[GRAPHIC]
Smith Barney
World Funds, Inc.
Global Government Bond Portfolio
International Equity Portfolio
International Balanced Portfolio
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SEMI-ANNUAL REPORT
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April 30, 1998
[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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"For many years, U.S. investors had little reason to look beyond their own
shores. Over time, the U.S. market has rewarded patient investors with handsome
returns. However, as the world becomes a truly global and interdependent market,
it has become more important than ever for investors to remain globally
diversified."
Heath B. McLendon
Chairman
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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 high-quality
bonds of the U.S. and foreign governments.
NASDAQ SYMBOL
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Class A SBGLX
Class B SGGBX
The International Equity Portfolio seeks 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
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Class A SBIEX
Class B SBIBX
Class C SBICX
The International Balanced Portfolio seeks a competitive total return on its
assets from growth of capital and income through a portfolio invested primarily
in securities of established non-U.S. issuers.
NASDAQ SYMBOL
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Class A SIEBX
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WHAT'S INSIDE
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<TABLE>
<CAPTION>
<S> <C>
A Message from the Chairman................................................ 1
Global Government Bond Portfolio
Portfolio Manager Commentary ........................................... 3
Historical Performance ................................................. 6
Portfolio at a Glance .................................................. 8
International Equity Portfolio
Portfolio Manager Commentary ........................................... 9
Historical Performance ................................................. 11
Portfolio at a Glance .................................................. 14
International Balanced Portfolio
Portfolio Manager Commentary ........................................... 15
Historical Performance ................................................. 16
Portfolio at a Glance .................................................. 18
Schedules of Investments................................................... 19
Statements of Assets and Liabilities....................................... 26
Statements of Operations................................................... 27
Statements of Changes in Net Assets........................................ 28
Notes to Financial Statements ............................................. 30
Financial Highlights ...................................................... 39
Additional Shareholder Information ........................................ 52
</TABLE>
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A Message from the Chairman
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[PHOTO]
HEATH B.
MCLENDON
Chairman
Dear Shareholder:
We are witnessing unparalleled prosperity in the United States today. As a
nation, we are more affluent than ever before, with much of that wealth created
in the last several decades. We are benefiting from a world that has been
largely at peace since the official end of the Cold War in 1989. We are reaping
the fruits of the restructuring of American businesses that took place in the
70s and 80s and benefiting from growth in worldwide demand for our products.
This unparalleled U.S. prosperity is now being followed closely by Europe.
Companies there are undergoing restructuring similar to that of the U.S. of the
last two decades. More and more, the inefficiencies of state-controlled
institutions in Europe are being replaced with the expansion of a free and more
competitive marketplace. As we approach the dawn of a new millennium, these
positive developments have enabled the U.S. and most of Europe to experience the
greatest period of peace and prosperity in generations.
The rapid rise of global markets in recent years has been helped in no small
measure by sophisticated monetary policy. In the U.S., policy-making bodies,
such as the Federal Reserve Board, coupled with technology-led productivity
gains, have controlled inflation to the extent that it is not a significant
factor in the U.S. economy today. This is also becoming true in Europe, where
the move to a common currency has forced both fiscal and monetary policies to
accomplish the same objective of bringing inflation and interest rates down
significantly in countries such as Italy and Spain. And as interest rates have
come down, investment funds have flowed into stock markets, which in turn have
helped propel dramatic gains in the U.S. and European financial markets.
Now, the developing world is taking its cue from the U.S. and Europe. Perhaps
the most meaningful example is Latin America, where, after a very rocky period
in the last decade, monetary and fiscal policy reforms have stabilized its
economies and established a base for solid and sustainable future growth. For
example, Brazil, historically plagued by hyperinflation that reached as high as
2,500% per year, has brought inflation down to manageable levels and plays a
larger role on the world stage today than ever before. Even lesser developed
countries in Eastern Europe and Africa are clearly demonstrating the positive
aspects of more freedom and greater competition.
The one area that is currently not enjoying growth and prosperity are parts of
Asia, particularly Japan, Southeast Asia and South Korea, where extraordinary
economic growth and expansion during the last several decades resulted in
overheated and overly extended financial conditions that are currently in the
painful process of readjustment.
For many years, U.S. investors had little reason to look beyond their own
shores. Over time, the U.S. market has rewarded patient investors with handsome
returns. However, as the world becomes a truly global and interdependent market,
it has become more important than ever for investors to remain globally
diversified.
Despite the historic and outsized returns of the U.S. stock market in recent
years, the U.S. has yet to be the top-performing market in any one year over the
last two decades. We continue to believe that maintaining a well-diversified
portfolio with some international exposure is an essential key to investing
success.
In this report, you will find specific market commentary and performance
information for the Smith Barney World Funds, Inc.--Global Government Bond
Portfolio, International Equity Portfolio and International Balanced
Portfolio--beginning on page three.
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Smith Barney World Funds, Inc. 1
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In closing, we thank you for your confidence in our investment approach and our
family of international funds. We look forward to continuing to help you take
advantage of the investment opportunities available in today's global economy.
Sincerely,
/S/HEATH B. MCLENDON
Heath B. McLendon
Chairman
May 14, 1998
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2 1998 Semi-Annual Report to Shareholders
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Global Government Bond Portfolio
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Portfolio Managers
VICTOR S. FILATOV
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
Denis P. Mangan is a Global Fixed Income Portfolio Manager and Research
Specialist. He joined Smith Barney 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, 1998, the Smith Barney World Funds--Global
Government Bond Portfolio ("Portfolio") generated a total return of 3.84% for
Class A shares before deducting any sales charges. The Portfolio outperformed
the average total return for global income funds of 3.24% for the same period
according to Lipper Analytical Services, Inc. (Lipper is an independent
fund-tracking organization.) In comparison, the J.P. Morgan Global Bond
Index--Hedged returned 4.93% for the same period. Additional information about
the Portfolio's other share classes can be found on pages six and seven.
We are pleased to announce that your Portfolio's Class A, B and C shares were
awarded a four-star rating from Morningstar, Inc.* for the three-year period and
overall for the period ended March 31, 1998. Past performance is not a guarantee
of future results.
Investment Strategy
The Global Government Bond Portfolio seeks as high a level of current income and
capital appreciation as is consistent with its policy of investing principally
in high-quality bonds of the U.S. and foreign governments. We strive to
outperform the U.S. government bond market with no more risk than investing
solely in U.S. government bonds. In addition, we utilize a hedging strategy to
minimize the risk of currency fluctuations.
North America
During the past six months, we have continued to devote a significant portion of
the Portfolio's assets to U.S. Treasury securities. As of April 30, 1998, U.S.
Treasury securities represented approximately 29% of the Portfolio, compared to
roughly 32% as of October 31, 1997. In our view, a strong U.S. dollar and sound
underlying domestic economy have made these securities attractive investments,
especially as financial turmoil persists in overseas markets.
Interest rates have continued to decline in the U.S., reaching historic lows in
January as Asia's financial and economic crisis appeared to worsen. The central
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* Morningstar, Inc. proprietary ratings reflect historical risk-adjusted
performance through March 31, 1998. The ratings are subject to change every
month. Morningstar, Inc. ratings are calculated from the Portfolio's three-
and five-year returns (including the effects of all fees and sales charges)
in excess of 90-day T-bill returns. Different classes within a fund share a
common portfolio of securities. The top-performing ten percent of the funds
in a rating category receive five stars, the next 22.5% of the funds
receive four stars, the middle 35% receive three stars, the next 22.5%
receive two stars and the bottom 10% receive one star. The Portfolio was
rated among 1,403 taxable bond funds.
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Smith Barney World Funds, Inc. 3
<PAGE>
question now facing investors and the Federal Reserve Board ("Fed") is how much
longer the U.S. economic expansion--now in its eighth year--can continue before
igniting inflation. Evidence of emerging inflationary pressures has often been
conflicting. For example, the U.S. unemployment rate, a traditional indicator of
rising prices, has remained remarkably low, recently reaching its lowest levels
in nearly thirty years. Yet, wholesale commodity prices, especially oil prices,
have remained stable or even fallen.
Those who favor a wait-and-see approach to U.S. monetary policy have argued that
overseas recessions should offset any inflationary pressures building in the
U.S. In addition, the widely expected slowdown in U.S. economic activity did
materialize to some extent earlier this year as weakness was seen in
manufacturing, factory orders and durable goods orders. This weakness hinted
that corporate America might be beginning the process of scaling back business
investment in response to a reduction in demand from many Asian economies.
So far, Fed policy-makers have chosen to remain on the sidelines rather than
risk any premature action that could upset the balance of forces that have kept
the U.S. economy humming at near perfect pitch. Moreover, raising short-term
interest rates now could exacerbate an already precarious situation in Asia by
further fueling a flight of capital out of the region.
In recent weeks, some Fed officials have publicly voiced their concerns that,
given the relatively lofty valuations of many U.S. stocks, the U.S. could be
creating an "asset bubble" similar to that of Japan in the early 90s, just prior
to that country's collapse into a prolonged multi-year recession. Following the
March 1998 meeting of the Federal Open Market Committee, the Fed's policy-making
body, officials announced a bias toward tightening monetary policy after months
of maintaining a neutral stance. We believe that it's now becoming increasingly
possible that the Fed may be preparing for an interest rate hike later this
year.
Europe
The European bond market performed well during the reporting period as all of
the continental bond markets tended to move together, underscoring the belief
that European monetary and economic integration was a fait accompli. In the
first quarter of 1998, the difference in returns between the best performing
market, Denmark (3.32%), and the worst, Germany (2.97%) was a mere 35 basis
points. (A basis point is 1/100 of a percent.)
Since the Asian financial crisis initially erupted in the summer of 1997,
government bond yields in Japan, the United States and Germany have fallen by 74
basis points, 83 basis points and 78 basis points, respectively. In our opinion,
the relative outperformance of European bonds in the first quarter (when
ten-year German bond yields fell by 42 basis points while U.S. Treasury yields
remained static) was, in effect, a catch-up on the strength seen elsewhere in
reaction to events in the Far East.
Another major factor in the resurgence of European bond performance has been
widespread reappraisal of the prospects of the Euro, the proposed common
currency for European Union ("EU") member countries. The fundamental economic
backdrop in Europe has improved substantially. The unemployment rate in both
Germany and France fell in the early months of 1998 after having risen
inexorably for the past three years. At the same time, there was a big decline
in the rate of consumer price inflation in Germany, falling from 1.7% to 1.2% in
January, driven mostly by large drops in imported commodity prices.
During the reporting period, we sold all of our holdings in Belgium because they
were underperforming and we believed we needed to trim our core European
exposure. We also reduced our
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4 1998 Semi-Annual Report to Shareholders
<PAGE>
position in Irish bonds by more than half because its strong economy and robust
financial markets unexpectedly delayed any interest rate cuts.
Japan
Japan remains mired in economic stagnation and has yet to join the financial
boom that many other developed nations have enjoyed in recent years. Investors
have increasingly looked to the Japanese government to rescue its moribund
economy. However, it is still not clear whether Japan can summon the political
will to undertake the inevitably painful, but necessary, restructuring steps
needed for Japan to effectively compete in the new global marketplace. Earlier
this year, Prime Minister Ryutaro Hashimoto announced a stimulus package to help
free up the economy but the plan failed to capture the confidence of investors.
In addition, Japan has been rocked by high profile scandals ranging from the
forced closure of Yamaichi Securities, the fourth largest brokerage firm in the
country, to the resignation of its Finance Minister, Mr. Mitsuzuka.
Nevertheless, the strength of the U.S. dollar versus the yen has enabled
U.S.-dollar-based investors to earn competitive returns despite Japan's very low
bond yields. Given Japan's financial and economic weakness, we believe that the
U.S. dollar's strength against the yen should continue. Therefore, we maintained
our exposure to Japan, which was approximately 19% as of April 30, 1998.
We thank you for your investment in the Smith Barney World Funds--Global
Government Bond Portfolio.
/S/VICTOR S. FILATOV /S/DENIS P. MANGAN
Victor S. Filatov Denis P. Mangan
Vice President Vice President
May 19, 1998
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Smith Barney World Funds, Inc. 5
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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>
4/30/98 $12.22 $11.79 $0.44 $0.44 $0.00 3.84%+
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10/31/97 12.55 12.22 1.22 0.08 0.00 8.21
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10/31/96 12.30 12.55 0.87 0.00 0.00 9.41
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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 $5.47 $1.43 $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>
4/30/98 $12.22 $11.78 $0.41 $0.44 $0.00 3.49%+
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10/31/97 12.50 12.22 1.10 0.08 0.00 7.62
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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+
====================================================================================================================================
Total $2.98 $0.52 $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>
4/30/98 $12.19 $11.76 $0.42 $0.44 $0.00 3.61%+
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10/31/97 12.47 12.19 1.11 0.08 0.00 7.73
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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+
====================================================================================================================================
Total $3.74 $1.11 $0.39
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</TABLE>
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6 1998 Semi-Annual Report to Shareholders
<PAGE>
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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>
4/30/98 $12.03 $11.60 $0.46 $0.44 $0.00 4.03%+
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10/31/97 12.39 12.03 1.28 0.08 0.00 8.61
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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 $4.05 $1.11 $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)
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Class A Class B Class C Class Y
====================================================================================================
<S> <C> <C> <C> <C>
Six Months Ended 4/30/98+ 3.84% 3.49% 3.61% 4.03%
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Year Ended 4/30/98 9.84 9.21 9.36 10.28
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Five Years Ended 4/30/98 7.97 N/A 7.36 7.98
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Inception* through 4/30/98 8.88 9.26 8.27 8.59
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<CAPTION>
With Sales Charge(2)
-------------------------------------------------------------
Class A Class B Class C Class Y
====================================================================================================
<S> <C> <C> <C> <C>
Six Months Ended 4/30/98+ (0.87)% (0.85)% 2.64% 4.03%
- ----------------------------------------------------------------------------------------------------
Year Ended 4/30/98 4.93 4.78 8.38 10.28
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Five Years Ended 4/30/98 6.98 N/A 7.36 7.98
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Inception* through 4/30/98 8.14 8.79 8.27 8.59
====================================================================================================
</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 4/30/98) 78.02%
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Class B (Inception* through 4/30/98) 35.73
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Class C (Inception* through 4/30/98) 52.58
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Class Y (Inception* through 4/30/98) 53.40
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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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Smith Barney World Funds, Inc. 7
<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 BY A LINE CHART IN THE PRINTED MATERIAL]
July 1991--April 1998
<TABLE>
<CAPTION>
Global Government JP Morgan Global JP Morgan Global
Bond Portfolio Bond Hedged Bond Market 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 12,369 12,609 13,740
Oct 1995 13,902 15,048 15,319
Oct 1996 15,210 16,566 16,254
Oct 1997 16,459 18,319 16,822
April 1998 17,090 19,222 17,024
</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, 1998. 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, 1998
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<S> <C>
1. U.S. Treasury Notes 30.0%
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2. Japanese Government 21.0
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3. United Kingdom Treasury 15.0
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4. France O.A.T. 9.0
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5. Spanish Government 5.0
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6. Ireland Treasury 5.0
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7. Buoni Poliennali del Tesoro (Italy) 4.0
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8. Swedish Government 4.0
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9. Republic of Argentina 4.0
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10. Australian Government 3.0
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</TABLE>
* As a percentage of total bonds.
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL]
<TABLE>
<CAPTION>
Investment Allocation** As of April 30, 1998
- --------------------------------------------------------------------------------
<S> <C>
Europe 40.0%
The Americas 32.5%
Asia/Pacific 21.9%
Cash Equivalent 5.6%
</TABLE>
** As a percentage of total investments.
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8 1998 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
International Equity Portfolio
================================================================================
[PHOTO]
JEFFREY J.
RUSSELl, CFA
Vice President
[PHOTO]
JAMES B. CONHEADY
Vice President
Portfolio Managers
Jeffrey J Russell is a Managing Director of Smith Barney and portfolio manager
of the Smith Barney World Funds International Equity Portfolio. Prior to joining
the firm in 1990, he worked for Drexel Burnham Lambert. Mr. Russell holds an
undergraduate degree from Massachusetts Institute of Technology and an M.B.A.
from the University of Pennsylvania's Wharton School of Finance.
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. Mr. Conheady holds a B.S.S. degree from Georgetown University.
Performance Update
For the six months ended April 30, 1998, Class A shares of the International
Equity Portfolio ("Portfolio") returned 15.37%. In comparison, the Morgan
Stanley Capital International ("MSCI") EAFE Index had a total return of 15.59%
for the same period. (The MSCI EAFE Index is a composite portfolio consisting of
equity total returns for the countries of Europe, Australia, New Zealand and the
countries in the Far East, weighted based on market capitalization.) Performance
information about the Portfolio's other classes of shares can be found beginning
on page eleven. As of April 30, 1998, the Portfolio owned securities of 66
issuers in 22 countries, consistent with its broadly diversified investment
approach that seeks to minimize portfolio risk.
For much of the past three years we have materially overweighted European stocks
in the Portfolio, both in large- and mid-capitalization growth stocks. It was
this emphasis on European companies that contributed most to the Portfolio's
returns during the reporting period. The strength of the U.S. dollar
considerably reduced unhedged returns in 1997, while the large-capitalization
stock market bias so evident in the U.S. also caused large-capitalization
international stocks to outperform smaller stocks. However, our emerging market
(i.e., non-EAFE) exposure penalized the Portfolio's performance somewhat during
the year as the emerging markets materially underperformed the developed
markets.
Investment Strategy
We pursue a "bottom-up" approach to stock investing-- namely, we look for
promising companies and industries rather than trying to discover investment
opportunities based on the present or future condition of the global economy,
the financial markets or the performance of particular markets. We seek
companies growing at a faster rate than their local country's economic growth
rate. At the same time, we strive to maintain a risk level no higher than that
of the overall international equity market through broad diversification in a
variety of markets.
Market and Portfolio Update
In our view, three trends predominated in the international stock markets during
the latter stages of the reporting period:
o Large-capitalization stocks materially outperformed mid- and
small-capitalization stocks.
o The stock markets of relatively mature, developed economies outperformed
the more volatile and less liquid emerging markets.
o The strength of the U.S. dollar versus the currencies of the United States'
major trading partners largely negated returns earned in local currencies.
The latter months of 1997 and early 1998 were marked by a sense of crisis in the
international markets. The
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Smith Barney World Funds, Inc. 9
<PAGE>
Southeast Asian currency collapse radiated outward, engulfing not only some of
the strongest regional economies (such as Taiwan and Singapore) but also
ultimately crushing the South Korean economy and its currency. In Japan, the
largest Asian stock market and economy and a major regional lender, the crisis
contributed to an already deteriorating outlook for that country.
We believe the Asian currency crisis and economic collapse has far-reaching and
as yet not fully understood implications for global capital markets. So far,
rescue efforts have centered on creating stability and stemming further
precipitous declines in currencies and consumer and business confidence-- such
as the feverish year-end efforts of the International Monetary Fund ("IMF") and
global banks to prevent a total collapse of the South Korean financial system.
In light of this turmoil, the strength of the U.S. dollar and bond market, to
some degree, has reflected investor preferences for liquidity, stability and
strength.
But the intermediate effects of these financial woes on Asia cannot be denied:
economic contraction and decline, massive bankruptcies and debt
restructurings/reschedulings, and potential labor and civil unrest have resulted
in an investment climate of much greater risk. Whether government and business
policy-makers have the will and flexibility to make the correct rehabilitative
choices remains unanswerable and we believe another six to twelve months of
uncertainty in Asia appears very likely.
Moreover, European and U.S. companies may not escape untouched as their exports
to Asia decline. Furthermore, competitive Asian-produced goods are likely to
flood domestic markets now that prices (in U.S. dollars) have declined
substantially. While many U.S. companies have already used the Asian economic
weakness as an explanation for earnings shortfalls from consensus expectations
in recent reporting periods, the severity of the downturn should really be felt
in 1998.
Yet, despite the number of bearish influences at work on the non-U.S. markets in
the past six months, there continue to be many positive developments, such as:
o The push for European monetary union has created favorable macroeconomic
conditions, the likes of which have not been seen for two decades. Interest
rates and inflation are, and likely will remain, subdued, thus heightening
demand for stocks from individuals and institutions. Eleven countries have
successfully reformed their economies and qualified for the first round
selections in the European Union.
o Corporations in Europe are continuing to restructure, boosting investor
returns and, for the first time, aligning management interests with
external shareholder interests through equity incentives.
o The strengthening of the U.S. dollar against its major trading partners of
the past 30 months has improved export competitiveness for many major
European and Asian exporters and led to an upturn in the consolidated
European economy.
o Restructuring of many industries continues (such as in financial services
and pharmaceuticals), improving economies of scale and eliminating
inefficient local and regional goods and service providers. At the same
time, innovative mid-size companies are finding access to capital, and an
open door to technologies and processes that lower costs for businesses and
consumers.
o Much of Latin America has recovered from the "tequila crisis" of early
1995.
For these reasons, we remain largely positive on the prospects for international
markets, particularly European markets, in the coming months.
Thank you for your continued confidence in our investment approach.
/s/ Jeffrey J. Russell /s/ James B. Conheady
Jeffrey J. Russell James B. Conheady
Vice President Vice President
May 22, 1998
- --------------------------------------------------------------------------------
10 1998 Semi-Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
============================================================================================
Historical Performance--Class A Shares
============================================================================================
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>
4/30/98 $20.36 $23.49 $0.00 $0.00 15.37%+
- --------------------------------------------------------------------------------------------
10/31/97 18.64 20.36 0.01 0.00 9.30
- --------------------------------------------------------------------------------------------
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
============================================================================================
<CAPTION>
============================================================================================
Historical Performance--Class B Shares
============================================================================================
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>
4/30/98 $20.22 $23.24 $0.00 $0.00 14.94%+
- --------------------------------------------------------------------------------------------
10/31/97 18.65 20.22 0.00 0.00 8.42
- --------------------------------------------------------------------------------------------
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
============================================================================================
<CAPTION>
============================================================================================
Historical Performance--Class C Shares
============================================================================================
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>
4/30/98 $19.93 $22.90 $0.00 $0.00 14.90%+
- --------------------------------------------------------------------------------------------
10/31/97 18.38 19.93 0.00 0.00 8.43
- --------------------------------------------------------------------------------------------
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>
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 11
<PAGE>
<TABLE>
<CAPTION>
============================================================================================
Historical Performance--Class Y Shares
============================================================================================
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>
4/30/98 $20.38 $23.49 $0.06 $0.00 15.61%+
- --------------------------------------------------------------------------------------------
10/31/97 18.64 20.38 0.06 0.00 9.68
- --------------------------------------------------------------------------------------------
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 $0.50 $0.10
============================================================================================
<CAPTION>
============================================================================================
Historical Performance--Class Z Shares
============================================================================================
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>
4/30/98 $20.36 $23.47 $0.06 $0.00 15.62%+
- --------------------------------------------------------------------------------------------
10/31/97 18.62 20.36 0.06 0.00 9.69
- --------------------------------------------------------------------------------------------
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 $0.50 $0.10
============================================================================================
</TABLE>
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
<TABLE>
<CAPTION>
============================================================================================
Average Annual Total Return
============================================================================================
Without Sales Charge(1)
-----------------------------------------------------------
Class A Class B Class C Class Y Class Z
============================================================================================
<S> <C> <C> <C> <C> <C>
Six Months Ended 4/30/98+ 15.37% 14.94% 14.90% 15.61% 15.62%
- --------------------------------------------------------------------------------------------
Year Ended 4/30/98 21.52 20.54 20.53 22.01 22.03
- --------------------------------------------------------------------------------------------
Five Years Ended 4/30/98 12.34 N/A 11.47 N/A N/A
- --------------------------------------------------------------------------------------------
Ten Years Ended 4/30/98 12.08 N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------
Inception* through 4/30/98 12.25 7.24 12.67 8.73 8.46
============================================================================================
<CAPTION>
Without Sales Charge(2)
-----------------------------------------------------------
Class A Class B Class C Class Y Class Z
============================================================================================
<S> <C> <C> <C> <C> <C>
Six Months Ended 4/30/98+ 9.61% 9.94% 13.90% 15.61% 15.62%
- --------------------------------------------------------------------------------------------
Year Ended 4/30/98 15.43 15.54 19.53 22.01 22.03
- --------------------------------------------------------------------------------------------
Five Years Ended 4/30/98 11.20 N/A 11.47 N/A N/A
- --------------------------------------------------------------------------------------------
Ten Years Ended 4/30/98 11.50 N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------
Inception* through 4/30/98 11.79 6.76 12.67 8.73 8.46
============================================================================================
</TABLE>
- --------------------------------------------------------------------------------
12 1998 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Cumulative Total Return
================================================================================
Without Sales Charge(1)
================================================================================
Class A (4/30/88 through 4/30/98) 212.76%
- --------------------------------------------------------------------------------
Class B (Inception* through 4/30/98) 27.55
- --------------------------------------------------------------------------------
Class C (Inception* through 4/30/98) 88.68
- --------------------------------------------------------------------------------
Class Y (Inception* through 4/30/98) 38.31
- --------------------------------------------------------------------------------
Class Z (Inception* through 4/30/98) 32.66
================================================================================
(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.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
* Inception dates for Class A, B, C, Y and Z shares are February 18, 1986,
November 7, 1994, January 4, 1993, June 16, 1994 and November 7, 1994,
respectively. Class A share performance includes the return on the Fenimore
International Fund whose management was assumed by Smith Barney on November
22, 1991.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 13
<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 and
MSCI EAFE Index+
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL]
April 1988--April 1998
<TABLE>
<CAPTION>
International MSCI EAFE-GDP MSCI EAFE
Equity Portfolio Weighted Index Index
---------------- -------------- -----
<S> <C> <C> <C>
April 1988 9,500 10,000 10,000
Oct 1988 9,453 10,792 10,310
Oct 1989 11,069 12,111 11,176
Oct 1990 11,269 11,852 9,774
Oct 1991 14,564 12,281 10,488
Oct 1992 14,818 11,415 9,135
Oct 1993 21,070 15,618 12,595
Oct 1994 23,185 17,295 13,903
Oct 1995 21,461 17,452 13,893
Oct 1996 23,560 19,396 15,394
Oct 1997 25,752 21,100 16,152
April 1998 29,711 25,426 18,671
</TABLE>
+ Hypothetical illustration of $10,000 invested in Class A shares on April
30, 1988, 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, 1998. The Morgan Stanley Capital
International ("MSCI") EAFE-GDP Weighted Index and the MSCI EAFE Index are
composite portfolios consisting of equity total returns for the countries
of Europe, Australia, New Zealand and countries in the Far East. The MSCI
EAFE-GDP Weighted Index is weighted based on each country's Gross Domestic
Product and the MSCI EAFE Index is weighted based on each company's market
capitalization. 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 value may be more or less than the original cost. No adjustment
has been made for shareholder tax liability on dividends or capital gains.
++ It is the opinion of management that the MSCI EAFE Index is a more
appropriate broad-based benchmark for the market in which the Portfolio
invests than the MSCI EAFE-GDP Weighted Index. In future reporting, the
MSCI EAFE Index will be used as a basis of comparison of total return
performance rather than the MSCI EAFE-GDP Weighted Index.
<TABLE>
<CAPTION>
Top Ten Holdings* As of April 30, 1998
- --------------------------------------------------------------------------------
<S> <C>
1. Nokia Oyj, Class A Shares 4.0%
- --------------------------------------------------------------------------------
2. Bank of Ireland 3.0
- --------------------------------------------------------------------------------
3. Rentokil Initial PLC 3.0
- --------------------------------------------------------------------------------
4. Compass Group PLC 3.0
- --------------------------------------------------------------------------------
5. Misys PLC 3.0
- --------------------------------------------------------------------------------
6. Telefonaktiebolaget LM Ericsson, Class B Shares 3.0
- --------------------------------------------------------------------------------
7. Novartis AG, Registered Shares 3.0
- --------------------------------------------------------------------------------
8. Grafton Group PLC 3.0
- --------------------------------------------------------------------------------
9. Telecom Italia Mobile S.p.A. 3.0
- --------------------------------------------------------------------------------
10. Hays PLC 2.0
- --------------------------------------------------------------------------------
* As a percentage of total stocks.
</TABLE>
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL]
<TABLE>
<CAPTION>
Investment Allocation** As of April 30, 1998
- --------------------------------------------------------------------------------
<S> <C>
Europe 72.5%
Asia/Pacific 14.2%
Other 5.5%
Cash Equivalent 2.5%
</TABLE>
** As a percentage of total investments.
- --------------------------------------------------------------------------------
14 1998 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
International Balanced Portfolio
================================================================================
Portfolio Managers -- Stocks
JEFFREY J. RUSSELL, CFA JAMES B. CONHEADY
Portfolio Managers -- Bonds
VICTOR S. FILATOV DENIS P. MANGAN
Performance Update and Investment Strategy
The Smith Barney World Funds -- International Balanced Portfolio ("Portfolio")
seeks a competitive total return on its assets from growth of capital and
current income through a balanced investment in the stocks and bonds of non-U.S.
issuers. The 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. For the six months ended April 30, 1998, the
International Balanced Portfolio returned 3.98% on Class A shares before the
deduction of any sales charges. In comparison, the MSCI EAFE Index returned
15.59% and the J.P. Morgan Global Bond Index (hedged) returned 4.93% for the
same period. Additional performance information about the Portfolio's other
share classes can be found on page sixteen. As of April 30, 1998, stocks
represented nearly 69% of the Portfolio's holdings, bonds made up roughly 25%
and the remaining 6% consisted of cash equivalents.
Please note that the International Balanced Portfolio utilizes a team management
approach with the stock portion managed by Jeff Russell and James Conheady
(International Equity Portfolio) and the bond portion managed by Victor Filatov
and Denis Mangan (Global Government Bond Portfolio). For a more in-depth
discussion of economic and market events during the reporting period, please
refer to the Manager's Commentaries for the International Equity Portfolio that
appears on page nine and the Global Government Bond Portfolio, which can be
found on page three.
Although the equity portion of the Portfolio is managed similarly to the
International Equity Portfolio and the fixed-income portion is managed similarly
to the Global Government Bond Portfolio, there are some differences due to,
among other things, cash flow and the timing and availability of investment
opportunities. It is thus impossible to replicate performance. The International
Balanced Portfolio's relative underperformance was mainly due to the mid-cap
emphasis of the equity portion of the Portfolio as large-cap stocks continued to
outperform.
We thank you for your investment in the Smith Barney World Funds --
International Balanced Portfolio.
Sincerely,
/s/ James B. Conheady /s/ Jeffrey J. Russell
James B. Conheady Jeffrey J. Russell
Vice President Vice President
/s/ Victor S. Filator /s/ Denis P. Mangan
Victor S. Filatov Denis P. Mangan
Vice President Vice President
November 21, 1997
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 15
<PAGE>
<TABLE>
<CAPTION>
============================================================================================
Historical Performance--Class A Shares
============================================================================================
Net Asset Value
----------------------
Beginning End Income Return of Total
Period Ended of Period of Period Dividends Capital Returns(1)
============================================================================================
<S> <C> <C> <C> <C> <C>
4/30/98 $13.32 $13.78 $0.07 $0.00 3.98%+
- --------------------------------------------------------------------------------------------
10/31/97 13.90 13.32 0.15 0.20 (1.71)
- --------------------------------------------------------------------------------------------
10/31/96 12.64 13.90 0.35 0.00 12.89
- --------------------------------------------------------------------------------------------
10/31/95 12.20 12.64 0.39 0.00 7.05
- --------------------------------------------------------------------------------------------
Inception*-- 10/31/94 12.00 12.20 0.00 0.00 1.67+
============================================================================================
Total $0.96 $0.20
============================================================================================
<CAPTION>
============================================================================================
Historical Performance--Class B Shares
============================================================================================
Net Asset Value
----------------------
Beginning End Income Return of Total
Period Ended of Period of Period Dividends Capital Returns(1)
============================================================================================
<S> <C> <C> <C> <C> <C>
4/30/98 $13.38 $13.84 $0.03 $0.00 3.63%+
- --------------------------------------------------------------------------------------------
10/31/97 13.90 13.38 0.08 0.10 (2.45)
- --------------------------------------------------------------------------------------------
10/31/96 12.65 13.90 0.26 0.00 12.05
- --------------------------------------------------------------------------------------------
Inception*-- 10/31/95 12.08 12.65 0.29 0.00 7.33+
============================================================================================
Total $0.66 $0.10
============================================================================================
<CAPTION>
============================================================================================
Historical Performance--Class C Shares
============================================================================================
Net Asset Value
----------------------
Beginning End Income Return of Total
Period Ended of Period of Period Dividends Capital Returns(1)
============================================================================================
<S> <C> <C> <C> <C> <C>
4/30/98 $13.35 $13.81 $0.02 $0.00 3.63%+
- --------------------------------------------------------------------------------------------
10/31/97 13.87 13.35 0.08 0.10 (2.46)
- --------------------------------------------------------------------------------------------
10/31/96 12.63 13.87 0.26 0.00 11.99
- --------------------------------------------------------------------------------------------
10/31/95 12.18 12.63 0.29 0.00 6.29
- --------------------------------------------------------------------------------------------
Inception*-- 10/31/94 12.00 12.18 0.00 0.00 1.50+
============================================================================================
Total $0.65 $0.10
============================================================================================
</TABLE>
- --------------------------------------------------------------------------------
16 1998 Semi-Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
============================================================================================
Historical Performance--Class Y Shares
============================================================================================
Net Asset Value
----------------------
Beginning End Income Return of Total
Period Ended of Period of Period Dividends Capital Returns(1)
============================================================================================
<S> <C> <C> <C> <C> <C>
4/30/98 $13.35 $13.86 $0.06 $0.00 4.29%+
- --------------------------------------------------------------------------------------------
10/31/97 13.93 13.35 0.18 0.23 (1.28)
- --------------------------------------------------------------------------------------------
Inception*-- 10/31/96 13.15 13.93 0.29 0.00 8.21+
============================================================================================
Total $0.53 $0.23
============================================================================================
</TABLE>
It is the Fund's policy to distribute dividends quarterly and capital gains, if
any, annually.
<TABLE>
<CAPTION>
============================================================================================
Average Annual Total Return
============================================================================================
Without Sales Charge(1)
-----------------------------------------------------
Class A Class B Class C Class Y
============================================================================================
<S> <C> <C> <C> <C>
Six Months Ended 4/30/98+ 3.98% 3.63% 3.63% 4.29%
- --------------------------------------------------------------------------------------------
Year Ended 4/30/98 5.16 4.43 4.43 5.75
- --------------------------------------------------------------------------------------------
Inception* through 4/30/98 6.38 5.77 5.58 4.96
============================================================================================
<CAPTION>
Without Sales Charge(2)
-----------------------------------------------------
Class A Class B Class C Class Y
============================================================================================
<S> <C> <C> <C> <C>
Six Months Ended 4/30/98+ (1.21)% (1.37)% 2.63% 4.29%
- --------------------------------------------------------------------------------------------
Year Ended 4/30/98 (0.11) (0.57) 3.43 5.75
- --------------------------------------------------------------------------------------------
Inception* through 4/30/98 4.91 5.27 5.58 4.96
============================================================================================
</TABLE>
<TABLE>
<CAPTION>
============================================================================================
Cumulative Total Return
============================================================================================
Without Sales Charge(1)
============================================================================================
<S> <C>
Class A (Inception* through 4/30/98) 25.57%
- --------------------------------------------------------------------------------------------
Class B (Inception* through 4/30/98) 21.57
- --------------------------------------------------------------------------------------------
Class C (Inception* through 4/30/98) 22.12
- --------------------------------------------------------------------------------------------
Class Y (Inception* through 4/30/98) 11.40
============================================================================================
</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.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 17
<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, MSCIEAFE Index and J.P. Morgan
Global Bond Market Index+
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL]
August 1994--April 1998
<TABLE>
<CAPTION>
International Balanced International Balanced MSCI EAFE-GDP MSCI EAFE J.P. Morgan Global
Portfolio -- Class A Portfolio -- Class C Weighted Index Index++ Bond Market Index
-------------------- -------------------- -------------- ------- -----------------
<S> <C> <C> <C> <C> <C>
Aug 1994 9,550 10,000 10,000 10,000 10,000
Oct 1994 9,706 10,050 9,960 10,443 10,262
Oct 1995 10,390 10,788 9,563 10,436 12,111
Oct 1996 11,730 12,081 10,607 11,563 12,850
Oct 1997 11,529 11,784 11,539 12,133 13,300
Apr 1998 11,988 12,212 13,904 14,024 13,459
</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,
1998. The Morgan Stanley Capital International ("MSCI") EAFE-GDP Weighted
Index and MSCI EAFE Index are composite portfolios consisting of equity
total returns for the countries of Europe, Australia, New Zealand and
countries in the Far East. The MSCI EAFE-GDP Weighted Index is weighted
based on each country's Gross Domestic Product and the MSCI EAFE Index is
weighted based on each company's market capitalization. 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 and C 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.
++ It is the opinion of management that the MSCI EAFE Index is a more
appropriate broad-based benchmark for the market in which the Portfolio
invests than the MSCI EAFE-GDP Weighted Index. In future reporting, the
MSCIEAFE Index will be used as a basis of comparison of total return
performance rather than the MSCI EAFE-GDP Weighted Index.
<TABLE>
<CAPTION>
Top Ten Holdings* As of April 30, 1998
- --------------------------------------------------------------------------------
<S> <C>
1. United Kingdom Treasury 10.0%
- --------------------------------------------------------------------------------
2. Buoni Poliennali del Tesoro (Italy) 7.0
- --------------------------------------------------------------------------------
3. Deutscheland Republic 6.0
- --------------------------------------------------------------------------------
4. U.S. Treasury Notes 6.0
- --------------------------------------------------------------------------------
5. Nokia Oyj, Class A Shares 5.0
- --------------------------------------------------------------------------------
6. NTT Data Corp. 4.0
- --------------------------------------------------------------------------------
7. Telecomunicacoes Brasileiras SA-- Telebras ADR 4.0
- --------------------------------------------------------------------------------
8. Telecom Italia Mobile S.p.A. 4.0
- --------------------------------------------------------------------------------
9. Compass Group PLC 4.0
- --------------------------------------------------------------------------------
10. Hays PLC 4.0
- --------------------------------------------------------------------------------
</TABLE>
* As a percentage of total stocks and bonds.
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL]
<TABLE>
<CAPTION>
Investment Allocation** As of April 30, 1998
- --------------------------------------------------------------------------------
<S> <C>
Europe 67.3%
The Americas 14.8%
Asia/Pacific 12.1%
Cash Equivalent 5.8%
</TABLE>
** As a percentage of total investments.
- --------------------------------------------------------------------------------
18 1998 Semi-Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================
Schedules of Investments (unaudited) April 30, 1998
=================================================================================================
GLOBAL GOVERNMENT BOND PORTFOLIO
FACE
AMOUNT++ SECURITY VALUE
=================================================================================================
<S> <C> <C>
BONDS -- 94.4%
Australia --- 2.5%
4,000,000 Australian Government, 7.500% due 7/15/05 $ 2,876,393
- -------------------------------------------------------------------------------------------------
France -- 8.7%
60,000,000 France O.A.T., 5.250% due 4/25/08 10,124,962
- -------------------------------------------------------------------------------------------------
Ireland -- 4.9%
4,000,000 Ireland Treasury, 6.250% due 4/1/99 5,676,404
- -------------------------------------------------------------------------------------------------
Italy -- 3.7%
7,550,000,000 Buoni Poliennali del Tesoro, 6.000% due 2/15/00 4,363,528
- -------------------------------------------------------------------------------------------------
Japan -- 19.4%
Japanese Government:
1,060,000,000 Series 113, 5.000% due 12/21/98 8,258,004
385,000,000 Series 153, 4.800% due 12/20/02 3,404,189
1,405,000,000 Series 200 B, 2.000% due 12/20/07 10,891,860
- -------------------------------------------------------------------------------------------------
22,554,053
- -------------------------------------------------------------------------------------------------
Spain -- 5.0%
Spanish Government:
770,000,000 5.000% due 1/31/01@ 5,127,619
90,000,000 8.800% due 4/30/06 737,880
- -------------------------------------------------------------------------------------------------
5,865,499
- -------------------------------------------------------------------------------------------------
Sweden -- 3.6%
31,300,000 Swedish Government, 6.000% due 2/9/05 4,219,360
- -------------------------------------------------------------------------------------------------
United Kingdom -- 14.1%
8,900,000 United Kingdom Treasury, 7.250% due 12/7/07 16,410,625
- -------------------------------------------------------------------------------------------------
United States -- 32.5%
4,000,000 Republic of Argentina, 11.375% due 1/30/17@ 4,397,117
U.S. Treasury Bonds:
14,000,000 6.250% due 2/15/07 14,476,000
8,600,000 6.125% due 08/15/07 8,828,674
4,000,000 5.500% due 2/15/08 3,949,040
6,000,000 6.125% due 11/15/27 6,144,960
- -------------------------------------------------------------------------------------------------
37,795,791
- -------------------------------------------------------------------------------------------------
TOTAL BONDS
(Cost-- $108,558,001) 109,886,615
=================================================================================================
Repurchase Agreement -- 5.6%
$6,500,000 CIBC Wood Gundy Securities Inc., 5.400% due 5/1/98;
Proceeds at maturity --- $6,500,975; (Fully collateralized by
U.S. Treasury Notes, 6.375% due 8/15/99;
Market value-- $6,630,799) (Cost-- $6,500,000) 6,500,000
=================================================================================================
TOTAL INVESTMENTS -- 100%
(Cost-- $115,058,001*) $116,386,615
=================================================================================================
</TABLE>
@ A portion of this securitiy is on loan (See Note 7).
++ Represents local currency.
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 19
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================
Schedules of Investments (unaudited) (continued) April 30, 1998
=================================================================================================
INTERNATIONAL EQUITY PORTFOLIO
SHARES SECURITY VALUE
=================================================================================================
<S> <C> <C>
STOCKS -- 97.5%
Australia -- 1.3%
2,475,729 Coca-Cola Amatil Ltd.@ $ 18,885,879
- -------------------------------------------------------------------------------------------------
Austria -- 0.4%
85,000 Wolford AG@ 5,728,771
- -------------------------------------------------------------------------------------------------
Brazil -- 3.5%
507,100 Petroleo Brasileiro S.A. ADR 12,832,419
200,000 Telecomunicacoes Brasileiras S.A. ADR 24,362,500
325,000 Uniao de Bancos Brasileiro S.A. GDR@ 12,918,750
- -------------------------------------------------------------------------------------------------
50,113,669
- -------------------------------------------------------------------------------------------------
Finland -- 3.5%
750,000 Nokia Oyj, Class A Shares@ 50,156,250
- -------------------------------------------------------------------------------------------------
France -- 1.2%
250,100 Companie Generale de Geophysique SA ADR+ 7,190,375
128,572 Sidel SA 9,828,030
- -------------------------------------------------------------------------------------------------
17,018,405
- -------------------------------------------------------------------------------------------------
Germany -- 7.6%
198,360 Leica Camera AG 3,316,132
200,000 SAP AG Preferred ADR 33,216,540
30,000 SAP AG Preferred Non-Voting Shares@ 14,995,820
225,000 SGL Carbon AG@ 23,841,599
55,000 Volkswagen AG Preferred Non-Voting Shares 32,426,859
- -------------------------------------------------------------------------------------------------
107,796,950
- -------------------------------------------------------------------------------------------------
Hong Kong -- 2.5%
12,197,185 Hong Kong and China Gas Co. Ltd.@ 16,612,484
554,417 Hong Kong China Warrants, Expire 9/30/99+ 0
3,000,000 Hutchison Whampoa Ltd. 18,551,510
- -------------------------------------------------------------------------------------------------
35,163,994
- -------------------------------------------------------------------------------------------------
India -- 0.6%
20,000 The India Magnum Fund, Class B Shares+ 700,000
990,877 Mahindra & Mahindra Ltd. GDR++ 7,307,717
166,667 Mahindra & Mahindra Ltd. GDR 1,229,169
- -------------------------------------------------------------------------------------------------
9,236,886
- -------------------------------------------------------------------------------------------------
Ireland -- 11.4%
2,272,202 Bank of Ireland 46,114,210
1,411,976 Grafton Group PLC 37,183,356
5,450,000 Independent Newspapers PLC 32,914,325
1,575,844 Irish Continental Group PLC 28,551,106
1,950,000 Irish Life PLC 18,103,230
- -------------------------------------------------------------------------------------------------
162,866,227
- -------------------------------------------------------------------------------------------------
Israel -- 1.7%
550,000 Teva Pharmaceutical Industries Ltd. ADR@ 23,512,500
- -------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
20 1998 Semi-Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================
Schedules of Investments (unaudited) (continued) April 30, 1998
=================================================================================================
INTERNATIONAL EQUITY PORTFOLIO
SHARES SECURITY VALUE
=================================================================================================
<S> <C> <C>
Italy -- 4.0%
7,000,000 Istituto Nazionale delle Assicurazioni@ $ 20,874,178
6,350,000 Telecom Italia Mobile S.p.A. 36,366,601
- -------------------------------------------------------------------------------------------------
57,240,779
- -------------------------------------------------------------------------------------------------
Japan -- 9.8%
833,000 Canon, Inc. 19,732,763
472,000 Murata Manufacturing Co., Ltd. 13,860,289
308,000 Noritsu Koki Co. Ltd. 9,207,598
500 NTT Data Corp.@ 21,645,349
67,000 Shohkoh Fund & Co., Ltd. 21,347,914
289,000 Sony Corp. 24,081,510
519,000 Sumitomo Realty & Development Co., Ltd.@ 2,494,248
1,857,000 Terumo Corp.@ 27,237,311
- -------------------------------------------------------------------------------------------------
139,606,982
- -------------------------------------------------------------------------------------------------
Malaysia -- 0.0%
476,150 Sungei Way Holdings Berhad Warrants, Expire 6/29/99+ 28,645
- -------------------------------------------------------------------------------------------------
Mexico -- 0.1%
815,944 Gruma SA, Class B Shares+ 1,872,263
- -------------------------------------------------------------------------------------------------
Netherlands -- 7.7%
602,777 Getronics NV 26,670,756
420,936 Hunter Douglas NV 20,520,760
406,349 IHC Caland NV 23,650,899
1,500,000 ING Groep NV Warrants, Expire 3/15/01+ 27,171,492
38,900 Royal Dutch Petroleum Co. 2,146,671
61,100 Royal Dutch Petroleum Co., N.Y. Registered Shares@ 3,455,968
185,000 Unique International NV 5,887,404
- -------------------------------------------------------------------------------------------------
109,503,950
- -------------------------------------------------------------------------------------------------
Norway -- 3.3%
750,000 Smedvig ASA, Class B Shares@ 15,084,270
1,000,000 Tomra Systems ASA@ 32,179,777
- -------------------------------------------------------------------------------------------------
47,264,047
- -------------------------------------------------------------------------------------------------
Panama -- 1.7%
600,000 Panamerican Beverages Inc., Class A Shares 23,925,000
- -------------------------------------------------------------------------------------------------
South Africa -- 3.8%
2,751,410 Dimension Data Holdings Ltd.+ 19,099,078
90,000 Investec Group Ltd. 4,342,924
622,400 Investec Holdings Ltd. 30,279,916
- -------------------------------------------------------------------------------------------------
53,721,918
- -------------------------------------------------------------------------------------------------
Spain -- 4.0%
325,000 Banco Popular Espanol SA 26,654,200
700,000 Telefonica de Espana 29,209,723
700,000 Telefonica de Espana Rights, Expire 5/7/98+ 541,941
- -------------------------------------------------------------------------------------------------
56,405,864
- -------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 21
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================
Schedules of Investments (unaudited) (continued) April 30, 1998
=================================================================================================
INTERNATIONAL EQUITY PORTFOLIO
SHARES SECURITY VALUE
=================================================================================================
<S> <C> <C>
Sweden -- 7.3%
1,342,853 Astra AB, Class A Shares@ $ 27,590,024
625,000 Autoliv Inc. 18,554,687
250,000 Munters AB@ 2,826,695
1,010,000 Nobel Biocare AB@ 13,181,630
800,000 Telefonaktiebolaget LM Ericsson, Class B Shares@ 42,177,081
- -------------------------------------------------------------------------------------------------
104,330,117
- -------------------------------------------------------------------------------------------------
Switzerland -- 4.1%
22,866 Novartis AG, Registered Shares 37,807,640
2,000 Roche Holding AG 20,274,684
- -------------------------------------------------------------------------------------------------
58,082,324
- -------------------------------------------------------------------------------------------------
United Kingdom -- 18.0%
2,900,000 Capita Group PLC 24,365,062
2,500,000 Compass Group PLC 43,262,719
140,995 Eidos PLC+ 2,233,656
2,000,000 Hays PLC 34,192,178
903,055 Misys PLC 43,183,087
1,452,331 Racal Electronics PLC 8,110,460
7,000,000 Rentokil Initial PLC 45,499,005
346,666 Reuters Group PLC ADR@ 22,468,290
1,640,000 Serco Group PLC 32,411,175
- -------------------------------------------------------------------------------------------------
255,725,632
- -------------------------------------------------------------------------------------------------
TOTAL STOCKS
(Cost-- $849,672,954) 1,388,187,052
=================================================================================================
<CAPTION>
FACE
AMOUNT SECURITY VALUE
=================================================================================================
REPURCHASE AGREEMENT-- 2.5%
$36,100,000 CIBC Wood Gundy Securities Inc., 5.400% due 5/1/98;
Proceeds at maturity -- $36,105,415; (Fully collateralized
by U.S. Treasury Notes, 6.000% due 8/15/99;
Market value-- $36,824,343) (Cost-- $36,100,000) 36,100,000
=================================================================================================
TOTAL INVESTMENTS -- 100%
(Cost-- $885,772,954*) $1,424,287,052
=================================================================================================
</TABLE>
@ A portion of this security is on loan (See Note 7).
+ Non-income producing security.
++ Security is exempt from registration under Rule 144A of the Security
Exchange Act of 1933. This security may be resold in transactions that are
exempt from registration to qualified institutional buyers.
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
22 1998 Semi-Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================
Schedules of Investments (unaudited) (continued) April 30, 1998
=================================================================================================
INTERNATIONAL BALANCED PORTFOLIO
SHARES SECURITY VALUE
=================================================================================================
<S> <C> <C>
STOCKS -- 68.8%
Australia -- 2.2%
123,616 Coca-Cola Amatil Ltd.@ $ 942,993
- -------------------------------------------------------------------------------------------------
Austria -- 1.6%
10,000 Wolford AG 673,973
- -------------------------------------------------------------------------------------------------
Brazil -- 6.8%
25,000 Petroleo Brasileiro S.A. ADR 632,637
10,000 Telecomunicacoes Brasilerias S.A.-- Telebras ADR 1,218,125
25,000 Uniao de Banco Brasileiro S.A. GDR@ 993,772
- -------------------------------------------------------------------------------------------------
2,844,534
- -------------------------------------------------------------------------------------------------
Finland -- 3.2%
20,000 Nokia Oyj, Class A Shares@ 1,337,500
- -------------------------------------------------------------------------------------------------
France -- 0.5%
2,900 Sidel S.A. 221,675
- -------------------------------------------------------------------------------------------------
Germany -- 3.6%
6,000 SGL Carbon AG 635,775
1,500 Volkswagen AG Preferred 884,368
- -------------------------------------------------------------------------------------------------
1,520,143
- -------------------------------------------------------------------------------------------------
Hong Kong -- 1.6%
161,368 Hong Kong and China Gas Co. Ltd. 219,781
11,880 Hong Kong China Warrants, Expire 9/30/99+ 0
75,000 Hutchison Whampoa Ltd. 463,787
- -------------------------------------------------------------------------------------------------
683,568
- -------------------------------------------------------------------------------------------------
Ireland -- 6.5%
45,591 Bank of Ireland 925,266
7,000 Elan Corp. PLC-- ADR+@ 434,875
130,000 Independent Newspapers PLC 785,112
60,000 Irish Life PLC 557,022
- -------------------------------------------------------------------------------------------------
2,702,275
- -------------------------------------------------------------------------------------------------
Italy -- 7.0%
30,000 Assicurazioni Generali 898,230
300,000 Istituto Nazionale delle Assicurazioni@ 894,607
200,000 Telecom Italia Mobile S.p.A. 1,145,404
- -------------------------------------------------------------------------------------------------
2,938,241
- -------------------------------------------------------------------------------------------------
Japan -- 7.7%
18,000 Canon, Inc. 426,398
9,000 Murata Manufacturing Co., Ltd. 264,285
9,000 Noritsu Koki Co. Ltd. 269,053
29 NTT Data Corp.@ 1,255,430
11,000 Sony Corp. 916,597
22,000 Sumitomo Realty & Development Co., Ltd. 105,729
- -------------------------------------------------------------------------------------------------
3,237,492
- -------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 23
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================
Schedules of Investments (unaudited) (continued) April 30, 1998
=================================================================================================
INTERNATIONAL BALANCED PORTFOLIO
SHARES SECURITY VALUE
=================================================================================================
<S> <C> <C>
Mexico -- 0.3%
55,900 Gruma SA, Class B Shares+ $ 128,268
- -------------------------------------------------------------------------------------------------
Netherlands -- 5.8%
9,000 Getronics NV 398,218
12,000 Hunter Douglas NV 585,003
13,238 IHC Caland NV 770,496
10,656 ING Groep NV 692,468
- -------------------------------------------------------------------------------------------------
2,446,185
- -------------------------------------------------------------------------------------------------
Norway -- 2.3%
30,000 Tomra Systems ASA 965,393
- -------------------------------------------------------------------------------------------------
Panama -- 1.3%
13,000 Panamerican Beverages Inc., Class A Shares 518,375
- -------------------------------------------------------------------------------------------------
Spain -- 1.8%
9,000 Banco Popular Espanol SA 738,116
- -------------------------------------------------------------------------------------------------
Sweden -- 3.3%
16,000 Astra AB, Class A Shares 328,726
10,000 Autoliv AB 296,875
40,000 Munters AB 452,266
6,000 Telefonaktiebolaget LM Ericcson ADR 308,625
- -------------------------------------------------------------------------------------------------
1,386,492
- -------------------------------------------------------------------------------------------------
Switzerland -- 2.0%
500 Novartis AG, Registered Shares 826,721
- -------------------------------------------------------------------------------------------------
United Kingdom -- 11.3%
85,000 Boxmore International PLC 424,225
60,000 Compass Group PLC 1,038,305
60,000 Hays PLC 1,025,765
20,807 Misys PLC 994,967
4,000 Reuters Holdings PLC ADR@ 259,250
50,000 Serco Group PLC 988,145
- -------------------------------------------------------------------------------------------------
4,730,657
- -------------------------------------------------------------------------------------------------
Venezuela -- 0.0%
7,140 Republic of Venezuela Warrants, Expire 4/15/20+ 0
- -------------------------------------------------------------------------------------------------
TOTAL STOCKS
(Cost-- $23,890,969) 28,842,601
=================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
24 1998 Semi-Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================
Schedules of Investments (unaudited) (continued) April 30, 1998
=================================================================================================
INTERNATIONAL BALANCED PORTFOLIO
FACE
AMOUNT++ SECURITY VALUE
=================================================================================================
<S> <C> <C>
BONDS -- 25.4%
Australia -- 0.6%
340,000 Australian Government, 7.500% due 7/15/05 $ 244,493
- -------------------------------------------------------------------------------------------------
France -- 1.7%
4,000,000 France O.A.T., 6.000% due 10/25/25 705,772
- -------------------------------------------------------------------------------------------------
Germany -- 4.2%
3,100,000 Deutscheland Republic, 5.250% due 1/4/08@ 1,753,240
- -------------------------------------------------------------------------------------------------
Italy -- 4.6%
Buoni Poliennali del Tesoro:
2,480,000,000 6.000% due 2/15/00 1,433,318
830,000,000 6.750% due 2/1/07 519,935
- -------------------------------------------------------------------------------------------------
1,953,253
- -------------------------------------------------------------------------------------------------
Spain -- 0.9%
45,000,000 Spanish Government, 8.800% due 4/30/06 368,940
- -------------------------------------------------------------------------------------------------
United Kingdom -- 7.0%
1,600,000 United Kingdom Treasury, 7.250% due 12/7/07 2,950,224
- -------------------------------------------------------------------------------------------------
United States -- 6.4%
1,000,000 Republic of Argentina, 11.375% due 1/30/17@ 1,099,278
1,550,000 U.S. Treasury Notes, 6.125% due 8/15/07 1,591,214
- -------------------------------------------------------------------------------------------------
2,690,492
- -------------------------------------------------------------------------------------------------
TOTAL BONDS
(Cost-- $10,494,743) 10,666,414
=================================================================================================
REPURCHASE AGREEMENT -- 5.8%
$2,438,000 CIBC Wood Gundy Securities Inc., 5.400% due 5/1/98;
Proceeds at maturity -- $2,438,366; (Fully collateralized by
U.S. Treasury Bonds, 6.375% due 8/15/99; Market value --
$2,476,746) (Cost-- $2,438,000) 2,438,000
=================================================================================================
TOTAL INVESTMENTS -- 100%
(Cost-- $36,823,712*) $41,947,015
=================================================================================================
</TABLE>
@ A portion of this security is on loan (See Note 7).
+ Non-income producing security.
++ Represents local currency.
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 25
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Statement of Assets and Liabilities (unaudited) April 30, 1998
====================================================================================================================================
Global
Government International International
Bond Equity Balanced
Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C>
ASSETS:
Investments-- Cost $115,058,001 $ 885,772,954 $36,823,712
Foreign currency-- Cost -- 11,475,209 (808,385)
====================================================================================================================================
Investments, at value $116,386,615 $1,424,287,052 $41,947,015
Foreign currency, at value -- 11,466,169 825,787
Cash 31,041 132,909 --
Receivable for Fund shares sold 929,780 1,467,548 4,354
Receivable for securities sold 21,502,004 6,111,230 2,948,362
Dividends and interest receivable 1,724,092 3,563,315 313,461
Receivable for open forward foreign currency contracts (Note 4) 470,320 1,411 49,652
Collateral for securities loaned (Note 7) 10,147,000 160,669,642 10,165,900
- ------------------------------------------------------------------------------------------------------------------------------------
Total Assets 151,190,852 1,607,699,276 56,254,531
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities loaned (Note 7) 10,147,000 160,669,642 10,165,900
Management fees payable 86,731 992,473 46,797
Payable for open forward foreign currency contracts (Note 4) 50,044 19,293 36,426
Payable for Fund shares purchased 23,848 52,237 --
Distribution fees payable 13,245 364,001 3,719
Payable for securities purchased -- 12,456,065 --
Payable to bank -- -- 3,864,004
Foreign currency payable to bank, at value 150 -- --
Accrued expenses 410,166 1,196,925 83,497
- ------------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 10,731,184 175,750,636 14,200,343
- ------------------------------------------------------------------------------------------------------------------------------------
Total Net Assets $140,459,668 $1,431,948,640 $42,054,188
====================================================================================================================================
NET ASSETS:
Par value of capital shares $ 11,962 $ 61,270 $ 567
Capital paid in excess of par value 140,531,297 957,955,111 36,044,742
Overdistributed net investment income (5,996,243) (17,584,189) (232,952)
Accumulated net realized gain (loss) from security
transactions and foreign currencies 4,152,648 (46,980,554) 1,126,548
Net unrealized appreciation of investments and
foreign currencies 1,760,004 538,497,002 5,115,283
- ------------------------------------------------------------------------------------------------------------------------------------
Total Net Assets $140,459,668 $1,431,948,640 $42,054,188
====================================================================================================================================
Shares Outstanding:
Class A 7,520,025 21,566,219 713,134
- ------------------------------------------------------------------------------------------------------------------------------------
Class B 1,480,690 9,715,509 292,865
- ------------------------------------------------------------------------------------------------------------------------------------
Class C 257,547 8,187,589 232,091
- ------------------------------------------------------------------------------------------------------------------------------------
Class Y 2,704,303 15,686,264 1,801,070
- ------------------------------------------------------------------------------------------------------------------------------------
Class Z -- 6,113,657 --
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $11.79 $23.49 $13.78
- ------------------------------------------------------------------------------------------------------------------------------------
Class B * $11.78 $23.24 $13.84
- ------------------------------------------------------------------------------------------------------------------------------------
Class C ** $11.76 $22.90 $13.81
- ------------------------------------------------------------------------------------------------------------------------------------
Class Y (and redemption price) $11.60 $23.49 $13.86
- ------------------------------------------------------------------------------------------------------------------------------------
Class Z (and redemption price) -- $23.47 --
- ------------------------------------------------------------------------------------------------------------------------------------
Class A Maximum Public Offering Price Per Share
(net asset value plus 4.71% of net asset value per share) $12.35 -- --
(net asset value plus 5.26% of net asset value per share) $24.73 $14.50
====================================================================================================================================
</TABLE>
* Redemption price is NAV of Class B shares reduced by a 4.50% CDSC for
Global Government Bond Portfolio, and by a 5.00% CDSC for International
Equity and International Balanced Portfolios 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 Note 2).
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
26 1998 Semi-Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Statement of Operations (unaudited) For the Six Months Ended April 30, 1998
====================================================================================================================================
Global
Government International International
Bond Equity Balanced
Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $4,152,171 $654,563 $677,303
Dividend -- 7,248,460 210,590
Less: Foreign withholding tax (14,954) (810,694) (19,780)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investment Income 4,137,217 7,092,329 868,113
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 528,180 5,552,672 280,247
Distribution fees (Note 2) 192,810 2,547,513 50,325
Shareholder and system servicing fees 88,283 531,760 20,448
Registration fees 59,540 98,370 32,899
Custody 41,082 445,998 36,495
Audit and legal 17,481 34,281 13,311
Shareholder communications 16,245 55,740 9,350
Directors' fees 6,847 17,324 2,769
Other 5,266 32,242 4,710
- ------------------------------------------------------------------------------------------------------------------------------------
Total Expenses 955,734 9,315,900 450,554
- ------------------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) 3,181,483 (2,223,571) 417,559
- ------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FOREIGN CURRENCIES (NOTES 3 AND 4):
Realized Gain (Loss) From:
Security transactions (excluding short-term securities) 3,967,421 27,005,528 1,969,490
Foreign currency transactions (3,906,588) (314,947) (353,519)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Realized Gain 60,833 26,690,581 1,615,971
- ------------------------------------------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation (Depreciation)
of Investments and Foreign Currencies:
Beginning of period (293,729) 361,620,491 3,551,353
End of period 1,760,004 538,497,002 5,115,283
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 2,053,733 176,876,511 1,563,930
- ------------------------------------------------------------------------------------------------------------------------------------
Net Gain on Investments and Foreign Currencies 2,114,566 203,567,092 3,179,901
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations $5,296,049 $201,343,521 $3,597,460
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 27
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Statement of Changes in Net Assets (unaudited) For the Six Months Ended April 30, 1998
====================================================================================================================================
Global
Government International International
Bond Equity Balanced
Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ 3,181,483 $ (2,223,571) $ 417,559
Net realized gain 60,833 26,690,581 1,615,971
Increase in net unrealized appreciation 2,053,733 176,876,511 1,563,930
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 5,296,049 201,343,521 3,597,460
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (5,232,178) (1,282,091) (296,992)
Net realized gains (5,160,368) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (10,392,546) (1,282,091) (296,992)
- ------------------------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 10):
Net proceeds from sale of shares 8,717,774 1,342,743,670 11,241,520
Net asset value of shares issued
for reinvestment of dividends 5,670,306 750,365 57,821
Cost of shares reacquired (14,832,598) (1,441,961,177) (34,452,557)
- ------------------------------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Fund Share Transactions (444,518) (98,467,142) (23,153,216)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets (5,541,015) 101,594,288 (19,852,748)
NET ASSETS:
Beginning of period 146,000,683 1,330,354,352 61,906,936
- ------------------------------------------------------------------------------------------------------------------------------------
End of period* $140,459,668 $ 1,431,948,640 $ 42,054,188
====================================================================================================================================
* Includes overdistributed net
investment income of: $(5,996,243) $(17,584,189) $(443,535)
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
28 1998 Semi-Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Statement of Changes in Net Assets For the Year Ended October 31, 1997
====================================================================================================================================
Global
Government International International
Bond Equity Balanced
Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C>
OPERATIONS:
Net investment gain (loss) $ 7,166,095 $ (4,446,616) $ 820,196
Net realized gain (loss) 7,628,774 6,344,807 (1,386,334)
Increase in net unrealized appreciation (depreciation) (3,023,160) 125,335,875 (491,304)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Operations 11,771,709 127,234,066 (1,057,442)
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (14,761,484) (1,479,385) (584,276)
Net realized gains (895,628) -- --
Capital -- -- (771,507)
- ------------------------------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (15,657,112) (1,479,385) (1,355,783)
- ------------------------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 10):
Net proceeds from sale of shares 48,612,809 1,530,238,808 27,220,805
Net asset value of shares issued
for reinvestment of dividends 8,530,565 1,110,321 442,806
Cost of shares reacquired (58,854,085) (1,602,262,084) (8,973,657)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets
From Fund Share Transactions (1,710,711) (70,912,955) 18,689,954
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets (5,596,114) 54,841,726 16,276,729
NET ASSETS:
Beginning of year 151,596,797 1,275,512,626 45,630,207
- ------------------------------------------------------------------------------------------------------------------------------------
End of year* $146,000,683 $ 1,330,354,352 $61,906,936
====================================================================================================================================
* Includes overdistributed net investment income of: $(38,960) $(13,763,580) --
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 29
<PAGE>
================================================================================
Notes to Financial Statements (unaudited) (continued)
================================================================================
1. Significant Accounting Policies
The Global Government Bond, International Equity and International Balanced
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 and consists of these Portfolios and three other separate
investment portfolios: Emerging Markets, European and Pacific Portfolios. The
financial statements and financial highlights for the other portfolios are
presented in a separate semi-annual report.
The significant accounting policies consistently followed by the Portfolios are:
(a) security transactions are accounted for on trade date; (b) securities traded
on national securities markets are valued at the closing prices on 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 an 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
Portfolio determines the existence of a dividend declaration after exercising
reasonable due diligence; (g) direct expenses are charged to each Portfolio and
each 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 or 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, 1997, 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. Net investment income, net
realized gains and net assets were not affected by these changes; (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.
In addition, the Portfolios may enter into forward exchange contracts in order
to hedge against foreign
- --------------------------------------------------------------------------------
30 1998 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Notes to Financial Statements (unaudited) (continued)
================================================================================
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
Mutual Management Corp. ("MMC"), formerly known as Smith Barney Mutual Funds
Management Inc., a subsidiary of Salomon Smith Barney Holdings Inc. ("SSBH"),
acts as investment manager of the Fund. The Global Government Bond Portfolio
pays MMC a management fee calculated at an annual rate of 0.75% of the average
daily net assets of the portfolio. The International Equity and International
Balanced Portfolios pay MMC a management fee calculated at an annual rate of
0.85% of the average daily net assets of each respective portfolio. These fees
are calculated daily and paid monthly.
Smith Barney Inc. ("SB"), another subsidiary of SSBH, acts as distributor of the
Fund's shares. SB received sales charges of approximately $262,000 on sales of
the Portfolios' Class A shares for the six months ended April 30, 1998. In
addition, SB did not receive any brokerage commissions.
For the Global Government Portfolio, there is a contingent deferred sales charge
("CDSC") of 4.50% on Class B shares, which applies if redemption occurs 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. For the
International Equity and International Balanced Portfolios, there is a 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 for each Portfolio have a 1.00% CDSC, which applies
if redemption occurs within the first year of purchase. In addition, Class A
shares for each Portfolio have a 1.00% CDSC, which applies if redemption occurs
within the first year of purchase. This CDSC only applies to those purchases of
Class A shares that equal or exceed $500,000 in the aggregate. These purchases
do not incur an initial sales charge.
For the six months ended April 30, 1998, CDSCs paid to SB were approximately:
<TABLE>
<CAPTION>
Portfolio Class A Class B Class C
================================================================================
<S> <C> <C> <C>
Global Government Bond -- $ 7,000 --
- --------------------------------------------------------------------------------
International Equity $5,000 379,000 $7,000
- --------------------------------------------------------------------------------
International Balanced -- 9,000 --
================================================================================
</TABLE>
Pursuant to a Distribution Plan, the Portfolios pay a service fee with respect
to Class A, B and C shares calculated at an annual rate of 0.25% of the average
daily net assets of each respective class's shares. 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. The International Equity and International Balanced
Portfolios pay a distribution fee with respect to Class B and C shares
calculated at an annual rate of 0.75% of the average daily net assets for each
respective Portfolio and class. For the six months ended April 30, 1998, 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 $112,886 $69,124 $10,800
- --------------------------------------------------------------------------------
International Equity 554,020 1,080,504 912,989
- --------------------------------------------------------------------------------
International Balanced 12,564 21,256 16,505
================================================================================
</TABLE>
All officers and two Directors of the Fund are employees of SB.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 31
<PAGE>
================================================================================
Notes to Financial Statements (unaudited) (continued)
================================================================================
3. Investments
During the six months ended April 30, 1998, 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 $169,953,057 $187,625,390
- -------------------------------------------------------------------------------
International Equity 194,106,353 291,415,045
- -------------------------------------------------------------------------------
International Balanced 41,964,086 61,340,615
===============================================================================
</TABLE>
At April 30, 1998, aggregate gross unrealized appreciation and depreciation of
investments for Federal income tax purposes were substantially as follows:
<TABLE>
<CAPTION>
Net Unrealized
Portfolio Appreciation Depreciation Appreciation
================================================================================
<S> <C> <C> <C>
Global Government Bond $ 2,530,166 $ (1,201,552) $ 1,328,614
- --------------------------------------------------------------------------------
International Equity 576,398,492 (37,884,394) 538,514,098
- --------------------------------------------------------------------------------
International Balanced 6,554,902 (1,431,599) 5,123,303
================================================================================
</TABLE>
4. Forward Foreign Currency Contracts
At April 30, 1998, 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 Sell:
Australian Dollars 4,550,000 $ 2,968,001 5/28/98 $ 191
Belgian Franc 212,300,000 5,733,555 5/28/98 19,832
French Franc 61,500,000 10,236,590 5/28/98 25,382
German Mark 28,600,000 15,963,533 5/28/98 40,944
British Pound 10,100,000 16,863,953 5/28/98 (47,454)
Italian Lira 7,850,000,000 4,431,163 5/28/98 8,882
Irish Punt 4,070,000 5,712,799 5/28/98 (2,590)
Japanese Yen 3,020,000,000 22,955,596 5/28/98 310,968
Spanish Peseta 914,400,000 6,005,100 5/28/98 11,877
Swedish Krona 33,500,000 4,332,572 5/28/98 52,244
- -----------------------------------------------------------------------------------------
Net Unrealized Gain on
Forward Foreign Currency Contracts $420,276
=========================================================================================
</TABLE>
- --------------------------------------------------------------------------------
32 1998 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Notes to Financial Statements (unaudited) (continued)
================================================================================
<TABLE>
<CAPTION>
Local Market Settlement Unrealized
Foreign Currency Currency Value Date Gain (Loss)
========================================================================================
International Equity Portfolio
To Sell:
<S> <C> <C> <C> <C>
Malaysian Ringgit 185,816 $ 49,633 5/4/98 $ (532)
Malaysian Ringgit 1,810,439 483,461 5/5/98 (10,514)
Malaysian Ringgit 1,198,577 319,987 5/6/98 (707)
- ----------------------------------------------------------------------------------------
(11,753)
- ----------------------------------------------------------------------------------------
To Buy:
British Pound 356,482 596,004 5/1/98 1,411
British Pound 1,244,161 2,079,714 5/5/98 (1,517)
Spanish Peseta 318,180,000 2,088,084 5/7/98 (3,966)
French Franc 4,303,392 716,336 5/29/98 (2,057)
- ----------------------------------------------------------------------------------------
(6,129)
- ----------------------------------------------------------------------------------------
Net Unrealized Loss on
Forward Foreign Currency Contracts $(17,882)
========================================================================================
International Balanced Portfolio
To Sell:
British Pound 85,296 $ 142,573 5/6/98 $ (324)
British Pound 510,000 851,879 5/20/98 7,215
Dutch Guilder 629,685 311,722 5/4/98 149
German Mark 740,000 412,850 5/20/98 (2,658)
Finnish Markka 1,408,819 258,649 5/4/98 230
Irish Punt 1,020,000 1,431,958 5/20/98 (9,997)
Italian Lira 488,440,738 275,665 5/6/98 (254)
Japanese Yen 315,000,000 2,391,406 5/20/98 14,974
Malaysian Ringgit 10,197 2,723 5/4/98 (29)
Malaysian Ringgit 97,923 26,149 5/5/98 (569)
Malaysian Ringgit 65,056 17,368 5/6/98 (37)
Swedish Krona 2,560,000 331,004 5/20/98 (1,647)
- ----------------------------------------------------------------------------------------
7,053
- ----------------------------------------------------------------------------------------
To Buy:
Canadian Dollar 1,500,000 1,049,119 5/20/98 1,634
German Mark 7,727,960 4,311,475 5/20/98 11,475
Irish Punt 1,020,000 1,431,958 5/20/98 13,975
Japanese Yen 500,000,000 3,795,882 5/20/98 (20,911)
- ----------------------------------------------------------------------------------------
6,173
- ----------------------------------------------------------------------------------------
Net Unrealized Gain on
Forward Foreign Currency Contracts $ 13,226
========================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 33
<PAGE>
================================================================================
Notes to Financial Statements (unaudited) (continued)
================================================================================
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 realize 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 that the Portfolio purchases upon exercise will
be increased by the permium originally paid.
At April 30, 1998, the Portfolios had no open purchased call or put options.
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. When the Portfolio enters into a closing purchase transaction, the
Portfolio realizes a gain or loss depending upon whether the cost of the closing
transaction is greater or less than the premium originally received, 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 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.
During the six months ended April 30, 1998, the Portfolios did not write any
options.
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 received or made 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.
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).
At April 30, 1998, the Portfolios had no open futures contracts.
- --------------------------------------------------------------------------------
34 1998 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Notes to Financial Statements (unaudited) (continued)
================================================================================
7. Lending of Portfolio Securities
The Portfolio has an agreement with their custodian whereby the custodian may
lend securities owned by the Portfolio to brokers, dealers, and other financial
organizations. Fees earned by the Portfolios on securities lending are recorded
as interest income. Loans of securities by the Portfolio are collateralized by
cash, U.S. government securities or high quality money market instruments that
are maintained at all times in an amount at least equal to the current market
value of the loaned securities, plus a margin which may vary depending on the
type of securities loaned. The Custodian establishes and maintains the
collateral in segregated accounts.
The Portfolios maintain exposure for the risk of any loss in the investment of
amounts received as collateral.
At April 30, 1998, the Portfolios listed below had loaned common stocks and
bonds. The market value for the securities on loan for each portfolio was as
follows:
<TABLE>
<CAPTION>
Portfolio Value
============================================================================================
<S> <C>
Global Government Bond Portfolio $ 9,491,634
- --------------------------------------------------------------------------------------------
international Equity Portfolio 156,424,782
- --------------------------------------------------------------------------------------------
International Balanced Portfolio 9,723,195
============================================================================================
At April 30, 1998, the collateral held for the securities on loan was as
follows:
Global Government Bond Portfolio
Security Description Value
===========================================================================================
Time Deposit:
UBS, Grand Cayman, 5.625% due 5/1/98 $ 475,462
Svenska Grand Cayman, 5.625% due 5/1/98 475,462
Deutsche Bank G.C., 5.625% due 5/1/98 475,462
Commerzbank AG, Frankfurt, 5.59375% due 5/1/98 475,462
Bank of Montreal, Montreal, 5.625% due 5/1/98 475,462
Repurchase Agreements:
CS First Boston, 5.570% due 5/1/98 2,007,506
Merrill Lynch, 5.625% due 5/1/98 686,777
J.P. Morgan Securities, 5.580% due 5/1/98 1,461,896
NationsBanc Montgomery Securities Inc. 5.6125% due 5/1/98 1,606,005
Bear Stearns, 5.600% due 5/1/98 2,007,506
- -------------------------------------------------------------------------------------------
Total $10,147,000
- -------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 35
<PAGE>
================================================================================
Notes to Financial Statements (unaudited) (continued)
================================================================================
International Equity Portfolio
<TABLE>
<CAPTION>
Security Description Value
===========================================================================================
<S> <C>
Time Deposit:
UBS, Grand Cayman, 5.625% due 5/1/98 $ 7,528,560
Svenska Grand Cayman, 5.625% due 5/1/98 7,528,560
Deutsche Bank G.C., 5.625% due 5/1/98 7,528,560
Commerzbank AG, Frankfurt, 5.59375% due 5/1/98 7,528,560
Bank of Montreal, Montreal, 5.625% due 5/1/98 7,528,560
Repurchase Agreements:
CS First Boston, 5.570% due 5/1/98 31,787,251
Merrill Lynch, 5.625% due 5/1/98 10,874,586
J.P. Morgan Securities, 5.580% due 5/1/98 23,147,955
NationsBanc Montgomery Securities Inc. 5.6125% due 5/1/98 25,429,801
Bear Stearns, 5.600% due 5/1/98 31,787,251
- -------------------------------------------------------------------------------------------
Total $160,669,642
===========================================================================================
<CAPTION>
International Balanced Portfolio
Security Description Value
===========================================================================================
<S> <C>
Time Deposit:
UBS, Grand Cayman, 5.625% due 5/1/98 $ 476,348
Svenska Grand Cayman, 5.625% due 5/1/98 476,348
Deutsche Bank G.C., 5.625% due 5/1/98 476,348
Commerzbank AG, Frankfurt, 5.59375% due 5/1/98 476,348
Bank of Montreal, Montreal, 5.625% due 5/1/98 476,348
Repurchase Agreements:
CS First Boston, 5.570% due 5/1/98 2,011,245
Merrill Lynch, 5.625% due 5/1/98 688,057
J.P. Morgan Securities, 5.580% due 5/1/98 1,464,618
NationsBanc Montgomery Securities Inc. 5.6125% due 5/1/98 1,608,995
Bear Stearns, 5.600% due 5/1/98 2,011,245
- -------------------------------------------------------------------------------------------
Total $10,165,900
===========================================================================================
</TABLE>
8. Concentration of Risk
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.
9. Capital Loss Carryforwards
At October 31, 1997, the International Equity and International Balanced
Portfolios had, for Federal income tax purposes, approximately $73,386,000 and
$855,000, respectively, of capital loss carryforwards available to offset
- --------------------------------------------------------------------------------
36 1998 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Notes to Financial Statements (unaudited) (continued)
================================================================================
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 losses for each Portfolio
is indicated below:
<TABLE>
<CAPTION>
Portfolio 10/31/03 10/31/04 10/31/05 Total
================================================================================
<S> <C> <C> <C> <C>
International Equity $73,386,000 -- -- $73,386,000
- --------------------------------------------------------------------------------
International Balanced 176,000 $2,000 $677,000 855,000
================================================================================
</TABLE>
10. Capital Shares
At April 30, 1998, 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, 1998, 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 $ 87,859,105 $ 16,480,549 $ 3,398,997 $ 32,804,608 --
- -------------------------------------------------------------------------------------------------
International Equity 269,726,473 159,323,271 133,523,257 291,139,105 $104,304,275
- -------------------------------------------------------------------------------------------------
International Balanced 7,329,978 3,490,653 2,543,915 22,680,763 --
=================================================================================================
</TABLE>
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
April 30, 1998 October 31, 1997
-------------------------- --------------------------
Shares Amount Shares Amount
=======================================================================================================
<S> <C> <C> <C> <C>
Global Government Bond Portfolio
Class A
Shares sold 215,462 $ 2,563,064 265,104 $ 3,204,232
Shares issued on reinvestment 376,755 4,464,879 541,805 6,590,007
Shares redeemed (840,991) (10,091,626) (1,524,120) (18,624,678)
=======================================================================================================
Net Decrease (248,774) $(3,063,683) (717,211) $(8,830,439)
=======================================================================================================
Class B
Shares sold 34,790 $417,761 64,923 $793,716
Shares issued on reinvestment 85,476 1,012,254 135,302 1,645,186
Shares redeemed (250,918) (3,004,989) (666,502) (8,130,886)
=======================================================================================================
Net Decrease (130,652) $(1,574,974) (466,277) $(5,691,984)
=======================================================================================================
Class C
Shares sold 3,801 $45,361 10,626 $129,906
Shares issued on reinvestment 16,340 193,173 24,330 295,171
Shares redeemed (29,679) (356,820) (87,408) (1,058,665)
=======================================================================================================
Net Decrease (9,538) $ (118,286) (52,452) $ (633,588)
=======================================================================================================
Class Y
Shares sold 482,676 $ 5,691,588 3,699,552 $44,484,955
Shares issued on reinvestment -- -- 16 201
Shares redeemed (113,418) (1,379,163) (2,583,197) (31,039,856)
=======================================================================================================
Net Increase 369,258 $ 4,312,425 1,116,371 $13,445,300
=======================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 37
<PAGE>
================================================================================
Notes to Financial Statements (unaudited) (continued)
================================================================================
<TABLE>
<CAPTION>
Six Months Ended Year Ended
April 30, 1998 October 31, 1997
-------------------------------- --------------------------------
Shares Amount Shares Amount
===================================================================================================================================
<S> <C> <C> <C> <C>
International Equity Portfolio
Class A
Shares sold 54,084,058 $ 1,171,298,861 57,094,304 $ 1,163,554,103
Shares issued on reinvestment -- -- 17,813 341,833
Shares redeemed (55,346,491) (1,202,517,070) (61,845,885) (1,267,607,993)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Decrease (1,262,433) $ (31,218,209) (4,733,768) $ (103,712,057)
===================================================================================================================================
Class B
Shares sold 3,994,749 $ 82,549,865 9,244,231 $ 186,954,945
Shares issued on reinvestment -- -- -- --
Shares redeemed (5,709,190) (117,932,107) (9,196,821) (187,319,844)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (1,714,441) $ (35,382,242) 47,410 $ (364,899)
===================================================================================================================================
Class C
Shares sold 1,369,841 $ 28,637,937 2,741,869 $ 54,441,240
Shares issued on reinvestment -- -- -- --
Shares redeemed (3,261,403) (66,744,232) (5,148,932) (102,729,446)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Decrease (1,891,562) $ (38,106,295) (2,407,063) $ (48,288,206)
===================================================================================================================================
Class Y
Shares sold 2,493,908 $ 52,018,436 5,446,442 $ 109,870,065
Shares issued on reinvestment 19,405 381,500 19,699 377,231
Shares redeemed (1,638,203) (38,411,143) (1,408,249) (29,325,663)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase 875,110 $ 13,988,793 4,057,892 $ 80,921,633
===================================================================================================================================
Class Z
Shares sold 394,676 $ 8,245,045 773,118 $ 15,418,455
Shares issued on reinvestment 18,443 362,392 20,453 391,257
Shares redeemed (767,731) (16,356,625) (737,233) (15,279,138)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (354,612) $ (7,749,188) 56,338 $ 530,574
===================================================================================================================================
International Balanced Portfolio
Class A
Shares sold 21,107 $ 284,359 61,050 $ 843,398
Shares issued on reinvestment 3,457 45,321 23,664 326,084
Shares redeemed (142,676) (1,866,141) (412,944) (5,716,189)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Decrease (118,112) $ (1,536,461) (328,230) $ (4,546,707)
===================================================================================================================================
Class B
Shares sold 9,988 $ 133,442 105,395 $ 1,461,573
Shares issued on reinvestment 529 6,961 4,766 65,979
Shares redeemed (77,508) (1,023,307) (128,598) (1,788,817)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Decrease (66,991) $ (882,904) (18,437) $ (261,265)
===================================================================================================================================
Class C
Shares sold 2,806 $ 37,152 24,414 $ 338,448
Shares issued on reinvestment 422 5,539 3,674 50,743
Shares redeemed (43,980) (578,422) (106,214) (1,468,651)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Decrease (40,752) $ (535,731) (78,126) $ (1,079,460)
===================================================================================================================================
Class Y
Shares sold 830,192 $ 10,786,567 1,782,664 $ 24,577,386
Shares issued on reinvestment -- -- -- --
Shares redeemed (2,203,747) (30,984,687) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (1,373,555) $ (20,198,120) 1,782,664 $ 24,577,386
===================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
38 1998 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 1998(1)(2) 1997(2) 1996(2) 1995 1994(3) 1993
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.22 $12.55 $12.30 $11.68 $12.92 $11.84
- -----------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.27 0.59 0.70 0.92* 0.69 0.83
Net realized and unrealized gain (loss) 0.18 0.38 0.42 0.48 (1.28) 1.36
- -----------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.45 0.97 1.12 1.40 (0.59) 2.19
- -----------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income(4) (0.44) (1.22) (0.87) (0.78) (0.23) (0.52)
Net realized gains (0.44) (0.08) -- -- -- (0.59)
Capital -- -- -- -- (0.42) --
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.88) (1.30) (0.87) (0.78) (0.65) (1.11)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $11.79 $12.22 $12.55 $12.30 $11.68 $12.92
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return 3.84%++ 8.21% 9.41% 12.40% (4.64)%++ 19.13%
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $88,633 $94,957 $106,536 $123,917 $77,961 $107,415
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(5) 1.33%+ 1.26% 1.26% 1.38% 1.32%+ 1.30%
Net investment income 4.50+ 4.82 5.69 7.44 6.57+ 6.67
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 133% 367% 133% 195% 179% 119%
===================================================================================================================================
</TABLE>
(1) For the six months ended April 30, 1998 (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; numbers prior to October 31,
1995 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. 39
<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 1998(1)(2) 1997(2) 1996(2) 1995(3)
===================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.22 $12.50 $12.26 $11.57
- ---------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.23 0.52 0.63 0.78*
Net realized and unrealized gain 0.18 0.38 0.42 0.57
- ---------------------------------------------------------------------------------------------------
Total Income From Operations 0.41 0.90 1.05 1.35
- ---------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income(4) (0.41) (1.10) (0.81) (0.66)
Net realized gains (0.44) (0.08) -- --
- ---------------------------------------------------------------------------------------------------
Total Distributions (0.85) (1.18) (0.81) (0.66)
- ---------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $11.78 $12.22 $12.50 $12.26
- ---------------------------------------------------------------------------------------------------
Total Return 3.49%++ 7.62% 8.83% 11.97%++
- ---------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $17,436 $19,690 $25,970 $35,159
- ---------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(5) 1.97%+ 1.80% 1.81% 1.92%+
Net investment income 3.92+ 4.24 5.15 6.65+
- ---------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 133% 367% 133% 195%
===================================================================================================
</TABLE>
(1) For the six months ended April 30, 1998 (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) Distributions from net investment income include 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 1.78% and 1.86% (annualized),
respectively; numbers prior to October 31, 1995 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.
- --------------------------------------------------------------------------------
40 1998 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 1998(1)(2) 1997(2) 1996(2) 1995(3) 1994(4) 1993(5)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.19 $12.47 $12.23 $11.68 $12.93 $11.83
- ------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.24 0.53 0.64 0.85* 0.90 0.79
Net realized and unrealized gain (loss) 0.19 0.38 0.41 0.42 (1.55) 1.37
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.43 0.91 1.05 1.27 (0.65) 2.16
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income(6) (0.42) (1.11) (0.81) (0.72) (0.21) (0.47)
Net realized gains (0.44) (0.08) -- -- -- (0.59)
Capital -- -- -- -- (0.39) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.86) (1.19) (0.81) (0.72) (0.60) (1.06)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $11.76 $12.19 $12.47 $12.23 $11.68 $12.93
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return 3.61%++ 7.73% 8.90% 11.25% (5.09)%++ 18.89%++
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $3,028 $3,257 $3,986 $4,141 $5,835 $4,972
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(7) 1.83%+ 1.69% 1.74% 1.84% 1.80%+ 1.74%+
Net investment income 3.95+ 4.33 5.22 7.15 6.05+ 6.28+
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 133% 367% 133% 195% 179% 119%
====================================================================================================================================
</TABLE>
(1) For the six months ended April 30, 1998.
(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; numbers prior to October 31,
1995 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. 41
<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 1998(1)(2) 1997(2) 1996(2) 1995(3) 1994(4) 1993(5)
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.03 $12.39 $12.14 $11.68 $12.93 $11.97
- ------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.28 0.63 0.73 0.78* 0.76 0.69
Net realized and unrealized gain (loss) 0.19 0.37 0.42 0.49 (1.35) 1.23
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.47 1.00 1.15 1.27 (0.59) 1.92
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income(6) (0.46) (1.28) (0.90) (0.81) (0.23) (0.37)
Net realized gains (0.44) (0.08) -- -- -- (0.59)
Capital -- -- -- -- (0.43) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.90) (1.36) (0.90) (0.81) (0.66) (0.96)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $11.60 $12.03 $12.39 $12.14 $11.68 $12.93
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return 4.03%++ 8.61% 9.82% 11.27% (4.62)%++ 16.49%++
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $31,363 $28,097 $15,105 $62 $3,202 $371
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(7) 0.93%+ 0.89% 0.84% 0.98% 1.23%+ 1.20%+
Net investment income 4.76+ 5.19 6.12 6.38 6.76+ 6.73+
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 133% 367% 133% 195% 179% 119%
====================================================================================================================================
</TABLE>
(1) For the six months ended April 30, 1998 (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; numbers prior to October 31,
1995 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.
================================================================================
42 1998 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 1998(1)(2) 1997(2) 1996(2) 1995 1994(3)(4) 1993
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $20.36 $18.64 $17.15 $18.79 $18.71 $12.35
- ------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss) (0.04) (0.04) 0.01 0.08* (0.01) (0.01)
Net realized and unrealized gain (loss) 3.17 1.77 1.65 (1.50) 0.09 6.53
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 3.13 1.73 1.66 (1.42) 0.08 6.52
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income(5) -- (0.01) (0.17) (0.12) -- --
Net realized gains -- (0.10) -- (0.16)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions -- (0.01) (0.17) (0.22) -- (0.16)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $23.49 $20.36 $18.64 $17.15 $18.79 $18.71
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return 15.37%++ 9.30% 9.78% (7.44)% 0.43%++ 52.78%
Net Assets, End of Period (000s) $506,668 $464,796 $513,870 $489,533 $591,598 $355,926
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(6) 1.30%+ 1.31% 1.35% 1.36% 1.35%+ 1.35%
Net investment income (loss) (0.38)+ (0.18) 0.17 0.50 (0.05)+ (0.10)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 15% 35% 46% 42% 35% 27%
- ------------------------------------------------------------------------------------------------------------------------------------
Average commissions per share
paid on equity transactions(7)(8) $0.03 $0.03 $0.02 $0.01 -- --
====================================================================================================================================
</TABLE>
(1) For the six months ended April 30, 1998 (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 include 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; numbers prior to October 31,
1995 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. 43
<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 1998(1)(2) 1997(2) 1996(2) 1995(3)
=====================================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $20.22 $18.65 $17.17 $18.38
- ---------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss) (0.17) (0.20) (0.08) 0.06*
Net realized and unrealized gain (loss) 3.19 1.77 1.60 (1.17)
- ---------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 3.02 1.57 1.52 (1.11)
- ---------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income(4) -- -- (0.04) --
Net realized gains -- -- -- (0.10)
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions -- -- (0.04) (0.10)
- ---------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $23.24 $20.22 $18.65 $17.17
- ---------------------------------------------------------------------------------------------------------------------
Total Return 14.94%++ 8.42% 8.89% (6.00)%++
- ---------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $225,832 $231,148 $212,294 $126,171
- ---------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(5) 2.08%+ 2.11% 2.11% 2.13%+
Net investment income (loss) (1.17)+ (0.95) (0.58) 0.34+
- ---------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 15% 35% 46% 42%
- ---------------------------------------------------------------------------------------------------------------------
Average commissions per share
paid on equity transactions(6) $0.03 $0.03 $0.02 $0.01
=====================================================================================================================
</TABLE>
(1) For the six months ended April 30, 1998 (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) 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.
- --------------------------------------------------------------------------------
44 1998 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 1998(1)(2) 1997(2) 1996(2) 1995(3) 1994(4) 1993(5)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $19.93 $18.38 $16.93 $18.54 $18.58 $12.35
- -----------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss) (0.26) (0.22) (0.13) (0.06)* (0.11) 0.14
Net realized and unrealized gain (loss) 3.23 1.77 1.62 (1.45) 0.07 6.25
- -----------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 2.97 1.55 1.49 (1.51) (0.04) 6.39
- -----------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income(6) -- -- (0.04) -- -- --
Net realized gains -- -- -- (0.10) -- (0.16)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions -- -- (0.04) (0.10) -- (0.16)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $22.90 $19.93 $18.38 $16.93 $18.54 $18.58
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return 14.90%++ 8.43% 8.85% (8.11)% (0.22)%++ 51.73%++
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $187,535 $200,849 $229,514 $240,090 $287,458 $114,951
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(7) 2.09%+ 2.12% 2.15% 2.16% 2.10%+ 2.14%+
Net investment loss (1.17)+ (0.97) (0.63) (0.34) (0.77)+ (1.08)+
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 15% 35% 46% 42% 35% 27%
- -----------------------------------------------------------------------------------------------------------------------------------
Average commissions per share
paid on equity transactions(8)(9) $0.03 $0.03 $0.02 $0.01 -- --
===================================================================================================================================
</TABLE>
(1) For the six months ended April 30, 1998 (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 2.09% and 2.08%, respectively; numbers prior to October 31,
1995 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. 45
<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 1998(1)(2) 1997(2) 1996(2) 1995(3) 1994(4)
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $20.38 $18.64 $17.13 $18.80 $17.64
- -----------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.02 0.04 0.18 0.10* 0.01
Net realized and unrealized gain (loss) 3.15 1.76 1.54 (1.50) 1.15
- -----------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 3.17 1.80 1.72 (1.40) 1.16
- -----------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income(5) (0.06) (0.06) (0.21) (0.17) --
Net realized gains -- -- -- (0.10) --
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.06) (0.06) (0.21) (0.27) --
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $23.49 $20.38 $18.64 $17.13 $18.80
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return 15.61%++ 9.68% 10.19% (7.11)% 6.58%++
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $368,443 $301,852 $200,427 $97,132 $48,765
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(6) 0.94%+ 0.94% 0.96% 1.06% 1.09%+
Net investment income 0.05+ 0.23 0.56 0.91 0.29+
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 15% 35% 46% 42% 35%
- -----------------------------------------------------------------------------------------------------------------------------------
Average commissions per share
paid on equity transactions(7)(8) $0.03 $0.03 $0.02 $0.01 --
===================================================================================================================================
</TABLE>
(1) For the six months ended April 30, 1998 (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 include 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; numbers prior to October 31,
1995 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.
- --------------------------------------------------------------------------------
46 1998 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 1998(1)(2) 1997(2) 1996(2) 1995(3)
===============================================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $20.36 $18.62 $17.12 $18.38
- -------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss) (0.01) 0.05 0.14 0.13*
Net realized and unrealized gain (loss) 3.18 1.75 1.57 (1.12)
- -------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 3.17 1.80 1.71 (0.99)
- -------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income(4) (0.06) (0.06) (0.21) (0.17)
Net realized gains -- -- -- (0.10)
- -------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.06) (0.06) (0.21) (0.27)
- -------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $23.47 $20.36 $18.62 $17.12
- -------------------------------------------------------------------------------------------------------------------------------
Total Return 15.62%++ 9.69% 10.13% (5.03)%++
- -------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $143,471 $131,709 $119,408 $94,387
- -------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(5) 0.99%+ 0.94% 0.97% 1.10%+
Net investment income 0.01+ 0.22 0.55 1.06+
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 15% 35% 46% 42%
- -------------------------------------------------------------------------------------------------------------------------------
Average commissions per share
paid on equity transactions(6) $0.03 $0.03 $0.02 $0.01
===============================================================================================================================
</TABLE>
(1) For the six months ended April 30, 1998 (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 include 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.
(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 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. 47
<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 1998(1)(2) 1997(2) 1996(2) 1995 1994(3)
==============================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $13.32 $13.90 $12.64 $12.20 $12.00
- ------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(4) 0.06 0.18 0.26 0.35 0.07
Net realized and unrealized gain (loss) 0.47 (0.41) 1.35 0.48 0.13
- ------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.53 (0.23) 1.61 0.83 0.20
- ------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.07) (0.15) (0.35) (0.39) --
Capital -- (0.20) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.07) (0.35) (0.35) (0.39) --
- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $13.78 $13.32 $13.90 $12.64 $12.20
- ------------------------------------------------------------------------------------------------------------------------------
Total Return 3.98%++ (1.71)% 12.89% 7.05% 1.67%++
- ------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $9,830 $11,072 $16,116 $17,667 $20,634
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(4) 1.67%+ 1.71% 1.81% 1.62% 1.34%+
Net investment income 0.93+ 1.32 1.94 2.89 1.37+
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 73% 197% 189% 42% 6%
- ------------------------------------------------------------------------------------------------------------------------------
Average commissions per share
paid on equity transactions(5)(6) $0.02 $0.03 $0.03 $0.02 --
==============================================================================================================================
</TABLE>
(1) For the period ended April 30, 1998 (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; numbers
prior to October 31, 1995 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.
- --------------------------------------------------------------------------------
48 1998 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 1998(1)(2) 1997(2) 1996(2) 1995(3)
======================================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $13.38 $13.90 $12.65 $12.08
- ----------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(4) 0.02 0.07 0.15 0.36
Net realized and unrealized gain (loss) 0.47 (0.41) 1.36 0.50
- ----------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.49 (0.34) 1.51 0.86
- ----------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.03) (0.08) (0.26) (0.29)
Capital -- (0.10) -- --
- ----------------------------------------------------------------------------------------------------------------------
Total Distributions (0.03) (0.18) (0.26) (0.29)
- ----------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $13.84 $13.38 $13.90 $12.65
- ----------------------------------------------------------------------------------------------------------------------
Total Return 3.63%++ (2.45)% 12.05% 7.33%++
- ----------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $4,054 $4,813 $5,258 $3,064
- ----------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(4) 2.33%+ 2.48% 2.62% 2.49%+
Net investment income 0.25+ 0.53 1.14 3.11+
- ----------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 73% 197% 189% 42%
- ----------------------------------------------------------------------------------------------------------------------
Average commissions per share
paid on equity transactions(5) $0.02 $0.03 $0.03 $0.02
======================================================================================================================
</TABLE>
(1) For the six months ended April 30, 1998 (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; numbers prior to October 31, 1995 have not been
restated to reflect these credits.
(5) 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. 49
<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 1998(1)(2) 1997(2) 1996(2) 1995(3) 1994(4)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $13.35 $13.87 $12.63 $12.18 $12.00
- ------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(5) 0.01 0.08 0.15 0.28 0.05
Net realized and unrealized gain (loss) 0.47 (0.42) 1.35 0.46 0.13
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.48 (0.34) 1.50 0.74 0.18
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.02) (0.08) (0.26) (0.29) --
Capital -- (0.10) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.02) (0.18) (0.26) (0.29) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $13.81 $13.35 $13.87 $12.63 $12.18
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return 3.63%++ (2.46)% 11.99% 6.29% 1.50%++
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $3,204 $3,642 $4,869 $4,317 $4,310
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(5) 2.43%+ 2.51% 2.62% 2.37% 2.03%+
Net investment income 0.18+ 0.60 1.14 2.33 0.79+
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 73% 197% 189% 42% 6%
- ------------------------------------------------------------------------------------------------------------------------------------
Average commissions per share
paid on equity transactions(6)(7) $0.02 $0.03 $0.03 $0.02 --
====================================================================================================================================
</TABLE>
(1) For the six months ended April 30, 1998 (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%; numbers prior to
October 31, 1995 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.
- --------------------------------------------------------------------------------
50 1998 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 1998(1)(2) 1997(2) 1996(2)(3)
=================================================================================================================
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $13.35 $13.93 $13.15
- -----------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.05 0.25 0.32
Net realized and unrealized gain (loss) 0.52 (0.42) 0.75
- -----------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.57 (0.17) 1.07
- -----------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.06) (0.18) (0.29)
Capital -- (0.23) --
- -----------------------------------------------------------------------------------------------------------------
Total Distributions (0.06) (0.41) (0.29)
- -----------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $13.86 $13.35 $13.93
- -----------------------------------------------------------------------------------------------------------------
Total Return 4.29%++ (1.28)% 8.21%++
- -----------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $24,966 $42,380 $19,387
- -----------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(4) 1.13%+ 1.24% 1.21%+
Net investment income 1.49+ 1.83 2.55+
- -----------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 73% 197% 189%
- -----------------------------------------------------------------------------------------------------------------
Average commissions per share
paid on equity transactions(5) $0.02 $0.03 $0.03
=================================================================================================================
</TABLE>
(1) For the six months ended April 30, 1998 (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).
(5) 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. 51
<PAGE>
================================================================================
Additional Shareholder Information (unaudited)
================================================================================
On March 30 and April 24, 1998, a special meeting of shareholders of the Fund
was held for the purpose of voting on the following matters:
1. To elect Directors of the Fund (All Portfolios);
2. To approve or disapprove the reclassification, modification and/or
elimination of certain fundamental investment policies (All
Portfolios);
3. To amend the terms of the Plan of Distribution Adopted Pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (All Portfolios,
Class A Shareholders only);
4. To approve a Subadvisory Agreement with Smith Barney Global Capital
Management, Inc. (International Balanced Portfolio Only); and
5. To transact such other business as may properly come before the
meeting or any adjournment thereof (All Portfolios). The results of
the vote on Proposal 1 were as follows:
<TABLE>
<CAPTION>
Shares Voted Percentage of Shares Voted Percentage of
Name of Directors For Shares Voted Against Shares Voted
=============================================================================================================
<S> <C> <C> <C> <C>
Victor K. Atkins 44,935,458.577 97.019% 1,380,909.568 2.981%
Abraham E. Cohen 45,053,565.974 97.274 1,262,802.171 2.726
Robert A. Frankel 44,946,591.915 97.043 1,369,776.230 2.957
Rainer Greeven 45,054,810.233 97.276 1,261,557.912 2.724
Susan M. Heilbron 45,074,392.907 97.318 1,241,975.238 2.682
Heath B. McLendon 45,063,780.606 97.296 1,252,587.539 2.704
Bruce D. Sargent 45,081,558.705 97.334 1,234,809.440 2.666
James M. Shuart 45,020,018.401 97.201 1,296,349.744 2.799
=============================================================================================================
</TABLE>
Proposal 2 requested that shareholders approve certain changes to the
fundamental policies of the Fund in order to modernize them in view of certain
regulatory, business or industry developments that have occurred since original
adoption of these policies by the Fund. The following chart demonstrates that
all proposals were approved by shareholders.
Please note that "M" indicates a modification of the policy; "E" indicates the
elimination of the policy; and "R" indicates the reclassification of the policy
from fundamental (which would require shareholder approval to change) to
non-fundamental (which can be changed by a vote of the Board of Directors).
<TABLE>
<CAPTION>
Global International International
Government Bond Equity Balanced
Portfolio Portfolio Portfolio
================================================================================================
<S> <C> <C> <C> <C>
"M" Diversification N/A Approved Approved
- ------------------------------------------------------------------------------------------------
"M" Senior Securities N/A Approved Approved
- ------------------------------------------------------------------------------------------------
"M" Industry Concentration Approved Approved Approved
- ------------------------------------------------------------------------------------------------
"M" Borrowing Approved Approved Approved
- ------------------------------------------------------------------------------------------------
"E" Ability to Pledge Assets Approved Approved Approved
- ------------------------------------------------------------------------------------------------
"M" Lending Approved Approved Approved
- ------------------------------------------------------------------------------------------------
"M" Underwriting of Securities Approved Approved Approved
- ------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
52 1998 Semi Annual Report to Shareholders
<PAGE>
================================================================================
Additional Shareholder Information (unaudited) (continued)
================================================================================
<TABLE>
<CAPTION>
Global
Government International International
Bond Equity Balanced
Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C> <C>
"R" Margin and Short-Sales Approved Approved Approved
- ------------------------------------------------------------------------------------------------------------------------------------
"M" Real Estate Approved Approved Approved
- ------------------------------------------------------------------------------------------------------------------------------------
"R" Restricted and Illiquid Securities Approved Approved Approved
- ------------------------------------------------------------------------------------------------------------------------------------
"R" Unseasoned Issues N/A Approved Approved
- ------------------------------------------------------------------------------------------------------------------------------------
"E" 5% Ownership of Certain Securities N/A Approved Approved
- ------------------------------------------------------------------------------------------------------------------------------------
"R" Purchases of Securities of Other Investment Companies Approved Approved Approved
- ------------------------------------------------------------------------------------------------------------------------------------
"R" Exercising Control or Management Approved Approved Approved
- ------------------------------------------------------------------------------------------------------------------------------------
"R" Investments in Oil, Gas and Mineral Exploration N/A Approved Approved
- ------------------------------------------------------------------------------------------------------------------------------------
"R" Puts, Calls and Combinations Thereof Approved N/A N/A
====================================================================================================================================
N/A - Not Applicable
</TABLE>
The information below reports the lowest percentage of shares voting for the
proposals and the highest percentage of shares voting against and abstaining by
shareholders of the Fund on all of the items in Proposal 2.
<TABLE>
<CAPTION>
Global Government Bond Portfolio
Percentage Percentage Percentage
Shares Voted of Shares Shares Voted of Shares Shares of Shares
For Voted Against Voted Abstaining Abstained
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
6,004,894.389 88.468% 162,450.948 2.394% 620,277.010 9.138%
====================================================================================================================================
<CAPTION>
International Equity Portfolio
Percentage Percentage Percentage
Shares Voted of Shares Shares Voted of Shares Shares of Shares
For Voted Against Voted Abstaining Abstained
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
29,378,013.705 91.673% 618,387.449 1.929% 2,050,224.780 6.398%
====================================================================================================================================
<CAPTION>
International Balanced Portfolio
Percentage Percentage Percentage
Shares Voted of Shares Shares Voted of Shares Shares of Shares
For Voted Against Voted Abstaining Abstained
====================================================================================================================================
<C> <C> <C> <C> <C> <C>
3,938,765.670 89.036% 77,528.054 1.753% 407,490.289 9.211%
====================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 53
<PAGE>
================================================================================
Additional Shareholder Information (unaudited) (continued)
================================================================================
The results of the vote on Proposal 3 were as follows:
<TABLE>
<CAPTION>
Global Government Bond Portfolio
Percentage Percentage Percentage
Shares Voted of Shares Shares Voted of Shares Shares of Shares
For Voted Against Voted Abstaining Abstained
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
3,412,757.372 84.925% 123,738.817 3.079% 482,069.436 11.996%
====================================================================================================================================
<CAPTION>
International Equity Portfolio
Percentage Percentage Percentage
Shares Voted of Shares Shares Voted of Shares Shares of Shares
For Voted Against Voted Abstaining Abstained
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
8,921,717.591 87.287% 265,038.967 2.593% 1,034,415.949 10.120%
====================================================================================================================================
<CAPTION>
International Balanced Portfolio
Percentage Percentage Percentage
Shares Voted of Shares Shares Voted of Shares Shares of Shares
For Voted Against Voted Abstaining Abstained
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
369,242.663 91.430% 2,910.734 0.721% 31,698.033 7.849%
====================================================================================================================================
<CAPTION>
The results of the vote on Proposal 4 were as follows:
International Balanced Portfolio
Percentage Percentage Percentage
Shares Voted of Shares Shares Voted of Shares Shares of Shares
For Voted Against Voted Abstaining Abstained
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
4,071,269.815 91.847% 23,708.438 0.535% 337,688.760 7.618%
====================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
54 1998 Semi-Annual Report to Shareholders
<PAGE>
[This page intentionally left blank]
<PAGE>
[This page intentionally left blank]
<PAGE>
Smith Barney Investment Manager and Administrator
World Funds, Inc. Mutual Management Corp.
Directors Distributor
Smith Barney Inc.
Victor Atkins
Robert A. Frankel Custodian
Rainer Greeven Chase Manhattan Bank
Susan M. Heilbron
Heath B. McLendon, Chairman Shareholder Servicing Agent
Bruce D. Sargent First Data Investor Services Group, Inc.
James M. Shuart P.O. Box 9134
Boston, MA 02205-9134
Officers
Maurits E. Edersheim
Chairman of the Fund This report is submitted for the general
& Advisory Director information of shareholders of Smith
Barney World Fund, Inc. -- Global
Heath B. McLendon Government, International Equity and
President and International Balanced Portfolios. It is
Chief Executive Officer not authorized for distribution to
prospective investors unless accompanied
Lewis E. Daidone or preceded by an effective Prospectus
Senior Vice President for the Fund, which contains information
and Treasurer concerning the Fund's investment
policies and expenses as well as other
James B. Conheady pertinent information.
Vice President
Victor S. Filatov SMITH BARNEY
Vice President -----------
Simon R. Hildreth A Member of TravelersGroup[LOGO]
Vice President
Denis P. Mangan Smith Barney
Vice President World Funds, Inc.
Smith Barney Mutual Funds
Jeffrey J. Russell 388 Greenwich Street
Vice President New York, New York 10013
Bruce D. Sargent www.smithbarney.com
Vice President
fd01489 6/98
Irving P. David
Controller
Christina T. Sydor
Secretary
<PAGE>
[GRAPHIC]
Smith Barney
World Funds, Inc.
Emerging Markets Portfolio
European Portfolio
Pacific Portfolio
-------------------------------------------------------
SEMI-ANNUAL REPORT
-------------------------------------------------------
April 30, 1998
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.(SM)
<PAGE>
Smith Barney
World Funds, Inc.
================================================================================
"For many years, U.S. investors had little reason to look beyond their shores.
Over time, the U.S. market has rewarded patient investors with handsome returns.
However, as the world becomes a truly global and interdependent market, it has
become more important than ever for investors to remain globally diversified."
Heath B. McLendon
Chairman
================================================================================
The Emerging Markets Portfolio seeks long-term capital appreciation of its
assets through a portfolio invested primarily in securities of emerging country
issuers. The Portfolio follows an investment strategy involving broad geographic
diversification.
NASDAQ SYMBOL
-------------
Class A SMMAX
Class B SEMBX
The European Portfolio seeks long-term capital appreciation by investing
primarily in equity of issuers based in countries of Europe.
NASDAQ SYMBOL
-------------
Class A SBEAX
Class B SBEBX
The Pacific Portfolio's primary investment objective 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,
Papau-New Guinea, the People's Republic of China, the Philippines, Singapore,
South Korea, Sri Lanka, Taiwan and Thailand.
================================================================================
WHAT'S INSIDE
================================================================================
<TABLE>
<CAPTION>
<S> <C>
A Message from the Chairman................................................ 1
Emerging Markets Portfolio
Portfolio Manager Commentary ........................................... 3
Historical Performance ................................................. 6
Portfolio at a Glance .................................................. 8
European Portfolio
Portfolio Manager Commentary ........................................... 9
Historical Performance ................................................. 11
Portfolio at a Glance .................................................. 13
Pacific Portfolio
Portfolio Managers Commentary .......................................... 14
Historical Performance ................................................. 17
Portfolio at a Glance .................................................. 19
Schedules of Investments................................................... 20
Statements of Assets and Liabilities....................................... 27
Statements of Operations................................................... 28
Statements of Changes in Net Assets........................................ 29
Notes to Financial Statements ............................................. 31
Financial Highlights ...................................................... 39
Additional Shareholder Information......................................... 49
</TABLE>
<PAGE>
================================================================================
A Message from the Chairman
================================================================================
[PHOTO]
HEATH B. MCLENDON
Chairman
Dear Shareholder:
We are witnessing unparalleled prosperity in the United States today. As a
nation, we are more affluent than ever before, with much of that wealth created
in the last several decades. We are benefiting from a world that has been
largely at peace since the official end of the Cold War in 1989. We are reaping
the fruits of the restructuring of American businesses that took place in the
1970s and 1980s and we are benefiting from growth in worldwide demand for our
products.
This unparalleled U.S. prosperity is now being followed closely by Europe.
Companies there are undergoing restructuring similar to those in the U.S. of the
last two decades. More and more, the inefficiencies of state-controlled
institutions in Europe are being replaced with the expansion of a free and more
competitive marketplace. As we approach the dawn of a new millenium, these
positive developments have enabled both the U.S. and most of Europe to
experience the greatest period of peace and prosperity in generations.
The rapid rise of global markets in recent years has been helped in no small
measure by sophisticated monetary policy. In the U.S., policy-making bodies,
such as the Federal Reserve Board, coupled with technology-led productivity
gains, have controlled inflation to the extent that it is not a significant
factor in the U.S. economy today. This is also becoming true in Europe, where
the move to a common currency has forced both fiscal and monetary policies to
accomplish the same objective of bringing inflation and interest rates down
significantly in countries such as Italy and Spain. And as interest rates have
come down, investment funds have flowed into stock markets, which in turn have
helped propel dramatic gains in the U.S. and European financial markets.
Now, the developing world is taking its cue from the U.S. and Europe. Perhaps
the most meaningful example is Latin America, where after a very rocky period in
the last decade, monetary and fiscal policy reforms have stabilized its
economies and established a base for solid and sustainable future growth. For
example, Brazil, historically plagued by hyperinflation that reached as high as
2,500% per year, has now brought inflation down to manageable levels and plays a
larger role on the world stage today than ever before. Even lesser developed
countries in Eastern Europe and Africa are clearly demonstrating the positive
aspects of more freedom and greater competition.
The one area that is currently not enjoying growth and prosperity are parts of
Asia, particularly Japan, Southeast Asia and South Korea, where extraordinary
economic growth and expansion during the last several decades resulted in
overheated and overly extended financial conditions that are currently in the
painful process of readjustment.
For many years, U.S. investors had little reason to look beyond their own
shores. Over time, the U.S. market has rewarded patient investors with handsome
returns. However, as the world becomes a truly global and interdependent market,
it has become more important than ever for investors to remain globally
diversified. Despite the historic and outsized returns of the U.S. stock market
in recent years, the U.S. has yet to be the top-performing market in any one
year over the last two decades. We continue to believe that maintaining a
well-diversified portfolio with some international exposure is an essential key
to investing success.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 1
<PAGE>
In this report, you will find specific market commentary and performance
information for the Smith Barney World Funds, Inc. -- Emerging Markets
Portfolio, European Portfolio and Pacific Portfolio beginning on page three.
In closing, we thank you for your confidence in our investment approach and our
family of international funds. We look forward to continuing to help you take
advantage of the investment opportunities available in today's global economy.
Sincerely,
/s/ Heath B. McLendon
Heath B. McLendon
Chairman
May 14, 1998
- --------------------------------------------------------------------------------
2 1998 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Emerging Markets Portfolio
================================================================================
Portfolio Manager
[PHOTO]
DONALD ELEFSON
Vice President
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, 1998, the Emerging Markets Portfolio
("Portfolio") returned -2.89% for Class A shares before the deduction of any
sales charges. In comparison, the Portfolio's benchmark, the Morgan Stanley
Capital International ("MSCI") Emerging Markets Free Index, returned 2.66% for
the same period. For performance information on the Portfolio's other classes,
please refer to page six.
Emerging Markets Overview
In October 1997, expectations were very low for emerging markets, due to the
prolonged nature of the Asian crisis. The International Monetary Fund ("IMF"),
the usual medic for ailing economies, not only had enormous tasks in front of it
(i.e., Thailand, Indonesia, and South Korea), it was also coming under political
pressure. In spite of this, programs were implemented and, as more details
became known, markets started to stabilize. Now, due to the magnitude of the
situation in Asia, many investors believe IMF programs are not enough and are no
longer a major positive force for struggling emerging markets.
Coinciding with economic deterioration in Asia (which spread to other emerging
regions like Eastern Europe and Latin America) the U.S. and European stock
markets delivered excellent performance. Prior to 1998, U.S. stock market
strength and resiliency kept money from finding a home in emerging markets. Now,
emerging markets must compete with European market resurgence. Competition from
other markets and continuation of the Asian crisis has caused asset levels in
funds that invest in emerging markets to shrink drastically in recent months.
Asia
While Asia suffered badly in the final months of 1997, it recovered strongly in
the first months of 1998. It seemed countries like Thailand and South Korea were
finally coming to grips with their problems. Thailand closed down weak finance
companies and South Korea was preparing for a multi-billion dollar international
bond issue. It seemed the Asian crisis was going to be of a shorter duration
than was experienced in Latin America in 1994 and 1995.
However, euphoria was short-lived, as deeper problems came to the surface. Due
to the rapid restructuring in China, its economy was expected to slow which
heightened fears of another round of currency devaluations. At the same time,
the extent of the banking crisis in Malaysia came to light. When the stock
market fell, collateral levels also fell, taking loan values with them, creating
a vicious cycle that in turn drove Malaysian financial markets down even
further.
Similarly, South Korea first raised investor hopes with its March 1998 bond
offering and then fell from grace as the true extent of bankruptcies started to
be known. The industrial infrastructure was built on heavily indebted companies
that, due to slow economic growth, were unable to service their debt.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 3
<PAGE>
While most of Asia remains mired in financial turmoil, Taiwan has so far been
the most resilient country in the region. Its currency devalued along with the
rest of the region, but not nearly as much. Taiwan has a very strong local
economy and stock market, where local investors account for approximately 50% to
60% of stock market trading volumes. Inflation in the Taiwanese economy has been
under control for some time and is now actually declining. Moreover, we think a
positive economic environment should allow Taiwan's central bank to lower
interest rates in the next twelve months. Companies added to the Portfolio
during the reporting period are China Trust, a quality Taiwanese bank that
should benefit from lower interest rates, and Fubon Insurance, the leading
insurance company in Taiwan. We believe that both of these companies have strong
franchises and should see strong future earnings growth as interest rates
decline.
Latin America
Brazil continued to be the focus of investor attention at the end of 1997 and
the beginning of 1998. A strong monetary policy, low inflation and fiscal reform
have been the underpinnings of Brazil's economic recovery. It is this dependence
on monetary policy that forced the Brazilian central bank to almost double
interest rates in the wake of the Asian crisis. In order to add more control to
inflation, President Cardoso is pursuing reform of the welfare, subsidy and
pension system. Progress on the necessary reforms is gaining speed and we
believe they will take place in 1998. An important part of fiscal recovery is
the privatization program, mainly of electrical utilities and telecommunication
companies. In our view, this privatization should lead to more efficient
operating structures and enhanced earnings. The Portfolio continues to hold
electrical utilities and telecommunication stocks in Brazil. Since the last
reporting, we maintained our Brazilian positions and our exposure to this
country increased from roughly 12% to nearly 18% of assets.
Since its surprisingly fast progress toward economic recovery, Mexico has become
an emerging market success story. However, we decreased our exposure in Mexico
from approximately 16% to roughly 12% of assets during the reporting period. In
general, we sold stocks we believed to be in danger of not meeting first quarter
earnings estimates. For example, we sold Coca-Cola Femsa and Industrias Bachoco,
a chicken processor, when first quarter earnings estimates seemed too
optimistic. Exposure to the improving economy was maintained through Grupo
Televisa, Mexico's leading television and media company, and Grupo Banamex, a
leading Mexican bank. While Mexico appears to be on the road to recovery in
1998, we believe that careful stock selection in that country will be crucial to
good investment performance going forward.
Europe/Africa
The most recent country added to the portfolio was South Africa. In our opinion,
South Africa has long been overlooked by emerging market investors, in spite of
the fact that it is one of the largest country exposures in the MSCI Index
(approximately 12%). In the transition to new government, the economy has been
hamstrung by high interest rates. However, due to strong oversight from South
Africa's central bank, interest rates seem poised to go down. At the same time,
the largest insurance companies are expected to be demutualized, which means
large amounts of money will be transferred to consumers. In order to benefit
from these trends, the Portfolio has invested in two South African financial
companies: Liberty Life, a life insurer, and Nedcor, a commercial bank. Both
companies have strong market positions and should benefit from increased
liquidity spurred by lower interest rates and demutualization of insurance
companies.
In Central Europe, we continue to believe that Poland has the brightest
prospects in the region. Poland is proving to be very disciplined in the area of
financial management. Its currency has strengthened as confidence in Poland's
abilities to manage the economy grows. In 1998, Poland's policy-makers should
liberalize their markets, making it easier for foreign investors to invest, and
might possibly privatize their telecommunications company, TPSA. Elektrim, a
Polish cable and electrical equipment company, remains the Portfolio's second
largest holding. Not only does the stock present growth opportunities, as Poland
upgrades
- --------------------------------------------------------------------------------
4 1998 Semi-Annual Report to Shareholders
<PAGE>
its infrastructure, but Elektrim also has a large stake in a cellular
telephone operator.
After a strong year in 1997, Russia has faltered from an investment performance
standpoint. In our judgement, key reforms in tax collection must be implemented
to keep the market and economy on a growth path. President Yeltsin recently
reshuffled his entire cabinet and did not receive full-fledged support. Given
political uncertainty at a time when economic reforms are so crucial, and with
elections slated for 1999 and 2000, the outlook for Russia remains uncertain.
While problems exist, the Portfolio continues to hold Russian stocks, because we
believe they offer good value. Two of the largest holdings are in power
generation: Mosenergo, the power utility in Moscow, and Irkutsenergo, the
utility in Irkuts region that is expected to have future opportunities in China.
We expect both should increase earnings by controlling their cash and collection
rates. (Many companies in Russia are unable to collect all the money due them.)
Investment Strategy
During this period of emerging market turmoil, the Portfolio has remained
diversified by country and region. No single market has made up more than 20% of
the Portfolio's assets and 21 countries are currently represented in the
Portfolio. We believe that allocating assets across a wide range of countries
and regions has kept the Portfolio away from too much exposure to trouble spots,
such as the hard-hit countries of Asia.
At the end of October 1997, the Portfolio started building positions in markets
that appeared to be showing fundamentals expected to improve in the next 12
months. We maintained or increased our exposure to Brazil, Mexico, Turkey and
China. Brazil has been pursuing vigorous economic reforms that should keep
inflation low; Mexico seemed poised to experience a resurgence of economic
growth; Turkey, was taking measures to bring inflation down from previous levels
of near 100%; and China laid out a reform plan to rehabilitate its industrial
infrastructure.
We also focused on purchasing undervalued large-capitalization stocks,
especially those of telecommunications companies with strong growth prospects
and that we believed to be attractively priced. Prior to the end of 1997, the
Portfolio had limited exposure to telecommunications. But by the end of April
1998, telecommunications constituted 16% of the Portfolio. During the reporting
period, we added Telefonica Argentina, an Argentine company; CTC, the Chilean
telecommunications provider; VSNL, an Indian long distance provider; Telekom
Malaysia, the leading Malaysian telecommunications company; Telefonica de Peru,
the Peruvian operator; Digitel Telecomm, a niche-oriented Philippine operator;
and Advanced Information Systems, a Thai cellular provider. We believe that
these companies offer solid future growth prospects. They are leaders in their
respective markets, the attractiveness on an enterprise value versus earnings
before interest, tax, dividend and amortization basis and should play an
important role in an emerging market recovery.
Latin America remains the largest regional exposure of the Portfolio at 39%. In
our view, Brazil and Mexico have internal dynamics that should allow them to
stand on their own during 1998. Ongoing reforms, declining inflation and renewed
economic growth in Latin America should provide a good defense against the
further spread of the effects of the Asian contagion.
Outlook
We expect the next six months will continue to be a period of adjustment in the
emerging markets. But in the midst of all this, we will maintain broad
diversification and focus on exposure to stocks that will benefit early from the
turnaround in sentiment towards the emerging markets. As it is impossible to
time this point precisely, we continue to be fully invested.
Thank you for your investment in the Smith Barney World Funds, Inc. -- Emerging
Markets Portfolio.
/s/ Donald Elefson
Donald Elefson
Vice President
May 25, 1998
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 5
<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>
4/30/98 $12.45 $12.09 $0.00 (2.89)%+
- --------------------------------------------------------------------------------
10/31/97 12.08 12.45 0.00 3.06
- --------------------------------------------------------------------------------
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>
4/30/98 $12.21 $11.81 $0.00 (3.28)%+
- --------------------------------------------------------------------------------
10/31/97 11.95 12.21 0.00 2.18
- --------------------------------------------------------------------------------
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
---------------------
Beginning End Income Total
Period Ended of Period of Period Dividends Returns(1)
================================================================================
<S> <C> <C> <C> <C>
4/30/98 $12.22 $11.82 $0.00 (3.27)%+
- --------------------------------------------------------------------------------
10/31/97 11.95 12.22 0.00 2.26
- --------------------------------------------------------------------------------
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 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>
Inception*-- 4/30/98 $12.16 $12.10 $0.00 (0.49)%+
================================================================================
</TABLE>
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
- --------------------------------------------------------------------------------
6 1998 Semi-Annual Report to Shareholders
<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 4/30/98+ (2.89)% (3.28)% (3.27)% --
- --------------------------------------------------------------------------------
Year Ended 4/30/98 (15.16) (15.82) (15.81) --
- --------------------------------------------------------------------------------
Inception* through 4/30/98 0.25 (0.54) (0.51) (0.49)%+
================================================================================
<CAPTION>
Without Sales Charge(1)
-----------------------------------------
Class A Class B Class C Class Y
================================================================================
<S> <C> <C> <C> <C>
Six Months Ended 4/30/98+ (7.78)% (8.11)% (4.24)% --
- --------------------------------------------------------------------------------
Year Ended 4/30/98 (19.40) (20.03) (16.65) --
- --------------------------------------------------------------------------------
Inception* through 4/30/98 (1.46) (1.55) (0.51) (0.49)%+
================================================================================
</TABLE>
================================================================================
Cumulative Total Return
================================================================================
<TABLE>
<CAPTION>
Without Sales Charge(1)
================================================================================
<S> <C>
Class A (Inception* through 4/30/98) 0.75%
- --------------------------------------------------------------------------------
Class B (Inception* through 4/30/98) (1.58)
- --------------------------------------------------------------------------------
Class C (Inception* through 4/30/98) (1.50)
- --------------------------------------------------------------------------------
Class Y (Inception* through 4/30/98) (0.49)+
================================================================================
</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 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.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
* The inception date for Class A, B and C shares is May 12, 1995 and the
inception date for Class Y shares is March 10, 1998.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 7
<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 and MSCI Emerging Markets Free Index+
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
May 1995--April 1998
Emerging Markets Emerging Markets Emerging Markets
Portfolio -- Portfolio -- Portfolio -- MSCI Free World MSCI Emerging Markets
Class A Shares Class B Shares Class C Shares Market Index++ Free Index++
-------------- -------------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
May 12, 1995 $ 9,501 $10,000 $10,000 $10,000 $10,000
Oct 1995 $ 8,757 $ 8,724 $ 9,092 $10,497 $ 9,453
Apr 1996 $ 9,850 $ 9,800 $10,167 $11,928 $10,600
Oct 1996 $ 9,565 $ 9,560 $ 9,958 $12,264 $ 9,861
Apr 1997 $11,283 $11,292 $11,700 $13,146 $10,837
Oct 31, 1997 $10,375 $10,175 $10,183 $14,098 $ 8,844
Apr 1998 $ 9,572 $ 9,546 $ 9,850 $16,645 $ 9,079
</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 (which decreases by 1.00% each year)
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, 1998. 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 MSCI Emerging Markets Free Index
consists of emerging market companies with an average size of $800 million,
the index measures performance of emerging markets in South America, South
Africa, Asia and Eastern Europe. Each index is unmanaged and is not subject
to the same management and trading expenses as a mutual fund.
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.
++ It is the opinion of management that the MSCI Emerging Markets Free Index
is a more appropriate broad-based benchmark for the market in which the
Emerging Markets Portfolio invests than the MSCI Free World Market Index.
In future reporting, the MSCI Emerging Markets Free Index will be used as a
basis of comparison of total return performance rather than the MSCI Free
World Market Index.
<TABLE>
<CAPTION>
Top Ten Holdings* As of April 30, 1998
- --------------------------------------------------------------------------------
<S> <C>
1. Telecomunicacoes Brasileiras SA ADR 3.1%
- --------------------------------------------------------------------------------
2. Elektrim Spolka Akcyjna SA 2.7
- --------------------------------------------------------------------------------
3. Liberty Life Association of Africa Ltd. 2.5
- --------------------------------------------------------------------------------
4. Grupo Televisa SA GDR 2.4
- --------------------------------------------------------------------------------
5. Cia de Eletricidade do Estado do Rio de Janeiro 2.4
- --------------------------------------------------------------------------------
6. Telefonica de Argentina SA ADR 2.4
- --------------------------------------------------------------------------------
7. Metro Cash and Carry Ltd. 2.3
- --------------------------------------------------------------------------------
8. Nedcor Ltd. 2.3
- --------------------------------------------------------------------------------
9. Asia Pulp & Paper Co. Ltd. ADR 2.2
- --------------------------------------------------------------------------------
10. Grupo Financiero Banamex Accival SA de CV
(Banacci), Class B Shares 2.2
- --------------------------------------------------------------------------------
</TABLE>
* As a percentage of total investments.
[THE FOLLOWING TABLE WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
Investment Allocation as of April 30, 1998*
- --------------------------------------------------------------------------------
<S> <C>
Europe 9.2%
Africa 8.8%
Asia\Pacific 40.2%
Latin America 41.8%
</TABLE>
* As a percentage of total investments.
- --------------------------------------------------------------------------------
8 1998 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
European Portfolio
================================================================================
Portfolio Manager
[PHOTO]
REIN W. VAN DER DOES
Vice President
Rein W. van der Does began his career with Drexel Burnham Lambert in 1968 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 ("Portfolio") posted a total return of 23.86% for Class A
shares, before the deduction of any sales charges, for the six months ended
April 30, 1998. In comparison, the Portfolio's benchmark, the Morgan Stanley
Capital International ("MSCI") European Market Index, had a total return of
29.26%. For performance information on the Portfolio's other classes, please
refer to page 11.
We are pleased to announce that your Portfolio was awarded a four-star rating
from Morningstar, Inc.* overall and for the three-year period ended March 31,
1998 for Class A, B and C shares. Past performance is not a guarantee of future
results.
During the reporting period, investors in European stock markets continued to
favor larger, better-known companies over mid-sized companies like the ones
emphasized in the Portfolio. In 1997, investor preference for big company shares
penalized the Portfolio's performance somewhat. However, we believe that there
is growing evidence that the performance of European stock markets is beginning
to broaden and this has helped boost the Portfolio's performance. In fact, in
the first four months of 1998, the Portfolio appreciated roughly 29%.
European Markets Update
European stock markets have soared in the past six months, fueled by heavy
corporate restructuring and the ongoing drive toward economic and monetary
unification. In particular, the smaller economies of Southern Europe posted
blistering market returns. The stock markets of Portugal, Italy and Spain all
returned more than 40% in the first quarter of this year.
The European Union ("EU"), with its aim of integrating the major European
economies and their currencies, took center stage in nearly all political and
economic discussions during the reporting period. On March 25, 1998, the
European Commission and European Monetary Institute (the forerunner of a
pan-European central bank) announced eleven countries that will be included in
the first round of membership in the EU, which will commence on January 1, 1999.
Those countries are: Germany, France, the Netherlands, Belgium, Luxembourg,
Austria, Finland, Ireland, Italy, Spain and Portugal. Other countries, most
notably the United Kingdom, have qualified for membership, but have declined to
participate in the first round of EU membership.
One of the chief criteria of membership in the EU is maintaining a budget
deficit of roughly 3% of the prospective country's Gross Domestic Product
- ----------
* Morningstar, Inc. proprietary ratings reflect historical risk-adjusted
performance through March 31, 1998. The ratings are subject to change every
month. Morningstar, Inc. ratings are calculated from the Portfolio's
three-year returns (including the effects of all fees and sales charges) in
excess of 90-day T-bill returns and a risk factor that reflects fund
performance below 90-day T-bill returns. Different classes within a fund
share a common portfolio of securities. The top-performing ten percent of
the funds in a rating category receive five stars; the next 22.5% of the
funds receive four stars; the middle 35% receive three stars; the next
22.5% receive two stars; and the bottom 10% receive one star. The Portfolio
was rated among 722 international equity funds.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 9
<PAGE>
("GDP"). Just a few years ago, this budget deficit target seemed impossibly out
of reach for many European countries used to carrying budget deficits three to
four times the 3% level. Today, as governments have implemented fiscal reforms,
interest rates have fallen across Europe and, in our opinion, have been largely
responsible for the Europe's recent economic upturn.
Another important development leading to Europe's recent economic successes has
been the rise of a true equity culture. As part of the effort to lower spending,
a number of governments are transforming key industries from state-controlled to
privately held companies. In several countries, government-sponsored pension and
retirement plans are also undergoing privatization. Moreover, many European
companies are increasingly focusing on rewarding their shareholders. Similar to
the U.S. in the 1970s and 1980s, European corporations have been undertaking
mergers and acquisitions at a feverish pace. The total value of completed
acquisitions of public companies in Europe rose nearly 37% in 1997. That trend
seems to be only accelerating. In our view, this process of corporate
restructuring in Europe is just beginning and should help drive profits in the
near future.
Investment Strategy
In selecting investments for the Portfolio, we continue to use a "bottom-up"
approach, evaluating individual companies rather than investment trends. While
economic cycles are important when evaluating a company's outlook, we generally
search for promising European companies with 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 found a number of attractive investment
opportunities. For example, we added to our position in Nokia, the Finnish
cellular phone giant, after uncertainties in Asia cast a pall over the industry.
We believe that Nokia's prospects remain bright. At the close of the reporting
period, Nokia remained the Portfolio's top holding representing 6.4% of the
Portfolio's total stocks held. Other significant additions to the Portfolio
include the Ordina, NV and SEMA, PLC.
European Markets Outlook
In our opinion, investing in Europe should be exciting and rewarding in the next
few years due to:
o The creation of the European Union in January, 1999;
o The creation of a single currency, the Euro;
o The creation of an equity culture through relatively inexpensive
privatization offerings; and
o The discovery by European companies of the concept of "enhancing
shareholder value."
Thank you for your investment in the Smith Barney World Funds, Inc. -- European
Portfolio.
/s/Rein W. van der Does
Rein W. van der Does
Vice President
May 15, 1998
- --------------------------------------------------------------------------------
10 1998 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>
4/30/98 $18.23 $22.07 $0.00 $0.39 23.86%+
- ------------------------------------------------------------------------------------------------------------------------------------
10/31/97 17.25 18.23 0.00 1.16 12.88
- ------------------------------------------------------------------------------------------------------------------------------------
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 $1.59
====================================================================================================================================
</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>
4/30/98 $17.92 $21.60 $0.00 $0.39 23.38%+
- ------------------------------------------------------------------------------------------------------------------------------------
10/31/97 17.09 17.92 0.00 1.16 12.08
- ------------------------------------------------------------------------------------------------------------------------------------
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 $1.59
====================================================================================================================================
</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>
4/30/98 $17.86 $21.55 $0.00 $0.39 23.51%+
- ------------------------------------------------------------------------------------------------------------------------------------
10/31/97 17.04 17.86 0.00 1.16 12.06
- ------------------------------------------------------------------------------------------------------------------------------------
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 $1.59
====================================================================================================================================
</TABLE>
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 11
<PAGE>
================================================================================
Average Annual Total Return
================================================================================
<TABLE>
<CAPTION>
Without Sales Charge(1)
--------------------------------
Class A Class B Class C
================================================================================
<S> <C> <C> <C>
Six Months Ended 4/30/98+ 23.86% 23.38% 23.51%
- --------------------------------------------------------------------------------
Year Ended 4/30/98 29.92 28.99 29.08
- --------------------------------------------------------------------------------
Inception* through 4/30/98 17.07 19.86 16.41
================================================================================
<CAPTION>
Without Sales Charge(1)
--------------------------------
Class A Class B Class C
================================================================================
<S> <C> <C> <C>
Six Months Ended 4/30/98+ 17.67% 18.38% 22.51%
- --------------------------------------------------------------------------------
Year Ended 4/30/98 23.46 23.99 28.08
- --------------------------------------------------------------------------------
Inception* through 4/30/98 15.66 19.49 16.41
================================================================================
</TABLE>
================================================================================
Cumulative Total Return
================================================================================
<TABLE>
<CAPTION>
Without Sales Charge(1)
================================================================================
<S> <C>
Class A (Inception* through 4/30/98) 94.70%
- --------------------------------------------------------------------------------
Class B (Inception* through 4/30/98) 87.81
- --------------------------------------------------------------------------------
Class C (Inception* through 4/30/98) 89.53
================================================================================
</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.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
* Inception dates for Class A, B and C shares are February 7, 1994, November
7, 1994 and February 14, 1994, respectively.
- --------------------------------------------------------------------------------
12 1998 Semi-Annual Report to Shareholders
<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 FOLLOWING TABLE WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
February 1994--April 1998
European MSCI European
Portfolio Market Index
--------- ------------
<S> <C> <C>
Feb 7 1994 $ 9,549 $10,000
Apr 1994 $ 9,481 $ 9,761
Oct 1994 $ 9,840 $10,064
Apr 1995 $10,298 $10,664
Oct 1995 $11,207 $11,393
Apr 1996 $12,550 $12,366
Oct 1996 $13,298 $13,383
Apr 1997 $14,311 $14,959
Oct 31 1997 $15,010 $16,861
Apr 1998 $18,592 $21,795
</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, 1998. 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.
<TABLE>
<CAPTION>
Top Ten Holdings* As of April 30, 1998
- --------------------------------------------------------------------------------
<S> <C>
1. Nokia OYJ, Class A Shares 6.4%
- --------------------------------------------------------------------------------
2. Tomra Systems ASA 6.2
- --------------------------------------------------------------------------------
3. Mannesmann AG 6.1
- --------------------------------------------------------------------------------
4. Fugro NV 5.3
- --------------------------------------------------------------------------------
5. Novartis AG 5.3
- --------------------------------------------------------------------------------
6. CMG PLC 5.1
- --------------------------------------------------------------------------------
7. Samas Groep NV CVA 4.9
- --------------------------------------------------------------------------------
8. Independent Newspapers PLC 4.2
- --------------------------------------------------------------------------------
9. Compass Group PLC 4.0
- --------------------------------------------------------------------------------
10. Hunter Douglas NV 3.9
- --------------------------------------------------------------------------------
</TABLE>
[THE FOLLOWING TABLE WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
Investment Allocation as of April 30, 1998**
- --------------------------------------------------------------------------------
<S> <C>
Norway 5.7%
France 16.7%
Germany 9.7%
Netherlands 21.1%
United Kingdom 10.9%
Finland 5.9%
Spain 5.6%
Cash Equivalents 8.3%
Other 16.1%
</TABLE>
* As a percentage of total stocks.
** As a percentage of total investments.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 13
<PAGE>
================================================================================
Pacific Portfolio
================================================================================
Portfolio Managers
[PHOTO]
SCOTT E. KALB
Vice President
Scott E. Kalb joined the Smith Barney International Equity Team in 1995. He has
11 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. 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 served for two years as economic consultant for the Ministry of
Finance in South 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. 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
S.G. 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, opening and operating Baring's first
West Coast office. He also spent four years at Nomura Securities International
brokering Japanese securities and establishing 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, 1998, the Pacific Portfolio
("Portfolio") Class A shares declined by 9.93%, performing in line with the
benchmark Morgan Stanley Capital International (MSCI) All Country Asia Pacific
Index, which was down by 9.20% for the same period. (The MSCI All Country Asia
Pacific Index, comprising equities in Australia, New Zealand, Japan and the Far
East, is a common benchmark against which the performance of Asian funds is
measured.) During the first quarter of the fiscal year (the period of November
1997 to January 1998), the Portfolio underperformed the benchmark because of its
underweighteded position in Japanese equities. For performance information on
the Portfolio's other classes, please refer to page 17.
So far in the second quarter, the situation has reversed, as Asian markets
(excluding Japan) rebounded sharply, helping the Portfolio to catch up with the
benchmark. We believe the worst of the financial meltdown in Asia is over and
that adjustments currently underway will lead to economic recovery for most
countries over the next 12 to 18 months.
Asian Market Review--The Meltdown is Over and Markets Rally in Relief
Asia Excluding Japan
After suffering a free fall during the second half of 1997, Asian stock prices
continued to slide in January, but finally hit bottom in February and rebounded
sharply. This rebound, while good news for battered Asian investors, was not so
much an indication of bright prospects for Asian economies as it was a
relief-rally that the worst may be over. Positive political and economic
developments continued into March and investors felt comfortable buying oversold
Asian blue chips.
- --------------------------------------------------------------------------------
14 1998 Semi-Annual Report to Shareholders
<PAGE>
Several events triggered this turnaround in market sentiment. First, initiatives
taken by the South Korean and Thai governments in conjunction with the
International Monetary Fund ("IMF") brought hope that necessary structural
reforms would finally begin. The announcement of the South Korean bank deal in
late January was an especially important signal. (The South Korean government
announced that it agreed to guarantee the loans of local banks and issue bonds,
in exchange for foreign commercial banks agreeing to rollover short-term loans
to the banking system). Another important, but less-publicized, factor was
China's decision not to devalue the renmenbi, easing fears of another round of
damaging currency falls in the region. Finally, the lack of runaway inflation
had a stabilizing effect, reducing the need for high interest rates and keeping
currencies at attractive levels in real terms.
Japan
The Japanese stock market was out of sync with the rest of Asia, rising 12% in
U.S. dollar terms during January while regional markets fell. Investors were
hopeful that the thirty trillion yen financial package (about $250-$300 billion)
proposed by the government to provide better support for depositors, shore-up
the banking system and ease capital adequacy controls, would finally get the
Japanese economy back on track. However, government unwillingness to combine
this package with tax cuts, deregulation and financial restructuring, tarnished
the long-term outlook for growth in the Japanese economy and caused investors to
lose confidence. The stock market was flat in February and fell by 7% in March,
just when the rest of Asia was rallying strongly.
Outlook for Second Half--The Crash Is Over, Now Comes the Hard Part....
We believe that the worst of Asia's crisis is probably over, but the pain of
adjustment is only beginning to be felt. Recessions are unfolding across Asia,
with Indonesia (1998 GDP estimated to decline by 10%), Korea and Thailand (-4%
each) hit the hardest by last year's contagion. Malaysia, despite government
efforts, is now expected to fall into recession and the Philippines is
struggling to maintain growth at just above zero. Hong Kong and Singapore will
be hit harder than expected, affected by the sharp slowdown in neighboring
countries, and China will not meet its 8% growth target. Australia and New
Zealand escaped the financial turmoil suffered by regional neighbors, but their
growth prospects will be undermined by slower trade.
The short-term outlook for Japan also is poor, with the economy increasingly
looking like it's headed into recession. Japan's long period of economic
stagnation and recent, ineffective attempts at boosting the economy indicate
that a sustained recovery cannot be achieved without deep structural and,
especially, financial reform. This requires strong political will and the
ability to suffer through painful reforms in order to emerge with a clean,
efficient and reinvigorated economy. The Japanese government has preferred to
maintain the status quo, using low interest rates and other funds to stave off a
meltdown, but this has not solved the country's structural problems. This has
important implications for the rest of Asia. First, a weak Japanese economy and
yen pose a double threat to Asian economies, since Japan is a major export
destination as well as the home of competitors and investors. Second, other
countries would do well to avoid the Japanese model and grasp the thorny nettles
of reform as the best way out of recession. Indeed, they will need to show
progress in real reform in order to attract the capital required for
restructuring.
Portfolio Changes
We expect most countries in Asia to suffer recession or, at best, slow growth in
1998 as policy-makers and corporations struggle through the reform process.
However, we are optimistic that these reform efforts will be successful, and we
look for growth in many countries to resume in 1999-2000. Going forward, we
expect Asian stocks to perform strongly next year.
The key question for Asian investors is how to best position themselves for the
economic adjustment
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 15
<PAGE>
period, which we feel is likely to last 12 months or so, and the recovery that
follows. We have several thoughts on this matter.
First, while we remain skeptical of the Japanese government's efforts to
stimulate the economy, we find the Japanese stock market relatively less
volatile than other markets in the region at this time. Accordingly, we have
increased our exposure to high-quality Japanese companies, raising our weighting
to 50% of the Portfolio from 30% previously. New Japanese companies added during
the period include Aiful and Takefuji, two small-business and consumer lenders,
NTT Data Communication, Japan's major information technology company, and
Terumo, the second largest supplier of medical equipment in the world. In
addition, we increased our weighting in Meitec, Minebea, Murata Noritsu Koki and
Sony. Japan now accounts for seven of our top ten holdings, up from two six
months ago.
Second, we believe that currency devaluations have made Asian products very
competitive in world markets and we expect exporters to thrive in the current
environment. As a result, we have built positions in selected exporters that are
trading at very attractive levels currently and that we expect can grow earnings
over the next few years. These companies include Samsung Display Devices, one of
the largest producers in the world of cathode ray tubes and computer monitors,
Youngone Corp., a South Korean garment manufacturer, Delta Electronics, a Thai
manufacturer of components for laptop and desktop computers, and GSS Array, a
contract manufacturer for electronics, also based in Thailand.
Third, we are optimistic about the prospects for recovery in those countries
where governments are implementing reforms aggressively and working closely with
the IMF, including Thailand and South Korea. At the same time, we are uneasy
with those countries where governments are resisting change and fighting with
the IMF, including Indonesia and Malaysia. Not surprisingly, our weightings in
South Korea and Thailand have increased to 5% and 10%, respectively, while we
have deleted Indonesia from the Portfolio and reduced Malaysia to a 2%
weighting.
Fourth, the Pacific Basin is home to many world-class blue chip companies that
will survive the crisis and likely will emerge stronger as a result. However, it
is unrealistic to expect much in the way of performance from these companies
during 1998, as higher costs and slower economic growth will cause short-term
problems. We believe such companies will benefit in the long run, as they buy
and consolidate weaker competitors, and that their shares should be accumulated
gradually. In the meantime, we have trimmed back holdings in both Hong Kong and
Singapore blue chips.
Thank you for your investment in the Smith Barney World Funds, Inc. -- Pacific
Portfolio.
/s/ Scott E. Kalb /s/ David Ishibashi
Scott E. Kalb David Ishibashi
Vice President Vice President
May 11, 1998
- --------------------------------------------------------------------------------
16 1998 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>
4/30/98 $ 8.46 $ 7.62 $0.00 (9.93)%+
- --------------------------------------------------------------------------------
10/31/97 10.18 8.46 0.00 (16.90)
- --------------------------------------------------------------------------------
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>
4/30/98 $ 8.25 $ 7.40 $0.00 (10.30)%+
- --------------------------------------------------------------------------------
10/31/97 10.01 8.25 0.00 (17.58)
- --------------------------------------------------------------------------------
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>
4/30/98 $ 8.21 $ 7.36 $0.00 (10.35)%+
- --------------------------------------------------------------------------------
10/31/97 9.98 8.21 0.00 (17.74)
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 17
<PAGE>
================================================================================
Average Annual Total Return
================================================================================
<TABLE>
<CAPTION>
Without Sales Charge(1)
------------------------------------
Class A Class B Class C
================================================================================
<S> <C> <C> <C>
Six Months Ended 4/30/98+ (9.93)% (10.30)% (10.35)%
- --------------------------------------------------------------------------------
Year Ended 4/30/98 (29.77) (30.32) (30.43)
- --------------------------------------------------------------------------------
Inception* through 4/30/98 (11.05) (14.26) (11.81)
================================================================================
<CAPTION>
Without Sales Charge(1)
------------------------------------
Class A Class B Class C
================================================================================
<S> <C> <C> <C>
Six Months Ended 4/30/98+ (14.48)% (14.79)% (11.25)%
- --------------------------------------------------------------------------------
Year Ended 4/30/98 (33.27) (33.80) (31.13)
- --------------------------------------------------------------------------------
Inception* through 4/30/98 (12.12) (14.76) (11.81)
================================================================================
</TABLE>
================================================================================
Cumulative Total Return
================================================================================
<TABLE>
<CAPTION>
Without Sales Charge(1)
================================================================================
<S> <C>
Class A (Inception* through 4/30/98) (39.04)%
- --------------------------------------------------------------------------------
Class B (Inception* through 4/30/98) (41.46)
- --------------------------------------------------------------------------------
Class C (Inception* through 4/30/98) (41.12)
================================================================================
</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.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
* Inception dates for Class A, B and C shares are February 7, 1994, November
7, 1994 and February 11, 1994, respectively.
- --------------------------------------------------------------------------------
18 1998 Semi-Annual Report to Shareholders
<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 AS A PIE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
February 1994--April 1998
Pacific MSCI All Country
Portfolio Asia Pacific Index
--------- ------------------
<S> <C> <C>
Feb 7 1994 $9,549 $10,000
Apr 1994 $9,465 $10,012
Oct 1994 $9,870 $10,716
Apr 1995 $8,121 $10,248
Oct 1995 $7,693 $ 9,438
Apr 1996 $8,579 $11,076
Oct 1996 $7,777 $ 9,650
Apr 1997 $8,289 $ 8,873
Oct 31 1997 $6,463 $ 7,703
Apr 1997 $5,821 $ 7,040
</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, 1998. 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.
<TABLE>
<CAPTION>
Top Ten Holdings* As of April 30, 1998
- --------------------------------------------------------------------------------
<S> <C>
1. Sony Corp. 5.5%
- --------------------------------------------------------------------------------
2. Shohkoh Fund & Co., Ltd. 4.6
- --------------------------------------------------------------------------------
3. VTech Holdings Ltd. 4.3
- --------------------------------------------------------------------------------
4. Meitec 3.7
- --------------------------------------------------------------------------------
5. Datacraft Asia Ltd. 3.7
- --------------------------------------------------------------------------------
6. Orix Corp. 3.6
- --------------------------------------------------------------------------------
7. Hutchison Whampoa Ltd. 3.4
- --------------------------------------------------------------------------------
8. Noritsu Koki Co., Ltd. 3.4
- --------------------------------------------------------------------------------
9. Murata Manufacturing Co., Ltd. 3.3
- --------------------------------------------------------------------------------
10. Minebea Co. Ltd. 3.3
================================================================================
</TABLE>
* As a percentage of total investments.
[THE FOLLOWING TABLE WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
Investment Allocation as of April 30, 1998*
- --------------------------------------------------------------------------------
<S> <C>
Hong Kong 13.6%
Japan 47.6%
Australia 7.4%
Thailand 10.1%
South Korea 4.9%
Singapore 8.1%
Other 8.3%
</TABLE>
* As a percentage of total investments.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 19
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================
Schedules of Investments (unaudited) April 30, 1998
====================================================================================================
EMERGING MARKETS PORTFOLIO
SHARES SECURITY VALUE
====================================================================================================
<S> <C> <C>
STOCKS -- 100.0%
Argentina -- 4.4%
22,357 Banco de Galicia y Buenos Aires SA de CV ADR(a) $ 547,746
17,000 Telefonica de Argentina SA ADR(a) 655,562
- ----------------------------------------------------------------------------------------------------
1,203,308
- ----------------------------------------------------------------------------------------------------
Brazil -- 17.7%
24,900 Aracruz Celulose SA ADR(a) 392,175
8,050,000 Centrais Eletricas Brasileiras SA-- Eletrobras, Preferred Class B Shares 361,687
698,000 Cia Cervejaria Brahma, Preferred(b) 454,554
888,100,000 Cia de Eletricidade do Estado do Rio de Janeiro(b) 659,864
938,000 Cia de Tecidos Norte de Minas-- Coteminas, Preferred 229,580
34,575,000 Cia Paranaense de Energia-- Copel, Preferred Class B Shares(b) 486,588
12,675,000 Cia Siderurgica Nacional SA 398,863
2,300,000 Eletropaulo Metropolitana-- Eletricidade de Sao Paulo SA 261,363
2,350,000 Petroleo Brasileiro SA-- Petrobras, Preferred 594,689
286,100 Tectoy Industria de Brinquedos SA, Preferred(b) 20,006
7,020 Telecomunicacoes Brasileiras SA ADR 855,123
436,646 Telecomunicacoes de Brasilia SA, Preferred 136,261
- ----------------------------------------------------------------------------------------------------
4,850,753
- ----------------------------------------------------------------------------------------------------
Chile -- 3.9%
19,000 Cia de Telecomunicaciones de Chile SA ADR(a) 476,187
18,200 Vina Concha Y Toro ADR(a) 591,500
- ----------------------------------------------------------------------------------------------------
1,067,687
- ----------------------------------------------------------------------------------------------------
China -- 1.3%
1,050,000 Shanghai China International Travel Service Co., Ltd., Class B Shares 344,400
- ----------------------------------------------------------------------------------------------------
Hong Kong -- 2.2%
493,000 Cosco Pacific Ltd.(a) 334,140
720 Hubei Sanonda Co. Ltd., Class B Shares(b) 184
639,800 Shandong Chenming Paper Holdings Ltd., Class B Shares(b) 274,223
- ----------------------------------------------------------------------------------------------------
608,547
- ----------------------------------------------------------------------------------------------------
Hungary -- 2.8%
221,932 Fotex RT(b) 218,823
5,218 Graboplast RT 197,881
3,400 Richter Gedeon RT 364,248
- ----------------------------------------------------------------------------------------------------
780,952
- ----------------------------------------------------------------------------------------------------
India -- 4.4%
20,000 BSES Ltd. GDR(b)(c) 328,500
34,900 Larsen & Toubro Ltd. GDR(b) 452,827
35,000 Videsh Sanchar Nigam Ltd. GDR(b) 428,750
- ----------------------------------------------------------------------------------------------------
1,210,077
- ----------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
20 1998 Semi-Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================
Schedules of Investments (unaudited)(continued) April 30, 1998
====================================================================================================
EMERGING MARKETS PORTFOLIO
SHARES SECURITY VALUE
====================================================================================================
<S> <C> <C>
Malaysia -- 2.3%
101,400 Genting Berhad $ 336,192
99,000 Telekom Malaysia Berhad 296,470
- ----------------------------------------------------------------------------------------------------
632,662
- ----------------------------------------------------------------------------------------------------
Mexico -- 12.4%
90,600 Cemex SA de CV, Class B Shares(b) 537,869
348,000 Cintra SA 327,934
81,200 Grupo Carso SA de CV Series A1 513,627
197,000 Grupo Financiero Banamex Accival, SA de CV (Banacci), Class B Shares(b) 611,455
21,200 Grupo Industrial Durango SA ADR(a)(b) 304,750
16,300 Grupo Televisa SA GDR(b) 668,300
594,400 Posada Series L 429,897
- ----------------------------------------------------------------------------------------------------
3,393,832
- ----------------------------------------------------------------------------------------------------
Peru -- 1.9%
24,000 Telefonica del Peru SA ADR(a) 531,000
- ----------------------------------------------------------------------------------------------------
Philippines -- 1.6%
9,900,000 Digital Telecommunications Philippines, Inc.(b) 429,041
- ----------------------------------------------------------------------------------------------------
Poland -- 6.4%
2,760 Bank Slaski SA 236,466
16,870 Debica SA 427,151
51,200 Elektrim Spolka Akcyjna SA 731,105
8,500 Polish National Investment Fund(b) 281,539
56,100 Swarzedzkie Fabryk Mebli SA(b) 75,978
- ----------------------------------------------------------------------------------------------------
1,752,239
- ----------------------------------------------------------------------------------------------------
Russia -- 6.3%
28 ING Baring Russian Regional Telecom Basket(c) 280,123
52,000 Irkutskenergo ADR 520,000
13,200 Mosenergo ADR(a) 470,250
62,000 Surgutneftegaz ADR(a) 465,000
- ----------------------------------------------------------------------------------------------------
1,735,373
- ----------------------------------------------------------------------------------------------------
Singapore -- 2.2%
42,000 Asia Pulp & Paper Co. Ltd. ADR(a) 611,625
- ----------------------------------------------------------------------------------------------------
South Africa -- 8.8%
20,000 Liberty Life Association of Africa Ltd. 676,357
566,221 Metro Cash and Carry Ltd. 627,081
22,000 Nedcor Ltd. 626,520
301,500 Plessey Corp. Ltd. 477,009
- ----------------------------------------------------------------------------------------------------
2,406,967
- ----------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 21
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================
Schedules of Investments (unaudited)(continued) April 30, 1998
====================================================================================================
EMERGING MARKETS PORTFOLIO
SHARES SECURITY VALUE
====================================================================================================
<S> <C> <C>
South Korea -- 3.9%
104,000 Comtec System Co. Ltd. $ 268,462
6,000 Lotte Confectionery Co. 448,933
6,840 Samsung Display Devices Co. 340,336
982 Samsung Display Devices Co. Rights, Expire 5/13/98(b) 17,046
- ----------------------------------------------------------------------------------------------------
1,074,777
- ----------------------------------------------------------------------------------------------------
Sri Lanka -- 0.2%
241,600 Lanka Walltile Ltd.(b) 58,200
- ----------------------------------------------------------------------------------------------------
Taiwan -- 8.3%
436,000 Chinatrust Commercial Bank(b) 511,704
131,000 Delta Electronics, Inc. 480,704
16,000 Fubon Insurance Co. GDR(b) 324,800
88,000 Hon Hai Precision Industry(b) 512,395
246,000 Yuanta Securities Corp.(b) 462,539
- ----------------------------------------------------------------------------------------------------
2,292,142
- ----------------------------------------------------------------------------------------------------
Thailand -- 2.6%
77,500 Advanced Info Service Public Co., Ltd. 521,008
84,500 Thai Farmers Bank Public Co. Ltd. 193,361
- ----------------------------------------------------------------------------------------------------
714,369
- ----------------------------------------------------------------------------------------------------
Turkey -- 4.9%
6,146,000 Brisa Bridgestone Sabanci Lastik Sanayire ve Ticaret AS 362,577
3,965,000 Ege Biracilik Ve Malt Sanayii AS 523,354
9,363,750 Turk Sise ve Cam Fabrikalari AS 458,777
- ----------------------------------------------------------------------------------------------------
1,344,708
- ----------------------------------------------------------------------------------------------------
Venezuela -- 1.5%
12,000 Compania Anonima Nacional Telefonos de Venezuela ADR(a) 402,000
- ----------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $27,065,188*) $27,444,659
====================================================================================================
</TABLE>
(a) A portion of this security is on loan (See Note 9).
(b) Non-income producing security.
(c) Security is exempt from registration under Rule 144a of the Securities Act
of 1993. This security may be resold in transactions that are exempt from
registration, generally to qualified institutional buyers.
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
22 1998 Semi-Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================
Schedules of Investments (unaudited)(continued) April 30, 1998
====================================================================================================
EUROPEAN PORTFOLIO
SHARES SECURITY VALUE
====================================================================================================
<S> <C> <C>
STOCKS -- 91.7%
Austria -- 3.0%
12,000 VA Technologie AG(a) $ 1,724,725
- ----------------------------------------------------------------------------------------------------
Canada -- 0.1%
242,957 International UNP Holdings Ltd.(b) 49,257
- ----------------------------------------------------------------------------------------------------
Finland -- 5.9%
50,000 Nokia OYJ, Class A Shares(a) 3,343,750
- ----------------------------------------------------------------------------------------------------
France -- 16.7%
10,000 Atos SA(b) 1,670,045
15,000 Cap Gemini SA 1,946,724
10,000 Christian Dior SA(a) 1,354,315
10,000 Coflexip SA 1,417,461
10,254 Guilbert SA(a) 1,835,148
10,000 Total SA, Class B Shares(a) 1,188,141
5,000 Transgene SA ADR(b) 90,000
- ----------------------------------------------------------------------------------------------------
9,501,834
- ----------------------------------------------------------------------------------------------------
Germany -- 9.7%
2,700 Buderus AG 1,269,880
4,000 Mannesmann AG 3,151,852
10,000 SGL Carbon AG 1,059,626
- ----------------------------------------------------------------------------------------------------
5,481,358
- ----------------------------------------------------------------------------------------------------
Ireland -- 3.8%
358,332 Independent Newspapers PLC 2,164,083
- ----------------------------------------------------------------------------------------------------
Italy -- 4.4%
20,000 Gucci Group NV, NY Registered Shares(a) 931,250
60,000 Industrie Natuzzi SpA ADR 1,541,250
- ----------------------------------------------------------------------------------------------------
2,472,500
- ----------------------------------------------------------------------------------------------------
Netherlands -- 21.1%
20,000 Baan Co. NV(b) 877,500
25,000 Content Beheer NV 798,069
70,000 Fugro NV 2,771,591
41,472 Hunter Douglas NV 2,021,772
30,000 Koninklijke Ahrend Groep NV 1,039,346
15,000 Nutreco Holding NV 535,263
60,000 Ordina NV(b) 1,407,572
40,930 Samas Groep NV CVA 2,538,247
- ----------------------------------------------------------------------------------------------------
11,989,360
- ----------------------------------------------------------------------------------------------------
Norway -- 5.7%
100,000 Tomra Systems ASA(a) 3,217,977
====================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 23
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================
Schedules of Investments (unaudited)(continued) April 30, 1998
====================================================================================================
EUROPEAN PORTFOLIO
SHARES SECURITY VALUE
====================================================================================================
<S> <C> <C>
Spain -- 5.6%
50,000 Amper SA $ 1,279,401
4,250 Azkoyen SA 585,572
30,800 Telefonica de Espana 1,285,227
30,800 Telefonica de Espana Rights, Expire 5/7/98(b) 23,845
- ----------------------------------------------------------------------------------------------------
3,174,045
- ----------------------------------------------------------------------------------------------------
Switzerland -- 4.8%
1,664 Novartis AG 2,751,330
- ----------------------------------------------------------------------------------------------------
United Kingdom -- 10.9%
60,000 CMG PLC(b) 2,676,018
120,000 Compass Group PLC 2,076,625
40,000 SEMA Group PLC(b) 1,446,605
- ----------------------------------------------------------------------------------------------------
6,199,248
- ----------------------------------------------------------------------------------------------------
TOTAL STOCKS
(Cost-- $28,259,530) 52,069,467
====================================================================================================
<CAPTION>
FACE
AMOUNT SECURITY VALUE
====================================================================================================
<S> <C> <C>
REPURCHASE AGREEMENT -- 8.3%
4,706,000 CIBC Wood Gundy Securities Inc., 5.40% due 5/1/98;
Proceeds at maturity -- $4,706,706; (Fully collateralized
by U.S. Treasury Notes, 6.00% due 8/15/99; Market
value -- $4,801,143) (Cost -- $4,706,000) 4,706,000
====================================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $32,965,530*) $56,775,467
====================================================================================================
</TABLE>
(a) A portion of this security is on loan (See Note 9).
(b) Non-income producing security.
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
24 1998 Semi-Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================
Schedules of Investments (unaudited)(continued) April 30, 1998
====================================================================================================
PACIFIC PORTFOLIO
SHARES SECURITY VALUE
====================================================================================================
<S> <C> <C>
STOCKS -- 96.5%
Australia -- 7.4%
25,412 Australian Gas Light Co. Ltd. $ 189,081
25,208 Coca-Cola Amatil Ltd.(a) 192,298
20,000 Leighton Holdings Ltd. 76,284
- ----------------------------------------------------------------------------------------------------
457,663
- ----------------------------------------------------------------------------------------------------
Hong Kong -- 13.6%
137,500 Hong Kong and China Gas Co. Ltd. 187,275
6,250 Hong Kong and China Gas Co. Ltd. Warrants, Expire 9/30/99(b) 0
2,108 HSBC Holdings PLC(a) 60,143
34,000 Hutchison Whampoa Ltd. 210,251
17,000 Shanghai Industrial Holdings Ltd.(a) 58,268
24,000 Smartone Telecommunications 63,051
75,000 VTech Holdings Ltd. 263,362
- ----------------------------------------------------------------------------------------------------
842,350
- ----------------------------------------------------------------------------------------------------
Indonesia -- 0.0%
30,000 PT Fiskaragung Perkasa 1,950
- ----------------------------------------------------------------------------------------------------
Japan -- 47.6%
2,100 Aiful Corp. 139,226
6,000 C. Uyemura & Co., Ltd. 158,934
7,000 Meitec 230,455
18,000 Minebea Co., Ltd.(a) 201,619
7,000 Murata Manufacturing Co., Ltd. 205,556
2,200 Nichiei Co., Ltd. 171,498
34,000 Nikko Securities Co., Ltd. 103,700
7,000 Noritsu Koki Co., Ltd. 209,264
3 NTT Data Corp. 129,872
3,200 Orix Corp. 221,599
3,000 Seven-Eleven Japan Co., Ltd. 200,939
900 Shohkoh Fund & Co., Ltd. 286,764
4,100 Sony Corp. 341,641
8,000 Sumitomo Realty & Development Co., Ltd. 38,446
2,000 Takefuji Corp. 105,199
13,000 Terumo Corp.(a) 190,676
- ----------------------------------------------------------------------------------------------------
2,935,388
- ----------------------------------------------------------------------------------------------------
Malaysia -- 2.2%
58,000 Kuala Lumpur Kepong Berhad 134,144
- ----------------------------------------------------------------------------------------------------
Philippines -- 1.4%
172,200 SPI Technologies Inc. 88,995
- ----------------------------------------------------------------------------------------------------
Singapore -- 8.1%
68,000 Datacraft Asia Ltd. 228,481
170,000 JIT Holdings Ltd. 138,490
36,000 Venture Manufacturing Ltd. 130,723
- ----------------------------------------------------------------------------------------------------
497,694
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 25
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================
Schedules of Investments (unaudited)(continued) April 30, 1998
====================================================================================================
PACIFIC PORTFOLIO
SHARES SECURITY VALUE
====================================================================================================
<S> <C> <C>
South Korea -- 4.9%
1,100 Samsung Display Devices Co. $ 54,733
159 Samsung Display Devices Co. Rights, Expire 5/13/98(b) 2,742
226 Samsung Fire & Marine Insurance 66,794
7,700 Youngone Corp. 175,721
- ----------------------------------------------------------------------------------------------------
299,990
- ----------------------------------------------------------------------------------------------------
Taiwan -- 3.7%
5,000 Asustek Computer Inc.(b) 101,897
172,000 Bank Sinopac(b) 125,188
- ----------------------------------------------------------------------------------------------------
227,085
- ----------------------------------------------------------------------------------------------------
Thailand -- 7.6%
20,000 Delta Electronics PLC 194,441
10,000 Delta Electronics PLC Rights, Expire 5/15/98(b) 94,635
52,000 GSS Array Technology PLC(b) 177,479
- ----------------------------------------------------------------------------------------------------
466,555
- ----------------------------------------------------------------------------------------------------
TOTAL STOCKS
(Cost -- $5,597,396) 5,951,814
====================================================================================================
<CAPTION>
FACE
AMOUNT SECURITY VALUE
====================================================================================================
<S> <C> <C>
BONDS -- 3.5%
Philippines -- 1.0%
$ 70,000 International Container Terminal, 1.75% due 3/13/04 61,250
- ----------------------------------------------------------------------------------------------------
Thailand -- 2.5%
180,000 Tipco Asphalt Co., 2.75% due 9/19/06 154,800
- ----------------------------------------------------------------------------------------------------
TOTAL BONDS
(Cost -- $197,331) 216,050
====================================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $5,794,727*) $ 6,167,864
====================================================================================================
</TABLE>
(a) A portion of this security is on loan (See Note 9).
(b) Non-income producing security.
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
26 1998 Semi-Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Statements of Assets and Liabilities (unaudited) April 30, 1998
====================================================================================================================================
Emerging
Markets European Pacific
Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C>
ASSETS:
Investments, at cost $ 27,065,188 $ 32,965,530 $ 5,794,727
Foreign currencies, at cost 6,987 29,366 26,306
====================================================================================================================================
Investments, at value $ 27,444,659 $ 56,775,467 $ 6,167,864
Foreign currencies, at value 7,304 29,560 26,096
Cash 628,465 10,046 2,114
Collateral for securities loaned (Note 9) 4,397,068 8,412,822 547,680
Dividend and interest receivable 108,458 134,845 26,689
Receivable for securities sold 106,589 -- --
Receivable for Fund shares sold 27,523 205,386 --
Receivable from manager -- -- 15,931
Receivable for open forward foreign currency contracts (Note 4) -- -- 353
- ------------------------------------------------------------------------------------------------------------------------------------
Total Assets 32,720,066 65,568,126 6,786,727
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities loaned (Note 9) 4,397,068 8,412,822 547,680
Payable for securities purchased 335,311 -- 126,165
Management fees payable 22,882 39,207 --
Distribution fees payable 10,318 17,737 3,547
Payable for open forward foreign currency contracts (Note 4) 968 222 --
Payable for Fund shares purchased -- 15,650 --
Accrued expenses 4,631 99,006 108,269
- ------------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 4,771,178 8,584,644 785,661
- ------------------------------------------------------------------------------------------------------------------------------------
Total Net Assets $ 27,948,888 $ 56,983,482 $ 6,001,066
====================================================================================================================================
NET ASSETS:
Par value of capital shares $ 2,345 $ 2,619 $ 803
Capital paid in excess of par value 29,497,234 29,875,119 9,154,650
Accumulated net investment loss (385,467) (340,741) (261,258)
Accumulated net realized gain (loss) from
security transactions and foreign currencies (1,544,536) 3,640,788 (3,268,939)
Net unrealized appreciation of investments and foreign currencies 379,312 23,805,697 375,810
- ------------------------------------------------------------------------------------------------------------------------------------
Total Net Assets $ 27,948,888 $ 56,983,482 $ 6,001,066
====================================================================================================================================
Shares Outstanding:
Class A 890,617 896,618 290,058
-------------------------------------------------------------------------------------------------------------------------------
Class B 1,165,081 1,523,257 382,480
-------------------------------------------------------------------------------------------------------------------------------
Class C 280,157 198,986 130,574
-------------------------------------------------------------------------------------------------------------------------------
Class Y 9,026 -- --
-------------------------------------------------------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $12.09 $22.07 $7.62
-------------------------------------------------------------------------------------------------------------------------------
Class B* $11.81 $21.60 $7.40
-------------------------------------------------------------------------------------------------------------------------------
Class C** $11.82 $21.55 $7.36
-------------------------------------------------------------------------------------------------------------------------------
Class Y (and redemption price) $12.10 -- --
-------------------------------------------------------------------------------------------------------------------------------
Class A Maximum Public Offering Price Per Share
(net asset value plus 5.26% of net asset value per share) $12.73 $23.23 $8.02
====================================================================================================================================
</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 Note 2).
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 27
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Statements of Operations (unaudited) For the Six Months Ended April 30, 1998
====================================================================================================================================
Emerging
Markets European Pacific
Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 194,757 $ 228,270 $ 52,012
Interest 14,848 42,544 9,939
Less: Foreign withholding tax (12,678) (29,674) (4,755)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investment Income 196,927 241,140 57,196
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 151,326 200,318 28,984
Distribution fees (Note 2) 107,635 177,397 25,165
Custody 39,232 23,329 14,704
Registration fees 27,537 59,540 57,063
Shareholder and system servicing fees 22,471 43,273 14,448
Shareholder communications 13,523 15,018 5,072
Audit and legal 7,913 10,645 10,861
Directors' fees 2,118 2,442 1,913
Other 5,762 3,591 4,210
- ------------------------------------------------------------------------------------------------------------------------------------
Total Expenses 377,517 535,553 162,420
- ------------------------------------------------------------------------------------------------------------------------------------
Net Investment Loss (180,590) (294,413) (105,224)
- ------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES
(NOTES 3 AND 4):
Net Realized Gain (Loss) From:
Security transactions (549,160) 3,642,140 (1,044,489)
Foreign currency transactions (204,877) (46,328) (22,338)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Realized Gain (Loss) (754,037) 3,595,812 (1,066,827)
- ------------------------------------------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation (Depreciation)
of Investments and Foreign Currencies:
Beginning of period 778,521 16,657,557 (257,451)
End of period 379,312 23,805,697 375,810
- ------------------------------------------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation (Depreciation) (399,209) 7,148,140 633,261
- ------------------------------------------------------------------------------------------------------------------------------------
Net Gain (Loss) on Investments and Foreign Currencies (1,153,246) 10,743,952 (433,566)
Increase (Decrease) in Net Assets From Operations $ (1,333,836) $ 10,449,539 $ (538,790)
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
28 1998 Semi-Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Statements of Changes in Net Assets (unaudited) For the Six Months Ended April 30, 1998
====================================================================================================================================
Emerging
Markets European Pacific
Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C>
OPERATIONS:
Net investment loss $ (180,590) $ (294,413) $ (105,224)
Net realized gain (loss) (754,037) 3,595,812 (1,066,827)
Increase (decrease) in net unrealized appreciation (399,209) 7,148,140 633,261
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Operations (1,333,836) 10,449,539 (538,790)
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gains -- (971,549) --
- ------------------------------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders -- (971,549) --
- ------------------------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 10):
Net proceeds from sale of shares 9,909,226 48,914,914 16,027,711
Net asset value of shares issued
for reinvestment of dividends -- 914,761 --
Cost of shares reacquired (17,111,272) (48,773,034) (19,288,551)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From
Fund Share Transactions (7,202,046) 1,056,641 (3,260,840)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets (8,535,882) 10,534,631 (3,799,630)
NET ASSETS:
Beginning of period 36,484,770 46,448,851 9,800,696
- ------------------------------------------------------------------------------------------------------------------------------------
End of period* $ 27,948,888 $ 56,983,482 $ 6,001,066
====================================================================================================================================
* Includes accumulated net investment loss of: $ (385,467) $ (340,741) $ (261,258)
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 29
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Statements of Changes in Net Assets For the Year Ended October 31,1997
====================================================================================================================================
Emerging
Markets European Pacific
Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C>
OPERATIONS:
Net investment loss $ (284,810) $ (428,508) $ (261,594)
Net realized gain (loss) (945,031) 891,582 (530,519)
Increase (decrease) in net unrealized appreciation 208,848 4,808,121 (479,484)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Operations (1,020,993) 5,271,195 (1,271,597)
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
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 35,138,483 59,471,115 27,795,046
Net asset value of shares issued
for reinvestment of dividends -- 2,505,751 --
Cost of shares reacquired (23,833,181) (57,078,021) (27,272,602)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 11,305,302 4,898,845 522,444
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets 10,284,309 7,526,017 (749,153)
NET ASSETS:
Beginning of year 26,200,461 38,922,834 10,549,849
- ------------------------------------------------------------------------------------------------------------------------------------
End of year* $ 36,484,770 $ 46,448,851 $ 9,800,696
====================================================================================================================================
* Includes accumulated net investment loss of: -- -- $ (133,696)
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
30 1998 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Notes to Financial Statements (unaudited)
================================================================================
1. Significant Accounting Policies
The 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 Fund
consists of these Portfolios and three other separate investment portfolios:
Global Government Bond, International Equity and International Balanced
Portfolios. The financial statements and financial highlights for the other
portfolios are presented in a separate semi-annual report.
The significant accounting policies consistently followed by the Fund are: (a)
security transactions are accounted for on trade date; (b) securities traded on
national securities markets are valued at the closing prices on 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 an 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 Portfolio expenses are allocated on the basis
of relative net assets by class; (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 or 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, 1997, 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 loss amounting to $285,646, $507,347 and $181,481 was reclassified to
paid-in capital for the Emerging Markets, European and Pacific Portfolios,
respectively. Net investment income, net realized gains and net assets were not
affected by these adjustments; (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.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 31
<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
Mutual Management Corp. ("MMC"), formerly known as Smith Barney Mutual Funds
Management Inc., a subsidiary of Salomon Smith Barney Holdings Inc. ("SSBH"),
acts as investment manager of the Fund. The European and Pacific Portfolios pay
MMC a management fee calculated at an annual rate of 0.85% of the average daily
net assets of each respective Portfolio. The Emerging Markets Portfolio pays
MMCa management fee calculated at an 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 SSBH, acts as distributor of the
Fund's shares. SB received sales charges of approximately $57,000 on sales of
the Portfolios' Class A shares for the six months ended April 30, 1998.
For the 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 for each
Portfolio have a 1.00% CDSC, which applies if redemption occurs within the first
year of purchase. In addition, Class A shares for each Portfolio have a 1.00%
CDSC, which applies if redemption occurs within the first year of purchase. This
CDSC only applies to those purchases of Class A shares that equal or exceed
$500,000 in the aggregate. These purchases do not incure an initial sales
charge.
For the six months ended April 30, 1998, CDSCs paid to SB were approximately:
<TABLE>
<CAPTION>
Portfolio Class A Class B Class C
================================================================================
<S> <C> <C> <C>
Emerging Markets -- $49,000 $1,000
- --------------------------------------------------------------------------------
European -- 22,000 1,000
- --------------------------------------------------------------------------------
Pacific $1,000 18,000 --
================================================================================
</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 Portfolios also 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. For the six months ended April 30, 1998, total Distribution Plan fees
incurred by the Portfolios were:
<TABLE>
<CAPTION>
Portfolio Class A Class B Class C
================================================================================
<S> <C> <C> <C>
Emerging Markets $14,550 $ 74,952 $18,133
- --------------------------------------------------------------------------------
European 19,424 142,984 14,989
- --------------------------------------------------------------------------------
Pacific 2,978 16,557 5,630
================================================================================
</TABLE>
All officers and two Directors of the Fund are employees of SB.
3. Investments
During the six months ended April 30, 1998, 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>
Emerging Markets $17,804,397 $20,709,811
- --------------------------------------------------------------------------------
European 5,234,359 9,961,631
- --------------------------------------------------------------------------------
Pacific 5,225,972 5,105,400
================================================================================
</TABLE>
- --------------------------------------------------------------------------------
32 1998 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Notes to Financial Statements (unaudited)(continued)
================================================================================
At April 30, 1998, aggregate gross unrealized appreciation and depreciation of
investments for Federal income tax purposes were substantially as follows:
<TABLE>
<CAPTION>
Net Unrealized
Portfolio Appreciation Depreciation Appreciation
================================================================================
<S> <C> <C> <C>
Emerging Markets $ 3,684,997 $3,305,526 $ 379,471
- --------------------------------------------------------------------------------
European 24,369,736 559,799 23,809,937
- --------------------------------------------------------------------------------
Pacific 749,519 376,382 373,137
================================================================================
</TABLE>
4. Forward Foreign Currency Contracts
At April 30, 1998, 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>
Emerging Markets Portfolio
Local Market Settlement Unrealized
Foreign Currency Currency Value Date Loss
====================================================================================================================================
<S> <C> <C> <C> <C>
To Buy:
South African Rand 1,684,116 $332,549 5/5/98 $(935)
- ------------------------------------------------------------------------------------------------------------------------------------
To Sell:
Hong Kong Dollar 569,247 73,484 5/4/98 (33)
Indonesian Rupiah 39,600 5 5/5/98 --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Unrealized Loss on
Forward Foreign Currency Contracts $(968)
====================================================================================================================================
<CAPTION>
European Portfolio
Local Market Settlement Unrealized
Foreign Currency Currency Value Date Loss
====================================================================================================================================
<S> <C> <C> <C> <C>
To Buy:
Spanish Peseta 14,000,000 $ 91,876 5/7/98 $(222)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Unrealized Loss on
Forward Foreign Currency Contracts $(222)
====================================================================================================================================
<CAPTION>
Pacific Portfolio
Local Market Settlement Unrealized
Foreign Currency Currency Value Date Loss
====================================================================================================================================
<S> <C> <C> <C> <C>
To Buy:
Japanese Yen 16,404,000 $124,381 5/12/98 $353
- ------------------------------------------------------------------------------------------------------------------------------------
Total Unrealized Gain on
Forward Foreign Currency Contracts $353
====================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 33
<PAGE>
================================================================================
Notes to Financial Statements (unaudited)(continued)
================================================================================
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 realize 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 that the Portfolio purchases upon exercise will
be increased by the premium originally paid.
At April 30, 1998, the Portfolios had no open purchased call or put options.
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 depending
upon whether the cost of the closing transaction is greater or less than the
premium originally received 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 premium originally received. When a written put option is
exercised, the amount of the premium originally received will reduce the cost of
the security that 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 a loss if the market price of the underlying security
declines.
During the six months ended April 30, 1998, the Portfolios did not write any
call or put options.
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 received or made 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. 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).
At April 30, 1998, the Portfolios had no open futures contracts.
7. Concentration of Risk
The Portfolios' investments in foreign securities may involve risks not present
in domestic investments. Since securities may be denominated in a foreign
currency
- --------------------------------------------------------------------------------
34 1998 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Notes to Financial Statements (unaudited)(continued)
================================================================================
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 Carryforwards
At October 31, 1997, the Emerging Markets and Pacific Portfolios had, for
Federal income tax purposes, approximately $925,000 and $2,224,000,
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 losses for each Portfolio is indicated
below:
<TABLE>
<CAPTION>
Portfolio 10/31/02 10/31/03 10/31/04 10/31/05 Total
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Emerging Markets -- $ 46,000 -- $879,000 $ 925,000
- ------------------------------------------------------------------------------------------------------------------------------------
Pacific $37,000 1,426,000 $246,000 515,000 2,224,000
====================================================================================================================================
</TABLE>
9. Lending of Portfolio Securities
The Portfolios have an agreement with their custodian whereby the custodian may
lend securities owned by the Portfolios to brokers, dealers and other financial
organizations. Fees earned by the Portfolios on securities lending are recorded
as interest income. Loans of securities by the Portfolios are collateralized by
cash, U.S. government securities or high quality money market instruments that
are maintained at all times in an amount at least equal to the current market
value of the loaned securities, plus a margin depending on the type of
securities loaned. The custodian establishes and maintains the collateral in a
segregated account. The Portfolios maintain exposure for the risk of any losses
in the investment of amounts received as collateral.
At April 30, 1998, the Emerging Markets, European and Pacific Portfolios loaned
common stock having a value of approximately $4,257,859, $8,272,388 and
$516,833, respectively, and the Portfolios hold the following collateral for
loaned securities:
<TABLE>
<CAPTION>
Emerging Markets Portfolio
Security Description Value
====================================================================================================================================
<S> <C>
Bank of Montreal, Montreal Time Deposit, 5.625% due 5/1/98 $ 206,035
- ------------------------------------------------------------------------------------------------------------------------------------
Bear Stearns Repurchase Agreement, 5.600% due 5/1/98 869,926
- ------------------------------------------------------------------------------------------------------------------------------------
Commerzbank AG, Frankfurt Time Deposit, 5.59375% due 5/1/98 206,035
- ------------------------------------------------------------------------------------------------------------------------------------
CS First Boston Repurchase Agreement, 5.570% due 5/1/98 869,926
- ------------------------------------------------------------------------------------------------------------------------------------
Deutsche Bank Grand Cayman Time Deposit, 5.625% due 5/1/98 206,035
- ------------------------------------------------------------------------------------------------------------------------------------
J.P. Morgan Securities Repurchase Agreement, 5.580% due 5/1/98 633,493
- ------------------------------------------------------------------------------------------------------------------------------------
Merrill Lynch Repurchase Agreement, 5.625% due 5/1/98 297,607
- ------------------------------------------------------------------------------------------------------------------------------------
NationsBanc Montgomery Securities Inc. Repurchase Agreement, 5.6125% due 5/1/98 695,941
- ------------------------------------------------------------------------------------------------------------------------------------
Svenska Grand Cayman Time Deposit, 5.625% due 5/1/98 206,035
- ------------------------------------------------------------------------------------------------------------------------------------
UBS, Grand Cayman Time Deposit, 5.625% due 5/1/98 206,035
====================================================================================================================================
Total $4,397,068
====================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 35
<PAGE>
================================================================================
Notes to Financial Statements (unaudited)(continued)
================================================================================
<TABLE>
<CAPTION>
European Portfolio
Security Description Value
====================================================================================================================================
<S> <C>
Bank of Montreal, Montreal Time Deposit, 5.625% due 5/1/98 $ 394,203
- ------------------------------------------------------------------------------------------------------------------------------------
Bear Stearns Repurchase Agreement, 5.600% due 5/1/98 1,664,412
- ------------------------------------------------------------------------------------------------------------------------------------
Commerzbank AG, Frankfurt Time Deposit, 5.59375% due 5/1/98 394,203
- ------------------------------------------------------------------------------------------------------------------------------------
CS First Boston Repurchase Agreement, 5.570% due 5/1/98 1,664,412
- ------------------------------------------------------------------------------------------------------------------------------------
Deutsche Bank Grand Cayman Time Deposit, 5.625% due 5/1/98 394,203
- ------------------------------------------------------------------------------------------------------------------------------------
J.P. Morgan Securities Repurchase Agreement, 5.580% due 5/1/98 1,212,050
- ------------------------------------------------------------------------------------------------------------------------------------
Merrill Lynch Repurchase Agreement, 5.625% due 5/1/98 569,404
- ------------------------------------------------------------------------------------------------------------------------------------
NationsBanc Montgomery Securities Inc. Repurchase Agreement, 5.6125% due 5/1/98 1,331,529
- ------------------------------------------------------------------------------------------------------------------------------------
Svenska Grand Cayman Time Deposit, 5.625% due 5/1/98 394,203
- ------------------------------------------------------------------------------------------------------------------------------------
UBS, Grand Cayman Time Deposit, 5.625% due 5/1/98 394,203
====================================================================================================================================
Total $8,412,822
====================================================================================================================================
<CAPTION>
Pacific Portfolio
Security Description Value
====================================================================================================================================
<S> <C>
Bank of Montreal, Montreal Time Deposit, 5.625% due 5/1/98 $ 25,663
- ------------------------------------------------------------------------------------------------------------------------------------
Bear Stearns Repurchase Agreement, 5.600% due 5/1/98 108,354
- ------------------------------------------------------------------------------------------------------------------------------------
Commerzbank AG, Frankfurt Time Deposit, 5.59375% due 5/1/98 25,663
- ------------------------------------------------------------------------------------------------------------------------------------
CS First Boston Repurchase Agreement, 5.570% due 5/1/98 108,354
- ------------------------------------------------------------------------------------------------------------------------------------
Deutsche Bank Grand Cayman Time Deposit, 5.625% due 5/1/98 25,663
- ------------------------------------------------------------------------------------------------------------------------------------
J.P. Morgan Securities Repurchase Agreement, 5.580% due 5/1/98 78,905
- ------------------------------------------------------------------------------------------------------------------------------------
Merrill Lynch Repurchase Agreement, 5.625% due 5/1/98 37,069
- ------------------------------------------------------------------------------------------------------------------------------------
NationsBanc Montgomery Securities Inc. Repurchase Agreement, 5.6125% due 5/1/98 86,683
- ------------------------------------------------------------------------------------------------------------------------------------
Svenska Grand Cayman Time Deposit, 5.625% due 5/1/98 25,663
- ------------------------------------------------------------------------------------------------------------------------------------
UBS, Grand Cayman Time Deposit, 5.625% due 5/1/98 25,663
====================================================================================================================================
Total $547,680
====================================================================================================================================
</TABLE>
10. Capital Shares
At April 30, 1998, 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, 1998, total paid-in capital amounted to the following for each
Portfolio:
<TABLE>
<CAPTION>
Portfolio Class A Class B Class C Class Y
================================================================================
<S> <C> <C> <C> <C>
Emerging Markets $11,067,790 $14,675,781 $ 3,644,994 $ 111,014
- --------------------------------------------------------------------------------
European 11,415,282 15,426,665 3,035,791 --
- --------------------------------------------------------------------------------
Pacific 3,723,321 3,611,960 1,820,172 --
================================================================================
</TABLE>
- --------------------------------------------------------------------------------
36 1998 Semi-Annual Report to Shareholders
<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, 1998 October 31, 1997
-------------------------------- --------------------------------
Shares Amount Shares Amount
====================================================================================================================================
<S> <C> <C> <C> <C>
Emerging Markets Portfolio
Class A
Shares sold 542,472 $ 6,449,008 976,387 $ 14,159,665
Shares redeemed (780,201) (9,267,713) (732,804) (10,604,436)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (237,729) $ (2,818,705) 243,583 $ 3,555,229
====================================================================================================================================
Class B
Shares sold 246,229 $ 2,869,563 1,261,047 $ 17,982,006
Shares redeemed (563,877) (6,523,312) (871,681) (12,363,356)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (317,648) $ (3,653,749) 389,366 $ 5,618,650
====================================================================================================================================
Class C
Shares sold 40,374 $ 479,641 212,076 $ 2,996,812
Shares redeemed (114,737) (1,320,247) (62,423) (865,389)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (74,363) $ (840,606) 149,653 $ 2,131,423
====================================================================================================================================
Class Y*
Shares sold 9,026 $ 111,014 -- --
Shares redeemed -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 9,026 $ 111,014 -- --
====================================================================================================================================
European Portfolio
Class A
Shares sold 1,042,305 $ 20,168,994 753,014 $ 13,546,213
Shares issued on reinvestment 17,388 292,645 39,393 670,082
Shares redeemed (937,579) (18,048,574) (628,399) (11,429,037)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 122,114 $ 2,413,065 164,008 $ 2,787,258
====================================================================================================================================
Class B
Shares sold 1,385,915 $ 26,130,606 2,437,568 $ 43,249,301
Shares issued on reinvestment 34,196 564,579 100,838 1,696,102
Shares redeemed (1,527,717) (28,671,128) (2,451,593) (43,812,735)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (107,606) $ (1,975,943) 86,813 $ 1,132,668
====================================================================================================================================
Class C
Shares sold 131,464 $ 2,615,314 148,958 $ 2,675,601
Shares issued on reinvestment 3,496 57,537 8,322 139,567
Shares redeemed (110,036) (2,053,332) (101,215) (1,836,249)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 24,924 $ 619,519 56,065 $ 978,919
====================================================================================================================================
</TABLE>
* For the period from March 10, 1998 (inception date) to April 30, 1998.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 37
<PAGE>
================================================================================
Notes to Financial Statements (unaudited)(continued)
================================================================================
<TABLE>
<CAPTION>
Six Months Ended Year Ended
April 30, 1998 October 31, 1997
---------------------------------- ----------------------------------
Shares Amount Shares Amount
====================================================================================================================================
<S> <C> <C> <C> <C>
Pacific Portfolio
Class A
Shares sold 1,655,883 $ 12,807,624 727,722 $ 7,499,628
Shares redeemed (1,927,285) (15,304,496) (650,293) (7,183,758)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (271,402) $ (2,496,872) 77,429 $ 315,870
====================================================================================================================================
Class B
Shares sold 239,680 $ 1,867,803 1,620,231 $ 16,776,361
Shares redeemed (288,615) (2,215,283) (1,589,348) (16,734,838)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (48,935) $ (347,480) 30,883 $ 41,523
====================================================================================================================================
Class C
Shares sold 179,534 $ 1,352,284 336,933 $ 3,519,057
Shares redeemed (230,819) (1,768,772) (316,621) (3,354,006)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (51,285) $ (416,488) 20,312 $ 165,051
====================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
38 1998 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
-----------------------------------------------------------------------
Emerging Markets Portfolio 1998(1)(2) 1997(2) 1996 1995(3)
====================================================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.45 $12.08 $11.06 $12.00
- ------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss(4) (0.03) (0.05) (0.02) (0.05)#
Net realized and unrealized gain (loss) (0.33) 0.42 1.04 (0.89)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.36) 0.37 1.02 (0.94)
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $12.09 $12.45 $12.08 $11.06
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return (2.89)%++ 3.06% 9.22% (7.83)%++
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $10,764 $14,046 $10,691 $7,069
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio to Average Net Assets:
Expenses(4) 2.02%+ 2.11% 2.25% 1.45%+
Net investment loss (0.73)+ (0.34) (0.19) (0.63)+
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 61% 99% 78% 17%
- ------------------------------------------------------------------------------------------------------------------------------------
Average commissions per share
on equity transactions(5)(6) $0.00* $0.00* $0.00* $0.00*
====================================================================================================================================
</TABLE>
(1) For the six months ended April 30, 1998 (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.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 39
<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 1998(1)(2) 1997(2) 1996 1995(3)
====================================================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.21 $11.95 $11.02 $12.00
- ------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss(4) (0.11) (0.14) (0.10) (0.09)#
Net realized and unrealized gain (loss) (0.29) 0.40 1.03 (0.89)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.40) 0.26 0.93 (0.98)
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $11.81 $12.21 $11.95 $11.02
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return (3.28)%++ 2.18% 8.44% (8.17)%++
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $13,764 $18,107 $13,062 $7,630
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio to Average Net Assets:
Expenses(4) 2.77%+ 2.88% 3.06% 2.00%+
Net investment loss (1.48)+ (1.00) (0.94) (1.17)+
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 61% 99% 78% 17%
- ------------------------------------------------------------------------------------------------------------------------------------
Average commissions per share
on equity transactions(5)(6) $0.00* $0.00* $0.00* $0.00*
====================================================================================================================================
</TABLE>
(1) For the six months ended April 30, 1998 (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.
- --------------------------------------------------------------------------------
40 1998 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
------------------------------------------------------------------------
Emerging Markets Portfolio 1998(1)(2) 1997(2) 1996 1995(3)
====================================================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.22 $11.95 $11.02 $12.00
- ------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss(4) (0.11) (0.15) (0.10) (0.08)#
Net realized and unrealized gain (loss) (0.29) 0.42 1.03 (0.90)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.40) 0.27 0.93 (0.98)
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $11.82 $12.22 $11.95 $11.02
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return (3.27)%++ 2.26% 8.44% (8.17)%++
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $3,312 $4,332 $2,448 $1,604
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio to Average Net Assets:
Expenses(4) 2.73%+ 2.86% 3.02% 1.95%+
Net investment loss (1.44)+ (1.03) (0.92) (1.08)+
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 61% 99% 78% 17%
- ------------------------------------------------------------------------------------------------------------------------------------
Average commissions per share
on equity transactions(5)(6) $0.00* $0.00* $0.00* $0.00*
====================================================================================================================================
</TABLE>
(1) For the six months ended April 30, 1998 (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.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 41
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each share of capital stock outstanding throughout the period:
<TABLE>
<CAPTION>
Class Y Shares
--------------
Emerging Markets Portfolio 1998(1)(2)
================================================================================
<S> <C>
Net Asset Value, Beginning of Period $12.16
- --------------------------------------------------------------------------------
Loss From Operations:
Net investment income 0.05
Net realized and unrealized loss (0.11)
- --------------------------------------------------------------------------------
Total Loss From Operations (0.06)
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income --
- --------------------------------------------------------------------------------
Total Distributions --
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $12.10
- --------------------------------------------------------------------------------
Total Return++ (0.49)%
- --------------------------------------------------------------------------------
Net Assets, End of Period (000s) $109
- --------------------------------------------------------------------------------
Ratio to Average Net Assets+:
Expenses 0.86%
Net investment income 0.82
- --------------------------------------------------------------------------------
Portfolio Turnover Rate 61%
- --------------------------------------------------------------------------------
Average commissions per share
on equity transactions(3) $0.00*
================================================================================
</TABLE>
(1) For the period from March 10, 1998 (inception date) to April 30, 1998
(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) Trades executed in the United States and Canada have a 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%.
* 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.
- --------------------------------------------------------------------------------
42 1998 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 1998(1)(2) 1997(2) 1996 1995 1994(3)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $18.23 $17.25 $14.67 $12.88 $12.50
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income (loss)(4) (0.07) (0.08) (0.08) 0.07 (0.11)
Net realized and unrealized gain 4.30 2.22 2.79 1.72 0.49
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 4.23 2.14 2.71 1.79 0.38
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- (0.09) -- --
Net realized gains (0.39) (1.16) (0.04) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.39) (1.16) (0.13) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $22.07 $18.23 $17.25 $14.67 $12.88
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return 23.86%++ 12.88% 18.65% 13.90% 3.04%++
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $19,792 $14,118 $10,528 $11,870 $5,189
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(4) 1.72%+ 1.80% 1.85% 2.06% 1.34%+
Net investment income (loss) (0.66)+ (0.42) (0.49) 0.51 (1.12)+
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 11% 28% 39% 34% 21%
- ------------------------------------------------------------------------------------------------------------------------------------
Average commissions per share
paid on equity transactions(5)(6) $0.07 $0.07 $0.05 $0.06 --
====================================================================================================================================
</TABLE>
(1) For the six months ended April 30, 1998 (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 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; numbers
prior to October 31, 1995 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. 43
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Class B Shares
----------------------------------------------------------------------
European Portfolio 1998(1)(2) 1997(2) 1996 1995(3)
====================================================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $17.92 $17.09 $14.56 $12.62
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income (loss)(4) (0.14) (0.20) (0.20) 0.02
Net realized and unrealized gain 4.21 2.19 2.77 1.92
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 4.07 1.99 2.57 1.94
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net realized gains (0.39) (1.16) (0.04) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.39) (1.16) (0.04) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $21.60 $17.92 $17.09 $14.56
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return 23.38%++ 12.08% 17.72% 15.37%++
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $32,903 $29,221 $26,384 $24,825
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(4) 2.52%+ 2.52% 2.59% 3.31%+
Net investment income (loss) (1.54)+ (1.13) (1.22) 0.26+
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 11% 28% 39% 34%
- ------------------------------------------------------------------------------------------------------------------------------------
Average commissions per share
paid on equity transactions(5)(6) $0.07 $0.07 $0.05 $0.06
====================================================================================================================================
</TABLE>
(1) For the six months ended April 30, 1998 (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 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%
(annualized), respectively; numbers prior to October 31, 1995 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.
* 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.
- --------------------------------------------------------------------------------
44 1998 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 1998(1)(2) 1997(2) 1996 1995(3) 1994(4)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $17.86 $17.04 $14.51 $12.83 $12.48
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment loss(5) (0.13) (0.21) (0.14) (0.08) (0.16)
Net realized and unrealized gain 4.21 2.19 2.71 1.76 0.51
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 4.08 1.98 2.57 1.68 0.35
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net realized gains (0.39) (1.16) (0.04) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.39) (1.16) (0.04) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $21.55 $17.86 $17.04 $14.51 $12.83
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return 23.51%++ 12.06% 17.78% 13.09% 2.80%++
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $4,288 $3,110 $2,011 $1,311 $1,607
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(5) 2.53%+ 2.54% 2.52% 2.51% 2.02%+
Net investment loss (1.47)+ (1.18) (1.17) (0.64) (1.60)+
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 11% 28% 39% 34% 21%
- ------------------------------------------------------------------------------------------------------------------------------------
Average commissions per share
paid on equity transactions(6)(7) $0.07 $0.07 $0.05 $0.06 --
====================================================================================================================================
</TABLE>
(1) For the six months ended April 30, 1998 (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 14, 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 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; numbers
prior to October 31, 1995 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 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. 45
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Class A Shares
-------------------------------------------------------------------------
Pacific Portfolio 1998(1)(2) 1997 1996(2) 1995 1994(3)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $8.46 $10.18 $10.07 $12.92 $12.50
- ------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss(4) (0.12) (0.17) (0.14) (0.01) (0.07)
Net realized and unrealized gain (loss) (0.72) (1.55) 0.25 (2.84) 0.49
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.84) (1.72) 0.11 (2.85) 0.42
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $7.62 $8.46 $10.18 $10.07 $12.92
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return (9.93)%++ (16.90)% 1.09% (22.06)% 3.36%++
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $2,209 $4,750 $4,929 $4,409 $7,538
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(4) 4.20%+ 3.37% 2.64% 1.97% 1.51%+
Net investment loss (2.53)+ (2.36) (1.38) (0.71) (0.82)+
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 80% 154% 86% 31% 6%
- ------------------------------------------------------------------------------------------------------------------------------------
Average commissions per share
paid on equity transactions(5)(6) $0.01 $0.01 $0.02 $0.01 --
====================================================================================================================================
</TABLE>
(1) For the six months ended April 30, 1998 (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 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 $0.14 $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; numbers
prior to October 31, 1995 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.
- --------------------------------------------------------------------------------
46 1998 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 1998(1)(2) 1997 1996(2) 1995(3)
====================================================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $8.25 $10.01 $9.99 $12.64
- ------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss(4) (0.14) (0.27) (0.23) (0.01)
Net realized and unrealized gain (loss) (0.71) (1.49) 0.25 (2.64)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.85) (1.76) 0.02 (2.65)
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $7.40 $8.25 $10.01 $9.99
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return (10.30)%++ (17.58)% 0.20% (20.97)%++
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $2,831 $3,558 $4,009 $1,031
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(4) 4.98%+ 4.24% 3.65% 3.39%+
Net investment loss (3.31)+ (3.07) (2.26) (1.47)+
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 80% 154% 86% 31%
- ------------------------------------------------------------------------------------------------------------------------------------
Average commissions per share
paid on equity transactions(5)(6) $0.01 $0.01 $0.02 $0.01
====================================================================================================================================
</TABLE>
(1) For the six months ended April 30, 1998 (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 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 $0.16 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; numbers prior to October 31, 1995 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. 47
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Class C Shares
---------------------------------------------------------------------------
Pacific Portfolio 1998(1)(2) 1997 1996(2) 1995(3) 1994(4)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $8.21 $9.98 $9.95 $12.86 $12.50
- ------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss(5) (0.18) (0.27) (0.24) (0.02) (0.11)
Net realized and unrealized gain (loss) (0.67) (1.50) 0.27 (2.89) 0.47
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.85) (1.77) 0.03 (2.91) 0.36
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $7.36 $8.21 $9.98 $9.95 $12.86
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return (10.35)%++ (17.74)% 0.30% (22.63)% 2.88%++
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $961 $1,493 $1,612 $1,952 $3,167
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(5) 5.13%+ 4.44% 3.46% 2.69% 2.29%+
Net investment loss (3.47)+ (3.21) (2.22) (1.45) (1.49)+
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 80% 154% 86% 31% 6%
- ------------------------------------------------------------------------------------------------------------------------------------
Average commissions per share
paid on equity transactions(6)(7) $0.01 $0.01 $0.02 $0.01 --
====================================================================================================================================
</TABLE>
(1) For the six months ended April 30, 1998 (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; numbers
prior to October 31, 1995 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.
- --------------------------------------------------------------------------------
48 1998 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Additional Shareholder Information (unaudited)
================================================================================
On March 30 and April 24, 1998, a special meeting of shareholders of the Fund
was held for the purpose of voting on the following matters:
1. To elect Directors of the Fund (All Portfolios);
2. To approve or disapprove the reclassification, modification and/or
elimination of certain fundamental investment policies (All
Portfolios);
3. To amend the terms of the Plan of Distribution Adopted Pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (All Portfolios,
Class A Shareholders only);
4. To approve a Subadvisory Agreement with Smith Barney Global Capital
Management, Inc. (International Balanced Portfolio Only); and
5. To transact such other business as may properly come before the
meeting or any adjournment thereof (All Portfolios).
The results of the vote on Proposal 1 were as follows:
<TABLE>
<CAPTION>
Shares Voted Percentage of Shares Voted Percentage of
Name of Directors For Shares Voted Against Shares Voted
====================================================================================================================================
<S> <C> <C> <C> <C>
Victor K. Atkins 44,935,458.577 97.019% 1,380,909.568 2.981%
Abraham E. Cohen 45,053,565.974 97.274 1,262,802.171 2.726
Robert A. Frankel 44,946,591.915 97.043 1,369,776.230 2.957
Rainer Greeven 45,054,810.233 97.276 1,261,557.912 2.724
Susan M. Heilbron 45,074,392.907 97.318 1,241,975.238 2.682
Heath B. McLendon 45,063,780.606 97.296 1,252,587.539 2.704
Bruce D. Sargent 45,081,558.705 97.334 1,234,809.440 2.666
James M. Shuart 45,020,018.401 97.201 1,296,349.744 2.799
====================================================================================================================================
</TABLE>
Proposal 2 requested that shareholders approve certain changes to the
fundamental policies of the Fund in order to modernize them in view of certain
regulatory, business or industry developments that have occurred since original
adoption of these policies by the Fund. The following chart demonstrates that
all proposals were approved by shareholders.
Please note that "M" indicates a modification of the policy; "E" indicates the
elimination of the policy; and "R" indicates the reclassification of the policy
from fundamental (which would require shareholder approval to change) to
non-fundamental (which can be changed by a vote of the Board of Directors).
<TABLE>
<CAPTION>
Emerging
Markets European Pacific
Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C> <C>
"M" Diversification Approved Approved Approved
- ------------------------------------------------------------------------------------------------------------------------------------
"M" Senior Securities Approved Approved Approved
- ------------------------------------------------------------------------------------------------------------------------------------
"M" Industry Concentration Approved Approved Approved
- ------------------------------------------------------------------------------------------------------------------------------------
"M" Borrowing Approved Approved Approved
- ------------------------------------------------------------------------------------------------------------------------------------
"E" Ability to Pledge Assets Approved Approved Approved
- ------------------------------------------------------------------------------------------------------------------------------------
"M" Lending Approved Approved Approved
- ------------------------------------------------------------------------------------------------------------------------------------
"M" Underwriting of Securities Approved Approved Approved
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Smith Barney World Fund, Inc. 49
<PAGE>
================================================================================
Additional Shareholder Information (unaudited)(continued)
================================================================================
<TABLE>
<CAPTION>
Emerging
Markets European Pacific
Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C> <C>
"R" Margin and Short-Sales Approved Approved Approved
- ------------------------------------------------------------------------------------------------------------------------------------
"M" Real Estate Approved Approved Approved
- ------------------------------------------------------------------------------------------------------------------------------------
"R" Restricted and Illiquid Securities Approved Approved Approved
- ------------------------------------------------------------------------------------------------------------------------------------
"R" Unseasoned Issues Approved Approved Approved
- ------------------------------------------------------------------------------------------------------------------------------------
"E" 5% Ownership of Certain Securities Approved Approved Approved
- ------------------------------------------------------------------------------------------------------------------------------------
"R" Purchases of Securities of Other Investment Companies Approved Approved Approved
- ------------------------------------------------------------------------------------------------------------------------------------
"R" Exercising Control or Management Approved Approved Approved
- ------------------------------------------------------------------------------------------------------------------------------------
"R" Investments in Oil, Gas and Mineral Exploration Approved Approved Approved
- ------------------------------------------------------------------------------------------------------------------------------------
"R" Puts, Calls and Combinations Thereof N/A N/A N/A
====================================================================================================================================
</TABLE>
N/A - Not Applicable
The information below reports the lowest percentage of shares voting for the
proposals and the highest percentage of shares voting against and abstaining by
shareholders of the Fund on all of the items in Proposal 2.
<TABLE>
<CAPTION>
Emerging Markets Portfolio
Percentage Percentage Percentage
Shares Voted of Shares Shares Voted of Shares Shares of Shares
For Voted Against Voted Abstaining Abstained
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
1,174,361.717 89.466% 36,555.613 2.785% 101,719.690 7.749%
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
European Portfolio
Percentage Percentage Percentage
Shares Voted of Shares Shares Voted of Shares Shares of Shares
For Voted Against Voted Abstaining Abstained
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
1,107,820.953 88.486% 32,309.769 2.581% 111,841.371 8.933%
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Pacific Portfolio
Percentage Percentage Percentage
Shares Voted of Shares Shares Voted of Shares Shares of Shares
For Voted Against Voted Abstaining Abstained
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
370,286.081 87.270% 19,304.583 4.550% 34,709.366 8.180%
====================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
50 1998 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Additional Shareholder Information (unaudited)(continued)
================================================================================
The results of the vote on Proposal 3 were as follows:
<TABLE>
<CAPTION>
Emerging Markets Portfolio
Percentage Percentage Percentage
Shares Voted of Shares Shares Voted of Shares Shares of Shares
For Voted Against Voted Abstaining Abstained
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
437,087.470 89.101% 12,335.767 2.515% 41,128.421 8.384%
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
European Portfolio
Percentage Percentage Percentage
Shares Voted of Shares Shares Voted of Shares Shares of Shares
For Voted Against Voted Abstaining Abstained
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
353,443.117 84.952% 22,161.098 5.327% 40,444.611 9.721%
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Pacific Portfolio
Percentage Percentage Percentage
Shares Voted of Shares Shares Voted of Shares Shares of Shares
For Voted Against Voted Abstaining Abstained
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
110,762.817 87.289% 3,918.195 3.087% 12,211.515 9.624%
====================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 51
<PAGE>
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<PAGE>
Smith Barney
World Funds, Inc.
Directors Investment Adviser and Administrator
Victor Atkins Mutual Management Corp.
Abraham E. Cohen
Robert A. Frankel Distributor
Rainer Greeven Smith Barney Inc.
Susan M. Heilbron
Heath B. McLendon, Chairman Custodian
Bruce D. Sargent The Chase Manhattan Bank, N.A.
James M. Shuart
Shareholder Servicing Agent
Officers First Data Investor Services Group, Inc.
Maurits E. Edersheim P.O. Box 9134
Chairman of the Fund Boston, MA 02205-9134
& Advisory Director
Heath B. McLendon This report is submitted for the general
Chief Executive Officer information of shareholders of Smith
Barney World Funds, Inc. -- Emerging
Lewis E. Daidone Markets, European and Pacific
Senior Vice President Portfolios. It is not authorized for
and Treasurer distribution to prospective investors
unless accompanied or preceded by an
Donald Elefson effective Prospectus for the Fund, which
Vice President contains information concerning the
Fund's investment policies and expenses
David Ishibashi as well as other pertinent information.
Vice President
Scott E. Kalb SMITH BARNEY
Vice President ------------
Bruce D. Sargent A Member of TravelersGroup[LOGO]
Vice President
Smith Barney
Rein W. van der Does World Funds, Inc.
Vice President Smith Barney Mutual Funds
388 Greenwich Street
Irving P. David New York, New York 10013
Controller
Christina T. Sydor www.smithbarney.com
Secretary
FDO1488 6/98
