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[GRAPHIC] Smith Barney
World Funds, Inc.
Global Government Bond Portfolio
International Equity Portfolio
International Balanced Portfolio
Emerging Markets Portfolio
European Portfolio
Pacific Portfolio
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S E M I - A N N U A L R E P O R T
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April 30, 1997
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day./SM/
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Smith Barney
World Funds, Inc.
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At Smith Barney Mutual Funds, your investment needs come first. Our goal is
to deliver consistent and competitive returns over time using a wide range of
investment strategies.
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Investors seeking as high a level of current income and capital appreciation as
is consistent with a policy of investing principally in the high-quality bonds
of the U.S. and foreign governments should consider ...
Global Government Bond Portfolio
Investors seeking long-term growth of capital and income through a balanced
investment in equity and debt securities of non-U.S. issuers should consider ...
International Balanced Portfolio
Investors seeking total return from growth of capital and income by investing
primarily in a diversified portfolio of equity securities of established
non-U.S. issuers should consider ...
International Equity Portfolio
Investors seeking long-term capital appreciation by investing principally in
equity securities of companies located in various parts of the world should
consider ...
Emerging Markets Portfolio
European Portfolio
Pacific Portfolio
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WHAT'S INSIDE
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<TABLE>
<S> <C>
A Message from the Chairman...............................................1
Global Government Bond Portfolio
Portfolio Manager Commentary......................................... 4
Historical Performance............................................... 7
Portfolio at a Glance................................................ 9
International Equity Portfolio
Portfolio Manager Commentary........................................ 10
Historical Performance.............................................. 13
Portfolio at a Glance............................................... 15
International Balanced Portfolio
Portfolio Manager Commentary........................................ 16
Historical Performance.............................................. 19
Portfolio at a Glance............................................... 21
Emerging Markets Portfolio
Portfolio Manager Commentary........................................ 22
Historical Performance.............................................. 25
Portfolio at a Glance............................................... 27
European Portfolio
Portfolio Manager Commentary........................................ 28
Historical Performance.............................................. 30
Portfolio at a Glance............................................... 32
Pacific Portfolio
Portfolio Manager Commentary........................................ 33
Historical Performance.............................................. 36
Portfolio at a Glance............................................... 38
Schedules of Investments.................................................39
Statements of Assets and Liabilities.....................................58
Statements of Operations.................................................60
Statements of Changes in Net Assets......................................62
Notes to Financial Statements........................................... 66
Financial Highlights ................................................... 77
</TABLE>
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A Message from the Chairman
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[PHOTO]
HEATH B. MCLENDON
Chairman
Dear Shareholder:
As the global economy expands, opportunities for investors who participate in
the global equity and fixed-income markets have never been greater. In developed
markets, ongoing consolidation of international companies, integrated trading
blocs and a sharper focus on enhancing shareholder value all point to increased
potential for long-term growth of capital. At the same time, political and
economic reforms, falling trade barriers, attractively priced privatizations and
increased consumer demand are making many emerging markets the fastest-growing
economies in history. At Smith Barney, we believe the creation of a truly global
economy is well under way, offering unprecedented investment opportunities in
many corners of the world.
Although the rewards are often great, sophisticated investors know that
investing directly in international stocks and bonds carries special risks.
Currency fluctuations, high inflation, differing standards of accounting and
financial disclosure, lower liquidity, the potential for adverse political
developments, and foreign taxation are just some of the challenges that global
investors may face. That's why many of these investors employ an experienced
international money management team to manage their international investments.
Experienced Money Management
Smith Barney's International Money Management Division was established in early
1990 to provide international asset management services. The various portfolio
management teams offer investors more than 120 years of combined international
investing experience.
Equity Portfolios -- Investment Philosophy
Emerging Markets Portfolio
European Portfolio
International Equity Portfolio
Pacific Portfolio
The equity Portfolios of the Smith Barney World Funds are actively managed,
internationally diversified portfolios consisting primarily of equity securities
from companies located in various parts of the world. We generally seek
long-term growth of capital by focusing on specific companies and industry
sectors (i.e., a "bottom up" approach) rather than the "top down" macroeconomic
approach employed by many asset managers. From time to time, we will also invest
in a country where opportunities such as the loosening of currency restrictions,
relaxed government regulation, privatization of state enterprises and declining
inflation or interest rates may translate into equity value growth.
Our Stock Selection Process
We believe that earnings growth drives stock performance and we generally
emphasize investments in countries with favorable macroeconomic trends. We focus
on quality common stocks that offer good relative value, because we believe this
is one of the most effective means of enhancing long-term capital growth. We
typically look for companies that demonstrate several of the following
characteristics:
o Superior growth prospects relative to the local domestic economy
o Large market shares, preferably dominant franchises with a high level of
product visibility
o High return on invested capital
o Financial stability
o Surplus cash generation
o Management stability with a sound business strategy
To help manage risk, the Portfolios that make up the Smith Barney World Funds
are generally diversified among ten or more markets, with a majority of
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Smith Barney World Funds, Inc. 1
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investments typically in medium- to large-capitalization core holdings. To help
increase returns, a component will also be invested in aggressive growth stocks
with the potential for rapid profit growth. We also invest in emerging markets
that have a reasonable degree of liquidity, free currency flows and an
encouraging trend of adopting capitalist tenets.
Our Sell Discipline
An important component of our equity management discipline is the establishment
of specific objectives for individual stocks. We sell a stock when a fundamental
change of importance occurs, such as when we believe management may be making a
poor decision, significant earnings disappointment, product failure or a decline
in demand for that company's products or services. We buy stocks for a specific
reason and if those fundamentals are not realized in stock prices within three
to six months, we will then closely reevaluate our position.
Global Government Bond Portfolio --
Investment Philosophy
The Global Government Bond Portfolio's investment philosophy is a combination of
top-down fundamental analysis and risk control. Our investment committee gives
us their outlook on interest rates and currencies, across all the markets in
which we invest. We then take that outlook, which is developed on a monthly
basis, and, using our asset allocation model, develop a well-diversified
portfolio that also has limited downside risk.
Our parameter for risk is that the funds we manage should not be any more
volatile than a U.S. government bond fund. Our goal is to significantly
outperform the U.S. bond market with no more risk than investing in that market.
As a result, we tend to invest primarily in high-quality government bonds of
U.S. and foreign markets. However, even though we participate in foreign
markets, we hedge most of the currency risk. We believe that assuming too much
currency risk creates the potential for a much more volatile portfolio compared
to a portfolio invested solely in the U.S. bond market.
International Balanced Portfolio --
Investment Philosophy
Fixed Income
The fixed-income component of the International Balanced Portfolio is managed
with an investment philosophy that combines top-down fundamental analysis and
risk control. Our investment committee gives us their outlook on interest rates
and currencies, across all the markets in which we invest. We then take that
outlook, which is developed on a monthly basis, and, using our asset allocation
model, develop a well-diversified fixed-income component of the International
Balanced Portfolio that also has limited downside risk.
Equities
The equity component of the International Balanced Portfolio is an actively
managed, internationally diversified portfolio consisting primarily of equity
securities from companies located throughout the world. We generally seek
long-term growth of capital by focusing on specific companies and industry
sectors (i.e., a "bottom up" approach) rather than the "top down" macroeconomic
approach employed by many asset managers. From time to time, we will also invest
in a country where opportunities such as the loosening of currency restrictions,
relaxed government regulation, privatization of state enterprises and declining
inflation or interest rates may translate into equity value growth.
International Markets Outlook
In the coming months, we expect most international equity markets to continue to
recover after partially participating in the recent global correction. We are
especially optimistic about the prospects for select European companies,
particularly in the area of information technology. In recent years, these
companies have continued to improve productivity and enhance shareholder value.
In Asia, we are guardedly optimistic about Japanese companies, as investors
appear to be gravitating toward Japan while other economies elsewhere in the
region begin to cool.
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2 1997 Semi-Annual Report to Shareholders
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In Latin American markets, we remain cautious and therefore have maintained a
relatively light exposure to those countries.
With respect to the global bond markets, the benefits to dollar-based investors
of diversifying across a broad range of global bond markets were brought home
strongly during 1996 and so far in 1997. At certain times there can be a wide
divergence in the performance of the world's major government bond markets, as
was demonstrated during the past year. For example, the U.S. government bond
market produced low-single-digit returns while the bond markets of Italy and
Spain both returned more than 20% in local currency terms.
We believe many European bond markets will continue to offer investors
attractive returns, both in local currency and U.S. dollar terms. In our view,
the anticipated European Monetary Union (EMU), which proposes a common European
currency, has contributed to an overall economic environment of high interest
rates with relatively low inflation. In our opinion, global fixed-income
investors with well-diversified portfolios stand to benefit from these trends.
For a more complete discussion on the performance of international financial
markets, please refer to the individual Portfolio commentaries that appear later
in this report.
Thank you for investing in the Smith Barney World Funds. We look forward to
helping you achieve your financial goals.
Sincerely,
/s/ Heath B. McLendon
Heath B. McLendon
Chairman
June 6, 1997
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Smith Barney World Funds, Inc. 3
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Global Government Bond Portfolio
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The Global Government Bond Portfolio seeks as high a level of current income and
capital appreciation as is consistent with investing principally in the
high-quality bonds of the U.S. and foreign governments.
NASDAQ SYMBOL
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Class A SBGLX
Class B SGGBX
Portfolio Managers
VICTOR S. FILATOV, Vice President
Victor S. Filatov joined Smith Barney Global Capital Management in 1993 from
J.P. Morgan where, as head of the Bond Index Group, he was responsible for
developing the J.P. Morgan Government Bond Index and for international
fixed-income and currency research. He has published numerous articles and is a
member of the Fixed Income Analysts Society, U.K. Bond Commission and the Global
FX Standards Board. Mr. Filatov has a B.A. in Mathematics and Economics from
Clark University and an M.A. in Economics from the University of Pennsylvania.
DENIS P. MANGAN, Vice President
Denis P. Mangan is a Director and Global Fixed Income Portfolio Manager and
Research Specialist. He joined Smith Barney Global Capital Management in 1994.
He was previously at J.P. Morgan as a Proprietary Fixed Income Trader and a
Researcher of Fixed Income Options and Trading for three years. Prior to that,
Mr. Mangan spent two years at Citibank, NA London as a Fixed Income and Currency
Strategist for the Strategic Positioning Desk. He also was at Citicorp for seven
years in Treasury management, doing analysis and strategic positioning. Mr.
Mangan graduated with honors from Trinity College, Dublin and holds an M.A. in
Mathematics from Columbia University and a Ph.D in Financial Economics from
Columbia University.
Performance Update
For the six months ended April 30, 1997, the Global Government Bond Portfolio
returned 2.30% for Class A shares and outperformed its Lipper Analytical
Services, Inc. peer group average of 0.07% for the same period. (Lipper
Analytical Services, Inc. is an independent fund-tracking organization.) In our
opinion, broad diversification and prudent use of currency hedging strategies
led to the Portfolio's outperformance versus its Lipper peer group.
Portfolio Investment Strategy
The Global Government Bond Portfolio strives to outperform the U.S. government
bond market with no more risk than investing solely in U.S. government bonds. In
addition, the Portfolio utilizes a hedging strategy to minimize the risk of
currency fluctuations.
North America
Over the six-month reporting period, we increased our exposure to the U.S.
government bond market. After growing steadily for the first part of 1996, the
U.S. economy began to show signs of increased inflationary pressures as the year
progressed. These inflationary fears depressed the U.S. bond market and caused
market volatility to rise significantly. However, by the fall of 1996, new
government reports indicated that the U.S. economy might be slowing down, and
this news led to a bond market rally. Subsequent U.S. government economic
reports in the first part of 1997 indicated rising consumer confidence and a
sharp rise in existing home sales, which renewed fears of higher inflation. As
economic activity continued to overshoot expectations, the U.S. Federal Reserve
Board ("Fed") was prompted to issue warnings of an imminent shift in U.S.
monetary policy. Consequently, the Fed's decision to raise official U.S.
interest rates by 25 basis points, or 0.25%, on
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4 1997 Semi-Annual Report to Shareholders
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March 25, 1997, although widely discounted, signaled a halt to rising bond
prices in the dollar-bloc markets. However, the U.S. dollar benefited from the
widening interest-rate gap between North America and the rest of the world.
Europe
The drive toward a single European currency under the agreement of the EMU
continued to exert a positive influence on European economies. Investor
skepticism regarding the likelihood of the EMU dissipated in the face of strong
determination by the monetary and fiscal authorities of Spain and Italy to meet
the criteria laid down for entry into the EMU.
The peripheral economies of Italy, Spain and Sweden performed well. Positive
reports of inflation in Italy and Spain enabled monetary authorities in those
countries to cut short-term interest rates aggressively. In fact, the bond
markets in these three countries turned in some of the best performances of the
world's major bond markets. Although Sweden has declared that it is not a
candidate for the EMU in 1999, its inflation and budget deficit performance
would likely qualify it for membership should it choose to apply. If it were not
for the inhibiting effect of opinion polls on investor appetites, which show a
large part of the Swedish population disenchanted not just with the EMU but with
the European Community itself, Sweden might well have been the best-performing
bond market during the reporting period.
On the other hand, the core European bond markets, particularly Germany, France
and the Netherlands, lagged behind the smaller markets. These three bond markets
significantly underperformed the higher-yielding peripheral bond markets and
underperformed the J.P. Morgan Global Government Bond Market Index ("Index") as
well. (The J.P. Morgan Global Government Bond Market Index is a common benchmark
that measures performance and quantifies risk across diverse international
fixed-income markets.) Optimism about further interest rate cuts in Germany
evaporated in fall 1996, which contributed to the sluggish performance by the
core bond markets as a whole. Furthermore, many market observers have voiced
concerns over Germany's possible inability to meet the membership criteria of
the monetary union. Failure to meet EMU deadlines by this leading European
economy could derail efforts to construct a single European currency.
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"Despite the economic hurdles facing some European economies, we remain positive
on European bonds, particularly in the smaller bond markets. In our view,
economic recovery is well under way in many key European countries and continued
efforts toward a European Monetary Union should further aid in this recovery."
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Moreover, recent elections in France, which restored the French Socialists to
power, has heightened anxiety over the fate of the EMU. However, the cabinet
appointments made by Lionel Jospin, France's new Prime Minister, have helped to
allay investor concerns over a possible disruption in European integration.
Although the United Kingdom's bond market also trailed the Index in local
currency terms, U.K. economic growth was the strongest of the major European
economies. Nevertheless, fears of possible higher inflation in the U.K. led
monetary authorities to raise interest rates by 25 basis points, or 0.25%, in
October 1996 and another 25 basis points in November. However, the real story
with regard to the
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Smith Barney World Funds, Inc. 5
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U.K. was the considerable strength of its currency. The pound sterling began to
rally even before the interest rate boosts as confidence in the United Kingdom's
economic recovery relative to the rest of Europe and the United States
strengthened. Moreover, the back-to-back interest rate increases fueled investor
enthusiasm for the pound sterling and intensified its appreciation against the
U.S. dollar and the German mark. This sharp appreciation of the pound sterling
transformed what would otherwise have been a mediocre performance in local
currency terms into the strongest-performing market for U.S. dollar investors of
any bond market in the Index.
Despite the economic hurdles facing some European economies, we remain positive
on European bonds, particularly in the smaller bond markets. In our view,
economic recovery is well under way in many key European countries and continued
efforts toward a European Monetary Union should further aid in this recovery.
Japan
The Japanese bond market generated positive returns over the reporting period,
but that performance was undercut by continued weakness in the yen. However, the
deflationary impact of the country's financial restructuring, combined with the
Bank of Japan's relatively easy monetary policy, ensured steady demand for the
bonds from many domestic investors. For these reasons, we remain guardedly
optimistic on the prospects for Japan's bond market going forward.
We expect that governments around the world should continue to increase spending
for major infrastructure projects. Moreover, we believe this represents an
expanding market with significant opportunities for investors.
/s/ Victor S. Filatov /s/ Denis P. Mangan
Victor S. Filatov Denis P. Mangan
Vice President Vice President
May 18, 1997
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6 1997 Semi-Annual Report to Shareholders
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Historical Performance -- Class A Shares
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<TABLE>
<CAPTION>
Net Asset Value
-------------------------
Beginning End Income Capital Gain Return Total
Period Ended of Period of Period Dividends Distributions of Capital Returns(1)
=====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
4/30/97 $12.55 $11.97 $0.82 $0.05 $0.00 2.30%+
- ---------------------------------------------------------------------------------------------------------------------
10/31/96 12.30 12.55 0.87 0.00 0.00 9.41
- ---------------------------------------------------------------------------------------------------------------------
10/31/95 11.68 12.30 0.78 0.00 0.00 12.40
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10/31/94++ 12.92 11.68 0.23 0.00 0.42 (4.64)+
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12/31/93 11.84 12.92 0.52 0.59 0.00 19.13
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12/31/92 12.90 11.84 0.97 0.19 0.00 0.93
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Inception*-- 12/31/91 12.00 12.90 0.44 0.13 0.00 12.42+
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Total $4.63 $0.96 $0.42
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</TABLE>
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Historical Performance -- Class B Shares
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<TABLE>
<CAPTION>
Net Asset Value
------------------------
Beginning End Income Capital Gain Return Total
Period Ended of Period of Period Dividends Distributions of Capital Returns(1)
=====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
4/30/97 $12.50 $11.97 $0.73 $0.05 $0.00 1.99%+
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10/31/96 12.26 12.50 0.81 0.00 0.00 8.83
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Inception*-- 10/31/95 11.57 12.26 0.66 0.00 0.00 11.97+
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Total $2.20 $0.05 $0.00
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</TABLE>
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Historical Performance -- Class C Shares
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<TABLE>
<CAPTION>
Net Asset Value
------------------------
Beginning End Income Capital Gain Return Total
Period Ended of Period of Period Dividends Distributions of Capital Returns(1)
=====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
4/30/97 $12.47 $11.94 $0.74 $0.05 $0.00 2.06%+
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10/31/96 12.23 12.47 0.81 0.00 0.00 8.90
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10/31/95 11.68 12.23 0.72 0.00 0.00 11.25
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10/31/94++ 12.93 11.68 0.21 0.00 0.39 (5.09)+
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Inception*-- 12/31/93 11.83 12.93 0.47 0.59 0.00 18.89+
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Total $2.95 $0.64 $0.39
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</TABLE>
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Smith Barney World Funds, Inc. 7
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Historical Performance -- Class Y Shares
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<TABLE>
<CAPTION>
Net Asset Value
------------------------
Beginning End Income Capital Gain Return Total
Period Ended of Period of Period Dividends Distributions of Capital Returns(1)
=====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
4/30/97 $12.39 $11.78 $0.86 $0.05 $0.00 2.45%+
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10/31/96 12.14 12.39 0.90 0.00 0.00 9.82
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10/31/95 11.68 12.14 0.81 0.00 0.00 11.27
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10/31/94++ 12.93 11.68 0.23 0.00 0.43 (4.62)+
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Inception* -- 12/31/93 11.97 12.93 0.37 0.59 0.00 16.49+
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Total $3.17 $0.64 $0.43
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</TABLE>
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
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Average Annual Total Return
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<TABLE>
<CAPTION>
Without Sales Charge(1)
------------------------------------------
Class A Class B Class C Class Y
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<S> <C> <C> <C> <C>
Six Months Ended 4/30/97+ 2.30% 1.99% 2.06% 2.45%
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Year Ended 4/30/97 8.53 7.97 8.26 8.92
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Five Years Ended 4/30/97 8.26 N/A N/A N/A
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Inception* through 4/30/97 8.72 9.28 8.01 8.18
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<CAPTION>
With Sales Charge(2)
-------------------------------------------
Class A Class B Class C Class Y
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<S> <C> <C> <C> <C>
Six Months Ended 4/30/97+ (2.30)% (2.32)% 1.10% 2.45%
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Year Ended 4/30/97 3.63 3.55 7.28 8.92
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Five Years Ended 4/30/97 7.27 N/A N/A N/A
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Inception* through 4/30/97 7.85 8.20 8.01 8.18
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</TABLE>
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Cumulative Total Return
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<TABLE>
<CAPTION>
Without Sales Charge(1)
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<S> <C>
Class A (Inception* through 4/30/97) 62.10%
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Class B (Inception* through 4/30/97) 24.28
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Class C (Inception* through 4/30/97) 39.52
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Class Y (Inception* through 4/30/97) 39.09
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</TABLE>
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges 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 within 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.
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8 1997 Semi-Annual Report to Shareholders
<PAGE>
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Global Government Bond Portfolio at a Glance (unaudited)
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Growth of $10,000 Invested in Class A Shares of the
Global Government Bond Portfolio vs. J.P. Morgan Global Bond Market Index+
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[THE FOLLOWING TABLE WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
July 1991--April 1997
Global Government J.P. Morgan Global J.P. Morgan Global
Bond Portfolio Bond Index--Hedged Bond Index--Unhedged
-------------- ------------------ --------------------
<S> <C> <C> <C>
Jul 1991 $ 9,600 $10,000 $10,000
Oct 1991 $10,422 $10,459 $10,685
Oct 1992 $10,964 $11,370 $12,028
Oct 1993 $12,614 $12,749 $13,351
Oct 1994 $12,341 $12,609 $13,740
Oct 1995 $13,903 $15,048 $15,319
Oct 1996 $15,203 416,566 $16,254
Apr 1997 $13,952 $17,141 $15,643
</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 April 30, 1997. The J.P.
Morgan Global Bond Market 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 as
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.
<TABLE>
<CAPTION>
================================================================================
Top Ten Holdings* As of April 30, 1997
================================================================================
<S> <C>
1. Japanese Government 11.2%
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2. Bonos Y Oblig Del Estado 9.3
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3. Ireland Government 6.5
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4. Buoni Poliennali Del Tesoro 5.7
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5. Kingdom of Belgium 5.2
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6. Kingdom of Denmark 4.4
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7. Deutschland Republic 3.0
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8. French Treasury Bill 2.2
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9. Finland Government 2.2
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10. United Kingdom Treasury 1.8
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</TABLE>
* As a percentage of total investments by issuer excluding U.S. Treasuries.
Investment Allocation as of April 30, 1997
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[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
<S> <C>
Cash and Cash Equivalents 5.9%
Europe 42.5%
The Americas 40.4%
Asia/Pacific 11.2%
</TABLE>
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Smith Barney World Funds, Inc. 9
<PAGE>
================================================================================
International Equity Portfolio
================================================================================
The International Equity Portfolio seeks a total return on its assets from
growth of capital and income. The Portfolio seeks to achieve its objective by
investing at least 65% of its assets in a diversified portfolio of equity
securities of established non-U.S. issuers.
NASDAQ SYMBOL
-------------
Class A SBIEX
Class B SBIBX
Class C SBICX
[PHOTO]
JEFFREY J. RUSSEL
Vice President
Portfolio Managers
Jeffrey J. Russell joined Smith Barney in 1990 after eight years as
International Portfolio Manager and Media Analyst with the International Equity
team at Drexel Burnham Lambert. He is a Chartered Financial Analyst and is a
member of the New York Society of Security Analysts. Mr. Russell holds a B.S.
degree from the Massachusetts Institute of Technology and an M.B.A. from the
University of Pennsylvania's Wharton School of Finance.
[PHOTO]
JAMES B. CONHEADY
Vice President
James B. Conheady has more than 35 years experience managing international and
global equity portfolios. He has been with the International Equity team since
its formation in 1968 at Drexel Burnham Lambert and moved to Smith Barney in
1990. Previously, he was a Portfolio Manager in the Pension Investment Trust
Department at Chase Manhattan Bank, N.A. for six years. Mr. Conheady holds a
B.S.S. degree from Georgetown University.
Performance Update
For the six months ended April 30, 1997, the Class A shares of the International
Equity Portfolio generated a total return of 3.78%. In comparison, its Lipper
Analytical Services Inc. peer group generated an average total return of 6.18%
for the same period. The Portfolio lagged its Lipper peer group primarily due to
the effects of the strengthening U.S. dollar versus European currencies, and the
Portfolio's higher component of middle- to small-capitalization stocks. During
the global market correction earlier this year, middle- to small-capitalization
stocks underperformed the larger capitalization stocks. As of April 30, 1997,
the Portfolio owned securities of 90 issuers in 29 countries, consistent with
its broadly diversified approach that seeks to minimize portfolio risk.
Market and Portfolio Update
Over the six months covered by this report, international financial news has
been dominated by two historic events -- the anticipated EMU in 1999 and the
scheduled handover on July 1, 1997 of Hong Kong to the People's Republic of
China after 150 years of British rule. Overall, performance varied considerably
across global markets. For instance, according to the Morgan Stanley Capital
International (MSCI) Europe and Japan indices, European markets gained nearly
14% over the past six months while Japanese markets fell over 20% during the
same period. (The MSCI Europe and MSCI Japan indices are gross domestic
product-weighted indices covering major companies on the stock exchanges of
Europe and Japan. Values for these indices are expressed in U.S. dollars.) In
our opinion, these disparate results emphasize the importance for international
investors to maintain well-diversified portfolios.
Europe
We continue to devote a major portion of the Portfolio's assets to European
markets. As of April 30, 1997, nearly 65% of the Portfolio's assets were
invested
- --------------------------------------------------------------------------------
10 1997 Semi-Annual Report to Shareholders
<PAGE>
in select European companies. Over the past six months, Europe turned in some of
the strongest performances of all global markets. The MSCI Europe Index gained
9.7% in the fourth quarter of 1996 and another 4.5% in the first quarter of
1997. In contrast, the overall MSCI Europe, Australia, Far East Index (EAFE)
returned approximately 1.2% and -2.0% for the same periods, respectively.
In our opinion, much of the recent gains in European markets can be attributed
to individual countries striving to meet the guidelines of the Maastricht
Treaty, which outlines requirements for membership in the EMU. Under the
Maastricht Treaty, member nations must meet a number of fiscal requirements,
including reducing national budget deficits. As a result, many countries have
reduced spending, which in turn has led to low interest rates and moderate
inflation. Against this positive economic backdrop, European growth stocks have
generally performed well.
However, after posting a relatively strong performance in the early part of
1997, international markets, including Europe, partially participated in a
market correction paralleling a similar correction in U.S. markets.
International markets now appear to be recovering and have regained much of
their losses experienced during that correction.
In our opinion, these market downturns were most likely triggered by the move to
raise U.S. short-term interest rates by the Fed and recent doubts over the
future of the EMU. The rise in U.S. interest rates and anticipation of further
tightening of monetary policy by the Fed caused many investors to believe that
U.S. equity markets would begin to lose their luster and that major world equity
markets would soon follow. Adding to the market volatility were Germany's
struggles to meet the Maastricht Treaty's strict criteria on budget deficits. As
the continent's strongest and most capable economy, Germany's failure to meet
the budget deficit requirements could call into question the viability of the
EMU. Furthermore, the recent French elections, and the return to a Socialist led
government, have added to EMU anxiety. However, announcements of new cabinet
appointments have calmed the market.
We remain bullish on the prospects for select European companies. The structural
changes occurring in European economies resulting in historically low inflation,
reduced budget deficits and the trend toward U.S.-style corporate restructuring
should continue to be beneficial for Europe's financial markets. In particular,
the ongoing drive to enhance productivity through the use of new technologies
should bolster many of our information technology holdings such as Germany's
Systeme Anwendungen Produkte (enterprise software), Holland's Getronics
(computer services), France's Axime (software and multimedia) and the United
Kingdom's Misys (computer systems).
Asia and the Pacific Rim
Since the last reporting period, we have reduced our exposure to the Pacific Rim
region to 22%, compared to 31% on October 31, 1996. The Japanese economy
continues to struggle despite a weakened currency compared to its major trading
partners (which increases the competitive advantage of its export goods) and low
interest rates. Although Japanese markets have improved somewhat recently, they
still remain confined to a fairly narrow trading range. There is some evidence
that investors may gravitate back to Japan as the previously booming Southeast
Asian markets of Thailand and Malaysia have cooled. Officials in those countries
recently instituted lending restrictions to head off inflationary pressures, and
the resulting credit squeeze has hampered growth stock performance in those
countries.
In Hong Kong, investors have displayed increased confidence toward the
transition to Chinese rule scheduled for July of this year. Chinese officials
have indicated that there are no substantial economic policy changes planned for
Hong Kong. Financial markets have responded very favorably to these
developments, and both the stock market and real estate markets continue to
thrive.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 11
<PAGE>
Other Markets
We remain lightly represented in Latin America with 4.89% of the Portfolio's
assets invested in the region. Although the economies of Latin American
countries have improved, we believe that other financial markets offer superior
return potential. Therefore, we continue to limit our exposure to Latin American
companies. However, we added to our position in Brazil's Telebras, because we
believe it exhibits excellent growth prospects. Telebras, Brazil's telephone
monopoly, has dominated telecommunications services in one of Latin America's
most dynamic economies. Moreover, Telebras is poised for tremendous growth
possibilities in a country with about half the number of telephones per capita
compared to its neighboring countries of Argentina and Chile. We have also
recently established a position in Unibanco, one of Brazil's leading banks.
In closing, we believe that investing in international equities helps to reduce
the risk of investing in only U.S. equities and offers investors broader
opportunities for better returns.
/s/ Jeffrey J. Russell /s/ James B. Conheady
Jeffrey J. Russell James B. Conheady
Vice President Vice President
May 15, 1997
- --------------------------------------------------------------------------------
12 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Historical Performance -- Class A Shares
================================================================================
<TABLE>
<CAPTION>
Net Asset Value
---------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
===================================================================================================================
<S> <C> <C> <C> <C> <C>
4/30/97 $18.64 $19.33 $0.01 $0.00 3.78%+
- -------------------------------------------------------------------------------------------------------------------
10/31/96 17.15 18.64 0.17 0.00 9.78
- -------------------------------------------------------------------------------------------------------------------
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 $0.32 $0.26
===================================================================================================================
</TABLE>
================================================================================
Historical Performance -- Class B Shares
================================================================================
<TABLE>
<CAPTION>
Net Asset Value
---------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
===================================================================================================================
<S> <C> <C> <C> <C> <C>
4/30/97 $18.65 $19.28 $0.00 $0.00 3.38%+
- -------------------------------------------------------------------------------------------------------------------
10/31/96 17.17 18.65 0.04 0.00 8.89
- -------------------------------------------------------------------------------------------------------------------
Inception*-- 10/31/95 18.38 17.17 0.00 0.10 (6.00)+
===================================================================================================================
Total $0.04 $0.10
===================================================================================================================
</TABLE>
================================================================================
Historical Performance -- Class C Shares
================================================================================
<TABLE>
<CAPTION>
Net Asset Value
---------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
===================================================================================================================
<S> <C> <C> <C> <C> <C>
4/30/97 $18.38 $19.00 $0.00 $0.00 3.37%+
- -------------------------------------------------------------------------------------------------------------------
10/31/96 16.93 18.38 0.04 0.00 8.85
- -------------------------------------------------------------------------------------------------------------------
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 $0.04 $0.26
===================================================================================================================
</TABLE>
================================================================================
Historical Performance -- Class Y Shares
================================================================================
<TABLE>
<CAPTION>
Net Asset Value
---------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
===================================================================================================================
<S> <C> <C> <C> <C> <C>
4/30/97 $18.64 $19.31 $0.06 $0.00 3.93%+
- -------------------------------------------------------------------------------------------------------------------
10/31/96 17.13 18.64 0.21 0.00 10.19
- -------------------------------------------------------------------------------------------------------------------
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 $0.44 $0.10
===================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 13
<PAGE>
================================================================================
Historical Performance -- Class Z Shares
================================================================================
<TABLE>
<CAPTION>
Net Asset Value
---------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
===================================================================================================================
<S> <C> <C> <C> <C> <C>
4/30/97 $18.62 $19.29 $0.06 $0.00 3.93%+
- -------------------------------------------------------------------------------------------------------------------
10/31/96 17.12 18.62 0.21 0.00 10.13
- -------------------------------------------------------------------------------------------------------------------
Inception*-- 10/31/95 18.38 17.12 0.17 0.10 (5.03)+
===================================================================================================================
Total $0.44 $0.10
===================================================================================================================
</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>
Six Months Ended 4/30/97+ 3.78% 3.38% 3.37% 3.93% 3.93%
- --------------------------------------------------------------------------------------------------------------
Year Ended 4/30/97 2.95 2.12 2.21 3.32 3.32
- --------------------------------------------------------------------------------------------------------------
Five Years Ended 4/30/97 8.83 N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------
Ten Years Ended 4/30/97 8.42 N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------
Inception* through 4/30/97 11.46 2.30 10.93 4.46 3.42
==============================================================================================================
<CAPTION>
With Sales Charge(2)
------------------------------------------------------------------------
Class A Class B Class C Class Y Class Z
==============================================================================================================
<S> <C> <C> <C> <C> <C>
Six Months Ended 4/30/97+ (1.41)% (1.62)% 2.37% 3.93% 3.93%
- --------------------------------------------------------------------------------------------------------------
Year Ended 4/30/97 (2.21) (2.88) 1.21 3.32 3.32
- --------------------------------------------------------------------------------------------------------------
Five Years Ended 4/30/97 7.72 N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------
Ten Years Ended 4/30/97 7.87 N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------
Inception* through 4/30/97 10.96 1.12 10.93 4.46 3.42
==============================================================================================================
</TABLE>
================================================================================
Cumulative Total Return
================================================================================
<TABLE>
<CAPTION>
Without Sales Charge(1)
================================================================================
<S> <C>
Class A (4/30/87 through 4/30/97) 124.45%
- --------------------------------------------------------------------------------
Class B (Inception* through 4/30/97) 5.81
- --------------------------------------------------------------------------------
Class C (Inception* through 4/30/97) 56.55
- --------------------------------------------------------------------------------
Class Y (Inception* through 4/30/97) 13.36
- --------------------------------------------------------------------------------
Class Z (Inception* through 4/30/97) 8.70
================================================================================
</TABLE>
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges 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 within one
year from initial purchase. Thereafter this CDSC declines 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.
* Inception dates for Class A, B, C, Y and Z shares are February 18, 1986,
November 7, 1994, January 4, 1993, June 16, 1994 and November 7, 1994,
respectively. Class A share performance includes the returns on the
Fenimore International Fund whose management was assumed by the Portfolio
on November 22, 1991.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
- --------------------------------------------------------------------------------
14 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
International Equity Portfolio at a Glance (unaudited)
================================================================================
Growth of $10,000 Invested in Class A Shares of the
International Equity Portfolio vs. MSCI EAFE-GDP Weighted Index+
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL]
<TABLE>
<CAPTION>
April 1987--April 1997
International MSCI EAFE-GDF
Equity Portfolio Weighted Index*
---------------- ---------------
<S> <C> <C>
Apr 1987 $ 9,504 $10,000
Oct 1987 $ 7,365 $ 8,610
Oct 1988 $ 8,248 $10,628
Oct 1989 $ 9,657 $11,927
Oct 1990 $ 9,832 $11,672
Oct 1991 $12,706 $12,095
Oct 1992 $12,928 $11,242
Oct 1993 $18,382 $15,381
Oct 1994 $20,228 $17,032
Oct 1995 $18,724 $17,187
Oct 1996 $20,555 $19,102
Apr 1997 $21,331 $19,900
</TABLE>
+ Hypothetical illustration of $10,000 invested in Class A shares on April
30, 1987, 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 April 30, 1997. The Morgan Stanley Capital
International ("MSCI") 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 as 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.
================================================================================
Top Ten Holdings* As of April 30, 1997
================================================================================
<TABLE>
<CAPTION>
<S> <C>
1. Novartis AG Registered Shares 2.9%
- --------------------------------------------------------------------------------
2. Telefonaktiebolaget LM Ericsson Class B Shares 2.7
- --------------------------------------------------------------------------------
3. Nokia OY AB Class A Shares 2.4
- --------------------------------------------------------------------------------
4. SGL Carbon AG 2.3
- --------------------------------------------------------------------------------
5. Coca-Cola Amatil Ltd. 2.1
- --------------------------------------------------------------------------------
6. Independent Newspapers PLC 2.1
- --------------------------------------------------------------------------------
7. Teva Pharmaceutical Industries Ltd. ADR 2.1
- --------------------------------------------------------------------------------
8. Compass Group PLC 2.0
- --------------------------------------------------------------------------------
9. Reuters Holdings PLC ADR 1.8
- --------------------------------------------------------------------------------
10. Wolters Kluwer N.V. 1.8
- --------------------------------------------------------------------------------
</TABLE>
* As a percentage of total investments by issuer.
[THE FOLLOWING WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
Investment Allocation as of April 30, 1997
- --------------------------------------------------------------------------------
<S> <C>
Cash and Cash Equivalents 4.5%
Europe 65.2%
Asia/Pacific 21.8%
The Americas 4.9%
Other 3.6%
</TABLE>
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 15
<PAGE>
================================================================================
International Balanced Portfolio
================================================================================
The International Balanced Portfolio seeks long-term growth of capital and
income through a portfolio invested primarily in securities of established
non-U.S. issuers.
NASDAQ SYMBOL
-------------
Class A SIEBX
[PHOTO]
JEFFERY J. RUSSELL
Vice President
Portfolio Managers -- Equities
Jeffrey J. Russell joined Smith Barney in 1990 after eight years as
International Portfolio Manager and Media Analyst with the International Equity
team at Drexel Burnham Lambert. He is a Chartered Financial Analyst and is a
member of the New York Society of Security Analysts. Mr. Russell holds a B.S.
degree from the Massachusetts Institute of Technology and an M.B.A. from the
University of Pennsylvania's Wharton School of Finance.
[PHOTO]
JAMES B. CONHEADY
Vice President
James B. Conheady has more than 35 years experience managing international and
global equity portfolios. He has been with the International Equity team since
its formation in 1968 at Drexel Burnham Lambert and moved to Smith Barney in
1990. Previously, he was a Portfolio Manager in the Pension Investment Trust
Department at Chase Manhattan Bank, N.A., for six years. Mr. Conheady holds a
B.S.S. degree from Georgetown University.
Portfolio Managers -- Fixed Income
VICTOR S. FILATOV, Vice President
Victor S. Filatov joined Smith Barney Global Capital Management in 1993 from
J.P. Morgan where, as head of the Bond Index Group, he was responsible for
developing the J.P. Morgan Government Bond Index and for international
fixed-income and currency research. He has published numerous articles and is a
member of the Fixed Income Analysts Society, U.K. Bond Commission and the Global
FX Standards Board. Mr. Filatov has a B.A. in Mathematics and Economics from
Clark University and an M.A. in Economics from the University of Pennsylvania.
DENIS P. MANGAN, Vice President
Dennis P. Mangan is a Director and Global Fixed Income Portfolio Manager and
Research Specialist. He joined Smith Barney Global Capital Management in 1994.
He was previously at J.P. Morgan as a Proprietary Fixed Income Trader and a
Researcher of Fixed Income Options and Trading for three years. Prior to that,
Mr. Mangan spent two years at Citibank, N.A. London as a Fixed Income and
Currency Strategist for the Strategic Positioning Desk. He also was at Citicorp
for seven years in Treasury management, doing analysis and strategic
positioning. Mr. Mangan graduated with honors from Trinity College, Dublin,
holds an M.A. in Mathematics from Columbia University and a Ph.D in Financial
Economics from Columbia University.
Performance Update and
Investment Strategy
The International Balanced Portfolio gives investors the opportunity to
participate in potential profits worldwide and to diversify assets over a number
of countries' equity and fixed-income markets. During the six months ended April
30, 1997, the Portfolio returned -2.81% for Class A shares. The Portfolio lagged
its Lipper peer group of 5.79%, primarily due to the effects of the
strengthening U.S. dollar versus
- --------------------------------------------------------------------------------
16 1997 Semi-Annual Report to Shareholders
<PAGE>
European currencies, and the Portfolio's higher component of middle- to
small-capitalization stocks. During the global market correction earlier this
year, middle- to small-capitalization stocks underperformed the larger
capitalization stocks.
Equities
We continue to devote a major portion of the Portfolio's equity assets to
European markets. In our opinion, much of the recent gains in European markets
can be attributed to individual countries striving to meet requirements for
membership in the EMU. As a result, many countries have reduced spending, which
in turn has led to low interest rates and moderate inflation. Against this
positive economic backdrop, European growth stocks have generally performed
well.
We remain bullish on the prospects for select European companies. The structural
changes occurring in European economies resulting in historically low inflation,
reduced budget deficits and the trend toward U.S.-style corporate restructuring
should continue to be beneficial for Europe's financial markets. In particular,
the ongoing drive to enhance productivity through the use of new technologies
should bolster many of our information technology holdings.
Since the last reporting period, we have reduced our exposure to the Pacific Rim
region. The Japanese economy continues to struggle despite a weakened currency
compared to its major trading partners (which increases the competitive
advantage of its export goods) and low interest rates. We expect increased
volatility for Japanese markets, with stock selection becoming even more
important. There is some evidence that investors may gravitate back to Japan, as
the previously booming Southeast Asian markets of Thailand and Malaysia have
cooled. Officials in those countries recently instituted lending restrictions to
head off inflationary pressures, and the resulting credit squeeze could hamper
growth stock performance in those countries.
In Hong Kong, investors have displayed increased confidence toward the
transition to Chinese rule scheduled for July. Chinese officials have indicated
that there are no substantial economic policy changes planned for Hong Kong.
Financial markets have responded very favorably to these developments, and both
the stock market and real estate markets continue to thrive.
We remain lightly represented in Latin America because although the economies of
Latin American countries have improved, we believe that other financial markets
offer superior return potential. Therefore, we continue to limit our exposure to
Latin American companies. However, we added to our position in Brazil's
Telebras, because we believe it exhibits excellent growth prospects. Telebras,
Brazil's telephone monopoly, has dominated telecommunications services in one of
Latin America's most dynamic economies. Moreover, Telebras, is poised for
tremendous growth possibilities in a country with about half the number of
telephones per capita compared to its neighboring countries of Argentina and
Chile.
Fixed Income
Over the six-month reporting period, we increased our exposure to the U.S.
government bond market. After growing steadily for the first part of 1996, the
U.S. economy began to show signs of increased inflationary pressures as the year
progressed. As economic activity continued to overshoot expectations, the Fed
was prompted to issue warnings of an imminent shift in U.S. monetary policy.
Consequently, the Fed's decision to raise official U.S. interest rates by 25
basis points on March 25, 1997, although widely discounted, signaled a halt to
rising bond prices in the dollar bloc markets. However, the U.S. dollar
benefited from the widening interest-rate gap between North America and the rest
of the world.
The drive toward a single European currency under the agreement of the EMU
continued to exert a positive influence on European economies. Investor
skepticism
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 17
<PAGE>
regarding the likelihood of the EMU continued to dissipate in the face of strong
determination by the monetary and fiscal authorities of Spain and Italy to meet
the criteria laid down for entry into the EMU.
The peripheral economies of Italy, Spain and Sweden performed well. Positive
reports of inflation in Italy and Spain enabled monetary authorities in those
countries to cut short-term interest rates aggressively. In fact, the bond
markets in these three countries turned in some of the best performances of the
world's major bond markets. Although Sweden has declared that it is not a
candidate for the EMU in 1999, its inflation and budget deficit performance
would likely qualify it for membership should it choose to apply.
On the other hand, the core European bond markets, particularly Germany, France
and the Netherlands, lagged behind the smaller markets. These three bond markets
significantly underperformed the higher-yielding peripheral bond markets and
underperformed the J.P. Morgan Global Government Bond Market Index ("Index") as
well. Optimism about further interest rate cuts in Germany evaporated in fall
1996, which contributed to the sluggish performance by the core bond markets as
a whole.
Moreover, recent elections in France, which restored the French Socialists to
power, have heightened anxiety over the fate of the EMU. However, the cabinet
appointments made by Lionel Jospin, France's new Prime Minister, have helped to
allay investor concerns over a possible disruption in European integration.
Although the United Kingdom's bond market also trailed the Index in local
currency terms, U.K. economic growth was the strongest of the major European
economies. Nevertheless, fears of possible higher inflation in the U.K. led
monetary authorities to raise interest rates by 25 basis points in October 1996
and another 25 basis points in November. However, the real story in regard to
the U.K. was the considerable strength of its currency. The pound sterling began
to rally even before the interest-rate boosts as confidence in the United
Kingdom's economic recovery relative to the rest of Europe and the United States
strengthened. Moreover, the back-to-back interest rate increases fueled investor
enthusiasm for the pound sterling and intensified its appreciation against the
U.S. dollar and the German mark. This sharp appreciation of the pound sterling
transformed what would otherwise be a mediocre performance in local currency
terms into the strongest-performing market for U.S. dollar investors of any bond
market in the Index.
Despite the economic hurdles facing some European economies, we remain positive
on European bonds, particularly in the smaller bond markets. In our view,
economic recovery is well under way in many key European countries and continued
efforts toward a European Monetary Union should further aid in this recovery.
The Japanese bond market generated positive returns over the reporting period,
but that performance was undercut by continued weakness in the yen. However, the
deflationary impact of the country's financial restructuring, combined with the
Bank of Japan's relatively easy monetary policy, ensured steady demand for the
bonds from many domestic investors. For these reasons, we remain guardedly
optimistic on the prospects for Japan's bond market going forward. Thank you for
your continued confidence in our investment approach.
/s/ James B. Conheady /s/ Jeffrey J. Russell
James B. Conheady Jeffrey J. Russell
Vice President Vice President
/s/ Victor S. Filatov /s/ Denis P. Mangan
Victor S. Filatov Denis P. Mangan
Vice President Vice President
May 18, 1997
- --------------------------------------------------------------------------------
18 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Historical Performance -- Class A Shares
================================================================================
<TABLE>
<CAPTION>
Net Asset Value
---------------
Beginning End Income Total
Period Ended of Period of Period Dividends Returns(1)
=====================================================================================
<S> <C> <C> <C> <C>
4/30/97 $13.90 $13.28 $0.23 (2.81)%+
- -------------------------------------------------------------------------------------
10/31/96 12.64 13.90 0.35 12.89
- -------------------------------------------------------------------------------------
10/31/95 12.20 12.64 0.39 7.05
- -------------------------------------------------------------------------------------
Inception*-- 10/31/94 12.00 12.20 0.00 1.67+
=====================================================================================
Total $0.97
=====================================================================================
</TABLE>
================================================================================
Historical Performance -- Class B Shares
================================================================================
<TABLE>
<CAPTION>
Net Asset Value
---------------
Beginning End Income Total
Period Ended of Period of Period Dividends Returns(1)
=====================================================================================
<S> <C> <C> <C> <C>
4/30/97 $13.90 $13.35 $0.11 (3.19)%+
- -------------------------------------------------------------------------------------
10/31/96 12.65 13.90 0.26 12.05
- -------------------------------------------------------------------------------------
Inception*-- 10/31/95 12.08 12.65 0.29 7.33+
=====================================================================================
Total $0.66
=====================================================================================
</TABLE>
================================================================================
Historical Performance -- Class C Shares
================================================================================
<TABLE>
<CAPTION>
Net Asset Value
---------------
Beginning End Income Total
Period Ended of Period of Period Dividends Returns(1)
=====================================================================================
<S> <C> <C> <C> <C>
4/30/97 $13.87 $13.32 $0.11 (3.20)%+
- -------------------------------------------------------------------------------------
10/31/96 12.63 13.87 0.26 11.99
- -------------------------------------------------------------------------------------
10/31/95 12.18 12.63 0.29 6.29
- -------------------------------------------------------------------------------------
Inception*-- 10/31/94 12.00 12.18 0.00 1.50+
=====================================================================================
Total $0.66
=====================================================================================
</TABLE>
================================================================================
Historical Performance -- Class Y Shares
================================================================================
<TABLE>
<CAPTION>
Net Asset Value
---------------
Beginning End Income Total
Period Ended of Period of Period Dividends Returns(1)
=====================================================================================
<S> <C> <C> <C> <C>
4/30/97 $13.93 $13.29 $0.28 (2.65)%+
Inception*-- 10/31/96 13.15 13.93 0.29 8.21+
======================================================================================
Total $0.57
======================================================================================
</TABLE>
IT IS THE FUND'S POLICY TO DISTRIBUTE DIVIDENDS QUARTERLY AND CAPITAL GAINS, IF
ANY, ANNUALLY
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 19
<PAGE>
================================================================================
Average Annual Total Return
================================================================================
<TABLE>
<CAPTION>
Without Sales Charge(1)
-----------------------------------------
Class A Class B Class C Class Y
================================================================================
<S> <C> <C> <C> <C>
Six Months Ended 4/30/97+ (2.81)% (3.19)% (3.20)% (2.65)%
- --------------------------------------------------------------------------------
Year Ended 4/30/97 2.27 1.39 1.39 2.63
- --------------------------------------------------------------------------------
Inception* through 4/30/97 6.84 6.32 6.01 4.32
================================================================================
<CAPTION>
With Sales Charge(2)
-----------------------------------------
Class A Class B Class C Class Y
================================================================================
<S> <C> <C> <C> <C>
Six Months Ended 4/30/97+ (7.66)% (8.00)% (4.16)% (2.65)%
- --------------------------------------------------------------------------------
Year Ended 4/30/97 (2.82) (3.59) 0.39 2.63
- --------------------------------------------------------------------------------
Inception* through 4/30/97 4.82 5.21 6.01 4.32
================================================================================
</TABLE>
================================================================================
Cumulative Total Return
================================================================================
<TABLE>
<CAPTION>
Without Sales Charge(1)
================================================================================
<S> <C>
Class A (Inception* through 4/30/97) 19.41%
- --------------------------------------------------------------------------------
Class B (Inception* through 4/30/97) 16.42
- --------------------------------------------------------------------------------
Class C (Inception* through 4/30/97) 16.94
- --------------------------------------------------------------------------------
Class Y (Inception* through 4/30/97) 5.34
================================================================================
</TABLE>
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges 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 within one
year from initial purchase. Thereafter, this CDSC declines 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.
* Inception dates for Class A, B, C and Y shares are August 25, 1994,
November 7, 1994, August 25, 1994 and February 7, 1996, respectively.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
- --------------------------------------------------------------------------------
20 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
International Balanced Portfolio at a Glance (unaudited)
================================================================================
Growth of $10,000 Invested in Class A and C Shares of the International Balanced
Portfolio vs. MSCI EAFE-GDP Weighted Index and J.P. Morgan Global Bond Market
Index+
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
August 1994--April 1997
International Balanced International MSCI EAFE-GDP J.P. Morgan Global Bond
Portfolio - Class A Balanced - Class C Weighted Index Market Index - Unhedged
------------------- ------------------ -------------- -----------------------
<S> <C> <C> <C> <C>
Aug 1994 $9,547 $10,000 $10,000 $10,000
Oct 1994 $9,706 $10,050 $9,960 $10,262
Apr 1995 $9,581 $9,893 $9,977 $11,314
Oct 1995 $10,390 $10,788 $9,563 $12,111
Apr 1996 $11,147 $11,534 $10,806 $12,136
Oct 1996 $11,730 $12,081 $10,607 $12,850
Apr 1997 $11,400 $11,694 $11,050 $12,367
</TABLE>
+ Hypothetical illustration of $10,000 invested in Class A and C shares at
inception on August 25, 1994, assuming deduction of the maximum 4.50% sales
charge at the time of investment for Class A shares and the deduction of
the 1.00% CDSC for Class C shares. It also assumes reinvestment of
dividends and capital gains, if any, at net asset value through April 30,
1997. The Morgan Stanley Capital International ("MSCI") 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 Market 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 as 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.
================================================================================
Top Ten Holdings* As of April 30, 1997
================================================================================
<TABLE>
<S> <C>
1. Japanese Government 9.9%
- --------------------------------------------------------------------------------
2. Bonos Y Oblig De Estado 4.3
- --------------------------------------------------------------------------------
3. Buoni Poliennali Del Tesoro 3.9
- --------------------------------------------------------------------------------
4. Kingdom of Belgium 3.3
- --------------------------------------------------------------------------------
5. United Kingdom Treasury 2.7
- --------------------------------------------------------------------------------
6. Coca-Cola Amatil Ltd. 2.6
- --------------------------------------------------------------------------------
7. Novartis AG Registered Shares 2.5
- --------------------------------------------------------------------------------
8. Telecom Italia Mobile S.p.A. 2.3
- --------------------------------------------------------------------------------
9. Volkswagen AG Preferred 2.3
- --------------------------------------------------------------------------------
10. Telecomunicoes Brasileiras S.A.-Telebras ADR 2.1
- --------------------------------------------------------------------------------
</TABLE>
* As a percentage of total investments by issuer.
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Investment Allocation as of April 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Cash and Cash Equivalents 10.7%
Europe 57.3%
Asia/Pacific 25.7%
The Americas 6.3%
</TABLE>
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 21
<PAGE>
================================================================================
Emerging Markets Portfolio
================================================================================
The Emerging Markets Portfolio seeks long-term capital appreciation on its
assets through a portfolio invested primarily in securities of emerging country
issuers.
NASDAQ SYMBOL
-------------
Class A SMMAX
Class B SEMBX
[PHOTO]
DONALD ELEFSON
Vice President
Portfolio Manager
Donald Elefson joined the Smith Barney International Equity team in 1994.
Previously he was at Merrill Lynch Asset Management, where he assisted in the
management of emerging markets mutual funds. Prior to Merrill Lynch, he held
positions in equity analysis with Cazenove Inc. and BHGF Securities in New York,
and with George Hauck and Sohn in Frankfurt, Germany. He is a Chartered
Financial Analyst, the past chairman of the New York Society of Securities
Analysts International Program committee and a member of the Institute of
Chartered Financial Analysts. Mr. Elefson holds a B.A. in Economics from the
University of Washington.
Performance Update
For the six months ended April 30, 1997, the Emerging Markets Portfolio had a
total return of 17.96% for Class A shares and outperformed its Lipper Analytical
Services, Inc. peer group average of 14.60% for the same period.
Emerging Markets Overview
Over the reporting period, many emerging markets enjoyed robust growth fueled by
improved economic fundamentals and increased investment capital inflows. The
soaring stock and real estate markets in Hong Kong indicate that investors there
have a generally positive outlook toward Hong Kong's transition to Chinese rule.
In addition, many Latin American countries appear to be well on their way to
economic recovery. However, a sharp correction in the U.S. stock market earlier
this year triggered similar declines across many global financial markets. This
correction was caused by the tightening of monetary policy by the Fed and fears
of higher U.S. interest rates. Nevertheless, many money managers continue to
look toward the emerging markets for investment opportunities.
Investment Strategy
The Emerging Markets Portfolio follows an investment strategy involving broad
geographic diversification, careful individual stock selection and prudent
exposure to newly emerging markets with high growth potential. We emphasize
investments in countries that are usually in the early stages of their economic
development and, in our view, offer superior return potential over more
developed nations.
Asia and Pacific Rim
We continue to devote a major portion of the Portfolio's assets to Asian
financial markets. As of April 30, 1997, approximately 44% of the Portfolio's
assets were invested in Asian companies. In our opinion, the performance of
these stocks was affected by two major political and economic events -- renewed
interest in China, driven in part by the impending handover of Hong Kong to
China in July, and considerable volatility in the markets of Malaysia and
Thailand.
China continues to show promise as one of the largest and most closely watched
emerging economies of the region. Over the past two years, the Chinese
government has successfully brought inflation down from 20% to around 8%
annually, which has led to expectations of a looser monetary policy. The
prospects of lower interest rates in this largely untapped marketplace were
viewed very favorably by many investors.
- --------------------------------------------------------------------------------
22 1997 Semi-Annual Report to Shareholders
<PAGE>
Moreover, investors have demonstrated a growing optimism towards the handover of
Hong Kong to China. Many observers believe that Hong Kong remains a critical
part of China's economic future. In fact, the Gross Domestic Product (GDP) of
Hong Kong with only a fraction of China's population is nearly one-fifth of the
entire GDP of China. More importantly, Hong Kong serves as a vital conduit for
trade, providing China with a source of capital and technology it will need to
carry out the planned massive infrastructure projects. In our opinion, with so
much economic advantage to gain, it is unlikely that China will move to dampen
Hong Kong's economy.
After a period of very strong growth in the peripheral Asian markets (e.g.,
Thailand, a major component in many major emerging market indices), some of
these economies began to show signs of overheating. In response, Thailand's
central bank announced loan restrictions in late 1996 after a rapid rise in loan
growth. According to Thailand's central bank, many of these loans were not
directed toward expanding the country's economic base, and therefore were
increasing inflationary pressures. The significance of this government
intervention in a previously vigorous economy rippled throughout the region and
raised investor concerns in many Asian markets.
Fearful of inflation, the Malaysian central bank followed with lending
restrictions of its own in March of this year. Officials in that country cited
the swift growth in loan rates, particularly to construction projects and
automobiles, as the cause for the intervention. Similar to Thailand, Malaysia's
overly rapid economic growth and the resulting lending restrictions created
considerable selling pressures in the first months of 1997.
The examples of Thailand and Malaysia have raised the question of whether other
Asian countries can maintain the high growth rates they have enjoyed in the
past. Furthermore, because Asia is the largest portion of emerging market
indices, its future is critical to the performance of emerging markets as a
whole.
In order to benefit from lower interest rates in China and improving investor
sentiment toward Hong Kong's absorption into China, we increased the Portfolio's
investments in China/Hong Kong from approximately 10% to 17% over the past six
months. Primarily, we added Chinese companies listed on Hong Kong stock
exchanges, frequently referred to as "red chips." For example, we added Guangnan
Holdings, a holding company with interests in supermarkets and food. Another red
chip we added was Guangdong Kelon, one of China's largest refrigerator
manufacturers. We believe that stocks such as Guangnan Holdings and Guangdo ng
Kelon should fare well in a new and more open posttransition China.
Latin America
Stocks of Latin American countries represented roughly 32% of the Portfolio's
investments as of April 30, 1997. Improved economic and political environments
in Brazil and Mexico led to good performance in Latin America. For example,
Mexico reported over 5% GDP growth in 1996. Although this growth represents only
one year of progress, it adds to the growing body of evidence that Mexico may be
recovering from the deep recession it entered in 1994.
Similarly, Brazil appears to be making solid progress on necessary public sector
reforms. For instance, allowances for rate rebalancing in the telecommunications
sector have helped pave the way for future full privatization of that industry.
Many investors believe that privatization will enhance company profits and lead
to lower inflation. In recent years, Brazil's inflation has dropped from
astronomical levels to around the low double-digit level. As privatization
continues, we believe the trend toward lower inflation in Brazil's economy
should also advance.
Over the reporting period, we increased the Portfolio's exposure to Brazil from
about 12% to over 15% to take advantage of the improving economic environment in
that country. The stocks we added were mainly public sector companies. Some of
these
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 23
<PAGE>
new additions include Telerj, the telephone operator in Rio de Janeiro; and
Copel, the power utility in the state of Parana. We believe that both of these
stocks should benefit from ongoing liberalization and privatization. We also
sold Acindar, an Argentine steel company, which had doubled in price since it
was purchased.
Europe and Russia
Many emerging market investors have returned their attention to Russian stocks
after a number of favorable events developed over the past six months. Russian
President Boris Yeltsin recovered from successful heart surgery to reassume
control of the government. Mr. Yeltsin's long-term health problems had left him
both physically and politically weakened, giving rise to speculation that
opposition parties might quash efforts toward economic reforms. However, after
returning to office, Mr. Yeltsin reshuffled his cabinet and the new appointees
have reduced opposition to the ongoing reforms that many investors believe are
necessary for the future health of the Russian economy. This renewed confidence
in Russia has attracted significant new investment capital. In addition, four
new American Depository Receipts (ADRs) were issued, further adding to
investors' exposure to the Russian equity market. (An ADR is a receipt for
shares of a foreign corporation held in the vault of a U.S. bank entitling
shareholders to all dividends and capital gains.) Also during the reporting
period, we sold Borsodchem, a Hungarian petrochemical producer. This stock had
also nearly doubled in price since it was first purchased and we believed that
it was prudent to take profits.
Emerging Markets Outlook
We remain very positive on the prospects for emerging markets over the next six
months. According to the International Monetary Fund (IMF), worldwide economic
growth should be around 4% in 1997 -- the strongest growth rate in many years.
Over the past six months, we have focused on cyclical stocks (e.g., pulp, steel
and oil industries), to take advantage of this anticipated growth. In our view,
stronger economic growth should lead to increased business opportunities for
many basic material and cyclical company stocks.
We expect continuing economic recovery in Latin American markets. As of April
30, 1997, Latin American markets had gained nearly 15% for the year. We believe
this robust economic growth should continue to attract investor interest as long
as these economies stay on track. In addition, growing confidence in Hong Kong's
transition to Chinese rule has the potential to shift investor attention back to
Asian emerging markets. Finally, eastern Europe and Russia continue to
demonstrate steady growth. The Russian economy appears to be on the right course
and should become even more attractive as the year progresses.
In closing, we believe emerging equity markets offer investors excellent
long-term growth prospects while providing necessary added diversity to their
portfolios.
/s/ Donald Elefson
Donald Elefson
Vice President
May 15, 1997
- --------------------------------------------------------------------------------
24 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Historical Performance -- Class A Shares
================================================================================
<TABLE>
<CAPTION>
Net Asset Value
--------------------
Beginning End Income Total
Period Ended of Period of Period Dividends Returns(1)
================================================================================
<S> <C> <C> <C> <C>
4/30/97 $12.08 $14.25 $0.00 17.96%+
- --------------------------------------------------------------------------------
10/31/96 11.06 12.08 0.00 9.22
- --------------------------------------------------------------------------------
Inception*-- 10/31/95 12.00 11.06 0.00 (7.83)+
================================================================================
Total $0.00
================================================================================
</TABLE>
================================================================================
Historical Performance -- Class B Shares
================================================================================
<TABLE>
<CAPTION>
Net Asset Value
---------------------
Beginning End Income Total
Period Ended of Period of Period Dividends Returns(1)
================================================================================
<S> <C> <C> <C> <C>
4/30/97 $11.95 $14.03 $0.00 17.41%+
- --------------------------------------------------------------------------------
10/31/96 11.02 11.95 0.00 8.44
- --------------------------------------------------------------------------------
Inception*-- 10/31/95 12.00 11.02 0.00 (8.17)+
================================================================================
Total $0.00
================================================================================
</TABLE>
================================================================================
Historical Performance -- Class C Shares
================================================================================
<TABLE>
<CAPTION>
Net Asset Value
--------------------
<C> Beginning End Income Total
Period Ended of Period of Period Dividends Returns(1)
================================================================================
<S> <C> <C> <C> <C>
4/30/97 $11.95 $14.04 $0.00 17.49%+
10/31/96 11.02 11.95 0.00 8.44
Inception*-- 10/31/95 12.00 11.02 0.00 (8.17)+
================================================================================
Total $0.00
================================================================================
</TABLE>
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 25
<PAGE>
================================================================================
Average Annual Total Return
================================================================================
<TABLE>
<CAPTION>
Without Sales Charge(1)
------------------------------------------
Class A Class B Class C
================================================================================
<S> <C> <C> <C>
Six Months Ended 4/30/97+ 17.96% 17.41% 17.49%
- --------------------------------------------------------------------------------
Year Ended 4/30/97 14.55 13.51 13.96
- --------------------------------------------------------------------------------
Inception* through 4/30/97 9.10 8.25 8.28
================================================================================
<CAPTION>
With Sales Charge(2)
----------------------------------------
Class A Class B Class C
================================================================================
<S> <C> <C> <C>
Six Months Ended 4/30/97+ 12.03% 12.41% 16.49%
- --------------------------------------------------------------------------------
Year Ended 4/30/97 8.86 8.51 12.96
- --------------------------------------------------------------------------------
Inception* through 4/30/97 6.31 6.35 8.28
================================================================================
</TABLE>
================================================================================
Cumulative Total Return
================================================================================
<TABLE>
<CAPTION>
Without Sales Charge(1)
================================================================================
<S> <C>
Class A (Inception* through 4/30/97) 18.75%
- --------------------------------------------------------------------------------
Class B (Inception* through 4/30/97) 16.92
- --------------------------------------------------------------------------------
Class C (Inception* through 4/30/97) 17.00
================================================================================
</TABLE>
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the 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 within one
year from initial purchase. Thereafter, this CDSC declines 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.
* The inception date for Class A, B and C shares is May 12, 1995.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
- --------------------------------------------------------------------------------
26 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Emerging Markets Portfolio at a Glance (unaudited)
================================================================================
Growth of $10,000 Invested in Class A, B and C Shares of the
Emerging Markets Portfolio vs. MSCI Free World Market Index+
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
May 1995--April 1997
Emerging Markets Emerging Markets Emerging Markets MSCI Free World
Portfolio - Class A Portfolio - Class B Portfolio - Class C Market Index
------------------- ------------------- ------------------- ------------
<S> <C> <C> <C> <C>
May 1995 $9,501 $10,000 $10,000 $10,000
Oct 1995 $8,757 $8,724 $9,092 $10,497
Apr 1996 $9,850 $9,800 $10,167 $11,928
Oct 1996 $9,565 $9,560 $9,958 $12,264
Apr 1997 $11,283 $11,292 $11,700 $13,146
</TABLE>
+ Hypothetical illustration of $10,000 invested in Class A, B and C shares at
inception on May 12, 1995, assuming deduction of the maximum 5.00% sales
charge at the time of investment for Class A shares, the deduction of the
maximum 5.00% CDSC for Class B shares and the deduction of the 1.00% CDSC
for Class C shares. It also assumes reinvestment of dividends and capital
gains, if any, at net asset value through April 30, 1997. The Morgan
Stanley Capital International ("MSCI") Free World Market 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 as 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.
================================================================================
Top Ten Holdings* As of April 30, 1997
================================================================================
<TABLE>
<CAPTION>
<S> <C>
1. Precious Shipping Public Co. Ltd. Foreign 1.8%
- --------------------------------------------------------------------------------
2. Telecomunicacoes Brasileiras S.A.-Telebras ADR 1.7
- --------------------------------------------------------------------------------
3. Ferreyros S.A. 1.5
- --------------------------------------------------------------------------------
4. Shanghai Lujiazui Finance and
Trade Zone Development Co. Ltd. 1.5
- --------------------------------------------------------------------------------
5. Vina Concha y Toro S.A. ADR 1.5
- --------------------------------------------------------------------------------
6. Centrais Electricas Brasileiras S.A. ADR Preferred 1.4
- --------------------------------------------------------------------------------
7. China Merchants Hai Hong Holdings 1.4
- --------------------------------------------------------------------------------
8. Petroleo Brasileiro S.A. Preferred 1.4
- --------------------------------------------------------------------------------
9. PT Indah Kiat Pulp &Paper Corp. 1.4
- --------------------------------------------------------------------------------
10. Telec Do Rio Janeiro S.A. Preferred 1.4
- --------------------------------------------------------------------------------
</TABLE>
* As a percentage of total investments by issuer.
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
Investment Allocation as of April 30, 1997
- --------------------------------------------------------------------------------
<S> <C>
Cash and Cash Equivalents 2.5%
Asia/Pacific 43.9%
Latin America 32.1%
Europe 13.5%
Other 8.0%
</TABLE>
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 27
<PAGE>
================================================================================
European Portfolio
================================================================================
The European Portfolio seeks long-term capital appreciation by investing
primarily in equity securities of issuers based in countries of Europe.
NASDAQ SYMBOL
-------------
Class A SBEAX
Class B SBEBX
[PHOTO]
REIN W. VAN DER DOES
Vice President
Portfolio Manager
Rein W. van der Does began his career with Drexel Burnham Lambert in 1958 as a
domestic research analyst. In 1975, he joined Drexel's International Research
Department and was appointed Director of International Research and Head of
Portfolio Strategy in 1985. He moved with the International Equity team to Smith
Barney in 1990. He is a member of the New York State Association for
International Investment and a member of the New York Society of Security
Analysts. Mr. van der Does was awarded a doctorate in Economics from the Dutch
Economic University in Rotterdam.
Performance Update
The European Portfolio posted a total return of 7.62% for Class A shares for the
six months ended April 30, 1997, and trailed its Lipper Analytical Services,
Inc. peer group average of 9.62% for the same period.
European Markets Update
We remain confident in our belief that Europe continues to offer investors
attractive opportunities to participate in the growth potential of the global
marketplace. The European economic recovery, which has lagged U.S. economic
recovery by 18 months, is well under way. In our opinion, this recovery has been
driven by three primary trends: European governments striving to meet membership
requirements in the EMU, the rise of a true shareholder culture on the Continent
and increasing privatization of many state-controlled industries.
Of the three trends, the EMU has received the most media attention and recently
has been the subject of considerable controversy. Prospective member nations
have until the end of 1997 to meet the strict fiscal requirements set down by
the Maastricht Treaty, which outlines conditions for membership in the EMU. As a
result, many countries are racing to meet the deadline by bringing their budgets
down to required levels.
Recently, some observers speculated that Germany, considered by many to be
Europe's leading economy, would be unable to meet the budget requirements.
Germany's failure to qualify for membership in the monetary union could threaten
the entire union. This possibility introduced significant market turbulence in
recent weeks. The high cost of reuniting with East Germany has been partially
responsible for the financial crunch in Germany. Furthermore, the recent
elections in France, which restored the Socialist Party to power, caused some
observers to doubt the future prospects for European integration. However,
France's newly elected Prime Minister, Lionel Jospin, has announced cabinet
appointments which have calmed the market somewhat. Nevertheless, efforts toward
a monetary union have created positive fundamental changes in European
economies. The movement toward the EMU has contributed to a low-interest-rate
environment, which in turn has aided Europe's economic upturn.
Moreover, many European companies have focused on enhancing shareholder value.
Facing increasing global competition, these companies have improved profits
through corporate restructuring, similar to the reforms undertaken by U.S.
corporations in the 1970s and 1980s. Most of these restructuring efforts have
focused on the bottom line, creating companies that are more efficient,
streamlined, and cost conscious.
- --------------------------------------------------------------------------------
28 1997 Semi-Annual Report to Shareholders
<PAGE>
For example, Ciba Geigy and Sandoz, the two Swiss pharmaceutical giants,
recently merged to form the world's third-largest pharmaceutical company, called
Novartis. (As of April 30, 1997, Novartis was the second largest holding of the
Portfolio at 4.7%.) Although this trend is only beginning, we believe that the
current wave of mergers and acquisitions, and the spinning off of unproductive
assets in Europe, will continue. In our view, the focus on shareholder value has
been driven by the growth of U.S. investing overseas, the expansion of European
pension plans, and relatively low Gross Domestic Product (GDP) growth -- trends
that we believe should only increase in the future.
Similar to reforms in the private sector, a number of European governments are
seeking to improve their own efficiency by privatizing many key state-owned
industries. Some recent, high-profile examples include Italy's energy supplier
Ente Nazionale Idrocarbu and the German telecommunications powerhouse, Deutsche
Telekom. Despite the widespread job cuts caused by economic reform in both the
public and private sectors, these governments recognize the necessity of
fundamental changes to ensure the future health of their economies.
Investment Strategy
We continue to favor a "bottom up" approach when selecting investments for the
Portfolio. Although economic cycles are important when evaluating a company's
outlook, we generally search for companies that exhibit excellent growth
prospects regardless of the macroeconomic conditions in Europe. In our opinion,
this approach should provide investors with competitive returns over the long
term.
During the reporting period, we remained underweighted in the United Kingdom
because of the political uncertainties that persist there. We continue to favor
select French companies (21.8%) because of their relative value and continue to
focus on Germany (14.4%) because of its leadership role in the corporate
restructuring trends discussed earlier in this letter. In the Netherlands
(15.4%), we continue to find compelling investment opportunities in companies
such as Randstad (a temporary employment company), Ahrend (an office supply and
furniture company) and Hunter Douglas (a window covering company).
European Markets Outlook
We believe that many European companies continue to offer excellent values
compared to their U.S. counterparts. For example, European stocks are selling at
an average of approximately 8.5x 1997 price/cash flow compared to U.S. stocks,
which are selling at 11.1x 1997 price/cash flow. In addition, Europe's average
stock dividend is roughly 3% while U.S. stock dividends average around 2%.
For these reasons, we remain bullish on the prospects for select European
companies. After lagging behind the U.S. stock market in performance, European
markets appear to be poised to enter a period of strong growth. In addition, we
believe that investing in Europe's well-established exchanges represents a
conservative way for investors to participate in the exciting growth potential
of foreign stock markets.
/s/ Rein W. van der Does
Rein W. van der Does
Vice President
May 1, 1997
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 29
<PAGE>
================================================================================
Historical Performance -- Class A Shares
================================================================================
<TABLE>
<CAPTION>
Net Asset Value
--------------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
===============================================================================================================
<S> <C> <C> <C> <C> <C>
4/30/97 $17.25 $17.38 $0.00 $1.16 7.62%+
- ---------------------------------------------------------------------------------------------------------------
10/31/96 14.67 17.25 0.09 0.04 18.65
- ---------------------------------------------------------------------------------------------------------------
10/31/95 12.88 14.67 0.00 0.00 13.90
- ---------------------------------------------------------------------------------------------------------------
Inception*-- 10/31/94 12.50 12.88 0.00 0.00 3.04+
===============================================================================================================
Total $0.09 $1.20
===============================================================================================================
</TABLE>
================================================================================
Historical Performance -- Class B Shares
================================================================================
<TABLE>
<CAPTION>
Net Asset Value
--------------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
===============================================================================================================
<S> <C> <C> <C> <C> <C>
4/30/97 $17.09 $17.14 $0.00 $1.16 7.20%+
- ---------------------------------------------------------------------------------------------------------------
10/31/96 14.56 17.09 0.00 0.04 17.72
- ---------------------------------------------------------------------------------------------------------------
Inception*-- 10/31/95 12.62 14.56 0.00 0.00 15.37+
===============================================================================================================
Total $0.00 $1.20
===============================================================================================================
</TABLE>
================================================================================
Historical Performance -- Class C Shares
================================================================================
<TABLE>
<CAPTION>
Net Asset Value
--------------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
===============================================================================================================
<S> <C> <C> <C> <C> <C>
4/30/97 $17.04 $17.09 $0.00 $1.16 7.22%+
- ---------------------------------------------------------------------------------------------------------------
10/31/96 14.51 17.04 0.00 0.04 17.78
- ---------------------------------------------------------------------------------------------------------------
10/31/95 12.83 14.51 0.00 0.00 13.09
- ---------------------------------------------------------------------------------------------------------------
Inception*-- 10/31/94 12.48 12.83 0.00 0.00 2.80+
===============================================================================================================
Total $0.00 $1.20
===============================================================================================================
</TABLE>
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
- --------------------------------------------------------------------------------
30 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Average Annual Total Return
================================================================================
<TABLE>
<CAPTION>
Without Sales Charge(1)
-----------------------------------
Class A Class B Class C
================================================================================
<S> <C> <C> <C>
Six Months Ended 4/30/97+ 7.62% 7.20% 7.22%
- --------------------------------------------------------------------------------
Year Ended 4/30/97 14.03 13.16 13.20
- --------------------------------------------------------------------------------
Inception* through 4/30/97 13.35 16.36 12.72
================================================================================
<CAPTION>
With Sales Charge(2)
-----------------------------------
Class A Class B Class C
================================================================================
<S> <C> <C> <C>
Six Months Ended 4/30/97+ 2.23% 2.20% 6.22%
- --------------------------------------------------------------------------------
Year Ended 4/30/97 8.31 8.16 12.20
- --------------------------------------------------------------------------------
Inception* through 4/30/97 11.56 15.39 12.72
================================================================================
</TABLE>
================================================================================
Cumulative Total Return
================================================================================
<TABLE>
<CAPTION>
Without Sales Charge(1)
================================================================================
<S> <C>
Class A (Inception* through 4/30/97) 49.86%
- --------------------------------------------------------------------------------
Class B (Inception* through 4/30/97) 45.60
- --------------------------------------------------------------------------------
Class C (Inception* through 4/30/97) 46.83
================================================================================
</TABLE>
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges 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 within one
year from initial purchase. Thereafter, this CDSC declines 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.
* Inception dates for Class A, B and C are February 7, 1984, November 7, 1994
and February 14, 1994, respectively.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 31
<PAGE>
================================================================================
European Portfolio at a Glance (unaudited)
================================================================================
Growth of $10,000 Invested in Class A Shares of the
European Portfolio vs. MSCI European Market Index*
- --------------------------------------------------------------------------------
[THE FOLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
February 1994--April 1997
European Portfolio MSCI European Market Index
------------------ --------------------------
<S> <C> <C>
Feb 1994 $9,549 $10,000
Apr 1994 $9,481 $10,531
Oct 1994 $9,840 $10,859
Apr 1995 $10,298 $11,306
Oct 1995 $11,207 $11,256
Apr 1996 $12,550 $12,250
Oct 1996 $13,298 $13,285
Apr 1997 $14,311 $14,874
</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 April 30, 1997. The
Morgan Stanley Capital International ("MSCI") European Market 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 as 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.
================================================================================
Top Ten Holdings* As of April 30, 1997
================================================================================
<TABLE>
<CAPTION>
<S> <C>
1. Nokia Oy AB Class A Shares 6.6%
- --------------------------------------------------------------------------------
2. Novartis AG Registered Shares 4.7
- --------------------------------------------------------------------------------
3. Tomara Systems ASA 4.1
- --------------------------------------------------------------------------------
4. Ahrend Groep N.V. 4.0
- --------------------------------------------------------------------------------
5. Independent Newspapers PLC 4.0
- --------------------------------------------------------------------------------
6. VA Technologie AG 4.0
- --------------------------------------------------------------------------------
7. Computer Management Systems PLC 3.8
- --------------------------------------------------------------------------------
8. Randstad Holdings N.V. 3.8
- --------------------------------------------------------------------------------
9. Hunter Douglas N.V. 3.6
- --------------------------------------------------------------------------------
10. Guilbert S.A. 3.4
- --------------------------------------------------------------------------------
</TABLE>
* As a percentage of total investments by issuer.
[THE FOLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
Investment Allocation as of April 30, 1997
- --------------------------------------------------------------------------------
<S> <C>
France 21.8%
Germany 14.4%
Netherlands 15.4%
United Kingdom 8.8%
Finland 8.6%
Italy 7.6%
Other 21.2%
Cash and Cash Equivalents 2.2%
</TABLE>
- --------------------------------------------------------------------------------
32 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Pacific Portfolio
================================================================================
The Pacific Portfolio's primary investment is long-term capital appreciation. In
seeking to achieve its objective, the Portfolio will invest primarily in a
diversified portfolio of equity securities of companies in Australia, Hong Kong,
India, Indonesia, Japan, Malaysia, New Zealand, Pakistan, Papua New Guinea, the
People's Republic of China, the Philippines, Singapore, South Korea, Sri Lanka,
Taiwan and Thailand.
[PHOTO]
SCOTT E. KALB
Vice President
Portfolio Managers
Scott E. Kalb joined the inter-national equity team in 1995. He has eleven years
of experience in research and was formerly Head of International Equity Research
at Smith Barney from 1990 to 1995, where he was responsible for the coverage of
equities in emerging markets, including Latin America, Asia, the Middle East and
Africa, as well as Europe and Japan. Prior to joining Smith Barney, Mr. Kalb
served as the First Vice President of Corporate Finance, and Vice President of
Equity Research, for Drexel Burnham Lambert. Previously he worked at James Capel
and he also served for two years as economic consultant for the Ministry of
Finance in Korea. Mr. Kalb lived in Asia for ten years and in London for two,
speaks Korean fluently and some Japanese. Mr. Kalb holds a B.A. degree from
Oberlin College and an M.A. in Economics from Harvard University.
[PHOTO]
DAVID ISHIBASHI
Vice President
David Ishibashi joined Smith Barney International Equity team as a Vice
President and Portfolio Manager in 1993. Mr. Ishibashi came to Smith Barney from
SG Warburg, where he was responsible for Japanese equities and headed the Japan
desk. Previously he was at Baring Securities, Inc., where he was responsible for
Japan and Southeast Asia and opened and operated Baring's first West Coast
office. He also spent four years at Nomura Securities International brokering
Japanese Securities and established the Nomura Finance Collection at the Crocker
School of Business and Business Library. Prior to that, he served as a financial
analyst at Rockwell International. Mr. Ishibashi has a B.A. from California
State College at Los Angeles and attended the post graduate studies program in
Tokyo at the Inter-Cultural Japanese Language Institute.
Performance Update
During the six-month period ended April 30, 1997, the Pacific Portfolio
generated a 6.58% total return, outperforming the Lipper Analytical Services
Inc. peer group average return of -0.29%. We are also pleased to report that the
Pacific Portfolio outperformed the benchmark Morgan Stanley Capital
International (MSCI) All Country Asia Pacific Index that had a roughly -8.60%
total return for the same period. At the end of April, the Pacific Portfolio
held 47 securities in 10 countries. (The MSCI All Country Asia Pacific Index is
a common benchmark used by investors to measure the performance of equities in
Australia, New Zealand and countries in the Far East.)
Asian Markets Update
The last half-year has been a difficult time for Asian stock markets in general,
as countries in the region have had to cope with three challenging developments.
The most important event has to do with the return of Hong Kong to Chinese
sovereignty in July. This transition has repercussions for all of Asia, as most
Pacific Basin economies depend greatly on intraregional trade, particularly with
China, to fuel economic growth. The event has focused attention away from Hong
Kong and onto China. Rather than being gloomy about the end of British rule,
many investors have become enthusiastic about the prospects for the new age
under China and have
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 33
<PAGE>
shown strong demand for Chinese-related shares. Chinese "red chips" (i.e.,
Chinese companies incorporated and domiciled in Hong Kong with shares trading on
the Hong Kong exchange but with their business based in China) and "H" shares
(i.e., Chinese companies incorporated and headquartered in China but whose
shares trade on the Hong Kong exchange) have been in great demand. Meanwhile,
Hong Kong blue-chip shares (i.e., stocks of well established companies) have
largely traded in a tight range.
The second major development has been economic crisis and a subsequent stock
market collapse in Thailand. After years of strong economic growth and heady
expansion, Thailand fell prey to an enormous speculative bubble in property that
burst in 1996. As property prices plunged, nonperforming loans soared, the Thai
baht came under pressure, interest rates skyrocketed and growth turned negative.
The ensuing Thai crisis has led to bankruptcies in the property, finance and
even manufacturing sectors. On a regional basis, the Thai crisis has made many
investors nervous about other Southeast Asian countries, and governments in
several countries have introduced measures to cool overheated property markets.
As a result, stock markets in Malaysia, Singapore and the Philippines declined
by approximately 10% to 17% in U.S. dollar terms during the period.
The third major development has been rapid depreciation of the yen vis-a-vis the
dollar. After appreciating to 80 yen to the dollar, the yen/dollar rate declined
to 114 by the end of October 1996. By the end of April 1997 the yen had fallen
to 127 to the dollar, a further 11.5% decline. Large swings in the yen/dollar
rate have a big impact on other Asian economics, affecting debt service ratios,
trade balances and the demand for local goods competing with Japanese products
in world markets.
Recent Portfolio Changes
We made several changes to the Pacific Portfolio to cope with the developments
noted above. To start with, we rebalanced the Hong Kong position, maintaining
our weighting at about 25% of the Portfolio but switching into select red chips
and H shares to take advantage of positive trends in China. Two of our favorite
companies in this regard are Shanghai Industrial and China Resources
Enterprises. Shanghai Industrial is the premier conglomerate in Shanghai
specializing in consumer products, auto businesses and infrastructure projects.
We believe the company's close ties to the local government position it well to
acquire new assets and projects on attractive terms. China Resources
Enterprises, owned indirectly by the Chinese Ministry of Foreign Trade, also is
well positioned for acquisitions and new projects. It specializes in property
development, cold storage, container terminals, food distribution and beer. Both
of these companies were among our top-ten holdings as of April 30, 1997.
Exposure to China stocks contributed to the Portfolio's outperformance versus
its benchmark during the reporting period.
Next, we reduced portfolio weightings in many Southeast Asian countries,
convinced that Thailand's economic woes were far from over and would continue to
trouble neighboring markets. Accordingly, we reduced Thailand to a zero
weighting from 6% at the end of October 1996, took the Philippines down to 1%
from 6% and reduced Singapore to 4.5% from 7.5%. Reduced exposure to Thailand
and the Philippines particularly, and Singapore to a lesser extent, contributed
to the Portfolio's relative outperformance during the period. In Malaysia, we
maintained the portfolio weighting at about 12%, switching into select shares
with less exposure to property, but were unable to escape completely the
negative sentiment and overall market decline.
In Japan, we increased the portfolio weighting to 21% from 16% previously,
expecting that the weaker yen rate against the dollar would stimulate growth in
export-oriented companies and eventually trickle down and cause better growth
for domestic firms. Accordingly, we added a familiar export name to the
- --------------------------------------------------------------------------------
34 1997 Semi-Annual Report to Shareholders
<PAGE>
portfolio, like Honda, as well as a few domestic firms like Seven Eleven Japan
and Sumitomo Realty. One new Japanese company we added, and one of our
favorites, is Noritsu Koki, the dominant manufacturer worldwide of automatic
photo developing machines. Nortisu Koki was one of the Portfolio's top-ten
holdings as of April 30, 1997.
Market Outlook
We expect that China-related shares in Hong Kong will continue to outperform
over the next six months. Valuations on some of these shares are a bit high, and
strong links to the dollar make this market vulnerable to interest-rate
tightening in the U.S., but for the time being the momentum is strong and a
resurgent Chinese economy is providing good growth opportunities for local
companies. We are attracted to the defensive nature of Japan at this stage, as
one of the few economies and stock markets that is out of sync with that of the
United States. We also believe that the weaker yen, if sustained, will drive
stronger earnings and economic recovery. We continue to look for fundamentally
attractive Japanese shares to add to the Portfolio.
We expect it will take some time for Thailand to sort out its economic problems
and thus have no immediate plans to reenter this market. The Philippines also
makes us a bit nervous, with its heavy exposure to foreign currency loans and
cracks appearing in the property market. On the other hand, we believe that
select Malaysian and Singaporean shares have been unfairly tarnished by economic
problems in neighboring countries and are likely to recover later this year. In
addition, we are expecting a rebound in the South Korean economy and have added
a few Korean shares to the Portfolio at what we believe are extremely attractive
valuation levels.
Thank you for your investment in the Pacific Portfolio.
/s/ Scott E. Kalb /s/ David Ishibashi
Scott E. Kalb David Ishibashi
Vice President Vice President
May 29, 1997
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 35
<PAGE>
================================================================================
Historical Performance -- Class A Shares
================================================================================
<TABLE>
<CAPTION>
Net Asset Value
---------------------
Beginning End Income Total
Period Ended of Period of Period Dividends Returns(1)
==================================================================================
<S> <C> <C> <C> <C>
4/30/97 $10.18 $10.85 $0.00 6.58%+
- ----------------------------------------------------------------------------------
10/31/96 10.07 10.18 0.00 1.09
- ----------------------------------------------------------------------------------
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
Period Ended of Period of Period Dividends Returns(1)
==================================================================================
<S> <C> <C> <C> <C>
4/30/97 $10.01 $10.62 $0.00 6.09%+
- ----------------------------------------------------------------------------------
10/31/96 9.99 10.01 0.00 0.20
- ----------------------------------------------------------------------------------
Inception*-- 10/31/95 12.64 9.99 0.00 (20.97)+
==================================================================================
Total $0.00
==================================================================================
</TABLE>
================================================================================
Historical Performance -- Class C Shares
================================================================================
<TABLE>
<CAPTION>
Net Asset Value
---------------------
Beginning End Income Total
Period Ended of Period of Period Dividends Returns(1)
==================================================================================
<S> <C> <C> <C> <C>
4/30/97 $9.98 $10.58 $0.00 6.01%+
10/31/96 9.95 9.98 0.00 0.30
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.
- --------------------------------------------------------------------------------
36 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Average Annual Total Return
================================================================================
<TABLE>
<CAPTION>
Without Sales Charge(1)
-----------------------------------
Class A Class B Class C
================================================================================
<S> <C> <C> <C>
Six Months Ended 4/30/97+ 6.58% 6.09% 6.01%
- --------------------------------------------------------------------------------
Year Ended 4/30/97 (3.38) (4.07) (3.99)
- --------------------------------------------------------------------------------
Inception* through 4/30/97 (4.29) (6.78) (5.05)
================================================================================
<CAPTION>
With Sales Charge(2)
-----------------------------------
Class A Class B Class C
================================================================================
<S> <C> <C> <C>
Six Months Ended 4/30/97+ 1.21% 1.09% 5.01%
Year Ended 4/30/97 (8.21) (8.86) (4.95)
Inception* through 4/30/97 (5.81) (7.92) (5.05)
================================================================================
</TABLE>
================================================================================
Cumulative Total Return
================================================================================
<TABLE>
<CAPTION>
Without Sales Charge(1)
================================================================================
<S> <C>
Class A (Inception* through 4/30/97) (13.20)%
- --------------------------------------------------------------------------------
Class B (Inception* through 4/30/97) (15.98)
- --------------------------------------------------------------------------------
Class C (Inception* through 4/30/97) (15.36)
================================================================================
</TABLE>
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges 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 within one
year from initial purchase. Thereafter, this CDSC declines 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.
* Inception dates for Class A, B and C shares are February 7, 1994, November
7, 1994 and February 11, 1994, respectively.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 37
<PAGE>
================================================================================
Pacific Portfolio at a Glance (unaudited)
================================================================================
Growth of $10,000 Invested in Class A Shares of the
Pacific Portfolio vs. MSCI All Country Asia Pacific Index+
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
February 1994--April 1997
MSCI All Country
Pacific Portfolio Pacific Index
----------------- -------------
<S> <C> <C>
Feb 1994 $9,549 $10,000
Apr 1994 $9,465 $9,857
Oct 1994 $9,870 $10,372
Apr 1995 $8,121 $10,111
Oct 1995 $7,693 $9,208
Apr 1996 $8,579 $10,869
Oct 1996 $7,777 $9,522
Apr 1997 $8,289 $8,533
</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 April 30, 1997. The
Morgan Stanley Capital International ("MSCI") All Country Asia 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.
================================================================================
Top Ten Holdings* As of April 30, 1997
================================================================================
<TABLE>
<CAPTION>
<S> <C>
1. Shanghai Industrial Holdings Ltd. 4.9%
- --------------------------------------------------------------------------------
2. Coca-Cola Amatil Ltd. 4.0
- --------------------------------------------------------------------------------
3. Sunway Building Technology Berhad 3.1
- --------------------------------------------------------------------------------
4. HSBC Holdings PLC 3.0
- --------------------------------------------------------------------------------
5. Hutchinson Whampoa Ltd. 2.7
- --------------------------------------------------------------------------------
6. Larsen & Toubro Ltd. GDR 2.7
- --------------------------------------------------------------------------------
7. China Resources Enterprise Ltd. 2.6
- --------------------------------------------------------------------------------
8. Sungei Way Holdings Berhad 2.4
- --------------------------------------------------------------------------------
9. Mahindra & Mahindra Ltd. GDR 2.3
- --------------------------------------------------------------------------------
10. Noritsu Koki Co. Ltd. 2.2
- --------------------------------------------------------------------------------
</TABLE>
* As a percentage of total investments by issuer.
[THE FOLLOWING WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
Investment Allocation as of April 30, 1997
- --------------------------------------------------------------------------------
<S> <C>
Hong Kong 25.0%
Japan 21.2%
Malaysia 11.6%
Australia 9.6%
South Korea 6.3%
India 5.9%
Singapore 4.5%
Other 4.3%
Cash and Cash Equivalents 11.6%
</TABLE>
- --------------------------------------------------------------------------------
38 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Schedules of Investments (unaudited) April 30, 1997
================================================================================
<TABLE>
<CAPTION>
GLOBAL GOVERNMENT BOND PORTFOLIO
FACE
AMOUNT+ SECURITY VALUE
================================================================================
<C> <S> <C>
BONDS -- 94.1%
Belgium -- 5.2%
200,000,000 Kingdom of Belgium, 9.000% due 6/27/01 $ 6,516,798
- --------------------------------------------------------------------------------
Denmark -- 4.4%
Kingdom of Denmark:
19,000,000 6.000% due 12/10/99 2,979,200
15,000,000 8.000% due 5/15/03 2,526,778
- --------------------------------------------------------------------------------
5,505,978
- --------------------------------------------------------------------------------
Finland -- 2.2%
12,000,000 Finland Government, 10.000% due 9/15/01 2,759,474
- --------------------------------------------------------------------------------
France -- 2.8%
16,000,000 French Treasury Bill, 4.500% due 10/12/98 2,775,684
4,500,000 Government of France, 6.000% due 10/25/25 709,958
- --------------------------------------------------------------------------------
3,485,642
- --------------------------------------------------------------------------------
Germany -- 3.0%
6,300,000 Deutschland Republic, 6.250% due 4/26/06 3,769,013
- --------------------------------------------------------------------------------
Ireland -- 6.5%
5,300,000 Ireland Government, 6.500% due 10/18/01 8,105,470
- --------------------------------------------------------------------------------
Italy -- 5.7%
Buoni Poliennali Del Tesoro:
7,550,000,000 6.000% due 2/15/00 4,333,187
5,140,000,000 6.750% due 2/1/07 2,853,329
- --------------------------------------------------------------------------------
7,186,516
- --------------------------------------------------------------------------------
Japan -- 11.2%
Japanese Government:
1,463,000,000 Series 190, 2.900% due 12/20/06 11,885,219
260,000,000 Series 190B, 2.900% due 12/20/06 2,113,844
- --------------------------------------------------------------------------------
13,999,063
- --------------------------------------------------------------------------------
Spain -- 9.3%
Bonos Y Oblig Del Estado
1,300,000,000 6.750% due 4/15/00 9,173,644
325,000,000 8.800% due 4/30/06 2,523,019
- --------------------------------------------------------------------------------
11,696,663
- --------------------------------------------------------------------------------
Sweden -- 1.6%
16,300,000 Sweden Government, 6.000% due 2/9/05 1,956,789
- --------------------------------------------------------------------------------
United Kingdom -- 1.8%
1,350,000 United Kingdom Treasury, 7.500% due 12/7/06 2,191,896
- --------------------------------------------------------------------------------
United States -- 40.4%
2,000,000 Brazil Discount Bond, 6.875% due 4/15/24++ 1,611,260
2,500,000 Gas Argentino S.A., 7.250% due 12/7/98 2,478,125
2,000,000 International Bank of Reconstruction
& Development, 5.875% due 7/16/97 2,006,200
1,000,000 Republic of Argentina Bocon Pro2,
5.625% due 4/1/07 1,186,500
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 39
<PAGE>
================================================================================
Schedules of Investments (unaudited) (continued) April 30, 1997
================================================================================
<TABLE>
<CAPTION>
GLOBAL GOVERNMENT BOND PORTFOLIO
FACE
AMOUNT+ SECURITY VALUE
================================================================================
<C> <S> <C>
United States -- 40.4% (continued)
2,000,000 Russia Principal Loans due 12/29/49+++ $ 1,170,000
United Mexican States:
1,000,000 7.625% due 8/6/01++ 1,013,250
1,000,000 6.250% due 12/31/19 726,880
1,000,000 Value Recovery Rights, Expire 6/30/03* 0
U.S. Treasury Notes:
8,500,000 6.250% due 1/31/02 8,396,130
18,700,000 6.500% due 10/15/06 18,388,832
14,000,000 6.250% due 2/15/07 13,541,360
- --------------------------------------------------------------------------------
50,518,537
- --------------------------------------------------------------------------------
TOTAL BONDS
(Cost -- $122,872,507) 117,691,839
================================================================================
SHORT-TERM INVESTMENTS -- 5.9%
Treasury Bill -- 0.4%
500,000 Ukraine Treasury Bill due 7/23/97 483,348
- --------------------------------------------------------------------------------
Repurchase Agreement -- 5.5%
6,948,000 CS First Boston Corp., 5.300% due 5/1/97;
Proceeds at maturity -- $6,949,023;
(Fully collateralized by U.S. Treasury
Notes, 7.125% due 2/29/00;
Market value -- $7,093,944) 6,948,000
- --------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS
(Cost -- $7,431,348) 7,431,348
================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $130,303,855**) $ 125,123,187
================================================================================
</TABLE>
+ Represents local currency.
++ Variable rate security.
+++ Security traded on a when-issued basis.
* Non-income producing security.
** Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
40 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Schedules of Investments (unaudited) (continued) April 30, 1997
================================================================================
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY PORTFOLIO
SHARES SECURITY VALUE
================================================================================
<C> <S> <C>
STOCKS -- 95.5%
Argentina -- 0.7%
30,500 Quilmes Industrial S.A. ADR $ 282,125
850,000 Quilmes Industrial S.A. Preferred ADR 9,456,250
- --------------------------------------------------------------------------------
9,738,375
- --------------------------------------------------------------------------------
Australia -- 2.1%
2,438,440 Coca-Cola Amatil Ltd. 27,942,007
- --------------------------------------------------------------------------------
Austria -- 1.3%
61,180 VA Technologie AG 9,503,168
85,000 Wolford AG 8,759,795
- --------------------------------------------------------------------------------
18,262,963
- --------------------------------------------------------------------------------
Belgium -- 1.1%
85,000 Barco Industries N.V. 14,491,881
- --------------------------------------------------------------------------------
Brazil -- 1.3%
150,000 Telecomunicacoes Brasileiras S.A.--
Telebras ADR 17,212,500
- --------------------------------------------------------------------------------
Chile -- 0.7%
400,000 Santa Isabel S.A. ADR 9,750,000
- --------------------------------------------------------------------------------
Finland -- 2.8%
80,000 Nokia Corp. Class A Shares ADR 5,170,000
500,000 Nokia OY AB Class A Shares 32,312,500
- --------------------------------------------------------------------------------
37,482,500
- --------------------------------------------------------------------------------
France -- 3.8%
35,000 Carrefour Supermarche S.A. 21,852,512
113,105 Group Axime* 13,604,227
225,000 Sidel S.A. 16,160,647
- --------------------------------------------------------------------------------
51,617,386
- --------------------------------------------------------------------------------
Germany -- 6.0%
159,700 Leica Camera AG* 4,818,574
225,000 SGL Carbon AG 31,573,021
67,000 Systeme Anwendungen Produkte in der
Datenverarbeitung AG Preferred
Non-Voting Shares 12,304,960
200,000 Systeme Anwendungen Produkte in der
Datenverarbeitung AG Preferred ADR 12,175,000
40,000 Volkswagen AG Preferred 19,633,886
- --------------------------------------------------------------------------------
80,505,441
- --------------------------------------------------------------------------------
Hong Kong -- 4.2%
2,000,000 Cheung Kong Holdings Ltd. 17,556,316
10,080,000 Hong Kong & China Gas Co. Ltd. 16,005,164
700,000 Hong Kong & China Gas Co. Ltd.
Warrants, Expire 9/30/97* 352,417
3,000,000 Hutchinson Whampoa Ltd. 22,268,121
- --------------------------------------------------------------------------------
56,182,018
- --------------------------------------------------------------------------------
India -- 2.7%
350,000 BSES Ltd. GDR* 8,225,000
900,000 Larsen & Toubro Ltd. GDR 12,771,000
166,667 Mahindra & Mahindra Ltd. GDR* 2,070,837
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 41
<PAGE>
================================================================================
Schedules of Investments (unaudited) (continued) April 30, 1997
================================================================================
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY PORTFOLIO
SHARES SECURITY VALUE
================================================================================
<C> <S> <C>
India -- 2.7% (continued)
990,877 Mahindra & Mahindra Ltd. GDR*++ $ 11,890,524
20,000 The India Magnum Fund N.V.
Class B Shares++ 960,000
- --------------------------------------------------------------------------------
35,917,361
- --------------------------------------------------------------------------------
Ireland -- 8.8%
2,091,858 Bank of Ireland 21,836,662
2,035,276 CRH PLC 19,714,355
1,383,342 Grafton Group PLC 18,699,988
3,057,519 Greencore Group PLC 15,614,114
5,483,227 Independent Newspapers PLC 28,413,490
1,569,263 Irish Continental Group PLC 14,142,176
- --------------------------------------------------------------------------------
118,420,785
- --------------------------------------------------------------------------------
Israel -- 2.1%
550,000 Teva Pharmaceutical Industries Ltd. ADR 27,912,500
- --------------------------------------------------------------------------------
Italy -- 3.9%
250,000 Gucci Group N.V. NY Registered Shares 17,343,750
861,500 Industria Macchine Automatiche 3,648,558
200,000 Luxottica Group S.p.A. ADR 12,075,000
6,250,000 Telecom Italia Mobile S.p.A. 19,609,346
- --------------------------------------------------------------------------------
52,676,654
- --------------------------------------------------------------------------------
Japan -- 6.8%
500 Bank of Tokyo-Mitsubishi 7,919
190,900 Bunkyodo Co. Ltd. 1,203,372
146,300 H.I.S. Co. Ltd. 6,167,402
98,000 Japan Associated Finance Co. Ltd. 6,362,934
487,000 Matsushita Kotobuki Electronics 15,541,329
212,000 Murata Manufacturing Co. Ltd 7,817,824
2,800 NIC Corp. 29,123
308,400 Noritsu Koki Co. Ltd. 13,146,671
350 NTT Data Communications Systems Co. 10,231,660
29,379 Sato Corp. 409,746
67,000 Shohkoh Fund 15,732,409
2,100,000 Sumitomo Realty & Development 14,908,991
- --------------------------------------------------------------------------------
91,559,380
- --------------------------------------------------------------------------------
Korea -- 1.3%
123,827 Daehan City Gas Co. 6,413,461
365,400 Korea Electric Power Corp. 10,896,457
- --------------------------------------------------------------------------------
17,309,918
- --------------------------------------------------------------------------------
Malaysia -- 2.6%
7,000,000 Metroplex Berhad 7,585,657
1,500,000 Pacific & Orient Berhad 3,286,853
6,000,000 Renong Berhad 8,223,108
1,200,000 Renong Berhad-- 4% ICULS Rights* 425,498
750,000 Renong Berhad-- Warrants, Expire 11/21/00* 412,351
6,600,000 Sungei Way Holdings Berhad 15,119,522
517,750 Sungei Way Holdings Berhad
Warrants, Expire 6/29/99* 600,260
- --------------------------------------------------------------------------------
35,653,249
- --------------------------------------------------------------------------------
Mexico -- 0.9%
2,500,631 Gruma S.A. de C.V. Class B Shares 11,791,721
- --------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
42 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Schedules of Investments (unaudited) (continued) April 30, 1997
================================================================================
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY PORTFOLIO
SHARES SECURITY VALUE
================================================================================
<C> <S> <C>
Netherlands -- 7.2%
500,000 Getronics N.V. $ 15,142,960
200,000 Hunter Douglas N.V. 16,323,597
400,000 IHC Caland N.V. 19,752,579
2,000,000 Ing Groep N.V. Warrants, Expire 3/15/01* 18,140,753
9,725 Royal Dutch Petroleum Co. 1,738,230
15,275 Royal Dutch Petroleum Co. ADR 2,753,319
200,631 Wolters Kluwer N.V. 23,779,939
- --------------------------------------------------------------------------------
97,631,377
- --------------------------------------------------------------------------------
Norway -- 3.6%
1,000,000 Schibsted A.S.A. Group 17,273,340
500,000 Smedvig A.S.A. Class B Shares 11,761,319
1,000,000 Tomra Systems A.S.A. 19,379,845
- --------------------------------------------------------------------------------
48,414,504
- --------------------------------------------------------------------------------
Panama -- 1.3%
600,000 Panamerican Beverages Inc. ADR 17,400,000
- --------------------------------------------------------------------------------
Poland -- 2.7%
150,000 Bank Slaski S.A. Katowicach 12,733,970
429,418 Debica S.A.* 10,725,946
1,500,000 Elektrim Spolka Akcyjna S.A. 13,469,078
- --------------------------------------------------------------------------------
36,928,994
- --------------------------------------------------------------------------------
Singapore -- 1.0%
2,100,000 Cerebos Pacific Ltd. 12,922,630
- --------------------------------------------------------------------------------
South Africa -- 1.5%
90,000 Investec Bank Ltd. 2,803,328
568,000 Investec Holdings Ltd. 17,117,283
- --------------------------------------------------------------------------------
19,920,611
- --------------------------------------------------------------------------------
Spain -- 1.3%
700,000 Telefonica de Espana 17,946,260
- --------------------------------------------------------------------------------
Sweden -- 8.0%
503,570 Astra AB Class A Shares 20,603,654
625,000 Autoliv AB 22,743,930
200,000 Intentia International AB Class B Shares* 2,345,293
1,025,000 Nobel Biocare AB 15,024,536
264,000 NK Cityfastigheter AB* 1,850,742
300,000 Pricer AB Class B Shares* 9,483,143
1,144,000 Telefonaktiebolaget LM Ericsson Class B Shares 36,162,386
- --------------------------------------------------------------------------------
108,213,684
- --------------------------------------------------------------------------------
Switzerland -- 4.2%
29,866 Novartis AG Registered Shares 39,364,580
2,000 Roche Holdings AG 16,899,688
2,000 Roche Holdings AG Warrants, Expire 5/5/98* 119,452
- --------------------------------------------------------------------------------
56,383,720
- --------------------------------------------------------------------------------
Thailand -- 1.1%
750,000 Central Pattana Public Co. Ltd. 2,583,732
1,307,800 Finance One Public Co. Ltd. 1,351,602
36,360 Finance One Public Co. Ltd.
Warrants, Expire 3/15/99* 29,923
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 43
<PAGE>
================================================================================
Schedules of Investments (unaudited) (continued) April 30, 1997
================================================================================
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY PORTFOLIO
SHARES SECURITY VALUE
================================================================================
<C> <S> <C>
Thailand -- 1.1% (continued)
2,500,000 Krung Thai Bank Public Co. Ltd. $ 3,133,971
31 Saha Pathana International
Holding Public Co. Ltd. 71
1,500,000 Total Access Communication Public Co. Ltd. 7,725,000
- --------------------------------------------------------------------------------
14,824,299
- --------------------------------------------------------------------------------
United Kingdom -- 10.5%
2,500,000 Compass Group PLC 27,543,852
2,000,000 Dixons Group PLC 16,420,841
1,013,859 Misys PLC 20,358,119
1,185,240 Powerscreen International PLC 11,683,352
3,500,000 Rentokil Group PLC 22,972,140
400,000 Reuters Holdings PLC ADR 24,650,000
1,570,000 Serco Group PLC 17,195,638
- --------------------------------------------------------------------------------
140,823,942
- --------------------------------------------------------------------------------
TOTAL STOCKS
(Cost -- $1,019,262,434) 1,285,836,660
================================================================================
<CAPTION>
FACE
AMOUNT SECURITY VALUE
================================================================================
<C> <S> <C>
BONDS -- 0.0%
Thailand -- 0.0%
3,636,000+Finance One Public Co. Ltd.,
Unsecured Debt, 3.750% due
3/15/01 (Cost -- $143,943) 139,177
================================================================================
REPURCHASE AGREEMENT -- 4.5%
$61,031,000 CS First Boston Corp., 5.300%
due 5/1/97; Proceeds at maturity --
$61,039,985; (Fully collateralized
by U.S. Treasury Notes, 7.125% due
2/29/00; Market value -- $62,280,504)
(Cost -- $61,031,000) 61,031,000
================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $1,080,437,377**) $1,347,006,837
================================================================================
</TABLE>
* Non-income producing security.
++ Security is exempt from registration under Rule 144A of the Securities
Exchange Act of 1933. This security may be resold in transactions exempt
from registration to qualified institutional buyers.
+ Represents local currency.
** Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
44 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Schedules of Investments (unaudited) (continued) April 30, 1997
================================================================================
<TABLE>
<CAPTION>
INTERNATIONAL BALANCED PORTFOLIO
SHARES SECURITY VALUE
================================================================================
<C> <S> <C>
STOCKS -- 56.4%
Australia -- 3.8%
121,755 Coca-Cola Amatil Ltd. $ 1,395,187
300,000 Portman Mining Ltd. 647,249
- --------------------------------------------------------------------------------
2,042,436
- --------------------------------------------------------------------------------
Austria -- 3.9%
7,000 VA Technologie AG 1,087,319
10,000 Wolford AG 1,030,564
- --------------------------------------------------------------------------------
2,117,883
- --------------------------------------------------------------------------------
Brazil -- 2.1%
10,000 Telecomunicacoes Brasileiras S.A.-- Telebras ADR 1,147,500
- --------------------------------------------------------------------------------
Finland -- 1.4%
12,000 Nokia OY AB Class A Shares 775,500
- --------------------------------------------------------------------------------
France -- 2.0%
1,000 Carrefour Supermarche S.A. 624,357
6,000 Sidel S.A. 430,951
- --------------------------------------------------------------------------------
1,055,308
- --------------------------------------------------------------------------------
Germany -- 3.8%
6,000 SGL Carbon AG 841,947
2,500 Volkswagen AG Preferred 1,227,118
- --------------------------------------------------------------------------------
2,069,065
- --------------------------------------------------------------------------------
Hong Kong -- 3.6%
75,000 Cheung Kong Holdings Ltd. 658,362
216,000 Hong Kong & China Gas Co. Ltd. 342,968
15,000 Hong Kong & China Gas Co. Ltd.
Warrants, Expire 9/30/97* 7,552
125,000 Hutchinson Whampoa Ltd. 927,838
- --------------------------------------------------------------------------------
1,936,720
- --------------------------------------------------------------------------------
Ireland -- 3.3%
51,178 CRH PLC 500,803
101,931 Greencore Group PLC 520,540
150,000 Independent Newspapers PLC 777,284
- --------------------------------------------------------------------------------
1,798,627
- --------------------------------------------------------------------------------
Italy -- 4.3%
10,000 Gucci Group N.V. N.Y. Registered Shares 693,750
75,000 Industria Macchine Automatiche S.p.A. 317,634
400,000 Telecom Italia Mobile S.p.A. 1,254,998
- --------------------------------------------------------------------------------
2,266,382
- --------------------------------------------------------------------------------
Japan -- 1.8%
2,000 Japan Associated Finance Co. Ltd. 129,856
7,000 Matsushita Kotobuki Electronics 223,387
6,000 Noritsu Koki Co. Ltd. 255,772
2,000 Sharp Corp. 26,003
46,000 Sumitomo Realty & Development 326,578
- --------------------------------------------------------------------------------
961,596
- --------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 45
<PAGE>
================================================================================
Schedules of Investments (unaudited) (continued) April 30, 1997
================================================================================
<TABLE>
<CAPTION>
INTERNATIONAL BALANCED PORTFOLIO
SHARES SECURITY VALUE
================================================================================
<C> <S> <C>
Malaysia -- 3.6%
400,000 Bandar Raya Developments Berhad $ 589,641
500,000 Metroplex Berhad 541,833
358,000 Sungei Way Holdings Berhad 820,120
- --------------------------------------------------------------------------------
1,951,594
- --------------------------------------------------------------------------------
Mexico -- 1.3%
150,000 Gruma S.A. de C.V. Class B Shares 707,325
- --------------------------------------------------------------------------------
Netherlands -- 6.4%
10,000 Hunter Douglas N.V. 816,180
15,000 IHC Caland N.V. 740,722
25,000 Ing Groep N.V. 981,726
7,000 Wolters Kluwer CVA 829,680
- --------------------------------------------------------------------------------
3,368,308
- --------------------------------------------------------------------------------
Norway -- 1.3%
30,000 Smedvig A.S.A. Class B Shares 705,679
- --------------------------------------------------------------------------------
Singapore -- 1.2%
100,000 Cerebos Pacific Ltd. 615,363
569 Jardine Matheson Holding Ltd. 3,130
- --------------------------------------------------------------------------------
618,493
- --------------------------------------------------------------------------------
Sweden -- 3.5%
10,000 Astra AB Class A Shares 409,152
20,000 Autoliv AB 727,806
22,000 Telefonakiebolaget LM Ericsson ADR 739,750
- --------------------------------------------------------------------------------
1,876,708
- --------------------------------------------------------------------------------
Switzerland -- 2.5%
1,000 Novartis AG Registered Shares 1,318,040
- --------------------------------------------------------------------------------
Thailand -- 0.6%
100,000 Siam Makro Public Co. Ltd. 220,096
20,000 United Communication Industry
Public Co. Ltd. 114,833
- --------------------------------------------------------------------------------
334,929
- --------------------------------------------------------------------------------
United Kingdom -- 6.0%
150,000 Boxmore International PLC 704,620
50,000 Compass Group PLC 550,877
100,000 Powerscreen International PLC 985,737
7,500 Reuters Holdings PLC ADR 462,188
50,000 Serco Group PLC 547,632
- --------------------------------------------------------------------------------
3,251,054
- --------------------------------------------------------------------------------
TOTAL STOCKS
(Cost -- $26,499,312) 30,303,147
================================================================================
OPTIONS PURCHASED -- 0.0%
Canada -- 0.0%
1 2,500,000 CAD Call/USD Put @ 1.33,
Expire 6/4/97 (Cost -- $7,750) 43
================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
46 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Schedules of Investments (unaudited) (continued) April 30, 1997
================================================================================
<TABLE>
<CAPTION>
INTERNATIONAL BALANCED PORTFOLIO
FACE
AMOUNT+ SECURITY VALUE
================================================================================
<C> <S> <C>
BONDS -- 32.9%
Australia -- 1.2%
800,000 Australian Government, 8.750% due 1/15/01 $ 660,676
- --------------------------------------------------------------------------------
Belgium -- 3.3%
58,000,000 Kingdom of Belgium, 7.000% due 5/15/06 1,757,049
- --------------------------------------------------------------------------------
Denmark -- 0.6%
2,000,000 Kingdom of Denmark, 6.000% due 12/10/99 313,600
- --------------------------------------------------------------------------------
Finland -- 0.4%
1,000,000 Finland Government, 7.250% due 4/18/06 205,031
- --------------------------------------------------------------------------------
France -- 1.2%
4,100,000 Government of France, 6.000% due 10/25/25 646,851
- --------------------------------------------------------------------------------
Germany -- 1.8%
1,600,000 Deutschland Republic, 6.250% due 4/26/06 957,856
- --------------------------------------------------------------------------------
Italy -- 3.8%
Buoni Poliennali Del Tesoro:
2,480,000,000 6.000% due 2/15/00 1,423,352
1,190,000,000 6.750% due 2/1/07 660,596
- --------------------------------------------------------------------------------
2,083,948
- --------------------------------------------------------------------------------
Japan -- 9.9%
Japanese Government:
213,000,000 Series 140, 6.600% due 6/20/01 2,019,396
307,000,000 Series 190, 2.900% due 12/20/01 2,494,027
100,000,000 Series 190, 2.900% due 12/20/06 813,017
- --------------------------------------------------------------------------------
5,326,440
- --------------------------------------------------------------------------------
Spain -- 4.3%
Bonos Y Oblig De Estado:
270,000,000 6.750% due 4/15/00 1,905,292
50,000,000 8.800% due 4/30/06 388,155
- --------------------------------------------------------------------------------
2,293,447
- --------------------------------------------------------------------------------
Sweden -- 0.8%
3,500,000 Sweden Government, 6.000% due 2/9/05 420,170
- --------------------------------------------------------------------------------
United Kingdom -- 2.7%
900,000 United Kingdom Treasury, 7.500% due 12/7/06 1,461,264
- --------------------------------------------------------------------------------
United States -- 2.9%
500,000 Republic of Argentina Bocon Pro2,
5.625% due 4/1/07++ 593,251
1,000,000 Russia Principal Loan due 12/20/49+++ 585,001
400,000 U.S. Treasury Note, 6.250% due 2/15/07 386,896
- --------------------------------------------------------------------------------
1,565,148
- --------------------------------------------------------------------------------
TOTAL BONDS
(Cost -- $18,549,031) 17,691,480
================================================================================
SUB-TOTAL INVESTMENTS
(Cost -- $45,056,093) 47,994,670
================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 47
<PAGE>
================================================================================
Schedules of Investments (unaudited) (continued) April 30, 1997
================================================================================
<TABLE>
<CAPTION>
INTERNATIONAL BALANCED PORTFOLIO
FACE
AMOUNT SECURITY VALUE
================================================================================
<C> <S> <C>
REPURCHASE AGREEMENTS -- 10.7%
$5,778,000 CS First Boston Corp., 5.300%
due 5/1/97; Proceeds at maturity --
$5,778,851; (Fully collateralized by
U.S. Treasury Notes, 7.125% due 2/29/00;
Market value -- $5,904,756)
(Cost -- $5,778,000) $ 5,778,000
================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $50,834,093**) $53,772,670
================================================================================
</TABLE>
* Non-income producing security.
+ Represents local currency.
+++ Security traded on a when-issued basis.
++ Current rate of floating security.
** Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
48 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Schedules of Investments (unaudited) (continued) April 30, 1997
================================================================================
<TABLE>
<CAPTION>
EMERGING MARKETS PORTFOLIO
SHARES SECURITY VALUE
================================================================================
<C> <S> <C>
STOCKS -- 97.1%
Argentina -- 3.0%
13,528 Banco de Galicia y Bueno ADR $ 329,111
16,500 Disco Aires S.A. de C.V. ADR 511,500
40,000 Perez Companc S.A. 322,464
- --------------------------------------------------------------------------------
1,163,075
- --------------------------------------------------------------------------------
Brazil -- 15.4%
26,000 Aracruz Celulose S.A. ADR 490,750
23,500 Centrais Electricas Brasileiras S.A.
ADR Preferred 549,313
718,000 Cia Cervejaria Brahma Preferred* 488,748
674,100,000 Compania de Eletricidade do Estado
de Rio de Janeiro* 411,964
34,100,000 Cia Paranaeose de Energia -- Copel 530,608
14,300,000 Cia Siderurgica Nacional 510,906
1,150,000 Cia Tecidos Norte de Mina -- Coteminas 475,743
18,400 Cia Vale Do Rio Doce ADR 469,200
2,600,000 Petroleo Brasileiro S.A. Preferred 551,241
3,500 Sade Vigesa S.A. Preferred* 13,492
286,100 Tectoy Industria Brinqued Preferred* 53,798
3,300,000 Telec Do Rio Janeiro S.A. Preferred* 553,827
5,700 Telecomunicacoes Brasileiras S.A.-- Telebras ADR 654,075
436,646 Telecomunicacoes de Brazilia S.A. Preferred 203,215
- --------------------------------------------------------------------------------
5,956,880
- --------------------------------------------------------------------------------
Chile -- 4.3%
15,000 Administradora de Fondos de
Pensiones Provida S.A. ADR 270,000
19,000 Laboratorio Chile -- Sponsored ADR 418,000
6,700 Sociedad Quimica Y Minera de
Chile S.A. ADR 396,975
18,200 Vina Concha y Toro S.A. ADR 593,775
- --------------------------------------------------------------------------------
1,678,750
- --------------------------------------------------------------------------------
China -- 2.8%
380,000 Shanghai Lujiazui Finance and Trade
Zone Development Co. Ltd. 566,960
790,000 Tientsin Marine Shipping Co. Ltd.
Class B Shares* 504,020
- --------------------------------------------------------------------------------
1,070,980
- --------------------------------------------------------------------------------
Czech Republic -- 1.8%
1,901 Ceska Zbrojovka A.s.* 116,947
9,300 Skoda Plzen A.s.* 297,179
2,655 SPT Telekom A.s.* 280,512
- --------------------------------------------------------------------------------
694,638
- --------------------------------------------------------------------------------
Egypt -- 0.4%
7,500 Al-Ahram Beverage Co. S.A.E. GDR* 140,625
- --------------------------------------------------------------------------------
Greece -- 2.3%
10,000 Intracom S.A. 430,981
50,000 Lavipharm S.A. 458,065
- --------------------------------------------------------------------------------
889,046
- --------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 49
<PAGE>
================================================================================
Schedules of Investments (unaudited) (continued) April 30, 1997
================================================================================
<TABLE>
<CAPTION>
EMERGING MARKETS PORTFOLIO
SHARES SECURITY VALUE
================================================================================
<C> <S> <C>
Hong Kong -- 14.5%
1,480,000 Anhui Expressway Co. Ltd.
Class H Shares $ 370,645
760,000 Beijing Datang Power
Generation Co. Ltd* 394,888
520,000 China Merchants Hai Hong Holdings 557,155
370,000 Cosco Pacific Ltd. 518,234
509,000 Guangdong Kelon Elec Holdings
Class H shares 492,803
300,000 Guangnan Holdings 431,808
2,118,000 Harbin Power Equipment Co. Ltd.
Class H shares 437,462
68,991 New World Development Co. Ltd. 398,102
346,000 Ng Fung Hong Ltd. 464,519
444,000 Qingling Motors Company 243,594
72,000 Shanghai Industrial Holdings Ltd.* 405,241
840,000 Silver Grant International Industries 452,721
114,000 Wing Hang Bank Ltd. 416,472
- --------------------------------------------------------------------------------
5,583,644
- --------------------------------------------------------------------------------
Hungary -- 2.1%
5,218 Graboplast Rt 239,241
6,208 Pannonplast Rt 309,456
3,400 Richter Gedeon Rt 257,018
- --------------------------------------------------------------------------------
805,715
- --------------------------------------------------------------------------------
India -- 3.0%
14,000 Hindalco Industries Ltd. GDR* 453,180
14,000 Indian Hotels Co Ltd. GDR* 334,180
20,500 Larsen & Toubro Ltd. GDR* 290,895
5,000 Videsh Sanchar Nigam Ltd.*++ 98,725
- --------------------------------------------------------------------------------
1,176,980
- --------------------------------------------------------------------------------
Indonesia -- 3.4%
862,000 PT Aneka Kimia Raya Foreign 399,074
81,000 PT Hanjaya Mandala Sampoerna Foreign 325,833
677,140 PT Indah Kiat Pulp & Paper Corp. 550,350
24,660 PT Steady Safe Transportation Foreign 23,087
- --------------------------------------------------------------------------------
1,298,344
- --------------------------------------------------------------------------------
Malaysia -- 8.7%
180,000 Bandar Raya Developments Berhad 265,339
125,000 Chemical Co. of Malaysia Berhad 388,446
15,000 Chemical Co. of Malaysia Berhad
Warrants, Expire 11/7/00* 15,598
213,000 Kumpulan Guthrie Berhad 329,259
310,000 Metroplex Berhad 335,936
196,000 Multi-Purpose Holdings Berhad 320,159
218,000 Oriental Interest Berhad 303,984
93,000 Pacific & Orient Berhad 203,785
179,333 Public Bank Berhad 297,222
132,000 Sungei Way Holdings Berhad 302,390
31,000 Telekom Malaysia Berhad 217,371
80,000 Tenaga Nasional Berhad 369,721
- --------------------------------------------------------------------------------
3,349,210
- --------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
50 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Schedules of Investments (unaudited) (continued) April 30, 1997
================================================================================
<TABLE>
<CAPTION>
EMERGING MARKETS PORTFOLIO
SHARES SECURITY VALUE
================================================================================
<C> <S> <C>
Mexico -- 7.5%
18,500 Bufete Industrial S.A. Sponsored ADR $ 353,813
85,600 Cemex S.A. de C.V. Class B Shares 316,459
40,160 Corporacion GEO S.A. de C.V. Series B 186,597
24,500 Empresas ICA Sociedad
Controladora S.A. de C.V. ADR* 364,438
55,000 Empresas La Moderna S.A. de C.V. 282,175
176,000 Grupo Financiero Banamex
Accival S.A. de C.V.* 375,349
17,300 Grupo Imsa S.A. de C.V. Sponsored ADR 371,950
561,400 Grupo Posadas S.A. Series L* 258,375
14,600 Hylsamex S.A. GDR* 374,052
- --------------------------------------------------------------------------------
2,883,208
- --------------------------------------------------------------------------------
Peru -- 1.5%
600,165 Ferreyros S.A. 585,527
16,285 Fima S.A. Trabajo 2,444
- --------------------------------------------------------------------------------
587,971
- --------------------------------------------------------------------------------
Philippines -- 1.2%
10,000 Equitable Banking Corp.* 39,060
189,000 La Tondena Distillers Inc. 433,618
- --------------------------------------------------------------------------------
472,678
- --------------------------------------------------------------------------------
Poland -- 3.5%
2,760 Bank Slaski S.A. W Katowicach 234,305
16,870 Debica S.A.* 421,377
4,200 E. Wedel S.A. 248,988
29,200 Elektrim Spolka Akcyjna S.A. 262,198
56,100 Swarzedzkie Fabryk Mebli S.A.* 173,827
- --------------------------------------------------------------------------------
1,340,695
- --------------------------------------------------------------------------------
Portugal -- 1.1%
31,000 Colep-Companhia Portuguesa de Embalagens* 424,645
- --------------------------------------------------------------------------------
Russia -- 3.6%
9,415 Lukoil Holding ADR*+ 534,301
12,000 Mosenergo ADR 474,000
10,000 Surgutneftegaz ADR 380,000
- --------------------------------------------------------------------------------
1,388,301
- --------------------------------------------------------------------------------
Singapore -- 1.9%
101,000 Clipsal Industries Ltd. 395,920
107,000 GP Batteries International Ltd. 315,650
14,250 GP Batteries International Ltd.
Warrants, Expire 11/15/00* 14,108
- --------------------------------------------------------------------------------
725,678
- --------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 51
<PAGE>
================================================================================
Schedules of Investments (unaudited) (continued) April 30, 1997
================================================================================
<TABLE>
<CAPTION>
EMERGING MARKETS PORTFOLIO
SHARES SECURITY VALUE
================================================================================
<C> <S> <C>
South Africa -- 4.6%
63,000 Amalgamated Banks of South Africa $ 415,136
500,000 Metro Cash & Carry Ltd. 483,526
40,000 Rembrandt Group Ltd. 421,005
34,500 Sasol Ltd. 442,258
- --------------------------------------------------------------------------------
1,761,925
- --------------------------------------------------------------------------------
South Korea -- 2.6%
3,800 Comtec System Co.* 421,749
19,867 Donghae Pulp Co.* 289,541
4,386 Dongah Tire Industry Co.* 300,938
16 Seah Steel Corp. 396
162 Woong Jin Publishing Co. 10,779
- --------------------------------------------------------------------------------
1,023,403
- --------------------------------------------------------------------------------
Sri Lanka -- 1.4%
100,440 John Keells Holdings Ltd.* 385,133
330,200 Lanka Walltile Ltd.* 167,331
- --------------------------------------------------------------------------------
552,464
- --------------------------------------------------------------------------------
Thailand -- 3.8%
72,000 Central Pattana Public Co. Ltd. 248,038
258,600 Precious Shipping Public Co. Ltd. Foreign 692,900
362,000 Sahaviriya Steel Industries Public Co. Ltd.* 112,237
293,000 Siam City Bank Public Co. Ltd. Foreign 238,325
25,400 Thai Engine Manufacturing Public Co. Ltd. 178,894
- --------------------------------------------------------------------------------
1,470,394
- --------------------------------------------------------------------------------
Turkey -- 2.7%
930,000 Brisa Bridgestone Sabanci
Lastik San. Ve Tis A.S. 318,383
1,901,000 Eregli Demir Ve Celik Fabrikalari T.A.S. 185,809
3,050,000 Tat Konserve Sanayii A.S. 545,608
- --------------------------------------------------------------------------------
1,049,800
- --------------------------------------------------------------------------------
TOTAL STOCKS
(Cost -- $33,315,352) 37,489,049
================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
52 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Schedules of Investments (unaudited) (continued) April 30, 1997
================================================================================
<TABLE>
<CAPTION>
EMERGING MARKETS PORTFOLIO
FACE
AMOUNT SECURITY VALUE
================================================================================
<C> <S> <C>
CONVERTIBLE BONDS -- 0.4%
United States -- 0.4%
$150,000 Qingling Motors, 3.500% due 1/22/02
(Cost -- $150,000) $ 152,790
================================================================================
REPURCHASE AGREEMENT -- 2.5%
985,000 CS First Boston Corp., 5.300% due
5/1/97; Proceeds at maturity -- $985,145;
(Fully collateralized by U.S. Treasury Notes,
7.125% due 2/29/00; Market value -- $1,009,008)
(Cost -- $985,000) 985,000
================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $34,450,352**) $38,626,839
================================================================================
</TABLE>
* Non-income producing security.
++ Security is exempt from registration under Rule 144A of the Securities
Exchange Act of 1933. This security may be resold in transactions exempt
from registration to qualified institutional buyers.
+ Represents local currency.
** Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 53
<PAGE>
================================================================================
Schedules of Investments (unaudited) (continued) April 30, 1997
================================================================================
<TABLE>
<CAPTION>
EUROPEAN PORTFOLIO
SHARES SECURITY VALUE
================================================================================
<C> <S> <C>
STOCKS -- 97.8%
Austria -- 4.0%
12,000 VA Technologie AG $ 1,863,975
- --------------------------------------------------------------------------------
Canada -- 0.1%
242,957 International UNP Holdings Ltd.* 28,681
- --------------------------------------------------------------------------------
Finland -- 8.6%
48,000 Nokia Oy AB Class A Shares 3,102,000
25,000 Orion-yhtyma OY Class B Shares 940,214
- --------------------------------------------------------------------------------
4,042,214
- --------------------------------------------------------------------------------
France -- 21.8%
8,523 Castorama Dubois Investisse 1,260,254
10,000 Christian Dior S.A. 1,482,079
400,000 Euro Disney S.C.A.* 671,647
10,000 Group Axime* 1,202,796
10,123 Guilbert S.A. 1,578,358
50,000 Lagardere S.C.A. 1,547,187
15,000 Sidel S.A. 1,077,376
17,029 Total S.A. Class B Shares 1,412,178
- --------------------------------------------------------------------------------
10,231,875
- --------------------------------------------------------------------------------
Germany -- 14.4%
2,700 Buderus AG 1,270,718
33,000 Leica Camera AG * 995,698
4,000 Mannesmann AG 1,573,483
7,000 Schmalbach Lubeca AG 1,536,063
10,000 SGL Carbon AG 1,403,245
- --------------------------------------------------------------------------------
6,779,207
- --------------------------------------------------------------------------------
Ireland -- 3.9%
358,332 Independent Newspapers PLC 1,856,839
- --------------------------------------------------------------------------------
Italy -- 7.6%
20,000 Gucci Group NV-- NY Registered Shares 1,387,500
20,000 Fila Holding S.p.A. 865,000
60,000 Industrie Natuzzi S.p.A. ADR 1,335,000
- --------------------------------------------------------------------------------
3,587,500
- --------------------------------------------------------------------------------
Netherlands -- 15.4%
30,925 Ahrend Groep N.V. 1,873,184
30,000 Computer Services Solutions* 337,252
20,417 Hunter Douglas N.V. 1,666,394
40,000 Samas Groep N.V. 1,542,015
20,000 Randstad Holdings N.V. 1,796,622
- --------------------------------------------------------------------------------
7,215,467
- --------------------------------------------------------------------------------
Norway -- 4.1%
100,000 Tomra Systems A.S.A. 1,937,984
- --------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
54 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Schedules of Investments (unaudited) (continued) April 30, 1997
================================================================================
<TABLE>
<CAPTION>
EUROPEAN PORTFOLIO
SHARES SECURITY VALUE
================================================================================
<C> <S> <C>
Spain -- 2.8%
3,400 Azkoyen SA $ 509,738
30,800 Telefonica de Espana 789,635
- --------------------------------------------------------------------------------
1,299,373
- --------------------------------------------------------------------------------
Sweden -- 1.6%
25,000 Pharmacia & Upjohn Inc. 740,625
- --------------------------------------------------------------------------------
Switzerland -- 4.7%
1,664 Novartis AG Registered Shares 2,193,218
- --------------------------------------------------------------------------------
United Kingdom -- 8.8%
125,000 Carlton Communications PLC 1,024,274
120,000 Compass Group PLC 1,322,105
100,000 Computer Management Systems PLC 1,768,649
- --------------------------------------------------------------------------------
4,115,028
- --------------------------------------------------------------------------------
TOTAL STOCKS
(Cost -- $31,201,868) 45,891,986
================================================================================
<CAPTION>
FACE
AMOUNT SECURITY VALUE
================================================================================
<C> <S> <C>
REPURCHASE AGREEMENT -- 2.2%
$1,014,000 CS First Boston Corp., 5.300% due
5/1/97; Proceeds at maturity --
$1,014,149; (Fully collateralized
by U.S. Treasury Notes, 7.125% due
2/29/00; Market value -- $1,034,748)
(Cost -- $1,014,000) 1,014,000
================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $32,215,868**) $46,905,986
================================================================================
</TABLE>
* Non-income producing security.
** Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 55
<PAGE>
================================================================================
Schedules of Investments (unaudited) (continued) April 30, 1997
================================================================================
<TABLE>
<CAPTION>
PACIFIC PORTFOLIO
SHARES SECURITY VALUE
================================================================================
<C> <S> <C>
STOCKS -- 88.4%
Australia -- 9.6%
320,000 AAPC Ltd. $ 195,113
37,210 Coca-Cola Amatil Ltd. 426,388
100,000 Henry Walker Group Ltd. 186,045
43,000 TABCORP Holdings Ltd. 212,940
- --------------------------------------------------------------------------------
1,020,486
- --------------------------------------------------------------------------------
Hong Kong -- 25.0%
420,000 Beijing Datang Power Generation Co. Ltd.* 218,228
100,000 China Resources Enterprise Ltd. 276,254
200,000 Guangdong Kelon Elec. Holding 193,636
134,000 Guangnan Holdings 192,874
142,000 Hong Kong & China Gas Co. Ltd. 225,470
12,723 HSBC Holdings PLC 321,914
38,000 Hutchinson Whampoa Ltd. 282,063
36,594 New World Development Co. Ltd. 211,160
93,000 Shanghai Industrial Holdings Ltd. 523,436
20,000 Sun Hung Kai Properties Ltd. 216,872
- --------------------------------------------------------------------------------
2,661,907
- --------------------------------------------------------------------------------
India -- 5.9%
20,000 Larsen & Toubro Ltd. GDR 283,800
20,000 Mahindra & Mahindra Ltd. GDR 240,000
5,000 Videsh Sanchar Nigam Ltd GDR* 98,725
- --------------------------------------------------------------------------------
622,525
- --------------------------------------------------------------------------------
Indonesia -- 1.9%
150,000 PT Bimantara Citra 203,704
- --------------------------------------------------------------------------------
Japan -- 21.2%
700 Bellsystem 24, Inc. 86,045
6,000 Fuji Photo Film 229,296
4,400 H.I.S. Co. Ltd. 185,486
7,000 Honda Motor Co. Ltd. 217,319
6,000 Matsushita Electric Industrial Co. Ltd. 191,474
5,000 Murata Manufacturing Co. Ltd. 184,383
5,600 Noritsu Koki Co. Ltd. 238,720
2,000 Rohm Co. 155,071
3,000 Seven-Eleven Japan 190,292
10,000 Sharp Corp. 130,013
1,000 Shohkoh Fund 234,812
30,000 Sumitomo Realty & Development 212,986
- --------------------------------------------------------------------------------
2,255,897
- --------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
56 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Schedules of Investments (unaudited) (continued) April 30, 1997
================================================================================
<TABLE>
<CAPTION>
PACIFIC PORTFOLIO
SHARES SECURITY VALUE
================================================================================
<C> <S> <C>
Malaysia -- 11.6%
130,000 Bandar Raya Developments Berhad $ 191,633
15,000 Cahya Mata Sarawak Berhad 141,633
6,000 Cahya Mata Sarawak Berhad
Rights, Expire 5/29/97* 0
12,000 Malayan Banking Berhad 119,522
60,000 Muhibbah Engineering Berhad 204,382
110,750 Sungei Way Holdings Berhad 253,710
90,000 Sunway Building Technology Berhad 324,503
- --------------------------------------------------------------------------------
1,235,383
- --------------------------------------------------------------------------------
New Zealand -- 1.7%
5,000 Telecom Corp of New Zealand Ltd. ADR 180,000
- --------------------------------------------------------------------------------
Philippines -- 0.7%
300,000 Belle Corp.* 71,672
129 Metropolitan Bank & Trust Co. 2,642
- --------------------------------------------------------------------------------
74,314
- --------------------------------------------------------------------------------
Singapore -- 4.5%
140,000 Lindeteves-Jacoberg Ltd 204,245
26,000 Parkway Holdings Ltd. 106,064
65,000 Singapore Technologies Industrial Corp. 168,084
- --------------------------------------------------------------------------------
478,393
- --------------------------------------------------------------------------------
South Korea -- 6.3%
2,460 Hung Chang Products Co. 201,323
5,000 Korea Electric Power Corp. 149,103
2,200 LG Information & Communication Ltd. 217,763
1,000 Lotte Chilsung Beverage Co. 104,821
- --------------------------------------------------------------------------------
673,010
- --------------------------------------------------------------------------------
TOTAL STOCKS
(Cost -- $8,335,172) 9,405,619
================================================================================
<CAPTION>
FACE
AMOUNT SECURITY VALUE
================================================================================
<C> <S> <C>
REPURCHASE AGREEMENT -- 11.6%
$1,234,000 CS First Boston Corp., 5.300% due
5/1/97; Proceeds at maturity --
$1,234,182; (Fully collateralized
by U.S. Treasury Notes, 7.125% due
2/29/00; Market value -- $1,261,260)
(Cost -- $1,234,000) 1,234,000
================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $9,569,172**) $10,639,619
================================================================================
</TABLE>
* Non-income producing security.
++ Security is exempt from registration under Rule 144A of the Securities
Exchange Act of 1933. This security may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
** Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 57
<PAGE>
================================================================================
Statements of Assets and Liabilities (unaudited) April 30, 1997
================================================================================
<TABLE>
<CAPTION>
Global
Government International International
Bond Equity Balanced
Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C>
ASSETS:
Investments-- Cost $ 130,303,855 $ 1,080,437,377 $ 45,056,093
Repurchase agreements-- Cost -- -- 5,778,000
Foreign currency-- Cost 6,107 4,246,992 407,297
====================================================================================================================================
Investments, at value $ 125,123,187 $ 1,347,006,837 $ 47,994,670
Repurchase agreements, at value -- -- 5,778,000
Foreign currency, at value 5,958 4,207,844 400,432
Cash 2,156 98,612 8,133
Receivable for Fund shares sold 211,625 1,621,441 447,413
Receivable for securities sold 23,467,788 -- 2,117,337
Dividends and interest receivable 2,490,023 3,858,930 415,910
Receivable for open forward foreign currency contracts 2,936,572 11,083 358,136
Receivable from manager -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Assets 154,237,309 1,356,804,747 57,520,031
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 7,466,439 7,095,886 3,323,713
Payable for open forward foreign currency contracts 191,788 14,138 359,436
Management fees payable 90,050 921,729 36,925
Payable for options written 60,000 -- 22,650
Distribution fees payable 15,415 391,809 4,906
Payable for Fund shares purchased -- 11,439 13
Accrued expenses and other liabilities 406,457 1,112,533 1,495
- ------------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 8,230,149 9,547,534 3,749,138
- ------------------------------------------------------------------------------------------------------------------------------------
Total Net Assets $ 146,007,160 $ 1,347,257,213 $ 53,770,893
====================================================================================================================================
NET ASSETS:
Par value of capital shares $ 12,230 $ 69,953 $ 4,044
Capital paid in excess of par value 144,110,291 1,152,104,219 51,743,091
Accumulated net investment income (loss) 4,097,573 (18,636,614) (937,384)
Accumulated net realized gain (loss) from security transactions,
options and foreign currencies 365,068 (52,715,951) 43,590
Net unrealized appreciation (depreciation) of investments, options
and foreign currencies (2,578,002) 266,435,606 2,917,552
- ------------------------------------------------------------------------------------------------------------------------------------
Total Net Assets $ 146,007,160 $ 1,347,257,213 $ 53,770,893
====================================================================================================================================
Shares Outstanding:
Class A 8,169,352 26,142,655 1,017,328
-------------------------------------------------------------------------------------------------------------------------------
Class B 1,854,542 12,091,543 423,201
-------------------------------------------------------------------------------------------------------------------------------
Class C 280,421 11,392,258 299,374
-------------------------------------------------------------------------------------------------------------------------------
Class Y 1,925,383 13,526,891 2,303,658
-------------------------------------------------------------------------------------------------------------------------------
Class Z -- 6,799,104 --
-------------------------------------------------------------------------------------------------------------------------------
Net Asset Value:
Class A $11.97 $19.33 $13.28
-------------------------------------------------------------------------------------------------------------------------------
Class B* $11.97 $19.28 $13.35
-------------------------------------------------------------------------------------------------------------------------------
Class C** $11.94 $19.00 $13.32
-------------------------------------------------------------------------------------------------------------------------------
Class Y $11.78 $19.31 $13.29
-------------------------------------------------------------------------------------------------------------------------------
Class Z -- $19.29 --
-------------------------------------------------------------------------------------------------------------------------------
Class A Maximum Public Offering Price Per Share
(net asset value plus 4.71% of net asset value per share) $12.53 -- --
(net asset value plus 5.26% of net asset value per share) -- $20.35 $13.98
====================================================================================================================================
</TABLE>
* Redemption price is NAV of Class B shares reduced by a 5.00% CDSC if shares
are redeemed within 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.
- --------------------------------------------------------------------------------
58 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Statements of Assets and Liabilities (unaudited) April 30, 1997
================================================================================
<TABLE>
<CAPTION>
Emerging
Markets European Pacific
Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C>
ASSETS:
Investments-- Cost $ 34,450,352 $ 32,215,868 $ 8,335,172
Repurchase agreements-- Cost -- -- 1,234,000
Foreign currency-- Cost 409,370 1,513,319 249,194
====================================================================================================================================
Investments, at value $ 38,626,839 $ 46,905,986 $ 9,405,619
Repurchase agreements, at value -- -- 1,234,000
Foreign currency, at value 409,611 1,507,978 247,754
Cash 1,931 20,895 1,294
Receivable for Fund shares sold 97,953 16,818 57,448
Receivable for securities sold -- 217,953 280,394
Dividends and interest receivable 134,418 105,090 15,281
Receivable for open forward foreign currency contracts -- 423 552
Receivable from manager -- -- 84,242
- ------------------------------------------------------------------------------------------------------------------------------------
Total Assets 39,270,752 48,775,143 11,326,584
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 582,238 1,944,277 511,137
Payable for open forward foreign currency contracts -- 122 1,075
Management fees payable 21,569 31,978 --
Payable for options written -- -- --
Distribution fees payable 12,520 14,830 4,290
Payable for Fund shares purchased 12 -- --
Accrued expenses and other liabilities 17,612 36,148 61,211
- ------------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 633,951 2,027,355 577,713
- ------------------------------------------------------------------------------------------------------------------------------------
Total Net Assets $ 38,636,801 $ 46,747,788 $ 10,748,871
====================================================================================================================================
NET ASSETS:
Par value of capital shares $ 2,737 $ 2,717 $ 1,005
Capital paid in excess of par value 33,382,501 31,978,146 11,602,235
Accumulated net investment income (loss) (158,055) (246,556) (158,133)
Accumulated net realized gain (loss) from security transactions,
options and foreign currencies 1,232,462 304,979 (1,764,049)
Net unrealized appreciation (depreciation) of investments, options
and foreign currencies 4,177,156 14,708,502 1,067,813
- ------------------------------------------------------------------------------------------------------------------------------------
Total Net Assets $ 38,636,801 $ 46,747,788 $ 10,748,871
====================================================================================================================================
Shares Outstanding:
Class A 1,039,593 753,314 355,901
-------------------------------------------------------------------------------------------------------------------------------
Class B 1,385,089 1,808,222 470,693
-------------------------------------------------------------------------------------------------------------------------------
Class C 312,615 155,704 178,696
-------------------------------------------------------------------------------------------------------------------------------
Class Y -- -- --
-------------------------------------------------------------------------------------------------------------------------------
Class Z -- -- --
-------------------------------------------------------------------------------------------------------------------------------
Net Asset Value:
Class A $14.25 $17.38 $10.85
-------------------------------------------------------------------------------------------------------------------------------
Class B* $14.03 $17.14 $10.62
-------------------------------------------------------------------------------------------------------------------------------
Class C** $14.04 $17.09 $10.58
-------------------------------------------------------------------------------------------------------------------------------
Class Y -- -- --
-------------------------------------------------------------------------------------------------------------------------------
Class Z -- -- --
-------------------------------------------------------------------------------------------------------------------------------
Class A Maximum Public Offering Price Per Share
(net asset value plus 4.71% of net asset value per share) -- -- --
(net asset value plus 5.26% of net asset value per share) $15.00 $18.29 $11.42
====================================================================================================================================
</TABLE>
* Redemption price is NAV of Class B shares reduced by a 5.00% CDSC if shares
are redeemed within 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.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 59
<PAGE>
================================================================================
Statements of Operations (unaudited) For the Six Months Ended April 30, 1997
================================================================================
<TABLE>
<CAPTION>
Global
Government International International
Bond Equity Balanced
Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 1,623 $ 6,789,752 $ 133,922
Interest 4,675,252 1,095,643 708,519
Less: Foreign withholding tax (51,608) (614,733) (19,074)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investment Income 4,625,267 7,270,662 823,367
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 556,624 5,620,208 210,572
Distribution fees (Note 2) 230,454 2,889,825 68,369
Shareholder and system servicing fees 78,289 576,969 19,712
Registration fees 39,474 96,633 73,556
Custody 27,236 424,825 24,195
Shareholder communications 20,885 40,253 7,307
Audit and legal 11,731 33,996 10,969
Directors' fees 4,540 32,182 1,836
Other 4,546 31,834 4,023
- ------------------------------------------------------------------------------------------------------------------------------------
Total Expenses 973,779 9,746,725 420,539
- ------------------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) 3,651,488 (2,476,063) 402,828
- ------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, OPTIONS AND FOREIGN
CURRENCIES (NOTE 3, 4 AND 5):
Realized Gain (Loss) From:
Security transactions (262,292) 21,315,965 (31,941)
Options purchased -- -- 102,977
Foreign currency transactions 5,249,968 (544,614) (837,283)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Realized Gain (Loss) 4,987,676 20,771,351 (766,247)
- ------------------------------------------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation (Depreciation)
of Investments, Options and Foreign Currencies:
Beginning of period 2,729,431 236,284,616 4,042,657
End of period (2,578,002) 266,435,606 2,917,552
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Unrealized Appreciation (5,307,433) 30,150,990 (1,125,105)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Gain (Loss) on Investments, Options and Foreign Currencies (319,757) 50,922,341 (1,891,352)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Operations $ 3,331,731 $ 48,446,278 $ (1,488,524)
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
60 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Statements of Operations (unaudited) For the Six Months Ended April 30, 1997
================================================================================
<TABLE>
<CAPTION>
Emerging
Markets European Pacific
Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 213,246 $ 212,376 $ 57,653
Interest 52,691 63,659 9,069
Less: Foreign withholding tax (15,868) (20,529) (3,575)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investment Income 250,069 255,506 63,147
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 159,782 181,162 39,610
Distribution fees (Note 2) 112,300 169,919 31,627
Shareholder and system servicing fees 29,462 42,052 14,296
Registration fees 51,972 39,474 44,874
Custody 33,090 20,467 24,303
Shareholder communications 9,517 16,887 5,134
Audit and legal 10,457 18,979 11,507
Directors' fees 1,948 2,318 1,268
Other 7,218 3,431 3,717
- ------------------------------------------------------------------------------------------------------------------------------------
Total Expenses 415,746 494,689 176,336
- ------------------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) (165,677) (239,183) (113,189)
- ------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, OPTIONS AND FOREIGN
CURRENCIES (NOTE 3, 4 AND 5):
Realized Gain (Loss) From:
Security transactions 1,278,114 304,983 (59,129)
Options purchased -- -- --
Foreign currency transactions 13,151 (7,153) (2,350)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Realized Gain (Loss) 1,291,265 297,830 (61,479)
- ------------------------------------------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation (Depreciation)
of Investments, Options and Foreign Currencies:
Beginning of period 569,673 11,849,436 222,033
End of period 4,177,156 14,708,502 1,067,813
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Unrealized Appreciation 3,607,483 2,859,066 845,780
- ------------------------------------------------------------------------------------------------------------------------------------
Net Gain (Loss) on Investments, Options and Foreign Currencies 4,898,748 3,156,896 784,301
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Operations $ 4,733,071 $ 2,917,713 $ 671,112
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 61
<PAGE>
================================================================================
Statements of Changes in Net Assets (unaudited)
For the Six Months Ended April 30, 1997
================================================================================
<TABLE>
<CAPTION>
Global
Government International International
Bond Portfolio Equity Portfolio Balanced Portfolio
====================================================================================================================================
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ 3,651,488 $ (2,476,063) $ 402,828
Net realized gain (loss) 4,987,676 20,771,351 (766,247)
Increase (decrease) in net unrealized appreciation (5,307,433) 30,150,990 (1,125,105)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Operations 3,331,731 48,446,278 (1,488,524)
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (9,772,463) (1,479,385) (837,847)
Net realized gains (572,938) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From Distributions to Shareholders (10,345,401) (1,479,385) (837,847)
- ------------------------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 10):
Net proceeds from sale of shares 10,075,145 684,523,159 14,528,709
Net asset value of shares issued for reinvestment of dividends 5,528,676 -- 298,553
Cost of shares reacquired (14,179,788) (659,745,465) (4,360,205)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Fund Share Transactions 1,424,033 24,777,694 10,467,057
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets (5,589,637) 71,744,587 8,140,686
NET ASSETS:
Beginning of period 151,596,797 1,275,512,626 45,630,207
- ------------------------------------------------------------------------------------------------------------------------------------
End of period* $ 146,007,160 $ 1,347,257,213 $ 53,770,893
====================================================================================================================================
* Includes accumulated net investment income (loss) of: $ 4,097,573 $ (18,636,614) $ (937,384)
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
62 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Statements of Changes in Net Assets (unaudited)
For the Six Months Ended April 30, 1997
================================================================================
<TABLE>
<CAPTION>
Emerging
Markets European Pacific
Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ (165,677) $ (239,183) $ (113,189)
Net realized gain (loss) 1,291,265 297,830 (61,479)
Increase (decrease) in net unrealized appreciation 3,607,483 2,859,066 845,780
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Operations 4,733,071 2,917,713 671,112
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- -- --
Net realized gains -- (2,644,023) --
- ------------------------------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From Distributions to Shareholders -- (2,644,023) --
- ------------------------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 10):
Net proceeds from sale of shares 17,370,775 29,394,058 18,179,607
Net asset value of shares issued for reinvestment of dividends -- 2,505,751 --
Cost of shares reacquired (9,667,506) (24,348,545) (18,651,697)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Fund Share Transactions 7,703,269 7,551,264 (472,090)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets 12,436,340 7,824,954 199,022
NET ASSETS:
Beginning of period 26,200,461 38,922,834 10,549,849
- ------------------------------------------------------------------------------------------------------------------------------------
End of period* $ 38,636,801 $ 46,747,788 $ 10,748,871
====================================================================================================================================
* Includes accumulated net investment income (loss) of: $ (158,055) $ (246,556) $ (158,133)
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 63
<PAGE>
================================================================================
Statements of Changes in Net Assets For the Year Ended October 31, 1996
================================================================================
<TABLE>
<CAPTION>
Global
Government International International
Bond Equity Balanced
Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ 8,559,776 $ (269,174) $ 653,494
Net realized gain (loss) 9,468,200 6,128,621 582,875
Increase (decrease) in net unrealized appreciation (4,222,849) 98,809,008 2,640,474
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 13,805,127 104,668,455 3,876,843
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (10,527,150) (8,277,473) (813,403)
Net realized gains -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From Distributions to Shareholders (10,527,150) (8,277,473) (813,403)
- ------------------------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares 22,772,237 947,882,501 23,961,742
Net asset value of shares issued for reinvestment of dividends 6,565,761 7,626,220 554,791
Cost of shares reacquired (44,297,898) (823,699,952) (6,997,464)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Fund Share Transactions (14,959,900) 131,808,769 17,519,069
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets (11,681,923) 228,199,751 20,582,509
NET ASSETS:
Beginning of year 163,278,720 1,047,312,875 25,047,698
- ------------------------------------------------------------------------------------------------------------------------------------
End of year* $ 151,596,797 $ 1,275,512,626 $ 45,630,207
====================================================================================================================================
* Includes accumulated net investment income (loss) of: $ 4,968,580 $ (14,136,552) $ 334,918
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
64 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Statements of Changes in Net Assets For the Year Ended October 31, 1996
================================================================================
<TABLE>
<CAPTION>
Emerging
Markets European Pacific
Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ (143,205) $ (375,575) $ (175,164)
Net realized gain (loss) 52,756 3,593,424 (159,611)
Increase (decrease) in net unrealized appreciation 1,615,021 2,933,737 346,323
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 1,524,572 6,151,586 11,548
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- (59,829) --
Net realized gains -- (100,457) --
- ------------------------------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From Distributions to Shareholders -- (160,286) --
- ------------------------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares 20,033,650 35,761,098 28,672,810
Net asset value of shares issued for reinvestment of dividends -- 152,260 --
Cost of shares reacquired (11,661,068) (40,988,044) (25,526,221)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Fund Share Transactions 8,372,582 (5,074,686) 3,146,589
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets 9,897,154 916,614 3,158,137
NET ASSETS:
Beginning of year 16,303,307 38,006,220 7,391,712
- ------------------------------------------------------------------------------------------------------------------------------------
End of year* $ 26,200,461 $ 38,922,834 $ 10,549,849
====================================================================================================================================
* Includes accumulated net investment income (loss) of: $ (5,529) $ (220) $ (42,594)
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 65
<PAGE>
================================================================================
Notes to Financial Statements (unaudited)
================================================================================
1. Significant Accounting Policies
The Global Government Bond, International Equity, International Balanced,
Emerging Markets, European and Pacific Portfolios ("Portfolios") are separate
investment 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 management company.
The significant accounting policies consistently followed by the Fund 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 securities for which no
sales price 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) securities maturing within 60 days
are valued at cost plus accreted discount, or minus amortized premium, which
approximates value; (d) gains or losses on the sale of securities are calculated
by using the specific identification method; (e) interest income, adjusted for
amortization of premium and accretion of discount, is recorded on the accrual
basis; (f) dividend income is recorded on the ex-dividend date; foreign dividend
income is recorded on the ex-dividend date or as soon as practical after the
Fund determines the existence of a dividend declaration after exercising
reasonable due diligence; (g) direct expenses are charged to each Portfolio and
class; management fees and general Fund expenses are allocated on the basis of
relative net assets; (h) dividends and distributions to shareholders are
recorded on the ex-dividend date; (i) the accounting records of each Portfolio
are maintained in U.S. dollars. All assets and liabilities denominated in
foreign currencies are translated into U.S. dollars on the date of valuation.
Purchases and sales of securities, and income and expenses are translated at the
rate of exchange quoted on the respective date that such transactions are
recorded. Differences between income and expense amounts recorded and collected
or paid are adjusted when reported by the custodian; (j) the character of income
and gains to be distributed are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles. At
October 31, 1996, reclassifications were made to the capital accounts of the
Portfolios to reflect permanent book/tax differences and income and gains
available for distributions under tax regulations. Accordingly, a portion of net
investment income/(loss) amounting to $175,084, $(245,422), $(449,844) and
$(91,959) was reclassified to paid-in capital for the Global Government Bond,
Emerging Markets, European and Pacific Portfolios, respectively. In addition, a
portion of accumulated net realized gains amounting to $3,492,676 and $1,136 was
reclassified to paid-in capital for the Global Government Bond and European
Portfolios, respectively. Net investment income, net realized gains and net
assets were not affected by this change; (k) each 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 each Portfolio from substantially all
Federal income and excise taxes; and (l) estimates and assumptions are required
to be made regarding assets, liabilities and changes in net assets resulting
from operations when financial statements are prepared. Changes in the economic
environment, financial markets and any other parameters used in determining
these estimates could cause actual results to differ.
- --------------------------------------------------------------------------------
66 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Notes to Financial Statements (unaudited) (continued)
================================================================================
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 ("SBH"), acts as investment manager of the Fund. The European,
Pacific, International Balanced and International Equity Portfolios pay SBMFM a
management fee calculated at the annual rate of 0.85% of the average daily net
assets of each respective portfolio. The Global Government Bond Portfolio pays
SBMFM a management fee calculated at the annual rate of 0.75% of the average
daily net assets of the portfolio. The Emerging Markets Portfolio pays SBMFM a
management fee calculated at the annual rate of 1.00% of the average daily net
assets of the portfolio. These fees are calculated daily and paid monthly.
Smith Barney Inc. ("SB"), another subsidiary of SBH, acts as distributor of the
Fund's shares. SB received sales charges of approximately $489,000 on sales of
the Portfolios' Class A shares for the six months ended April 30, 1997. In
addition, SB received total brokerage commissions of $98 from all of the
Portfolios.
For the International Equity, International Balanced, Emerging Markets, European
and Pacific Portfolios, there is a contingent deferred sales charge ("CDSC") of
5.00% on Class B shares, which applies if redemption occurs within one year from
initial purchase. Thereafter this CDSC declines 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 six months ended April 30, 1997, CDSCs paid to SB were approximately:
<TABLE>
<CAPTION>
Portfolio Class B Class C
================================================================================
<S> <C> <C>
Global Government Bond $ 25,000 $ --
- --------------------------------------------------------------------------------
International Equity 300,000 8,000
- --------------------------------------------------------------------------------
International Balanced 7,000 --
- --------------------------------------------------------------------------------
Emerging Markets 35,000 1,000
- --------------------------------------------------------------------------------
European 21,000 1,000
- --------------------------------------------------------------------------------
Pacific 4,000 --
================================================================================
</TABLE>
Pursuant to a Distribution Plan, the Portfolios pay 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 International Equity,
International Balanced, Emerging Markets, European and Pacific Portfolios pay 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 each respective Portfolio and
class. The Global Government Bond Portolio pays a distribution fee with respect
to Class B and C shares calculated at the annual rates of 0.50% and 0.45% of the
average daily net assets of each class, respectively. For the six months ended
April 30, 1997, total Distribution Plan fees incurred by the Portfolios were:
<TABLE>
<CAPTION>
Portfolio Class A Class B Class C
================================================================================
<S> <C> <C> <C>
Global Government Bond $127,013 $ 90,129 $ 13,312
- --------------------------------------------------------------------------------
International Equity 635,021 1,121,672 1,133,132
- --------------------------------------------------------------------------------
International Balanced 18,473 27,833 22,063
- --------------------------------------------------------------------------------
Emerging Markets 15,946 80,002 16,352
- --------------------------------------------------------------------------------
European 14,565 143,584 11,770
- --------------------------------------------------------------------------------
Pacific 5,026 18,701 7,900
================================================================================
</TABLE>
All officers and two Directors of the Fund are employess of SB.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 67
<PAGE>
================================================================================
Notes to Financial Statements (unaudited) (continued)
================================================================================
3. Investments
During the six months ended April 30, 1997, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
<TABLE>
<CAPTION>
Portfolio Purchases Sales
================================================================================
<S> <C> <C>
Global Government Bond $240,092,142 $258,567,504
- --------------------------------------------------------------------------------
International Equity 250,090,506 266,874,700
- --------------------------------------------------------------------------------
International Balanced 57,007,375 47,345,112
- --------------------------------------------------------------------------------
Emerging Markets 18,826,714 10,044,083
- --------------------------------------------------------------------------------
European 11,027,271 5,047,099
- --------------------------------------------------------------------------------
Pacific 6,388,653 6,828,362
================================================================================
</TABLE>
At April 30, 1997, aggregate gross unrealized appreciation and depreciation of
investments for Federal income tax purposes were substantially as follows:
<TABLE>
<CAPTION>
Net Unrealized
Appreciation
Portfolio Appreciation Depreciation (Depreciation)
================================================================================
<S> <C> <C> <C>
Global Government Bond $ 108,635 $ 5,289,303 $ (5,180,668)
- --------------------------------------------------------------------------------
International Equity 322,881,518 56,312,058 266,569,460
- --------------------------------------------------------------------------------
International Balanced 5,270,072 2,331,495 2,938,577
- --------------------------------------------------------------------------------
Emerging Markets 6,345,631 2,169,144 4,176,487
- --------------------------------------------------------------------------------
European 15,825,405 1,135,287 14,690,118
- --------------------------------------------------------------------------------
Pacific 1,401,954 331,507 1,070,447
================================================================================
</TABLE>
- --------------------------------------------------------------------------------
68 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Notes to Financial Statements (unaudited) (continued)
================================================================================
4. Forward Foreign Currency Contracts
At April 30, 1997, the Portfolios 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 were as follows:
<TABLE>
<CAPTION>
Local Market Settlement Unrealized
Foreign Currency Currency Value Date Gain (Loss)
====================================================================================================================================
<S> <C> <C> <C> <C>
Global Government Bond Portfolio
To Buy:
British Pound 2,830,000 $ 4,591,514 5/06/97 $ (26,197)
German Deutschemark 8,163,750 4,716,294 5/06/97 (165,591)
- -------------------------------------------------------------------------------------------------------------------------------
(191,788)
- -------------------------------------------------------------------------------------------------------------------------------
To Sell:
Belgian Franc 247,000,000 6,915,188 5/06/97 265,044
British Pound 4,160,000 6,749,363 5/06/97 95,501
Danish Krone 37,600,000 5,706,645 5/06/97 211,819
Finnish Markka 15,000,000 2,883,922 5/06/97 136,618
French Franc 20,800,000 3,565,255 5/06/97 139,108
German Deutschemark 14,660,000 8,469,254 5/06/97 324,987
Irish Pound 5,600,000 8,409,789 5/06/97 253,411
Italian Lira 18,100,000,000 10,570,781 5/06/97 235,976
Japanese Yen 3,096,600,000 24,421,540 5/06/97 848,222
Spanish Peseta 1,730,000,000 11,843,474 5/06/97 357,054
Swedish Krona 15,400,000 1,963,367 5/06/97 68,832
- -------------------------------------------------------------------------------------------------------------------------------
2,936,572
- -------------------------------------------------------------------------------------------------------------------------------
Total Unrealized Gain on
Forward Foreign Currency Contracts $2,744,784
===============================================================================================================================
International Equity Portfolio
To Buy:
Australian Dollar 462,691 $ 361,683 5/01/97 $ 2,311
Australian Dollar 1,515,880 1,184,943 5/02/97 8,772
British Pound 167,918 272,437 5/06/97 (497)
German Deutschemark 5,498,462 3,176,302 5/05/97 (13,616)
Japanese Yen 3,990,512 31,453 5/02/97 (25)
- -------------------------------------------------------------------------------------------------------------------------------
Total Unrealized Loss on
Forward Foreign Currency Contracts $ (3,055)
====================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 69
<PAGE>
================================================================================
Notes to Financial Statements (unaudited) (continued)
================================================================================
<TABLE>
<CAPTION>
Local Market Settlement Unrealized
Foreign Currency Currency Value Date Gain (Loss)
====================================================================================================================================
<S> <C> <C> <C> <C>
International Balanced Portfolio
To Buy:
Australian Dollar 37,015 $ 28,935 5/01/97 $ 185
British Pound 392,000 635,593 6/10/97 553
Canadian Dollar 1,760,000 1,262,887 6/10/97 (11,552)
Danish Krone 6,950,000 1,057,061 6/10/97 (10,691)
German Deutschemark 12,712,312 7,344,571 5/07/97 (55,429)
German Deutschemark 16,657,060 9,623,659 5/07/97 (176,341)
German Deutschemark 100,000 57,787 5/10/97 (539)
German Deutschemark 5,700,000 3,301,322 6/10/97 (35,915)
Italian Lira 690,200,000 403,184 6/10/97 2,429
Japanese Yen 268,114,000 2,125,438 6/10/97 (12,632)
Malaysian Ringgit 407,088 162,177 5/02/97 (723)
Swedish Krona 1,220,000 155,762 6/10/97 (3,798)
Swiss Franc 3,160,000 2,154,544 6/10/97 (27,777)
- ------------------------------------------------------------------------------------------------------------------------------------
(332,230)
- ------------------------------------------------------------------------------------------------------------------------------------
To Sell:
Australian Dollar 2,752,649 2,151,605 5/07/97 (21,605)
Australian Dollar 380,000 296,940 6/10/97 (1,946)
Belgian Franc 67,900,000 1,901,456 6/10/97 25,715
Finnish Markka 1,160,000 223,627 6/10/97 4,271
French Franc 4,300,000 738,788 6/10/97 9,559
German Deutschemark 4,735,080 2,735,705 5/07/97 64,295
German Deutschemark 7,729,200 4,465,565 5/07/97 34,435
Italian Lira 852,000,000 496,959 6/10/97 5,987
Japanese Yen 608,643,700 4,800,816 5/07/97 99,184
Japanese Yen 276,848,000 2,183,702 5/07/97 16,298
Japanese Yen 566,865,000 4,471,277 5/07/97 28,723
Japanese Yen 434,500,000 3,444,442 6/10/97 26,006
Japanese Yen 105,800,000 838,716 6/10/97 7,684
Spanish Peseta 183,700,000 1,257,844 6/10/97 11,240
Swiss Franc 2,339,840 1,589,312 5/07/97 10,688
Swiss Franc 3,160,000 2,154,544 6/10/97 (488)
- ------------------------------------------------------------------------------------------------------------------------------------
320,046
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Market Value
-------------------------------------
Cross Forwards**: German Australian
To Sell: Deutschemark Dollar
------------ ------------
<S> <C> <C> <C>
Sell German Deutschemark vs. Australian Dollar 2,102,164 2,110,452 8,288
Swiss Franc
------------
Sell German Deutschemark vs. Swiss Franc 1,587,683 1,589,312 1,629
Japanese Yen
------------
Sell German Deutschemark vs. Japanese Yen 3,666,205 3,667,172 967
- --------------------------------------------------------------------------------------------------------------------
10,884
- --------------------------------------------------------------------------------------------------------------------
Total Unrealized Loss on
Forward Foreign Currency Contracts $(1,300)
====================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
70 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Notes to Financial Statements (unaudited) (continued)
================================================================================
<TABLE>
<CAPTION>
** Local Currency on Cross Forwards Sell Buy
--------- -----------
<S> <C> <C>
Sell German Deutschemark vs. Australian Dollar 3,638,520 2,700,000
Sell German Deutschemark vs. Swiss Franc 2,748,033 2,339,840
Sell German Deutschemark vs. Japanese Yen 6,330,000 462,596,400
<CAPTION>
====================================================================================================================================
Local Market Settlement Unrealized
Currency Value Date Gain (Loss)
====================================================================================================================================
<S> <C> <C> <C> <C>
European Portfolio
To Buy:
Dutch Guilder 640,342 $ 328,747 5/02/97 $ (122)
- -----------------------------------------------------------------------------------------------------------------------------------
To Sell:
Dutch Guilder 214,937 110,386 5/07/97 423
- -----------------------------------------------------------------------------------------------------------------------------------
Total Unrealized Gain on
Forward Foreign Currency Contracts $ 301
====================================================================================================================================
Pacific Portfolio
To Buy:
Australian Dollar 117,594 $ 91,923 5/01/97 $ 552
Singapore Dollar 77,002 53,244 5/02/97 (122)
Singapore Dollar 76,474 52,879 5/02/97 (209)
Singapore Dollar 78,587 54,346 5/05/97 (62)
Singapore Dollar 63,813 44,131 5/06/97 (46)
- -----------------------------------------------------------------------------------------------------------------------------------
113
- -----------------------------------------------------------------------------------------------------------------------------------
To Sell:
Indonesian Rupiah 52,353,992 21,541 5/01/97 (636)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Unrealized Loss on
Forward Foreign Currency Contracts $ (523)
====================================================================================================================================
</TABLE>
5. Option Contracts
Premiums paid when put or call options are purchased by the Portfolios represent
investments, which are marked-to-market daily. When a purchased option expires,
the Portfolio will realize a loss in the amount of the premium paid. When the
Portfolio enters into a closing sales transaction, the Portfolio will realize a
gain or loss depending on whether the proceeds from the closing sales
transaction are greater or less than the premium paid for the option. When the
Portfolio exercises a put option, it will realized a gain or loss from the sale
of the underlying security and the proceeds from such sale will be decreased by
the amount of the premium originally paid. When the Portfolio exercises a call
option, the cost of the security which the Portfolio purchases upon exercise
will be increased by the permium originally paid.
As of April 30, 1997, the International Balanced Portfolio had one open
purchased option with a total cost of $7,750.
When a Portfolio writes a call or put option, an amount equal to the premium
received by the Portfolio is recorded as a liability, the value of which is
marked-to-market daily. When a written option expires, the Portfolio realizes a
gain equal to the amount of the premium received. When the Portfolio enters into
a closing purchase transaction, the Portfolio realizes a gain (or loss if the
cost of the closing purchase transaction exceeds the premium received when the
option was written) without regard to any unrealized gain or loss on the
underlying security, and the liability related to such option is eliminated.
When a written call option is exercised the cost of the security sold will be
decreased by the
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 71
<PAGE>
================================================================================
Notes to Financial Statements (unaudited) (continued)
================================================================================
premium originally received. When a written put option is exercised, the amount
of the premium originally received will reduce the cost of the security which
the Portfolio purchased upon exercise. When written index options are exercised,
settlement is made in cash.
The risk associated with purchasing options is limited to the premium originally
paid. The Portfolio enters into options for hedging purposes. The risk in
writing a call option is that the Portfolio gives up the opportunity to
participate in any increase in the price of the underlying security beyond the
exercise price. The risk in writing a put option is that the Portfolio is
exposed to the risk of loss if the market price of the underlying security
declines.
The following covered call option transactions occurred during the six months
ended April 30, 1997:
<TABLE>
<CAPTION>
Number of
Contracts Premiums
====================================================================================================================================
<S> <C> <C>
Global Government Bond Portfolio
Options written, outstanding at October 31, 1996 0 $ --
Options written during the six months ended April 30, 1997 1 60,000
- ------------------------------------------------------------------------------------------------------------------------------------
Options written, outstanding at April 30, 1997 1 $60,000
====================================================================================================================================
International Balanced Portfolio
Options written, outstanding at October 31, 1996 0 $--
Options written during the six months ended April 30, 1997 2 28,175
-------
Options written, outstanding at April 30, 1997 2 $28,175
====================================================================================================================================
The following table represents the written call option contracts open as of
April 30,1997:
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Number of Strike
Contracts Expiration Price Value
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Call Options Written
Global Government Bond Portfolio
1 20,000,000 USD Call/JPY Put
(Premiums received-- $60,000) 5/19/97 128Yen $ (60,000)
====================================================================================================================================
International Balanced Portfolio
1 4,250,000 USD Call/DEM Put 5/19/97 1.76Dem $ 7,650
1 5,000,000 USD Call/JPY Put 5/19/97 128Yen 15,000
- ------------------------------------------------------------------------------------------------------------------------------------
(Premium received-- $28,175) $ 22,650
====================================================================================================================================
</TABLE>
6. Futures Contracts
Initial margin deposits made upon entering into futures contracts are recognized
as assets. Securities equal to the initial margin amount are segregated by the
custodian in the name of the broker. Additional securities are also segregated
up to the current market value of the futures contract. During the period the
futures contract is open, changes in the value of the contract are recognized as
unrealized gains or losses by "marking-to-market" on a daily basis to reflect
the market value of the contract at the end of each day's trading. Variation
margin payments are made or received and recognized as assets due from or
liabilities due to broker, depending upon whether unrealized gains or losses are
incurred. When the contract is closed, the Portfolio records a realized gain or
loss equal to the difference between the proceeds from (or cost of) the closing
transactions and the Portfolio's basis in the contract.
- --------------------------------------------------------------------------------
72 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Notes to Financial Statements (unaudited) (continued)
================================================================================
The Portfolio enters into such contracts to hedge a portion of its portfolio.
The Portfolio bears the market risk that arises from changes in the value of the
financial instruments and securities indices (futures contracts) and the credit
risk should a counterparty fail to perform under such contracts.
As of April 30, 1997, the Portfolios had no open futures contracts.
7. 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 each 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 counterparties to
meet the terms of their contracts.
8. Capital Loss Carryforward
At October 31, 1996, the International Equity, International Balanced, Emerging
Markets and Pacific Portfolios had, for Federal income tax purposes,
approximately $73,454,000, $161,000, $46,000 and $1,709,000, respectively, of
capital loss carryforwards available to offset future realized gains. To the
extent that these carryforward losses are used to offset gains, it is probable
that the gains so offset will not be distributed. The amount and date of
expiration of the carryforward loss for each Portfolio is indicated below:
<TABLE>
<CAPTION>
Portfolio 10/31/02 10/31/03 10/31/04 Total
====================================================================================================================================
<S> <C> <C> <C> <C>
International Equity $ -- $73,454,000 $ -- $73,454,000
- ------------------------------------------------------------------------------------------------------------------------------------
International Balanced -- 161,000 -- 161,000
- ------------------------------------------------------------------------------------------------------------------------------------
Emerging Markets -- 46,000 -- 46,000
- ------------------------------------------------------------------------------------------------------------------------------------
Pacific 37,000 1,426,000 246,000 1,709,000
====================================================================================================================================
</TABLE>
9. Capital Shares
At April 30, 1997, the Fund had one billion shares of capital stock authorized
with a par value of $0.001 per share. The Portfolios have the ability to issue
multiple classes of shares. Each share of a class represents an identical legal
interest in a Portfolio and has the same rights, except that each class bears
certain expenses specifically related to the distribution of its shares.
At April 30, 1997, total paid-in capital amounted to the following for each
Portfolio:
<TABLE>
<CAPTION>
Portfolio Class A Class B Class C Class Y Class Z
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Global Government Bond $ 95,814,043 $ 21,007,087 $ 3,679,725 $ 23,621,666 $ --
- ------------------------------------------------------------------------------------------------------------------------------------
International Equity 375,609,909 208,593,266 198,976,911 249,867,449 119,126,637
- ------------------------------------------------------------------------------------------------------------------------------------
International Balanced 11,664,931 5,306,237 3,481,344 31,294,623 --
- ------------------------------------------------------------------------------------------------------------------------------------
Emerging Markets 12,591,465 16,919,544 3,874,229 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
European 8,830,292 21,034,222 2,116,349 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Pacific 4,626,761 4,693,607 2,282,872 -- --
====================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 73
<PAGE>
================================================================================
Notes to Financial Statements (unaudited) (continued)
================================================================================
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
April 30, 1997 October 31, 1996
--------------------------- ---------------------------
Shares Amount Shares Amount
====================================================================================================================================
<S> <C> <C> <C> <C>
Global Government Bond Portfolio
Class A
Shares sold 76,337 $ 936,617 489,319 $ 6,083,120
Shares issued on reinvestment 344,524 4,196,485 396,504 4,899,900
Shares redeemed (737,519) (9,072,286) (2,475,502) (30,710,185)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Decrease (316,658) $ (3,939,184) (1,589,679) $ (19,727,165)
====================================================================================================================================
Class B
Shares sold 40,131 $ 492,702 121,679 $ 1,505,000
Shares issued on reinvestment 92,605 1,127,773 117,711 1,449,119
Shares redeemed (355,813) (4,360,895) (1,030,724) (12,706,817)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Decrease (223,077) $ (2,740,420) (791,334) $ (9,752,698)
====================================================================================================================================
Class C
Shares sold 5,777 $ 71,244 33,934 $ 417,363
Shares issued on reinvestment 16,810 204,217 17,412 213,650
Shares redeemed (61,703) (746,607) (70,458) (867,055)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Decrease (39,116) $ (471,146) (19,112) $ (236,042)
====================================================================================================================================
Class Y
Shares sold 706,692 $ 8,574,582 1,214,448 $ 14,766,754
Shares issued on reinvestment 17 201 253 3,092
Shares redeemed -- -- (1,138) (13,841)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 706,709 $ 8,574,783 1,213,563 $ 14,756,005
====================================================================================================================================
International Equity Portfolio
Class A
Shares sold 25,816,632 $ 500,352,968 29,809,743 $ 540,225,017
Shares issued on reinvestment -- -- 270,352 4,617,617
Shares redeemed (27,236,397) (529,399,798) (31,054,593) (565,101,407)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Decrease (1,419,765) $ (29,046,830) (974,498) $ (20,258,773)
====================================================================================================================================
Class B
Shares sold 4,635,510 $ 89,393,852 12,723,350 $ 229,942,996
Shares issued on reinvestment -- -- 19,196 330,185
Shares redeemed (3,926,507) (75,870,999) (8,709,898) (158,190,577)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 709,003 $ 13,522,853 4,032,648 $ 72,082,604
====================================================================================================================================
Class C
Shares sold 1,570,105 $ 30,008,616 2,740,842 $ 48,948,469
Shares issued on reinvestment -- -- 34,000 576,308
Shares redeemed (2,664,063) (50,949,463) (4,471,834) (79,543,267)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Decrease (1,093,958) $ (20,940,847) (1,696,992) $ (30,018,490)
====================================================================================================================================
Class Y
Shares sold 2,773,879 $ 53,643,636 5,706,318 $ 105,704,162
Shares issued on reinvestment -- -- 54,561 928,635
Shares redeemed (250) (4,866) (676,092) (12,631,569)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 2,773,629 $ 53,638,770 5,084,787 $ 94,001,228
====================================================================================================================================
Class Z
Shares sold 570,187 $ 11,124,087 1,285,495 $ 23,061,857
Shares issued on reinvestment -- -- 68,987 1,173,475
Shares redeemed (183,014) (3,520,339) (455,720) (8,233,132)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 387,173 $ 7,603,748 898,762 $ 16,002,200
====================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
74 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Notes to Financial Statements (unaudited) (continued)
================================================================================
<TABLE>
<CAPTION>
Six Months Ended Year Ended
April 30, 1997 October 31, 1996
--------------------------- ---------------------------
Shares Amount Shares Amount
====================================================================================================================================
<S> <C> <C> <C> <C>
International Balanced Portfolio
Class A
Shares sold 39,650 $ 547,279 136,189 $ 1,791,427
Shares issued on reinvestment 16,752 228,865 29,395 391,488
Shares redeemed (198,550) (2,730,853) (403,806) (5,337,395)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Decrease (142,148) $ (1,954,709) (238,222) $ (3,154,480)
====================================================================================================================================
Class B
Shares sold 88,177 $ 1,220,450 211,895 $ 2,785,875
Shares issued on reinvestment 2,858 39,000 5,840 78,180
Shares redeemed (46,127) (631,447) (81,609) (1,097,160)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 44,908 $ 628,003 136,126 $ 1,766,895
====================================================================================================================================
Class C
Shares sold 18,632 $ 257,199 45,360 $ 593,585
Shares issued on reinvestment 2,252 30,688 6,383 85,123
Shares redeemed (72,479) (997,905) (42,497) (562,896)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (51,595) $ (710,018) 9,246 $ 115,812
====================================================================================================================================
Class Y
Shares sold 911,697 $ 12,503,781 1,391,962 $ 18,790,855
Shares redeemed -- -- (1) (13)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 911,697 $ 12,503,781 1,391,961 $ 18,790,842
====================================================================================================================================
Emerging Markets Portfolio
Class A
Shares sold 493,952 $ 6,854,753 845,973 $ 10,156,535
Shares redeemed (339,122) (4,701,409) (600,551) (7,224,148)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 154,830 $ 2,153,344 245,422 $ 2,932,387
====================================================================================================================================
Class B
Shares sold 635,540 $ 8,675,322 701,375 $ 8,323,429
Shares redeemed (343,814) (4,611,110) (300,425) (3,574,650)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 291,726 $ 4,064,212 400,950 $ 4,748,779
====================================================================================================================================
Class C
Shares sold 134,111 $ 1,840,700 130,701 $ 1,553,686
Shares redeemed (26,363) (354,987) (71,401) (862,270)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 107,748 $ 1,485,713 59,300 $ 691,416
====================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 75
<PAGE>
================================================================================
Notes to Financial Statements (unaudited) (continued)
================================================================================
<TABLE>
<CAPTION>
Six Months Ended Year Ended
April 30, 1997 October 31, 1996
--------------------------- ---------------------------
Shares Amount Shares Amount
====================================================================================================================================
<S> <C> <C> <C> <C>
European Portfolio
Class A
Shares sold 324,853 $ 5,670,102 925,533 $ 14,551,767
Shares issued on reinvestment 39,393 670,082 5,876 83,554
Shares redeemed (221,428) (3,867,517) (1,130,019) (17,610,700)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 142,818 $ 2,472,667 (198,610) $ (2,975,379)
====================================================================================================================================
Class B
Shares sold 1,329,295 $ 22,933,946 1,272,772 $ 20,413,451
Shares issued on reinvestment 100,838 1,696,102 4,564 64,632
Shares redeemed (1,165,961) (20,200,635) (1,438,755) (22,998,214)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 264,172 $ 4,429,413 (161,419) $ (2,520,131)
====================================================================================================================================
Class C
Shares sold 45,714 $ 790,010 51,785 $ 795,880
Shares issued on reinvestment 8,322 139,567 289 4,074
Shares redeemed (16,329) (280,393) (24,464) (379,130)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 37,707 $ 649,184 27,610 $ 420,824
====================================================================================================================================
Pacific Portfolio
Class A
Shares sold 188,713 $ 1,985,527 835,124 $ 8,882,687
Shares redeemed (316,843) (3,333,203) (788,783) (8,407,176)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 128,130 $ (1,347,676) 46,341 $ 475,511
====================================================================================================================================
Class B
Shares sold 1,417,573 $ 14,822,272 1,874,088 $ 19,538,963
Shares redeemed (1,347,412) (14,123,561) (1,576,819) (16,512,252)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 70,161 $ 698,711 297,269 $ 3,026,711
====================================================================================================================================
Class C
Shares sold 131,896 $ 1,371,808 23,983 $ 251,160
Shares redeemed (114,747) (1,194,933) (58,530) (606,793)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 17,149 $ 176,875 (34,547) $ (355,633)
====================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
76 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Financial Highlights
================================================================================
For a share of each class of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Class A Shares
-------------------------------------------------------------------------------------
Global Government Bond Portfolio 1997(1)(2) 1996(2) 1995 1994(3) 1993 1992
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.55 $12.30 $11.68 $12.92 $11.84 $12.90
- -----------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.31 0.70 0.92* 0.69 0.83 1.00
Net realized and unrealized gain (loss) (0.02) 0.42 0.48 (1.28) 1.36 (0.90)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.29 1.12 1.40 (0.59) 2.19 0.10
- -----------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.82) (0.87) (0.78) (0.23) (0.52) (0.97)
Net realized gains(4) (0.05) -- -- -- (0.59) (0.19)
Capital -- -- -- (0.42) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.87) (0.87) (0.78) (0.65) (1.11) (1.16)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $11.97 $12.55 $12.30 $11.68 $12.92 $11.84
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return 2.30%++ 9.41% 12.40% (4.64)%++ 19.13% 0.93%
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $97,777 $106,536 $123,917 $77,961 $107,415 $107,609
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(5) 1.25%+ 1.26% 1.38% 1.32%+ 1.30% 1.36%
Net investment income 4.92+ 5.69 7.44 6.57+ 6.67 7.72
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 176% 133% 195% 179% 119% 177%
===================================================================================================================================
</TABLE>
(1) For the six months ended April 30, 1997 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method rather than the undistributed net investment income method, because
it more accurately reflects the per share data for the period.
(3) For the period from January 1, 1994 to October 31, 1994.
(4) Distributions from net investment income include short-term capital gains,
if any, for Federal income tax purposes.
(5) During the years ended October 31, 1996 and October 31, 1995, the Portfolio
had earned credits from the custodian which reduced service fees incurred.
If the credits are taken into consideration, the expense ratios for Class A
would have been 1.24% and 1.32%, 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.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 77
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Class B Shares
---------------------------------------------
Global Government Bond Portfolio 1997(1)(2) 1996(2) 1995(3)
=============================================================================================
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $12.50 $12.26 $11.57
- ---------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.29 0.63 0.78*
Net realized and unrealized gain (loss) (0.04) 0.42 0.57
- ---------------------------------------------------------------------------------------------
Total Income From Operations 0.25 1.05 1.35
- ---------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.73) (0.81) (0.66)
Net realized gains (0.05) -- --
- ---------------------------------------------------------------------------------------------
Total Distributions (0.78) (0.81) (0.66)
- ---------------------------------------------------------------------------------------------
Net Asset Value, End of Period $11.97 $12.50 $12.26
- ---------------------------------------------------------------------------------------------
Total Return 1.99%++ 8.83% 11.97%++
- ---------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $22,195 $25,970 $35,159
- ---------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(4) 1.79%+ 1.81% 1.92%+
Net investment income 4.37+ 5.15 6.65+
- ---------------------------------------------------------------------------------------------
Portfolio Turnover Rate 176% 133% 195%
=============================================================================================
</TABLE>
(1) For the six months ended April 30, 1997 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method rather than the undistributed net investment income method, because
it more accurately reflects the per share data for the period.
(3) For the period from November 18, 1994 (inception date) to October 31, 1995.
(4) During the year ended October 31, 1996 and the period ended October 31,
1995, the Portfolio had earned credits from the custodian which reduced
service fees incurred. If the credits are taken into consideration, the
expense ratios for Class B would have been 1.78% and 1.86% (annualized),
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.
- --------------------------------------------------------------------------------
78 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Class C Shares
---------------------------------------------------------------------------
Global Government Bond Portfolio 1997(1)(2) 1996(2) 1995(3) 1994(4) 1993(5)
==========================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.47 $12.23 $11.68 $12.93 $11.83
- --------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.31 0.64 0.85* 0.90 0.79
Net realized and unrealized gain (loss) (0.05) 0.41 0.42 (1.55) 1.37
- --------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.26 1.05 1.27 (0.65) 2.16
- --------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.74) (0.81) (0.72) (0.21) (0.47)
Net realized gains(6) (0.05) -- -- -- (0.59)
Capital -- -- -- (0.39) --
- --------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.79) (0.81) (0.72) (0.60) (1.06)
- --------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $11.94 $12.47 $12.23 $11.68 $12.93
- --------------------------------------------------------------------------------------------------------------------------
Total Return 2.06%++ 8.90% 11.25% (5.09)%++ 18.89%++
- --------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $3,348 $3,986 $4,141 $5,835 $4,972
- --------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(7) 1.69%+ 1.74% 1.84% 1.80%+ 1.74%+
Net investment income 4.47+ 5.22 7.15 6.05+ 6.28+
- --------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 176% 133% 195% 179% 119%
==========================================================================================================================
</TABLE>
(1) For the six months ended April 30, 1997 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method rather than the undistributed net investment income method, because
it more accurately reflects the per share data for the period.
(3) On November 7, 1994, the former Class B shares were renamed Class C shares.
(4) For the period from January 1, 1994 to October 31, 1994.
(5) For the period from January 4, 1993 (inception date) to December 31, 1993.
(6) Distributions from net investment income include short-term capital gains,
if any, for Federal income tax purposes.
(7) During the years ended October 31, 1996 and October 31, 1995, the Portfolio
had earned credits from the custodian which reduced service fees incurred.
If the credits are taken into consideration, the expense ratios for Class C
would have been 1.71% and 1.78%, 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.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 79
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Class Y Shares
----------------------------------------------------------------------------
Global Government Bond Portfolio 1997(1)(2) 1996(2) 1995(3) 1994(4) 1993(5)
============================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.39 $12.14 $11.68 $12.93 $11.97
- ----------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.27 0.73 0.78* 0.76 0.69
Net realized and unrealized gain (loss) 0.03 0.42 0.49 (1.35) 1.23
- ----------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.30 1.15 1.27 (0.59) 1.92
- ----------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.86) (0.90) (0.81) (0.23) (0.37)
Net realized gains(6) (0.05) -- -- -- (0.59)
Capital -- -- -- (0.43) --
- ----------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.91) (0.90) (0.81) (0.66) (0.96)
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $11.78 $12.39 $12.14 $11.68 $12.93
- ----------------------------------------------------------------------------------------------------------------------------
Total Return 2.45%++ 9.82% 11.27% (4.62)%++ 16.49%++
- ----------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $22,687 $15,105 $62 $3,202 $371
- ----------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(7) 0.89%+ 0.84% 0.98% 1.23%+ 1.20%+
Net investment income 5.28+ 6.12 6.38 6.76+ 6.73+
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 176% 133% 195% 179% 119%
============================================================================================================================
</TABLE>
(1) For the six months ended April 30, 1997 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method rather than the undistributed net investment income method, because
it more accurately reflects the per share data for the period.
(3) On November 7, 1994 the former Class C shares were renamed Class Y shares.
(4) For the period from January 1, 1994 to October 31, 1994.
(5) For the period from February 19, 1993 (inception date) to December 31,
1993.
(6) Distributions from net investment income include short-term capital gains,
if any, for Federal income tax purposes.
(7) During the years ended October 31, 1996 and October 31, 1995, the Portfolio
had earned credits from the custodian which reduced service fees incurred.
If the credits are taken into consideration, the expense ratios for Class Y
would have been 0.81% and 0.93%, 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.
- --------------------------------------------------------------------------------
80 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Class A Shares
--------------------------------------------------------------------------------------
International Equity Portfolio 1997(1)(2) 1996(2) 1995 1994(3)(4) 1993 1992
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $18.64 $17.15 $18.79 $18.71 $12.35 $12.31
- ------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss) (0.02) 0.01 0.08* (0.01) (0.01) 0.02
Net realized and unrealized gain (loss) 0.72 1.65 (1.50) 0.09 6.53 0.04
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.70 1.66 (1.42) 0.08 6.52 0.06
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.01) (0.17) (0.12) -- -- (0.02)
Net realized gains(5) (0.10) -- (0.16) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.01) (0.17) (0.22) -- (0.16) (0.02)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $19.33 $18.64 $17.15 $18.79 $18.71 $12.35
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return 3.78%++ 9.78% (7.44)% 0.43%++ 52.78% 0.49%
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $505,343 $513,870 $489,533 $591,598 $355,926 $122,605
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(6) 1.29%+ 1.35% 1.36% 1.35%+ 1.35% 1.56%
Net investment income (loss) (0.20)+ 0.17 0.50 (0.05)+ (0.10) 0.24
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 19% 46% 42% 35% 27% 20%
- ------------------------------------------------------------------------------------------------------------------------------------
Average commissions per share
paid on equity transactions(7)(8) $0.02 $0.02 $0.01 -- -- --
====================================================================================================================================
</TABLE>
(1) For the six months ended April 30, 1997(unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method rather than the undistributed net investment income method, because
it more accurately reflects the per share data for the period.
(3) For the period from January 1, 1994 to October 31, 1994.
(4) 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 10, 1994 is included with Class A share activity.
(5) Distributions from net investment income included short-term capital gains,
if any, for Federal income tax purposes.
(6) During the years ended October 31, 1996 and October 31, 1995, the Portfolio
had earned credits from the custodian which reduced service fees incurred.
If the credits are taken into consideration, the expense ratios for Class A
would have been 1.29% and 1.28%, respectively; prior year numbers have not
been restated to reflect these credits.
(7) As of September 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per share.
(8) Trades executed in the United States and Canada have an average commission
rate of $0.06 per share. Commission on trades executed outside these
countries are generally executed as a percentage of cost or proceeds
ranging from 0.5% to 1.0%.
* 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.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 81
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Class B Shares
-------------------------------------------------
International Equity Portfolio 1997(1)(2) 1996(2) 1995(3)
================================================================================================
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $18.65 $17.17 $18.38
- ------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss) (0.09) (0.08) 0.06*
Net realized and unrealized gain (loss) 0.72 1.60 (1.17)
- ------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.63 1.52 (1.11)
- ------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- (0.04) --
Net realized gains(4) -- -- (0.10)
- ------------------------------------------------------------------------------------------------
Total Distributions -- (0.04) (0.10)
- ------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $19.28 $18.65 $17.17
- ------------------------------------------------------------------------------------------------
Total Return 3.38%++ 8.89% (6.00)%++
- ------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $233,095 $212,294 $126,171
- ------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(5) 2.06%+ 2.11% 2.13%+
Net investment income (loss) (0.97)+ (0.58) 0.34+
- ------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 19% 46% 42%
- ------------------------------------------------------------------------------------------------
Average commissions per share
paid on equity transactions(6)(7) $0.02 $0.02 $0.01
================================================================================================
</TABLE>
(1) For the six months ended April 30, 1997(unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method rather than the undistributed net investment income method, because
it more accurately reflects the per share data for the period.
(3) For the period from November 7, 1994 (inception date) to October 31, 1995.
(4) Distributions from net investment income included short-term capital gains,
if any, for Federal income tax purposes.
(5) During the year ended October 31, 1996 and the period ended October 31,
1995, the Portfolio had earned credits from the custodian which reduced
service fees incurred. If the credits are taken into consideration, the
expense ratios for Class B would have been 2.04% and 2.04% (annualized),
respectively.
(6) As of September 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per share.
(7) Trades executed in the United States and Canada have an average commission
rate of $0.06 per share. Commission on trades executed outside these
countries are generally executed as a percentage of cost or proceeds
ranging from 0.5% to 1.0%.
* 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.
- --------------------------------------------------------------------------------
82 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Class C Shares
------------------------------------------------------------------------------------
International Equity Portfolio 1997(1)(2) 1996(2) 1995(3) 1994(4) 1993(5)
=================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $18.38 $16.93 $18.54 $18.58 $12.35
- ---------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss) (0.10) (0.13) (0.06)* (0.11) 0.14
Net realized and unrealized gain (loss) 0.72 1.62 (1.45) 0.07 6.25
- ---------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.62 1.49 (1.51) (0.04) 6.39
- ---------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- (0.04) -- -- --
Net realized gains(6) -- -- (0.10) -- (0.16)
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions -- (0.04) (0.10) -- (0.16)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $19.00 $18.38 $16.93 $18.54 $18.58
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 3.37%++ 8.85% (8.11)% (0.22)%++ 51.73%++
- ---------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $216,417 $229,514 $240,090 $287,458 $114,951
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(7) 2.07%+ 2.15% 2.16% 2.10%+ 2.14%+
Net investment loss (0.99)+ (0.63) (0.34) (0.77)+ (1.08)+
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 19% 46% 42% 35% 27%
- ---------------------------------------------------------------------------------------------------------------------------------
Average commissions per share
paid on equity transactions(8)(9) $0.02 $0.02 $0.01 -- --
=================================================================================================================================
</TABLE>
(1) For the six months ended April 30, 1997(unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method rather than the undistributed net investment income method, because
it more accurately reflects the per share data for the period.
(3) On November 7, 1994, the former Class B shares were renamed Class C shares.
(4) For the period from January 1, 1994 to October 31, 1994.
(5) For the period from January 4, 1993 (inception date) to December 31, 1993.
(6) Distributions from net investment income included short-term capital gains,
if any, for Federal income tax purposes.
(7) During the years ended October 31, 1996 and October 31, 1995, the Portfolio
had earned credits from the custodian which reduced service fees incurred.
If the credits are taken into consideration, the expense ratios for Class C
would have been 2.09% and 2.08%, respectively; prior year numbers have not
been restated to reflect these credits.
(8) As of September 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per share.
(9) Trades executed in the United States and Canada have an average commission
rate of $0.06 per share. Commission on trades executed outside these
countries are generally executed as a percentage of cost or proceeds
ranging from 0.5% to 1.0%.
* 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.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 83
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Class Y Shares
----------------------------------------------------------------
International Equity Portfolio 1997(1)(2) 1996(2) 1995(3) 1994(4)
=================================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $18.64 $17.13 $18.80 $17.64
- -----------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.01 0.18 0.10* 0.01
Net realized and unrealized gain (loss) 0.72 1.54 (1.50) 1.15
- -----------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.73 1.72 (1.40) 1.16
- -----------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.06) (0.21) (0.17) --
Net realized gains(5) -- -- (0.10) --
- -----------------------------------------------------------------------------------------------------------------
Total Distributions (0.06) (0.21) (0.27) --
- -----------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $19.31 $18.64 $17.13 $18.80
- -----------------------------------------------------------------------------------------------------------------
Total Return 3.93%++ 10.19% (7.11)% 6.58%++
- -----------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $261,217 $200,427 $97,132 $48,765
- -----------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(6) 0.94%+ 0.96% 1.06% 1.09%+
Net investment income 0.15+ 0.56 0.91 0.29+
- -----------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 19% 46% 42% 35%
- -----------------------------------------------------------------------------------------------------------------
Average commissions per share
paid on equity transactions(7)(8) $0.02 $0.02 $0.01 --
=================================================================================================================
</TABLE>
(1) For the six months ended April 30, 1997(unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method rather than the undistributed net investment income method, because
it more accurately reflects the per share data for the period.
(3) On November 7, 1994, the Class D shares were renamed Class Y shares.
(4) For the period from June 16, 1994 (inception date) to October 31, 1994.
(5) Distributions from net investment income included short-term capital gains,
if any, for Federal income tax purposes.
(6) During the years ended October 31, 1996 and October 31, 1995, the Portfolio
had earned credits from the custodian which reduced service fees incurred.
If the credits are taken into consideration, the expense ratios for Class Y
would have been 0.90% and 0.98%, respectively.
(7) As of September 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per share.
(8) Trades executed in the United States and Canada have an average commission
rate of $0.06 per share. Commission on trades executed outside these
countries are generally executed as a percentage of cost or proceeds
ranging from 0.5% to 1.0%.
* 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.
- --------------------------------------------------------------------------------
84 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Class Z Shares
-----------------------------------------------
International Equity Portfolio 1997(1)(2) 1996(2) 1995(3)
================================================================================================
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $18.62 $17.12 $18.38
- ------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss) 0.01 0.14 0.13*
Net realized and unrealized gain (loss) 0.72 1.57 (1.12)
- ------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.73 1.71 (0.99)
- ------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.06) (0.21) (0.17)
Net realized gains(4) -- -- (0.10)
- ------------------------------------------------------------------------------------------------
Total Distributions (0.06) (0.21) (0.27)
- ------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $19.29 $18.62 $17.12
- ------------------------------------------------------------------------------------------------
Total Return 3.93%++ 10.13% (5.01)%++
- ------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $131,185 $119,408 $94,387
- ------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(5) 0.94%+ 0.97% 1.10%+
Net investment income 0.15+ 0.55 1.06+
- ------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 19% 46% 42%
- ------------------------------------------------------------------------------------------------
Average commissions per share
paid on equity transactions(6)(7) $0.02 $0.02 $0.01
================================================================================================
</TABLE>
(1) For the six months ended April 30, 1997(unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method rather than the undistributed net investment income method, because
it more accurately reflects the per share data for the period.
(3) For the period from November 7, 1994 (inception date) to October 31, 1995.
(4) Distributions from net investment income included short-term capital gains,
if any, for Federal income tax purposes.
(5) During the year ended October 31, 1996 and the period ended October 31,
1995, the Portfolio had earned credits from the custodian which reduced
service fees incurred. If the credits are taken into consideration, the
expense ratios for Class Z would have been 0.91% and 1.02% (annualized),
respectively; prior year numbers have not been restated to reflect these
credits.
(6) As of September 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per share.
(7) Trades executed in the United States and Canada have an average commission
rate of $0.06 per share. Commission on trades executed outside these
countries are generally executed as a percentage of cost or proceeds
ranging from 0.5% to 1.0%.
* 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.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 85
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Class A Shares
-----------------------------------------------------------
International Balanced Portfolio 1997(1)(2) 1996(2) 1995 1994(3)
======================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $13.90 $12.64 $12.20 $12.00
- ------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(4) 0.12 0.26 0.35 0.07
Net realized and unrealized gain (0.51) 1.35 0.48 0.13
- ------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.39) 1.61 0.83 0.20
- ------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.23) (0.35) (0.39) --
- ------------------------------------------------------------------------------------------------------
Total Distributions (0.23) (0.35) (0.39) --
- ------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $13.28 $13.90 $12.64 $12.20
- ------------------------------------------------------------------------------------------------------
Total Return (2.81)%++ 12.89% 7.05% 1.67%++
- ------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $13,509 $16,116 $17,667 $20,634
- ------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(4) 1.73%+ 1.81% 1.62% 1.34%+
Net investment income 1.57+ 1.94 2.89 1.37+
- ------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 99% 189% 42% 6%
- ------------------------------------------------------------------------------------------------------
Average commissions per share
paid on equity transactions(5)(6) $0.02 $0.03 $0.02 --
======================================================================================================
</TABLE>
(1) For the six months ended April 30, 1997 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method rather than the undistributed net investment income method, because
it more accurately reflects the per share data for the period.
(3) For the period from August 25, 1994 (inception date) to October 31, 1994.
(4) The Manager waived all or part of its fees for the year ended October 31,
1995 and the period ended October 31, 1994. If such fees were not waived,
the per share effect on net investment income and the expense ratios would
have been as follows:
<TABLE>
<CAPTION>
Expense Ratios
Per Share Decreases to Without Fee Waivers
Net Investment Income and Custody Credits
--------------------- -------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Class A $0.04 $0.02 1.96% 2.03%+
</TABLE>
In addition, during the years ended October 31, 1996 and October 31, 1995,
the Portfolio had earned credits from the custodian which reduced service
fees incurred. If the credits are taken into consideration, the expense
ratios for Class A would have been 1.72% and 1.52%, respectively; prior
year numbers have not been restated to reflect these credits.
(5) As of September 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per share.
(6) Trades executed in the United States and Canada have an average commission
rate of $0.06 per share. Commission on trades executed outside these
countries are generally executed as a percentage of cost or proceeds
ranging from 0.5% to 1.0%.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
86 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Class B Shares
-------------------------------------------
International Balanced Portfolio 1997(1)(2) 1996(2) 1995(3)
==========================================================================================
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $13.90 $12.65 $12.08
- ------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(4) 0.05 0.15 0.36
Net realized and unrealized gain (loss) (0.49) 1.36 0.50
- ------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.44) 1.51 0.86
- ------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.11) (0.26) (0.29)
- ------------------------------------------------------------------------------------------
Total Distributions (0.11) (0.26) (0.29)
- ------------------------------------------------------------------------------------------
Net Asset Value, End of Period $13.35 $13.90 $12.65
- ------------------------------------------------------------------------------------------
Total Return (3.19)%++ 12.05% 7.33%++
- ------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $5,651 $5,258 $3,064
- ------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(4) 2.49%+ 2.62% 2.49%+
Net investment income 0.81+ 1.14 3.11+
- ------------------------------------------------------------------------------------------
Portfolio Turnover Rate 99% 189% 42%
- ------------------------------------------------------------------------------------------
Average commissions per share
paid on equity transactions(5)(6) $0.02 $0.03 $0.02
==========================================================================================
</TABLE>
(1) For the six months ended April 30, 1997 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method rather than the undistributed net investment income method, because
it more accurately reflects the per share data for the period.
(3) For the period from November 7, 1994 (inception date) to October 31, 1995.
(4) The Manager waived all or part of its fees for the period ended October 31,
1995. If such fees were not waived, the per share effect on net investment
income and the expense ratio would have been as follows:
<TABLE>
<CAPTION>
Expense Ratio
Per Share Decrease to Without Fee Waivers
Net Investment Income and Custody Credits
--------------------- -------------------
1995 1995
---- ----
<S> <C> <C>
Class B $0.04 2.86%+
</TABLE>
In addition, during the year ended October 31, 1996 and the period ended
October 31, 1995, the Portfolio had earned credits from the custodian which
reduced service fees incurred. If the credits are taken into consideration,
the expense ratios for Class B would have been 2.53% and 2.39%
(annualized), respectively; prior year numbers have not been restated to
reflect these credits.
(5) As of September 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per share.
(6) Trades executed in the United States and Canada have an average commission
rate of $0.06 per share. Commission on trades executed outside these
countries are generally executed as a percentage of cost or proceeds
ranging from 0.5% to 1.0%.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 87
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Class C Shares
----------------------------------------------------------
International Balanced Portfolio 1997(1)(2) 1996(2) 1995(3) 1994(4)
====================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $13.87 $12.63 $12.18 $12.00
- ----------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(5) 0.06 0.15 0.28 0.05
Net realized and unrealized gain (0.50) 1.35 0.46 0.13
- ----------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.44) 1.50 0.74 0.18
- ----------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.11) (0.26) (0.29) --
- ----------------------------------------------------------------------------------------------------
Total Distributions (0.11) (0.26) (0.29) --
- ----------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $13.32 $13.87 $12.63 $12.18
- ----------------------------------------------------------------------------------------------------
Total Return (3.20)%++ 11.99% 6.29% 1.50%++
- ----------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $3,989 $4,869 $4,317 $4,310
- ----------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(5) 2.52%+ 2.62% 2.37% 2.03%+
Net investment income 0.77+ 1.14 2.33 0.79+
- ----------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 99% 189% 42% 6%
- ----------------------------------------------------------------------------------------------------
Average commissions per share
paid on equity transactions(6)(7) $0.02 $0.03 $0.02 --
====================================================================================================
</TABLE>
(1) For the six months ended April 30, 1997 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method rather than the undistributed net investment income method, because
it more accurately reflects the per share data for the period.
(3) On November 7, 1994 the former Class B shares were renamed Class C shares.
(4) For the period from August 25, 1994 (inception date) to October 31, 1994.
(5) The Manager waived all or part of its fees for the year ended October 31,
1995 and the period ended October 31, 1994. If such fees were not waived,
the per share effect on net investment income and the expense ratios would
have been as follows:
<TABLE>
<CAPTION>
Expense Ratios
Per Share Decreases to Without Fee Waivers
Net Investment Income and Custody Credits
--------------------- -------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Class C $0.04 $0.02 2.71% 2.74%+
</TABLE>
In addition, during the years ended October 31, 1996 and October 31, 1995,
the Portfolio had earned credits from the custodian which reduced service
fees incurred. If the credits are taken into consideration, the expense
ratios for Class C would have been 2.53% and 2.27%; prior year numbers have
not been restated to reflect these credits.
(6) As of September 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per share.
(7) Trades executed in the United States and Canada have an average commission
rate of $0.06 per share. Commission on trades executed outside these
countries are generally executed as a percentage of cost or proceeds
ranging from 0.5% to 1.0%.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
88 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Class Y Shares
-----------------------------
International Balanced Portfolio 1997(1)(2) 1996(2)(3)
============================================================================
<S> <C> <C>
Net Asset Value, Beginning of Period $13.93 $13.15
- ----------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.11 0.32
Net realized and unrealized gain (loss) (0.47) 0.75
- ----------------------------------------------------------------------------
Total Income (Loss) From Operations (0.36) 1.07
- ----------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.28) (0.29)
- ----------------------------------------------------------------------------
Total Distributions (0.28) (0.29)
- ----------------------------------------------------------------------------
Net Asset Value, End of Period $13.29 $13.93
- ----------------------------------------------------------------------------
Total Return (2.65)%++ 8.21%++
- ----------------------------------------------------------------------------
Net Assets, End of Period (000s) $30,622 $19,387
- ----------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(4) 1.33%+ 1.21%+
Net investment income 1.97+ 2.55+
- ----------------------------------------------------------------------------
Portfolio Turnover Rate 99% 189%
- ----------------------------------------------------------------------------
Average commissions per share
paid on equity transactions(5)(6) $0.02 $0.03
============================================================================
</TABLE>
(1) For the six months ended April 30, 1997 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method rather than the undistributed net investment income method, because
it more accurately reflects the per share data for the period.
(3) For the period from February 7, 1996 (inception date) to October 31, 1996.
(4) During the period ended October 31, 1996, the Portfolio had earned credits
from the custodian which reduced service fees incurred. If the credits are
taken into consideration, the expense ratio for Class Y would have been
1.12% (annualized); prior year numbers have not been restated to reflect
these credits.
(5) As of September 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per share.
(6) Trades executed in the United States and Canada have an average commission
rate of $0.06 per share. Commission on trades executed outside these
countries are generally executed as a percentage of cost or proceeds
ranging from 0.5% to 1.0%.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 89
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Class A Shares
-------------------------------------------
Emerging Markets Portfolio 1997(1)(2) 1996 1995(3)
===========================================================================================
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $12.08 $11.06 $12.00
- -------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss(4) (0.03) (0.02) (0.05)#
Net realized and unrealized gain (loss) 2.20 1.04 (0.89)
- -------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 2.17 1.02 (0.94)
- -------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- --
- -------------------------------------------------------------------------------------------
Total Distributions -- -- --
- -------------------------------------------------------------------------------------------
Net Asset Value, End of Period $14.25 $12.08 $11.06
- -------------------------------------------------------------------------------------------
Total Return 17.96%++ 9.22% (7.83)%++
- -------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $14,813 $10,691 $7,069
- -------------------------------------------------------------------------------------------
Ratio to Average Net Assets:
Expenses(4) 2.10%+ 2.25% 1.45%+
Net investment loss (0.56)+ (0.19) (0.63)+
- -------------------------------------------------------------------------------------------
Portfolio Turnover Rate 31% 78% 17%
- -------------------------------------------------------------------------------------------
Average commissions per share
on equity transactions(5)(6) $0.00* $0.00* $0.00*
===========================================================================================
</TABLE>
(1) For the six months ended April 30, 1997 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method rather than the undistributed net investment income method, because
it more accurately reflects the per share data for the period.
(3) For the period from May 12, 1995 (inception date) to October 31, 1995.
(4) The Manager waived all or part of its fees for the period ended October 31,
1995. If such fees were not waived, the per share effect on net investment
loss and the expense ratio would have been as follows:
<TABLE>
<CAPTION>
Per Share Increase Expense Ratio
to Net Investment Loss Without Fee Waivers
---------------------- -------------------
1995 1995
---- ----
<S> <C> <C>
Class A $0.05 2.12%+
</TABLE>
In addition, during the year ended October 31, 1996 and the period ended
October 31, 1995, the Portfolio had earned credits from the custodian which
reduced service fees incurred. If the credits are taken into consideration,
the expense ratios for Class A would have been 2.16% and 1.20%
(annualized), respectively.
(5) As of September 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per share.
(6) Trades executed in the United States and Canada have an average commission
rate of $0.06 per share. Commission on trades executed outside these
countries are generally executed as a percentage of cost or proceeds
ranging from 0.5% to 1.0%.
# Includes realized gains and losses on foreign currency transactions.
* Amount represents less than $0.01 per share.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
90 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Class B Shares
-------------------------------------------
Emerging Markets Portfolio 1997(1)(2) 1996 1995(3)
===========================================================================================
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $11.95 $11.02 $12.00
- -------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss(4) (0.08) (0.10) (0.09)#
Net realized and unrealized gain (loss) 2.16 1.03 (0.89)
- -------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 2.08 0.93 (0.98)
- -------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- --
- -------------------------------------------------------------------------------------------
Total Distributions -- -- --
- -------------------------------------------------------------------------------------------
Net Asset Value, End of Period $14.03 $11.95 $11.02
- -------------------------------------------------------------------------------------------
Total Return 17.41%++ 8.44% (8.17)%++
- -------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $19,436 $13,062 $7,630
- -------------------------------------------------------------------------------------------
Ratio to Average Net Assets:
Expenses(4) 2.88%+ 3.06% 2.00%+
Net investment loss (1.34)+ (0.94) (1.17)+
- -------------------------------------------------------------------------------------------
Portfolio Turnover Rate 31% 78% 17%
- -------------------------------------------------------------------------------------------
Average commissions per share
on equity transactions(5)(6) $0.00* $0.00* $0.00*
===========================================================================================
</TABLE>
(1) For the six months ended April 30, 1997 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method rather than the undistributed net investment income method, because
it more accurately reflects the per share data for the period.
(3) For the period from May 12, 1995 (inception date) to October 31, 1995.
(4) The Manager waived all or part of its fees for the period ended October 31,
1995. If such fees were not waived, the per share effect on net investment
loss and the expense ratio would have been as follows:
<TABLE>
<CAPTION>
Per Share Increase Expense Ratio
to Net Investment Loss Without Fee Waivers
---------------------- -------------------
1995 1995
---- ----
<S> <C> <C>
Class B $0.05 2.68%+
</TABLE>
In addition, during the year ended October 31, 1996 and the period ended
October 31, 1995, the Portfolio had earned credits from the custodian which
reduced service fees incurred. If the credits are taken into consideration,
the expense ratios for Class B would have been 2.97% and 1.74%
(annualized), respectively.
(5) As of September 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per share.
(6) Trades executed in the United States and Canada have an average commission
rate of $0.06 per share. Commission on trades executed outside these
countries are generally executed as a percentage of cost or proceeds
ranging from 0.5% to 1.0%.
# Includes realized gains and losses on foreign currency transactions.
* Amount represents less than $0.01 per share.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 91
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Class C Shares
-----------------------------------------
Emerging Markets Portfolio 1997(1)(2) 1996 1995(3)
========================================================================================
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $11.95 $11.02 $12.00
- ----------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss(4) (0.07) (0.10) (0.08)#
Net realized and unrealized gain (loss) 2.16 1.03 (0.90)
- ----------------------------------------------------------------------------------------
Total Income (Loss) From Operations 2.09 0.93 (0.98)
- ----------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- --
- ----------------------------------------------------------------------------------------
Total Distributions -- -- --
- ----------------------------------------------------------------------------------------
Net Asset Value, End of Period $14.04 $11.95 $11.02
- ----------------------------------------------------------------------------------------
Total Return 17.49%++ 8.44% (8.17)%++
- ----------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $4,388 $2,448 $1,604
- ----------------------------------------------------------------------------------------
Ratio to Average Net Assets:
Expenses(4) 2.86%+ 3.02% 1.95%+
Net investment loss (1.31)+ (0.92) (1.08)+
- ----------------------------------------------------------------------------------------
Portfolio Turnover Rate 31% 78% 17%
- ----------------------------------------------------------------------------------------
Average commissions per share
on equity transactions(5)(6) $0.00* $0.00* $0.00*
========================================================================================
</TABLE>
(1) For the six months ended April 30, 1997 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method rather than the undistributed net investment income method, because
it more accurately reflects the per share data for the period.
(3) For the period from May 12, 1995 (inception date) to October 31, 1995.
(4) The Manager waived all or part of its fees for the period ended October 31,
1995. If such fees were not waived, the per share effect on net investment
loss and the expense ratio would have been as follows:
<TABLE>
<CAPTION>
Per Share Increase Expense Ratio
to Net Investment Loss Without Fee Waivers
---------------------- -------------------
1995 1995
---- ----
<S> <C> <C>
Class C $0.05 2.61%+
</TABLE>
In addition, during the year ended October 31, 1996 and the period ended
October 31, 1995, the Portfolio had earned credits from the custodian which
reduced service fees incurred. If the credits are taken into consideration,
the expense ratios for Class C would have been 2.92% and 1.70%
(annualized), respectively.
(5) As of September 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per share.
(6) Trades executed in the United States and Canada have an average commission
rate of $0.06 per share. Commission on trades executed outside these
countries are generally executed as a percentage of cost or proceeds
ranging from 0.5% to 1.0%.
# Includes realized gains and losses on foreign currency transactions.
* Amount represents less than $0.01 per share.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
92 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Class A Shares
-----------------------------------------------------
European Portfolio 1997(1) 1996 1995 1994(2)
================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $17.25 $14.67 $12.88 $12.50
- ------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income (loss)(3) (0.06) (0.08) 0.07 (0.11)
Net realized and unrealized gain 1.35 2.79 1.72 0.49
- ------------------------------------------------------------------------------------------------
Total Income From Operations 1.29 2.71 1.79 0.38
- ------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- (0.09) -- --
Net realized gains (1.16) (0.04) -- --
- ------------------------------------------------------------------------------------------------
Total Distributions (1.16) (0.13) -- --
- ------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $17.38 $17.25 $14.67 $12.88
- ------------------------------------------------------------------------------------------------
Total Return 7.62%++ 18.65% 13.90% 3.04%++
- ------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $13,090 $10,528 $11,870 $5,189
- ------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(3) 1.78%+ 1.85% 2.06% 1.34%+
Net investment income (loss) (0.57)+ (0.49) 0.51 (1.12)+
- ------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 12% 39% 34% 21%
- ------------------------------------------------------------------------------------------------
Average commissions per share
paid on equity transactions(4)(5) $0.11 $0.05 $0.06 --
================================================================================================
</TABLE>
(1) For the six months ended April 30, 1997 (unaudited).
(2) For the period from February 7, 1994 (inception date) to October 31, 1994.
(3) The Manager waived all or part of its fees for the year ended October 31,
1995 and the period ended October 31, 1994. In addition, the manager agreed
to reimburse the European Portfolio for $10,344 of the Portfolio's expenses
for the period ended October 31, 1994. If such fees and expenses were not
waived or reimbursed, the per share effect on net investment income and the
expense ratios would have been as follows:
<TABLE>
<CAPTION>
Expense Ratios
Per Share Decreases to Without Fee Waivers
Net Investment Income and Custody Credits
--------------------- -------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Class A $0.01 $0.10 2.09% 2.37%+
</TABLE>
In addition, during the years ended October 31, 1996 and October 31, 1995,
the Portfolio had earned credits from the custodian which reduced service
fees incurred. If the credits are taken into consideration, the expense
ratios for Class A would have been 1.82% and 2.02%, respectively;
prior year numbers have not been restated to reflect these credits.
(4) As of September 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per share.
(5) Trades executed in the United States and Canada are executed at an average
commission rate of $0.06 per share. Commission on trades executed outside
these countries generally are executed as a percentage of cost or proceeds
ranging from 0.50% to 1.00%. The European Portfolio paid commissions which
equaled an average rate of 0.30% on the total of either cost or proceeds on
executed trades, which is below the average range. While the amount of
commissions paid is reasonable on a percentage basis, the commission per
share amount appears high because these securities were trading at a very
large dollar amount per share, which is atypical of the way U.S. or
Canadian companies' shares trade. As a result, since less shares trade for
a comparable dollar amount than would ordinarily be the case in the U.S. or
Canada, the commission per share amount skewed upward.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 93
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Class B Shares
---------------------------------------
European Portfolio 1997(1) 1996 1995(2)
==================================================================================
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $17.09 $14.56 $12.62
- ----------------------------------------------------------------------------------
Income From Operations:
Net investment income (loss)(3) (0.11) (0.20) 0.02
Net realized and unrealized gain 1.32 2.77 1.92
- ----------------------------------------------------------------------------------
Total Income From Operations 1.21 2.57 1.94
- ----------------------------------------------------------------------------------
Less Distributions From:
Net realized gains (1.16) (0.04) --
- ----------------------------------------------------------------------------------
Total Distributions (1.16) (0.04) --
- ----------------------------------------------------------------------------------
Net Asset Value, End of Period $17.14 $17.09 $14.56
- ----------------------------------------------------------------------------------
Total Return 7.20%++ 17.72% 15.37%++
- ----------------------------------------------------------------------------------
Net Assets, End of Period (000s) $30,996 $26,384 $24,825
- ----------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(3) 2.49%+ 2.59% 3.31%+
Net investment income (loss) (1.32)+ (1.22) 0.26+
- ----------------------------------------------------------------------------------
Portfolio Turnover Rate 12% 39% 34%
- ----------------------------------------------------------------------------------
Average commissions per share
paid on equity transactions(4)(5) $0.11 $0.05 $0.06
==================================================================================
</TABLE>
(1) For the six months ended April 30, 1997 (unaudited).
(2) For the period from November 7, 1994 (inception date) to October 31, 1995.
(3) The Manager waived all or part of its fees for the year ended October 31,
1995. If such fees were not waived, the per share effect on net investment
income and the expense ratio would have been as follows:
Expense Ratio
Per Share Decrease to Without Fee Waivers
Net Investment Income and Custody Credits
--------------------- -------------------
1995 1995
---- ----
Class B $0.00* 3.35%+
In addition, during the year ended October 31, 1996 and the period ended
October 31, 1995, the Portfolio had earned credits from the custodian which
reduced service fees incurred. If the credits are taken into consideration,
the expense ratios for Class B would have been 2.56% and 3.26%,
respectively; prior year numbers have not been restated to reflect these
credits.
(4) As of September 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per share.
(5) Trades executed in the United States and Canada are executed at an average
commission rate of $0.06 per share. Commission on trades executed outside
these countries generally are executed as a percentage of cost or proceeds
ranging from 0.50% to 1.00%. The European Portfolio paid commissions which
equaled an average rate of 0.30% on the total of either cost or proceeds on
executed trades, which is below the average range. While the amount of
commissions paid is reasonable on a percentage basis, the commission per
share amount appears high because these securities were trading at a very
large dollar amount per share, which is atypical of the way U.S. or
Canadian companies' shares trade. As a result, since less shares trade for
a comparable dollar amount than would ordinarily be the case in the U.S. or
Canada, the commission per share amount skewed upward.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
94 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Class C Shares
------------------------------------------------------
European Portfolio 1997(1) 1996 1995(2) 1994(3)
===============================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $17.04 $14.51 $12.83 $12.48
- -----------------------------------------------------------------------------------------------
Income From Operations:
Net investment loss(4) (0.08) (0.14) (0.08) (0.16)
Net realized and unrealized gain 1.29 2.71 1.76 0.51
- -----------------------------------------------------------------------------------------------
Total Income From Operations 1.21 2.57 1.68 0.35
- -----------------------------------------------------------------------------------------------
Less Distributions From:
Net realized gains (1.16) (0.04) -- --
- -----------------------------------------------------------------------------------------------
Total Distributions (1.16) (0.04) -- --
- -----------------------------------------------------------------------------------------------
Net Asset Value, End of Period $17.09 $17.04 $14.51 $12.83
- -----------------------------------------------------------------------------------------------
Total Return 7.22%++ 17.78% 13.09% 2.80%++
- -----------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $2,662 $2,011 $1,311 $1,607
- -----------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(4) 2.47%+ 2.52% 2.51% 2.02%+
Net investment loss (1.25)+ (1.17) (0.64) (1.60)+
- -----------------------------------------------------------------------------------------------
Portfolio Turnover Rate 12% 39% 34% 21%
- -----------------------------------------------------------------------------------------------
Average commissions per share
paid on equity transactions(5)(6) $0.11 $0.05 $0.06 --
===============================================================================================
</TABLE>
(1) For the six months ended April 30, 1997 (unaudited).
(2) On November 7, 1994, the former Class B shares were renamed Class C shares.
(3) For the period from February 14, 1994 (inception date) to October 31, 1994.
(4) The Manager waived all or part of its fees for the year ended October 31,
1995 and the period ended October 31, 1994. In addition, the manager agreed
to reimburse the European Portfolio for $10,344 of the Portfolio's expenses
for the period ended October 31, 1994. If such fees and expenses were not
waived or reimbursed, the per share effect on net investment income and the
expense ratios would have been as follows:
<TABLE>
<CAPTION>
Expense Ratios
Per Share Decreases to Without Fee Waivers
Net Investment Income and Custody Credits
--------------------- -------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Class C $0.01 $0.10 2.54% 3.07%+
</TABLE>
In addition, during the years ended October 31, 1996 and October 31, 1995,
the Portfolio had earned credits from the custodian which reduced service
fees incurred. If the credits are taken into consideration, the expense
ratios for Class C would have been 2.50% and 2.48%, respectively; prior
year numbers have not been restated to reflect these credits.
(5) As of September 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per share.
(6) Trades executed in the United States and Canada are executed at an average
commission rate of $0.06 per share. Commission on trades executed outside
these countries generally are executed as a percentage of cost or proceeds
ranging from 0.50% to 1.00%. The European Portfolio paid commissions which
equaled an average rate of 0.30% on the total of either cost or proceeds on
executed trades, which is below the average range. While the amount of
commissions paid is reasonable on a percentage basis, the commission per
share amount appears high because these securities were trading at a very
large dollar amount per share, which is atypical of the way U.S. or
Canadian companies' shares trade. As a result, since less shares trade for
a comparable dollar amount than would ordinarily be the case in the U.S. or
Canada, the commission per share amount skewed upward.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 95
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Class A Shares
-----------------------------------------------------
Pacific Portfolio 1997(1) 1996(2) 1995 1994(3)
=====================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.18 $10.07 $12.92 $12.50
- -----------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss(4) (0.11) (0.14) (0.01) (0.07)
Net realized and unrealized gain (loss) 0.78 0.25 (2.84) 0.49
- -----------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.67 0.11 (2.85) 0.42
- -----------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- -- --
- -----------------------------------------------------------------------------------------------------
Total Distributions -- -- -- --
- -----------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.85 $10.18 $10.07 $12.92
- -----------------------------------------------------------------------------------------------------
Total Return 6.58%++ 1.09% (22.06)% 3.36%++
- -----------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $3,860 $4,929 $4,409 $7,538
- -----------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(4) 3.23%+ 2.64% 1.97% 1.51%+
Net investment loss (2.09)+ (1.38) (0.71) (0.82)+
- -----------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 71% 86% 31% 6%
- -----------------------------------------------------------------------------------------------------
Average commissions per share
paid on equity transactions(5)(6) $0.01 $0.02 $0.01 --
=====================================================================================================
</TABLE>
(1) For the six months ended April 30, 1997 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method rather than the undistributed net investment income method, because
it more accurately reflects the per share data for the period.
(3) For the period from February 7, 1994 (inception date) to October 31, 1994.
(4) The Manager waived all or part of its fees for the year ended October 31,
1995 and the period ended October 31, 1994. In addition, the Manager agreed
to reimburse the Pacific Portfolio for $30,862 of the Portfolio's expenses
for the year ended October 31, 1995. If such fees and expenses were not
waived or reimbursed, the per share effect on net investment and the
expense ratios would have been as follows:
<TABLE>
<CAPTION>
Expense Ratios
Per Share Decreases to Without Fee Waivers
Net Investment Income and Custody Credits
--------------------- -------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Class A $0.14 $0.03 3.18% 1.87%+
</TABLE>
In addition, during the years ended October 31, 1996 and October 31, 1995,
the Portfolio had earned credits from the custodian which reduced service
fees incurred. If the credits are taken into consideration, the expense
ratios for Class A would have been 2.51% and 1.70%, respectively; prior
year numbers have not been restated to reflect these credits.
(5) As of September 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per share.
(6) Trades executed in the United States and Canada have an average commission
rate of $0.06 per share. Commission on trades executed outside these
countries are generally executed as a percentage of cost or proceeds
ranging from 0.5% to 1.0%.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
96 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Class B Shares
----------------------------------------
Pacific Portfolio 1997(1) 1996(2) 1995(3)
=======================================================================================
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $10.01 $9.99 $12.64
- ---------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss(4) (0.10) (0.23) (0.01)
Net realized and unrealized gain (loss) 0.71 0.25 (2.64)
- ---------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.61 0.02 (2.65)
- ---------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- --
- ---------------------------------------------------------------------------------------
Total Distributions -- -- --
- ---------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.62 $10.01 $9.99
- ---------------------------------------------------------------------------------------
Total Return 6.09%++ 0.20% (20.97)%++
- ---------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $4,999 $4,009 $1,031
- ---------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(4) 4.08%+ 3.65% 3.39%+
Net investment loss (2.69)+ (2.26) (1.47)+
- ---------------------------------------------------------------------------------------
Portfolio Turnover Rate 71% 86% 31%
- ---------------------------------------------------------------------------------------
Average commissions per share
paid on equity transactions(5)(6) $0.01 $0.02 $0.01
=======================================================================================
</TABLE>
(1) For the six months ended April 30, 1997 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method rather than the undistributed net investment income method, because
it more accurately reflects the per share data for the period.
(3) For the period from November 7, 1994 (inception date) to October 31, 1995.
(4) The Manager waived all or part of its fees for the period ended October 31,
1995. In addition, the Manager agreed to reimburse the Pacific Portfolio
for $30,862 of the Portfolio's expenses for the period ended October 31,
1995. If such fees and expenses were not waived or reimbursed, the per
share effect on net investment and the expense ratio would have been as
follows:
<TABLE>
<CAPTION>
Expense Ratio
Per Share Decrease to Without Fee Waivers
Net Investment Income and Custody Credits
--------------------- -------------------
1995 1995
---- ----
<S> <C> <C>
Class B $0.16 4.90%+
</TABLE>
In addition, during the year ended October 31, 1996 and the period ended
October 31, 1995, the Portfolio had earned credits from the custodian which
reduced service fees incurred. If the credits are taken into consideration,
the expense ratios for Class B would have been 3.47% and 3.06%
(annualized), respectively; prior year numbers have not been restated to
reflect these credits.
(5) As of September 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per share.
(6) Trades executed in the United States and Canada have an average commission
rate of $0.06 per share. Commission on trades executed outside these
countries are generally executed as a percentage of cost or proceeds
ranging from 0.5% to 1.0%.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 97
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Class C Shares
-------------------------------------------------------
Pacific Portfolio 1997(1) 1996(2) 1995(3) 1994(4)
=======================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $9.98 $9.95 $12.86 $12.50
- -------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss(5) (0.11) (0.24) (0.02) (0.11)
Net realized and unrealized gain (loss) 0.71 0.27 (2.89) 0.47
- -------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.60 0.03 (2.91) 0.36
- -------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- -- --
- -------------------------------------------------------------------------------------------------------
Total Distributions -- -- -- --
- -------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.58 $9.98 $9.95 $12.86
- -------------------------------------------------------------------------------------------------------
Total Return 6.01%++ 0.30% (22.63)% 2.88%++
- -------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $1,890 $1,612 $1,952 $3,167
- -------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(5) 4.23%+ 3.46% 2.69% 2.29%+
Net investment loss (2.82)+ (2.22) (1.45) (1.49)+
- -------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 71% 86% 31% 6%
- -------------------------------------------------------------------------------------------------------
Average commissions per share
paid on equity transactions(6)(7) $0.01 $0.02 $0.01 --
=======================================================================================================
</TABLE>
(1) For the six months ended April 30, 1997 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method rather than the undistributed net investment income method, because
it more accurately reflects the per share data for the period.
(3) On November 7, 1994, the former Class B shares were renamed Class C shares.
(4) For the period from February 11, 1994 (inception date) to October 31, 1994.
(5) The Manager waived all or part of its fees for the year ended October 31,
1995 and the period ended October 31, 1994. In addition, the Manager agreed
to reimburse the Portfolio for $30,862 of the Portfolio's expense for the
year ended October 31, 1995. If such fees and expenses were not waived or
reimbursed, the per share effect on net investment income and the expense
ratios would have been as follows:
<TABLE>
<CAPTION>
Expense Ratios
Per Share Decreases to Without Fee Waivers
Net Investment Income and Custody Credits
--------------------- -------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Class C $0.13 $0.03 3.88% 2.70%+
</TABLE>
In addition, during the years ended October 31, 1996 and October 31, 1995,
the Portfolio had earned credits from the custodian which reduced service
fees incurred. If the credits are taken into consideration, the expense
ratios for Class C would have been 3.29% and 2.42%, respectively; prior
year numbers have not been restated to reflect these credits.
(6) As of September 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per share.
(7) Trades executed in the United States and Canada have an average commission
rate of $0.06 per share. Commission on trades executed outside these
countries are generally executed as a percentage of cost or proceeds
ranging from 0.5% to 1.0%.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
98 1997 Semi-Annual Report to Shareholders
<PAGE>
[This page intentionally left blank]
<PAGE>
[This page intentionally left blank]
<PAGE>
Smith Barney
World Funds, Inc.
Directors Investment Adviser and Administrator
Victor Atkins Smith Barney Mutual Funds Management Inc.
Robert A. Frankel
Rainer Greeven Distributor
Susan M. Heilbron Smith Barney Inc.
Heath B. McLendon, Chairman
Bruce D. Sargent Custodian
James M. Shuart Chase Manhattan Bank
Officers Shareholder
Maurits E. Edersheim Servicing Agent
Chairman of the Fund First Data Investor Services Group, Inc.
& Advisory Director P.O. Box 9134
Boston, MA 02205-9134
Heath B. McLendon
Chief Executive Officer
This report is submitted for the general
Lewis E. Daidone information of the shareholders of Smith
Senior Vice President Barney World Funds, Inc. It is not
and Treasurer authorized for distribution to
prospective investors unless accompanied
James B. Conheady or preceded by a current Prospectus for
Vice President the Fund, which contains information
concerning the Fund's investment
Victor S. Filatov policies and expenses as well as other
Vice President pertinent information. Please note that
investing in international markets
Simon R. Hildreth involves certain risks including but not
Vice President limited to illiquid markets and
political and economic instability.
David Ishibashi Before investing overseas, you should
Vice President understand the risks as well as the
opportunities and be prepared for
Scott E. Kalb substantial market volatility,
Vice President especially when investing in emerging
markets. Investors should have a
Denis P. Mangan long-term investment horizon to reap the
Vice President potential benefits of international
investments.
Jeffrey J. Russell
Vice President SMITH BARNEY
------------
Bruce D. Sargent
Vice President A Member of TravelersGroup[LOGO]
Rein W. van der Does Smith Barney
Vice President World Funds, Inc.
Smith Barney Mutual Funds
Irving P. David 388 Greenwich Street
Controller New York, New York 10013
Christina T. Sydor
Secretary
FD01303 6/97
