.42 (4.87)+
- ------------------------------------------------------------
- ------------------------------------------------------------
12/31/93 11.84 12.92
0.52 0.59 0.00 19.13
- ------------------------------------------------------------
- ------------------------------------------------------------
12/31/92 12.90 11.84
0.97 0.19 0.00 0.93
- ------------------------------------------------------------
- ------------------------------------------------------------
Inception*-12/31/91 12.00 12.90
0.44 0.13 0.00 12.42+
============================================================
============================================================
Total
$2.94 $0.91 $0.42
============================================================
============================================================
</TABLE>
- ------------------------------------------------------------
- --------------------
Historical Performance -- Class B Shares
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Net Asset Value
----------------------
Beginning End
Income Capital Gain Return Total
Year Ended of Year of Year
Dividends Distributions of Capital Returns/(1)/
============================================================
============================================================
<S> <C> <C>
<C> <C> <C> <C>
Inception*-10/31/95 $11.57 $12.26
$0.66 $0.00 $0.00 12.55%+
============================================================
============================================================
</TABLE>
- ------------------------------------------------------------
- --------------------
Historical Performance -- Class C Shares
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Net Asset Value
----------------------
Beginning End
Income Capital Gain Return Total
Year Ended of Year of Year
Dividends Distributions of Capital Returns/(1)/
============================================================
============================================================
<S> <C> <C>
<C> <C> <C> <C>
10/31/95 $11.68 $12.23
$0.72 $0.00 $0.00 11.25%
- ------------------------------------------------------------
- ------------------------------------------------------------
10/31/94[+] 12.93 11.68
0.21 0.00 0.39 (5.33)+
- ------------------------------------------------------------
- ------------------------------------------------------------
Inception*-12/31/93 11.83 12.93
0.47 0.59 0.00 18.89+
============================================================
============================================================
Total
$1.40 $0.59 $0.39
============================================================
============================================================
</TABLE>
- ------------------------------------------------------------
- --------------------
Historical Performance -- Class Y Shares
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Net Asset Value
----------------------
Beginning End
Income Capital Gain Return Total
Year Ended of Year of Year
Dividends Distributions of Capital Returns/(1)/
============================================================
============================================================
<S> <C> <C>
<C> <C> <C> <C>
10/31/95 $11.68 $12.14
$0.81 $0.00 $0.00 11.27%
- ------------------------------------------------------------
- ------------------------------------------------------------
10/31/94[+] 12.93 11.68
0.23 0.00 0.43 (4.86)+
- ------------------------------------------------------------
- ------------------------------------------------------------
Inception*-12/31/93 11.97 12.93
0.37 0.59 0.00 16.49+
============================================================
============================================================
Total
$1.41 $0.59 $0.43
============================================================
============================================================
</TABLE>
It is the Fund's policy to distribute dividends monthly and
capital gains, if
any, annually.
3
<PAGE>
Smith Barney World Funds, Inc.
Global Government Bond Portfolio
- ------------------------------------------------------------
- --------------------
Average Annual Total Return
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Without Sales Charge/(1)/
---------
- --------------------------------------
Class A
Class B Class C Class Y
============================================================
======================================
<S> <C>
<C> <C> <C>
Year Ended 10/31/95 12.40%
N/A 11.25% 11.27%
- ------------------------------------------------------------
- --------------------------------------
Inception* through 10/31/95 9.04
11.97% 8.39 8.19
============================================================
======================================
<CAPTION>
With Sales Charge/(2)/
---------
- --------------------------------------
Class A
Class B Class C Class Y
============================================================
======================================
<S> <C>
<C> <C> <C>
Year Ended 10/31/95 7.34%
N/A 10.25% 11.27%
- ------------------------------------------------------------
- --------------------------------------
Inception* through 10/31/95 7.87
7.47% 8.39 8.19
============================================================
======================================
</TABLE>
- ------------------------------------------------------------
- --------------------
Cumulative Total Return
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Without Sales Charge/(1)/
============================================================
======================================
<S>
<C>
Class A (Inception* through 10/31/95)
44.83%
- ------------------------------------------------------------
- --------------------------------------
Class B (Inception* through 10/31/95)
11.97
- ------------------------------------------------------------
- --------------------------------------
Class C (Inception* through 10/31/95)
25.54
- ------------------------------------------------------------
- --------------------------------------
Class Y (Inception* through 10/31/95)
23.63
============================================================
======================================
</TABLE>
(1) Assumes reinvestment of all dividends and capital gain
distributions, if
any, at net asset value and does not reflect deduction
of the applicable
sales charge with respect to Class A shares or the
applicable contingent
deferred sales charges ("CDSC") with respect to Class B
and C shares.
(2) Assumes reinvestment of all dividends and capital gain
distributions, if
any, at net asset value. In addition, Class A shares
reflect the deduction
of the maximum initial sales charge of 4.50%; Class B
shares reflect the
deduction of a 4.50% CDSC, which applies if shares are
redeemed less than
one year from initial purchase. This CDSC declines by
0.50% the first year
after purchase and thereafter by 1.00% per year until no
CDSC is incurred.
Class C shares reflect the deduction of a 1.00% CDSC,
which applies if
shares are redeemed within the first year of purchase.
[+] For the period from January 1, 1994 to October 31, 1994,
which reflects a
change in the fiscal year end of the Portfolio.
+ Total return is not annualized, as it may not be
representative of the total
return for the year.
* Inception dates for Class A, B, C and Y shares are July
22, 1991,
November 18, 1994, January 4, 1993 and February 19,
1993, respectively.
4
<PAGE>
Smith Barney World Funds, Inc.
Global Government Bond Portfolio
- ------------------------------------------------------------
- --------------------
Historical Performance
- ------------------------------------------------------------
- --------------------
Growth of $10,000 Invested in Class A Shares
of
the Global Government Bond Portfolio vs.
J.P. Morgan Global Bond Index+
(unaudited)
- ------------------------------------------------------------
- --------------------
July 1991 - October 1995
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Global Govt Hedged
Unhedged
<S> <C> <C>
<C>
7/22/91 9,600.00 10,000.00
10,000.00
8/91 9,864.00 10,191.28
10,207.82
9/91 10,288.00 10,368.34
10,580.09
10/91 10,421.00 10,459.21
10,684.63
11/91 10,361.51 10,525.11
10,858.61
12/91 10,789.92 10,785.61
11,407.36
1/92 10,484.46 10,747.65
11,183.93
2/92 10,523.29 10,786.50
11,151.31
3/92 10,400.63 10,718.37
11,048.39
4/92 10,464.61 10,780.40
11,140.29
5/92 10,606.55 10,926.03
11,456.67
6/92 10,872.32 11,005.62
11,769.11
7/92 11,304.19 11,126.82
12,028.40
8/92 11,114.91 11,184.08
12,348.49
9/92 11,039.45 11,342.52
12,336.49
10/92 10,964.08 11,369.89
12,028.34
11/92 10,753.39 11,343.46
11,815.08
12/92 10,888.86 11,504.17
11,926.71
1/93 10,941.68 11,676.49
12,128.95
2/93 11,263.65 11,894.09
12,324.42
3/93 11,429.20 11,918.84
12,513.77
4/93 11,651.41 11,970.45
12,741.60
5/93 11,743.22 11,991.42
12,822.45
6/93 12,016.33 12,236.19
12,833.27
7/93 12,131.22 12,334.70
12,838.46
8/93 12,458.53 12,589.14
13,218.47
9/93 12,351.87 12,642.12
13,358.21
10/93 12,614.00 12,749.19
13,351.42
11/93 12,575.00 12,739.24
13,253.92
12/93 12,971.80 12,903.12
13,389.69
1/94 13,358.39 12,945.93
13,515.97
2/94 12,898.15 12,671.09
13,367.52
3/94 12,527.00 12,494.22
13,306.33
4/94 12,501.45 12,401.54
13,295.62
5/94 12,362.51 12,321.48
13,185.76
6/94 12,161.90 12,244.85
13,342.35
7/94 12,187.70 12,515.46
13,637.22
8/94 12,172.20 12,713.21
13,852.68
9/94 12,272.00 12,251.72
13,349.83
10/94 12,340.50 12,609.47
13,739.65
11/94 12,427.60 12,450.59
13,833.08
12/94 12,454.20 12,479.22
13,851.06
1/95 12,524.20 12,731.30
14,040.82
2/95 12,745.30 13,059.77
14,271.09
3/95 12,924.20 13,724.51
14,478.02
4/95 13,364.00 13,943.00
14,687.00
</TABLE>
+ Hypothetical illustration of $10,000 invested in Class A
shares at inception
on July 22, 1991, assuming deduction of the maximum 4.00%
sales charge at the
time of investment and the reinvestment of dividends and
capital gains, if
any, at net asset value through October 31, 1995. The J.P.
Morgan Global Bond
Index is a daily, market capitalization weighted
international fixed income
index consisting of 13 countries. The index is unmanaged
and is not subject to
the same management and trading expenses of a mutual fund.
The performance of
the Portfolio's other classes may be greater or less than
the Class A shares'
performance indicated on this chart, depending on whether
greater or lesser
sales charges and fees were incurred by shareholders
investing in the other
classes.
All figures represent past performance and are not a
guarantee of future
results. Investment returns and principal value will
fluctuate, and redemption
values may be more or less than the original cost. No
adjustment has been made
for shareholder tax liability on dividends or capital
gains.
5
<PAGE>
Smith Barney World Funds, Inc.
Global Government Bond Portfolio
- ------------------------------------------------------------
- --------------------
Schedule of Investments
October 31, 1995
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
FACE
AMOUNT+ SECURITY
VALUE
============================================================
================================================
<C> <S>
<C>
BONDS -- 100.0%
Argentina -- 2.7%
4,500,000 Gas Argentina S.A., 7.250% due 12/7/98
$ 3,926,250
- ------------------------------------------------------------
- ------------------------------------------------
Belgium -- 6.1%
240,000,000 Kingdom of Belgium, 9.000% due 7/30/98
9,088,625
- ------------------------------------------------------------
- ------------------------------------------------
Canada -- 15.0%
14,000,000 Government of Canada, 7.500% due
7/1/97 10,586,914
14,000,000 Government of Canada, 9.750% due
6/1/01 11,608,549
- ------------------------------------------------------------
- ------------------------------------------------
22,195,463
- ------------------------------------------------------------
- ------------------------------------------------
Denmark -- 7.0%
55,000,000 Kingdom of Denmark, 8.000% due 5/15/03
10,287,661
- ------------------------------------------------------------
- ------------------------------------------------
Finland -- 5.7%
32,000,000 Republic of Finland, 10.000% due
9/15/01 8,457,347
- ------------------------------------------------------------
- ------------------------------------------------
Germany -- 8.7%
18,000,000 Bundesrepublik Deutschland, 6.500% due
7/15/03 12,913,016
- ------------------------------------------------------------
- ------------------------------------------------
Ireland -- 5.8%
5,200,000 Republic of Ireland, 8.000% due
10/18/00 8,585,481
- ------------------------------------------------------------
- ------------------------------------------------
Japan -- 2.4%
125,000,000 International Bank Reconstruction &
Development,
5.250% due 3/20/02
1,428,096
175,000,000 Japan Development Bank, 6.500% due
9/20/01 2,100,958
- ------------------------------------------------------------
- ------------------------------------------------
3,529,054
- ------------------------------------------------------------
- ------------------------------------------------
Portugal -- 0.7%
160,000,000 International Finance Corp., 15.750%
due 12/7/95 1,088,435
- ------------------------------------------------------------
- ------------------------------------------------
Spain -- 7.0%
1,200,000,000 Government of Spain, 12.250% due
3/25/00 10,373,497
- ------------------------------------------------------------
- ------------------------------------------------
Sweden -- 7.3%
70,000,000 Kingdom of Sweden, 10.750% due 1/23/97
10,758,038
- ------------------------------------------------------------
- ------------------------------------------------
United Kingdom -- 5.5%
4,720,000 United Kingdom Treasury, 10.000% due
2/26/01 8,229,744
- ------------------------------------------------------------
- ------------------------------------------------
United States -- 26.1%
3,000,000 Abbey National Treasury Service,
4.750% due 4/25/96 2,980,350
2,000,000 International Bank Reconstruction &
Development,
5.875% due 7/19/97
2,025,860
6,000,000 U.S. Treasury Notes, 6.000% due
11/30/97 6,045,000
5,000,000 U.S. Treasury Notes, 6.500% due
4/30/99 5,120,350
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
Smith Barney World Funds, Inc.
Global Government Bond Portfolio
- ------------------------------------------------------------
- --------------------
Schedule of Investments (continued)
October 31, 1995
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
FACE
AMOUNT+ SECURITY
VALUE
============================================================
================================================
<C> <S>
<C>
United States -- 26.1% (continued)
11,000,000 U.S. Treasury Notes, 5.750% due
8/15/03 $ 10,856,560
10,000,000 U.S. Treasury Bonds, 7.625% due
2/15/25 11,587,500
- ------------------------------------------------------------
- ------------------------------------------------
38,615,620
- ------------------------------------------------------------
- ------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $141,411,878)[+]
$148,048,231
============================================================
================================================
</TABLE>
+ Represents local currency.
[+] Aggregate cost for Federal income tax purposes is
substantially the same.
See Notes to Financial Statements.
7
<PAGE>
Smith Barney World Funds, Inc.
Global Government Bond Portfolio
- ------------------------------------------------------------
- --------------------
Statement of Assets and Liabilities
October 31, 1995
- ------------------------------------------------------------
- --------------------
<TABLE>
<S>
<C>
ASSETS:
Investments, at value (Cost -- $141,411,878)
$148,048,231
Cash
15,143,544
Receivable for Fund shares sold
53,996
Interest receivable
4,747,373
Receivable for open forward foreign currency contracts
196,233
Other assets
874
- ------------------------------------------------------------
- ----------------------------------------
Total Assets
168,190,251
- ------------------------------------------------------------
- ----------------------------------------
LIABILITIES:
Payable to bank
3,992,139
Payable for Fund shares purchased
151,849
Management fees payable
104,479
Distribution fees payable
78,280
Accrued expenses and other liabilities
584,784
- ------------------------------------------------------------
- ----------------------------------------
Total Liabilities
4,911,531
- ------------------------------------------------------------
- ----------------------------------------
Total Net Assets
$163,278,720
============================================================
========================================
NET ASSETS:
Par value of capital shares
$ 13,288
Capital paid in excess of par value
153,977,340
Undistributed net investment income
1,350,890
Accumulated net realized gain on investments
984,922
Net unrealized appreciation of investments and foreign
currencies 6,952,280
- ------------------------------------------------------------
- ----------------------------------------
Total Net Assets
$163,278,720
============================================================
========================================
Shares Outstanding:
Class A
10,075,689
---------------------------------------------------------
- ----------------------------------------
Class B
2,868,953
---------------------------------------------------------
- ----------------------------------------
Class C
338,649
---------------------------------------------------------
- ----------------------------------------
Class Y
5,111
---------------------------------------------------------
- ----------------------------------------
Net Asset Value:
Class A (and redemption price)
$12.30
---------------------------------------------------------
- ----------------------------------------
Class B *
$12.26
---------------------------------------------------------
- ----------------------------------------
Class C **
$12.23
---------------------------------------------------------
- ----------------------------------------
Class Y (and redemption price)
$12.14
---------------------------------------------------------
- ----------------------------------------
Class A Maximum Public Offering Price Per Share
(net asset value plus 4.71% of net asset value per share)
$12.88
============================================================
========================================
</TABLE>
* Redemption price is NAV of Class B shares reduced by a
4.50% CDSC if shares
are redeemed less than one year from initial purchase
(See Note 2).
** Redemption price is NAV of Class C shares reduced by a
1.00% CDSC if shares
are redeemed within the first year of purchase.
See Notes to Financial Statements.
8
<PAGE>
Smith Barney World Funds, Inc.
Global Government Bond Portfolio
- ------------------------------------------------------------
- --------------------
Statement of Operations For the Year
Ended October 31, 1995
- ------------------------------------------------------------
- --------------------
<TABLE>
<S>
<C>
INVESTMENT INCOME:
Interest
$ 9,514,054
- ------------------------------------------------------------
- ----------------------------------------
EXPENSES:
Management fees (Note 2)
901,693
Distribution fees (Note 2)
399,682
Shareholder and system servicing fees
144,000
Registration fees
110,000
Custody
97,126
Audit and legal
50,000
Shareholder communications
39,000
Directors' fees
15,000
Pricing service fees
2,000
Other
10,183
- ------------------------------------------------------------
- ----------------------------------------
Total Expenses
1,768,684
Less: Custody earnings credit (Note 1)
(73,156)
- ------------------------------------------------------------
- ----------------------------------------
Net Expenses
1,695,528
- ------------------------------------------------------------
- ----------------------------------------
Net Investment Income
7,818,526
- ------------------------------------------------------------
- ----------------------------------------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS AND FOREIGN CURRENCIES (NOTE 3):
Realized Gain From:
Security transactions (excluding short-term
securities) 2,337,011
Foreign currency transactions
993,890
- ------------------------------------------------------------
- ----------------------------------------
Net Realized Gain
3,330,901
- ------------------------------------------------------------
- ----------------------------------------
Change in Net Unrealized Appreciation
of Investments and Foreign Currencies:
Beginning of year
591,217
End of year
6,952,280
- ------------------------------------------------------------
- ----------------------------------------
Increase in Net Unrealized Appreciation
6,361,063
Less: Net unrealized appreciation related to the transfer
of Smith Barney Global Bond Fund's net assets (Note
7) (4,121,630)
- ------------------------------------------------------------
- ----------------------------------------
Increase in Net Unrealized Appreciation After Transfer
2,239,433
- ------------------------------------------------------------
- ----------------------------------------
Net Gain on Investments and Foreign Currencies
5,570,334
- ------------------------------------------------------------
- ----------------------------------------
Increase in Net Assets From Operations
$13,388,860
============================================================
========================================
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
Smith Barney World Funds, Inc.
Global Government Bond Portfolio
- ------------------------------------------------------------
- --------------------
Statements of Changes in Net Assets
- ------------------------------------------------------------
- --------------------
For the Year Ended October 31, 1995
and the Period Ended October 31, 1994
<TABLE>
<CAPTION>
1995 1994(a)
============================================================
===========================================
<S>
<C> <C>
OPERATIONS:
Net investment income
$ 7,818,526 $ 5,397,116
Net realized gain (loss)
3,330,901 (6,947,202)
Increase (decrease) in net unrealized appreciation
2,239,433 (3,563,743)
- ------------------------------------------------------------
- -------------------------------------------
Increase (Decrease) in
Net Assets From Operations
13,388,860 (5,113,829)
- ------------------------------------------------------------
- -------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
(7,461,526) (1,840,958)
Capital
- -- (3,463,739)
- ------------------------------------------------------------
- -------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders
(7,461,526) (5,304,697)
- ------------------------------------------------------------
- -------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares
6,240,071 8,103,416
Net asset value of shares issued
in connection with the transfer of
Smith Barney Global Bond Fund's
net assets (Note 7)
103,934,782 --
Net asset value of shares issued
for reinvestment of dividends
4,588,382 3,110,947
Cost of shares reacquired
(44,409,826) (26,555,201)
- ------------------------------------------------------------
- -------------------------------------------
Increase (Decrease) in Net Assets From
Fund Share Transactions
70,353,409 (15,340,838)
- ------------------------------------------------------------
- -------------------------------------------
Increase (Decrease) in Net Assets
76,280,743 (25,759,364)
NET ASSETS:
Beginning of year
86,997,977 112,757,341
- ------------------------------------------------------------
- -------------------------------------------
End of year*
$163,278,720 $ 86,997,977
============================================================
===========================================
* Includes undistributed net investment income of:
$1,350,890 --
============================================================
===========================================
</TABLE>
(a) For the period from January 1, 1994 to October 31, 1994.
See Notes to Financial Statements.
10
<PAGE>
Smith Barney World Funds, Inc.
Global Government Bond Portfolio
- ------------------------------------------------------------
- --------------------
Notes to Financial Statements
- ------------------------------------------------------------
- --------------------
1. Significant Accounting Policies
The Global Government Bond Portfolio ("Portfolio") is a
separate investment
portfolio of the Smith Barney World Funds, Inc. ("Fund").
The Fund, a Maryland
corporation, is registered under the Investment Company Act
of 1940, as amended,
as an open-end investment company and consists of this
Portfolio and five other
separate investment portfolios: European, Pacific,
International Balanced,
International Equity and Emerging Markets Portfolios. The
financial statements
and financial highlights for the other portfolios are
presented in separate
annual reports.
The significant accounting policies consistently
followed by the Portfolio
are: (a) security transactions are accounted for on trade
date; (b) securities
traded in national securities markets are valued at the
closing prices in the
primary exchange on which they are traded; securities listed
or traded on
certain foreign exchanges or other markets whose operations
are similar to the
U.S. over-the-counter market (including securities listed on
exchanges where the
primary market is believed to be over-the-counter) and
listed securities for
which no sale was reported on that date are valued at the
mean between the bid
and ask prices. Securities which are listed or traded on
more than one exchange
or market are valued at the quotations on the exchange or
market determined to
be the primary market for securities; (c) short-term
securities maturing within
60 days are valued at cost plus accreted discount, or minus
amortized premium,
as applicable; (d) gains or losses on the sale of securities
are calculated by
using the specific identification method; (e) interest
income, adjusted for
amortization of premiums and accretion of discount, is
recorded on the accrual
basis; (f) direct expenses are charged to each portfolio and
each class;
management fees and general expenses are allocated on the
basis of relative net
assets; (g) foreign currencies (and receivables and payables
for unsettled
foreign securities transactions) are translated into U.S.
dollars based on the
rate of exchange of such currencies against U.S. dollars on
the date of
valuation. Translation gains or losses resulting from
changes in the exchange
rate and realized gains and losses on the settlement of
foreign currency
transactions are reported in the statement of operations;
and (h) the Portfolio
intends to comply with the applicable provisions of the
Internal Revenue Code of
1996, as amended, pertaining to regulated investment
companies and to make
distributions of taxable income sufficient to relieve it
from substantially all
Federal income and excise taxes.
The Portfolio has an arrangement with its custodian,
Morgan Guaranty Trust
Company of New York, where it earns custody credits on
11
<PAGE>
Smith Barney World Funds, Inc.
Global Government Bond Portfolio
- ------------------------------------------------------------
- --------------------
Notes to Financial Statements (continued)
- ------------------------------------------------------------
- --------------------
available cash balances. These credits offset custody fees
which may be charged
to the Portfolio during the current year. These credits
totalled $73,156 for the
year ended October 31, 1995.
In addition, the Portfolio may enter into forward
exchange contracts in
order to hedge against foreign currency risk. These
contracts are marked to
market daily, by recognizing the difference between the
contract exchange rate
and the current market rate as an unrealized gain or loss.
Realized gains or
losses are recognized when contracts are settled.
2. Management Agreement and Other Transactions
Smith Barney Mutual Funds Management Inc. ("SBMFM"), a
subsidiary of Smith
Barney Holdings Inc. ("SBH"), acts as investment manager of
the Fund. The
Portfolio pays SBMFM a fee calculated at the annual rate of
0.75% of its average
daily net assets. This fee is calculated daily and paid
monthly.
Smith Barney Inc. ("SB"), another subsidiary of SBH,
acts as distributor of
the Portfolio's shares. For the year ended October 31, 1995,
SB received sales
charges of approximately $17,000 on sales of the Portfolio's
Class A shares.
There is a contingent deferred sales charge ("CDSC") of
4.50% on Class B
shares, which applies if redemption occurs less than one
year from initial
purchase. This CDSC declines by 0.50% the first year after
purchase and
thereafter by 1.00% per year until no CDSC is incurred.
Class C shares have a
1.00% CDSC, which applies if redemption occurs within the
first year of
purchase. For the year ended October 31, 1995, CDSCs of
approximately $38,000
were paid to SB.
Pursuant to a Distribution Plan, the Portfolio pays a
service fee with
respect to Class A, B and C shares calculated at the annual
rate of 0.25% of the
average daily net assets of each respective class' shares.
The Portfolio also
pays a distribution fee with respect to Class B and C shares
calculated at the
annual rate of 0.50% and 0.45%, respectively, of average
daily net assets for
each respective class. For the year ended October 31, 1995,
total Distribution
Plan fees incurred were as follows:
<TABLE>
<CAPTION>
Class A
Class B Class C
============================================================
==================
<S> <C> <C>
<C>
Distribution Plan Fees $242,291
$124,076 $33,315
============================================================
==================
</TABLE>
All officers and three Directors of the Fund are
employees of SB.
12
<PAGE>
Smith Barney World Funds, Inc.
Global Government Bond Portfolio
- ------------------------------------------------------------
- --------------------
Notes to Financial Statements (continued)
- ------------------------------------------------------------
- --------------------
3. Investments
During the year ended October 31, 1995, the aggregate
cost of purchases and
proceeds from sales of investments (including maturities,
but excluding short-
term securities) were as follows:
<TABLE>
============================================================
====================
<S>
<C>
Purchases
$276,456,896
- ------------------------------------------------------------
- --------------------
Sales
191,037,980
============================================================
====================
</TABLE>
At October 31, 1995, the aggregate gross unrealized
appreciation and
depreciation of investments for tax purposes were as
follows:
<TABLE>
============================================================
====================
<S>
<C>
Gross unrealized appreciation
$6,992,932
Gross unrealized depreciation
(356,579)
- ------------------------------------------------------------
- --------------------
Net unrealized appreciation
$6,636,353
============================================================
====================
</TABLE>
4. Forward Foreign Currency Contracts
At October 31, 1995, the Portfolio had open forward
foreign currency
contracts as described below. The Portfolio bears the market
risk that arises
from changes in foreign currency exchange rates. The
unrealized gain (loss) on
the contracts reflected in the accompanying financial
statements are as follows:
<TABLE>
<CAPTION>
Local
Market Settlement Unrealized
Foreign Currency Currency
Value Date Gain (Loss)
============================================================
========================================
<S> <C> <C>
<C> <C>
To Sell:
Belgian Franc 260,000,000 $
8,974,275 11/30/95 $ 122,996
Canadian Dollar 29,700,000
22,077,681 11/30/95 (394,100)
German Deutschemark 18,300,000
13,014,166 11/30/95 139,945
Dannish Krone 55,700,000
10,192,255 11/30/95 109,236
Finnish Markka 33,800,000
7,961,277 11/30/95 86,342
British Pound 5,000,000
7,883,700 11/30/95 1,300
Irish Pound 5,000,000
8,092,972 11/30/95 33,528
Spanish Peseta 1,300,000,000
10,600,130 11/30/95 39,474
Swedish Krona 75,000,000
11,259,655 11/30/95 57,512
- ------------------------------------------------------------
- ----------------------------------------
Total Market Value and
Unrealized Gain
on Forward Foreign
Currency Contracts
$100,056,111 $ 196,233
============================================================
========================================
</TABLE>
13
<PAGE>
Smith Barney World Funds, Inc.
Global Government Bond Portfolio
- ------------------------------------------------------------
- --------------------
Notes to Financial Statements (continued)
- ------------------------------------------------------------
- --------------------
5. Portfolio Concentration
The Portfolio's investments in foreign securities may
involve risks not
present in domestic investments. Since securities may be
denominated in a
foreign currency and may require settlement in foreign
currencies and pay
interest or dividends in foreign currencies, changes in the
relationship of
these foreign currencies to the U.S. dollar can
significantly affect the value
of the investments and earnings of the Portfolio. Foreign
investments may
subject the Portfolio to foreign government exchange
restrictions,
expropriation, taxation or other political, social or
economic developments, all
of which could affect the market and/or credit risk of the
investments.
In addition to the risks described above, risks may
arise from forward
currency contracts with respect to the potential inability
of counter parties to
meet the terms of their contracts.
6. Capital Shares
At October 31, 1995, the Fund had two billion shares of
$0.001 par value
capital stock authorized. The Portfolio has the ability to
issue multiple
classes of shares. Each share of a class represents an
identical legal interest
in the Portfolio and has the same rights except that each
class bears certain
expenses, including those specifically related to the
distribution of its
shares. Effective November 7, 1994, the Portfolio adopted a
new Class structure
renaming the existing Class B and C shares as Class C and Y
shares,
respectively. At October 31, 1995, total paid-in capital
amounted to the
following for each class:
<TABLE>
<CAPTION>
Class A
Class B Class C Class Y
============================================================
=======================================
<S> <C> <C>
<C> <C>
Total Paid-in Capital $116,727,560
$32,821,451 $4,296,384 $145,233
============================================================
=======================================
</TABLE>
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Year Ended Period Ended
October 31, 1995* October 31, 1994**
-----------
- --------------- ---------------------------
Shares
Amount Shares Amount
============================================================
=================================================
<S> <C>
<C> <C> <C>
Class A
Shares sold 354,759
$ 4,360,838 194,227 $ 2,467,800
Net assets of shares issued in
connection with the transfer of
the Smith Barney Global Bond
Fund's net assets (Note 7) 5,559,691
66,771,888 -- --
Shares issued on reinvestment 300,046
3,596,267 230,834 2,800,281
Shares redeemed (2,814,842)
(33,525,776) (2,059,934) (25,206,264)
- ------------------------------------------------------------
- -------------------------------------------------
Net Increase (Decrease) 3,399,654
$ 41,203,217 (1,634,873) $(19,938,183)
============================================================
=================================================
</TABLE>
14
<PAGE>
Smith Barney World Funds, Inc.
Global Government Bond Portfolio
- ------------------------------------------------------------
- --------------------
Notes to Financial Statements (continued)
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Year Ended Period Ended
October 31, 1995* October 31, 1994**
-----------
- --------------- --------------------------
Shares
Amount Shares Amount
============================================================
================================================
<S> <C>
<C> <C> <C>
Class B
Shares sold 128,260
$ 1,538,870 -- --
Net assets of shares issued in
connection with the transfer of
the Smith Barney Global Bond
Fund's net assets (Note 7) 3,101,368
37,123,375 -- --
Shares issued on reinvestment 56,123
679,411 -- --
Shares redeemed (416,798)
(5,055,656) -- --
- ------------------------------------------------------------
- ------------------------------------------------
Net Increase 2,868,953
$ 34,286,000 -- --
============================================================
================================================
Class C+
Shares sold 30,137
$ 340,363 208,788 $2,634,361
Net assets of shares issued in
connection with the transfer of
the Smith Barney Global Bond
Fund's net assets (Note 7) 3,310
39,519 -- --
Shares issued on reinvestment 19,074
226,356 19,019 229,506
Shares redeemed (213,312)
(2,514,987) (113,045) (1,347,764)
- ------------------------------------------------------------
- ------------------------------------------------
Net Increase (Decrease) (160,791)
$ (1,908,749) 114,762 $1,516,103
============================================================
================================================
Class Y[+]
Shares sold --
$ -- 238,639 $3,001,255
Shares issued on reinvestment 9,906
86,348 6,874 81,160
Shares redeemed (278,894)
(3,313,407) (101) (1,173)
- ------------------------------------------------------------
- ------------------------------------------------
Net Increase (Decrease) (268,988)
$ (3,227,059) 245,412 $3,081,242
============================================================
================================================
</TABLE>
* For Class B shares, transactions are for the period from
November 18, 1994
(inception date) to October 31, 1995.
** For the period from January 1, 1994 to October 31, 1994.
+ On November 7, 1994, the former Class B shares were
renamed Class C shares.
[+] On November 7, 1994, the former Class C shares were
renamed Class Y shares.
15
<PAGE>
Smith Barney World Funds, Inc.
Global Government Bond Portfolio
- ------------------------------------------------------------
- --------------------
Notes to Financial Statements (continued)
- ------------------------------------------------------------
- --------------------
7. Transfer of Net Assets
On May 19, 1995, the Portfolio acquired the assets and
certain liabilities
of the Smith Barney Global Bond Fund Inc. ("SBGB"), pursuant
to a plan of
reorganization approved by SBGB shareholders on May 11,
1995. Total shares
issued by the Portfolio and the total net assets of SBGB and
the Portfolio on
the date of the transfer were:
<TABLE>
<CAPTION>
Total Net
Shares
Assets of Total Net
Issued by
Acquired Assets of
Acquired Fund the Portfolio
Fund the Portfolio
============================================================
===================================================
<S> <C>
<C> <C>
SBGB 8,664,369
$103,934,782 $78,484,669
============================================================
===================================================
</TABLE>
The total net assets of SBGB before acquisition
included unrealized
appreciation of $4,121,630. The transaction was structured
for tax purposes to
qualify as a tax-free reorganization under the Internal
Revenue Code.
8. Capital Loss Carryforwards
As of May 19, 1995, the Smith Barney Global Bond Fund,
Inc. had $3,046,307
of unused capital loss carryforwards. Due to limitations
under the Internal
Revenue Code of 1986, as amended, only $1,056,457 could be
used to offset
current year gains of the Portfolio. The remaining
$1,989,850 is a loss
carryforward which will be available to offset any future
gains of the
Portfolio. These carryforwards will expire beginning October
31, 2001. In
addition the Portfolio had other capital loss carryforwards,
not related to the
transfer, of $1,798,458 which will also expire on October
31, 2001.
The total unused capital loss carryforward for the year
ended October 31,
1995 is $2,507,754, available to offset future realized
capital gains. To the
extent these carryforward losses are used to offset capital
gains, it is
probable that the gains, if any, so offset will not be
distributed.
16
<PAGE>
Smith Barney World Funds, Inc.
Global Government Bond Portfolio
- ------------------------------------------------------------
- --------------------
Financial Highlights
- ------------------------------------------------------------
- --------------------
For a share of each class of capital stock outstanding
throughout each year:
<TABLE>
<CAPTION>
Class A Shares 1995
1994(1) 1993 1992 1991(2)
============================================================
============================================================
====
<S> <C>
<C> <C> <C> <C>
Net Asset Value, Beginning of Year $11.68
$12.92 $11.84 $12.90 $12.00
- ------------------------------------------------------------
- ------------------------------------------------------------
- ----
Income (Loss) From Operations:
Net investment income++ 0.92
0.69 0.83 1.00 0.35
Net realized and unrealized gain (loss) 0.48
(1.28) 1.36 (0.90) 1.12
- ------------------------------------------------------------
- ------------------------------------------------------------
- ----
Total Income (Loss) From Operations 1.40
(0.59) 2.19 0.10 1.47
- ------------------------------------------------------------
- ------------------------------------------------------------
- ----
Less Distributions From:
Net investment income (0.78)
(0.23) (0.52) (0.97) (0.44)
Net realized gains(3) --
- -- (0.59) (0.19) (0.13)
Capital --
(0.42) -- -- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- ----
Total Distributions (0.78)
(0.65) (1.11) (1.16) (0.57)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ----
Net Asset Value, End of Year $12.30
$11.68 $12.92 $11.84 $12.90
- ------------------------------------------------------------
- ------------------------------------------------------------
- ----
Total Return 12.40%
(4.64)%[+] 19.13% 0.93% 12.42%[+]
- ------------------------------------------------------------
- ------------------------------------------------------------
- ----
Net Assets, End of Year (000s) $123,917
$77,961 $107,415 $107,609 $99,855
- ------------------------------------------------------------
- ------------------------------------------------------------
- ----
Ratios to Average Net Assets:
Expenses(5) 1.38%
1.32%+ 1.30% 1.36% 1.15%+
Net investment income 7.44
6.57+ 6.67 7.72 8.26+
- ------------------------------------------------------------
- ------------------------------------------------------------
- ----
Portfolio Turnover Rate 195.40%
179.29% 119.06% 177.06% 63.46%
============================================================
============================================================
====
<CAPTION>
Class B Shares 1995(4)
============================================================
============================================================
====
<S> <C>
Net Asset Value, Beginning of Year $11.57
- ------------------------------------------------------------
- ------------------------------------------------------------
- ----
Income From Operations:
Net investment income++ 0.78
Net realized and unrealized gain 0.57
- ------------------------------------------------------------
- ------------------------------------------------------------
- ----
Total Income From Operations 1.35
- ------------------------------------------------------------
- ------------------------------------------------------------
- ----
Less Distributions From:
Net investment income (0.66)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ----
Total Distributions (0.66)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ----
Net Asset Value, End of Year $12.26
- ------------------------------------------------------------
- ------------------------------------------------------------
- ----
Total Return
11.97%[+]
- ------------------------------------------------------------
- ------------------------------------------------------------
- ----
Net Assets, End of Year (000s) $35,159
- ------------------------------------------------------------
- ------------------------------------------------------------
- ----
Ratios to Average Net Assets:
Expenses(5) 1.92%+
Net investment income 6.65+
- ------------------------------------------------------------
- ------------------------------------------------------------
- ----
Portfolio Turnover Rate 195.40%
============================================================
============================================================
====
</TABLE>
(1) For the period from January 1, 1994 to October 31,
1994.
(2) For the period from July 22, 1991 (inception date) to
December 31, 1991.
(3) Net short term gains, if any, are included and reported
as ordinary income
for income tax purposes.
(4) For the period from November 18, 1994 (inception date)
to October 31, 1995.
(5) During the period ended October 31, 1995, the Portfolio
has earned credits
from the custodian which reduce service fees incurred.
If the credits are
taken into consideration, the ratios of expenses to
average net assets for
Class A and B would be 1.32% and 1.86%+, respectively;
prior year numbers
have not been restated to reflect these credits.
++ Includes realized gains and losses from foreign
currency transactions.
[+] Total return is not annualized, as it may not be
representative of the
total return for the year.
+ Annualized.
17
<PAGE>
Smith Barney World Funds, Inc.
Global Government Bond Portfolio
- ------------------------------------------------------------
- --------------------
Financial Highlights (continued)
- ------------------------------------------------------------
- --------------------
For a share of each class of capital stock outstanding
throughout each year:
<TABLE>
<CAPTION>
Class C Shares(1)
1995 1994(2) 1993(3)
============================================================
===========================================================
<S>
<C> <C> <C>
Net Asset Value, Beginning of Year
$11.68 $12.93 $11.83
- ------------------------------------------------------------
- -----------------------------------------------------------
Income (Loss) From Operations:
Net investment income++
0.85 0.90 0.79
Net realized and unrealized gain (loss)
0.42 (1.55) 1.37
- ------------------------------------------------------------
- -----------------------------------------------------------
Total Income (Loss) From Operations
1.27 (0.65) 2.16
- ------------------------------------------------------------
- -----------------------------------------------------------
Less Distributions From:
Net investment income
(0.72) (0.21) (0.47)
Net realized gains(4)
- -- -- (0.59)
Capital
- -- (0.39) --
- ------------------------------------------------------------
- -----------------------------------------------------------
Total Distributions
(0.72) (0.60) (1.06)
- ------------------------------------------------------------
- -----------------------------------------------------------
Net Asset Value, End of Year
$12.23 $11.68 $12.93
- ------------------------------------------------------------
- -----------------------------------------------------------
Total Return
11.25% (5.09)%[+] 18.89%[+]
- ------------------------------------------------------------
- -----------------------------------------------------------
Net Assets, End of Year (000s)
$4,141 $5,835 $4,972
- ------------------------------------------------------------
- -----------------------------------------------------------
Ratios to Average Net Assets:
Expenses(5)
1.84% 1.80%+ 1.74%+
Net investment income
7.15 6.05+ 6.28+
- ------------------------------------------------------------
- -----------------------------------------------------------
Portfolio Turnover Rate
195.40% 179.29% 119.06%
============================================================
===========================================================
</TABLE>
(1) On November 7, 1994, the former Class B shares were
renamed Class C shares.
(2) For the period from January 1, 1994 to October 31,
1994.
(3) For the period from January 4, 1993 (inception date) to
December 31, 1993.
(4) Net short term gains, if any, are included and reported
as ordinary income
for income tax purposes.
(5) During the year ended October 31, 1995, the Portfolio
has earned credits
from the custodian which reduce service fees incurred.
If the credits are
taken into consideration, the ratio of expenses to
average net assets for
Class C would be 1.78%; prior year numbers have not
been restated to
reflect these credits.
++ Includes realized gains and losses from foreign
currency transactions.
[+] Total return is not annualized, as it may not be
representative of the
total return for the year.
+ Annualized.
18
<PAGE>
Smith Barney World Funds, Inc.
Global Government Bond Portfolio
- ------------------------------------------------------------
- --------------------
Financial Highlights (continued)
- ------------------------------------------------------------
- --------------------
For a share of each class of capital
stock outstanding throughout each year:
<TABLE>
<CAPTION>
Class Y Share(1)
1995 1994(2) 1993(3)
============================================================
===========================================================
<S>
<C> <C> <C>
Net Asset Value, Beginning of Year
$11.68 $12.93 $11.97
- ------------------------------------------------------------
- -----------------------------------------------------------
Income (Loss) From Operations:
Net investment income++
0.78 0.76 0.69
Net realized and unrealized gain (loss)
0.49 (1.35) 1.23
- ------------------------------------------------------------
- -----------------------------------------------------------
Total Income (Loss) From Operations
1.27 (0.59) 1.92
- ------------------------------------------------------------
- -----------------------------------------------------------
Less Distributions From:
Net investment income
(0.81) (0.23) (0.37)
Net realized gains(4)
- -- -- (0.59)
Capital
- -- (0.43) --
- ------------------------------------------------------------
- -----------------------------------------------------------
Total Distributions
(0.81) (0.66) (0.96)
- ------------------------------------------------------------
- -----------------------------------------------------------
Net Asset Value, End of Year
$12.14 $11.68 $12.93
- ------------------------------------------------------------
- -----------------------------------------------------------
Total Return
11.27% (4.62)%[+] 16.49%[+]
- ------------------------------------------------------------
- -----------------------------------------------------------
Net Assets, End of Year (000s)
$ 62 $3,202 $ 371
- ------------------------------------------------------------
- -----------------------------------------------------------
Ratios to Average Net Assets:
Expenses(5)
0.98% 1.23%+ 1.20%+
Net investment income
6.38 6.76+ 6.73+
- ------------------------------------------------------------
- -----------------------------------------------------------
Portfolio Turnover Rate
195.40% 179.29% 119.06%
============================================================
===========================================================
</TABLE>
(1) On November 7, 1994 the former Class C shares were
renamed Class Y shares.
(2) For the period from January 1, 1994 to October 31,
1994.
(3) For the period from February 19, 1993 (inception date)
to
December 31, 1993.
(4) Net short term gains, if any, are included and reported
as ordinary income
for income tax purposes.
(5) During the year ended October 31, 1995, the Portfolio
has earned credits
from the custodian which reduce service fees incurred.
If the credits are
taken into consideration, the ratio of expenses to
average net assets for
Class Y would be 0.93%; prior year numbers have not
been restated to
reflect these credits.
++ Includes realized gains and losses from foreign
currency transactions.
[+] Total return is not annualized, as it may not be
representative of the
total return for the year.
+ Annualized.
19
<PAGE>
Smith Barney World Funds, Inc.
Global Government Bond Portfolio
- ------------------------------------------------------------
- --------------------
Independent Auditors' Report
- ------------------------------------------------------------
- --------------------
The Shareholders and Board of Directors of
Smith Barney World Funds, Inc.:
We have audited the accompanying statement of assets and
liabilities, including
the schedule of investments, of the Global Government Bond
Portfolio of Smith
Barney World Funds, Inc. as of October 31, 1995, the related
statement of
operations for the year then ended, the statements of
changes in net assets for
the year then ended and for the period from January 1, 1994
to October 31, 1994,
and the financial highlights for the year then ended, the
period from January 1,
1994 to October 31, 1994, the two-years ended December 31,
1993 and for the
period from July 22, 1991 (commencement of operations) to
December 31, 1991.
These financial statements and financial highlights are the
responsibility of
the Fund's management. Our responsibility is to express an
opinion on these
financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally
accepted auditing
standards. Those standards require that we plan and perform
the audit to obtain
reasonable assurance about whether the financial statements
and financial
highlights are free of material misstatement. An audit
includes examining, on a
test basis, evidence supporting the amounts and disclosures
in the financial
statements. Our procedures included confirmation of
securities owned as of
October 31, 1995, by correspondence with the custodian. An
audit also includes
assessing the accounting principles used and significant
estimates made by
management, as well as evaluating the overall financial
statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial
highlights referred to
above present fairly, in all material respects, the
financial position of the
Global Government Portfolio of Smith Barney World Funds,
Inc. as of October 31,
1995, the results of its operations for the year then ended,
and the changes in
its net assets for the year then ended and for the period
from January 1, 1994
to October 31, 1994, and financial highlights for the year
then ended, the
period from January 1, 1994 to October 31, 1994, the two-
year period ended
December 31, 1993 and for the period from July 22, 1991 to
December 31, 1991, in
conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
New York, New York
December 28, 1995
20
<PAGE>
SMITH BARNEY
WORLD FUNDS, INC.
DIRECTORS
Victor Atkins
Robert A. Belfer
Jessica M. Bibliowicz
Alger B. Chapman
Robert A. Frankel
Rainer Greeven
Susan M. Heilbron
Heath B. McLendon, Chairman
Bruce D. Sargent
James M. Shuart
OFFICERS
Maurits E. Edersheim
Chairman of the Fund
& Advisory Director
Heath B. McLendon
Chief Executive Officer
Jessica M. Bibliowicz
President
Lewis E. Daidone
Senior Vice President
and Treasurer
James B. Conheady
Vice President
Victor S. Filatov
Vice President
Simon R. Hildreth
Vice President
Denis P. Mangan
Vice President
Jeffrey J. Russell
Vice President
Bruce D. Sargent
Vice President
Rein W. van der Does
Vice President
Irving P. David
Controller
Christina T. Sydor
Secretary
Smith Barney
------------
A Member of TravelersGroup [LOGO APPEARS HERE]
INVESTMENT MANAGER
Smith Barney Mutual Funds
Management Inc.
DISTRIBUTOR
Smith Barney Inc.
CUSTODIAN
Morgan Guaranty Trust Company
of New York
SHAREHOLDER
SERVICING AGENT
First Data Investor Services Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is submitted for the general information of the
shareholders of
Smith Barney World Funds, Inc. -- Global Government Bond
Portfolio. It is not
authorized for distribution to prospective investors unless
accompanied or
preceded by a current Prospectus for the Portfolio, which
contains information
concerning the Portfolio's investment policies and expenses
as well as other
pertinent information.
SMITH BARNEY
WORLD FUNDS, INC.
388 Greenwich Street
New York, New York 10013
FD01048 12/95
<PAGE>
- ------------------------------------------------------------
- --------------------
ANNUAL REPORT
- ------------------------------------------------------------
- --------------------
1995
1995
1995
1995
Smith Barney
World Funds, Inc.
European Portfolio
Pacific Portfolio
International
Balanced Portfolio
------------------------------------
- --------------------
October 31, 1995
[LOGO APPEARS HERE] Smith Barney Mutual Funds
Investing for your future.
Every day.
<PAGE>
- ------------------------------------------------------------
- --------------------
European, Pacific and
International Balanced Portfolios
- ------------------------------------------------------------
- --------------------
Dear Shareholder:
We are pleased to provide you with this annual report for
the Smith Barney World
Funds -- European, Pacific and International Balanced
Portfolios for the twelve-
month period ended October 31, 1995. For your convenience,
we have summarized
this period's prevailing economic and market conditions
below and outlined the
portfolio strategies during this time. A more detailed
summary of performance
and current holdings can be found in the appropriate
sections that follow in the
annual report.
Portfolio Highlights
European Portfolio
The European Portfolio had a total return of 13.90% for
Class A shares for the
year ended October 31, 1995. A flight to safety dominated
financial markets
since Mexico's devaluation of the peso in December 1994,
refocusing investors'
attention on Europe's relatively safe-haven status. In our
opinion, Europe
represents a conservative way for investors to participate
in the exciting
growth potential of foreign stock markets. For the most
part, the European story
is simple. The European economic upturn, which lagged the
economic recovery in
the U.S. by 18 months, is continuing. We believe that the
improved economic
environment in Europe, combined with the heavy corporate
restructuring that
occurred during the recession years of 1992 through 1993,
will result in
excellent earnings comparisons throughout 1995 and into
1996. While we estimate
that the earnings of the S&P 500-Stock Price Index, a common
proxy for the U.S.
stock market, will advance by only 13% and 4% in 1995 and
1996, respectively,
the consensus for Europe is a 25% to 35% average increase in
1995 and a 10% to
15% rise in 1996.
Valuations in Europe, with the exception of Germany, are
inexpensive relative to
the U.S. For example, most European stocks currently have a
P/E ratio from 11 to
14 times estimated 1996 earnings. While the U.S. stock
market reaches new record
highs daily, the European index is still 3% below the high
that was reached in
January 1994. In terms of investment strategy, the European
Portfolio is heavily
underweighted in the United Kingdom relative to the MSCI
European Index. That is
because the British economic cycle is about 12 months ahead
of Continental
Europe. Both short- and long-term interest rates do not have
much room to
decline. Moreover, we believe the corporate earnings cycle
should be more
explosive on the Continent. We have overweighted Ireland
relative to the Index
because we believe that economic conditions there are far
superior to those in
the U.K. We also overweighted Austria as a way to
participate in the exciting
new developments taking place in Eastern Europe. Germany's
weighting has been
upgraded to neutral. We have underweighted Switzerland
because most Swiss
companies are export-oriented, and the strong Swiss franc
will penalize
earnings. We have also sharply increased our position in
France due to the
reasonably priced valuations of French companies compared to
neighboring
Germany.
1
<PAGE>
In addition, Mr. Chirac's victory as the new President of
France may also be a
positive factor for the depressed and under-owned Paris
stock market. The
Portfolio is also overweighted in the Netherlands because of
investments in a
few attractive special situations such as Ahrend (office
furniture), Grolsch
(beer) and IHC-Caland (dredging equipment).
If European interest rates continue to fall, which we
anticipate, the improved
environment for European stocks should be enhanced and
perform more like the
U.S. market during the last three years. As the trend
towards privatization
continues and private pension plans replace state-guaranteed
retirement plans,
equity ownership will be further stimulated in many European
countries. In
short, European corporations are finally discovering the
necessity as well as
the benefits of enhancing shareholder value.
Our investment approach is bottom-up and pure growth stock
selection. Many
European companies sell at a fraction of the valuations
accorded their U.S.
competitors and we are excited about the long-term
investment opportunities in
Europe.
Pacific Portfolio
During the last twelve months, several factors combined to
produce a negative
effect on most Pacific region economies. For the twelve
months ended October 31,
1995, the Pacific Portfolio had a total return for Class A
shares of -22.06%.
Reversing a multi-year downward trend, the U.S. dollar rose
sharply against many
foreign currencies in 1995, including the yen, rallying
against that currency by
approximately 9%-10%. This had a dramatic affect on the
Pacific region,
especially in Hong Kong, where interest rates climbed in
order for their
currency to maintain parity with the U.S. dollar. In
addition, the Chinese
government, concerned about Taiwanese independence, staged
large naval exercises
in August and September, demonstrating its ability to launch
an amphibious
attack. The resulting negative psychological effect,
combined with higher
interest rates, contributed to a 20% decline in the Hong
Kong stock market for
the period.
Last August, Malaysian officials began making changes to
their nation's monetary
policy, and that upset the Malaysian stock market. Moreover,
a large number of
shareholders of one of the largest capitalized companies in
Malaysia discovered
that they possessed counterfeit certificates when they tried
to sell their
shares. The government has halted trading in the company's
securities while the
matter is investigated and there are fears that the problem
may affect other
Malaysian companies as well. At the same time, the former
president of South
Korea has been indicted and accused of accepting more than
$650 million in
bribes from executives at several companies, including the
Daewoo Corporation,
the largest capitalized company in the country. The scandal
has adversely
affected South Korea's stock market.
Japan experienced a major shift in currency valuation during
the period, with
the yen growing weaker versus the U.S. dollar by
approximately 15%. The Japanese
stock market has been relatively flat, giving up any
potential gains as
2
<PAGE>
a result of continuing scandals in the banking industry.
With one major bank
reporting losses of more than $1 billion dollars by a single
rogue trader, and a
series of bad loans on the part of other financial
institutions, the viability
of several Japanese banking concerns has been called into
question. Although the
stock market held its own, the weaker yen has had a negative
impact on the
Japanese economy.
Looking forward, we continue to have a positive viewpoint on
the impressive
growth potential of Southeast Asia. We believe that the U.S.
dollar will
continue to stay strong versus foreign currencies into 1996,
and that should
fuel the demand for imports both in the U.S. and Europe.
This in turn should
enable many Pacific Basin companies to increase their
production and provide a
stimulus to the local economies. We are finally starting to
see a corporate
earnings recovery in Japan with the latest reports
indicating a 47% increase in
average profits over the previous year. These are the best
results in over six
years and may signal the start of a long-awaited Japanese
economic recovery. In
addition, there is a high probability of major tax reforms
in Japan next spring
which could result in the largest corporate and individual
tax cuts in Japanese
history. We are also beginning to see the effects of
political reforms in the
region. Japan, Malaysia and Thailand all have upcoming
elections with the
primary issues being reform and attention to fiscal
stimulus. The Pacific region
as a whole is not only still growing, but is also
participating in the continued
recovery of Western economies. These positive factors may
provide our
shareholders with strong investment returns over the long
term.
International Balanced Portfolio
The International Balanced Portfolio is designed to seek
long-term growth
through a balanced approach to investments in international
equity and bond
markets. For the one-year period ended October 31, 1995, the
Portfolio generated
a total return for Class A shares of 7.05%.
International Balanced Portfolio: Equity
The international equity markets have been roiled over the
past twelve months by
economic and political uncertainties. While many countries
have enjoyed a
cyclical economic recovery during 1995, the rate of growth
has abated during the
year and new concerns of global economic slowdown have
increased. In addition,
the Mexican peso devaluation in late 1994 and specific
corporate disappointments
have led to a sharp correction in many emerging markets.
Against this backdrop,
the net asset value (NAV) of the International Equity
Portfolio declined 7.4%
for the twelve months ended October 1995.
The International Equity Portfolio's largest allocation is
in Europe at 51% of
assets. Europe was a safe haven for the Portfolio during
1995, given the flight
from emerging markets after the Mexican peso devaluation. In
our view, there are
many reasons to commit a substantial portion of the
Portfolio to Europe.
Companies are restructuring, undergoing a process of self-
evaluation, and
improving their profits, which is similar to what U.S.
companies have undergone
for nearly a decade.
We have 35% of the Portfolio invested in the Pacific Rim
markets which turned
out to be a disappointment in 1995. In the short term, these
markets have been
3
<PAGE>
subject to concerns regarding the Japanese economic
recovery, perceived
deterioration in macroeconomic fundamentals, and, in some
instances, rising
short-term interest rates and other government measures to
subdue inflationary
pressures. In our view, the potential underlying growth
rates of the Pacific Rim
economies justify committing a portion of the Portfolio's
assets to this region.
The Pacific Rim markets are now valued at levels not seen in
many years,
particularly after the bear market of the preceding two
years. In our view,
these markets are attractively valued compared to many other
equity markets.
A relatively modest 8% of the Portfolio is invested in the
Americas, including
Canada. The Mexican crisis had a ripple effect on several
Latin economies and
markets. We felt these events provided a buying opportunity
in certain markets
and, as a result, increased our presence during the year in
Chile (which is our
largest Latin America holding). In our opinion, confidence
in policy and
financial stability, as well as a resumption of
institutional reform, are
critical for higher equity prices in the Latin America
markets. Given the
attractive opportunities we have found elsewhere, our
commitment to the Latin
America markets is somewhat reduced from years past.
During 1995, we have established new positions in two
exciting emerging markets:
South Africa and Israel. The South African economy is
recovering from years of
international sanctions. The Israeli market is home to many
attractive
technology companies as well as other companies who will
participate in the
turnaround of Israel's economy. While we are aware of the
risks inherent in
investing in the emerging markets as evidenced by the events
of the last twelve
months, we remain committed to our belief that best
opportunities lie in the
dynamic growth stocks of the emerging markets.
International Balanced Portfolio: Fixed Income
We lengthened the duration (weighted average maturity) of
the fixed income
portion of the Portfolio starting at year end and continuing
throughout the
first half of 1995. On July 1, 1995, the duration of the
Portfolio was increased
by 1.25 years, from 4.7 years to almost 6 years in order to
take full advantage
of rallying bond markets throughout the period. However,
towards the end of
October, we cut back the duration about 4 years in
anticipation of turbulent
bond markets towards year end as well as difficulties from
the ongoing budget
negotiations in Washington, D.C. Over the next few years,
however, we believe
that bond markets worldwide (with the possible exception of
Japan) should
continue to do well because of continuing moderate economic
growth and
relatively low inflation. We anticipate extending the fixed
income part of the
Portfolio's duration in the relatively near future.
The weak U.S. dollar throughout the first half of 1995 also
helped the
Portfolio's performance. By lowering the proportion of the
Portfolio hedged back
into U.S. dollars, we were able to take advantage of the
fact that foreign
currencies performed well. As the U.S. currency strengthened
beginning in April
1995 (and gathered steam in July and August), we increased
the proportion of the
Portfolio hedged back into U.S. dollars from a low of 40% at
the end of April to
a high of about 85% at the end of August.
4
<PAGE>
At the end of October 1995, the U.S. dollar weight in the
fixed income portion
of the Portfolio is close to 50%, reflecting our neutral-to-
slightly bullish
near-term outlook for the U.S. dollar. However, we believe
the outcome of the
budget negotiations in the U.S. in favor of a seven- or
eight-year balanced
federal budget agreement will be positive for the U.S.
dollar. We intend to
therefore hedge a greater portion of the Portfolio back into
the U.S. by
increasing its dollar-currency weighting sometime in the
near future.
Following a very difficult year for bond markets worldwide,
the U.S. bond market
found its feet in November 1994 and has enjoyed a
significant rally through most
of 1995. Foreign bond markets, especially the core European
markets, took their
lead from the U.S. and produced significant capital gains
through October 1995.
The main drivers for the 1995 bond market rallies were the
slowing economies of
North America and, most of Europe and Japan, culminating in
easier central bank
monetary policies in most major industrialized economies. In
addition, there
appears to be growing optimism about the worldwide outlook
for inflation.
Thank you for your investment in the Portfolios and your
ongoing confidence in
our investment management approach.
Sincerely,
/s/ Heath B. McLendon /s/ Denis P. Mangan
Heath B. McLendon Denis P. Mangan
Chairman and Vice President
Chief Executive Officer
/s/ James B. Conheady /s/ Jeffrey J.
Russell
James B. Conheady Jeffrey J. Russell
Vice President Vice President
/s/ Victor S. Filatov /s/ Rein W. van der
Does
Victor S. Filatov Rein W. van der
Does
Vice President Vice President
December 1, 1995
5
<PAGE>
Smith Barney World Funds, Inc.
European Portfolio
- ------------------------------------------------------------
- --------------------
Historical Performance -- Class A Shares
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Net Asset Value
---------------------
Beginning End
Income Total
Year Ended of Year of Year
Dividends Returns/(1)/
============================================================
=============================
<S> <C> <C>
<C> <C>
10/31/95 $12.88 $14.67
$0.00 13.90%
- ------------------------------------------------------------
- -----------------------------
Inception*-10/31/94 12.50 12.88
0.00 3.04+
============================================================
=============================
Total
$0.00
============================================================
=============================
</TABLE>
- ------------------------------------------------------------
- --------------------
Historical Performance -- Class B Shares
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Net Asset Value
---------------------
Beginning End
Income Total
Year Ended of Year of Year
Dividends Returns/(1)/
============================================================
=============================
<S> <C> <C>
<C> <C>
Inception*-10/31/95 $12.62 $14.56
$0.00 15.37%+
============================================================
=============================
</TABLE>
- ------------------------------------------------------------
- --------------------
Historical Performance -- Class C Shares
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Net Asset Value
---------------------
Beginning End
Income Total
Year Ended of Year of Year
Dividends Returns/(1)/
============================================================
=============================
<S> <C> <C>
<C> <C>
10/31/95 $12.83 $14.51
$0.00 13.09%
- ------------------------------------------------------------
- -----------------------------
Inception*-10/31/94 12.48 12.83
0.00 2.80+
============================================================
=============================
Total
$0.00
============================================================
=============================
</TABLE>
It is the Fund's policy to distribute dividends and capital
gains, if any,
annually.
6
<PAGE>
Smith Barney World Funds, Inc.
European Portfolio
- ------------------------------------------------------------
- --------------------
Average Annual Total Return
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Without Sales Charge/(1)/
- --------------------------------------
Class A Class B Class C
============================================================
======================================
<S>
<C> <C> <C>
Year Ended 10/31/95
13.90% N/A 13.09%
- ------------------------------------------------------------
- --------------------------------------
Inception* through 10/31/95
9.70 15.37% 9.22
============================================================
======================================
<CAPTION>
With Sales Charge/(2)/
- --------------------------------------
Class A Class B Class C
============================================================
======================================
<S>
<C> <C> <C>
Year Ended 10/31/95
8.20% N/A 12.09%
- ------------------------------------------------------------
- --------------------------------------
Inception* through 10/31/95
6.49 10.37% 9.22
</TABLE>
- ------------------------------------------------------------
- --------------------
Cumulative Total Return
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Without Sales Charge/(1)/
============================================================
=================================
<S>
<C>
Class A (Inception* through 10/31/95)
17.36%
- ------------------------------------------------------------
- ---------------------------------
Class B (Inception* through 10/31/95)
15.37
- ------------------------------------------------------------
- ---------------------------------
Class C (Inception* through 10/31/95)
16.27
============================================================
=================================
</TABLE>
(1) Assumes reinvestment of all dividends and capital gain
distributions, if
any, at net asset value and does not reflect deduction
of the applicable
sales charge with respect to Class A shares or the
applicable contingent
deferred sales charges ("CDSC") with respect to Class B
and C shares.
(2) Assumes reinvestment of all dividends and capital gain
distributions, if
any, at net asset value. In addition, Class A shares
reflect the deduction
of the maximum initial sales charge of 5.00%; Class B
shares reflect the
deduction of a 5.00% CDSC, which applies if shares are
redeemed less than
one year from initial purchase and declines thereafter
by 1.00% per year
until no CDSC is incurred. Class C shares reflect the
deduction of a 1.00%
CDSC, which applies if shares are redeemed within the
first year of
purchase.
+ Total return is not annualized, as it may not be
representative of the total
return for the year.
* Inception dates for Class A, B and C shares are February
7, 1994,
November 7, 1994 and February 14, 1994, respectively.
7
<PAGE>
Smith Barney World Funds, Inc.
European Portfolio
- ------------------------------------------------------------
- --------------------
Historical Performance
- ------------------------------------------------------------
- --------------------
Growth of $10,000 Invested in Class A Shares
of
the European Portfolio vs.
European Financial Times Index+
(unaudited)
- ------------------------------------------------------------
- --------------------
February 1994 -- October 1995
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
European
European
Financial
Portfolio Times
Index
<S> <C> <C>
2/7/94 9,549.30
10,000.00
4/94 9,480.50
10,575.23
10/94 9,839.60
10,431.46
4/95 10,297.90
10,844.77
10/95 11,207.00
11,160.02
</TABLE>
+ Hypothetical illustration of $10,000 invested in Class A
shares at inception
on February 7, 1994, assuming deduction of the maximum
4.50% sales charge at
the time of investment and the reinvestment of dividends
and capital gains, if
any, at net asset value through October 31, 1995. The
European Financial Times
Index is a composite portfolio consisting of equity total
returns for Europe.
The index is unmanaged and is not subject to the same
management and trading
expenses of a mutual fund. The performance of the
Portfolio's other classes
may be greater or less than the Class A shares'
performance indicated on this
chart, depending on whether greater or lesser sales
charges and fees were
incurred by shareholders investing in the other classes.
All figures represent past performance and are not a
guarantee of future
results. Investment returns and principal value will
fluctuate, and redemption
values may be more or less than the original cost. No
adjustment has been made
for shareholder tax liability on dividends or capital
gains.
8
<PAGE>
Smith Barney World Funds, Inc.
Pacific Portfolio
- ------------------------------------------------------------
- --------------------
Historical Performance -- Class A Shares
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Net Asset Value
---------------------
Beginning End
Income Total
Year Ended of Year of Year
Dividends Returns/(1)/
============================================================
=============================
<S> <C> <C>
<C> <C>
10/31/95 $12.92 $10.07
$0.00 (22.06)%
- ------------------------------------------------------------
- -----------------------------
Inception*-10/31/94 12.50 12.92
0.00 3.36+
============================================================
=============================
Total
$0.00
============================================================
=============================
</TABLE>
- ------------------------------------------------------------
- --------------------
Historical Performance -- Class B Shares
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Net Asset Value
---------------------
Beginning End
Income Total
Year Ended of Year of Year
Dividends Returns/(1)/
============================================================
=============================
<S> <C> <C>
<C> <C>
Inception*-10/31/95 $12.64 $9.99
$0.00 (20.97)%+
============================================================
=============================
</TABLE>
- ------------------------------------------------------------
- --------------------
Historical Performance -- Class C Shares
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Net Asset Value
---------------------
Beginning End
Income Total
Year Ended of Year of Year
Dividends Returns/(1)/
============================================================
=============================
<S> <C> <C>
<C> <C>
10/31/95 $12.86 $ 9.95
$0.00 (22.63)%
- ------------------------------------------------------------
- -----------------------------
Inception*-10/31/94 12.50 12.86
0.00 2.88+
============================================================
=============================
Total
$0.00
============================================================
=============================
</TABLE>
It is the Fund's policy to distribute dividends and capital
gains, if any,
annually.
9
<PAGE>
Smith Barney World Funds, Inc.
Pacific Portfolio
- ------------------------------------------------------------
- --------------------
Average Annual Total Return
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Without Sales Charge/(1)/
- --------------------------------------
Class A Class B Class C
============================================================
======================================
<S>
<C> <C> <C>
Year Ended 10/31/95
(22.06)% N/A (22.63)%
- ------------------------------------------------------------
- --------------------------------------
Inception* through 10/31/95
(11.75) (20.97)% (12.44)
============================================================
======================================
<CAPTION>
With Sales Charge/(2)/
- --------------------------------------
Class A Class B Class C
============================================================
======================================
<S>
<C> <C> <C>
Year Ended 10/31/95
(25.96)% N/A (23.40)%
- ------------------------------------------------------------
- --------------------------------------
Inception* through 10/31/95
(14.33) (24.92)% (12.44)
============================================================
======================================
</TABLE>
- ------------------------------------------------------------
- --------------------
Cumulative Total Return
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Without Sales Charge/(1)/
============================================================
=================================
<S>
<C>
Class A (Inception* through 10/31/95)
(19.44)%
- ------------------------------------------------------------
- ---------------------------------
Class B (Inception* through 10/31/95)
(20.97)
- ------------------------------------------------------------
- ---------------------------------
Class C (Inception* through 10/31/95)
(20.40)
============================================================
=================================
</TABLE>
(1) Assumes reinvestment of all dividends and capital gain
distributions, if
any, at net asset value and does not reflect deduction
of the applicable
sales charge with respect to Class A shares or the
applicable contingent
deferred sales charges ("CDSC") with respect to Class B
and C shares.
(2) Assumes reinvestment of all dividends and capital gain
distributions, if
any, at net asset value. In addition, Class A shares
reflect the deduction
of the maximum initial sales charge of 5.00%; Class B
shares reflect the
deduction of a 5.00% CDSC, which applies if shares are
redeemed less than
one year from initial purchase and declines thereafter
by 1.00% per year
until no CDSC is incurred. Class C shares reflect the
deduction of a 1.00%
CDSC, which applies if shares are redeemed within the
first year of
purchase.
+ Total return is not annualized, as it may not be
representative of the total
return for the year.
* Inception dates for Class A, B and C shares are February
7, 1994,
November 7, 1994 and February 11, 1994, respectively.
10
<PAGE>
Smith Barney World Funds, Inc.
Pacific Portfolio
- ------------------------------------------------------------
- --------------------
Historical Performance
- ------------------------------------------------------------
- --------------------
Growth of $10,000 Invested in Class A Shares
of
the Pacific Portfolio vs.
MSCI Pacific Index+
(unaudited)
- ------------------------------------------------------------
- --------------------
February 1994 -- October 1995
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Pacific MSCI
Pacific
Portfolio Index
<S> <C> <C>
2/7/94 9,549.30
10,000.00
4/94 9,465.20
10,088.30
10/94 9,870.10
10,222.48
4/95 8,120.70
9,975.86
10/95 7,708.20
9,040.71
</TABLE>
+ Hypothetical illustration of $10,000 invested in Class A
shares at inception
on February 7, 1994, assuming deduction of the maximum
4.50% sales charge at
the time of investment and the reinvestment of dividends
and capital gains, if
any, at net asset value through October 31, 1995. The
Morgan Stanley Capital
International Pacific Index is a composite portfolio
consisting of equity
total returns for the countries of Australia, New Zealand
and countries in the
Far East. The index is unmanaged and is not subject to the
same management and
trading expenses of a mutual fund. The performance of the
Portfolio's other
classes may be greater or less than the Class A shares'
performance indicated
on this chart, depending on whether greater or lesser
sales charges and fees
were incurred by shareholders investing in the other
classes.
All figures represent past performance and are not a
guarantee of future
results. Investment returns and principal value will
fluctuate, and redemption
values may be more or less than the original cost. No
adjustment has been made
for shareholder tax liability on dividends or capital
gains.
11
<PAGE>
Smith Barney World Funds, Inc.
International Balanced Portfolio
- ------------------------------------------------------------
- --------------------
Historical Performance -- Class A Shares
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Net Asset Value
---------------------
Beginning End
Income Total
Year Ended of Year of Year
Dividends Returns/(1)/
============================================================
=============================
<S> <C> <C>
<C> <C>
10/31/95 $12.20 $12.64
$0.39 7.05%
- ------------------------------------------------------------
- -----------------------------
Inception*-10/31/94 12.00 12.20
0.00 1.67+
============================================================
=============================
Total
$0.39
============================================================
=============================
</TABLE>
- ------------------------------------------------------------
- --------------------
Historical Performance -- Class B Shares
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Net Asset Value
---------------------
Beginning End
Income Total
Year Ended of Year of Year
Dividends Returns/(1)/
============================================================
=============================
<S> <C> <C>
<C> <C>
Inception*-10/31/95 $12.08 $12.65
$0.29 7.33%+
============================================================
=============================
</TABLE>
- ------------------------------------------------------------
- --------------------
Historical Performance -- Class C Shares
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Net Asset Value
---------------------
Beginning End
Income Total
Year Ended of Year of Year
Dividends Returns/(1)/
============================================================
=============================
<S> <C> <C>
<C> <C>
10/31/95 $12.18 $12.63
$0.29 6.29%
- ------------------------------------------------------------
- -----------------------------
Inception*-10/31/94 12.00 12.18
0.00 1.50+
============================================================
=============================
Total
$0.29
============================================================
=============================
</TABLE>
It is the Fund's policy to distribute dividends quarterly
and capital gains,
if any, annually.
12
<PAGE>
Smith Barney World Funds, Inc.
International Balanced Portfolio
- ------------------------------------------------------------
- --------------------
Average Annual Total Return
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Without Sales Charge/(1)/
- --------------------------------------
Class A Class B Class C
============================================================
======================================
<S>
<C> <C> <C>
Year Ended 10/31/95
7.05% N/A 6.29%
- ------------------------------------------------------------
- --------------------------------------
Inception* through 10/31/95
7.41 7.33% 6.62
============================================================
======================================
<CAPTION>
With Sales Charge/(2)/
- --------------------------------------
Class A Class B Class C
============================================================
======================================
<S>
<C> <C> <C>
Year Ended 10/31/95
1.70% N/A 5.29%
- ------------------------------------------------------------
- --------------------------------------
Inception* through 10/31/95
2.86 2.33% 6.62
============================================================
======================================
</TABLE>
- ------------------------------------------------------------
- --------------------
Cumulative Total Return
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Without Sales Charge/(1)/
============================================================
================================
<S>
<C>
Class A (Inception* through 10/31/95)
8.83%
- ------------------------------------------------------------
- --------------------------------
Class B (Inception* through 10/31/95)
7.33
- ------------------------------------------------------------
- --------------------------------
Class C (Inception* through 10/31/95)
7.88
============================================================
================================
</TABLE>
(1) Assumes reinvestment of all dividends and capital gain
distributions, if
any, at net asset value and does not reflect deduction
of the applicable
sales charge with respect to Class A shares or the
applicable contingent
deferred sales charges ("CDSC") with respect to Class B
and C shares.
(2) Assumes reinvestment of all dividends and capital gain
distributions, if
any, at net asset value. In addition, Class A shares
reflect the deduction
of the maximum initial sales charge of 5.00%; Class B
shares reflect the
deduction of a 5.00% CDSC, which applies if shares are
redeemed less than
one year from initial purchase and declines thereafter
by 1.00% per year
until no CDSC is incurred. Class C shares reflect the
deduction of a 1.00%
CDSC, which applies if shares are redeemed within the
first year of
purchase.
+ Total return is not annualized, as it may not be
representative of the total
return for the year.
* Inception dates for Class A, B and C shares are August
25, 1994,
November 7, 1994 and August 25, 1994, respectively.
13
<PAGE>
Smith Barney World Funds, Inc.
International Balanced Portfolio
- ------------------------------------------------------------
- --------------------
Historical Performance
- ------------------------------------------------------------
- --------------------
Growth of $10,000 Invested in Class A Shares
of
the International Balanced Portfolio vs.
MSCI EAFE-GDP Weighted Index and
J.P. Morgan Global Bond Index+
(unaudited)
- ------------------------------------------------------------
- --------------------
August 1994 -- October 1995
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
J.P. Morgan
International
Global Bond
Balanced MSCI EAFE-GDP
Index
Portfolio Index
(unhedged)
<S> <C> <C>
<C>
8/25/94 9,546.50 10,000.00
10,000.00
10/94 9,705.60 9,948.73
10,194.60
1/95 9,048.60 9,170.53
10,293.11
4/95 9,581.30 10,088.58
11,272.53
7/95 10,847.30 10,484.45
11,678.67
10/95 10,733.20 9,834.78
12,088.58
</TABLE>
+ Hypothetical illustration of $10,000 invested in Class A
shares at inception
on August 25, 1994, assuming deduction of the maximum
4.50% sales charge at
the time of investment and the reinvestment of dividends
and capital gains, if
any, at net asset value through October 31, 1995. The
Morgan Stanley Capital
International EAFE-GDP Weighted Index is a composite
portfolio consisting of
equity total returns for the countries of Europe,
Australia, New Zealand and
countries in the Far East, weighted based on each
country's gross domestic
product. The J.P. Morgan Global Bond Index (unhedged) is a
daily, market
capitalization weighted international fixed income index
consisting of 13
countries. The indexes are unmanaged and are not subject
to the same
management and trading expenses of a mutual fund. The
performance of the
Portfolio's other classes may be greater or less than the
Class A shares'
performance indicated on this chart, depending on whether
greater or lesser
sales charges and fees were incurred by shareholders
investing in the other
classes.
All figures represent past performance and are not a
guarantee of future
results. Investment returns and principal value will
fluctuate, and redemption
values may be more or less than the original cost. No
adjustment has been made
for shareholder tax liability on dividends or capital
gains.
14
<PAGE>
Smith Barney World Funds, Inc.
- ------------------------------------------------------------
- --------------------
Schedules of Investments
October 31, 1995
- ------------------------------------------------------------
- --------------------
EUROPEAN PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
============================================================
===============================================
<C> <S>
<C>
STOCKS -- 100.0%
Austria -- 6.8%
26,000 Baumax AG Preferred
$ 1,057,294
12,000 VA Technologie AG
1,390,083
- ------------------------------------------------------------
- -----------------------------------------------
2,447,377
- ------------------------------------------------------------
- -----------------------------------------------
Canada -- 0.2%
242,957 International UNP Holdings Ltd.
86,706
- ------------------------------------------------------------
- -----------------------------------------------
Finland -- 7.6%
48,000 Nokia OY AB Shares A
2,746,345
- ------------------------------------------------------------
- -----------------------------------------------
France -- 20.3%
10,000 BIS S.A.
936,050
8,536 Castorama Dubois Investment
1,383,573
400,000 Euro Disney SCA
1,344,806
13,854 Guilbert S.A.
1,662,061
5,000 Louis Vuitton Moet Hennessy
994,298
16,698 Total Series B
1,031,318
- ------------------------------------------------------------
- -----------------------------------------------
7,352,106
- ------------------------------------------------------------
- -----------------------------------------------
Germany -- 11.8%
2,700 Buderus AG Lahn Wetzlar
1,158,951
2,875 GEA AG Non-Voting Preferred
939,075
1,430 Linde AG
869,190
4,000 Mannesmann AG
1,312,220
- ------------------------------------------------------------
- -----------------------------------------------
4,279,436
- ------------------------------------------------------------
- -----------------------------------------------
Ireland -- 6.1%
140,000 CRH PLC
924,137
215,000 Independent Newspapers PLC
1,287,029
- ------------------------------------------------------------
- -----------------------------------------------
2,211,166
- ------------------------------------------------------------
- -----------------------------------------------
Italy -- 6.9%
20,000 Gucci Group N.V. -- NY ADR
600,000
30,000 Industrie Natuzzi S.p.A. ADR
1,200,000
325,000 Stet di Risp NC
708,450
- ------------------------------------------------------------
- -----------------------------------------------
2,508,450
- ------------------------------------------------------------
- -----------------------------------------------
Netherlands -- 13.0%
30,000 Ahrend N.V.
1,059,427
30,000 Grolsch CTA
1,051,832
30,000 Randstad Holding N.V.
1,351,813
10,200 Royal Dutch Petroleum Co.
1,264,591
- ------------------------------------------------------------
- -----------------------------------------------
4,727,663
- ------------------------------------------------------------
- -----------------------------------------------
</TABLE>
See Notes to Financial Statements.
15
<PAGE>
Smith Barney World Funds, Inc.
- ------------------------------------------------------------
- --------------------
Schedules of Investments (continued)
October 31, 1995
- ------------------------------------------------------------
- --------------------
EUROPEAN PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
============================================================
===============================================
<C> <S>
<C>
Norway -- 1.5%
14,000 Norsk Hydro AS ADR
$ 560,000
- ------------------------------------------------------------
- -----------------------------------------------
Spain -- 5.5%
30,000 Inmobil Metro Vasco Central
912,883
20,560 Repsol S.A.
613,016
16,000 Repsol SA ADR
474,000
- ------------------------------------------------------------
- -----------------------------------------------
1,999,899
- ------------------------------------------------------------
- -----------------------------------------------
Sweden -- 5.8%
9,100 Asea AB Series A Free
910,877
18,000 Hennes Mauritz Series B Free
1,175,869
- ------------------------------------------------------------
- -----------------------------------------------
2,086,746
- ------------------------------------------------------------
- -----------------------------------------------
Switzerland -- 3.7%
1,560 Ciba Geigy AG Basel Registered
1,349,300
- ------------------------------------------------------------
- -----------------------------------------------
United Kingdom -- 10.8%
3,482 BTR PLC Warrants, expire 12/31/98(a)
1,374
50,000 Carlton Communications PLC
760,552
92,000 Norweb Ordinary
1,676,686
8,000 Vodafone Group PLC ADR
327,000
184,275 Wolseley PLC
1,139,815
- ------------------------------------------------------------
- -----------------------------------------------
3,905,427
- ------------------------------------------------------------
- -----------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $27,361,371)[+]
$36,260,621
============================================================
===============================================
</TABLE>
See Notes to Financial Statements.
16
<PAGE>
Smith Barney World Funds, Inc.
- ------------------------------------------------------------
- --------------------
Schedules of Investments (continued)
October 31, 1995
- ------------------------------------------------------------
- --------------------
PACIFIC PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
============================================================
===============================================
<C> <S>
<C>
STOCKS -- 100.0%
Australia -- 4.9%
45,264 Coca Cola Amatil Ltd.
$ 349,832
- ------------------------------------------------------------
- -----------------------------------------------
Hong Kong -- 10.1%
40,000 Guoco Group Ltd.
185,209
72,000 Hong Kong & China Gas Co.
116,868
50,000 Hutchison Whampoa Ltd.
275,486
80,000 Singamas Container Holding Ltd.
Warrants, expire 6/30/97(a) 2,059
40,000 Wharf Holdings
135,027
- ------------------------------------------------------------
- -----------------------------------------------
714,649
- ------------------------------------------------------------
- -----------------------------------------------
Indonesia -- 2.3%
5,000 PT Indonesian Satellite Corp. ADR
165,625
- ------------------------------------------------------------
- -----------------------------------------------
Japan -- 17.2%
6,000 Bunkyodo Co. Ltd.
135,557
9,000 Ishikawajima Construction Materials Co.
Ltd. 95,946
22,000 Itochu Corp. Ltd.
130,393
15,000 Kajima Corp.
138,491
3,000 Mabuchi Motor Co. Ltd.
181,623
9,000 Matsushita Electric Ind. Co. Ltd.
127,635
6,050 Mr. Max Corp.
107,101
5,000 Rohm Co.
303,680
- ------------------------------------------------------------
- -----------------------------------------------
1,220,426
- ------------------------------------------------------------
- -----------------------------------------------
Malaysia -- 14.5%
83,333 Leader Universal Holdings Bhd.
224,472
12,000 Malaysian Helicopter Services Bhd.
16,799
400 Malaysian Helicopter Services Bhd.
Warrants, expire 6/11/00(a) 164
60,000 Muhibbah Engineering Bhd.
217,066
100,000 Renong Bhd.
152,576
66,250 Sungei Way Holdings Bhd.
222,744
8,750 Sungei Way Holdings Bhd. Warrants,
expire 6/29/99(a) 10,322
25,000 Telekom Malaysia Bhd.
178,922
- ------------------------------------------------------------
- -----------------------------------------------
1,023,065
- ------------------------------------------------------------
- -----------------------------------------------
New Zealand -- 4.7%
5,000 Telecom Corp. New Zealand Ltd. ADR
331,875
- ------------------------------------------------------------
- -----------------------------------------------
</TABLE>
See Notes to Financial Statements.
17
<PAGE>
Smith Barney World Funds, Inc.
- ------------------------------------------------------------
- --------------------
Schedules of Investments (continued)
October 31, 1995
- ------------------------------------------------------------
- --------------------
PACIFIC PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
============================================================
===============================================
<C> <S>
<C>
Philippines -- 6.5%
500,000 Bankard Inc.
$ 206,651
187,500 International Container Services Inc.
79,296
650,000 SM Prime Holdings Inc.
174,933
- ------------------------------------------------------------
- -----------------------------------------------
460,880
- ------------------------------------------------------------
- -----------------------------------------------
Singapore -- 23.8%
35,000 Cerebos Pacific
217,729
75,000 DBS Land Ltd.
221,617
10,000 Fraser & Neave
118,055
10,000 Fraser & Neave Ltd. Warrants, expire
5/27/98(a) 53,019
20,837 Jardine Matheson Holding Registered
127,106
200,000 QAF Ltd.
241,764
50,000 Sembawang Maritime Ltd.
168,952
87,000 Singapore Shipbuilding & Engineering
Foreign Registered 222,635
200,000 Steamers Maritime Holding Ltd.
148,452
43,830 United Overseas Bank Ltd. Warrants,
expire 6/17/97(a) 166,541
- ------------------------------------------------------------
- -----------------------------------------------
1,685,870
- ------------------------------------------------------------
- -----------------------------------------------
South Korea -- 5.7%
5,000 Korea Electric Power Corp.
217,506
800 Samsung Electronics Co. Ltd.
182,678
- ------------------------------------------------------------
- -----------------------------------------------
400,184
- ------------------------------------------------------------
- -----------------------------------------------
Taiwan -- 1.2%
6,600 Advanced Semiconductor Engineering GDR
84,150
- ------------------------------------------------------------
- -----------------------------------------------
Thailand -- 9.1%
20,000 Dhana Siam Finance & Securities Public
Co. Ltd.
Foreign Registered
96,184
7,500 Land & House Public Co. Ltd. Foreign
121,025
9,000 Siam City Cement Public Co. Ltd.
Foreign 148,808
22,000 United Communication Industry Public
Co. Ltd. Foreign 276,312
- ------------------------------------------------------------
- -----------------------------------------------
642,329
- ------------------------------------------------------------
- -----------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $7,203,074)++
$ 7,078,885
============================================================
===============================================
</TABLE>
See Notes to Financial Statements.
18
<PAGE>
Smith Barney World Funds, Inc.
- ------------------------------------------------------------
- --------------------
Schedules of Investments (continued)
October 31, 1995
- ------------------------------------------------------------
- --------------------
INTERNATIONAL BALANCED PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
============================================================
===============================================
<C> <S>
<C>
STOCKS -- 59.3%
Argentina -- 0.1%
11,132 Bagley S.A. Series B
$ 22,490
- ------------------------------------------------------------
- -----------------------------------------------
Australia -- 0.8%
25,263 Coca Cola Amatil Ltd.
195,250
- ------------------------------------------------------------
- -----------------------------------------------
Austria -- 5.8%
5,000 Austria Mikro Systeme International AG
925,814
2,000 VA Technologie AG
231,681
2,000 VAE Eisenbahn AG
178,806
- ------------------------------------------------------------
- -----------------------------------------------
1,336,301
- ------------------------------------------------------------
- -----------------------------------------------
Brazil -- 0.7%
4,000 Telecomunicoes Brasileiras S.A. ADR
160,752
- ------------------------------------------------------------
- -----------------------------------------------
Canada -- 0.5%
14,000 Videotron Group Ltd. Subord. Voting
104,089
- ------------------------------------------------------------
- -----------------------------------------------
Chile -- 1.4%
10,000 Embotelladora Andina S.A. ADR
332,500
- ------------------------------------------------------------
- -----------------------------------------------
Finland -- 2.5%
10,000 Nokia OY AB Shares A
572,155
- ------------------------------------------------------------
- -----------------------------------------------
France -- 1.2%
1,674 Castorama Dubois Investment
271,308
- ------------------------------------------------------------
- -----------------------------------------------
Germany -- 4.3%
500 Bayerische Motoren Werke AG
267,166
1,000 Mannesmann AG
328,055
6,000 SGL Carbon AG ORD
393,240
- ------------------------------------------------------------
- -----------------------------------------------
988,461
- ------------------------------------------------------------
- -----------------------------------------------
Hong Kong -- 2.2%
50,000 Guoco Group Ltd.
231,511
50,000 Hutchison Whampoa Ltd.
275,486
- ------------------------------------------------------------
- -----------------------------------------------
506,997
- ------------------------------------------------------------
- -----------------------------------------------
Indonesia -- 1.4%
10,000 PT Indonesian Satellite Corp. ADR
331,250
- ------------------------------------------------------------
- -----------------------------------------------
Ireland -- 4.0%
50,000 CRH PLC
330,049
50,000 Independent News
299,309
110,000 Smurfit Jefferson
295,426
- ------------------------------------------------------------
- -----------------------------------------------
924,784
- ------------------------------------------------------------
- -----------------------------------------------
</TABLE>
See Notes to Financial Statements.
19
<PAGE>
Smith Barney World Funds, Inc.
- ------------------------------------------------------------
- --------------------
Schedules of Investments (continued)
October 31, 1995
- ------------------------------------------------------------
- --------------------
INTERNATIONAL BALANCED PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
============================================================
===============================================
<C> <S>
<C>
Italy -- 1.6%
100,000 Telecom Italia S.p.A.
$ 151,805
125,000 Telecom Italia Mobile S.p.A.
209,751
- ------------------------------------------------------------
- -----------------------------------------------
361,556
- ------------------------------------------------------------
- -----------------------------------------------
Japan -- 3.9%
25,000 Kajima Corp.
230,818
14,000 Matsushita Electric Ind. Co. Ltd.
198,543
31,000 Mitsubishi Heavy Industries Ltd.
239,220
12,000 Nippon Denso Co. Ltd.
219,473
- ------------------------------------------------------------
- -----------------------------------------------
888,054
- ------------------------------------------------------------
- -----------------------------------------------
Malaysia -- 1.8%
66,666 Leader Universal Holdings Bhd.
179,576
70,000 Sungei Way Holdings
235,352
- ------------------------------------------------------------
- -----------------------------------------------
414,928
- ------------------------------------------------------------
- -----------------------------------------------
Mexico -- 2.5%
40,800 Gruma S.A. de C.V. B
116,514
25,000 Grupo Carso A1
130,602
15,000 Kimberly Clark A NPV
195,168
5,000 Telefonos de Mexico ADR Series L
137,500
- ------------------------------------------------------------
- -----------------------------------------------
579,784
- ------------------------------------------------------------
- -----------------------------------------------
Netherlands -- 3.8%
15,000 IHC Caland N.V.
426,239
10,000 Randstad Holdings N.V.
450,604
- ------------------------------------------------------------
- -----------------------------------------------
876,843
- ------------------------------------------------------------
- -----------------------------------------------
Norway -- 1.0%
12,000 Petroleum Geo Services AS
227,324
- ------------------------------------------------------------
- -----------------------------------------------
Singapore -- 3.8%
50,000 Cerebos Pacific
311,042
26,047 Jardine Matheson Holding Registered
158,887
200,000 Qaf Ltd.
241,765
50,000 Sembawang Maritime Ltd.
168,952
- ------------------------------------------------------------
- -----------------------------------------------
880,646
- ------------------------------------------------------------
- -----------------------------------------------
South Africa -- 1.5%
14,000 Barlow Ltd.
180,432
25,000 Malbak Ltd.
166,242
- ------------------------------------------------------------
- -----------------------------------------------
346,674
- ------------------------------------------------------------
- -----------------------------------------------
</TABLE>
See Notes to Financial Statements.
20
<PAGE>
Smith Barney World Funds, Inc.
- ------------------------------------------------------------
- --------------------
Schedules of Investments (continued)
October 31, 1995
- ------------------------------------------------------------
- --------------------
INTERNATIONAL BALANCED PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
============================================================
===============================================
<C> <S>
<C>
Spain -- 1.1%
2,420 Acerinox S.A. ORD
$ 254,570
- ------------------------------------------------------------
- -----------------------------------------------
Sweden -- 6.3%
7,500 Autoliv AB Free
430,113
22,000 Ericcson LM Telephone Co. B ADR
469,898
25,000 Volvo AB Series B Free
562,572
- ------------------------------------------------------------
- -----------------------------------------------
1,462,583
- ------------------------------------------------------------
- -----------------------------------------------
Thailand -- 1.9%
12,000 Land & House Public Co. Ltd. Foreign
193,641
20,000 United Communication Industry Public
Co. Ltd. Foreign 251,192
- ------------------------------------------------------------
- -----------------------------------------------
444,833
- ------------------------------------------------------------
- -----------------------------------------------
United Kingdom -- 5.2%
100,000 Rentokil Group
497,041
5,000 Reuters Holdings PLC ADR B
277,500
10,000 Vodafone Group PLC ADR
408,750
- ------------------------------------------------------------
- -----------------------------------------------
1,183,291
- ------------------------------------------------------------
- -----------------------------------------------
TOTAL STOCKS
(Cost -- $12,989,972)
13,667,423
============================================================
===============================================
<CAPTION>
FACE
AMOUNT SECURITY
VALUE
============================================================
===============================================
<C> <S>
<C>
BONDS -- 40.7%
Argentina -- 1.9%
$ 500,000 Gas Argentina S.A., 7.250% due 12/7/98
436,250
- ------------------------------------------------------------
- -----------------------------------------------
Brazil -- 2.2%
500,000 Banco Nacional, 10.375% due 4/27/98
502,500
- ------------------------------------------------------------
- -----------------------------------------------
Canada -- 7.0%
2,000,000+ Canada, 8.750% due 12/1/05
1,613,576
- ------------------------------------------------------------
- -----------------------------------------------
Denmark -- 3.8%
5,000,000+ Kingdom of Denmark, 7.000% due 12/15/04
868,380
- ------------------------------------------------------------
- -----------------------------------------------
Malaysia -- 1.4%
300,000 Renong Bhd. Convertible, 2.500% due
1/15/05(b) 327,750
- ------------------------------------------------------------
- -----------------------------------------------
Netherlands -- 6.6%
2,500,000+ Netherlands, 5.750% due 1/15/04
1,524,904
- ------------------------------------------------------------
- -----------------------------------------------
New Zealand -- 5.8%
2,000,000+ New Zealand, 9.000% due 11/15/96
1,335,780
- ------------------------------------------------------------
- -----------------------------------------------
</TABLE>
See Notes to Financial Statements.
21
<PAGE>
Smith Barney World Funds, Inc.
- ------------------------------------------------------------
- --------------------
Schedules of Investments (continued)
October 31, 1995
- ------------------------------------------------------------
- --------------------
INTERNATIONAL BALANCED PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY
VALUE
============================================================
===============================================
<C> <S>
<C>
Philippines -- 1.1%
$ 250,000 House of Investments Inc. Convertible,
4.000% due 10/17/01(b)
$ 262,500
- ------------------------------------------------------------
- -----------------------------------------------
Spain -- 7.5%
200,000,000+ Spanish Government, 12.250% due 3/25/00
1,728,916
- ------------------------------------------------------------
- -----------------------------------------------
Sweden -- 3.4%
5,000,000+ Kingdom of Sweden, 10.750% due 1/23/97
768,431
- ------------------------------------------------------------
- -----------------------------------------------
TOTAL BONDS
(Cost -- $8,656,383)
9,368,987
============================================================
===============================================
TOTAL INVESTMENTS -- 100%
(Cost -- $21,646,355)++
$23,036,410
============================================================
===============================================
</TABLE>
(a) Non-income producing security.
(b) Security exempt from registration under Rule 144A of
Securities Act of 1933.
These securities may be resold in transactions exempt
from registration,
generally to qualified institutional buyers.
+ Represents local currency.
[+] Aggregate cost for Federal income tax purposes is
substantially the same.
See Notes to Financial Statements.
22
<PAGE>
Smith Barney World Funds, Inc.
- ------------------------------------------------------------
- --------------------
Statements of Assets and Liabilities
October 31, 1995
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
International
European Pacific Balanced
Portfolio Portfolio Portfolio
============================================================
===========================================================
<S>
<C> <C> <C>
ASSETS:
Investments, at value
(Cost -- $27,361,371, $7,203,074
and $21,646,355)
$36,260,621 $ 7,078,885 $23,036,410
Foreign currency
(Cost -- $961,031, $9,268
and $1,415,208)
957,690 9,254 1,411,845
Cash
436,154 222,341 43,433
Receivable for Fund shares sold
203,839 19,207 103,231
Receivable for securities sold
1,986,490 3,643 --
Dividends and interest receivable
213,299 2,804 466,020
Receivable for open forward foreign
currency contacts
- -- -- 7,326
Receivable from investment manager
- -- 104,914 --
Other assets
- -- -- 110,453
- ------------------------------------------------------------
- ----------------------------------------------------------
Total Assets
40,058,093 7,441,048 25,178,718
- ------------------------------------------------------------
- ----------------------------------------------------------
LIABILITIES:
Payable for securities purchased
1,495,541 1,607 6,349
Payable for Fund shares purchased
377,282 1,720 --
Distribution fees payable
37,943 5,642 15,486
Management fees payable
10,733 -- 18,378
Payable for open forward foreign
currency contracts
5,269 -- --
Accrued expenses and other liabilities
125,105 40,367 90,807
- ------------------------------------------------------------
- ----------------------------------------------------------
Total Liabilities
2,051,873 49,336 131,020
- ------------------------------------------------------------
- ----------------------------------------------------------
Total Net Assets
$38,006,220 $ 7,391,712 $25,047,698
============================================================
==========================================================
NET ASSETS:
Par value of capital shares
$ 2,605 $ 737 $ 1,982
Capital paid in excess of par value
29,950,388 9,019,963 23,759,027
Undistributed (accumulated)
net investment income (loss)
64,926 (41,379) 60,565
Accumulated net realized loss
on investments
(927,398) (1,463,319) (176,059)
Net unrealized appreciation (depreciation)
of investments and foreign currencies
8,915,699 (124,290) 1,402,183
- ------------------------------------------------------------
- ----------------------------------------------------------
Total Net Assets
$38,006,220 $ 7,391,712 $25,047,698
============================================================
==========================================================
</TABLE>
See Notes to Financial Statements.
23
<PAGE>
Smith Barney World Funds, Inc.
- ------------------------------------------------------------
- --------------------
Statements of Assets and Liabilities (continued)
October 31, 1995
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
International
European Pacific Balanced
Portfolio Portfolio Portfolio
============================================================
===========================================================
<S>
<C> <C> <C>
Shares Outstanding:
Class A
809,106 437,690 1,397,698
---------------------------------------------------------
- ----------------------------------------------------------
Class B
1,705,469 103,263 242,167
---------------------------------------------------------
- ----------------------------------------------------------
Class C
90,387 196,094 341,723
---------------------------------------------------------
- ----------------------------------------------------------
Net Asset Value:
Class A (and redemption price)
$14.67 $10.07 $12.64
---------------------------------------------------------
- ----------------------------------------------------------
Class B *
$14.56 $9.99 $12.65
---------------------------------------------------------
- ----------------------------------------------------------
Class C **
$14.51 $9.95 $12.63
---------------------------------------------------------
- ----------------------------------------------------------
Class A Maximum Public Offering Price Per Share
(net asset value plus 5.26% of net asset value
per share)
$15.44 $10.60 $13.31
============================================================
===========================================================
</TABLE>
* Redemption price is NAV of Class B shares reduced by a
5.00% CDSC if shares
are redeemed less than one year from initial purchase
(See Note 2).
** Redemption price is NAV of Class C shares reduced by a
1.00% CDSC if shares
are redeemed within the first year of purchase.
See Notes to Financial Statements.
24
<PAGE>
Smith Barney World Funds, Inc.
- ------------------------------------------------------------
- --------------------
Statements of Operations
- ------------------------------------------------------------
- --------------------
For the Year Ended October 31, 1995
<TABLE>
<CAPTION>
International
European Pacific Balanced
Portfolio Portfolio Portfolio
============================================================
===========================================================
<S>
<C> <C> <C>
INVESTMENT INCOME:
Dividends
$ 768,670 $ 124,531 $ 190,391
Interest
- -- 2,935 1,080,972
Less: Foreign withholding tax
(101,317) (14,793) (23,686)
- ------------------------------------------------------------
- -----------------------------------------------------------
Total Investment Income
667,353 112,673 1,247,677
- ------------------------------------------------------------
- -----------------------------------------------------------
EXPENSES:
Management fees (Note 2)
202,500 74,052 213,800
Distribution fees (Note 2)
170,951 44,884 109,997
Registration fees
92,500 87,000 97,500
Shareholder and system servicing fees
56,000 24,000 41,500
Custody
29,400 25,571 26,994
Audit and legal
27,250 13,600 17,500
Shareholder communications
22,000 18,000 20,000
Pricing service fees
8,300 5,000 5,000
Directors' fees
3,600 4,000 5,850
Other
2,900 2,800 3,300
- ------------------------------------------------------------
- -----------------------------------------------------------
Total Expenses
615,401 298,907 541,441
Less: Management fee waiver and
expense reimbursement (Note 2)
(8,684) (104,914) (87,233)
Custody earnings credit (Note 1)
(9,200) (23,174) (23,725)
- ------------------------------------------------------------
- -----------------------------------------------------------
Net Expenses
597,517 170,819 430,483
- ------------------------------------------------------------
- -----------------------------------------------------------
Net Investment Income (Loss)
69,836 (58,146) 817,194
- ------------------------------------------------------------
- -----------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN
CURRENCIES (NOTE 3):
Realized Gain (Loss) From:
Security transactions
(excluding short-term securities)
489,669 (1,426,281) (188,723)
Options purchased
- -- -- 12,664
Foreign currency transactions
(4,910) (24,727) (113,131)
- ------------------------------------------------------------
- -----------------------------------------------------------
Net Realized Gain (Loss)
484,759 (1,451,008) (289,190)
- ------------------------------------------------------------
- -----------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
25
<PAGE>
Smith Barney World Funds, Inc.
- ------------------------------------------------------------
- --------------------
Statements of Operations (continued)
- ------------------------------------------------------------
- --------------------
For the Year Ended October 31, 1995
<TABLE>
<CAPTION>
International
European Pacific Balanced
Portfolio Portfolio Portfolio
============================================================
===========================================================
<S>
<C> <C> <C>
Change in Net Unrealized Appreciation
(Depreciation) of Investments and
Foreign Currencies:
Beginning of year
$ 462,498 $ 457,481 $ 276,354
End of year
8,915,699 (124,290) 1,402,183
- ------------------------------------------------------------
- -----------------------------------------------------------
Increase (Decrease) in
Net Unrealized Appreciation
8,453,201 (581,771) 1,125,829
Less: Net Unrealized Appreciation
related to the transfer of
Smith Barney European Fund's
net assets (Note 7)
(4,996,448) -- --
- ------------------------------------------------------------
- -----------------------------------------------------------
Increase (Decrease) in Net Unrealized
Appreciation After Transfer
3,456,753 (581,771) 1,125,829
- ------------------------------------------------------------
- -----------------------------------------------------------
Net Gain (Loss) on Investments
and Foreign Currencies
3,941,512 (2,032,779) 836,639
- ------------------------------------------------------------
- -----------------------------------------------------------
Increase (Decrease) in Net Assets
From Operations
$4,011,348 $(2,090,925) $1,653,833
============================================================
===========================================================
</TABLE>
See Notes to Financial Statements.
26
<PAGE>
Smith Barney World Funds, Inc.
- ------------------------------------------------------------
- --------------------
Statements of Changes in Net Assets
- ------------------------------------------------------------
- --------------------
For the Year Ended October 31, 1995
and the Period Ended October 31, 1994
<TABLE>
<CAPTION>
European
Portfolio
- ---------------------------------
1995 1994(a)
============================================================
===============================================
<S>
<C> <C>
OPERATIONS:
Net investment income (loss)
$ 69,836 $ (56,218)
Net realized gain (loss)
484,759 (141,544)
Increase in net unrealized appreciation
3,456,753 462,498
- ------------------------------------------------------------
- -----------------------------------------------
Increase in Net Assets From Operations
4,011,348 264,736
- ------------------------------------------------------------
- -----------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
- -- --
Net realized gains
- -- --
- ------------------------------------------------------------
- -----------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders
- -- --
- ------------------------------------------------------------
- -----------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares
26,923,706 8,562,656
Net asset value of shares issued
in connection with the transfer of
the Smith Barney European Fund's
net assets (Note 7)
30,778,301 --
Net asset value of shares issued
for reinvestment of dividends
- -- --
Cost of shares reacquired
(30,503,488) (2,031,039)
- ------------------------------------------------------------
- -----------------------------------------------
Increase in Net Assets From
Fund Share Transactions
27,198,519 6,531,617
- ------------------------------------------------------------
- -----------------------------------------------
Increase in Net Assets
31,209,867 6,796,353
NET ASSETS:
Beginning of year
6,796,353 --
- ------------------------------------------------------------
- -----------------------------------------------
End of year*
$38,006,220 $6,796,353
============================================================
===============================================
* Includes undistributed net investment income of:
$64,926 --
============================================================
===============================================
</TABLE>
(a) For the period from February 7, 1994 (commencement of
operations) to October
31, 1994.
See Notes to Financial Statements.
27
<PAGE>
Smith Barney World Funds, Inc.
- ------------------------------------------------------------
- --------------------
Statements of Changes in Net Assets (continued)
- ------------------------------------------------------------
- --------------------
For the Year Ended October 31, 1995
and the Period Ended October 31, 1994
<TABLE>
<CAPTION>
Pacific
Portfolio
- ---------------------------------
1995 1994(a)
============================================================
===============================================
<S>
<C> <C>
OPERATIONS:
Net investment loss
$ (58,146) $ (57,806)
Net realized loss
(1,451,008) (47,641)
Increase (decrease) in net unrealized appreciation
(581,771) 457,481
- ------------------------------------------------------------
- -----------------------------------------------
Increase (Decrease) in Net Assets From Operations
(2,090,925) 352,034
- ------------------------------------------------------------
- -----------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
- -- --
Net realized gains
- -- --
- ------------------------------------------------------------
- -----------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders
- -- --
- ------------------------------------------------------------
- -----------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares
40,966,925 12,242,972
Net asset value of shares issued
for reinvestment of dividends
- -- --
Cost of shares reacquired
(42,190,082) (1,889,212)
- ------------------------------------------------------------
- -----------------------------------------------
Increase (Decrease) in Net Assets From
Fund Share Transactions
(1,223,157) 10,353,760
- ------------------------------------------------------------
- -----------------------------------------------
Increase (Decrease) in Net Assets
(3,314,082) 10,705,794
NET ASSETS:
Beginning of year
10,705,794 --
- ------------------------------------------------------------
- -----------------------------------------------
End of year*
$ 7,391,712 $10,705,794
============================================================
===============================================
* Includes accumulated net investment loss of:
$(41,379) --
============================================================
===============================================
</TABLE>
(a) For the period from February 7, 1994 (commencement of
operations) to October
31, 1994.
See Notes to Financial Statements.
28
<PAGE>
Smith Barney World Funds, Inc.
- ------------------------------------------------------------
- --------------------
Statements of Changes in Net Assets (continued)
- ------------------------------------------------------------
- --------------------
For the Year Ended October 31, 1995
and the Period Ended October 31, 1994
<TABLE>
<CAPTION>
International
Balanced Portfolio
- ---------------------------------
1995 1994(a)
============================================================
===============================================
<S>
<C> <C>
OPERATIONS:
Net investment income
$ 817,194 $ 55,414
Net realized gain (loss)
(289,190) 72,613
Increase in net unrealized appreciation
1,125,829 276,354
- ------------------------------------------------------------
- -----------------------------------------------
Increase in Net Assets From Operations
1,653,833 404,381
- ------------------------------------------------------------
- -----------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
(771,525) --
Net realized gains
- -- --
- ------------------------------------------------------------
- -----------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders
(771,525) --
- ------------------------------------------------------------
- -----------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares
6,748,172 24,701,801
Net asset value of shares issued
for reinvestment of dividends
691,456 --
Cost of shares reacquired
(8,218,656) (161,764)
- ------------------------------------------------------------
- -----------------------------------------------
Increase (Decrease) in Net Assets From
Fund Share Transactions
(779,028) 24,540,037
- ------------------------------------------------------------
- -----------------------------------------------
Increase in Net Assets
103,280 24,944,418
NET ASSETS:
Beginning of year
24,944,418 --
- ------------------------------------------------------------
- -----------------------------------------------
End of year*
$25,047,698 $24,944,418
============================================================
===============================================
* Includes undistributed net investment income of:
$60,565 $134,941
============================================================
===============================================
</TABLE>
(a) For the period from August 25, 1994 (commencement of
operations) to October
31, 1994.
See Notes to Financial Statements.
29
<PAGE>
Smith Barney World Funds, Inc.
- ------------------------------------------------------------
- --------------------
Notes to Financial Statements
- ------------------------------------------------------------
- --------------------
1. Significant Accounting Policies
The European Portfolio ("European"), Pacific Portfolio
("Pacific") and
International Balanced Portfolio ("International Balanced")
are separate
investment portfolios ("Portfolios") of the Smith Barney
World Funds, Inc.
("Fund"). The Fund, a Maryland corporation, is registered
under the Investment
Company Act of 1940, as amended, as an open-end investment
company and consists
of these Portfolios and three other separate investment
portfolios:
International Equity, Global Government Bond and Emerging
Markets Portfolios.
The financial statements and financial highlights for the
other portfolios are
presented in separate annual reports.
The significant accounting policies consistently
followed by the Portfolios
are: (a) security transactions are accounted for on trade
date; (b) securities
traded in national securities markets are valued at the
closing prices in the
primary exchange on which they are traded; securities listed
or traded on
certain foreign exchanges or other markets whose operations
are similar to the
U.S. over-the-counter market (including securities listed on
exchanges where the
primary market is believed to be over-the-counter) and
listed securities for
which no sale was reported on that date are valued at the
mean between the bid
and ask prices. Securities which are listed or traded on
more than one exchange
or market are valued at the quotations on the exchange or
market determined to
be the primary market for such securities; (c) short-term
securities maturing
within 60 days are valued at cost plus accreted discount, or
minus amortized
premium, as applicable; (d) gains or losses on the sale of
securities are
calculated by using the specific identification method; (e)
interest income,
adjusted for amortization of premiums and accretion of
discounts, is recorded on
the accrual basis; (f) dividend income is recorded on the ex-
dividend date
except that certain dividends from foreign securities are
recorded as soon as
the Portfolios are informed of the ex-dividend date; (g)
direct expenses are
charged to each Portfolio and class; management fees and
general expenses are
allocated on the basis of relative net assets; (h) foreign
currencies (and
receivables and payables for unsettled foreign securities
transactions) are
translated into U.S. dollars based on the rate of exchange
of such currencies
against U.S. dollars on the date of valuation. Translation
gains or losses
resulting from changes in the exchange rate and realized
gains and losses on the
settlement of foreign currency transactions are reported in
the statements of
operations; (i) in accordance with Statement of Position 93-
2
30
<PAGE>
Smith Barney World Funds, Inc.
- ------------------------------------------------------------
- --------------------
Notes to Financial Statements (continued)
- ------------------------------------------------------------
- --------------------
Determination, Disclosure, and Financial Statement
Presentation of Income,
- ------------------------------------------------------------
- --------------
Capital Gain, and Return of Capital Distributions by
Investment Companies, book
- ------------------------------------------------------------
- --------------
and tax basis differences relating to shareholder
distributions and other
permanent book and tax differences are reclassified from
accumulated net
investment loss. As of October 31, 1995, the cumulative
effect of such
differences, totaling $75,204 for Pacific were reclassified
to paid-in capital
from accumulated net investment loss. Net investment income,
net realized gains,
and net assets were not affected by this change; (j) the
Portfolios intend to
comply with the applicable provisions of the Internal
Revenue Code of 1986, as
amended, pertaining to regulated investment companies and to
make distributions
of taxable income sufficient to relieve it from
substantially all Federal income
and excise taxes and (k) certain prior year amounts have
been restated to
reflect current year's presentation. Net investment, net
realized gains, and net
assets were not affected by this change.
The Portfolios have an arrangement with their
custodian, Morgan Guaranty
Trust Company of New York, where they earn custody credits
on available cash
balances. These credits offset custody fees which may be
charged to the
Portfolios during the current year. For the year ended
October 31, 1995, custody
credits totalled $9,200, $23,174 and $23,725 for European,
Pacific and
International Balanced, respectively.
In addition, the Portfolios may enter into forward
exchange contracts in
order to hedge against foreign currency risk. These
contracts are marked to
market daily by recognizing the difference between the
contract exchange rate
and the current market rate as an unrealized gain or loss.
Realized gains or
losses are recognized when contracts are settled.
2. Management Agreement and Other Transactions
Smith Barney Mutual Funds Management Inc. ("SBMFM"), a
subsidiary of Smith
Barney Holdings Inc. ("SBH"), acts as investment manager of
the Fund. The
European, Pacific and International Balanced Portfolios pay
SBMFM a management
fee calculated at the annual rate of 0.85% of average daily
net assets of each
respective Portfolio. This fee is calculated daily and paid
monthly.
Smith Barney Inc. ("SB"), another subsidiary of SBH,
acts as distributor of
the Fund's shares. For the year ended October 31, 1995, SB
received sales
charges of approximately $72,000 on sales of the Portfolios'
Class A shares.
31
<PAGE>
Smith Barney World Funds, Inc.
- ------------------------------------------------------------
- --------------------
Notes to Financial Statements (continued)
- ------------------------------------------------------------
- --------------------
There is a contingent deferred sales charge ("CDSC") of
5.00% on Class B
shares, which applies if redemption occurs less than one
year from initial
purchase and declines thereafter by 1.00% per year until no
CDSC is incurred.
Class C shares have a 1.00% CDSC, which applies if
redemption occurs within the
first year of purchase. For the year ended October 31, 1995,
CDSCs of
approximately $38,000 were paid to SB.
Pursuant to a Distribution Plan, each Portfolio pays a
service fee with
respect to Class A, B and C shares calculated at the annual
rate of 0.25% of the
average daily net assets of each respective class' shares.
The Portfolios also
pay a distribution fee with respect to Class B and C shares
calculated at the
annual rate of 0.75% of average daily net assets for each
respective class. For
the year ended October 31, 1995, total Distribution Plan
fees incurred by the
Portfolios were:
<TABLE>
<CAPTION>
International
European Pacific
Balanced
============================================================
================
<S> <C> <C>
<C>
Class A $ 21,781 $14,078
$47,170
Class B 134,916 6,954
19,968
Class C 14,254 23,852
42,859
============================================================
================
</TABLE>
All officers and three Directors of the Fund are
employees of SB.
For the year ended October 31, 1995, SBMFM waived
$8,684, $74,052 and
$87,233 of management fees for European, Pacific and
International Balanced,
respectively, and has agreed to reimburse Pacific for
expenses in the amount of
$30,862.
3. Investments
During the year ended October 31, 1995, the aggregate
cost of purchases and
proceeds from sales of investments (including maturities,
but excluding short-
term securities) were as follows:
<TABLE>
<CAPTION>
International
European Pacific
Balanced
============================================================
================
<S> <C> <C>
<C>
Purchases $ 7,280,625 $2,589,750
$ 9,927,389
- ------------------------------------------------------------
- ----------------
Sales 11,899,425 3,963,409
11,317,482
============================================================
================
</TABLE>
32
<PAGE>
Smith Barney World Funds, Inc.
- ------------------------------------------------------------
- --------------------
Notes to Financial Statements (continued)
- ------------------------------------------------------------
- --------------------
At October 31, 1995, the aggregate gross unrealized
appreciation and
depreciation of investments for tax purposes were as
follows:
<TABLE>
<CAPTION>
International
European Pacific Balanced
============================================================
===========================================
<S> <C>
<C> <C>
Gross unrealized appreciation
$9,203,382 $ 651,759 $ 2,888,729
Gross unrealized depreciation
(304,132) (775,948) (1,498,674)
- ------------------------------------------------------------
- -------------------------------------------
Net unrealized appreciation (depreciation)
$8,899,250 $(124,189) $ 1,390,055
============================================================
===========================================
</TABLE>
4. Forward Foreign Currency Contracts
At October 31, 1995, European and International
Balanced had open forward
foreign currency contracts as described below. The
Portfolios bear the market
risk that arises from changes in foreign currency exchange
rates. The unrealized
gain (loss) on the contracts reflected in the accompanying
financial statements
are as follows:
<TABLE>
<CAPTION>
Local
Market Settlement Unrealized
Foreign Currency Currency
Value Date Gain (Loss)
============================================================
=============================================
<S> <C>
<C> <C> <C>
European
To Sell:
French Franc 4,663,195
$953,053 11/2/95 $(5,269)
============================================================
============================================
International Balanced
To Sell:
Canadian Dollar 2,000,000 $
1,486,674 12/8/95 $ 5,278
German Deutschemark 5,500,000
3,912,905 12/8/95 (6,308)
Japanese Yen 151,860,000
1,494,441 12/8/95 5,559
Japanese Yen 151,800,000
1,493,851 12/8/95 6,149
- ------------------------------------------------------------
- --------------------------------------------
8,387,871 10,678
- ------------------------------------------------------------
- --------------------------------------------
To Buy:
German Deutschemark 5,378,900
3,826,750 12/8/95 26,750
German Deutschemark 2,768,900
1,969,899 12/8/95 (30,102)
- ------------------------------------------------------------
- --------------------------------------------
5,796,649 (3,352)
- ------------------------------------------------------------
- --------------------------------------------
Total Market Value and
Unrealized Gain on
Forward Foreign
Currency Contracts
$14,184,520 $7,326
============================================================
============================================
</TABLE>
33
<PAGE>
Smith Barney World Funds, Inc.
- ------------------------------------------------------------
- --------------------
Notes to Financial Statements (continued)
- ------------------------------------------------------------
- --------------------
5. Portfolio Concentration
The Portfolios' investments in foreign securities may
involve risks not
present in domestic investments. Since securities may be
denominated in a
foreign currency and may require settlement in foreign
currencies and pay
interest or dividends in foreign currencies, changes in the
relationship of
these foreign currencies to the U.S. dollar can
significantly affect the value
of the investments and earnings of the Portfolios. Foreign
investments may also
subject the Portfolios to foreign government exchange
restrictions,
expropriation, taxation or other political, social or
economic developments, all
of which could affect the market and/or credit risk of the
investments.
In addition to the risks described above, risks may
arise from forward
foreign currency contracts with respect to the potential
inability of counter
parties to meet the terms of their contracts.
6. Capital Shares
At October 31, 1995, the Fund had two billion shares of
$0.001 par value
capital stock authorized. The Portfolios have the ability to
issue multiple
classes of shares. Each share of a class represents an
identical legal interest
in the Portfolios and has the same rights, except that each
class bears certain
expenses specifically related to the distribution of its
shares. Effective
November 7, 1994, the Portfolios adopted a new class
structure, renaming the
existing Class B shares as Class C shares. At October 31,
1995, total paid-in
capital, including adjustments for book and tax differences
discussed in Note 1,
amounted to the following for each Portfolio:
<TABLE>
<CAPTION>
Total Paid-in Capital Class A
Class B Class C
============================================================
======================
<S> <C> <C>
<C>
European $ 9,455,274
$19,431,393 $ 1,066,326
Pacific 5,531,182
1,019,088 2,470,430
International Balanced 16,774,120
2,911,339 4,075,550
============================================================
======================
</TABLE>
34
<PAGE>
Smith Barney World Funds, Inc.
- ------------------------------------------------------------
- --------------------
Notes to Financial Statements (continued)
- ------------------------------------------------------------
- --------------------
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Year Ended Period Ended
October 31, 1995* October 31,
1994**
-----
- ----------------------- ----------------------
- ----------
European
Shares Amount Shares
Amount
============================================================
============================================================
==========
<S> <C>
<C> <C> <C>
Class A+
Shares sold
1,428,268 $ 19,689,880 458,402
$ 6,252,684
Net asset value of shares
issued in connection with
the transfer of the
European Fund's
net assets (Note 7)
491,711 6,525,008 --
- --
Shares redeemed
(1,513,648) (20,920,268) (55,627)
(1,258,667)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ----------
Net Increase
406,331 $ 5,294,620 402,775
$ 4,994,017
============================================================
============================================================
==========
Class B
Shares sold
489,229 $ 6,946,797 --
- --
Net asset value of shares
issued in connection with
the transfer of the
European Fund's
net assets (Note 7)
1,834,562 24,252,906 --
- --
Shares redeemed
(618,322) (8,837,396) --
- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- ----------
Net Increase
1,705,469 $ 22,362,307 --
- --
============================================================
============================================================
==========
Class C[+]
Shares sold
20,683 $ 287,029 141,147
$ 1,735,144
Net asset value of shares
issued in connection with
the transfer of the
European Fund's
net assets (Note 7)
29 387 --
- --
Shares redeemed
(55,599) (745,824) (15,873)
(195,392)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ----------
Net Increase (Decrease)
(34,887) $ (458,408) 125,274
$ 1,539,752
============================================================
============================================================
==========
</TABLE>
* For Class B shares, transactions are for the period from
November 7, 1994
(inception date) to October 31, 1995.
** For Class A and C shares, transactions are for the
periods from February 7,
1994 and February 14, 1994 (inception dates) to October
31, 1994,
respectively.
+ On October 10, 1994, the former Class C shares were
exchanged into Class A
shares, therefore Class C share activity for the period
from February 14,
1994 to October 9, 1994 is included with the Class A
share's activity.
[+] On November 7, 1994, the former Class B shares were
renamed Class C shares.
35
<PAGE>
Smith Barney World Funds, Inc.
- ------------------------------------------------------------
- --------------------
Notes to Financial Statements (continued)
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Year Ended Period Ended
October 31, 1995* October 31,
1994**
-------
- ------------------------ ---------------------
- ----------
Pacific
Shares Amount Shares
Amount
============================================================
============================================================
==========
<S> <C>
<C> <C> <C>
Class A+
Shares sold
1,736,685 $ 18,498,096 713,604
$ 8,894,536
Shares redeemed
(1,882,567) (20,211,534) (130,032)
(1,592,618)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ----------
Net Increase (Decrease)
(145,882) $ (1,713,438) 583,572
$ 7,301,918
============================================================
============================================================
==========
Class B
Shares sold
2,094,088 $ 22,232,270 --
- --
Shares redeemed
(1,990,825) (21,205,511) --
- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- ----------
Net Increase
103,263 $ 1,026,759 --
- --
============================================================
============================================================
==========
Class C[+]
Shares sold
21,913 $ 236,559 264,017
$ 3,273,313
Shares redeemed
(72,193) (773,037) (17,643)
(219,994)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ----------
Net Increase (Decrease)
(50,280) $ (536,478) 246,374
$ 3,053,319
============================================================
============================================================
==========
</TABLE>
* For Class B shares, transactions are for the period from
November 7, 1994
(inception date) to October 31, 1995.
** For Class A and C shares, transactions are for the
periods from February 7,
1994 and February 14, 1994 (inception dates) to October
31, 1994,
respectively.
+ On October 10, 1994, the former Class C shares were
exchanged into Class A
shares, therefore Class C share activity for the period
from February 14,
1994 to October 9, 1994 is included with the Class A
share activity.
[+]On November 7, 1994, the former Class B shares were
renamed Class C shares.
<TABLE>
<CAPTION>
Year Ended Period Ended
October 31, 1995* October 31, 1994**
----
- ------------------------ -----------------------------
International Balanced
Shares Amount Shares Amount
============================================================
===========================================================
<S> <C>
<C> <C> <C>
Class A
Shares sold
209,809 $ 2,540,922 1,704,454
$20,452,319
Shares issued on reinvestment
46,277 548,563 -- -
- -
Shares redeemed
(549,877) (6,611,678) (12,965)
(156,006)
- ------------------------------------------------------------
- -----------------------------------------------------------
Net Increase (Decrease)
(293,791) $(3,522,193) 1,691,489
$20,296,313
============================================================
===========================================================
</TABLE>
36
<PAGE>
Smith Barney World Funds, Inc.
- ------------------------------------------------------------
- --------------------
Notes to Financial Statements (continued)
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Year Ended Period Ended
October 31, 1995* October 31,
1994**
---
- ------------------------ -------------------
- -----------
International Balanced
Shares Amount Shares
Amount
============================================================
============================================================
===========
<S> <C>
<C> <C> <C>
CLASS B
Shares sold
280,399 $ 3,376,386 --
- --
Shares issued on reinvestment
3,830 46,164 --
- --
Shares redeemed
(42,062) (511,211) --
- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
Net Increase
242,167 $ 2,911,339 --
- --
============================================================
============================================================
===========
CLASS C[+]
Shares sold
68,996 $ 830,864 354,268
$ 4,249,482
Shares issued on reinvestment
8,140 96,729 --
- --
Shares redeemed
(89,199) (1,095,767) (482)
(5,758)
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
Net Increase (Decrease)
(12,063) $ (168,174) 353,786
$ 4,243,724
============================================================
============================================================
===========
</TABLE>
* For Class B shares, transactions are for the period from
November 7, 1994
(inception date) to October 31, 1995.
** For Class A and C shares, transactions are for the
period from August 25,
1994 (inception date) to October 31, 1994.
[+] On November 7, 1994, the former Class B shares were
renamed Class C shares.
7. Transfer of Net Assets
On April 21, 1995, the Portfolio acquired the assets
and certain
liabilities of the Smith Barney European Fund Inc. ("SBEF"),
pursuant to a plan
of reorganization approved by SBEF shareholders on April 20,
1995. Total shares
issued by the Portfolio and the total net assets of SBEF and
the Portfolio are
on the date of the transfer were:
<TABLE>
<CAPTION>
Total Net
Shares
Assets of Total Net
Acquired Issued by
Acquired Assets of
Fund the Portfolio
Fund the Portfolio
============================================================
===============================
<S> <C> <C>
<C>
SBEF 2,326,302
$30,778,301 $7,165,502
============================================================
===============================
</TABLE>
The total net assets of SBEF before acquisition
included unrealized
appreciation of $4,996,448 and a net realized loss of
$56,023. The transaction
was structured for tax purposes to qualify as a tax-free
reorganization under
the Internal Revenue Code.
37
<PAGE>
Smith Barney World Funds, Inc.
- ------------------------------------------------------------
- --------------------
Notes to Financial Statements (continued)
- ------------------------------------------------------------
- --------------------
8. Capital Loss Carryforwards
As of April 21, 1995, the Smith Barney European Funds,
Inc. had $1,287,956
of unused capital loss carryforwards. Due to limitations
under the Internal
Revenue Code of 1986, as amended, only $260,262 could be
used to offset current
year gains of European. The remaining $1,027,694 is a loss
carryforward which
will be available to offset any future gains of European.
These carryforwards
will expire beginning October 31, 1998. In addition the
Portfolio had other
capital loss carryforwards, not related to the transfer, of
$129,111 which will
also expire on October 31, 1998.
The total unused capital loss carryforward for the year
ended October 31,
1995 is $1,027,694, available to offset future realized
capital gains. To the
extent these carryforward losses are used to offset capital
gains, it is
probable that the gains, if any, so offset will not be
distributed.
In addition, Pacific and International Balanced had for
Federal income tax
purposes $1,463,319 and $176,059, respectively, of unused
capital loss
carryforwards, available to offset future realized capital
gains. To the extent
these carryforward losses are used to offset capital gains
it is probable that
the gains, if any, so offset will not be distributed. The
amount and year of the
expiration for each carryforward loss is indicated below:
<TABLE>
<CAPTION>
Portfolio 2002
2003
============================================================
====================
<S> <C>
<C>
Pacific
$37,038 $1,426,281
International Balanced -
- - 176,059
============================================================
====================
</TABLE>
38
<PAGE>
Smith Barney World Funds, Inc.
- ------------------------------------------------------------
- --------------------
Financial Highlights (continued)
- ------------------------------------------------------------
- --------------------
For a share of each class of capital stock outstanding
throughout each year:
<TABLE>
<CAPTION>
Class A
(a) Class B Class C (b)
---------------
- --------- -------- ------------------------
European Portfolio 1995
1994(1) 1995(2) 1995 1994(3)
============================================================
============================================================
<S> <C>
<C> <C> <C> <C>
Net Asset Value, Beginning of Year $12.88
$12.50 $12.62 $12.83 $12.48
- ------------------------------------------------------------
- ------------------------------------------------------------
Income From Operations:
Net investment income (loss)(4) 0.07
(0.11) 0.02 (0.08) (0.16)
Net realized and unrealized gain 1.72
0.49 1.92 1.76 0.51
- ------------------------------------------------------------
- ------------------------------------------------------------
Total Income From Operations 1.79
0.38 1.94 1.68 0.35
- ------------------------------------------------------------
- ------------------------------------------------------------
Less Distributions From:
Net investment income --
- -- -- -- --
- ------------------------------------------------------------
- ------------------------------------------------------------
Total Distributions --
- -- -- -- --
- ------------------------------------------------------------
- ------------------------------------------------------------
Net Asset Value, End of Year $14.67
$12.88 $14.56 $14.51 $12.83
- ------------------------------------------------------------
- ------------------------------------------------------------
Total Return 13.90%
3.04%[+] 15.37%[+] 13.09% 2.80%[+]
- ------------------------------------------------------------
- ------------------------------------------------------------
Net Assets, End of Year (000s) $11,870
$5,189 $24,825 $1,311 $1,607
- ------------------------------------------------------------
- ------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(4) 2.06%
1.34%+ 3.31%+ 2.51% 2.02%+
Net investment income (loss) 0.51
(1.12)+ 0.26+ (0.64) (1.60)+
- ------------------------------------------------------------
- ------------------------------------------------------------
Portfolio Turnover Rate 34.38%
20.57% 34.38% 34.38% 20.57%
============================================================
============================================================
Average commissions paid on
equity security transactions(5) $0.06
- -- $0.06 $0.06 --
============================================================
============================================================
</TABLE>
(a) On October 10, 1994, the former Class C shares were
exchanged into Class A
shares; therefore Class C share activity for the period
from February 14,
1994 to October 9, 1994 is included with the Class A
share activity.
(b) On November 7, 1994, the former Class B shares were
renamed Class C shares.
(1) For the period from February 7, 1994 (inception date)
to October 31, 1994.
(2) For the period from November 7, 1994 (inception date)
to October 31, 1995.
(3) For the period from February 14, 1994 (inception date)
to October 31, 1994.
(4) The Manager has agreed to waive all or part of its
management fees for the
European Portfolio for the year ended October 31, 1995
and the period ended
October 31, 1994. In addition, the manager has agreed
to reimburse the
European Portfolio for $10,344 of the Portfolio's
expenses for the period
ended October 31, 1994. If the Manager had not agreed
to the fee waivers
and the expense reimbursement, the per share decreases
in net investment
income and the ratios of expenses to average net assets
would have been:
<TABLE>
<CAPTION>
Expense Ratios
Per Share Decreases
Without Fee Waivers
in Net Investment Income
and Reimbursement
------------------------
- -----------------------
1995 1994
1995 1994
------ -----
- ------ -----
<S> <C> <C>
<C> <C>
Class A $0.01 $0.10
2.09% 2.37%+
Class B -- --
3.35+ --
Class C 0.01 0.10
2.54 3.07+
</TABLE>
In addition, during the period ended October 31, 1995,
the Portfolio has
earned credits from the custodian which reduce service
fees incurred. If
the credits are taken into consideration, the ratios of
expenses to average
net assets for Class A, B and C would be 2.02%, 3.26%+
and 2.48%,
respectively; prior year numbers have not been restated
to reflect these
credits.
(5) Due to new SEC disclosure guidelines, average
commissions per share are
calculated only for the current year and not for the
prior periods.
[+] Total return is not annualized, as it may not be
representative of the
total return for the year.
+ Annualized.
39
<PAGE>
Smith Barney World Funds, Inc.
- ------------------------------------------------------------
- --------------------
Financial Highlights (continued)
- ------------------------------------------------------------
- --------------------
For a share of each class of capital stock outstanding
throughout each year:
<TABLE>
<CAPTION>
Class A
(a) Class B Class C (b)
---------------
- --------- -------- ------------------------
Pacific Portfolio 1995
1994(1) 1995(2) 1995 1994(3)
============================================================
============================================================
<S> <C>
<C> <C> <C> <C>
Net Asset Value, Beginning of Year $12.92
$12.50 $12.64 $12.86 $12.50
- ------------------------------------------------------------
- ------------------------------------------------------------
Income From Operations:
Net investment loss(4) (0.01)
(0.07) (0.01) (0.02) (0.11)
Net realized and unrealized gain (loss) (2.84)
0.49 (2.64) (2.89) 0.47
- ------------------------------------------------------------
- ------------------------------------------------------------
Total Income (Loss) From Operations (2.85)
0.42 (2.65) (2.91) 0.36
- ------------------------------------------------------------
- ------------------------------------------------------------
Less Distributions From:
Net investment income --
- -- -- -- --
- ------------------------------------------------------------
- ------------------------------------------------------------
Total Distributions --
- -- -- -- --
- ------------------------------------------------------------
- ------------------------------------------------------------
Net Asset Value, End of Year $10.07
$12.92 $ 9.99 $9.95 $12.86
- ------------------------------------------------------------
- ------------------------------------------------------------
Total Return (22.06)%
3.36%[+] (20.97)%[+] (22.63)% 2.88%[+]
- ------------------------------------------------------------
- ------------------------------------------------------------
Net Assets, End of Year (000s) $4,409
$7,538 $1,031 $1,952 $3,167
- ------------------------------------------------------------
- ------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(4) 1.97%
1.51%+ 3.39%+ 2.69% 2.29%+
Net investment loss (0.71)
(0.82)+ (1.47)+ (1.45) (1.49)+
- ------------------------------------------------------------
- ------------------------------------------------------------
Portfolio Turnover Rate 31.25%
6.14% 31.25% 31.25% 6.14%
============================================================
============================================================
Average commissions paid on
equity security transactions(5) $0.01
- -- $0.01 $0.01 --
============================================================
============================================================
</TABLE>
(a) On October 10, 1994, the former Class C shares were
exchanged into Class A
shares; therefore Class C share activity for the period
from February 11,
1994 to October 9, 1994 is included with the Class A
share activity.
(b) On November 7, 1994 the former Class B shares were
renamed Class C shares.
(1) For the period from February 7, 1994 (inception date)
to October 31, 1994.
(2) For the period from November 7, 1994 (inception date)
to October 31, 1995.
(3) For the period from February 11, 1994 (inception date)
to October 31, 1994.
(4) The Manager has agreed to waive all or part of its
management fees for the
Pacific Portfolio for the year ended October 31, 1995
and the period ended
October 31, 1994. In addition, the Manager has agreed
to reimburse the
Portfolio for $30,862 of the Portfolio's expenses for
the period ended
October 31, 1995. If the Manager had not agreed to the
fee waivers and
expense reimbursement, the per share increases in net
investment loss and
the ratios of expenses to average net assets would have
been:
<TABLE>
<CAPTION>
Expense Ratios
Per Share Increases
Without Fee Waivers
in Net Investment Income
and Reimbursement
------------------------
- -----------------------
1995 1994
1995 1994
------ -----
- ------ -----
<S> <C> <C>
<C> <C>
Class A $0.14 $0.03
3.18% 1.87%+
Class B 0.16 --
4.90+ --
Class C 0.13 0.03
3.88 2.70+
</TABLE>
In addition, during the period ended October 31, 1995,
the Portfolio has
earned credits from the custodian which reduce service
fees incurred. If
the credits are taken into consideration, the ratios of
expenses to average
net assets for Class A, B and C would be 1.70%, 3.06%+
and 2.42%,
respectively; prior year numbers have not been restated
to reflect these
credits.
(5) Due to new SEC disclosure guidelines, average
commissions per share are
calculated only for the current year and not for the
prior periods.
[+] Total return is not annualized, as it may not be
representative of the
total return for the year.
+ Annualized.
40
<PAGE>
Smith Barney World Funds, Inc.
- ------------------------------------------------------------
- --------------------
Financial Highlights (continued)
- ------------------------------------------------------------
- --------------------
For a share of each class of capital stock outstanding
throughout each year:
<TABLE>
<CAPTION>
Class A
Class B Class C (a)
---------------
- --------- -------- ------------------------
International Balanced Portfolio 1995
1994(1) 1995(2) 1995 1994(1)
============================================================
============================================================
<S> <C>
<C> <C> <C> <C>
Net Asset Value, Beginning of Year $12.20
$12.00 $12.08 $12.18 $ 12.00
- ------------------------------------------------------------
- ------------------------------------------------------------
Income From Operations:
Net investment income(3) 0.35
0.07 0.36 0.28 0.05
Net realized and unrealized gain 0.48
0.13 0.50 0.46 0.13
- ------------------------------------------------------------
- ------------------------------------------------------------
Total Income From Operations 0.83
0.20 0.86 0.74 0.18
- ------------------------------------------------------------
- ------------------------------------------------------------
Less Distributions From:
Net investment income (0.39)
- -- (0.29) (0.29) --
- ------------------------------------------------------------
- ------------------------------------------------------------
Total Distributions (0.39)
- -- (0.29) (0.29) --
- ------------------------------------------------------------
- ------------------------------------------------------------
Net Asset Value, End of Year $12.64
$12.20 $12.65 $12.63 $ 12.18
- ------------------------------------------------------------
- ------------------------------------------------------------
Total Return 7.05%
1.67%[+] 7.33%[+] 6.29% 1.50%[+]
- ------------------------------------------------------------
- ------------------------------------------------------------
Net Assets, End of Year (000s) $17,667
$20,634 $3,064 $4,317 $4,310
- ------------------------------------------------------------
- ------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(3) 1.62%
1.34%+ 2.49%+ 2.37% 2.03%+
Net investment income 2.89
1.37+ 3.11+ 2.33 0.79+
- ------------------------------------------------------------
- ------------------------------------------------------------
Portfolio Turnover Rate 41.72%
5.52% 41.72% 41.72% 5.52%
============================================================
============================================================
Average commissions paid on
equity security transactions(4) $0.02
- -- $0.02 $0.02 --
============================================================
============================================================
</TABLE>
(a) On November 7, 1994 the former Class B shares were
renamed Class C shares.
(1) For the period from August 25, 1994 (inception date) to
October 31, 1994.
(2) For the period from November 7, 1994 (inception date)
to October 31, 1995.
(3) The Manager has agreed to waive all or part of its
management fees for the
International Balanced Portfolio for the year ended
October 31, 1995 and
the period ended October 31, 1994. If the Manager had
not agreed to the fee
waivers, the per share decreases in net investment
income and the ratios of
expenses to average net assets would have been:
<TABLE>
<CAPTION>
Per Share Decreases
Expense Ratios
in Net Investment Income
Without Fee Waivers
------------------------
- -----------------------
1995 1994
1995 1994
------ -----
- ------ -----
<S> <C> <C>
<C> <C>
Class A $0.04 $0.02
1.96% 2.03%+
Class B 0.04 --
2.86+ --
Class C 0.04 0.02
2.71 2.74+
</TABLE>
In addition, during the period ended October 31, 1995,
the Portfolio has
earned credits from the custodian which reduce service
fees incurred. If
the credits are taken into consideration, the ratios of
expenses to average
net assets for Class A, B and C would be 1.52%, 2.39%+
and 2.27%,
respectively; prior year numbers have not been restated
to reflect these
credits.
(4) Due to new SEC disclosure guidelines, average
commissions per share are
calculated only for the current year and not for the
prior periods.
[+] Total return is not annualized, as it may not be
representative of the
total return for the year.
+ Annualized.
41
<PAGE>
Smith Barney World Funds, Inc.
- ------------------------------------------------------------
- --------------------
Independent Auditors' Report
- ------------------------------------------------------------
- --------------------
The Shareholders and Board of Directors of
Smith Barney World Funds, Inc.:
We have audited the accompanying statements of assets
and liabilities,
including the schedules of investments, of the European,
Pacific and
International Balanced Portfolios of Smith Barney World
Funds, Inc. as of
October 31, 1995, the related statements of operations for
the year then ended,
and the statements of changes in net assets and financial
highlights for the
year then ended and for the period from February 7, 1994
(commencement of
operations) to October 31, 1994 with respect to the European
and Pacific
Portfolios and for the period from August 25, 1994
(commencement of operations)
to October 31, 1994 with respect to the International
Balanced Portfolio. These
financial statements and financial highlights are the
responsibility of the
Fund's management. Our responsibility is to express an
opinion on these
financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally
accepted auditing
standards. Those standards require that we plan and perform
the audit to obtain
reasonable assurance about whether the financial statements
and financial
highlights are free of material misstatement. An audit
includes examining, on a
test basis, evidence supporting the amounts and disclosures
in the financial
statements. Our procedures included confirmation of
securities owned as of
October 31, 1995, by correspondence with the custodian. An
audit also includes
assessing the accounting principles used and significant
estimates made by
management, as well as evaluating the overall financial
statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial
highlights referred
to above present fairly, in all material respects, the
financial position of the
European, Pacific and International Balanced Portfolios of
Smith Barney World
Funds, Inc. as of October 31, 1995, the results of their
operations for the year
then ended, and the changes in their net assets and
financial highlights for the
year then ended and for the period from February 7, 1994 to
October 31, 1994
with respect to the European and Pacific Portfolios and for
the period from
August 25, 1994 to October 31, 1994 with respect to the
International Balanced
Portfolio, in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
New York, New York
December 28, 1995
42
<PAGE>
SMITH BARNEY
WORLD FUNDS, INC.
DIRECTORS
Victor Atkins
Robert A. Belfer
Jessica M. Bibliowicz
Alger B. Chapman
Robert A. Frankel
Rainer Greeven
Susan M. Heilbron
Heath B. McLendon, Chairman
Bruce D. Sargent
James M. Shuart
OFFICERS
Maurits E. Edersheim
Chairman of the Fund
& Advisory Director
Heath B. McLendon
Chief Executive Officer
Jessica M. Bibliowicz
President
Lewis E. Daidone
Senior Vice President
and Treasurer
James B. Conheady
Vice President
Victor S. Filatov
Vice President
Simon R. Hildreth
Vice President
Denis P. Mangan
Vice President
Jeffrey J. Russell
Vice President
Bruce D. Sargent
Vice President
Rein W. van der Does
Vice President
Irving P. David
Controller
Christina T. Sydor
Secretary
Smith Barney
------------
A Member of TravelersGroup
[LOGO APPEARS HERE]
INVESTMENT MANAGER
Smith Barney Mutual Funds
Management Inc.
DISTRIBUTOR
Smith Barney Inc.
CUSTODIAN
Morgan Guaranty Trust Company of New York
SHAREHOLDER
SERVICING AGENT
First Data Investor Services Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is submitted for the general information of the
shareholders of
Smith Barney World Funds, Inc. -- European, Pacific and
International Balanced
Portfolios. It is not authorized for distribution to
prospective investors
unless accompanied or preceded by a current Prospectus for
the Portfolios, which
contains information concerning the Portfolios' investment
policies and expenses
as well as other pertinent information.
SMITH BARNEY
WORLD FUNDS, INC.
388 Greenwich Street
New York, New York 10013
FD01046 12/95
<PAGE>
- ------------------------------------------------------------
- --------------------
ANNUAL REPORT
- ------------------------------------------------------------
- --------------------
1995
1995 [ARTWORK APPEARS HERE]
1995
1995
1995
Smith Barney
World Funds, Inc.
Emerging Markets
Portfolio
------------------------------------
- --------------------
October 31, 1995
[LOGO APPEARS HERE] Smith Barney Mutual Funds
Investing for your future.
Every day.
<PAGE>
- ------------------------------------------------------------
- --------------------
Emerging Markets Portfolio
- ------------------------------------------------------------
- --------------------
Dear Shareholder:
We would like to extend a warm welcome to you as a
shareholder in the Smith
Barney World Funds, Inc.--Emerging Markets Portfolio. We
believe an important
part of serving your investment needs is keeping you
informed about the Emerging
Markets Portfolio. We are therefore pleased to provide the
first annual report
and audited financial statements for the period ended
October 31, 1995. Below we
have provided a summary of economic and market conditions,
as well as a brief
summary of our portfolio strategy. We hope you find this
information to be
useful as you evaluate your investment.
Portfolio Highlights
Smith Barney World Funds:
Emerging Markets Portfolio
Since its inception on May 12, 1995 through October 15,
1995, the Emerging
Markets Portfolio generated a total return of -7.83% for
Class A shares. The
Mexican currency crisis caused severe weakness in the
emerging markets at the
beginning of 1995. The contraction late in the year stemmed
from renewed concern
and disappointment over Mexico and the peso. Compounding
these concerns was a
weakness in the Asian markets due to a variety of factors
including the strong
performance of the U.S. markets.
As of October 31, 1995, the Emerging Markets Portfolio is
invested in 26
countries and 89 securities. On that date, 45% of the
Portfolio's assets were
allocated to Asia (China/Hong Kong: 13%); 22% were allocated
to Latin America
(Brazil: 7.59%); 13% were allocated to Europe (Poland: 4%);
and 6% were
allocated to Africa (South Africa: 5%).
In order to benefit from the underlying strength of emerging
market economies
over the long term, the Portfolio has focused on select
stocks. In our view,
overall uncertainty in the emerging markets has created very
attractive
valuations for many stocks with stellar growth prospects. In
keeping with the
Portfolio's selective investment approach, we bought stocks
in smaller and
promising emerging markets such as Sri Lanka, Pakistan,
Poland, and Zimbabwe.
Large money flows into the emerging markets have been
limited in part because of
the rising market on Wall Street. As Wall Street continues
to reach new
historical highs, these type of valuations should cause more
money to be
targeted for investment in the emerging markets. And, in our
view, the Asian
markets are particularly well positioned to benefit from
these anticipated
future money flows and thus we have overweighted the
Portfolio in Asia.
1
<PAGE>
In Asia, we foresee a possible comeback in China over the
next six months.
Fourteen months ago, the Chinese government went on a
stringent austerity
program. As a result, inflation has been brought down from
25% to 12%. Prompted
by an easing of austerity measures, we believe that by
spring 1996, China may
see a turnaround in earnings that would benefit both Hong
Kong and Chinese
companies.
In Latin America, we expect that Brazil will continue its
reform efforts and
inflation should remain low. As this happens, we believe
investors will put more
of their money in Brazilian stocks and the Brazilian stock
market should move up
strongly. The Portfolio is currently overweighted in Brazil
to take advantage of
this anticipated trend. We anticipate that Mexico may put
its economic house in
order over the next six months. The Portfolio is currently
underweighted in
Mexico (4.1% of the Portfolio) and no change is planned
unless we become
convinced that the Mexican economy is on surer footing.
We expect Eastern Europe to attract investor attention going
into 1996.
Important elections are being held in Poland and Russia in
November and
December. Following these elections, the markets, in our
view, should go up. In
particular, we see numerous opportunities in Poland. The
economy is growing at
6%, inflation is down, and direct foreign investment
continues unabated. Strong
economic underpinnings could allow Poland to become the
growth country of
Europe.
Thank you for your investment in the Smith Barney World
Funds--Emerging
Markets Portfolio and your confidence in our investment
management approach.
Sincerely,
/s/ Heath B. McLendon /s/ Donald
Elefson
Heath B. McLendon Donald Elefson
Chairman and Portfolio
Manager
Chief Executive Officer
December 1, 1995
2
<PAGE>
Smith Barney World Funds, Inc.
Emerging Markets Portfolio
- ------------------------------------------------------------
- --------------------
Historical Performance -- Class A Shares
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Net
Asset Value
-------
- --------------
Beginning End Income Total
Year Ended of
Year of Year Dividends Returns/(1)/
============================================================
================================================
<S> <C>
<C> <C> <C>
Inception*-10/31/95 $12.00
$11.06 $0.00 (7.83)%+
============================================================
================================================
</TABLE>
- ------------------------------------------------------------
- --------------------
Historical Performance -- Class B Shares
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Net
Asset Value
-------
- --------------
Beginning End Income Total
Year Ended of
Year of Year Dividends Returns/(1)/
============================================================
================================================
<S> <C>
<C> <C> <C>
Inception*-10/31/95 $12.00
$11.02 $0.00 (8.17)%+
============================================================
================================================
</TABLE>
- ------------------------------------------------------------
- --------------------
Historical Performance -- Class C Shares
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Net
Asset Value
-------
- --------------
Beginning End Income Total
Year Ended of
Year of Year Dividends Returns/(1)/
============================================================
================================================
<S> <C>
<C> <C> <C>
Inception*-10/31/95 $12.00
$11.02 $0.00 (8.17)%+
============================================================
================================================
</TABLE>
It is the Fund's policy to distribute dividends and capital
gains, if any,
annually.
3
<PAGE>
Smith Barney World Funds, Inc.
Emerging Markets Portfolio
- ------------------------------------------------------------
- --------------------
Average Annual Total Return
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Without Sales Charge/(1)/
------------
- ---------------------------
Class A
Class B Class C
============================================================
===========================
<S> <C>
<C> <C>
Inception* through 10/31/95+ (7.83)%
(8.17)% (8.17)%
============================================================
===========================
<CAPTION>
With Sales Charge/(2)/
------------
- ---------------------------
Class A
Class B Class C
============================================================
===========================
<S> <C>
<C> <C>
Inception* through 10/31/95+ (12.43)%
(12.76)% (9.08)%
============================================================
===========================
</TABLE>
(1) Assumes reinvestment of all dividends and capital gain
distributions, if
any, at net asset value and does not reflect deduction
of the applicable
sales charge with respect to Class A shares or the
applicable contingent
deferred sales charge ("CDSC") with respect to Class B
and C shares.
(2) Assumes reinvestment of all dividends and capital gain
distributions, if
any, at net asset value. In addition, Class A shares
reflect the deduction
of the maximum initial sales charge of 5.00%; Class B
shares reflect the
deduction of a 5.00% CDSC, which applies if shares are
redeemed less than
one year from initial purchase and declines thereafter
by 1.00% per year
until no CDSC is incurred. Class C shares reflect the
deduction of a 1.00%
CDSC, which applies if shares are redeemed within the
first year of
purchase.
+ Total return is not annualized, as it may not be
representative of the total
return for the year.
* The inception date for Class A, B and C shares is May
12, 1995.
4
<PAGE>
Smith Barney World Funds, Inc.
Emerging Markets Portfolio
- ------------------------------------------------------------
- --------------------
Historical Performance
- ------------------------------------------------------------
- --------------------
Growth of $10,000 Invested in Class A Shares
of
the Emerging Markets Portfolio vs.
MSCI Free World Index+
(unaudited)
- ------------------------------------------------------------
- --------------------
May 1995 -- October 1995
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Emerging Markets MSCI Pacific
Index
<S> <C> <C>
May 12, 95 9,501.20
10,000.00
5/95 9,366.60
10,072.00
6/95 9,303.20
10,050.85
7/95 9,588.30
10,536.30
8/95 9,244.10
10,296.08
9/95 9,113.20
10,568.92
10/95 8,812.40
10,387.14
</TABLE>
+ Hypothetical illustration of $10,000 invested in Class A
shares at inception
on May 12, 1995, assuming deduction of the maximum 5.00%
sales charge at the
time of investment and the reinvestment of dividends and
capital gains, if
any, at net asset value through October 31, 1995. The
Morgan Stanley Capital
International Free World Index measures performance for a
diverse range of
global stock markets, including the United States, Canada,
Europe, Australia,
New Zealand and the Far East and excludes shares which are
not readily
purchased by non-local investors. The index is unmanaged
and is not subject to
the same management and trading expenses of a mutual fund.
The performance of
the Portfolio's other classes may be greater or less than
the Class A shares'
performance indicated on this chart, depending on whether
greater or lesser
sales charges and fees were incurred by shareholders
investing in the other
classes.
All figures represent past performance and are not a
guarantee of future
results. Investment returns and principal value will
fluctuate, and redemption
values may be more or less than the original cost. No
adjustment has been made
for shareholder tax liability on dividends or capital
gains.
5
<PAGE>
Smith Barney World Funds, Inc.
Emerging Markets Portfolio
- ------------------------------------------------------------
- --------------------
Schedule of Investments
October 31, 1995
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
============================================================
===============================================
<C> <S>
<C>
STOCKS -- 98.5%
Argentina -- 1.8%
94,000 Astra Compania Argentina Series B
$ 136,320
39,000 Central Costanera S.A. Series B
107,640
- ------------------------------------------------------------
- -----------------------------------------------
243,960
- ------------------------------------------------------------
- -----------------------------------------------
Austria -- 0.6%
3,000 Voest-Alpine Stahl AG*
91,724
- ------------------------------------------------------------
- -----------------------------------------------
Brazil -- 9.0%
670,000 Cia Cervejaria Brahma Preferred
255,656
8,400 Cia Energetica De Minas Gerais Cemig
Preferred 179,913
900 Cia Vale Do Rio Doce Preferred
145,041
620,000 Coteminas Preferred
193,387
94,800,000 Refrigeracao Parana S.A. Preferred
223,743
3,500 Sade Sul Americana De Engenharia S.A.
Preferred 47,307
194,400 Tec Toy Industria De Brinquedos S.A.
Preferred* 107,124
410,000 Telecomunicacoes De Brasilia S.A. TBR
Preferred 89,520
18,573 Telecomunicacoes De Sao Paulo S.A.
Preferred 2,665
- ------------------------------------------------------------
- -----------------------------------------------
1,244,356
- ------------------------------------------------------------
- -----------------------------------------------
Chile -- 3.4%
6,000 Administradora de Fondos de Pensions
Provida S.A. ADR 147,000
3,600 Sociedad Quimeca Y Minera de Chile S.A.
ADR 156,150
9,800 Vina Concha Y Toro S.A. ADR
171,500
- ------------------------------------------------------------
- -----------------------------------------------
474,650
- ------------------------------------------------------------
- -----------------------------------------------
China -- 4.1%
11,800 Huaneng Power International Inc. Series N
ADR 196,175
1,892,000 Shanghai Hai Xing Shipping Company Ltd.
195,763
702,000 Shanghai Jintai Co. Ltd. Series B*
176,904
- ------------------------------------------------------------
- -----------------------------------------------
568,842
- ------------------------------------------------------------
- -----------------------------------------------
Colombia -- 1.1%
25,000 Banco de Colombia GDR+
159,375
- ------------------------------------------------------------
- -----------------------------------------------
Ecuador -- 1.2%
800 La Cemento Nacional GDR+*
170,400
- ------------------------------------------------------------
- -----------------------------------------------
Greece -- 1.9%
8,300 Hellenic Bottling
264,810
- ------------------------------------------------------------
- -----------------------------------------------
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
Smith Barney World Funds, Inc.
Emerging Markets Portfolio
- ------------------------------------------------------------
- --------------------
Schedule of Investments (continued)
October 31, 1995
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
============================================================
===============================================
<C> <S>
<C>
Hong Kong -- 11.0%
82,000 Consolidated Electric Power Asia Ltd.
$ 165,977
928,000 Harbin Power Equipment Co. Ltd.
213,642
147,000 Hong Kong & China Gas Co.
238,606
44,000 Hutchison Whampoa Ltd.
242,427
150,000 Inner Mongolia Erdos Cashmere Products Co.
Ltd. Class B* 63,600
598,000 Luoyang Glass Company Ltd.
203,025
320,000 Sehnzen North Jianshe Motorcycle Co. Ltd.
Series B* 196,591
696,000 Yizheng Chemical Fibre Company Ltd.
202,540
- ------------------------------------------------------------
- -----------------------------------------------
1,526,408
- ------------------------------------------------------------
- -----------------------------------------------
Indonesia -- 6.5%
89,000 Astra International
178,314
30,000 Hanjaya Mandala Sampoerna
277,411
10,000 Pt Darya-Varia Laboratoria
16,842
45,000 Pt Tempo Scan Pacific
241,744
71,000 Semen Cibinong
186,019
- ------------------------------------------------------------
- -----------------------------------------------
900,330
- ------------------------------------------------------------
- -----------------------------------------------
Malaysia -- 5.1%
54,000 Arab Malaysian Finance Berhad
188,989
69,000 Leader Universal Holdings
185,863
40,000 Sungei Way Holdings
134,487
87,000 UMW Holdings Berhad
206,980
- ------------------------------------------------------------
- -----------------------------------------------
716,319
- ------------------------------------------------------------
- -----------------------------------------------
Mexico -- 5.0%
143,000 Cifra S.A. de C.V. Series B
151,812
54,160 Corporacion Geo S.A. de C.V. Series B
144,427
41,000 Empresas La Moderna de C.V. Series A
143,557
337,000 Grupo Posadas S.A. de C.V. Posadas Series
L* 98,646
11,600 Kimberly Clark A NPV
151,092
- ------------------------------------------------------------
- -----------------------------------------------
689,534
- ------------------------------------------------------------
- -----------------------------------------------
Morocco -- 0.9%
3,500 Cior*
130,200
- ------------------------------------------------------------
- -----------------------------------------------
Pakistan -- 1.1%
1,640 Pakistan Telecommunication Ltd. ADR+*
155,800
- ------------------------------------------------------------
- -----------------------------------------------
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
Smith Barney World Funds, Inc.
Emerging Markets Portfolio
- ------------------------------------------------------------
- --------------------
Schedule of Investments (continued)
October 31, 1995
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
============================================================
===============================================
<C> <S>
<C>
Peru -- 4.6%
65,624 Banco de Credito del Peru Comun
$ 107,300
143,770 Enrique Ferreyros Y Cia S.A.
164,743
185,000 FIMA
77,457
73,000 Goodyear Peru Trabajo
131,265
86,000 Telefonica del Peru Series B
153,504
- ------------------------------------------------------------
- -----------------------------------------------
634,269
- ------------------------------------------------------------
- -----------------------------------------------
Philippines -- 5.2%
710,000 Bankard Inc.*
293,444
110,000 La Tondena Distillers Inc.
109,958
14,800 Manila Electric Company Series B
110,388
1,220,000 Steniel Manufacturing Corporation
211,073
- ------------------------------------------------------------
- -----------------------------------------------
724,863
- ------------------------------------------------------------
- -----------------------------------------------
Poland -- 5.6%
14,300 Debica S.A. Series A
197,111
54,200 Elektrim S.A.
181,237
40,000 Polifarb Cieszyn S.A.
147,574
22,300 Swarzedz S.A.*
90,909
3,650 Wedel S.A.
160,701
- ------------------------------------------------------------
- -----------------------------------------------
777,532
- ------------------------------------------------------------
- -----------------------------------------------
Russia -- 1.2%
13,000 Sun Brewing Ltd. ADR+
125,125
5,000 Sun Brewing Ltd. GDR*
48,125
- ------------------------------------------------------------
- -----------------------------------------------
173,250
- ------------------------------------------------------------
- -----------------------------------------------
Singapore -- 4.2%
25,000 Cerebos Pacific
155,521
57,000 Clipsal Industries Ltd.
139,650
57,000 GP Batteries International Ltd.
139,080
124,000 QAF Ltd.
149,894
- ------------------------------------------------------------
- -----------------------------------------------
584,145
- ------------------------------------------------------------
- -----------------------------------------------
South Africa -- 5.7%
15,000 Barlow Ltd.
193,320
22,000 Malbak Ltd.
146,293
24,000 Pepkor Ltd.
148,075
5,100 South African Breweries
167,469
17,000 South African Druggists Ltd.
141,014
- ------------------------------------------------------------
- -----------------------------------------------
796,171
- ------------------------------------------------------------
- -----------------------------------------------
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
Smith Barney World Funds, Inc.
Emerging Markets Portfolio
- ------------------------------------------------------------
- --------------------
Schedule of Investments (continued)
October 31, 1995
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
============================================================
===============================================
<C> <S>
<C>
South Korea -- 7.3%
4,900 Kookmin Bank
$ 101,356
1,347 Kookmin Bank First Issue
20,029
3,000 Korea Electric Power Corp.
130,503
1,000 Pohang Iron & Steel Co. Ltd.
99,228
4,350 Pusan Steel Pipe Corp.
156,757
800 Samsung Electronics Co. Ltd.
182,678
9 Samsung Electronics Co. Ltd. Third Issue
New 2,055
4,600 Tong Yang Cement Co. Ltd.
155,708
3,800 Woong Jin Publishing Co. Ltd.
173,822
- ------------------------------------------------------------
- -----------------------------------------------
1,022,136
- ------------------------------------------------------------
- -----------------------------------------------
Sri Lanka -- 3.2%
472,100 Blue Diamond Jewelery Worldwide Ltd.
175,519
24,400 John Keells Ltd.
79,085
179,600 Lanka Walltile Ltd.
184,908
- ------------------------------------------------------------
- -----------------------------------------------
439,512
- ------------------------------------------------------------
- -----------------------------------------------
Taiwan -- 0.6%
6,600 Advanced Semiconductor Engineering Inc.
GDR* 84,150
- ------------------------------------------------------------
- -----------------------------------------------
Thailand -- 3.3%
29,200 Bank of Ayudhya Public Co. Ltd.
168,283
23,000 Finance One Public Co.
141,693
9,000 Siam City Cement Public Company Ltd.
148,808
- ------------------------------------------------------------
- -----------------------------------------------
458,784
- ------------------------------------------------------------
- -----------------------------------------------
Turkey -- 3.0%
272,500 Alarko Holding
106,186
1,610,000 Eczacibasi Ilac
147,433
1,360,000 Eczacibasi Yapi
161,637
- ------------------------------------------------------------
- -----------------------------------------------
415,256
- ------------------------------------------------------------
- -----------------------------------------------
United States -- 0.1%
14,250 GP Batteries International Ltd. Warrants,
expire 11/15/00* 7,125
- ------------------------------------------------------------
- -----------------------------------------------
Zimbabwe -- 1.8%
140,000 Trans Zambesi Industries Ltd. ADR+
192,500
45,000 Trans Zambesi Industries GDR
61,875
- ------------------------------------------------------------
- -----------------------------------------------
254,375
- ------------------------------------------------------------
- -----------------------------------------------
TOTAL STOCKS
(Cost -- $14,733,214)
13,708,276
============================================================
===============================================
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
Smith Barney World Funds, Inc.
Emerging Markets Portfolio
- ------------------------------------------------------------
- --------------------
Schedule of Investments (continued)
October 31, 1995
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY
VALUE
============================================================
===============================================
<C> <S>
<C>
BONDS -- 1.5%
Russia -- 0.6%
$ 96,000 Lukoil Convertible, zero coupon due
4/6/96+ $ 79,200
- ------------------------------------------------------------
- -----------------------------------------------
Taiwan -- 0.9%
120,000 Yangming Marine Transport Corp.
Convertible,
2.000% due 10/6/01
127,500
- ------------------------------------------------------------
- -----------------------------------------------
TOTAL BONDS
(Cost -- $228,552)
206,700
============================================================
===============================================
TOTAL INVESTMENTS -- 100%
(Cost -- $14,961,766)[+]
$13,914,976
============================================================
===============================================
</TABLE>
* Non-income producing security.
+ Security exempt from registration under Rule 144A of the
Securities Act of
1993. These securities may be resold in transactions
exempt from
registration, generally to qualified institutional
buyers.
[+]Aggregate cost for Federal income tax purposes is
substantially the same.
See Notes to Financial Statements.
10
<PAGE>
Smith Barney World Funds, Inc.
Emerging Markets Portfolio
- ------------------------------------------------------------
- --------------------
Statement of Assets and Liabilities
October 31, 1995
- ------------------------------------------------------------
- --------------------
<TABLE>
<S>
<C>
ASSETS:
Investments, at value (Cost -- $14,961,766)
$13,914,976
Foreign currency (Cost -- $97,916)
126,683
Cash
1,872,114
Receivable for Fund shares sold
67,417
Receivable for securities sold
322,892
Dividends and interest receivable
6,116
Receivable from investment manager
55,298
- ------------------------------------------------------------
- ---------------------------------------
Total Assets
16,365,496
- ------------------------------------------------------------
- ---------------------------------------
LIABILITIES:
Distribution fees payable
14,314
Management fees payable
5,147
Payable for securities purchased
1,656
Payable for Fund shares purchased
278
Accrued expenses
40,794
- ------------------------------------------------------------
- ---------------------------------------
Total Liabilities
62,189
- ------------------------------------------------------------
- ---------------------------------------
Total Net Assets
$16,303,307
============================================================
=======================================
NET ASSETS:
Par value of capital shares
$ 1,477
Capital paid in excess of par value
17,553,332
Accumulated net realized loss on investments
(206,154)
Net unrealized depreciation of investments and foreign
currencies (1,045,348)
- ------------------------------------------------------------
- ---------------------------------------
Total Net Assets
$16,303,307
============================================================
=======================================
Shares Outstanding:
Class A
639,341
---------------------------------------------------------
- ---------------------------------------
Class B
692,413
---------------------------------------------------------
- ---------------------------------------
Class C
145,567
---------------------------------------------------------
- ---------------------------------------
Net Asset Value:
Class A (and redemption price)
$11.06
---------------------------------------------------------
- ---------------------------------------
Class B *
$11.02
---------------------------------------------------------
- ---------------------------------------
Class C **
$11.02
---------------------------------------------------------
- ---------------------------------------
Class A Maximum Public Offering Price Per Share
(net asset value plus 5.26% of net asset value per share)
$11.64
============================================================
=======================================
</TABLE>
* Redemption price is NAV of Class B shares reduced by a
5.00% CDSC if shares
are redeemed less than one year from initial purchase
(See Note 2).
** Redemption price is NAV of Class C shares reduced by a
1.00% CDSC if shares
are redeemed within the first year of purchase.
See Notes to Financial Statements.
11
<PAGE>
Smith Barney World Funds, Inc.
Emerging Markets Portfolio
- ------------------------------------------------------------
- --------------------
Statement of Operations For the Period Ended
October 31, 1995(a)
- ------------------------------------------------------------
- --------------------
<TABLE>
<S>
<C>
INVESTMENT INCOME:
Dividends
$ 64,545
Interest
980
Less: Foreign withholding tax
(1,329)
- ------------------------------------------------------------
- ---------------------------------------
Total Investment Income
64,196
- ------------------------------------------------------------
- ---------------------------------------
EXPENSES:
Management fees (Note 2)
69,254
Registration fees
50,000
Distribution fees (Note 2)
46,033
Custody
24,244
Shareholder communications
14,000
Shareholder and system servicing fees
13,308
Audit and legal
12,000
Pricing service fees
2,500
- ------------------------------------------------------------
- ---------------------------------------
Total Expenses
231,339
Less: Management fee waiver (Note 2)
(64,107)
Custody earnings credit (Note 1)
(24,244)
- ------------------------------------------------------------
- ---------------------------------------
Net Expenses
142,988
- ------------------------------------------------------------
- ---------------------------------------
Net Investment Loss
(78,792)
- ------------------------------------------------------------
- ---------------------------------------
REALIZED AND UNREALIZED LOSS ON
INVESTMENTS AND FOREIGN CURRENCIES (NOTE 3):
Realized Loss From:
Security transactions (excluding short-term
securities) (206,154)
Foreign currency transactions
(9,426)
- ------------------------------------------------------------
- ---------------------------------------
Net Realized Loss
(215,580)
- ------------------------------------------------------------
- ---------------------------------------
Change in Net Unrealized Depreciation of
Investments and Foreign Currencies:
Beginning of period
- --
End of period
(1,045,348)
- ------------------------------------------------------------
- ---------------------------------------
Increase in Net Unrealized Depreciation
(1,045,348)
- ------------------------------------------------------------
- ---------------------------------------
Net Loss on Investments and Foreign Currencies
(1,260,928)
- ------------------------------------------------------------
- ---------------------------------------
Decrease in Net Assets From Operations
$(1,339,720)
============================================================
=======================================
</TABLE>
(a) For the period from May 12, 1995 (commencement of
operations) to
October 31, 1995.
See Notes to Financial Statements.
12
<PAGE>
Smith Barney World Funds, Inc.
Emerging Markets Portfolio
- ------------------------------------------------------------
- --------------------
Statement of Changes in Net Assets For the
Period Ended October 31,
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
1995(a)
============================================================
=======================================
<S>
<C>
OPERATIONS:
Net investment loss
$ (78,792)
Net realized loss
(215,580)
Increase in net unrealized depreciation
(1,045,348)
- ------------------------------------------------------------
- ---------------------------------------
Decrease in Net Assets From Operations
(1,339,720)
- ------------------------------------------------------------
- ---------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
- --
- ------------------------------------------------------------
- ---------------------------------------
Decrease in Net Assets From
Distributions to Shareholders
- --
- ------------------------------------------------------------
- ---------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares
18,878,056
Cost of shares reacquired
(1,235,029)
- ------------------------------------------------------------
- ---------------------------------------
Increase in Net Assets From
Fund Share Transactions
17,643,027
- ------------------------------------------------------------
- ---------------------------------------
Increase in Net Assets
16,303,307
NET ASSETS:
Beginning of period
- --
- ------------------------------------------------------------
- ---------------------------------------
End of period
$16,303,307
============================================================
=======================================
</TABLE>
(a) For the period from May 12, 1995 (commencement of
operations) to
October 31, 1995.
See Notes to Financial Statements.
13
<PAGE>
Smith Barney World Funds, Inc.
Emerging Markets Portfolio
- ------------------------------------------------------------
- --------------------
Notes to Financial Statements
- ------------------------------------------------------------
- --------------------
1. Significant Accounting Policies
The Emerging Markets Portfolio ("Portfolio") is a
separate investment
portfolio of the Smith Barney World Funds, Inc. ("Fund").
The Fund, a Maryland
corporation, is registered under the Investment Company Act
of 1940, as amended,
as an open-end investment company and consists of this
Portfolio and five other
separate investment portfolios: European, Pacific,
International Balanced,
Global Government Bond and International Equity Portfolios.
The financial
statements and financial highlights for the other portfolios
are presented in
separate annual reports.
The significant accounting policies consistently
followed by the Portfolio
are: (a) security transactions are accounted for on trade
date; (b) securities
traded in national securities markets are valued at the
closing prices in the
primary exchange on which they are traded; securities listed
or traded on
certain foreign exchanges or other markets whose operations
are similar to the
U.S. over-the-counter market (including securities listed on
exchanges where the
primary market is believed to be over-the-counter) and
listed securities for
which no sale was reported on that date are valued at the
mean between the bid
and ask prices. Securities which are listed or traded on
more than one exchange
or market are valued at the quotations on the exchange or
market determined to
be the primary market for such securities; (c) short-term
securities maturing
within 60 days are valued at cost plus accreted discount, or
minus amortized
premium, as applicable; (d) gains or losses on the sale of
securities are
calculated by using the specific identification method; (e)
interest income,
adjusted for amortization of premiums and accretion of
discount, is recorded on
the accrual basis; (f) dividend income is recorded on the ex-
dividend date
except that certain dividends from foreign securities are
recorded as soon as
the Fund is informed of the ex-dividend date; (g) direct
expenses are charged to
each portfolio and class; management fees and general
expenses are allocated on
the basis of relative net assets; (h) foreign currencies
(and receivables and
payables for unsettled foreign securities transactions) are
translated into U.S.
dollars based on the rate of exchange of such currencies
against U.S. dollars on
the date of valuation. Translation gains or losses resulting
from changes in the
exchange rate and realized gains and losses on the
settlement of foreign
currency transactions are reported in the statements
14
<PAGE>
Smith Barney World Funds, Inc.
Emerging Markets Portfolio
- ------------------------------------------------------------
- --------------------
Notes to Financial Statements (continued)
- ------------------------------------------------------------
- --------------------
of operations; (i) in accordance with Statement of Position
93-2 Determination,
- --------------
Disclosure, and Financial Statement Presentation of Income,
Capital Gain, and
- ------------------------------------------------------------
- -----------------
Return of Capital Distributions by Investment Companies,
book and tax basis
- -------------------------------------------------------
differences relating to shareholder distributions and other
permanent book and
tax differences are reclassified from accumulated net
investment loss. As of
October 31, 1995, the cumulative effect of such differences,
totaling $88,218
were reclassified to paid-in capital from accumulated net
investment loss. Net
investment income, net realized gains, and net assets were
not affected by this
change; and (j) the Portfolio intends to comply with the
applicable provisions
of the Internal Revenue Code of 1986, as amended, pertaining
to regulated
investment companies and to make distributions of taxable
income sufficient to
relieve it from substantially all Federal income and excise
taxes.
The Portfolio has an agreement with its custodian,
Morgan Guaranty Trust
Company of New York, where it earns custody credits on
available cash balances.
These credits offset custody fees which may be charged to
the Portfolio during
the current year. These credits totalled $24,244 for the
year ended October 31,
1995.
In addition, the Portfolio may enter into forward
exchange contracts in
order to hedge against foreign currency risk. These
contracts are marked to
market daily, by recognizing the difference between the
contract exchange rate
and the current market rate as an unrealized gain or loss.
Realized gains or
losses are recognized when contracts are settled. There were
no open forward
foreign currency contracts as of October 31, 1995.
2. Management Agreement and Other Transactions
Smith Barney Mutual Funds Management, Inc. ("SBMFM"), a
subsidiary of Smith
Barney Holdings Inc. ("SBH"), acts as investment manager of
the Portfolio. The
Portfolio pays SBMFM a management fee calculated at the
annual rate of 1.00% of
average daily net assets. This fee is calculated daily and
paid monthly.
Smith Barney Inc. ("SB"), another subsidiary of SBH,
acts as distributor of
the Portfolio's shares. For the period ended October 31,
1995, SB received
brokerage commissions of $299 and sales charges of
approximately $232,000 on
sales of the Portfolio's Class A shares.
15
<PAGE>
Smith Barney World Funds, Inc.
Emerging Markets Portfolio
- ------------------------------------------------------------
- --------------------
Notes to Financial Statements (continued)
- ------------------------------------------------------------
- --------------------
There is a contingent deferred sales charge ("CDSC") of
5.00% on Class B
shares, which applies if redemption occurs less than one
year from initial
purchase and declines thereafter by 1.00% per year until no
CDSC is incurred.
Class C shares have a 1.00% CDSC, which applies if
redemption occurs within the
first year of purchase. For the period ended October 31,
1995, CDSCs of
approximately $13,000 were paid to SB.
Pursuant to a Distribution Plan, the Portfolio pays a
service fee with
respect to Class A, B and C shares calculated at the annual
rate of 0.25% of the
average daily net assets for each class. In addition, the
Portfolio pays a
distribution fee with respect to its Class B and C shares
calculated at the
annual rate of 0.75% of the average daily net assets for
each class. For the
period ended October 31, 1995, total Distribution Plan fees
incurred were:
<TABLE>
<CAPTION>
Class A
Class B Class C
============================================================
====================
<S> <C>
<C> <C>
Distribution Plan Fees $7,608
$32,458 $5,967
============================================================
====================
</TABLE>
All officers and three Directors of the Fund are
employees of SB.
3. Investments
During the period ended October 31, 1995, the aggregate
cost of
purchases and proceeds from sales of investments (including
maturities, but
excluding short-term securities) were as follows:
<TABLE>
============================================================
====================
<S>
<C>
Purchases
$17,214,447
============================================================
====================
Sales
2,046,527
============================================================
====================
</TABLE>
At October 31, 1995, the aggregate gross unrealized
appreciation and
depreciation of investments for tax purposes were as
follows:
<TABLE>
============================================================
====================
<S>
<C>
Gross unrealized appreciation
$ 491,654
Gross unrealized depreciation
(1,538,444)
- ------------------------------------------------------------
- --------------------
Net unrealized depreciation
$(1,046,790)
============================================================
====================
</TABLE>
4. Capital Loss Carryforwards
At October 31, 1995, the Fund had for Federal tax
purposes approximately
$206,154 of unused capital loss carryforwards, available to
offset future
realized capital gains which expire on October 31, 2003. To
the extent that
these carryforward losses are used to offset capital gains,
it is probable that
the gains so offset will not be distributed.
16
<PAGE>
Smith Barney World Funds, Inc.
Emerging Markets Portfolio
- ------------------------------------------------------------
- --------------------
Notes to Financial Statements (continued)
- ------------------------------------------------------------
- --------------------
5. Portfolio Concentration
The Portfolio's investments in foreign securities may
involve risks not
present in domestic investments. Since securities may be
denominated in a
foreign currency and may require settlement in foreign
currencies and pay
interest or dividends in foreign currencies, changes in the
relationship of
these foreign currencies to the U.S. dollar can
significantly affect the value
of the investments and earnings of the Portfolio. Foreign
investments may also
subject the Portfolio to foreign government exchange
restrictions,
expropriation, taxation or other political, social or
economic developments, all
of which could affect the market and/or credit risk of the
investments.
In addition to the risks described above, risks may
arise from forward
foreign currency contracts with respect to the potential
inability of counter
parties to meet the terms of their contracts.
6. Capital Shares
At October 31, 1995, the Fund had two billion shares of
$0.001 par value
capital stock authorized. The Portfolio has the ability to
issue multiple
classes of shares. Each share of a class represents an
identical legal interest
in the Portfolio and has the same rights, except that each
class bears certain
expenses specifically related to the distribution of its
shares. At October 31,
1995, total paid-in capital, including adjustments for book
and tax differences
discussed in Note 1, amounted to the following for each
class:
<TABLE>
<CAPTION>
Class A
Class B Class C
============================================================
====================
<S> <C> <C>
<C>
Total Paid-in Capital $7,605,054
$8,228,265 $1,721,490
============================================================
====================
</TABLE>
17
<PAGE>
Smith Barney World Funds, Inc.
Emerging Markets Portfolio
- ------------------------------------------------------------
- --------------------
Notes to Financial Statements (continued)
- ------------------------------------------------------------
- --------------------
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Period Ended
October 31, 1995*
-----
- -------------------
Shares Amount
============================================================
===================
<S> <C>
<C>
Class A
Shares sold
703,658 $8,405,032
Shares redeemed
(64,317) (773,612)
- ------------------------------------------------------------
- -------------------
Net Increase
639,341 $7,631,420
============================================================
===================
Class B
Shares sold
730,233 $8,719,543
Shares redeemed
(37,820) (438,631)
- ------------------------------------------------------------
- -------------------
Net Increase
692,413 $8,280,912
============================================================
===================
Class C
Shares sold
147,507 $1,753,481
Shares redeemed
(1,940) (22,786)
- ------------------------------------------------------------
- -------------------
Net Increase
145,567 $1,730,695
============================================================
===================
</TABLE>
* For the period from May 12, 1995 (inception date) to
October 31, 1995.
18
<PAGE>
Smith Barney World Funds, Inc.
Emerging Markets Portfolio
- ------------------------------------------------------------
- --------------------
Financial Highlights
- ------------------------------------------------------------
- --------------------
For a share of each class of capital stock outstanding
throughout the period:
<TABLE>
<CAPTION>
Class A(1) Class B(1) Class C(1)
============================================================
================================================
<S>
<C> <C> <C>
Net Asset Value, Beginning of Period
$12.00 $12.00 $12.00
- ------------------------------------------------------------
- ------------------------------------------------
Income (Loss) From Operations:
Net investment loss(2)++
(0.05) (0.09) (0.08)
Net realized and unrealized loss
(0.89) (0.89) (0.90)
- ------------------------------------------------------------
- ------------------------------------------------
Total Loss From Operations
(0.94) (0.98) (0.98)
- ------------------------------------------------------------
- ------------------------------------------------
Less Distributions From:
Net investment income
- -- -- --
- ------------------------------------------------------------
- ------------------------------------------------
Total Distributions
- -- -- --
- ------------------------------------------------------------
- ------------------------------------------------
Net Asset Value, End of Period
$11.06 $11.02 $11.02
- ------------------------------------------------------------
- ------------------------------------------------
Total Return[+]
(7.83)% (8.17)% (8.17)%
- ------------------------------------------------------------
- ------------------------------------------------
Net Assets, End of Period (000s)
$7,069 $7,630 $1,604
- ------------------------------------------------------------
- ------------------------------------------------
Ratio to Average Net Assets+:
Expenses(2)
1.45% 2.00% 1.95%
Net investment loss
(0.63) (1.17) (1.08)
- ------------------------------------------------------------
- ------------------------------------------------
Portfolio Turnover Rate
16.87% 16.87% 16.87%
============================================================
================================================
Average commissions paid on
equity security transactions(3)
$0.00[++] $0.00[++] $0.00[++]
============================================================
================================================
</TABLE>
(1) For the period from May 12, 1995 (inception date) to
October 31, 1995.
(2) The Manager has agreed to waive all or part of its
management fees for the
Emerging Markets Portfolio. If the Manager had not
agreed to the fee
waiver, the per share increases in net investment loss
and the ratio of
expenses would have been:
<TABLE>
<CAPTION>
Per Share Increases
Expense Ratios
in Net Investment Loss
Without Fee Waivers
----------------------
- -------------------
1995
1995
----
- ----
<S> <C>
<C>
Class A $0.05
2.12%+
Class B 0.05
2.68+
Class C 0.05
2.61+
</TABLE>
In addition, during the period ended October 31, 1995,
the Portfolio has
earned credits from the custodian which reduce service
fees incurred. If
the credits are taken into consideration, the ratios of
expenses to average
net assets for Class A, B and C would be 1.20%+, 1.74%+
and 1.70%+,
respectively; prior year numbers have not been restated
to reflect these
credits.
(3) Due to new SEC disclosure guidelines, average
commissions per share are
calculated only for the current year and not for the
prior periods.
++ Includes realized gains and losses on foreign currency
transactions.
[+] Total return is not annualized, as it may not be
representative of the
total return for the year.
+ Annualized.
[++] Per share amount is less than $0.01.
19
<PAGE>
Smith Barney World Funds, Inc.
Emerging Markets Portfolio
- ------------------------------------------------------------
- --------------------
Independent Auditors' Report
- ------------------------------------------------------------
- --------------------
The Shareholders and Board of Directors of
Smith Barney World Funds, Inc.:
We have audited the accompanying statement of assets and
liabilities, including
the schedule of investments, of the Emerging Markets
Portfolio of Smith Barney
World Funds, Inc. as of October 31, 1995, and the related
statements of
operations, changes in net assets and financial highlights
for the period from
May 12, 1995 (commencement of operations) to October 31,
1995. These financial
statements and financial highlights are the responsibility
of the Fund's
management. Our responsibility is to express an opinion on
these financial
statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards.
Those standards require that we plan and perform the audit
to obtain reasonable
assurance about whether the financial statements and
financial highlights are
free of material misstatement. An audit includes examining,
on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. Our
procedures included confirmation of securities owned as of
October 31, 1995, by
correspondence with the custodian. An audit also includes
assessing the
accounting principles used and significant estimates made by
management, as well
as evaluating the overall financial statement presentation.
We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to
above present fairly, in all material respects, the
financial position of the
Emerging Markets Portfolio of Smith Barney World Funds, Inc.
as of October 31,
1995, and the results of its operations, the changes in its
net assets and
financial highlights for the period from May 12, 1995 to
October 31, 1995, in
conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
New York, New York
December 28, 1995
20
<PAGE>
Smith Barney
World Funds, Inc.
DIRECTORS
Victor Atkins
Robert A. Belfer
Jessica M. Bibliowicz
Alger B. Chapman
Robert A. Frankel
Rainer Greeven
Susan M. Heilbron
Heath B. McLendon, Chairman
Bruce D. Sargent
James M. Shuart
OFFICERS
Maurits E. Edersheim
Chairman of the Fund
& Advisory Director
Heath B. McLendon
Chief Executive Officer
Jessica M. Bibliowicz
President
Lewis E. Daidone
Senior Vice President
and Treasurer
James B. Conheady
Vice President
Victor S. Filatov
Vice President
Simon R. Hildreth
Vice President
Denis P. Mangan
Vice President
Jeffrey J. Russell
Vice President
Bruce D. Sargent
Vice President
Rein W. van der Does
Vice President
Irving P. David
Controller
Christina T. Sydor
Secretary
Smith Barney
------------
A Member of TravelersGroup [LOGO APPEARS HERE]
INVESTMENT MANAGER
Smith Barney Mutual Funds
Management Inc.
DISTRIBUTOR
Smith Barney Inc.
CUSTODIAN
Morgan Guaranty Trust Company
of New York
SHAREHOLDER
SERVICING AGENT
First Data Investor Services Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is submitted for the general information of the
shareholders of
Smith Barney World Funds, Inc. -- Emerging Markets
Portfolio. It is not
authorized for distribution to prospective investors unless
accompanied or
preceded by a current Prospectus for the Portfolio, which
contains information
concerning the Portfolio's investment policies and expenses
as well as other
pertinent information.
SMITH BARNEY
WORLD FUNDS, INC.
388 Greenwich Street
New York, New York 10013
FD01044 12/95
