<PAGE>
Smith Barney
World Funds, Inc.
Emerging Markets Portfolio
European Portfolio
Pacific Portfolio
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A N N U A L R E P O R T
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October 31, 1999
[LOGO OF SMITH BARNEY MUTUAL FUNDS]
NOT FDIC INSURED . NOT BANK GUARANTEED . MAY LOSE VALUE
<PAGE>
Smith Barney
World Funds, Inc.
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"While the e-commerce revolution is already booming in the U.S., the
international markets present enormous opportunities. Internet penetration is
much lower overseas than in the United States. With the rebound in global growth
and Asia emerging from its slump, we expect that other regions of the world may
begin to catch up with the United States in an effort to become more efficient
and more competitive."
Heath B. McLendon
Chairman
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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
Class L SEMLX
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
Class L SBELX
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 the
Pacific Rim.
NASDAQ SYMBOL
-------------
Class A SBPPX
Class B SBPFX
Class L SBPCX
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WHAT'S INSIDE
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A Message from the Chairman .............................................. 1
Emerging Markets Portfolio
Managers Commentary .................................................... 3
Historical Performance ................................................. 5
Portfolio at a Glance .................................................. 7
European Portfolio
Manager Commentary ..................................................... 8
Historical Performance ................................................. 10
Portfolio at a Glance .................................................. 12
Pacific Portfolio
Manager Commentary ..................................................... 13
Historical Performance ................................................. 15
Portfolio at a Glance .................................................. 17
Schedules of Investments ................................................. 18
Statements of Assets and Liabilities ..................................... 25
Statements of Operations ................................................. 26
Statements of Changes in Net Assets ...................................... 27
Notes to Financial Statements ............................................ 29
Financial Highlights ..................................................... 38
Independent Auditors' Report ............................................. 48
Tax Information .......................................................... 49
<PAGE>
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A Message from the Chairman
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Dear Shareholder:
The globalization of securities markets continues to accelerate. Economic growth
increased in Europe and Asia, with a great deal of corporate restructuring
taking place. A year ago, a major topic of discussion and possible concern was
the introduction of the Euro. (The Euro is the single currency of the European
Monetary Union that was adopted by Belgium, Germany, Spain, France, Ireland,
Italy, Luxembourg, the Netherlands, Austria, Portugal and Finland on January 1,
1999.)
[PHOTO]
HEATH B.
MCLENDON
Chairman
Twelve months later, the introduction of the Euro can be viewed as a success,
fostering lower inflation and interest rates throughout Western Europe.
Moreover, the Euro has contributed to the consolidation of businesses and the
creation of even stronger and more competitive European companies.
Last year, Asia was reeling under the impact of currency and banking problems,
and Japan was mired in economic stagnation. Today we see firsthand the amazing
resiliency of these economies as Asia returns to economic stability and growth
albeit at a slower, yet more sustainable, rate. Additionally, Japan has moved
decisively to turn around its struggling economy. Companies in Japan are
restructuring, instituting efficiencies and selling unprofitable divisions.
The globalization of financial markets has also continued as the New York Stock
Exchange and Nasdaq continue to a more foreign stocks for trading. Investors
have more investment options today than ever before as trading hours expand.
The Internet age has dawned. Increasingly sophisticated financial transactions
are being handled electronically with the click of a "mouse" regardless of
whether you are in New York, Buenos Aires or Timbuktu. Although near-term issues
persist, we believe that the development of the "Information Superhighway" will
remain a powerful driver of share prices.
The Internet is gaining millions of users monthly and many of these people will
become active on-line consumers. Moreover, Dell, a global computer systems
company, estimates that 15% of all U.S. Gross Domestic Product ("GDP") could
soon come from Internet electronic commerce. There is no shortage of companies
willing to provide the systems and services necessary to facilitate online
transactions. We expect e-commerce to represent an outstanding investment
opportunity as companies attempt to increase their productivity through online
sourcing and more direct distribution. E-commerce generally conjures up images
of consumers buying books or smaller items on the Internet; however, business-
to-business e-commerce is expanding as well. Traditional industrial
manufacturing companies are aggressively moving toward e-commerce as a means to
boost efficiency.
While the e-commerce revolution is already booming in the U.S., the
international markets present enormous opportunities. Internet penetration is
much lower overseas than in the United States. With the rebound in global growth
and Asia emerging from its slump, we expect that other regions of the world may
begin to catch up with the United States in an effort to become more efficient
and more competitive.
In this report, you will find specific market commentary and performance
information on the Smith Barney
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Smith Barney World Funds, Inc. 1
<PAGE>
World Funds, Inc. - Emerging Markets Portfolio, European Portfolio and Pacific
Portfolio beginning on page three.
Thank you for investing in our family of international funds. We remain
committed to providing our shareholders with competitive performance in the
years ahead, and look forward to serving your financial needs in the future.
Sincerely,
/s/ Heath B. McLendon
Heath B. McLendon
Chairman
November 16, 1999
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2 1999 Annual Report to Shareholders
<PAGE>
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Emerging Markets Portfolio
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Jeffrey J. Russell is a Managing Director of Salomon Smith Barney. 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.
[PHOTO OF JEFFREY J. RUSSELL]
JEFFREY J.
RUSSELL, CFA
Vice President
James B. Conheady has more than 35 years experience managing international and
global equity portfolios. He has been with the International Equity team since
its formation in 1968 at Drexel Burnham Lambert and moved to Salomon Smith
Barney in 1990. Mr. Conheady holds a B.S.S. degree from Georgetown University.
[PHOTO OF JAMES B. CONHEADY]
JAMES B. CONHEADY
Vice President
Performance Update
For the year ended October 31, 1999, the Emerging Markets Portfolio
("Portfolio") returned 28.45% for Class A shares without sales charges. In
comparison, the Portfolio's benchmark, the Morgan Stanley Capital International
Emerging Markets Free Index ("Index"), returned 41.81% for the same period. (The
a Emerging Markets Free Index, comprising equities in Brazil, Mexico, Korea,
Taiwan, India, South Africa and other countries in the emerging markets, is a
common benchmark against which the performance of emerging market funds is
measured.)
For information on the Portfolio's other share classes, please see page five.
Market Review
Emerging market stocks performed well compared to developed market stocks during
the past 12 months after a relatively dismal preceding five years. In our view,
the anxieties of 1998 have been alleviated by the prompt policy responses of
central banks. Additionally, ample financial liquidity helped to fuel recovery
in many troubled economies and drove financial market rallies.
The developing Asian stock markets turned in exceptional performances during the
Portfolio's fiscal year, led by renewed confidence in several of the smaller
markets. After several years of unremitting bad news from Asia, growth resumed
in many of the Asian economies such as Korea, Singapore, Taiwan and Thailand.
Currencies in the region stabilized allowing interest rates to decline in many
economies, and also caused a reallocation back to the stock markets by many
global investors. In addition, trade accounts have rebalanced in favor of Asia,
and the external debt position of many Asian countries has improved.
Investment Strategy
Our primary investment objective in selecting stocks is their capital
appreciation potential. We employ an extensive stock selection process using
rigorous fundamental analysis and exhaustive research. We first assess the
relative attractiveness of different emerging markets. After a thorough country
assessment is made, specific investment themes are identified. We believe that
by diversifying the Portfolio's investments across many emerging markets, we can
potentially reduce volatility compared to an investment in any one single
region.
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Smith Barney World Funds, Inc. 3
<PAGE>
The Emerging Markets Portfolio's composition shifted over its fiscal year as a
result of our increased commitment to select Asian stocks. Our regional position
at fiscal year-end was 21% in Europe, the Mile East and Africa, 54% in Asia-
Pacific, and 25% in Latin America.
We remain cautiously positioned in Latin America, given that the region is still
working through the adjustments that affected Asia two years ago. Mexico appears
well-positioned, although the Presidential elections in 2000 may moderate
returns from that country. Brazil's structural reform proceeds slowly, yet the
economy should certainly benefit from the rebound in global commodity prices.
European emerging markets enjoyed competitive returns during the period as
Russia and Turkey led the performance race following the debt debacle of last
year. We have relatively modest investments in Europe, the Mile East and Africa,
except for major commitments in South Africa, where we expect to benefit from
commodity price recoveries.
Market Outlook
For many years, large-capitalization, U.S. growth stocks have led global
financial markets. In recent months, however, international markets have assumed
leadership and provided strong absolute and relative returns. We think that the
opportunities over the next several years bode well for the performance of
emerging market stocks. Global economic recovery and low relative valuations are
positive for this asset class given the historic high correlation between global
growth and emerging market stock returns.
Japan, a major trading partner with emerging Asia, has embarked upon a major
restructuring program after many years of ineffective policies. The financial
system is being transformed, interest rates are at very low levels and
multinational companies have announced significant plans to lower expenses,
improve productivity and boost returns on invested capital. In our view, the
resurgence in Japan should bolster the recovery throughout the rest of Asia.
Our outlook with respect to emerging markets stocks, going forward, is one of
guarded optimism. Global economic growth is expected by many investment
professionals to accelerate in 2000, and the prices of commodities, which are
key exports for many emerging economies, have risen significantly.
Thank you for your confidence in our investment approach. We look forward to
helping you take advantage of the growing number of opportunities available in
today's global economy.
[SIGNATURES APPEAR HERE]
/s/ Jeffrey Russell /s/ James Conheady
Jeffrey Russell James Conheady
Vice President Vice President
November 16, 1999
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4 1999 Annual Report to Shareholders
<PAGE>
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EMERGING MARKETS PORTFOLIO
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Historical Performance -- Class A Shares
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Net Asset Value
--------------------
Beginning End Income Total
Year Ended of Year of Year Dividends Returns(1)
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10/31/99 $ 7.03 $ 9.03 $0.00 28.45%
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10/31/98 12.45 7.03 0.00 (43.53)
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10/31/97 12.08 12.45 0.00 3.06
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10/31/96 11.06 12.08 0.00 9.22
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Inception* -- 10/31/95 12.00 11.06 0.00 (7.83)+
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Total $0.00
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Historical Performance -- Class B Shares
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Net Asset Value
--------------------
Beginning End Income Total
Year Ended of Year of Year Dividends Returns(1)
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10/31/99 $ 6.85 $ 8.72 $0.00 27.30%
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10/31/98 12.21 6.85 0.00 (43.90)
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10/31/97 11.95 12.21 0.00 2.18
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10/31/96 11.02 11.95 0.00 8.44
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Inception* -- 10/31/95 12.00 11.02 0.00 (8.17)+
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Total $0.00
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Historical Performance -- Class L Shares
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Net Asset Value
--------------------
Beginning End Income Total
Year Ended of Year of Year Dividends Returns(1)
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10/31/99 $ 6.84 $ 8.71 $0.00 27.34%
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10/31/98 12.22 6.84 0.00 (44.03)
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10/31/97 11.95 12.22 0.00 2.26
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10/31/96 11.02 11.95 0.00 8.44
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Inception* -- 10/31/95 12.00 11.02 0.00 (8.17)+
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Total $0.00
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Smith Barney World Funds, Inc. 5
<PAGE>
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EMERGING MARKETS PORTFOLIO
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Historical Performance -- Class Y Shares
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Net Asset Value
--------------------
Beginning End Income Total
Year Ended of Year of Year Dividends Returns(1)
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10/31/99 $ 7.07 $ 9.12 $0.00 29.00%
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Inception* -- 10/31/98 12.16 7.07 0.00 (41.86)+
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Total $0.00
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It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
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Average Annual Total Returns
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Without Sales Charges(1)
--------------------------------------------------
Class A Class B Class L Class Y
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Year Ended 10/31/99 28.45% 27.30% 27.34% 29.00%
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Inception* through 10/31/99 (6.15) (6.88) (6.91) (16.05)
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With Sales Charges(2)
--------------------------------------------------
Class A Class B Class L Class Y
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Year Ended 10/31/99 22.03% 22.30% 25.05% 29.00%
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Inception* through 10/31/99 (7.22) (7.09) (7.11) (16.05)
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Cumulative Total Returns
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Without Sales Charges(1)
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Class A (Inception* through 10/31/99) (24.75)%
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Class B (Inception* through 10/31/99) (27.33)
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Class L (Inception* through 10/31/99) (27.42)
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Class Y (Inception* through 10/31/99) (25.00)
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(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 and L shares or the
applicable contingent deferred sales charge ("a") with respect to Class
B and L shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charge of 5.00% and 1.00%,
respectively; Class B shares reflect the deduction of a 5.00% CDSC, which
applies if shares are redeemed within one period from initial purchase.
Thereafter, this CDSC declines by 1.00% per year until no CDSC is incurred.
Class L shares also 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 L shares is May 12, 1995 and the
inception date for Class Y shares is March 10, 1998.
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6 1999 Annual Report to Shareholders
<PAGE>
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Emerging Markets Portfolio at a Glance (unaudited)
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Growth of $10,000 Invested in Class A, B and L Shares of the Emerging Markets
Portfolio vs. MSCI Emerging Markets Free Index+
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May 1995 -- October 1999
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
May 12 Oct Oct Oct Oct Oct 31,
1995 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
Emerging Markets Portfolio -- Class A Shares 9,501 8,757 9,565 10,375 5,566 7,150
Emerging Markets Portfolio -- Class B Shares 10,000 8,724 9,560 9,875 5,594 7,194
Emerging Markets Portfolio -- Class L Shares 10,000 9,092 9,958 10,183 5,644 7,187
MSCI Emerging Markets Free World Market Index 10,000 9,453 9,861 8,844 5,936 7,611
</TABLE>
+ Hypothetical illustration of $10,000 invested in Class A, B and L 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 L shares. It also assumes
reinvestment of dividends and capital gains, if any, at net asset value
through October 31, 1999. The Morgan Stanley Capital International ("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. The index
is unmanaged and is not subject to the same management and trading expenses
as a mutual fund. An investor cannot invest directly in an index.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption values may be more or less than the original cost. No adjustment
has been made for shareholder tax liability on dividends or capital gains.
Top Ten Holdings* As of October 31, 1999
- -------------------------------------------------------------
1. Trigem Computer Inc. 6.3%
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2. Telefonos de Mexico SA ADR, Series L 5.5
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3. Malayan Banking Berhad 4.9
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4. Berjaya Sports Toto Berhad 3.5
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5. Hon Hai Precision Industry Co. Ltd. 3.4
- -------------------------------------------------------------
6. Grupo Televisa SA GDR 3.0
- -------------------------------------------------------------
7. Yapi Ve Kredi Bankasi AS 2.7
- -------------------------------------------------------------
8. Taiwan Semiconductor Manufacturing Co. 2.7
- -------------------------------------------------------------
9. Uniao de Bancos Brasileiros SA GDR 2.6
- -------------------------------------------------------------
10. Comverse Technology Inc. 2.5
- -------------------------------------------------------------
* As a percentage of total investments.
Investment Allocation as of October 31, 1999*
- -------------------------------------------------------------
[PIE CHART]
10.2% Africa
11.4% Europe
53.5% Asia/Pacific
24.9% Latin America
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Smith Barney World Funds, Inc. 7
<PAGE>
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European Portfolio
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Portfolio Manager
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
Salomon 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.
[PHOTO APPEARS HERE]
REIN W.
VAN DER DOES
Vice President
Performance Update
The European Portfolio ("Portfolio") posted a total return of 18.02% for Class A
shares, before the deduction of any sales charges, for the year ended October
31, 1999. In comparison, the Portfolio's benchmark, the Morgan Stanley Capital
International European Market Index ("Index"), had a total return of 12.52%. For
performance information on the Portfolio's other classes, please refer to page
ten.
Market Review
As many investment professionals expected, on November 4, 1999, the European
Central Bank (ECB) raised the discount rate by 0.5%. In our view, the ECB seems
to be well ahead of the interest rate curve, as inflation in Europe remains very
subdued. Despite a heavy stock issuance calendar in October 1999, the European
markets got a boost from better-than-anticipated corporate earnings as well as
the tremendous growth in merger and acquisition ("M&A") activity. Total third
quarter 1999 M&A activity was larger in Europe than in the U.S. for the first
time in ten years.
Since the start of 1999, the European Portfolio rose 14.9% versus the 4.1%
return for the Morgan Stanley European Index over the same period. Information
technology services, telecommunications, pharmaceuticals and insurance were the
top performing sectors, while steel, real estate, tobacco, water, brewers and
restaurants were the worst performing sectors. Large-cap stocks continue to be
favored over small-cap stocks in most European countries. Some of the small
Internet stocks listed on the five Euro New Markets (i.e., 315 companies listed
with total market cap of $66 billion) performed well. Market leadership came
from financials and the growth sector, while most cyclicals lagged behind the
major averages.
The introduction of the Euro in January 1999 eliminated many country-specific
risk factors and promoted a shift from country to sector-based investment
strategies, resulting in the development of new European stock indices. As a
result, many large-sized European pension funds have, or have begun to,
rebalance their European portfolios, a development that could accelerate the
trend of investors gravitating to large-capitalization stocks.
Investment Strategy
In the European Portfolio, we use a "bottom-up" investment approach, evaluating
individual companies rather than investment trends. While economic cycles are
important considerations when evaluating a company's outlook, we generally
search for promising European companies with excellent growth prospects
regardless of the macroeconomic conditions affecting the region. And while no
guarantees can be made, we believe our "bottom-up" strategy can provide
investors with competitive returns over the long term.
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8 1999 Annual Report to Shareholders
<PAGE>
We are positive on European stocks, going forward, in light of the many exciting
changes taking place in the region and because of its relative undervaluation
and the lackluster performance of European stock markets versus the U.S. stock
market over the last few years.
In general, we continue to overweight the service sector (i.e., outsourcing of
information technology as well as catering), telecommunications and growth
stocks and underweight basic materials and financials (preferably insurance over
banking). Geographically, we are overweight in continental Europe and remain
underweighted in the UK. In our view, Britain's decision to stay out of the
European Monetary Union may hurt its growth prospects and the relatively strong
British pound versus the Euro should penalize corporate profits.
Market Outlook
We think that the European economy may be on the verge of stronger-than-
anticipated growth for the remainder of 1999. Our bullish outlook is based in
part upon strong incoming orders and higher business confidence in Germany,
lower unemployment and growing consumer confidence in France and a government
budget surplus in Italy. At this stage, the consensus for economic growth in
Europe is around 2.0% in 1999 (from 2.7% in 1998) and a strong 3.1% annual
growth rate next year. Inflation is anticipated to rise slightly from 1.1% this
year to 1.4% in 2000 (3% in the UK). We believe these favorable economic
conditions in Europe - combined with heavy corporate restructuring - should
result in healthy corporate earnings in the years ahead. While our analysts
estimate that the earnings of the Standard & Poor's 500 Stock Index may rise 5%
in 2000, the consensus for Europe (ex-UK) is an 18% rise for 1999 and a 15%
increase in 2000. (The Standard & Poor's 500 Index ("S&P 500") is a widely
recognized, unmanaged index of the prices of 500 widely held U.S. stocks that
includes reinvestment of dividends and capital gains.)
We are also bullish on European stocks primarily because of:
. The creation of the European Monetary Union on January 1, 1999 which has
resulted in greater deregulation, privatization, restructuring and
merger/acquisitions;
. The introduction of one currency, the Euro, that has increased price
transparency and effectively lowered inflation;
. The development of a stock culture through inexpensively priced
privatization offerings, stock options and corporate share buybacks; and
. The commitment on the part of many European companies to enhance
shareholder value.
Within these changing market conditions, prudent stock picking will be critical.
Stock price valuations in Europe are much less expensive than in the U.S. For
example, Europe is selling at 10.4x 2000 price/cash flow, while the U.S. is at
15.5x. Europe's average dividend yield is around 2.1% versus only 1.3% in the
U.S. Based on price/book value, Europe also is much cheaper, 3.0x versus 4.1x in
the U.S. In our view, these factors make a compelling case for investing in
European stocks.
Thank you for your investment in the European Portfolio. We look forward to
bringing you European stock opportunities in the coming years.
[SIGNATURE APPEARS HERE]
Rein W. van der Does
Vice President
November 16, 1999
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Smith Barney World Funds, Inc. 9
<PAGE>
- --------------------------------------------------------------------------------
EUROPEAN PORTFOLIO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Historical Performance -- Class A Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
-------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
<S> <C> <C> <C> <C> <C>
====================================================================================
10/31/99 $19.44 $22.58 $0.00 $0.33 18.02%
- ------------------------------------------------------------------------------------
10/31/98 18.23 19.44 0.00 0.39 9.10
- ------------------------------------------------------------------------------------
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 $1.92
====================================================================================
<CAPTION>
- ------------------------------------------------------------------------------------
Historical Performance -- Class B Shares
- ------------------------------------------------------------------------------------
Net Asset Value
-------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
<S> <C> <C> <C> <C> <C>
====================================================================================
10/31/99 $18.95 $21.83 $0.00 $0.33 17.10%
- ------------------------------------------------------------------------------------
10/31/98 17.92 18.95 0.00 0.39 8.24
- ------------------------------------------------------------------------------------
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 $1.92
====================================================================================
<CAPTION>
- ------------------------------------------------------------------------------------
Historical Performance -- Class L Shares
- ------------------------------------------------------------------------------------
Net Asset Value
-------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
<S> <C> <C> <C> <C> <C>
====================================================================================
10/31/99 $18.91 $21.79 $0.00 $0.33 17.14%
- ------------------------------------------------------------------------------------
10/31/98 17.86 18.91 0.00 0.39 8.38
- ------------------------------------------------------------------------------------
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 $1.92
====================================================================================
</TABLE>
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
- --------------------------------------------------------------------------------
10 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
EUROPEAN PORTFOLIO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Average Annual Total Returns
- --------------------------------------------------------------------------------
Without Sales Charges(1)
-------------------------------------------------
Class A Class B Class L
================================================================================
Year Ended 10/31/99 18.02% 17.10% 17.14%
- --------------------------------------------------------------------------------
Five Years Ended 10/31/99 14.46 N/A 13.64
- --------------------------------------------------------------------------------
Inception* through 10/31/99 13.09 14.10 12.38
================================================================================
With Sales Charges(2)
-------------------------------------------------
Class A Class B Class L
================================================================================
Year Ended 10/31/99 12.14% 12.10% 14.97%
- --------------------------------------------------------------------------------
Five Years Ended 10/31/99 13.29 N/A 13.41
- --------------------------------------------------------------------------------
Inception* through 10/31/99 12.08 13.98 12.18
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Cumulative Total Returns
- --------------------------------------------------------------------------------
Without Sales Charges(1)
================================================================================
Class A (Inception* through 10/31/99) 102.41%
- --------------------------------------------------------------------------------
Class B (Inception* through 10/31/99) 92.95
- --------------------------------------------------------------------------------
Class L (Inception* through 10/31/99) 94.81
================================================================================
(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 and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to Class
B and L shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charge of 5.00% and 1.00%,
respectively; 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 L shares also 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 L shares are February 7, 1994, November
7, 1994 and February 14, 1994, respectively.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 11
<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+
- --------------------------------------------------------------------------------
February 1994 -- October 1999
[GRAPH]
European Portfolio MSCI European Index
Feb 7 1994 9,545 10,000
Oct-94 9,840 10,064
Oct-95 11,207 11,393
Oct-96 13,298 13,383
Oct-97 15,010 16,861
Oct-98 16,377 20,812
Oct-99 19,328 23,417
+ Hypothetical illustration of $10,000 invested in Class A shares at
inception on February 7, 1994, assuming deduction of the maximum 4.50%
sales charge at the time of investment and the reinvestment of dividends
and capital gains, if any, at net asset value through October 31, 1999. 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. An investor
cannot invest directly in an index.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption values may be more or less than the original cost. No adjustment
has been made for shareholder tax liability on dividends or capital gains.
Top Ten Holdings* As of October 31, 1999
- -----------------------------------------------------------------------------
1. Nokia Oyj 9.5%
- -----------------------------------------------------------------------------
2. CMG PLC 5.5
- -----------------------------------------------------------------------------
3. Mannesmann AG 5.4
- -----------------------------------------------------------------------------
4. BP Amoco PLC ADR 4.7
- -----------------------------------------------------------------------------
5. Tomra Systems ASA 4.5
- -----------------------------------------------------------------------------
6. Schering AG 4.1
- -----------------------------------------------------------------------------
7. Axa 3.3
- -----------------------------------------------------------------------------
8. Telefonica SA 3.2
- -----------------------------------------------------------------------------
9. SEMA Group PLC 3.0
- -----------------------------------------------------------------------------
10. Compass Group PLC 3.0
- -----------------------------------------------------------------------------
* As a percentage of total investments.
Investment Allocation as of October 31, 1999*
- --------------------------------------------------------------------------------
[CHART]
4.7% Switzerland
6.6% Other
25.3% France
5.4% Norway
6.1% Spain
13.5% Germany
10.9% Finland
16.3% United Kingdom
11.2% Netherlands
- --------------------------------------------------------------------------------
12 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Pacific Portfolio
- --------------------------------------------------------------------------------
Portfolio Manager
David Ishibashi joined Smith Barney International Equity team as a Vice
President and Portfolio Manager in 1993. Mr. Ishibashi came to Salomon 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 established the Nomura Finance
Collection at the Crocker School of Business and Business Library. Prior to
that, he served as a financial analyst at Rockwell International. Mr. Ishibashi
has a B.A. from California State College at Los Angeles and attended the post-
graduate studies program in Tokyo at the Inter-Cultural Japanese Language
Institute.
[PHOTO]
DAVID ISHIBASHI
Vice President
Performance Update
For the year ended October 31, 1999, the Smith Barney World Funds - Pacific
Portfolio returned 75.33% for Class A shares without sales charges. In
comparison, the Portfolio's benchmark Morgan Stanley Capital International
("MSCI") All Country Asia Pacific Index returned 54.22% 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.)
For information on the Portfolio's other share classes, please see page 15.
Market Review
In our view, Asia's economic recovery is well underway, albeit with a few new
twists and turns, and has been led primarily by Japan. Our general optimism for
Asia (ex-Japan) remains, and we have reallocated a portion of the Fund's assets
to Japan given its current attractiveness. Although doubts and questions may
still linger over Japan, we think there have been clear signs lately that many
investors can differentiate the forest of the stock market from the trees of
individual companies.
Japan is making significant progress, both on a governmental level as well as on
a corporate level. Japan's bureaucracy is deregulating its old laws in earnest
and creating new ones to replace them at a surprising rate. We are pleased to
report that the Pacific Portfolio has benefited from these structural changes in
Japan.
We think the strong relative performance of the Pacific region reflects growing
recognition on the part of many investors of structural changes and cyclical
recovery in many of its economies. The region appears to be awakening from its
lengthy torpor and the Japanese stock market has been one of the best global
performers so far this year. In our view, a combination of strong government
policies and cost-cutting and streamlining of multinational Japanese
corporations has increased our optimism about the region's long-term investment
prospects.
Investment Strategy
We employ a "bottom-up" investment strategy, emphasizing individual security
selection, while optimally allocating the Fund's assets among companies in the
Asia Pacific region. Our stock
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 13
<PAGE>
selection process involves exhaustive analyses of companies' fundamentals, in
which we look for certain criteria such as above-average earnings growth, high
relative return on invested capital, experienced and effective management and
competitive advantages (i.e., high market share or special licenses and
patents). We also actively monitor and evaluate economic and political
conditions in the region that may affect the companies in which we invest.
Because it is the largest nursing care outsourcing company listed on the Tokyo
Stock Exchange, Nichii Gakkan was added to the portfolio during the period. To
capitalize on the trend of Japan's revitalized economy, we intend to increase
our exposure in the information technology (IT) and office automation
industries. Pasona Softbank, a listed subsidiary of Softbank (i.e., the Internet
super-company), was also added during the period. Pasona Softbank is one of the
few Japanese IT personnel placement company opportunities available in the
market today.
As for Asia (ex-Japan), the Fund's Hong Kong weightings remained unchanged
during the period. Yet, we did pare back on our positions in Korea and Australia
and we increased our weightings in Taiwan. We became a bit more cautious on the
Korean market, so we sold our holding in Dongwon, a food processing company, as
well as roughly cut in half our position in SK Telecom, a cellular provider and
nationwide paging service. In Australia, we sold Westfield, the retailer and
Lendlease, the real estate project management company.
In Taiwan, two new companies were added to the Fund's portfolio -- Synnex, an IC
producer, and Ritek, the world leader in opto-magnetic disc manufacturing (i.e.,
CDs, CD-ROMs and DVD blank discs). The effects of the devastating earthquake in
Taiwan that killed more than 2,000 people and caused billions in monetary damage
did not affect the Pacific Portfolio as much as we expected. None of the
companies we owned were severely damaged or incapacitated due to the quake. One
major disruption in Taiwan was the closing of the stock exchange for the week, a
policy adopted by the Taiwanese government to prevent a massive sell-off in the
market.
Market Outlook
As previously noted, we remain optimistic that the Asian recovery will continue
into 2000 and will be led by Japan's ongoing economic recovery. We plan on
remaining heavily invested in Japan and we also intend to a to our positions in
Hong Kong and Korea when those markets finally show signs of stabilizing.
Thank you for investing in the Pacific Portfolio. We look forward to continuing
to help you pursue your investment goals.
/s/ David Ishibashi
David Ishibashi
Vice President
November 16, 1999
- --------------------------------------------------------------------------------
14 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
PACIFIC PORTFOLIO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Historical Performance -- Class A Shares
- --------------------------------------------------------------------------------
Net Asset Value
---------------------
Beginning End Income Total
Year Ended of Year of Year Dividends Returns(1)
================================================================================
10/31/99 $ 6.73 $11.80 $0.00 75.33%
- --------------------------------------------------------------------------------
10/31/98 8.46 6.73 0.00 (20.45)
- --------------------------------------------------------------------------------
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
================================================================================
- --------------------------------------------------------------------------------
Historical Performance -- Class B Shares
- --------------------------------------------------------------------------------
Net Asset Value
---------------------
Beginning End Income Total
Year Ended of Year of Year Dividends Returns(1)
================================================================================
10/31/99 $ 6.51 $11.31 $0.00 73.73%
- --------------------------------------------------------------------------------
10/31/98 8.25 6.51 0.00 (21.09)
- --------------------------------------------------------------------------------
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
================================================================================
- --------------------------------------------------------------------------------
Historical Performance -- Class L Shares
- --------------------------------------------------------------------------------
Net Asset Value
---------------------
Beginning End Income Total
Year Ended of Year of Year Dividends Returns(1)
================================================================================
10/31/99 $ 6.48 $11.27 $0.00 73.92%
- --------------------------------------------------------------------------------
10/31/98 8.21 6.48 0.00 (21.07)
- --------------------------------------------------------------------------------
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
================================================================================
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 15
<PAGE>
- --------------------------------------------------------------------------------
PACIFIC PORTFOLIO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Average Annual Total Returns
- --------------------------------------------------------------------------------
Without Sales Charges(1)
---------------------------------------------------
Class A Class B Class L
================================================================================
Year Ended 10/31/99 75.33% 73.73% 73.92%
- --------------------------------------------------------------------------------
Five Years Ended 10/31/99 (1.80) N/A (2.61)
- --------------------------------------------------------------------------------
Inception* through 10/31/99 (1.00) (2.21) (1.79)
================================================================================
With Sales Charges(2)
---------------------------------------------------
Class A Class B Class L
================================================================================
Year Ended 10/31/99 66.67% 68.73% 71.06%
- --------------------------------------------------------------------------------
Five Years Ended 10/31/99 (2.80) N/A (2.80)
- --------------------------------------------------------------------------------
Inception* through 10/31/99 (1.89) (2.40) (1.97)
================================================================================
- --------------------------------------------------------------------------------
Cumulative Total Returns
- --------------------------------------------------------------------------------
Without Sales Charges(1)
================================================================================
Class A (Inception* through 10/31/99) (5.60)%
- --------------------------------------------------------------------------------
Class B (Inception* through 10/31/99) (10.52)
- --------------------------------------------------------------------------------
Class L (Inception* through 10/31/99) (9.84)
================================================================================
(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 and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to Class
B and L shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charge of 5.00% and 1.00%,
respectively; 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 L shares also 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 L shares are February 7, 1994, November
7, 1994 and February 11, 1994, respectively.
- --------------------------------------------------------------------------------
16 1999 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+
- --------------------------------------------------------------------------------
February 1994 -- October 1999
[GRAPH]
Pacific Portfolio MSCI All Country Asia Pacific Index
7-Feb-94 9,549 10,000
Apr-94 9,465 10,012
Oct-94 9,870 10,716
Apr-95 8,121 10,248
Oct-95 7,693 9,438
Apr-96 8,579 11,076
Oct-96 7,777 9,650
Apr-97 8,289 8,873
Oct-97 6,463 7,703
Apr-98 5,821 7,040
Oct-98 5,141 6,634
30-Apr-98 6,440 8,615
+ Hypothetical illustration of $10,000 invested in Class A shares at
inception on February 7, 1994, assuming deduction of the maximum 4.50%
sales charge at the time of investment and the reinvestment of dividends
and capital gains, if any, at net asset value through October 31, 1999. 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. An investor cannot invest directly in an index.
The performance of the Portfolio's other classes may be greater or less
than the Class A shares' performance indicated on this chart, depending on
whether greater or lesser sales charges and fees were incurred by
shareholders investing in the other classes.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption values may be more or less than the original cost. No adjustment
has been made for shareholder tax liability on dividends or capital gains.
Top Ten Holdings* As of October 31, 1999
- --------------------------------------------------------------------------------
1. Trend Micro, Inc. 8.4%
- --------------------------------------------------------------------------------
2. Drake Beam Morin - Japan Inc. 8.1
- --------------------------------------------------------------------------------
3. Murata Manufacturing Co., Ltd. 4.8
- --------------------------------------------------------------------------------
4. NICHII GAKKAN CO. 4.6
- --------------------------------------------------------------------------------
5. NTT Data Corp. 4.5
- --------------------------------------------------------------------------------
6. Nippon Telegraph & Telephone Corp. 4.3
- --------------------------------------------------------------------------------
7. Japan Telecom Co., Ltd. 3.5
- --------------------------------------------------------------------------------
8. Sony Corp. 3.5
- --------------------------------------------------------------------------------
9. Seven-Eleven Japan Co., Ltd. 3.4
- --------------------------------------------------------------------------------
10. Star Cruises PLC 3.0
- --------------------------------------------------------------------------------
* As a percentage of total investments.
Investment Allocation as of October 31, 1999*
- --------------------------------------------------------------------------------
[CHART]
1.8% Other
2.6% Hong Kong
5.9% Singapore
4.9% South Korea
7.4% Taiwan
3.3% Australia
74.1% Japan
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 17
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments October 31, 1999
- --------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO
SHARES SECURITY VALUE
================================================================================
STOCK -- 100%
Brazil -- 12.1%
26,900 Comphania Cervejaria Brahma ADR $ 336,250
20,700 Petroleo Brasileiro SA ADR (a) 330,854
17,100 Tele Norte Leste Participacoes SA ADR 288,562
2,700 Telecomunicacoes Brasileiras SA ADR (b) 127
2,700 Telecomunicacoes Brasileiras SA ADR, Preferred 210,263
7,000 Telesp Particpacoes SA ADR 113,313
15,200 Uniao de Bancos Brasileiros SA GDR 351,500
- --------------------------------------------------------------------------------
1,630,869
- --------------------------------------------------------------------------------
Greece -- 4.9%
2,531 Alpha Credit Bank SA 193,560
8,600 Hellenic Telecommunications Organization SA 182,235
3,887 National Bank of Greece SA 278,682
- --------------------------------------------------------------------------------
654,477
- --------------------------------------------------------------------------------
Hong Kong -- 1.0%
2,000 China Telecom Ltd. ADR (b) 135,000
- --------------------------------------------------------------------------------
Hungary -- 1.6%
7,500 Magyar Tavkozlesi Rt. ADR 216,094
- --------------------------------------------------------------------------------
India -- 1.3%
5,900 Pentafour Software & Exports Ltd. GDR(b) 168,150
- --------------------------------------------------------------------------------
Indonesia -- 2.4%
9,200 PT Indosat ADR 146,625
383,400 PT Telekomunikasi Indonesia 182,571
- --------------------------------------------------------------------------------
329,196
- --------------------------------------------------------------------------------
Israel -- 5.4%
3,000 Comverse Technology Inc. (b) 340,500
4,900 Gilat Satellite Networks Ltd. (b) 255,413
2,800 Teva Pharmaceutical Industries Ltd. ADR 135,100
- --------------------------------------------------------------------------------
731,013
- --------------------------------------------------------------------------------
Malaysia -- 8.3%
215,000 Berjaya Sports Toto Berhad 466,862
194,000 Malayan Banking Berhad 658,700
- --------------------------------------------------------------------------------
1,125,562
- --------------------------------------------------------------------------------
Mexico -- 12.8%
195,680 Cifra SA de CV, Series V (b) 305,531
30,000 Grupo Carso SA de CV, Series A-1 (b) 125,201
9,450 Grupo Televisa SA GDR (b) 401,625
8,700 Telefonos de Mexico SA ADR, Series L 743,850
14,000 Tubos de Acero de Mexico SA ADR (a) 153,125
- --------------------------------------------------------------------------------
1,729,332
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
18 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1999
- --------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO
SHARES SECURITY VALUE
================================================================================
Philippines -- 1.0%
784,000 SM Prime Holdings Inc. $ 138,640
- --------------------------------------------------------------------------------
Poland -- 2.2%
51,350 Budimex SA (b) 290,821
- --------------------------------------------------------------------------------
Singapore -- 1.0%
8,000 Singapore Press Holdings Ltd. 137,036
- --------------------------------------------------------------------------------
South Africa -- 10.2%
5,000 Anglo American Platinum Corp. Ltd. 144,020
17,344 Bidvest Group Ltd. 125,882
41,232 Dimension Data Holdings Ltd. (b) 199,953
1,606 The Education Investment Corp. Ltd. 1,061
15,600 Fedsure Holdings Ltd. 104,466
8,000 Investec Group Ltd. 281,725
635,500 Iscor Ltd. (b) 246,133
7,222 Nedcor Ltd. (a) 141,971
20,000 Sasol Ltd. 137,673
- --------------------------------------------------------------------------------
1,382,884
- --------------------------------------------------------------------------------
South Korea -- 17.9%
7,200 Housing & Commercial Bank of Korea 190,279
5,750 Korea Electric Power Corp. 168,258
3,700 Korea Telecom Corp. 248,929
3,700 Korea Telecom Corp. ADR (b) 130,425
8,600 Pohang Iron & Steel Co. Ltd. ADR 287,025
13,900 Samsung Corp. (b) 220,175
24,790 SK Telecom Co. Ltd. ADR 323,819
11,427 Trigem Computer Inc. 850,714
- --------------------------------------------------------------------------------
2,419,624
- --------------------------------------------------------------------------------
Taiwan -- 12.2%
59,800 Cathay Life Insurance Co. Ltd. 154,493
133,350 China Motor Co. Ltd. 162,591
67,200 Hon Hai Precision Industry Co. Ltd. (b) 459,433
67,260 President Chain Store Corp. 189,658
82,410 Taiwan Semiconductor Manufacturing Co. (b) 366,094
173,000 Winbond Electronics Corp. (b) 316,131
- --------------------------------------------------------------------------------
1,648,400
- --------------------------------------------------------------------------------
Thailand -- 3.0%
58,000 Italian-Thai Development Public Co. Ltd. 68,744
280,000 National Finance Public Co. Ltd. (a) 99,596
169,000 Thai Farmers Bank Public Co. Ltd. 238,614
- --------------------------------------------------------------------------------
406,954
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 19
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1999
- --------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------
Turkey -- 2.7%
3,154,500 Yapi Ve Kredi Bankasi A.S. $ 367,435
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $10,803,276*) $ 13,511,487
================================================================================
(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.
- --------------------------------------------------------------------------------
20 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1999
- --------------------------------------------------------------------------------
EUROPEAN PORTFOLIO
SHARES SECURITY VALUE
================================================================================
STOCK -- 100%
Austria -- 0.9%
12,000 VA Technologie AG $ 801,825
- --------------------------------------------------------------------------------
Finland -- 10.9%
260,000 Fortum Corp. (a) 1,257,121
70,000 Nokia Oyj 8,085,038
- --------------------------------------------------------------------------------
9,342,159
- --------------------------------------------------------------------------------
France -- 25.3%
10,000 Alcatel 1,560,890
20,000 Atos S.A. (a)(b) 2,560,491
20,000 Axa 2,819,063
25,000 Banque Nationale de Paris 2,194,181
15,000 Cap Gemini S.A. 2,270,386
10,000 Coflexip S.A. 788,329
5,000 Danone 1,274,464
10,391 Guilbert S.A. 1,548,744
45,000 Rhone-Poulenc S.A. 2,516,345
35,000 Schlumberger Ltd. (b) 2,119,687
20,000 Sidel S.A. (a) 1,997,099
- --------------------------------------------------------------------------------
21,649,679
- --------------------------------------------------------------------------------
Germany -- 13.5%
21,104 DaimlerChrysler AG 1,643,724
30,000 Mannesmann AG 4,625,912
4,000 SAP AG (b) 1,724,653
30,000 Schering AG 3,541,172
- --------------------------------------------------------------------------------
11,535,461
- --------------------------------------------------------------------------------
Ireland -- 1.2%
50,000 CBT Group Public Ltd. Co. ADR (b) 1,031,250
- --------------------------------------------------------------------------------
Italy -- 3.3%
800,000 Istituto Nazionale delle Assicurazioni S.p.A. (a) 2,427,631
800,000 Unione Immobiliare S.p.A. (a) 410,772
- --------------------------------------------------------------------------------
2,838,403
- --------------------------------------------------------------------------------
Netherlands -- 11.2%
75,034 Fugro NV 2,523,795
43,116 Hunter Douglas NV 1,166,975
41,592 IHC Caland NV 1,803,349
41,235 ING Groep NV 2,430,636
60,526 Koninklijke Ahrend NV 830,230
50,640 Vedior NV 851,647
- --------------------------------------------------------------------------------
9,606,632
- --------------------------------------------------------------------------------
Norway -- 5.4%
50,000 Orkla ASA, Class A Shares 697,932
7,142 Orkla ASA Rights (b) 94,002
100,000 Tomra Systems ASA 3,824,287
- --------------------------------------------------------------------------------
4,616,221
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 21
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1999
- --------------------------------------------------------------------------------
EUROPEAN PORTFOLIO
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------
Spain -- 6.1%
7,000 Amadeus Global Travel Distribution S.A.,
Class A Shares (b) $ 41,865
100,000 Amper S.A. 779,920
122,500 Azkoyen S.A. 1,187,170
39,000 Indra Sistemas S.A. 409,521
167,295 Telefonica S.A. (b) 2,750,209
- --------------------------------------------------------------------------------
5,168,685
- --------------------------------------------------------------------------------
Sweden -- 1.2%
150,000 Mandator AB 1,028,744
- --------------------------------------------------------------------------------
Switzerland -- 4.7%
51,000 Mettler-Toledo International Inc. (b) 1,520,438
1,664 Novartis AG 2,489,939
- --------------------------------------------------------------------------------
4,010,377
- --------------------------------------------------------------------------------
United Kingdom -- 16.3%
70,000 BP Amoco PLC ADR (a) 4,042,500
120,000 CMG PLC 4,674,609
240,000 Compass Group PLC 2,579,502
200,000 SEMA Group PLC 2,605,756
- --------------------------------------------------------------------------------
13,902,367
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $60,538,469*) $ 85,531,803
================================================================================
(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.
- --------------------------------------------------------------------------------
22 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1999
- --------------------------------------------------------------------------------
PACIFIC PORTFOLIO
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------
STOCK -- 100%
Australia -- 3.3%
2,100 Brambles Industries Ltd. $ 59,021
28,600 Computershare Ltd. (a) 103,892
91,000 LibertyOne Ltd. (a) 112,509
12,656 Telstra Corp. Ltd. (a) 64,339
4,171 Telstra Corp. Ltd. (b) 13,371
- --------------------------------------------------------------------------------
353,132
- --------------------------------------------------------------------------------
Hong Kong -- 2.6%
487 Cable & Wireless HKT Ltd. 1,112
3,748 HSBC Holdings PLC 44,983
8,600 Hutchison Whampoa Ltd. 86,338
91,000 Shaw Brothers Ltd. 81,988
7,440 Sun Hung Kai Properties Ltd. 60,088
- --------------------------------------------------------------------------------
274,509
- --------------------------------------------------------------------------------
Japan -- 74.1%
7,000 Canon, Inc. 197,873
3,000 Drake Beam Morin - Japan Inc. 868,148
1,000 Hirose Electric Co., Ltd. 174,300
4,000 Hosiden Corp. 151,399
3,000 Ito-Yokado Co., Ltd. 239,747
11 Japan Telecom Co., Ltd. 377,348
500 Kao Corp. 15,235
4,000 Murata Manufacturing Co., Ltd. 513,607
3,000 NICHII GAKKAN CO. 488,692
106,000 Nippon Steel Corp. 269,165
30 Nippon Telegraph & Telephone Corp. 459,946
30 NTT Data Corp. 474,319
4,000 Pasona Softbank, Inc. 260,637
8,000 Sailor Pen Co., Ltd. (a) 129,552
34,000 Sekisui Chemical Co., Ltd. 167,133
13,000 Sekisui House, Ltd. 140,639
4,000 Seven-Eleven Japan Co., Ltd. (c) 366,040
500 Shohkoh Fund & Co. 305,673
2,400 Sony Corp. 373,937
16,000 Sumitomo Bank, Ltd. 257,264
4,000 Takeda Chemical Industries, Ltd. 229,590
5,000 Terumo Corp. 151,879
13,000 Tokio Marine & Fire Insurance Co., Ltd. 170,037
10,000 Tostem Corp. 223,745
4,500 Trend Micro, Inc. (a)(c) 892,584
- --------------------------------------------------------------------------------
7,898,489
- --------------------------------------------------------------------------------
New Zealand -- 0.9%
24,000 Telecom Corp. of New Zealand Ltd. (c) 96,461
- --------------------------------------------------------------------------------
Philippines -- 0.6%
364,000 SM Prime Holdings 64,368
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 23
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1999
- --------------------------------------------------------------------------------
PACIFIC PORTFOLIO
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------
Singapore -- 5.9%
12,300 City Developments Ltd. $ 63,578
39,139 Datacraft Asia Ltd. 180,040
17,200 Natsteel Electronics Ltd. (c) 67,195
37,000 Star Cruises PLC (c) 314,500
- --------------------------------------------------------------------------------
625,313
- --------------------------------------------------------------------------------
South Korea -- 4.9%
4,000 Hanaro Telecom, Inc. (a) 65,027
4,100 Kookmin Bank 63,919
2,500 Korea Electric Power Corp. 73,155
1,600 Korea Telecom Corp. 107,645
3,150 Pohang Iron & Steel Co., Ltd. ADR 105,131
6,500 Samsung Corp. (a) 102,959
- --------------------------------------------------------------------------------
517,836
- --------------------------------------------------------------------------------
Taiwan -- 7.4%
27,600 Cathay Life Insurance Co., Ltd. 71,304
25,480 Hon Hai Precision Industry 174,202
15,600 Ritek Corp. GDR (a) 208,260
11,000 Synnex Technolgy GDR 217,525
25,830 Taiwan Semiconductor Manufacturing Co. 114,746
- --------------------------------------------------------------------------------
786,037
- --------------------------------------------------------------------------------
Thailand -- 0.3%
112,000 National Finance Public Co., Ltd. (a) 39,839
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $6,108,119*) $ 10,655,984
================================================================================
(a) Non-income producing security.
(b) Installment receipt.
(c) A portion of this security is on loan (See Note 9).
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
24 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Emerging
Markets European Pacific
Portfolio Portfolio Portfolio
==================================================================================================================
ASSETS:
<S> <C> <C> <C>
Investments, at cost $ 10,803,276 $ 60,538,469 $ 6,108,119
Foreign currency, at cost 281,964 447 175,945
==================================================================================================================
Investments, at value $ 13,511,487 $ 85,531,803 $ 10,655,984
Foreign currency, at value 288,251 436 174,368
Cash -- -- 2,020,642
Collateral for securities on loan (Note 9) 555,669 8,633,625 859,225
Receivable for securities sold 185,000 85,975 37,669
Dividends and interest receivable 20,706 40,322 10,505
Receivable for Fund shares sold 1,821 16,612 265,423
Receivable from manager -- -- 42,860
Receivable for open forward foreign currency contracts (Note 4) -- 1,147 8
- ------------------------------------------------------------------------------------------------------------------
Total Assets 14,562,934 94,309,920 14,066,684
- ------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities on loan (Note 9) 555,669 8,633,625 859,225
Payable to bank 201,962 163,535 --
Payable for Fund shares purchased 17,620 4,250,561 220,845
Management fees payable 9,961 55,508 --
Distribution fees payable 5,271 13,079 5,552
Payable for open forward foreign currency contracts (Note 4) -- -- 132
Accrued expenses 36,560 76,014 67,179
- ------------------------------------------------------------------------------------------------------------------
Total Liabilities 827,043 13,192,322 1,152,933
- ------------------------------------------------------------------------------------------------------------------
Total Net Assets $ 13,735,891 $ 81,117,598 $ 12,913,751
==================================================================================================================
NET ASSETS:
Par value of capital shares $ 1,549 $ 3,668 $ 1,125
Capital paid in excess of par value 22,105,882 51,981,934 11,905,583
Accumulated net investment loss -- -- (134,587)
Accumulated net realized gain (loss)
from security transactions (11,080,500) 4,139,408 (3,404,226)
Net unrealized appreciation
of investments and foreign currencies 2,708,960 24,992,588 4,545,856
- ------------------------------------------------------------------------------------------------------------------
Total Net Assets $ 13,735,891 $ 81,117,598 $ 12,913,751
==================================================================================================================
Shares Outstanding:
Class A 550,576 1,414,848 415,681
---------------------------------------------------------------------------------------------------------------
Class B 641,286 1,721,224 321,279
---------------------------------------------------------------------------------------------------------------
Class L 202,237 532,186 388,293
---------------------------------------------------------------------------------------------------------------
Class Y 155,018 -- --
---------------------------------------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $9.03 $22.58 $11.80
---------------------------------------------------------------------------------------------------------------
Class B* $8.72 $21.83 $11.31
---------------------------------------------------------------------------------------------------------------
Class L ** $8.71 $21.79 $11.27
---------------------------------------------------------------------------------------------------------------
Class Y (and redemption price) $9.12 -- --
---------------------------------------------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 5.26% of net asset value per share) $9.50 $23.77 $12.42
---------------------------------------------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset value per share) $8.80 $22.01 $11.38
==================================================================================================================
</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 L shares reduced by a 1.00% CDSC if shares
are redeemed within the first year of purchase.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 25
<PAGE>
- --------------------------------------------------------------------------------
Statements of Operations October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Emerging
Markets European Pacific
Portfolio Portfolio Portfolio
==================================================================================================================
INVESTMENT INCOME:
<S> <C> <C> <C>
Interest $ 16,804 $ 173,285 $ 13,814
Dividends 225,732 1,246,296 66,515
Less: Foreign withholding tax (22,178) (173,175) (8,402)
- ------------------------------------------------------------------------------------------------------------------
Total Investment Income 220,358 1,246,406 71,927
- ------------------------------------------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 140,773 708,758 58,938
Distribution fees (Note 2) 87,892 600,180 50,444
Registration fees 74,614 64,484 50,000
Custody 54,676 42,761 21,838
Audit and legal 35,537 37,598 30,713
Shareholder and system servicing fees 34,462 153,202 27,885
Shareholder communications 16,660 42,322 12,945
Pricing service fees 3,482 3,687 5,387
Directors' fees 2,377 3,983 2,379
Other 4,453 5,120 3,807
- ------------------------------------------------------------------------------------------------------------------
Total Expenses 454,926 1,662,095 264,336
Less: Management fee waiver and
expense reimbursement (Note 2) -- -- (108,362)
- ------------------------------------------------------------------------------------------------------------------
Net Expenses 454,926 1,662,095 155,974
- ------------------------------------------------------------------------------------------------------------------
Net Investment Loss (234,568) (415,689) (84,047)
- ------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN
CURRENCIES (NOTES 3 AND 4):
Realized Gain (Loss) From:
Security transactions (4,530,471) 4,188,122 589,683
Foreign currency transactions (117,650) 3,892 (4,039)
- ------------------------------------------------------------------------------------------------------------------
Net Realized Gain (Loss) (4,648,121) 4,192,014 585,644
- ------------------------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation (Depreciation)
of Investments and Foreign Currencies:
Beginning of year (5,748,404) 14,047,667 465,438
End of year 2,708,960 24,992,588 4,545,856
- ------------------------------------------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 8,457,364 10,944,921 4,080,418
- ------------------------------------------------------------------------------------------------------------------
Net Gain on Investments and Foreign Currencies 3,809,243 15,136,935 4,666,062
- ------------------------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 3,574,675 $ 14,721,246 $ 4,582,015
==================================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
26 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Emerging
Markets European Pacific
Portfolio Portfolio Portfolio
==================================================================================================================
OPERATIONS:
<S> <C> <C> <C>
Net investment loss $ (234,568) $ (415,689) $ (84,047)
Net realized gain (loss) (4,648,121) 4,192,014 585,644
Increase in net unrealized appreciation 8,457,364 10,944,921 4,080,418
- ------------------------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 3,574,675 14,721,246 4,582,015
- ------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gains -- (1,344,312) --
- ------------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders -- (1,344,312) --
- ------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 10):
Net proceeds from sale of shares 17,353,837 339,884,177 50,017,389
Net asset value of shares issued
for reinvestment of dividends -- 1,277,397 --
Cost of shares reacquired (21,161,899) (351,836,377) (46,615,096)
- ------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From
Fund Share Transactions (3,808,062) (10,674,803) 3,402,293
- ------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets (233,387) 2,702,131 7,984,308
NET ASSETS:
Beginning of year 13,969,278 78,415,467 4,929,443
- ------------------------------------------------------------------------------------------------------------------
End of year* $ 13,735,891 $ 81,117,598 $ 12,913,751
==================================================================================================================
* Includes accumulated net investment loss of: -- -- $ (134,587)
==================================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 27
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Emerging
Markets European Pacific
Portfolio Portfolio Portfolio
==================================================================================================================
OPERATIONS:
<S> <C> <C> <C>
Net investment loss $ (268,393) $ (153,463) $ (153,249)
Net realized gain (loss) (5,703,990) 1,340,410 (1,687,288)
Change in net unrealized appreciation (depreciation) (6,526,925) (2,609,890) 722,889
- ------------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From Operations (12,499,308) (1,422,943) (1,117,648)
- ------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gains -- (971,550) --
- ------------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders -- (971,550) --
- ------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 10):
Net proceeds from sale of shares 16,605,085 232,181,828 29,892,372
Net asset value of shares issued
for reinvestment of dividends -- 914,761 --
Cost of shares reacquired (26,621,269) (198,735,480) (33,645,977)
- ------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets
From Fund Share Transactions (10,016,184) 34,361,109 (3,753,605)
- ------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets (22,515,492) 31,966,616 (4,871,253)
NET ASSETS:
Beginning of year 36,484,770 46,448,851 9,800,696
- ------------------------------------------------------------------------------------------------------------------
End of year* $ 13,969,278 $ 78,415,467 $ 4,929,443
==================================================================================================================
* Includes undistributed net investment income of: -- -- $ 82,953
==================================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
28 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 shareholder 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 for which market
quotations are not available will be valued in good faith at fair value by or
under the direction of the Board of Directors; (d) securities maturing within 60
days are valued at cost plus accreted discount, or minus amortized premium,
which approximates value; (e) gains or losses on the sale of securities are
calculated by using the specific identification method; (f) interest income,
adjusted for amortization of premium and accretion of discount, is recorded on
an accrual basis; (g) 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; (h) 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; (i) dividends and
distributions to shareholders are recorded on the ex-dividend date; (j) 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; (k) 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, 1999, 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 accumulated net investment loss amounting
to $308,308 and $369,237 was reclassified to paid-in capital for the Emerging
Markets and European Portfolios, respectively. Net investment income (loss), net
realized gains and net assets were not affected by these adjustments; (l) 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 (m) 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. 29
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (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
SSB Citi Fund Management LLC ("SSBC"), formerly known as SSBC Fund Management
Inc., a subsidiary of Salomon Smith Barney Holdings Inc. ("SSBH") which in turn
is a subsidiary of Citigroup Inc. ("Citigroup"), acts as investment manager of
the Portfolios. The European and Pacific Portfolios pay SSBC 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 SSBC a 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. For the year ended
October 31, 1999, SSBC waived all of its management fee for the Pacific
Portfolio in the amount of $58,938 and agreed to reimburse the Pacific Portfolio
for expenses in the amount of $49,424.
Smith Barney Private Trust Company, another subsidiary of Citigroup, acts as the
Fund's shareholder servicing agent.
CFBDS, Inc. ("CFBDS") acts as the Portfolios' distributor. Salomon Smith Barney
Inc. ("SSB"), another subsidiary of SSBH, as well as certain other broker-
dealers, continues to sell shares of the Portfolios to the public as a member of
the selling group.
SSB acts as the primary broker for the Fund's portfolio agency transactions. For
the six months ended October 31, 1999, SSB received brokerage commissions of
$9,605.
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
L shares also 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 year ended October 31, 1999, CDSC's paid to CFBDS were approximately:
Portfolio Class A Class B Class L
================================================================================
Emerging Markets $1,000 $ 31,000 --
- --------------------------------------------------------------------------------
European 1,000 106,000 $6,000
- --------------------------------------------------------------------------------
Pacific -- 24,000 --
================================================================================
For the year ended October 31, 1999, sales charges received by CFBDS were
approximately:
Portfolio Class A Class L
================================================================================
Emerging Markets $ 6,000 $ 3,000
- --------------------------------------------------------------------------------
European 181,000 33,000
- --------------------------------------------------------------------------------
Pacific 11,000 7,000
================================================================================
Pursuant to a Distribution Plan, the Portfolios pay a service fee with respect
to Class A, B and L 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 L shares calculated at the annual
rate of 0.75% of the average daily net assets for each respective Portfolio and
class. For the year ended October 31, 1999, total Distribution Plan fees
incurred by the Portfolios were:
Portfolio Class A Class B Class L
================================================================================
Emerging Markets $13,847 $ 57,331 $ 16,714
- --------------------------------------------------------------------------------
European 77,884 403,279 119,017
- --------------------------------------------------------------------------------
Pacific 6,297 24,979 19,168
================================================================================
All officers and one Director of the Fund are employees of SSB.
- --------------------------------------------------------------------------------
30 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
3. Investments
During the year ended October 31, 1999, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
Portfolio Purchases Sales
================================================================================
Emerging Markets $ 21,061,940 $25,214,590
- --------------------------------------------------------------------------------
European 13,868,408 16,329,592
- --------------------------------------------------------------------------------
Pacific 10,011,104 8,657,360
================================================================================
At October 31, 1999, aggregate gross unrealized appreciation and depreciation of
investments for Federal income tax purposes were substantially as follows:
Net Unrealized
Portfolio Appreciation Depreciation Appreciation
================================================================================
Emerging Markets $ 3,119,352 $ (411,141) $ 2,708,211
- --------------------------------------------------------------------------------
European 31,337,549 (6,344,215) 24,993,334
- --------------------------------------------------------------------------------
Pacific 4,623,256 (75,391) 4,547,865
================================================================================
4. Forward Foreign Currency Contracts
At October 31, 1999, 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:
European Portfolio
Local Market Settlement Unrealized
Foreign Currency Currency Value Date Loss
================================================================================
To Sell:
British Pound 52,395 $85,975 11/1/99 $1,147
- --------------------------------------------------------------------------------
Total Unrealized Loss on
Forward Foreign Currency Contracts $1,147
================================================================================
Pacific Portfolio
Local Market Settlement Unrealized
Foreign Currency Currency Value Date Gain (Loss)
================================================================================
To Sell:
Japanese Yen 2,012,926 $19,297 11/1/99 $ 8
Japanese Yen 1,972,014 18,907 11/2/99 (132)
- --------------------------------------------------------------------------------
Total Unrealized Loss on
Forward Foreign Currency Contracts $ (124)
================================================================================
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 31
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (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 October 31, 1999, 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 year ended October 31, 1999, 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 October 31, 1999, the Portfolios had no open futures contracts.
- --------------------------------------------------------------------------------
32 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
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 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. As of
October 31, 1999, 74.1% of the Pacific Portfolio's total investments were
concentrated in Japan.
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, 1999, the Emerging Markets and Pacific Portfolios had, for
Federal income tax purposes, approximately $11,076,000 and $3,402,000,
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>
<S> <C> <C> <C> <C> <C> <C>
Portfolio 10/31/03 10/31/04 10/31/05 10/31/06 10/31/07 Total
==============================================================================================================
Emerging Markets $ 45,000 -- $ 880,000 $5,533,000 $4,618,000 $11,076,000
- --------------------------------------------------------------------------------------------------------------
Pacific 917,000 $ 246,000 515,000 1,724,000 -- 3,402,000
==============================================================================================================
</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, high quality money market instruments or other
securities 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 October 31, 1999, the Portfolios listed below had loaned common stocks which
were collateralized by cash and securities. The market value for the securities
on loan for each portfolio was as follows:
Portfolio Value
================================================================================
Emerging Markets $ 532,187
- --------------------------------------------------------------------------------
European 8,433,723
- --------------------------------------------------------------------------------
Pacific 832,581
================================================================================
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 33
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
At October 31, 1999, the Portfolios held the following collateral for loaned
securities:
Emerging Markets Portfolio
Security Descriptions Value
================================================================================
Time Deposits:
Banco Bilbao, Milan, 5.410% due 11/1/99 $ 1,814
Bank of Austria, 5.438% due 11/1/99 21,622
Banque Bruxelles Lambert London, 5.406% due 11/1/99 21,623
Barclays Bank PLC, 5.410% due 11/1/99 21,623
BNP, 5.410% due 11/1/99 21,622
Caisse de Depots et Consign, Paris, 5.375% due 11/1/99 21,622
Commerzbank AG, Frankfurt, 5.390% due 11/1/99 21,623
Credit Commerciale de France, 5.375% due 11/1/99 21,622
Credit Suisse, London, 5.410% due 11/1/99 21,623
Den Danske-Copenhagen, 5.375% due 11/1/99 21,623
KBC, Brussels, 5.375% due 11/1/99 21,622
Nordeutsche Landesbank G.C., 5.410% due 11/1/99 21,623
Norwest Bank, Grand Cayman, 5.344% due 11/1/99 21,623
Paribas London, 5.406% due 11/1/99 21,623
Societe Generale, 5.390% due 11/1/99 21,622
Svenska Stockholm, 5.375% due 11/1/99 21,623
Toronto Dominion, London, 5.406% due 11/1/99 21,623
Commercial Paper:
Associates First Capital, 5.352% due 11/1/99 21,613
General Electric Credit, 5.332% due 11/1/99 523
General Motors Acceptance Corp., 5.352% due 11/1/99 21,613
New Center Asset Trust, 5.352% due 11/1/99 15,808
UBS Finance, Inc., 5.382% due 11/1/99 21,613
Repurchase Agreements:
Bear Stearns, 5.405% due 11/1/99 24,223
- --------------------------------------------------------------------------------
Total $453,169
================================================================================
European Portfolio
Security Descriptions Value
================================================================================
Time Deposits:
Banco Bilbao, Milan, 5.410% due 11/1/99 $ 33,457
Bank of Austria, 5.438% due 11/1/99 398,825
Banque Bruxelles Lambert London, 5.406% due 11/1/99 398,825
Barclays Bank PLC, 5.410% due 11/1/99 398,825
BNP, 5.410% due 11/1/99 398,825
Caisse de Depots et Consign, Paris, 5.375% due 11/1/99 398,825
Commerzbank AG, Frankfurt, 5.390% due 11/1/99 398,825
Credit Commerciale de France, 5.375% due 11/1/99 398,825
Credit Suisse, London, 5.410% due 11/1/99 398,825
Den Danske-Copenhagen, 5.375% due 11/1/99 398,825
KBC, Brussels, 5.375% due 11/1/99 398,825
Nordeutsche Landesbank G.C., 5.410% due 11/1/99 398,825
Norwest Bank, Grand Cayman, 5.344% due 11/1/99 398,825
Paribas London, 5.406% due 11/1/99 398,825
Societe Generale, 5.390% due 11/1/99 398,825
Svenska Stockholm, 5.375% due 11/1/99 398,825
Toronto Dominion, London, 5.406% due 11/1/99 398,825
Commercial Paper:
Associates First Capital, 5.352% due 11/1/99 398,647
General Electric Credit, 5.332% due 11/1/99 9,656
General Motors Acceptance Corp., 5.352% due 11/1/99 398,647
New Center Asset Trust, 5.352% due 11/1/99 291,580
UBS Finance, Inc., 5.382% due 11/1/99 398,646
Repurchase Agreements:
Bear Stearns, 5.405% due 11/1/99 446,792
- --------------------------------------------------------------------------------
Total $8,358,625
================================================================================
- --------------------------------------------------------------------------------
34 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
Pacific Portfolio
Security Descriptions Value
================================================================================
Time Deposits:
Banco Bilbao, Milan, 5.410% due 11/1/99 $ 3,439
Bank of Austria, 5.438% due 11/1/99 40,997
Banque Bruxelles Lambert London, 5.406% due 11/1/99 40,997
Barclays Bank PLC, 5.410% due 11/1/99 40,997
BNP, 5.410% due 11/1/99 40,997
Caisse de Depots et Consign, Paris, 5.375% due 11/1/99 40,997
Commerzbank AG, Frankfurt, 5.390% due 11/1/99 40,997
Credit Commerciale de France, 5.375% due 11/1/99 40,997
Credit Suisse, London, 5.410% due 11/1/99 40,997
Den Danske-Copenhagen, 5.375% due 11/1/99 40,997
KBC, Brussels, 5.375% due 11/1/99 40,997
Nordeutsche Landesbank G.C., 5.410% due 11/1/99 40,997
Norwest Bank, Grand Cayman, 5.344% due 11/1/99 40,997
Paribas London, 5.406% due 11/1/99 40,997
Societe Generale, 5.390% due 11/1/99 40,998
Svenska Stockholm, 5.375% due 11/1/99 40,998
Toronto Dominion, London, 5.406% due 11/1/99 40,998
Commercial Paper:
Associates First Capital, 5.352% due 11/1/99 40,979
General Electric Credit, 5.332% due 11/1/99 993
General Motors Acceptance Corp., 5.352% due 11/1/99 40,979
New Center Asset Trust, 5.352% due 11/1/99 29,973
UBS Finance, Inc., 5.382% due 11/1/99 40,979
Repurchase Agreements:
Bear Stearns, 5.405% due 11/1/99 45,928
- --------------------------------------------------------------------------------
Total $859,225
================================================================================
In addition to the above noted cash collateral, the Emerging Markets Portfolio
and the European Portfolio held securities collateral with a market value of
$102,500 and $275,000, respectively, as of October 31, 1999.
Income earned by the Portfolios from securities loaned for the year ended
October 31, 1999 was as follows:
Emerging
Markets European Pacific
Portfolio Portfolio Portfolio
================================================================================
Income from securities lending $6,158 $40,941 $1,481
================================================================================
10. Capital Shares
At October 31, 1999, 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 October 31, 1999, total paid-in capital amounted to the following for each
Portfolio:
Portfolio Class A Class B Class L Class Y
================================================================================
Emerging Markets $ 7,773,625 $10,106,090 $ 2,981,378 $1,246,338
- --------------------------------------------------------------------------------
European 20,744,039 20,738,473 10,503,090 --
- --------------------------------------------------------------------------------
Pacific 4,721,594 3,177,425 4,007,689 --
================================================================================
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 35
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 1999 October 31, 1998
---------------------------- ---------------------------
Shares Amount Shares Amount
=================================================================================================
<S> <C> <C> <C> <C>
Emerging Markets Portfolio
Class A
Shares sold 1,636,720 $ 13,139,320 1,137,419 $ 10,738,376
Shares reacquired (1,899,726) (15,412,364) (1,452,183) (14,275,725)
- -------------------------------------------------------------------------------------------------
Net Decrease (263,006) $ (2,273,044) (314,764) $ (3,537,349)
=================================================================================================
Class B
Shares sold 315,062 $ 2,527,606 464,368 $ 4,405,558
Shares reacquired (549,267) (4,314,145) (1,071,606) (10,500,886)
- -------------------------------------------------------------------------------------------------
Net Decrease (234,205) $ (1,786,539) (607,238) $ (6,095,328)
=================================================================================================
Class L(1)
Shares sold 156,610 $ 1,264,649 54,700 $ 603,227
Shares reacquired (179,799) (1,435,390) (183,794) (1,844,658)
- -------------------------------------------------------------------------------------------------
Net Decrease (23,189) $ (170,741) (129,094) $ (1,241,431)
=================================================================================================
Class Y(2)
Shares sold 54,732 $ 422,262 100,286 $ 857,924
Shares reacquired -- -- -- --
- -------------------------------------------------------------------------------------------------
Net Increase 54,732 $ 422,262 100,286 $ 857,924
=================================================================================================
European Portfolio
Class A
Shares sold 14,508,592 $ 302,669,958 7,081,251 $ 145,667,578
Shares issued on reinvestment 21,291 439,883 17,388 292,645
Shares reacquired (14,533,239) (304,802,469) (6,454,939) (132,333,615)
- -------------------------------------------------------------------------------------------------
Net Increase (Decrease) (3,356) $ (1,692,628) 643,700 $ 13,626,608
=================================================================================================
Class B
Shares sold 953,658 $ 19,317,878 3,390,677 $ 67,508,019
Shares issued on reinvestment 32,746 658,501 34,196 564,579
Shares reacquired (1,380,533) (28,069,881) (2,940,383) (56,380,398)
- -------------------------------------------------------------------------------------------------
Net Increase (Decrease) (394,129) $ (8,093,502) 484,490 $ 11,692,200
=================================================================================================
Class L(1)
Shares sold 887,776 $ 17,896,341 922,946 $ 19,006,231
Shares issued on reinvestment 8,919 179,013 3,496 57,537
Shares reacquired (933,531) (18,964,027) (531,482) (10,021,467)
- -------------------------------------------------------------------------------------------------
Net Increase (Decrease) (36,836) $ (888,673) 394,960 $ 9,042,301
=================================================================================================
(1) On June 12, 1998, Class C shares were renamed Class L shares.
(2) For the period from March 10, 1998 (inception date) to October 31, 1998.
</TABLE>
- --------------------------------------------------------------------------------
36 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 1999 October 31, 1998
---------------------------- ---------------------------
Shares Amount Shares Amount
=================================================================================================
<S> <C> <C> <C> <C>
Pacific Portfolio
Class A
Shares sold 3,886,615 $ 32,085,747 3,240,998 $ 22,974,473
Shares reacquired (3,736,734) (30,751,044) (3,536,658) (25,734,908)
- -------------------------------------------------------------------------------------------------
Net Increase (Decrease) 149,881 $ 1,334,703 (295,660) $ (2,760,435)
=================================================================================================
Class B
Shares sold 807,310 $ 7,262,774 357,395 $ 2,621,087
Shares reacquired (817,705) (7,303,299) (457,136) (3,300,568)
- -------------------------------------------------------------------------------------------------
Net Decrease (10,395) $ (40,525) (99,741) $ (679,481)
=================================================================================================
Class L(1)
Shares sold 1,353,683 $ 10,668,868 648,151 $ 4,296,812
Shares reacquired (1,117,046) (8,560,753) (678,354) (4,610,501)
- -------------------------------------------------------------------------------------------------
Net Increase (Decrease) 236,637 $ 2,108,115 (30,203) $ (313,689)
=================================================================================================
(1) On June 12, 1998, Class C shares were renamed Class L shares.
</TABLE>
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 37
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended October 31, except where noted:
<TABLE>
<CAPTION>
Class A Shares
----------------------------------------------------------------
Emerging Markets Portfolio 1999(1) 1998(1) 1997(1) 1996 1995(2)
============================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 7.03 $ 12.45 $ 12.08 $ 11.06 $ 12.00
- ------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss(3) (0.10) (0.06) (0.05) (0.02) (0.05)#
Net realized and unrealized gain (loss) 2.10 (5.36) 0.42 1.04 (0.89)
- ------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 2.00 (5.42) 0.37 1.02 (0.94)
- ------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------
Total Distributions -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 9.03 $ 7.03 $ 12.45 $ 12.08 $ 11.06
- ------------------------------------------------------------------------------------------------------------
Total Return 28.45% (43.53)% 3.06% 9.22% (7.83)%++
- ------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $ 4,969 $ 5,723 $14,046 $10,691 $ 7,069
- ------------------------------------------------------------------------------------------------------------
Ratio to Average Net Assets:
Expenses(3) 2.87% 2.46% 2.11% 2.25% 1.45%+
Net investment loss (1.25) (0.63) (0.34) (0.19) (0.63)+
- ------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 153% 97% 99% 78% 17%
============================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from May 12, 1995 (inception date) to October 31, 1995.
(3) 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:
Per Share Increase Expense Ratio
to Net Investment Loss Without Fee Waivers
---------------------- -------------------
1995 1995
----- ------
Class A $0.05 2.12%+
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.
# Includes realized gains and losses on foreign currency transactions.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
38 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended October 31, except where noted:
<TABLE>
<CAPTION>
Class B Shares
--------------------------------------------------------------
Emerging Markets Portfolio 1999(1) 1998(1) 1997(1) 1996 1995(2)
============================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 6.85 $ 12.21 $ 11.95 $ 11.02 $ 12.00
- ------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss(3) (0.17) (0.14) (0.14) (0.10) (0.09)#
Net realized and unrealized gain (loss) 2.04 (5.22) 0.40 1.03 (0.89)
- ------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 1.87 (5.36) 0.26 0.93 (0.98)
- ------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------
Total Distributions -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 8.72 $ 6.85 $ 12.21 $ 11.95 $ 11.02
- ------------------------------------------------------------------------------------------------------------
Total Return 27.30% (43.90)% 2.18% 8.44% (8.17)%++
- ------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $ 5,591 $ 5,994 $18,107 $13,062 $ 7,630
- ------------------------------------------------------------------------------------------------------------
Ratio to Average Net Assets:
Expenses(3) 3.63% 3.24% 2.88% 3.06% 2.00%+
Net investment loss (2.11) (1.42) (1.00) (0.94) (1.17)+
- ------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 153% 97% 99% 78% 17%
============================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from May 12, 1995 (inception date) to October 31, 1995.
(3) 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:
Per Share Increase Expense Ratio
to Net Investment Loss Without Fee Waivers
---------------------- -------------------
1995 1995
----- ------
Class B $0.05 2.68%+
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.
# Includes realized gains and losses on foreign currency transactions.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 39
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended October 31, except where noted:
<TABLE>
<CAPTION>
Class L Shares
--------------------------------------------------------------
Emerging Markets Portfolio 1999(1) 1998(1)(2) 1997(1) 1996 1995(3)
==========================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 6.84 $ 12.22 $ 11.95 $ 11.02 $ 12.00
- ----------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss(4) (0.16) (0.15) (0.15) (0.10) (0.08)#
Net realized and unrealized gain (loss) 2.03 (5.23) 0.42 1.03 (0.90)
- ----------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 1.87 (5.38) 0.27 0.93 (0.98)
- ----------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------
Total Distributions -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 8.71 $ 6.84 $ 12.22 $ 11.95 $ 11.02
- ----------------------------------------------------------------------------------------------------------
Total Return 27.34% (44.03)% 2.26% 8.44% (8.17)%++
- ----------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $ 1,762 $ 1,543 $ 4,332 $ 2,448 $ 1,604
- ----------------------------------------------------------------------------------------------------------
Ratio to Average Net Assets:
Expenses(4) 3.62% 3.31% 2.86% 3.02% 1.95%+
Net investment loss (2.10) (1.47) (1.03) (0.92) (1.08)+
- ----------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 153% 97% 99% 78% 17%
==========================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) On June 12, 1998, Class C shares were renamed Class L shares.
(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:
Per Share Increase Expense Ratio
to Net Investment Loss Without Fee Waivers
---------------------- -------------------
1995 1995
----- ------
Class L $0.05 2.61%+
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.
# Includes realized gains and losses on foreign currency transactions.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
40 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each share of capital stock outstanding throughout the year ended
October 31, except where noted:
Class Y Shares
-----------------------
Emerging Markets Portfolio 1999(1) 1998(1)(2)
================================================================================
Net Asset Value, Beginning of Year $ 7.07 $ 12.16
- --------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss (0.07) (0.01)
Net realized and unrealized gain (loss) 2.12 (5.08)
- --------------------------------------------------------------------------------
Total Income (Loss) From Operations 2.05 (5.09)
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- --
- --------------------------------------------------------------------------------
Total Distributions -- --
- --------------------------------------------------------------------------------
Net Asset Value, End of Year $ 9.12 $ 7.07
- --------------------------------------------------------------------------------
Total Return 29.00% (41.86)%++
- --------------------------------------------------------------------------------
Net Assets, End of Year (000s) $ 1,414 $ 709
- --------------------------------------------------------------------------------
Ratio to Average Net Assets:
Expenses 2.32% 1.89%+
Net investment loss (0.80) (0.16)+
- --------------------------------------------------------------------------------
Portfolio Turnover Rate 153% 97%
================================================================================
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from March 10, 1998 (inception date) to October 31, 1998.
++ 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 year
ended October 31:
<TABLE>
<CAPTION>
Class A Shares
--------------------------------------------------------------
European Portfolio 1999(1) 1998(1) 1997(1) 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 19.44 $ 18.23 $ 17.25 $ 14.67 $ 12.88
- ------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss)(2) (0.00)* 0.06 (0.08) (0.08) 0.07
Net realized and unrealized gain 3.47 1.54 2.22 2.79 1.72
- ------------------------------------------------------------------------------------------------------------
Total Income From Operations 3.47 1.60 2.14 2.71 1.79
- ------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- -- (0.09) --
Net realized gains (0.33) (0.39) (1.16) (0.04) --
- ------------------------------------------------------------------------------------------------------------
Total Distributions (0.33) (0.39) (1.16) (0.13) --
- ------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 22.58 $ 19.44 $ 18.23 $ 17.25 $ 14.67
- ------------------------------------------------------------------------------------------------------------
Total Return 18.02% 9.10% 12.88% 18.65% 13.90%
- ------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $31,946 $27,563 $14,118 $10,528 $11,870
- ------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(2) 1.51% 1.56% 1.80% 1.85% 2.06%
Net investment income (loss) (0.00)** 0.30 (0.42) (0.49) 0.51
- ------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 17% 27% 28% 39% 34%
============================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) The Manager waived all or part of its fees 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 (loss) and the expense ratios would have
been as follows:
Expense Ratios
Per Share Decreases to Without Fee Waivers
Net Investment Income and Custody Credits
---------------------- -------------------
1995 1995
----- -----
Class A $0.01 2.09%
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.
* Amount represents less than $0.01 per share.
** Amount represents less than 0.01%.
- --------------------------------------------------------------------------------
42 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended October 31, except where noted:
<TABLE>
<CAPTION>
Class B Shares
----------------------------------------------------------------
European Portfolio 1999(1) 1998(1) 1997(1) 1996 1995(2)
============================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 18.95 $ 17.92 $ 17.09 $ 14.56 $ 12.62
- ------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss)(3) (0.16) (0.11) (0.20) (0.20) 0.02
Net realized and unrealized gain 3.37 1.53 2.19 2.77 1.92
- ------------------------------------------------------------------------------------------------------------
Total Income From Operations 3.21 1.42 1.99 2.57 1.94
- ------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net realized gains (0.33) (0.39) (1.16) (0.04) --
- ------------------------------------------------------------------------------------------------------------
Total Distributions (0.33) (0.39) (1.16) (0.04) --
- ------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 21.83 $ 18.95 $ 17.92 $ 17.09 $ 14.56
- ------------------------------------------------------------------------------------------------------------
Total Return 17.10% 8.24% 12.08% 17.72% 15.37%++
- ------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $37,575 $40,090 $29,221 $26,384 $24,825
- ------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(3) 2.28% 2.32% 2.52% 2.59% 3.31%+
Net investment income (loss) (0.81) (0.56) (1.13) (1.22) 0.26+
- ------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 17% 27% 28% 39% 34%
============================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from November 7, 1994 (inception date) to October 31, 1995.
(3) The Manager waived all or part of its fees for the year ended October 31,
1995. If such fees were not waived, the per share effect on net investment
income and the expense ratio would have been as follows:
Expense Ratio
Per Share Decrease to Without Fee Waivers
Net Investment Income and Custody Credits
--------------------- -------------------
1995 1995
----- ------
Class B $0.00* 3.35%+
In addition, during the year ended October 31, 1996 and the period ended
October 31, 1995, the Portfolio had earned credits from the custodian which
reduced service fees incurred. If the credits are taken into consideration,
the expense ratios for Class B would have been 2.56% and 3.26%
(annualized), respectively; numbers prior to October 31, 1995 have not been
restated to reflect these credits.
* 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. 43
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended October 31:
<TABLE>
<CAPTION>
Class L Shares
----------------------------------------------------------------
European Portfolio 1999(1) 1998(1)(2) 1997(1) 1996 1995(3)
============================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 18.91 $ 17.86 $ 17.04 $ 14.51 $ 12.83
- ------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss(4) (0.15) (0.07) (0.21) (0.14) (0.08)
Net realized and unrealized gain 3.36 1.51 2.19 2.71 1.76
- ------------------------------------------------------------------------------------------------------------
Total Income From Operations 3.21 1.44 1.98 2.57 1.68
- ------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net realized gains (0.33) (0.39) (1.16) (0.04) --
- ------------------------------------------------------------------------------------------------------------
Total Distributions (0.33) (0.39) (1.16) (0.04) --
- ------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 21.79 $ 18.91 $ 17.86 $ 17.04 $ 14.51
- ------------------------------------------------------------------------------------------------------------
Total Return 17.14% 8.38% 12.06% 17.78% 13.09%
- ------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $11,597 $10,762 $ 3,110 $2,011 $ 1,311
- ------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(4) 2.24% 2.18% 2.54% 2.52% 2.51%
Net investment loss (0.74) (0.37) (1.18) (1.17) (0.64)
- ------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 17% 27% 28% 39% 34%
============================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) On June 12, 1998, Class C shares were renamed Class L shares.
(3) On November 7, 1994, the former Class B shares were renamed Class C shares.
(4) The Manager waived all or part of its fees 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:
Expense Ratios
Per Share Decrease to Without Fee Waivers
Net Investment Loss and Custody Credits
--------------------- -------------------
1995 1995
----- -----
Class L $0.01 2.54%
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.
- --------------------------------------------------------------------------------
44 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended October 31:
<TABLE>
<CAPTION>
Class A Shares
--------------------------------------------------------------
Pacific Portfolio 1999(1) 1998(1) 1997 1996(1) 1995
============================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 6.73 $ 8.46 $ 10.18 $ 10.07 $ 12.92
- ------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss(2) (0.05) (0.12) (0.17) (0.14) (0.01)
Net realized and unrealized gain (loss) 5.12 (1.61) (1.55) 0.25 (2.84)
- ------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 5.07 (1.73) (1.72) 0.11 (2.85)
- ------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------
Total Distributions -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 11.80 $ 6.73 $ 8.46 $ 10.18 $ 10.07
- ------------------------------------------------------------------------------------------------------------
Total Return 75.33% (20.45)% (16.90)% 1.09% (22.06)%
- ------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $ 4,905 $ 1,788 $ 4,750 $ 4,929 $ 4,409
- ------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(2) 1.72% 3.47% 3.37% 2.64% 1.97%
Net investment loss (0.64) (1.66) (2.36) (1.38) (0.71)
- ------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 128% 135% 154% 86% 31%
============================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) The Manager waived all or part of its fees for the years ended October 31,
1999 and October 31, 1995. In addition, the Manager agreed to reimburse the
Pacific Portfolio for $49,424 and $30,862 of the Portfolio's expenses for
the years ended October 31, 1999 and October 31, 1995, respectively. If such
fees and expenses were not waived or reimbursed, the per share effect on net
investment loss and the expense ratios would have been as follows:
Expense Ratios
Per Share Decreases to Without Fee Waivers
Net Investment Loss and Custody Credits
---------------------------- ----------------------------
1999 1998 1997 1996 1995 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Class A $0.13 N/A N/A N/A $0.14 3.39% N/A N/A N/A 3.18%
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.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 45
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended October 31, except where noted:
<TABLE>
<CAPTION>
Class B Shares
--------------------------------------------------------------
Pacific Portfolio 1999(1) 1998(1) 1997 1996(1) 1995(2)
============================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 6.51 $ 8.25 $ 10.01 $ 9.99 $ 12.64
- ------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss(3) (0.14) (0.22) (0.27) (0.23) (0.01)
Net realized and unrealized gain (loss) 4.94 (1.52) (1.49) 0.25 (2.64)
- ------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 4.80 (1.74) (1.76) 0.02 (2.65)
- ------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------
Total Distributions -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 11.31 $ 6.51 $ 8.25 $ 10.01 $ 9.99
- ------------------------------------------------------------------------------------------------------------
Total Return 73.73% (21.09)% (17.58)% 0.20% (20.97)%++
- ------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $ 3,633 $ 2,159 $ 3,558 $ 4,009 $ 1,031
- ------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(3) 2.64% 4.45% 4.24% 3.65% 3.39%+
Net investment loss (1.62) (3.14) (3.07) (2.26) (1.47)+
- ------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 128% 135% 154% 86% 31%
============================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from November 7, 1994 (inception date) to October 31, 1995.
(3) The Manager waived all or part of its fees for the year ended October 31,
1999 and period ended October 31, 1995. In addition, the Manager agreed to
reimburse the Pacific Portfolio for $49,424 and $30,862 of the Portfolio's
expenses for the year ended October 31, 1999 and the period ended October
31, 1995, respectively. If such fees and expenses were not waived or
reimbursed, the per share effect on net investment loss and the expense
ratio would have been as follows:
Expense Ratios
Per Share Decreases to Without Fee Waivers
Net Investment Loss and Custody Credits
---------------------------- ----------------------------
1999 1998 1997 1996 1995 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Class B $0.13 N/A N/A N/A $0.16 4.31% N/A N/A N/A 4.90%+
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.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
46 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended October 31:
<TABLE>
<CAPTION>
Class L Shares
--------------------------------------------------------------
Pacific Portfolio 1999(1) 1998(1)(2) 1997 1996(1) 1995(3)
==========================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 6.48 $ 8.21 $ 9.98 $ 9.95 $ 12.86
- ----------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss(4) (0.12) (0.20) (0.27) (0.24) (0.02)
Net realized and unrealized gain (loss) 4.91 (1.53) (1.50) 0.27 (2.89)
- ----------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 4.79 (1.73) (1.77) 0.03 (2.91)
- ----------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------
Total Distributions -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 11.27 $ 6.48 $ 8.21 $ 9.98 $ 9.95
- ----------------------------------------------------------------------------------------------------------
Total Return 73.92% (21.07)% (17.74)% 0.30% (22.63)%
- ----------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $ 4,375 $ 982 $ 1,493 $ 1,612 $ 1,952
- ----------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(4) 2.38% 4.28% 4.44% 3.46% 2.69%
Net investment loss (1.44) (2.90) (3.21) (2.22) (1.45)
- ----------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 128% 135% 154% 86% 31%
==========================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) On June 12, 1998, Class C shares were renamed Class L shares.
(3) On November 7, 1994, the former Class B shares were renamed Class C shares.
(4) The Manager waived all or part of its fees for the years ended October 31,
1999 and October 31, 1995. In addition, the Manager agreed to reimburse the
Pacific Portfolio for $49,424 and $30,862 of the Portfolio's expenses for
the years ended October 31, 1999 and October 31, 1995, respectively. If such
fees and expenses were not waived or reimbursed, the per share effect on net
investment loss and the expense ratios would have been as follows:
Expense Ratios
Per Share Decreases to Without Fee Waivers
Net Investment Loss and Custody Credits
---------------------------- ----------------------------
1999 1998 1997 1996 1995 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Class L $0.13 N/A N/A N/A $0.13 4.04% N/A N/A N/A 3.88%
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 L would have been 3.29% and 2.42%, respectively; numbers
prior to October 31, 1995 have not been restated to reflect these credits.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 47
<PAGE>
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
The Shareholders and Board of Directors of Smith Barney World Funds, Inc.:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of the Emerging Markets, European, and Pacific
Portfolios of Smith Barney World Funds, Inc. as of October 31, 1999, and the
related statements of operations for the year then ended, the statements of
changes in net assets for each of the years in the two-year period then ended,
and the financial highlights for each of the years or periods in the five-year
period then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1999, by correspondence with the custodian. As to securities
purchased or sold but not yet received or delivered, we performed other
appropriate auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Emerging Markets, European and Pacific Portfolios of Smith Barney World Funds,
Inc. as of October 31, 1999, and the results of their operations for the year
then ended, the changes in their net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the years
or periods in the five-year period then ended in conformity with generally
accepted accounting principles.
/s/ KPMG LLP
New York, New York
December 15, 1999
- --------------------------------------------------------------------------------
48 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Tax Information (unaudited)
- --------------------------------------------------------------------------------
For Federal tax purposes the European Portfolio hereby designates for the fiscal
year ended October 31, 1999:
. Long-term capital gain distributions paid of $1,344,312.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 49
<PAGE>
Smith Barney World Funds, Inc.
Directors
Victor Atkins
Abraham E. Cohen
Robert A. Frankel
Michael Gellert
Rainer Greeven
Susan M. Heilbron
Heath B. McLendon, Chairman
Officers
Maurits E. Edersheim
Chairman of the Fund & Advisory Director
Heath B. McLendon
Chief Executive Officer
Lewis E. Daidone
Senior Vice President and Treasurer
James B. Conheady
Vice President
David Ishibashi
Vice President
Jeffrey J. Russell
Vice President
Rein W. van der Does
Vice President
Irving P. David
Controller
Christina T. Sydor
Secretary
Investment Manager
SSB Citi Fund Management LLC
Distributor
CFBDS, Inc.
Custodian
The Chase Manhattan Bank, N.A.
Shareholder Servicing Agent
Smith Barney Private Trust Company
388 Greenwich Street
22nd Floor
New York, New York 10013
Sub-Shareholder Servicing Agent
PFPC Global Fund Services
P.O. Box 9699
Providence, Rhode Island 02940-9699
This report is submitted for the general information of shareholders of Smith
Barney World Funds, Inc. -- Emerging Markets, European and Pacific Portfolios.
It is not authorized for distribution to prospective investors unless
accompanied or preceded by a current Prospectus for the Fund, which contains
information concerning the Fund's investment policies and expenses as well as
other pertinent information.
[LOGO OF SALOMON SMITH BARNEY]
Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
Smith Barney
World Funds, Inc.
Smith Barney Mutual Funds
388 Greenwich Street, MF-2
New York, New York 10013
www.smithbarney.com/mutualfunds
FD01358 12/99
<PAGE>
[GRAPHIC]
Smith Barney
World Funds, Inc.
Global Government Bond Portfolio
International Equity Portfolio
International Balanced Portfolio
A N N U A L R E P O R T
October 31, 1999
[LOGO OF SMITH BARNEY MUTUAL FUNDS]
NOT FDIC INSURED . NOT BANK GUARANTEED . MAY LOSE VALUE
<PAGE>
Smith Barney
World Funds, Inc.
"While the e-commerce revolution is already booming in the U.S., the
international markets present enormous opportunities. Internet penetration is
much lower overseas than in the United States. With the rebound in global growth
and Asia emerging from its slump, we expect that other regions of the world may
begin to catch up with the United States in an effort to become more efficient
and more competitive."
Heath B. McLendon
Chairman
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
-------------
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
-------------
Class A SBIEX
Class B SBIBX
Class L 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
-------------
Class A SIEBX
- --------------------------------------------------------------------------------
What's Inside
- --------------------------------------------------------------------------------
A Message from the Chairman................................................. 1
Global Government Bond Portfolio
Portfolio Manager Commentary............................................. 2
Historical Performance................................................... 4
Portfolio at a Glance.................................................... 6
International Equity Portfolio
Portfolio Manager Commentary............................................. 7
Historical Performance................................................... 10
Portfolio at a Glance.................................................... 13
International Balanced Portfolio
Portfolio Manager Commentary............................................. 14
Historical Performance................................................... 16
Portfolio at a Glance.................................................... 18
Schedules of Investments.................................................... 19
Statements of Assets and Liabilities........................................ 27
Statements of Operations.................................................... 29
Statements of Changes in Net Assets......................................... 30
Notes to Financial Statements............................................... 32
Financial Highlights ....................................................... 42
Independent Auditors' Report ............................................... 54
Tax Information ............................................................ 55
<PAGE>
- --------------------------------------------------------------------------------
A Message from the Chairman
- --------------------------------------------------------------------------------
[PHOTO]
HEATH B. MCLENDON
Chairman
Dear Shareholder:
The globalization of securities markets continues to accelerate. Economic growth
increased in Europe and Asia, with a great deal of corporate restructuring
taking place. A year ago, a major topic of discussion and possible concern was
the introduction of the Euro. (The Euro is the single currency of the European
Monetary Union that was adopted by Belgium, Germany, Spain, France, Ireland,
Italy, Luxembourg, the Netherlands, Austria, Portugal and Finland on January 1,
1999.)
Twelve months later, the introduction of the Euro can be viewed as a success,
fostering lower inflation and interest rates throughout Western Europe.
Moreover, the Euro has contributed to the consolidation of businesses and the
creation of even stronger and more competitive European companies.
Last year, Asia was reeling under the impact of currency and banking problems,
and Japan was mired in economic stagnation. Today we see firsthand the amazing
resiliency of these economies as Asia returns to economic stability and growth
albeit at a slower, yet more sustainable, rate. Additionally, Japan has moved
decisively to turn around its struggling economy. Companies in Japan are
restructuring, instituting efficiencies and selling unprofitable divisions.
The globalization of financial markets has also continued as the New York Stock
Exchange and NASDAQ continue to add more foreign stocks for trading. Investors
have more investment options today than ever before as trading hours expand.
The Internet age has dawned. Increasingly sophisticated financial transactions
are being handled electronically with the click of a "mouse" regardless of
whether you are in New York, Buenos Aires or Timbuktu. Although near-term issues
persist, we believe that the development of the "Information Superhighway" will
remain a powerful driver of share prices.
The Internet is gaining millions of users monthly and many of these people will
become active on-line consumers. Moreover, Dell, a global computer systems
company, estimates that 15% of all U.S. Gross Domestic Product ("GDP") could
soon come from Internet electronic commerce. There is no shortage of companies
willing to provide the systems and services necessary to facilitate online
transactions. We expect e-commerce to represent an outstanding investment
opportunity as companies attempt to increase their productivity through online
sourcing and more direct distribution. E-commerce generally conjures up images
of consumers buying books or smaller items on the Internet; however,
business-to-business e-commerce is expanding as well. Traditional industrial
manufacturing companies are aggressively moving toward e-commerce as a means to
boost efficiency.
While the e-commerce revolution is already booming in the U.S., the
international markets present enormous opportunities. Internet penetration is
much lower overseas than in the United States. With the rebound in global growth
and Asia emerging from its slump, we expect that other regions of the world may
begin to catch up with the United States in an effort to become more efficient
and more competitive.
In this report, you will find specific market commentary and performance
information on the Smith Barney World Funds, Inc. - Global Government Bond
Portfolio, International Equity Portfolio and International Balanced Portfolio
beginning on page two.
Thank you for investing in our family of international funds. We remain
committed to providing our shareholders with competitive performance in the
years ahead, and look forward to serving your financial needs in the years
ahead.
Sincerely,
/s/ Heath B. McLendon
Heath B. McLendon
Chairman
November 16, 1999
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 1
<PAGE>
- --------------------------------------------------------------------------------
Global Government Bond Portfolio
- --------------------------------------------------------------------------------
Portfolio Manager
DENIS P. MANGAN
Denis P. Mangan is a Global Fixed Income Portfolio Manager and Research
Specialist. He joined Salomon 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
In the 12 months covered in this report, the Global Government Bond Portfolio
("Portfolio") returned a negative 1.62% for Class A shares, including dividends
and before deducting any sales charges. The Portfolio underperformed the average
total return for global income funds of a negative 0.65% for the same period
according to Lipper, Inc. (Lipper is a major fund-tracking organization.)
Additional information about the Portfolio's other share classes can be found on
pages four and five.
Market and Portfolio Update
We think that the major story for the global bond markets early in the period
was the devaluation of the Brazilian Real on January 13, 1999. In our view, this
currency devaluation removed uncertainty from the market and enabled emerging
market bond yield spreads to tighten.
The Japanese bond market surged higher despite large supply because of continued
economic stagnation and the ten-basis point rate cut in February. (A basis point
is one-hundredth of one percent.) The U.S. bond market had to deal with strong
economic growth numbers, which may potentially reduce the chance of a U.S.
Federal Reserve Board ("Fed") interest rate cut later in 1999. Fed Chairman Alan
Greenspan reinforced this possibility in his Humphrey-Hawkins testimony, which
drove the U.S. bond market lower. European bonds followed the U.S. decline but
still managed to post positive returns. This was partly due to declining
interest rates in the non-Euro European countries combined with poor economic
data from within the Euro-zone over the period.
The growth rate in the G7 economies appeared to be on the increase and a strong
rise in leading economic indicators was another major concern for global bond
investors. Robust consumer activity in the U.S. continued, while the better
outlook for Asia's economies helped core European manufacturing industries to
enjoy more normal profit growth.
While growing inflationary pressures were evident, this was mostly due to the
sharp increase in oil and other commodity prices in recent months. In the U.S.,
there were heightened fears that a tight labor market would inevitably result in
higher employment costs. Central bankers on the three major continents began to
voice these concerns over signs of growing economic imbalances. Also, while
there was increasingly tough talk from members of the European Central Bank's
board, no actions were taken. Many investors were left with the impression that
the Fed in the U.S. was overly cautious in an attempt to engineer a soft landing
for the U.S. economy without seriously undermining the prices of financial
assets.
- --------------------------------------------------------------------------------
2 1999 Annual Report to Shareholders
<PAGE>
Investment Strategy
As previously noted, the Portfolio seeks as high a level of current income and
capital appreciation as is consistent with investing principally in high-quality
bonds of U.S. and foreign governments.
Our current investment strategy involves three themes:
. To be fully invested and earn high yields;
. To stay moderately long with respect to duration (i.e., a common gauge of the
price sensitivity of a fixed-income asset to a change in interest rates) and
to be prepared to take advantage of potential spread tightening; and
. To focus on countries with low external financing requirements.
During the reporting period, we significantly increased the Portfolio's
allocation to the Japanese bond market. We had owned no Japanese bonds for
roughly 12 months, because yields were in the 1.0%-1.8% range and we believed
there was little room for price appreciation. Moreover, we thought that owning
such low-yielding bonds might make it more difficult for the Portfolio to
achieve its dividend target.
However, we underestimated the extent of the recession in Japan during the first
half of 1999, and failed to predict the subsequent rally in Japanese bonds.
Indeed, as of late October 1999, Japan was the best-performing government bond
market. As a result, we thought it was prudent to increase our Japanese bond
exposure during the period.
Another significant portfolio change over the past year was the elimination of
our position in Australia and the reduction of our position in Denmark. These
moves allowed us to take profits as those markets outperformed versus the U.S.
We also increased the percentage of Portfolio assets allocated to Euroland and
extended our duration in that market in the wake of Euroland underperformance
versus the U.S. during the summer of 1999.
Market Outlook
Bond yields have moved higher worldwide so far in 1999, making it the worst year
for fixed-income returns since 1994. In local currency terms, returns are
significantly worse than at the same stage in 1994. In our opinion, a growing
global economy and concerns over inflationary pressures were responsible for the
rise in yields. Over the next 12 months, we expect the rebound in the global
economy to continue and bond yields to move slightly higher. We also anticipate
an uptick in inflation over the same period, but no return to the kind of high
inflation levels last seen in the 1980s.
We project better performance from Euroland versus the U.S. over the next six
months because interest rates in Euroland are discounting greater central bank
rate hikes than in the U.S., yet both inflation and economic growth are lower in
Europe.
One risk to our expectations is the Japanese economy rebounding too strongly,
leading to a drain of capital from the U.S. and Europe back to Japan. This in
turn could result in a stronger yen and greater upward pressure on commodity
prices. Should this occur, the global economy could become unbalanced and
worldwide inflation might reappear.
Thank you for your investment in the Global Government Bond Portfolio.
/s/ Denis P. Mangan
Denis P. Mangan
Vice President
November 9, 1999
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 3
<PAGE>
- --------------------------------------------------------------------------------
GLOBAL GOVERNMENT BOND PORTFOLIO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Historical Performance -- Class A Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
------------------------
Beginning End Income Capital Gain Return Total
Year Ended of Year of Year Dividends Distributions of Capital Returns(1)
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
10/31/99 $11.88 $11.18 $0.52 $0.00 $0.00 (1.62)%
- ---------------------------------------------------------------------------------------------------------------------------
10/31/98 12.22 11.88 0.22 0.60 0.45 8.08
- ---------------------------------------------------------------------------------------------------------------------------
10/31/97 12.55 12.22 1.22 0.08 0.00 8.21
- ---------------------------------------------------------------------------------------------------------------------------
10/31/96 12.30 12.55 0.87 0.00 0.00 9.41
- ---------------------------------------------------------------------------------------------------------------------------
10/31/95 11.68 12.30 0.78 0.00 0.00 12.40
- ---------------------------------------------------------------------------------------------------------------------------
10/31/94++ 12.92 11.68 0.23 0.00 0.42 (4.64)+
- ---------------------------------------------------------------------------------------------------------------------------
12/31/93 11.84 12.92 0.52 0.59 0.00 19.13
- ---------------------------------------------------------------------------------------------------------------------------
12/31/92 12.90 11.84 0.97 0.19 0.00 0.93
- ---------------------------------------------------------------------------------------------------------------------------
Inception* -- 12/31/91 12.00 12.90 0.44 0.13 0.00 12.42+
===========================================================================================================================
Total $5.77 $1.59 $0.87
===========================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Historical Performance -- Class B Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
------------------------
Beginning End Income Capital Gain Return Total
Year Ended of Year of Year Dividends Distributions of Capital Returns(1)
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
10/31/99 $11.87 $11.16 $0.47 $0.00 $0.00 (2.11)%
- ---------------------------------------------------------------------------------------------------------------------------
10/31/98 12.22 11.87 0.19 0.60 0.42 7.46
- ---------------------------------------------------------------------------------------------------------------------------
10/31/97 12.50 12.22 1.10 0.08 0.00 7.62
- ---------------------------------------------------------------------------------------------------------------------------
10/31/96 12.26 12.50 0.81 0.00 0.00 8.83
- ---------------------------------------------------------------------------------------------------------------------------
Inception* -- 10/31/95 11.57 12.26 0.66 0.00 0.00 11.97+
===========================================================================================================================
Total $3.23 $0.68 $0.42
===========================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Historical Performance -- Class L Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
------------------------
Beginning End Income Capital Gain Return Total
Year Ended of Year of Year Dividends Distributions of Capital Returns(1)
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
10/31/99 $11.86 $11.15 $0.47 $0.00 $0.00 (2.11)%
- ---------------------------------------------------------------------------------------------------------------------------
10/31/98 12.19 11.86 0.19 0.60 0.42 7.67
- ---------------------------------------------------------------------------------------------------------------------------
10/31/97 12.47 12.19 1.11 0.08 0.00 7.73
- ---------------------------------------------------------------------------------------------------------------------------
10/31/96 12.23 12.47 0.81 0.00 0.00 8.90
- ---------------------------------------------------------------------------------------------------------------------------
10/31/95 11.68 12.23 0.72 0.00 0.00 11.25
- ---------------------------------------------------------------------------------------------------------------------------
10/31/94++ 12.93 11.68 0.21 0.00 0.39 (5.09)+
- ---------------------------------------------------------------------------------------------------------------------------
Inception* -- 12/31/93 11.83 12.93 0.47 0.59 0.00 18.89+
===========================================================================================================================
Total $3.98 $1.27 $0.81
===========================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
4 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
GLOBAL GOVERNMENT BOND PORTFOLIO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Historical Performance -- Class Y Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
------------------------
Beginning End Income Capital Gain Return Total
Year Ended of Year of Year Dividends Distributions of Capital Returns(1)
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
10/31/99 $11.70 $11.03 $0.53 $0.00 $0.00 (1.28)%
- ---------------------------------------------------------------------------------------------------------------------------
10/31/98 12.03 11.70 0.23 0.60 0.46 8.50
- ---------------------------------------------------------------------------------------------------------------------------
10/31/97 12.39 12.03 1.28 0.08 0.00 8.61
- ---------------------------------------------------------------------------------------------------------------------------
10/31/96 12.14 12.39 0.90 0.00 0.00 9.82
- ---------------------------------------------------------------------------------------------------------------------------
10/31/95 11.68 12.14 0.81 0.00 0.00 11.27
- ---------------------------------------------------------------------------------------------------------------------------
10/31/94a++ 12.93 11.68 0.23 0.00 0.43 (4.62)+
- ---------------------------------------------------------------------------------------------------------------------------
Inception*-- 12/31/93 11.97 12.93 0.37 0.59 0.00 16.49+
===========================================================================================================================
Total $4.35 $1.27 $0.89
===========================================================================================================================
</TABLE>
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
- --------------------------------------------------------------------------------
Average Annual Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
-----------------------------------------------
Class A Class B Class L Class Y
================================================================================
Year Ended 10/31/99 (1.62)% (2.11)% (2.11)% (1.28)%
- --------------------------------------------------------------------------------
Five Years Ended 10/31/99 7.19 N/A 6.58 7.29
- --------------------------------------------------------------------------------
Inception* through 10/31/99 7.52 6.71 6.65 7.06
================================================================================
Without Sales Charge(2)
-----------------------------------------------
Class A Class B Class L Class Y
================================================================================
Year Ended 10/31/99 (6.05)% (6.34)% (4.02)% (1.28)%
- --------------------------------------------------------------------------------
Five Years Ended 10/31/99 6.21 N/A 6.37 7.29
- --------------------------------------------------------------------------------
Inception* through 10/31/99 6.92 6.56 6.50 7.06
================================================================================
- --------------------------------------------------------------------------------
Cumulative Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
================================================================================
Class A (Inception* through 10/31/99) 82.31%
- --------------------------------------------------------------------------------
Class B (Inception* through 10/31/99) 37.95
- --------------------------------------------------------------------------------
Class L (Inception* through 10/31/99) 55.22
- --------------------------------------------------------------------------------
Class Y (Inception* through 10/31/99) 57.95
================================================================================
(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 and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to Class
B and L shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charges of 4.50% and 1.00%,
respectively; Class B shares reflect the deduction of a 4.50% CDSC, which
applies if shares are redeemed within one year from 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 L 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, L and Y shares are July 22, 1991, November
18, 1994, January 4, 1993 and February 19, 1993, respectively.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 5
<PAGE>
- --------------------------------------------------------------------------------
Global Government Bond Portfolio at a Glance (unaudited)
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Class A Shares of the
Global Government Bond Portfolio vs. J.P. Morgan Global Bond Market Index+
- --------------------------------------------------------------------------------
July 1991--October 1999
[GRAPH]
Global Government Fund
JP Morgan Global Bond Hedged
JP Morgan Global Bond Unhedged
Jul\1991 9,600 10,000 10,000
Oct\1991 10422 10,459 10,685
Oct\1992 10,963 11,370 12,028
Oct\1993 12,612 12,749 13,351
Oct\1994 12,368 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
Oct\1998 17,789 20,645 19,006
Oct\1999 17,502 20,871 18,444
+ Hypothetical illustration of $10,000 invested in Class A shares at
inception on July 22, 1991, assuming deduction of the maximum initial sales
charge of 4.00% at the time of investment and the reinvestment of dividends
and capital gains, if any, at net asset value through October 31, 1999. 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. An investor
may not invest directly in an index.
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 October 31, 1999 Investment Allocation** As of October 31, 1999
- ----------------------------------------------------------------- ------------------------------------------------------
<S> <C> <C> <C>
1. Depfa Pfandbrief Bank 19.9% [PIE CHART]
---------------------------------------------------------------
2. Japan Government 13.1
---------------------------------------------------------------
3. Kingdom of Denmark 11.2 4.5% Repurchase Agreement
--------------------------------------------------------------- 9.4% Japan
4. KFW International Finance 10.8 15.1% The Americas
--------------------------------------------------------------- 24.0% U.S.Government Obligations
5. Inter-American Development Bank 9.3 47.0% Europe
---------------------------------------------------------------
6. Buoni Poliennali Del Tes 7.6
---------------------------------------------------------------
7. Bundesrepublik Deutschland 7.1
---------------------------------------------------------------
8. Republic of Cyprus 6.8
---------------------------------------------------------------
9. Kingdom of Spain 6.3
---------------------------------------------------------------
10. Canada Government 3.6
---------------------------------------------------------------
* As a percentage of total bonds, excluding U.S. government ** As a percentage of total investments.
obligations and repurchase agreement.
</TABLE>
- --------------------------------------------------------------------------------
6 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
International Equity Portfolio
- --------------------------------------------------------------------------------
Portfolio Managers
Jeffrey J. Russell is a Managing Director of Salomon Smith Barney. 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.
[PHOTO]
Jeffrey J. Russell, CFA
Vice President
James B. Conheady has more than 35 years experience managing international and
global equity portfolios. He has been with the International Equity team since
its formation in 1968 at Drexel Burnham Lambert and moved to Salomon Smith
Barney in 1990. Mr. Conheady holds a B.S.S. degree from Georgetown University.
James B. Conheady
Vice President
[PHOTO]
Performance Update
For the year ended October 31, 1999, Class A shares of the International Equity
Portfolio ("Portfolio") advanced 31.19% outperforming the 23.03% gain of the
Morgan Stanley Capital International EAFE Index 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 of the Far East,
weighted based on market capitalization.) Performance information about the
Portfolio's other classes of shares can be found beginning on page ten.
The Portfolio's outperformance versus the index was attributable to our Asian
growth stocks and the favorable performance of mid- and small-capitalization
stocks during 1999 compared with the prior two years. Strength of the Japanese
yen also helped our total returns.
Investment Strategy
The Portfolio seeks total return on its assets from growth of capital and
income.
We pursue a "bottom-up" approach to stock investing. We look for promising
companies and industries rather than trying to uncover 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 the economic growth rate of their local countries. At the same
time, we strive to maintain a risk level no higher than that of the overall
international stock market through broad diversification in a variety of
markets.
During the past year, we have adjusted our stock positions as industry and
company trends warranted. Our common aim has been to position the Portfolio in
the highest-quality growth stocks of the international marketplace, consistent
with prudent diversification.
Market Update
International stock markets performed well compared to the U.S. market during
the Portfolio's fiscal year as many of the negative market influences of 1998
dissipated. In our view, swift policy responses by central financial
institutions helped stem last year's anxieties. Moreover, ample financial
liquidity fueled genuine recovery in many troubled economies and caused many
markets to rally.
- --------------------------------------------------------------------------------
Smith Barney World Funds,Inc. 7
<PAGE>
For many years, large-capitalization U.S. growth stocks have led the world's
financial markets. In recent months, international markets have assumed
leadership and provided strong absolute and relative returns versus the U.S. In
our view, the opportunities over the next several years, as measured by growth,
structural change and valuation, bode well for the performance of international
stocks.
Portfolio Update
As we took profits in select European situations, the composition of the
Portfolio changed over the period as a result of our increased commitment to
Asian stocks. Our country allocations were 74% Europe, 18% Asia and 8% Canada,
Latin America and other emerging markets at the beginning of the year and became
54% Europe, 40% in Asia and 6% in Canada, Latin America and other emerging
markets by the end of the period.
Europe
European stock markets showed relatively modest performance during much of the
reporting period. Yet recent evidence has shown that, in conjunction with the
Asian economic recovery, business conditions are improving in Europe. The new
European currency, the Euro, after declining precipitously versus the U.S.
dollar since its January 1999 debut, has stabilized in recent months.
In our view, the most notable trend in Europe this year has been the
exceptionally high level of merger and acquisition activity, driven by
industrial concentration and a desire to build economies of scale. Hostile
takeovers in a number of industries such as telecommunications, financial
services and energy have served notice to entrenched managements that inferior
strategic execution will no longer be tolerated by investors. The ready
availability of capital to fund hostile takeovers is a new development in
Europe.
Several core European purchases during the Portfolio's fiscal year include:
. Mannesmann, the former German capital goods supplier, which has been recast
as a pan-European telecommunications provider based on its ownership of key
franchises in Germany, France and Italy and now the United Kingdom through
its recent agreement to purchase Orange.
. Securitas of Sweden, Europe's leading security services operator, which
recently expanded significantly into the U.S. through the acquisition of
Pinkertons.
. Petroleum Geo Services, the Norwegian technological leader in the seismic
mapping of petroleum reserves. The recovery of energy commodity prices
provides a much-improved environment for exploration and production
expenditures over the next several years.
During the period, we also sold several of our long-standing European holdings
such as:
. Volkswagen has done a great job in cutting costs. However, we think that
most of the company's gains from these cost-cutting measures were already
reflected in its stock price.
. Novartis has done well cutting costs and building on the positive
developments from the merger of Sandoz and Ciba Geigy. Yet revenue growth
was noticeably slowing and a difficult, highly competitive European
pharmaceutical industry led us to take profits.
Asia
The developed Asian stock markets turned in exceptional performances during the
period, led by renewed confidence in Japan. After years of unremitting bad news
from Asia, economic growth resumed in many of the Asian economies such as Korea,
Singapore, Taiwan and Thailand. Currencies stabilized, allowing interest rates
to decline in many economies, and that in turn caused renewed investor interest
in local company stocks.
- --------------------------------------------------------------------------------
8 1999 Annual Report to Shareholders
<PAGE>
Japan has begun a major restructuring program after many years of ineffective
policies. The financial system is being rationalized, interest rates are at
extremely low levels, and multinational companies have announced significant
plans to lower expenses, improve productivity and boost returns on invested
capital. In fact, Japanese economic growth has resumed and surveys of business
expectations are improving. While we are aware that the recovery in Japan is
fragile, we believe Japanese stocks are inexpensive relative to other markets
given the substantial changes that are likely to occur in that country in the
months and years ahead.
Several Asian stocks added to the Portfolio during the period include:
. Matsushita Communications Industries, which supplies mobile communications
equipment in Japan, and is, in our view, well positioned to benefit from a
deregulating telecommunications marketplace.
. Softbank of Japan, a well-diversified portfolio of global Internet
interests and opportunities.
. Venture Manufacturing of Singapore, another of our outsourcing investments
leveraged to the growth of the global electronics industry and also
positioned to capitalize on the trend of branded technology leaders
subcontracting their manufacturing to technologically capable
subcontractors.
. Trend Micro, a Japanese developer of antivirus computer software with a
formidable list of multinational clients and joint ventures with other key
technology providers.
Emerging Markets
Emerging markets rallied sharply earlier this year as the global financial
crisis eased. Prospects of accelerating global growth in the coming months have
caused select commodity prices to firm, and this trend has benefited
commodity-dependent export economies. We have not made significant new
commitments to the emerging markets because we think year 2000 concerns and
resultant problems, if any, are likely to be most acute in those economies.
Thank you for your confidence in our investment approach. As always, we look
forward to helping you take advantage of the growing number of investment
opportunities available in today's global economy.
/s/ Jeffrey Russell /s/ James Conheady
Jeffrey Russell James Conheady
Vice President Vice President
November 9, 1999
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 9
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Historical Performance -- Class A Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
------------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
============================================================================================================
<S> <C> <C> <C> <C> <C>
10/31/99 $20.39 $26.75 $0.00 $0.00 31.19%
- ------------------------------------------------------------------------------------------------------------
10/31/98 20.36 20.39 0.00 0.00 0.15
- ------------------------------------------------------------------------------------------------------------
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
============================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Historical Performance -- Class B Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
------------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
============================================================================================================
<S> <C> <C> <C> <C> <C>
10/31/99 $20.08 $26.13 $0.00 $0.00 30.13%
- ------------------------------------------------------------------------------------------------------------
10/31/98 20.22 20.08 0.00 0.00 (0.69)
- ------------------------------------------------------------------------------------------------------------
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
============================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Historical Performance -- Class L Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
------------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
============================================================================================================
<S> <C> <C> <C> <C> <C>
10/31/99 $19.79 $25.76 $0.00 $0.00 30.17%
- ------------------------------------------------------------------------------------------------------------
10/31/98 19.93 19.79 0.00 0.00 (0.70)
- ------------------------------------------------------------------------------------------------------------
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>
- --------------------------------------------------------------------------------
10 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Historical Performance -- Class Y Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
------------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
============================================================================================================
<S> <C> <C> <C> <C> <C>
10/31/99 $20.41 $26.88 $0.00 $0.00 31.70%
- ------------------------------------------------------------------------------------------------------------
10/31/98 20.38 20.41 0.06 0.00 0.45
- ------------------------------------------------------------------------------------------------------------
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
============================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Historical Performance -- Class Z Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
------------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
============================================================================================================
<S> <C> <C> <C> <C> <C>
10/31/99 $20.39 $26.85 $0.00 $0.00 31.68%
- ------------------------------------------------------------------------------------------------------------
10/31/98 20.36 20.39 0.06 0.00 0.45
- ------------------------------------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
Average Annual Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
--------------------------------------------------
Class A Class B Class L Class Y Class Z
================================================================================
Year Ended 10/31/99 31.19% 30.13% 30.17% 31.70% 31.68%
- --------------------------------------------------------------------------------
Five Years Ended 10/31/99 7.85 N/A 6.99 8.23 N/A
- --------------------------------------------------------------------------------
Ten Years Ended 10/31/99 11.82 N/A N/A N/A N/A
- --------------------------------------------------------------------------------
Inception* through 10/31/99 11.89 7.50 11.66 8.91 8.73
================================================================================
With Sales Charge(2)
--------------------------------------------------
Class A Class B Class L Class Y Class Z
================================================================================
Year Ended 10/31/99 24.65% 25.13% 27.86% 31.70% 31.68%
- --------------------------------------------------------------------------------
Five Years Ended 10/31/99 6.75 N/A 6.77 8.23 N/A
- --------------------------------------------------------------------------------
Ten Years Ended 10/31/99 11.25 N/A N/A N/A N/A
- --------------------------------------------------------------------------------
Inception* through 10/31/99 11.48 7.35 11.50 8.91 8.73
================================================================================
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 11
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Cumulative Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
================================================================================
Class A (10/31/89 through 10/31/99)(3) 205.67%
- --------------------------------------------------------------------------------
Class B (Inception* through 10/31/99) 43.41
- --------------------------------------------------------------------------------
Class L (Inception* through 10/31/99) 112.25
- --------------------------------------------------------------------------------
Class Y (Inception* through 10/31/99) 58.28
- --------------------------------------------------------------------------------
Class Z (Inception* through 10/31/99) 51.76
================================================================================
(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 and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to Class
B and L shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charges of 5.00% and 1.00%,
respectively. Class B shares reflect the deduction of a 5.00% CDSC, which
applies if shares are redeemed within one year from purchase. Thereafter
this CDSC declines by 1.00% per year until no CDSC is incurred. Class L
shares reflect the deduction of a 1.00% CDSC, which applies if shares are
redeemed within the first year of purchase.
(3) Performance calculations for Class A shares include the historical return
information related to the Fenimore International Fund, which was the
predecessor fund, for the period from February 18, 1986 through November
22, 1991.
++ 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, L, Y and Z shares are November 22, 1991,
November 7, 1994, January 4, 1993, June 16, 1994 and November 7, 1994,
respectively.
- --------------------------------------------------------------------------------
12 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
International Equity Portfolio at a Glance (unaudited)
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Class A Shares of the
International Equity Portfolio vs. MSCI EAFE Index+
- --------------------------------------------------------------------------------
October 1989--October 1999
[GRAPH]
International Equity Portfolio
MSCI EAFE Index
Oct\1989 9,498 10,000
Oct\1990 9,670 8,745
Oct\1991 12,497 9,384
Oct\1992 12,715 8,173
Oct\1993 18,080 11,269
Oct\1994 19,895 12,440
Oct\1995 18,416 12,431
Oct\1996 20,217 13,774
Oct\1997 22,098 14,452
Oct\1998 22,131 15,890
Oct\1999 29,033 19,551
+ Hypothetical illustration of $10,000 invested in Class A shares on October
31, 1989, assuming deduction of the maximum initial sales charge of 4.50%
at the time of investment and the reinvestment of dividends and capital
gains, if any, at net asset value through October 31, 1999. Illustration
includes historical return information related to the Fenimore
International Fund, which was the predecessor fund, for the period from
October 31, 1989 through November 22, 1991. The Morgan Stanley Capital
International ("MSCI") EAFE Index is a composite portfolio consisting of
equity total returns for the countries of Europe, Australia, New Zealand
and countries in the Far East. The MSCI EAFE Index is weighted based on
each company's market capitalization. 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. An investor may not invest
directly in an index.
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.
Top Ten Holdings* As of October 31, 1999
- ------------------------------------------------------------
1. NTT Data Communication Corp. 5.9%
- ------------------------------------------------------------
2. Nokia Oyj 5.0
- ------------------------------------------------------------
3. Serco Group PLC 3.5
- ------------------------------------------------------------
4. Colt Telecom Group PLC 3.1
- ------------------------------------------------------------
5. Hays PLC 3.0
- ------------------------------------------------------------
6. Murata Manufacturing Co., Ltd. 2.9
- ------------------------------------------------------------
7. Compass Group PLC 2.7
- ------------------------------------------------------------
8. Hosiden Corp. 2.6
- ------------------------------------------------------------
9. Tomra Systems ASA 2.5
- ------------------------------------------------------------
10. Matsushita Communication Industrial Co., Ltd. 2.5
- ------------------------------------------------------------
Investment Allocation* As of October 31, 1999
- -------------------------------------------------
[PIE CHART]
1.4% Africa
39.6% Asia/Pacific
0.3% Australia
3.9% The Americas
54.8% Europe
* As a percentage of total investments.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 13
<PAGE>
- --------------------------------------------------------------------------------
International Balanced Portfolio
- --------------------------------------------------------------------------------
Performance Update and Investment Strategy
The International Balanced Portfolio ("Portfolio") seeks long-term 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' stock and bond markets.
Please note that the Portfolio uses a team management approach with the stock
portion managed by Jeff Russell and James Conheady (International Equity
Portfolio) and the bond portion managed by 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 commentary for the
International Equity Portfolio that appears on page seven and the Global
Government Bond Portfolios, which can be found on page two.
Although the stock 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 therefore impossible to replicate exact
performance.
For the year ended October 31, 1999, the Portfolio returned 9.16% for Class A
shares. In comparison the MSCI EAFE Index returned 23.03% and the J.P. Morgan
Global Government Bond Market Index returned a negative 2.96% (unhedged). (The
MSCI EAFE Index is a composite portfolio consisting of equity total returns for
the countries of Europe, Australia, New Zealand and the countries of the Far
East, weighted based on market capitalization. The J.P. Morgan Global Government
Bond Market Index-Unhedged is a daily, market capitalization weighted
international fixed income index consisting of 13 countries.) Additional
performance information about the Portfolio's other share classes can be found
on page 16.
The Portfolio's outperformance versus its index was attributable to its Asian
growth stock holdings and due to the favorable performance of middle-to-smaller
capitalization stocks during 1999 compared with the prior two years. Strength of
the Japanese yen also helped our total returns.
Stock Market Update
International stock markets performed well, on a relative basis, compared to the
U.S. market during the past 12 months. Fast and effective policy responses from
central financial institutions helped to allay any lingering negative
consequences regarding 1998's global financial crisis. In our view, widespread
recovery in many troubled economies and financial market rallies across the
globe have been fueled by the existence of much-needed liquidity in global
markets.
The composition of the Portfolio's equity component has changed to reflect an
increased commitment to Asian stocks. Additionally, we have taken profits in
several of our European holdings consistent with our goal to minimize risk.
In recent months, international equity markets have assumed a role of market
leader, following in the footsteps of long-reigning U.S. large-capitalization
growth stocks. And while no guarantees can be given, we are confident that
opportunities over the next several years, as measured by growth, structural
change and valuation, will bode well for international stock investing.
Bond Market Update
During the 12 months ended October 31, 1999, the strength of the Japanese yen
became apparent,
- --------------------------------------------------------------------------------
14 1999 Annual Report to Shareholders
<PAGE>
despite the country's recent weak economic situation. We also
saw a widening of investment-grade credit spreads in the U.S. and disappointing
performance by Euroland government bonds. We believe that the latter is evidence
of investor unease regarding further interest-rate increases, despite little or
no evidence of inflationary pressures.
The Portfolio's fixed-income currency position is neutral to its index, holding
around 35% in Japanese yen, approximately 50% in the Euro, and roughly 12% in
the non-Euro currencies of the U.K., Denmark and Sweden.
Thank you for your investment in the International Balanced Portfolio. We look
forward to helping you take advantage of the growing number of investment
opportunities available in today's global economy.
/s/ James B. Conheady /s/ Jeffrey J. Russell
James B. Conheady Jeffrey J. Russell
Vice President Vice President
/s/ Denis P. Mangan
Denis P. Mangan
Vice President
November 9, 1999
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 15
<PAGE>
- --------------------------------------------------------------------------------
International Balanced Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Historical Performance -- Class A Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
--------------------
Beginning End Income Capital Gain Return Total
Year Ended of Year of Year Dividends Distributions of Capital Returns(1)
=====================================================================================================
<S> <C> <C> <C> <C> <C> <C>
10/31/99 $14.89 $14.11 $0.13 $1.86 $0.00 9.16%
.....................................................................................................
10/31/98 13.32 14.89 0.10 0.03 0.00 12.87
.....................................................................................................
10/31/97 13.90 13.32 0.15 0.00 0.20 (1.71)
.....................................................................................................
10/31/96 12.64 13.90 0.35 0.00 0.00 12.89
.....................................................................................................
10/31/95 12.20 12.64 0.39 0.00 0.00 7.05
.....................................................................................................
Inception* -- 10/31/94 12.00 12.20 0.00 0.00 0.00 1.67+
=====================================================================================================
Total $1.12 $1.89 $0.20
=====================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Historical Performance -- Class B Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
---------------------
Beginning End Income Capital Gain Return Total
Year Ended of Year of Year Dividends Distributions of Capital Returns(1)
=====================================================================================================
<S> <C> <C> <C> <C> <C> <C>
10/31/99 $14.93 $14.15 $0.04 $1.86 $0.00 8.42%
.....................................................................................................
10/31/98 13.38 14.93 0.02 0.03 0.00 11.96
.....................................................................................................
10/31/97 13.90 13.38 0.08 0.00 0.10 (2.45)
.....................................................................................................
10/31/96 12.65 13.90 0.26 0.00 0.00 12.05
.....................................................................................................
Inception* -- 10/31/95 12.08 12.65 0.29 0.00 0.00 7.33+
=====================================================================================================
Total $0.69 $1.89 $0.10
=====================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Historical Performance -- Class L Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
----------------------
Beginning End Income Capital Gain Return Total
Year Ended of Year of Year Dividends Distributions of Capital Returns(1)
=====================================================================================================
<S> <C> <C> <C> <C> <C> <C>
10/31/99 $14.89 $14.06 $0.04 $1.86 $0.00 8.07%
.....................................................................................................
10/31/98 13.35 14.89 0.01 0.03 0.00 11.90
.....................................................................................................
10/31/97 13.87 13.35 0.08 0.00 0.10 (2.46)
.....................................................................................................
10/31/96 12.63 13.87 0.26 0.00 0.00 11.99
.....................................................................................................
10/31/95 12.18 12.63 0.29 0.00 0.00 6.29
.....................................................................................................
Inception* -- 10/31/94 12.00 12.18 0.00 0.00 0.00 1.50
=====================================================================================================
Total $0.68 $1.89 $0.10
=====================================================================================================
</TABLE>
It is the Fund's policy to distribute dividends quarterly and capital gains, if
any, annually.
- --------------------------------------------------------------------------------
16 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Average Annual Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
--------------------------------------
Class A Class B Class L
================================================================================
Year Ended 10/31/99 9.16% 8.42% 8.07%
................................................................................
Five Years Ended 10/31/99 7.92 N/A 7.02
................................................................................
Inception* through 10/31/99 7.96 7.35 7.07
================================================================================
With Sales Charge(2)
---------------------------------------
Class A Class B Class L
================================================================================
Year Ended 10/31/99 3.73% 3.68% 6.06%
................................................................................
Five Years Ended 10/31/99 6.82 N/A 6.81
................................................................................
Inception* through 10/31/99 6.90 7.20 6.86
================================================================================
- --------------------------------------------------------------------------------
Cumulative Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
================================================================================
Class A (Inception* through 10/31/99) 48.80%
................................................................................
Class B (Inception* through 10/31/99) 42.39
................................................................................
Class L (Inception* through 10/31/99) 42.51
================================================================================
(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 and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to Class
B and L shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charges of 5.00% and 1.00%,
respectively; Class B shares reflect the deduction of a 5.00% CDSC, which
applies if shares are redeemed within one year from purchase. Thereafter,
this CDSC declines by 1.00% per year until no CDSC is incurred. Class L
shares reflect the deduction of a 1.00% CDSC, which applies if shares are
redeemed within the first year of purchase.
* Inception dates for Class A, B and L shares are August 25, 1994, November
7, 1994 and August 25, 1994, respectively.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 17
<PAGE>
- --------------------------------------------------------------------------------
International Balanced Portfolio at a Glance (unaudited)
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Class A and L Shares of the
International Balanced Portfolio vs.
MSCIEAFE Index and J.P. Morgan Global Bond Market Index+
August 1994--October 1999
[GRAPH]
International Balanced Portfolio Class A
International Balanced Portfolio Class L
J.P. Morgan Global Bond Index (unhedged)
MSCI EAFE Index
8/25/94 9,547 10,000 10,000 10000
10/94 9,706 9,950 10,262 10443
10/95 10,390 10,681 12,111 10436
10/96 11,730 11,962 12,850 11563
10/97 11,529 11,667 13,300 12133
10/98 13,013 13,056 15,026 13340
10/31/99 14,185 14,090 14,582 16413
+ Hypothetical illustration of $10,000 invested in Class A and L shares
at inception on August 25, 1994, assuming deduction of the maximum
initial sales charge of 4.50% at the time of investment for Class A
shares and the deduction of the 1.00% CDSC for Class L shares. It also
assumes reinvestment of dividends and capital gains, if any, at net
asset value through October 31, 1999. The Morgan Stanley Capital
International ("MSCI") EAFE Index is a composite portfolio consisting
of equity total returns for the countries of Europe, Australia, New
Zealand and countries in the Far East. 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 L 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. An investor may not invest directly in an index.
- --------------------------------------------------------------------------------
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption values may be more or less than the original cost. No adjustment
has been made for shareholder tax liability on dividends or capital
gains.
Top Ten Holdings* As of October 31, 1999
- -------------------------------------------------------------------
1.France O.A.T. 16.7%
- -------------------------------------------------------------------
2. Japan Government 14.2
- -------------------------------------------------------------------
3. Bundesrepublik Deutschland 8.0
- -------------------------------------------------------------------
4. NTT Data Corp. 6.7
- -------------------------------------------------------------------
5. United Kingdom Treasury 5.5
- -------------------------------------------------------------------
6. Serco Group PLC 5.1
- -------------------------------------------------------------------
7. Nokia 0y AB, Class K Shares 4.8
- -------------------------------------------------------------------
8. Bundesobligation 4.1
- -------------------------------------------------------------------
9. Buoni Poliennali Del Tes 3.0
- -------------------------------------------------------------------
10. Canadian Government 2.7
- -------------------------------------------------------------------
Investment Allocation* As of October 31, 1999
- -------------------------------------------------------------------
[PIE CHART]
30.3% Asia/Pacific
5.3% The Americas
64.4% Europe
* As a percentage of total investments.
- --------------------------------------------------------------------------------
18 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments October 31, 1999
- --------------------------------------------------------------------------------
GLOBAL GOVERNMENT BOND PORTFOLIO
FACE
AMOUNT SECURITY VALUE
================================================================================
U.S. TREASURY OBLIGATIONS -- 24.0%
U.S. Treasury Notes:
$ 10,000,000 6.000% due 8/15/04 $10,027,700
20,000,000 6.000% due 8/15/09 19,983,000
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost -- $30,214,063) 30,010,700
================================================================================
FACE
AMOUNT+ SECURITY VALUE
================================================================================
BONDS -- 71.5%
Canada -- 2.6%
4,700,000 Canada Government, 6.000% 6/01/08++ 3,183,499
- --------------------------------------------------------------------------------
Denmark -- 0.6%
5,000,000 Kingdom of Denmark, 7.000% due 11/15/07 773,472
- --------------------------------------------------------------------------------
Europe -- 5.4%
6,900,000 Buoni Poliennali Del Tes, 3.250% due 4/15/04 6,797,157
- --------------------------------------------------------------------------------
Germany -- 19.3%
6,300,000 Bundesrepublik Deutschland, 4.500% due 4/15/04 6,296,821
17,000,000 Depfa Pfandbrief Bank, 5.500% due 1/15/10 17,777,113
- --------------------------------------------------------------------------------
24,073,934
- --------------------------------------------------------------------------------
Greece -- 4.8%
6,000,000 Republic of Cyprus, 5.375% due 7/28/08 6,024,091
- --------------------------------------------------------------------------------
Japan -- 9.4%
1,200,000,000 Japan Government, 1.900% due 9/21/09 11,698,735
- --------------------------------------------------------------------------------
Sweden -- 2.5%
26,000,000 AB Spintab, 5.500% due 9/17/03 3,111,844
- --------------------------------------------------------------------------------
United States -- 12.5%
10,000,000 Kingdom of Denmark, 6.625% due 6/17/03++ 10,019,000
6,000,000 Kingdom of Spain, 5.875% due 7/28/08++ 5,590,500
- --------------------------------------------------------------------------------
15,609,500
- --------------------------------------------------------------------------------
United Kingdom -- 14.4%
5,000,000 Inter-American Development Bank,
7.125% due 11/26/04 8,321,847
5,000,000 KFW International Finance, 9.438% due 2/27/08 9,648,933
- --------------------------------------------------------------------------------
17,970,780
- --------------------------------------------------------------------------------
TOTAL BONDS
(Cost -- $92,618,162) 89,243,012
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 19
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1999
- --------------------------------------------------------------------------------
GLOBAL GOVERNMENT BOND PORTFOLIO
FACE
AMOUNT SECURITY VALUE
================================================================================
REPURCHASE AGREEMENT -- 4.5%
$5,600,000 CIBC Wood Gundy Securities Inc., 5.150%
due 11/1/99;
Proceeds at maturity -- $5,602,403;
(Fully collateralized by U.S. Treasury Notes,
5.375% due 6/30/00; Market value -- $5,712,320)
(Cost -- $5,600,000) $ 5,600,000
================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $128,432,225*) $124,853,712
================================================================================
+ Represents local currency.
++ All or a portion of this security is on loan (See Note 9).
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
20 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1999
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------
STOCKS -- 99.1%
Australia -- 0.3%
1,306,359 Coca Cola Amatil Ltd. $ 4,029,505
- --------------------------------------------------------------------------------
Canada -- 1.8%
260,000 Celestica Inc.+ 14,317,765
444,000 The Toronto Dominion Bank 10,187,640
- --------------------------------------------------------------------------------
24,505,405
- --------------------------------------------------------------------------------
Finland -- 5.0%
583,000 Nokia Oyj 67,336,813
- --------------------------------------------------------------------------------
France -- 4.5%
140,000 Axa 19,733,439
80,000 Groupe Danone 20,391,432
200,000 Sidel SA++ 19,970,989
- --------------------------------------------------------------------------------
60,095,860
- --------------------------------------------------------------------------------
Germany -- 3.6%
35,000 Aixtron AG 3,929,030
176,100 Mannesmann AG 27,154,102
24,000 Sap AG++ 10,347,916
30,000 Sap AG ADR 1,096,875
294,300 Stinnes Ag+ 5,568,123
- --------------------------------------------------------------------------------
48,096,046
- --------------------------------------------------------------------------------
Hong Kong -- 6.7%
13,416,904 Hong Kong and China Gas Co., Ltd. 17,786,743
1,864,116 HSBC Holdings PLC++ 22,373,231
3,000,000 Hutchison Whampoa Ltd. 30,117,768
2,505,727 Sun Hung Kai Properties Ltd.++ 20,237,386
- --------------------------------------------------------------------------------
90,515,128
- --------------------------------------------------------------------------------
India -- 0.1%
20,000 The India Magnum Fund+ 860,000
- --------------------------------------------------------------------------------
Ireland -- 6.4%
2,192,854 Bank of Ireland 17,102,499
1,411,976 Grafton Group PLC 31,166,827
4,061,000 Independent News & Media PLC 21,470,738
1,579,402 Irish Continental Group PLC 16,518,162
1 Irish Life & Permanent PLC 9
- --------------------------------------------------------------------------------
86,258,235
- --------------------------------------------------------------------------------
Italy -- 2.1%
775,000 Alleanza Assicurazioni+++ 7,887,016
3,300,000 Telecom Italia Mobile S.p.A.++ 20,655,785
- --------------------------------------------------------------------------------
28,542,801
- --------------------------------------------------------------------------------
Japan -- 27.4%
616,000 Canon, Inc. 17,412,801
933,000 Hosiden Corp.++ 35,313,818
295 Japan Telecom Co., Ltd. 10,119,777
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 21
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1999
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------
Japan -- 27.4% (continued)
200,000 Matsushita Communication Industrial
Co., Ltd. $ 33,576,083
300,000 Murata Manufacturing Co., Ltd. 38,520,505
5,000 NTT Data Communication Corp. 79,053,278
31,000 Shohkoh Fund & Co., Ltd. 18,951,705
60,000 Softbank Corp. 24,894,596
203,000 Sony Corp. 31,628,784
880,000 Terumo Corp. 26,730,549
1,100,000 Tostem Corp. 24,611,920
150,000 Trend Micro Inc.++ 29,752,779
- --------------------------------------------------------------------------------
370,566,595
- --------------------------------------------------------------------------------
Mexico -- 2.1%
18,310,000 Cifra SA de CV, Series C+ 28,512,847
- --------------------------------------------------------------------------------
Netherlands -- 2.5%
374,899 IHC Caland NV 16,254,897
1,000,000 ING Groep Warrants, Expire 3/15/01+ 16,208,034
20,000 United Pan-Europe Communication N.V.+ 1,536,716
- --------------------------------------------------------------------------------
33,999,647
- --------------------------------------------------------------------------------
Norway -- 3.4%
400,000 Petroleum Geo-Services ASA+ 5,850,000
465,000 Tandberg Television ASA+ 5,512,710
897,000 Tomra Systems ASA++ 34,303,852
- --------------------------------------------------------------------------------
45,666,562
- --------------------------------------------------------------------------------
Poland -- 0.1%
91,300 Netia Holdings SA ADR+++ 1,460,800
- --------------------------------------------------------------------------------
Singapore -- 5.4%
1,056,100 DelGro Corp. Ltd. 3,649,823
2,362,800 Keppel Corp. Ltd. PLC 6,418,954
1,350,000 Singapore Press Holdings Ltd. 23,124,775
8,000,000 Singapore Technologies Engineering Ltd. 11,587,931
1,568,000 United Overseas Bank Foreign Ltd. 11,874,505
1,830,000 Venture Manufacturing (Singapore) Ltd. 16,278,398
- --------------------------------------------------------------------------------
72,934,386
- --------------------------------------------------------------------------------
South Africa -- 1.4%
207,000 Anglo American Platinum Corp. Ltd. 5,962,409
2,770,669 Dimension Data Holdings Ltd.++ 13,436,279
- --------------------------------------------------------------------------------
19,398,688
- --------------------------------------------------------------------------------
Spain -- 2.6%
700,000 Indra Sistemas SA 7,350,376
221,000 Superdiplo SA+ 4,048,886
1,421,000 Telefonica SA+ 23,360,222
- --------------------------------------------------------------------------------
34,759,484
- --------------------------------------------------------------------------------
Sweden -- 0.8%
750,000 Securitas AB++ 11,106,795
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
22 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1999
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------
Switzerland -- 3.0%
775,000 Mettler-Toledo International Inc.+ $ 23,104,687
1,500 Roche Holding AG 18,015,358
- --------------------------------------------------------------------------------
41,120,045
- --------------------------------------------------------------------------------
United Kingdom -- 19.9%
2,370,000 Capita Group PLC 31,461,553
1,404,500 Colt Telecom Group PLC+ 41,990,729
3,375,000 Compass Group PLC 36,274,244
525,000 Guardian IT PLC 5,728,808
3,500,000 Hays PLC 39,972,432
2,145,000 Invensys 10,541,622
3,899,170 Misys PLC 32,598,653
1,640,000 Serco Group PLC 46,959,405
5,467,000 TeleWest Communications PLC 23,234,436
- --------------------------------------------------------------------------------
268,761,882
- --------------------------------------------------------------------------------
TOTAL STOCKS
(Cost -- $733,494,244) 1,338,527,524
================================================================================
FOREIGN STOCKS -- 0.9%
Spain -- 0.4%
921,000 Amadeus Global Travel Distribution
SA--Class A+++ 5,508,303
- --------------------------------------------------------------------------------
United Kingdom -- 0.5%
326,000 Filtronic PLC 6,044,763
- --------------------------------------------------------------------------------
TOTAL FOREIGN STOCKS
(Cost -- $11,758,786) 11,553,066
================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $745,253,030*) $1,350,080,590
================================================================================
+ Non-income producing.
++ All or a portion of this security is on loan (See Note 9).
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 23
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1999
- --------------------------------------------------------------------------------
INTERNATIONAL BALANCED PORTFOLIO
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------
STOCKS -- 45.7%
Australia -- 0.0%
2,146 Coca Cola Amatil Ltd. $ 6,618
- --------------------------------------------------------------------------------
Canada -- 0.2%
600 Celestica Inc.+ 33,041
- --------------------------------------------------------------------------------
Finland -- 4.8%
5,400 Nokia OY AB, Class K Shares 623,702
- --------------------------------------------------------------------------------
France -- 2.9%
1,050 Axa 148,000
330 Groupe DaNone 84,114
1,400 Sidel SA 139,796
- --------------------------------------------------------------------------------
371,910
- --------------------------------------------------------------------------------
Germany -- 1.4%
1,000 Mannesmann AG 154,197
65 SAP AG Preferred 28,025
- --------------------------------------------------------------------------------
182,222
- --------------------------------------------------------------------------------
Hong Kong -- 2.7%
33,000 Hong Kong & China Gas Co. Ltd. 43,747
4,937 HSBC Holdings PLC 59,254
14,000 Hutchison Whampoa Ltd. 140,549
13,000 Sun Hung Kai Properties Ltd. 104,993
- --------------------------------------------------------------------------------
348,543
- --------------------------------------------------------------------------------
Ireland -- 0.4%
6,863 Bank of Ireland 53,526
4 CRH PLC 75
- --------------------------------------------------------------------------------
53,601
- --------------------------------------------------------------------------------
Italy -- 1.5%
10,000 Alleanza Assicurazioni+ ++ 101,767
15,000 Telecom Italia Mobile S.p.A.+ 93,889
- --------------------------------------------------------------------------------
195,656
- --------------------------------------------------------------------------------
Japan -- 11.4%
1,000 Canon, Inc. 28,267
4,000 Hosiden Corp. 151,399
1 Japan Telecom Co., Ltd. 34,304
1,000 Murata Manufacturing Co., Ltd. 128,401
55 NTT Data Corp. 869,586
150 Shohkoh Fund & Co.,Ltd. 91,701
200 Softbank Corp. 82,981
600 Sony Corp. 93,484
- --------------------------------------------------------------------------------
1,480,123
- --------------------------------------------------------------------------------
Mexico -- 1.4%
118,800 Cifra SA de CV+ 184,998
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
24 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1999
- --------------------------------------------------------------------------------
INTERNATIONAL BALANCED PORTFOLIO
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------
Netherlands -- 1.2%
1,827 Aalberts Industries NV $ 33,990
1,030 IHC Caland NV 44,659
1,227 ING Groep NV 72,327
- --------------------------------------------------------------------------------
150,976
- --------------------------------------------------------------------------------
Norway -- 0.6%
2,200 Tomra Systems ASA 84,134
- --------------------------------------------------------------------------------
Singapore -- 2.0%
4,000 DelGro Corp. Ltd. 13,823
7,500 Keppel Corp. Ltd. 20,375
5,000 Singapore Press Holdings Ltd. 85,647
62,500 Singapore Technologies Engineering Ltd. 90,530
6,000 United Overseas Bank Foreign Ltd. 45,438
- --------------------------------------------------------------------------------
255,813
- --------------------------------------------------------------------------------
Spain -- 0.1%
500 Superdiplo SA+ 9,160
- --------------------------------------------------------------------------------
Switzerland -- 0.5%
2,000 Mettler-Toledo International Inc.+ 59,625
- --------------------------------------------------------------------------------
U.S.A. -- 1.0%
2,741 Telefonica SA ADR 136,878
- --------------------------------------------------------------------------------
United Kingdom -- 13.6%
6,800 Capita Group PLC 90,269
8,500 Colt Telecom Group PLC+ 254,126
8,700 Compass Group PLC 93,506
22,100 Hays PLC 252,397
6,500 Invensys PLC 31,944
9,050 Misys PLC 75,661
23,200 Serco Group PLC 664,303
72,000 Telewest Communications PLC+ 305,995
- --------------------------------------------------------------------------------
1,768,201
- --------------------------------------------------------------------------------
Venezuela -- 0.0%
7,140 Republic of Venezuela Warrants, Expire 4/15/20 0
- --------------------------------------------------------------------------------
TOTAL STOCKS
(Cost -- $3,695,285) 5,945,201
- --------------------------------------------------------------------------------
FACE
AMOUNT+ SECURITY VALUE
- --------------------------------------------------------------------------------
FOREIGN BONDS -- 54.3%
Canada -- 2.7%
500,000 Canadian Government, 7.000% due 12/1/06++ 358,012
- --------------------------------------------------------------------------------
Europe -- 19.8%
400,000 Buoni Poliennali Del Tes, 3.250% due 4/15/04 394,038
2,067,143 France O.A.T., 5.250% due 4/25/08 2,180,388
- --------------------------------------------------------------------------------
2,574,426
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 25
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1999
- --------------------------------------------------------------------------------
INTERNATIONAL BALANCED PORTFOLIO
FACE
AMOUNT# SECURITY VALUE
================================================================================
Germany -- 12.1%
500,000 Bundesobligation, 5.000% due 5/21/01 $ 535,012
511,292 Bundesrepublik Deutschland, 5.250% due 1/4/08 539,033
500,000 Bundesrepublik Deutschland, 4.500% due 7/4/99 499,747
- --------------------------------------------------------------------------------
1,573,792
- --------------------------------------------------------------------------------
Japan -- 14.2%
190,000,000 Japan Government, 1.900% due 9/21/09 1,852,327
- --------------------------------------------------------------------------------
United Kingdom -- 5.5%
400,000 United Kingdom Treasury, 7.250% due 12/7/07 717,403
- --------------------------------------------------------------------------------
TOTAL FOREIGN BONDS
(Cost -- $7,342,540) 7,075,960
================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $11,037,825*) $13,021,161
================================================================================
+ Non-income producing security.
++ All or a portion of this security is on loan (See Note 9).
# Represents local currency.
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
26 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Global International International
Government Equity Balanced
Bond Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investments -- Cost $128,432,225 $ 745,253,030 $11,037,825
Foreign currency -- Cost 6,190,234 91,864 13,492
- ------------------------------------------------------------------------------------------------------------------------------------
Investments, at value $124,853,712 $1,350,080,590 $13,021,161
Foreign currency, at value -- 53,534 13,702
Cash 8,124 110,313,444 417,656
Collateral for securities on loan (Note 9) 6,384,250 90,504,261 506,750
Receivable for securities sold -- 16,398,092 50,129
Dividends and interest receivable 2,570,848 1,811,919 188,410
Receivable for Fund shares sold 12,856 1,741,116 1,449
Receivable for open forward foreign
currency contracts (Note 4) 813,487 106,545 37,341
Receivable from manager -- -- 16,109
- ------------------------------------------------------------------------------------------------------------------------------------
Total Assets 134,643,277 1,571,009,501 14,252,707
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities on loan (Note 9) 6,384,250 90,504,261 506,750
Dividends payable 288,007 -- --
Payable for Fund shares purchased 244,080 9,631,747 --
Management fees payable 76,105 878,175 8,752
Payable for open forward foreign
currency contracts (Note 4) 48,816 115,920 6,408
Payable for securities purchased -- 1,033,937 4,207
Payable to bank, foreign currency 15,059 -- --
Distribution fees payable 9,773 217,303 1,675
Accrued expenses 120,534 801,493 90,970
- ------------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 7,186,624 103,182,836 618,762
- ------------------------------------------------------------------------------------------------------------------------------------
Total Net Assets $127,456,653 $1,467,826,665 $13,633,945
====================================================================================================================================
NET ASSETS:
Par value of capital shares $ 11,460 $ 55,225 $ 966
Capital paid in excess of par value 129,158,254 764,015,311 11,697,270
Undistributed net investment income 3,140,784 4,178,735 304,591
Accumulated net realized gain (loss)
from security transactions and foreign currencies (2,328,771) 94,970,580 (353,980)
Net unrealized appreciation (depreciation)
of investments and foreign currencies (2,525,074) 604,606,814 1,985,098
- ------------------------------------------------------------------------------------------------------------------------------------
Total Net Assets $127,456,653 $1,467,826,665 $13,633,945
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 27
<PAGE>
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities (continued) October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Global International International
Government Equity Balanced
Bond Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C>
Shares Outstanding:
Class A 6,130,041 22,358,327 572,011
- ------------------------------------------------------------------------------------------------------------------------------------
Class B 850,054 7,655,779 213,091
- ------------------------------------------------------------------------------------------------------------------------------------
Class L 155,213 6,920,690 181,324
- ------------------------------------------------------------------------------------------------------------------------------------
Class Y 4,324,908 13,180,221 --
- ------------------------------------------------------------------------------------------------------------------------------------
Class Z -- 5,109,941 --
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $11.18 $26.75 $14.11
- ------------------------------------------------------------------------------------------------------------------------------------
Class B* $11.16 $26.13 $14.15
- ------------------------------------------------------------------------------------------------------------------------------------
Class L** $11.15 $25.76 $14.06
- ------------------------------------------------------------------------------------------------------------------------------------
Class Y (and redemption price) $11.03 $26.88 --
- ------------------------------------------------------------------------------------------------------------------------------------
Class Z (and redemption price) -- $26.85 --
- ------------------------------------------------------------------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 4.71% of net asset value per share) $11.71 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Class A (net asset value plus 5.26% of net asset value per share) -- $28.16 $14.85
- ------------------------------------------------------------------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset value per share) $11.26 $26.02 $14.20
====================================================================================================================================
</TABLE>
* Redemption price is NAV of Class B shares reduced by a 4.50% CDSC for
Global Government Bond Portfolio or by a 5.00% CDSC for the International
Equity and International Balanced Portfolios if shares are redeemed within
one year from purchase (See Note 2).
** Redemption price is NAV of Class L shares reduced by a 1.00% CDSC if shares
are redeemed within the first year of purchase.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
28 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statements of Operations For the Year Ended October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Global International International
Government Equity Balanced
Bond Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 7,715,656 $ 1,865,354 $ 493,674
Dividends -- 12,477,328 80,068
Less: Foreign withholding tax -- (1,005,608) (11,180)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investment Income 7,715,656 13,337,074 562,562
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 1,024,623 10,291,301 126,157
Distribution fees (Note 2) 301,205 4,503,478 83,088
Shareholder and system servicing fees 159,900 955,078 26,915
Registration fees 65,000 74,325 65,000
Audit and legal 40,925 66,939 35,000
Custody 28,000 620,000 25,000
Shareholder communications 14,000 105,461 9,854
Directors' fees 5,598 29,244 2,573
Pricing service fees -- 5,107 5,000
Other 7,539 25,697 4,124
- ------------------------------------------------------------------------------------------------------------------------------------
Total Expenses 1,646,790 16,676,640 382,711
- ------------------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) 6,068,866 (3,339,566) 179,851
- ------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN
CURRENCIES (NOTES 3 AND 4):
Realized Gain (Loss) From:
Security transactions (2,577,032) 127,937,328 (39,774)
Foreign currency transactions 4,366,343 (818,675) (104,187)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Realized Gain (Loss) 1,789,311 127,118,653 (143,961)
- ------------------------------------------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation (Depreciation)
of Investments and Foreign Currencies:
Beginning of year 7,359,067 337,608,556 883,228
End of year (2,525,074) 604,606,814 1,985,098
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation (Depreciation) (9,884,141) 266,998,258 1,101,870
- ------------------------------------------------------------------------------------------------------------------------------------
Net Gain (Loss) on Investments and Foreign Currencies (8,094,830) 394,116,911 957,909
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Operations $(2,025,964) $390,777,345 $1,137,760
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 29
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets For the Year Ended October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Global International International
Government Equity Balanced
Bond Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ 6,068,866 $ (3,339,566) $ 179,851
Net realized gain (loss) 1,789,311 127,118,653 (143,961)
Increase in net unrealized appreciation (depreciation) (9,884,141) 266,998,258 1,101,870
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Operations (2,025,964) 390,777,345 1,137,760
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (6,073,273) -- (110,820)
Net realized gains -- -- (2,750,084)
- ------------------------------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (6,073,273) -- (2,860,904)
- ------------------------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 10):
Net proceeds from sale of shares 18,556,991 7,522,591,959 7,269,474
Net asset value of shares issued
for reinvestment of dividends 2,636,510 -- 2,475,580
Cost of shares reacquired (28,490,266) (7,683,231,190) (10,971,288)
- ------------------------------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Fund Share Transactions (7,296,765) (160,639,231) (1,226,234)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets (15,396,002) 230,138,114 (2,949,378)
NET ASSETS:
Beginning of year 142,852,655 1,237,688,551 16,583,323
- ------------------------------------------------------------------------------------------------------------------------------------
End of year* $127,456,653 $ 1,467,826,665 $ 13,633,945
====================================================================================================================================
* Includes undistributed net investment income of: $3,140,784 $4,178,735 $304,591
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
30 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets For the Year Ended October 31, 1998
(continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Global International International
Government Equity Balanced
Bond Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ 6,488,551 $ (1,455,652) $ 673,640
Net realized gain (loss) (3,133,405) 63,603,029 7,009,119
Increase (decrease) in net unrealized appreciation 7,652,796 (24,011,935) (2,668,125)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 11,007,942 38,135,442 5,014,634
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (2,571,347) (1,282,091) (274,304)
Net realized gains (7,063,325) -- (147,477)
Capital (5,311,989) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (14,946,661) (1,282,091) (421,781)
- ------------------------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 10):
Net proceeds from sale of shares 21,964,285 3,488,292,293 12,535,645
Net asset value of shares issued
for reinvestment of dividends 7,826,233 743,911 104,623
Cost of shares reacquired (28,999,827) (3,618,555,356) (62,556,734)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets
From Fund Share Transactions 790,691 (129,519,152) (49,916,466)
- ------------------------------------------------------------------------------------------------------------------------------------
Decrease in Net Assets (3,148,028) (92,665,801) (45,323,613)
NET ASSETS:
Beginning of year 146,000,683 1,330,354,352 61,906,936
- ------------------------------------------------------------------------------------------------------------------------------------
End of year* $142,852,655 $1,237,688,551 $16,583,323
====================================================================================================================================
* Includes overdistributed net investment income of: $(596,540) $(11,347,580) --
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 31
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 shareholder 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, 1999, 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, for the
International Balanced Portfolio, a portion of accumulated net realized gain
amounting to $3,642,411 was reclassified to paid-in capital. 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.
- --------------------------------------------------------------------------------
32 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (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
SSB Citi Fund Management LLC ("SSBC"), formerly known as SSBC Fund Management
Inc., a subsidiary of Salomon Smith Barney Holdings Inc. ("SSBH") which, in
turn, is a subsidiary of Citigroup Inc. ("Citigroup"), acts as investment
manager of the Fund. The Global Government Bond Portfolio pays SSBC 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
SSBC 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 Private Trust Company, another subsidiary of Citigroup, acts as the
Fund's shareholder servicing agent.
CFBDS, Inc. ("CFBDS") acts as the Fund's distributor. Salomon Smith Barney Inc.
("SSB"), another subsidiary of SSBH, as well as certain other broker-dealers,
continues to sell Fund shares to the public as a member of the selling group.
SSB acts as the primary broker for its portfolio agency transactions. For the
year ended October 31, 1999, SSB received total brokerage commissions of
$152,267 from the International Equity and International Balanced Portfolios.
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 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
purchase. Thereafter this CDSC declines by 1.00% per year until no CDSC is
incurred. Class L 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 year ended October 31, 1999, CDSCs paid to SSB were approximately:
CDSCs
----------------------------------
Portfolio Class A Class B Class L
================================================================================
Global Government Bond -- $ 8,000 --
- --------------------------------------------------------------------------------
International Equity $10,000 384,000 $19,000
- --------------------------------------------------------------------------------
International Balanced 5,000 11,000 --
================================================================================
For the year ended October 31, 1999, sales charges received by SSB and CFBDS
were approximately:
Sales Charges
-------------------
Portfolio Class A Class L
================================================================================
Global Government Bond $ 7,000 --
- --------------------------------------------------------------------------------
International Equity 646,000 $ 67,000
- --------------------------------------------------------------------------------
International Balanced 14,000 --
================================================================================
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 33
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
Pursuant to a Distribution Plan, the Portfolios pay a service fee with respect
to Class A, B and L 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
Portfolio pays a distribution fee with respect to Class B and L 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 L shares
calculated at an annual rate of 0.75% of the average daily net assets for each
respective Portfolio and class. For the year ended October 31, 1999, total
Distribution Plan fees incurred by the Portfolios were:
Portfolio Class A Class B Class L
================================================================================
Global Government Bond $ 195,608 $ 91,284 $ 14,313
- --------------------------------------------------------------------------------
International Equity 1,072,787 1,856,625 1,574,066
- --------------------------------------------------------------------------------
International Balanced 21,777 34,584 26,727
================================================================================
All officers and one Director of the Fund are employees of SSB.
3. Investments
During the year ended October 31, 1999, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding short-
term securities) were as follows:
Portfolio Purchases Sales
================================================================================
Global Government Bond $203,353,058 $212,191,943
- --------------------------------------------------------------------------------
International Equity 369,848,603 537,600,381
- --------------------------------------------------------------------------------
International Balanced 14,849,199 16,936,707
================================================================================
At October 31, 1999, aggregate gross unrealized appreciation and depreciation of
investments for Federal income tax purposes were substantially as follows:
Net Unrealized
Appreciation
Portfolio Appreciation Depreciation (Depreciation)
================================================================================
Global Government Bond $ 1,014,090 $ (4,592,603) $ (3,578,513)
- --------------------------------------------------------------------------------
International Equity 621,624,970 (16,797,410) 604,827,560
- --------------------------------------------------------------------------------
International Balanced 2,477,047 (493,711) 1,983,336
================================================================================
- --------------------------------------------------------------------------------
34 1999 Annual Report To Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
4. Forward Foreign Currency Contracts
At October 31, 1999, 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 or (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:
Canadian Dollar 4,760,000 $ 3,238,215 11/29/99 $ (472)
Danish Krone 5,740,000 813,265 11/29/99 12,160
Euro 35,340,000 37,227,277 11/29/99 547,650
British Pound 11,510,000 18,887,820 11/29/99 212,795
Japanese Yen 1,240,000,000 11,937,126 11/29/99 (48,344)
Swedish Krona 25,870,000 3,146,354 11/29/99 40,882
- ------------------------------------------------------------------------------------------------------------------------------------
Total Net Unrealized Gain on
Forward Foreign Currency Contracts $ 764,671
====================================================================================================================================
International Equity Portfolio
To Sell:
Australian Dollar 2,821,659 $ 1,798,309 11/1/99 $ 18,387
Australian Dollar 520,957 332,026 11/3/99 4,199
Australian Dollar 1,626,808 1,045,708 11/4/99 (11,058)
Euro 3,204,936 3,369,429 11/1/99 22,836
British Pound 2,723,854 4,469,600 11/1/99 61,123
Singapore Dollar 736,155 442,607 11/2/99 (816)
Singapore Dollar 6,606,990 4,078,893 11/5/99 (104,046)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Net Unrealized Loss on Forward
Foreign Currency Contracts $ (9,375)
====================================================================================================================================
International Balanced Portfolio
To Sell:
Australian Dollar 5,248 $ 3,345 11/1/99 $ 35
Australian Dollar 1,164 742 11/3/99 9
Australian Dollar 2,894 1,860 11/4/99 (17)
Euro 9,820 10,323 11/1/99 75
Euro 660,000 694,650 11/17/99 17,867
British Pound 22,416 36,783 11/1/99 523
Singapore Dollar 23,392 14,441 11/5/99 (372)
- ------------------------------------------------------------------------------------------------------------------------------------
18,120
- ------------------------------------------------------------------------------------------------------------------------------------
To Buy:
Australian Dollar 140,000 89,243 11/17/99 (2,775)
Euro 470,000 494,675 11/17/99 118
Japanese Yen 97,000,000 932,085 11/17/99 18,714
Swedish Krona 1,600,000 194,446 11/17/99 (3,244)
- ------------------------------------------------------------------------------------------------------------------------------------
12,813
- ------------------------------------------------------------------------------------------------------------------------------------
Total Net Unrealized Gain on
Forward Foreign Currency Contracts $ 30,933
====================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 35
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (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 October 31, 1999, 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 year ended October 31, 1999, 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 October 31, 1999, the Portfolios had no open futures contracts.
- --------------------------------------------------------------------------------
36 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
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 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, 1999, the International Balanced and Global Government Bond
Portfolios had, for Federal income tax purposes, approximately $338,000 and
$2,148,000, respectively, of capital loss carryforwards available to offset
future realized gains before expiration in 2007. To the extent that these
carryforward losses are used to offset gains, it is probable that the gains so
offset will not be distributed.
9. 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, high quality money market instruments or other
securities 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 October 31, 1999, the Portfolios listed below had loaned common stocks and
bonds which were collateralized by cash. The market value for the securities on
loan for each portfolio was as follows:
Portfolio Value
================================================================================
Global Government Bond Portfolio $ 5,669,440
- --------------------------------------------------------------------------------
International Equity Portfolio 86,573,504
- --------------------------------------------------------------------------------
International Balanced Portfolio 460,080
================================================================================
At October 31, 1999, the cash collateral received for these securities on loan
was invested as follows:
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 37
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
Global Government Bond Portfolio
Security Description Value
- --------------------------------------------------------------------------------
Time Deposits:
Banco Bilbao, Milan, 5.410% due 11/1/99 $ 25,554
Bank of Austria, 5.438% due 11/1/99 304,619
Banque Bruxelles Lambert London, 5.406% due 11/1/99 304,619
Barclays Bank PLC, 5.410% due 11/1/99 304,619
BNP, 5.410% due 11/1/99 304,619
Caisse de Depots et Consign, Paris, 5.375% due 11/1/99 304,619
Commerzbank AG, Frankfurt, 5.390% due 11/1/99 304,619
Credit Commerciale de France, 5.375% due 11/1/99 304,619
Credit Suisse, London, 5.410% due 11/1/99 304,620
Den Danske-Copenhagen, 5.375% due 11/1/99 304,619
KBC, Brussels, 5.375% due 11/1/99 304,620
Nordeutsche Landesbank G.C., 5.410% due 11/1/99 304,619
Norwest Bank, Grand Cayman, 5.344% due 11/1/99 304,620
Paribas London, 5.406% due 11/1/99 304,619
Societe Generale, 5.390% due 11/1/99 304,620
Svenska Stockholm, 5.375% due 11/1/99 304,619
Toronto Dominion, London, 5.406% due 11/1/99 304,620
Commercial Paper:
Associates First Capital, 5.352% due 11/1/99 304,483
General Electric Credit, 5.332% due 11/1/99 7,375
General Motors Acceptance Corp., 5.352% due 11/1/99 304,483
New Center Asset Trust, 5.352% due 11/1/99 222,707
UBS Finance, Inc., 5.382% due 11/1/99 304,483
Repurchase Agreement:
Bear Stearns, 5.405% due 11/1/99 $ 341,256
- --------------------------------------------------------------------------------
Total 6,384,250
================================================================================
International Equity Portfolio
Security Description Value
================================================================================
Time Deposits:
Banco Bilbao, Milan, 5.410% due 11/1/99 $ 362,260
Bank of Austria, 5.438% due 11/1/99 4,318,336
Banque Bruxelles Lambert London, 5.406% due 11/1/99 4,318,336
Barclays Bank PLC, 5.410% due 11/1/99 4,318,336
BNP, 5.410% due 11/1/99 4,318,336
Caisse de Depots et Consign, Paris, 5.375% due 11/1/99 4,318,336
Commerzbank AG, Frankfurt, 5.390% due 11/1/99 4,318,336
Credit Commerciale de France, 5.375% due 11/1/99 4,318,336
Credit Suisse, London, 5.410% due 11/1/99 4,318,336
Den Danske-Copenhagen, 5.375% due 11/1/99 4,318,336
KBC, Brussels, 5.375% due 11/1/99 4,318,337
Nordeutsche Landesbank G.C., 5.410% due 11/1/99 4,318,336
Norwest Bank, Grand Cayman, 5.344% due 11/1/99 4,318,337
Paribas London, 5.406% due 11/1/99 4,318,336
Societe Generale, 5.390% due 11/1/99 4,318,337
Svenska Stockholm, 5.375% due 11/1/99 4,318,336
Toronto Dominion, London, 5.406% due 11/1/99 4,318,337
Commercial Paper:
Associates First Capital, 5.352% due 11/1/99 4,316,411
General Electric Credit, 5.332% due 11/1/99 104,552
General Motors Acceptance Corp., 5.352% due 11/1/99 4,316,411
New Center Asset Trust, 5.352% due 11/1/99 3,157,134
UBS Finance, Inc., 5.382% due 11/1/99 4,316,400
Repurchase Agreement:
Bear Stearns, 5.405% due 11/1/99 4,837,713
- --------------------------------------------------------------------------------
Total $90,504,261
================================================================================
- --------------------------------------------------------------------------------
38 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
International Balanced Portfolio
Security Description Value
================================================================================
Time Deposits:
Banco Bilbao, Milan, 5.410% due 11/1/99 $ 2,028
Bank of Austria, 5.438% due 11/1/99 24,179
Banque Bruxelles Lambert London, 5.406% due 11/1/99 24,179
Barclays Bank PLC, 5.410% due 11/1/99 24,179
BNP, 5.410% due 11/1/99 24,179
Caisse de Depots et Consign, Paris, 5.375% due 11/1/99 24,179
Commerzbank AG, Frankfurt, 5.390% due 11/1/99 24,179
Credit Commerciale de France, 5.375% due 11/1/99 24,179
Credit Suisse, London, 5.410% due 11/1/99 24,179
Den Danske-Copenhagen, 5.375% due 11/1/99 24,179
KBC, Brussels, 5.375% due 11/1/99 24,179
Nordeutsche Landesbank G.C., 5.410% due 11/1/99 24,179
Norwest Bank, Grand Cayman, 5.344% due 11/1/99 24,179
Paribas London, 5.406% due 11/1/99 24,179
Societe Generale, 5.390% due 11/1/99 24,180
Svenska Stockholm, 5.375% due 11/1/99 24,179
Toronto Dominion, London, 5.406% due 11/1/99 24,180
Commercial Paper:
Associates First Capital, 5.352% due 11/1/99 24,168
General Electric Credit, 5.332% due 11/1/99 586
General Motor Acceptance Corp., 5.352% due 11/1/99 24,168
New Center Asset Trust, 5.352% due 11/1/99 17,678
UBS Finance, Inc., 5.382% due 11/1/99 24,168
Repurchase Agreement:
Bear Stearns, 5.405% due 11/1/99 27,088
- --------------------------------------------------------------------------------
Total $506,750
================================================================================
Income earned by the Portfolios from securities loaned for the year ended
October 31, 1999 was as follows:
================================================================================
Global Government Bond Portfolio $ 58,881
- --------------------------------------------------------------------------------
International Equity Portfolio 629,960
- --------------------------------------------------------------------------------
International Balanced Portfolio 2,258
================================================================================
10. Capital Shares
At October 31, 1999, 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 October 31, 1999, total paid-in capital amounted to the following for each
Portfolio:
<TABLE>
<CAPTION>
Portfolio Class A Class B Class L Class Y Class Z
====================================================================================================================================
<S> <C> <C> <C> <C>
Global Government Bond $ 68,244,242 $ 8,525,859 $ 2,103,536 $ 50,296,077 --
- ------------------------------------------------------------------------------------------------------------------------------------
International Equity 233,213,316 112,072,205 102,357,218 234,573,556 $81,854,241
- ------------------------------------------------------------------------------------------------------------------------------------
International Balanced 4,996,965 3,621,257 3,080,014 -- --
====================================================================================================================================
</TABLE>
- -------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 39
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 1999 October 31, 1998
---------------------------------- ----------------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Global Government Bond Portfolio
Class A
Shares sold 379,601 $ 4,408,169 854,433 $ 10,070,134
Shares issued on reinvestment 185,035 2,147,392 525,036 6,212,574
Shares reacquired (1,913,231) (22,315,455) (1,669,632) (19,842,022)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Decrease (1,348,595) $(15,759,894) (290,163) $ (3,559,314)
====================================================================================================================================
Class B
Shares sold 56,587 $ 669,157 59,689 $ 711,346
Shares issued on reinvestment 31,703 367,804 114,717 1,356,444
Shares reacquired (465,281) (5,410,347) (558,703) (6,632,006)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Decrease (376,991) $ (4,373,386) (384,297) $ (4,564,216)
====================================================================================================================================
Class L+
Shares sold 13,517 $ 157,346 9,865 $ 116,532
Shares issued on reinvestment 5,766 66,804 21,786 257,215
Shares reacquired (65,706) (764,464) (97,100) (1,146,636)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Decrease (46,423) $ (540,314) (65,449) $ (772,889)
====================================================================================================================================
Class Y
Shares sold 1,151,897 $ 13,322,319 946,492 $ 11,066,273
Shares issued on reinvestment 4,892 54,510 -- --
Shares reacquired -- -- (113,418) (1,379,163)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 1,156,789 $ 13,376,829 833,074 $ 9,687,110
====================================================================================================================================
</TABLE>
+ On June 12, 1998, Class C shares were renamed Class L shares.
- --------------------------------------------------------------------------------
40 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 1999 October 31, 1998
------------------------------ ------------------------------
Shares Amount Shares Amount
===================================================================================================================================
<S> <C> <C> <C> <C>
International Equity Portfolio
Class A
Shares sold 277,740,518 $ 6,465,343,447 145,287,524 $ 3,124,384,638
Shares issued on reinvestment -- -- -- --
Shares reacquired (277,604,093) (6,489,021,477) (145,894,274) (3,167,710,830)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 136,425 $ (23,678,030) (606,750) $ (43,326,192)
===================================================================================================================================
Class B
Shares sold 13,558,032 $ 306,708,150 8,282,267 $ 175,524,703
Shares issued on reinvestment -- -- -- --
Shares reacquired (14,915,091) (339,020,342) (10,699,379) (225,481,466)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Decrease (1,357,059) $ (32,312,192) (2,417,112) $ (49,956,763)
===================================================================================================================================
Class L+
Shares sold 30,608,093 $ 691,468,417 3,611,918 $ 76,814,423
Shares issued on reinvestment -- -- -- --
Shares reacquired (31,396,364) (712,272,205) (5,982,110) (124,971,412)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Decrease (788,271) $ (20,803,788) (2,370,192) $ (48,156,989)
===================================================================================================================================
Class Y
Shares sold 1,660,086 $ 38,367,414 4,632,642 $ 99,224,433
Shares issued on reinvestment -- -- 19,405 381,500
Shares reacquired (4,840,726) (107,071,746) (3,102,340) (72,862,759)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (3,180,640) $ (68,704,332) 1,549,707 $ 26,743,174
===================================================================================================================================
Class Z
Shares sold 905,454 $ 20,704,531 579,525 $ 12,344,096
Shares issued on reinvestment -- -- 18,443 362,411
Shares reacquired (1,538,727) (35,845,420) (1,323,023) (27,528,889)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Decrease (633,273) $ (15,140,889) (725,055) $ (14,822,382)
===================================================================================================================================
International Balanced Portfolio
Class A
Shares sold 443,933 $ 6,612,336 90,635 $ 1,264,311
Shares issued on reinvestment 126,168 1,662,623 6,185 83,320
Shares reacquired (645,585) (8,565,360) (280,571) (6,136,725)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Decrease (75,484) $ (290,401) (183,751) $ (4,789,094)
===================================================================================================================================
Class B
Shares sold 27,073 $ 364,002 30,146 $ 415,822
Shares issued on reinvestment 33,138 438,378 876 11,818
Shares reacquired (115,296) (1,549,721) (122,702) (1,654,968)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Decrease (55,085) $ (747,341) (91,680) $ (1,227,328)
===================================================================================================================================
Class L+
Shares sold 20,226 $ 293,136 5,081 $ 68,946
Shares issued on reinvestment 28,423 374,579 704 9,485
Shares reacquired (64,808) (856,207) (81,145) (1,099,592)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Decrease (16,159) $ (188,492) (75,360) $ (1,021,161)
===================================================================================================================================
Class Y++
Shares sold -- -- 830,192 $ 10,786,566
Shares issued on reinvestment -- -- -- --
Shares reacquired -- -- (4,004,817) (53,665,449)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Decrease -- -- (3,174,625) $ (42,878,883)
===================================================================================================================================
</TABLE>
+ On June 12, 1998, Class C shares were renamed Class L shares.
++ On July 30, 1998, all Class Y shares were redeemed from the International
Balanced Portfolio.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 41
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended October 31, except where noted:
<TABLE>
<CAPTION>
Class A Shares
-------------------------------------------------------------------------------
Global Government Bond Portfolio 1999(1) 1998(1) 1997(1) 1996(1) 1995
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $11.88 $12.22 $12.55 $12.30 $11.68
- -----------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.51 0.54 0.59 0.70 0.92*
Net realized and unrealized gain (loss) (0.69) 0.39 0.38 0.42 0.48
- -----------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.18) 0.93 0.97 1.12 1.40
- -----------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income(2) (0.52) (0.22) (1.22) (0.87) (0.78)
Net realized gains -- (0.60) (0.08) -- --
Capital -- (0.45) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.52) (1.27) (1.30) (0.87) (0.78)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $11.18 $11.88 $12.22 $12.55 $12.30
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return (1.62)% 8.08% 8.21% 9.41% 12.40%
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $68,532 $88,836 $94,957 $106,536 $123,917
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(3) 1.26% 1.22% 1.26% 1.26% 1.38%
Net investment income 4.39 4.58 4.82 5.69 7.44
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 164% 287% 367% 133% 195%
===================================================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) Distributions from net investment income include short-term capital gains,
if any, for Federal income tax purposes.
(3) 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.
* Includes realized gains and losses from foreign currency transactions.
- --------------------------------------------------------------------------------
42 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended October 31, except where noted:
<TABLE>
<CAPTION>
Class B Shares
--------------------------------------------------------------------------------
Global Government Bond Portfolio 1999(1) 1998(1) 1997(1) 1996(1) 1995(2)
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $11.87 $12.22 $12.50 $12.26 $11.57
- -----------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.45 0.47 0.52 0.63 0.78*
Net realized and unrealized gain (loss) (0.69) 0.39 0.38 0.42 0.57
- -----------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.24) 0.86 0.90 1.05 1.35
- -----------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income(3) (0.47) (0.19) (1.10) (0.81) (0.66)
Net realized gains -- (0.60) (0.08) -- --
Capital -- (0.42) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.47) (1.21) (1.18) (0.81) (0.66)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $11.16 $11.87 $12.22 $12.50 $12.26
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return (2.11)% 7.46% 7.62% 8.83% 11.97%++
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $9,485 $14,569 $19,690 $25,970 $35,159
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(4) 1.81% 1.77% 1.80% 1.81% 1.92%+
Net investment income 3.86 3.93 4.24 5.15 6.65+
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 164% 287% 367% 133% 195%
===================================================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from November 18, 1994 (inception date) to October 31, 1995.
(3) Distributions from net investment income include short-term capital gains,
if any, for Federal income tax purposes.
(4) During the year ended October 31, 1996 and the period ended October 31,
1995, the Portfolio had earned credits from the custodian which reduced
service fees incurred. If the credits are taken into consideration, the
expense ratios for Class B would have been 1.78% and 1.86% (annualized),
respectively.
* 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 year
ended October 31, except where noted:
<TABLE>
<CAPTION>
Class L Shares
---------------------------------------------------------------------------------
Global Government Bond Portfolio 1999(1) 1998(1)(2) 1997(1) 1996(1) 1995(3)
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $11.86 $12.19 $12.47 $12.23 $11.68
- -----------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.46 0.48 0.53 0.64 0.85*
Net realized and unrealized gain (loss) (0.70) 0.40 0.38 0.41 0.42
- -----------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.24) 0.88 0.91 1.05 1.27
- -----------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income(4) (0.47) (0.19) (1.11) (0.81) (0.72)
Net realized gains -- (0.60) (0.08) -- --
Capital -- (0.42) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.47) (1.21) (1.19) (0.81) (0.72)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $11.15 $11.86 $12.19 $12.47 $12.23
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return (2.11)% 7.67% 7.73% 8.90% 11.25%
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $1,731 $2,391 $3,257 $3,986 $4,141
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(5) 1.72% 1.68% 1.69% 1.74% 1.84%
Net investment income 3.98 4.01 4.33 5.22 7.15
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 164% 287% 367% 133% 195%
===================================================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) On June 12, 1998, Class C shares were renamed Class L shares.
(3) On November 7, 1994, Class B shares were renamed Class C shares.
(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 L
would have been 1.71% and 1.78%, respectively.
* Includes realized gains and losses from foreign currency transactions.
- --------------------------------------------------------------------------------
44 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended October 31, except where noted:
<TABLE>
<CAPTION>
Class Y Shares
----------------------------------------------------------------------------------
Global Government Bond Portfolio 1999(1) 1998(1) 1997(1) 1996(1) 1995(2)
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $11.70 $12.03 $12.39 $12.14 $11.68
- -----------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.54 0.59 0.63 0.73 0.78*
Net realized and unrealized gain (loss) (0.68) 0.37 0.37 0.42 0.49
- -----------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.14) 0.96 1.00 1.15 1.27
- -----------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income(3) (0.53) (0.23) (1.28) (0.90) (0.81)
Net realized gains -- (0.60) (0.08) -- --
Capital -- (0.46) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.53) (1.29) (1.36) (0.90) (0.81)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $11.03 $11.70 $12.03 $12.39 $12.14
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return (1.28)% 8.50% 8.61% 9.82% 11.27%
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $47,708 $37,057 $28,097 $15,105 $62
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(4) 0.91% 0.83% 0.89% 0.84% 0.98%
Net investment income 4.69 5.06 5.19 6.12 6.38
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 164% 287% 367% 133% 195%
===================================================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) On November 7, 1994, Class C shares were renamed Class Y shares.
(3) Distributions from net investment income include short-term capital gains,
if any, for Federal income tax purposes.
(4) 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.
* Includes realized gains and losses from foreign currency transactions.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 45
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended October 31, except where noted:
<TABLE>
<CAPTION>
Class A Shares
---------------------------------------------------------------------------------
International Equity Portfolio 1999(1) 1998(1) 1997(1) 1996(1) 1995
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $20.39 $20.36 $18.64 $17.15 $18.79
- -----------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss) (0.03) -- (0.04) 0.01 0.08*
Net realized and unrealized gain (loss) 6.39 0.03 1.77 1.65 (1.50)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 6.36 0.03 1.73 1.66 (1.42)
- -----------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income(2) -- -- (0.01) (0.17) (0.12)
Net realized gains -- -- -- -- (0.10)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions -- -- (0.01) (0.17) (0.22)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $26.75 $20.39 $20.36 $18.64 $17.15
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return 31.19% 0.15% 9.30% 9.78% (7.44)%
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $598,043 $453,029 $464,796 $513,870 $489,533
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(3) 1.28% 1.28% 1.31% 1.35% 1.36%
Net investment income (loss) (0.13) 0.00 (0.18) 0.17 0.50
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 31% 25% 35% 46% 42%
===================================================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) Distributions from net investment income include short-term capital gains,
if any, for Federal income tax purposes.
(3) 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.
* Includes realized gains and losses from foreign currency transactions.
- --------------------------------------------------------------------------------
46 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended October 31, except where noted:
<TABLE>
<CAPTION>
Class B Shares
-------------------------------------------------------------------------------
International Equity Portfolio 1999(1) 1998(1) 1997(1) 1996(1) 1995(2)
=================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $20.08 $20.22 $18.65 $17.17 $18.38
- ---------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss) (0.23) (0.18) (0.20) (0.08) 0.06*
Net realized and unrealized gain (loss) 6.28 0.04 1.77 1.60 (1.17)
- ---------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 6.05 (0.14) 1.57 1.52 (1.11)
- ---------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income(3) -- -- -- (0.04) --
Net realized gains -- -- -- -- (0.10)
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions -- -- -- (0.04) (0.10)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $26.13 $20.08 $20.22 $18.65 $17.17
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 30.13% (0.69)% 8.42% 8.89% (6.00)%++
- ---------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $200,071 $180,980 $231,148 $212,294 $126,171
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(4) 2.08% 2.09% 2.11% 2.11% 2.13%+
Net investment income (loss) (1.01) (0.84) (0.95) (0.58) 0.34+
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 31% 25% 35% 46% 42%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from November 7, 1994 (inception date) to October 31, 1995.
(3) Distributions from net investment income included short-term capital gains,
if any, for Federal income tax purposes.
(4) During the year ended October 31, 1996 and the period ended October 31,
1995, the Portfolio had earned credits from the custodian which reduced
service fees incurred. If the credits are taken into consideration, the
expense ratios for Class B would have been 2.04% and 2.04% (annualized),
respectively.
* 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 year
ended October 31, except where noted:
<TABLE>
<CAPTION>
Class L Shares
---------------------------------------------------------------------------------
International Equity Portfolio 1999(1) 1998(1)(2) 1997(1) 1996(1) 1995(3)
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $19.79 $19.93 $18.38 $16.93 $18.54
- -----------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss (0.22) (0.17) (0.22) (0.13) (0.06)*
Net realized and unrealized gain (loss) 6.19 0.03 1.77 1.62 (1.45)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 5.97 (0.14) 1.55 1.49 (1.51)
- -----------------------------------------------------------------------------------------------------------------------------------
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 Year $25.76 $19.79 $19.93 $18.38 $16.93
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return 30.17% (0.70)% 8.43% 8.85% (8.11)%
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $178,259 $152,569 $200,849 $229,514 $240,090
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(5) 2.07% 2.07% 2.12% 2.15% 2.16%
Net investment loss (0.98) (0.81) (0.97) (0.63) (0.34)
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 31% 25% 35% 46% 42%
===================================================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) On June 12, 1998, Class C shares were renamed Class L shares.
(3) On November 7, 1994, Class B shares were renamed Class C shares.
(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 L
would have been 2.09% and 2.08%, respectively.
* Includes realized gains and losses from foreign currency transactions.
- --------------------------------------------------------------------------------
48 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended October 31, except where noted:
<TABLE>
<CAPTION>
Class Y Shares
----------------------------------------------------------------------------
International Equity Portfolio 1999(1) 1998(1) 1997(1) 1996(1) 1995(2)
=============================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $20.41 $20.38 $18.64 $17.13 $18.80
- -----------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.03 0.08 0.04 0.18 0.10*
Net realized and unrealized gain (loss) 6.44 0.01 1.76 1.54 (1.50)
- -----------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 6.47 0.09 1.80 1.72 (1.40)
- -----------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income(3) -- (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 Year $26.88 $20.41 $20.38 $18.64 $17.13
- -----------------------------------------------------------------------------------------------------------------------------
Total Return 31.70% 0.45% 9.68% 10.19% (7.11)%
- -----------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $354,242 $333,979 $301,852 $200,427 $97,132
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(4) 0.92% 0.91% 0.94% 0.96% 1.06%
Net investment income 0.14 0.37 0.23 0.56 0.91
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 31% 25% 35% 46% 42%
=============================================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) On November 7, 1994, the Class D shares were renamed Class Y shares.
(3) Distributions from net investment income include short-term capital gains,
if any, for Federal income tax purposes.
(4) 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.
* Includes realized gains and losses from foreign currency transactions.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 49
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended October 31, except where noted:
<TABLE>
<CAPTION>
Class Z Shares
----------------------------------------------------------------------------
International Equity Portfolio 1999(1) 1998(1) 1997(1) 1996(1) 1995(2)
=============================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $20.39 $20.36 $18.62 $17.12 $18.38
- -----------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.04 0.08 0.05 0.14 0.13*
Net realized and unrealized gain (loss) 6.42 0.01 1.75 1.57 (1.12)
- -----------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 6.46 0.09 1.80 1.71 (0.99)
- -----------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income(3) -- (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 Year $26.85 $20.39 $20.36 $18.62 $17.12
- -----------------------------------------------------------------------------------------------------------------------------
Total Return 31.68% 0.45% 9.69% 10.13% (5.03)%++
- -----------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $137,212 $117,132 $131,709 $119,408 $94,387
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(4) 0.92% 0.92% 0.94% 0.97% 1.10%+
Net investment income 0.16 0.36 0.22 0.55 1.06+
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 31% 25% 35% 46% 42%
=============================================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from November 7, 1994 (inception date) to October 31, 1995.
(3) Distributions from net investment income include short-term capital gains,
if any, for Federal income tax purposes.
(4) During the year ended October 31, 1996 and the period ended October 31,
1995, the Portfolio had earned credits from the custodian which reduced
service fees incurred. If the credits are taken into consideration, the
expense ratios for Class Z would have been 0.91% and 1.02% (annualized),
respectively.
* 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.
- --------------------------------------------------------------------------------
50 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended October 31, except where noted:
<TABLE>
<CAPTION>
Class A Shares
------------------------------------------------------------------------
International Balanced Portfolio 1999(1) 1998(1) 1997(1) 1996(1) 1995
=======================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $14.89 $13.32 $13.90 $12.64 $12.20
- -----------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(2) 0.21 0.51 0.18 0.26 0.35
Net realized and unrealized gain (loss) 1.00 1.19 (0.41) 1.35 0.48
- -----------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 1.21 1.70 (0.23) 1.61 0.83
- -----------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.13) (0.10) (0.15) (0.35) (0.39)
Net realized gains (1.86) (0.03) -- -- --
Capital -- -- (0.20) -- --
- -----------------------------------------------------------------------------------------------------------------------
Total Distributions (1.99) (0.13) (0.35) (0.35) (0.39)
- -----------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $14.11 $14.89 $13.32 $13.90 $12.64
- -----------------------------------------------------------------------------------------------------------------------
Total Return 9.16% 12.87% (1.71)% 12.89% 7.05%
- -----------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $8,070 $9,639 $11,072 $16,116 $17,667
- -----------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(2) 2.21% 1.79% 1.71% 1.81% 1.62%
Net investment income 1.56 3.80 1.32 1.94 2.89
- -----------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 109% 141% 197% 189% 42%
=======================================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) 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 ratios would have been as follows:
Expense Ratios
Per Share Decreases to Without Fee Waivers
Net Investment Income and Custody Credits
---------------------- -------------------
1995 1995
------ ------
Class A $0.04 1.96%
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.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 51
<PAGE>
Financial Highlights (continued)
For a share of each class of capital stock outstanding throughout each year
ended October 31, except where noted:
<TABLE>
<CAPTION>
Class B Shares
-------------------------------------------------------------------
International Balanced Portfolio 1999(1) 1998(1) 1997(1) 1996(1) 1995(2)
=====================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $14.93 $13.38 $13.90 $12.65 $12.08
- ---------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(3) 0.10 0.41 0.07 0.15 0.36
Net realized and unrealized gain (loss) 1.02 1.19 (0.41) 1.36 0.50
- ---------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 1.12 1.60 (0.34) 1.51 0.86
- ---------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.04) (0.02) (0.08) (0.26) (0.29)
Net realized gains (1.86) (0.03) -- -- --
Capital -- -- (0.10) -- --
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions (1.90) (0.05) (0.18) (0.26) (0.29)
- ---------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $14.15 $14.93 $13.38 $13.90 $12.65
- ---------------------------------------------------------------------------------------------------------------------
Total Return 8.42% 11.96% (2.45)% 12.05% 7.33%++
- ---------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $3,015 $4,004 $4,813 $5,258 $3,064
- ---------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(3) 3.03% 2.52% 2.48% 2.62% 2.49%+
Net investment income 0.77 3.03 0.53 1.14 3.11+
- ---------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 109% 141% 197% 189% 42%
=====================================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from November 7, 1994 (inception date) to October 31, 1995.
(3) The Manager waived all or part of its fees for the 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:
Expense Ratio
Per Share Decrease to Without Fee Waivers
Net Investment Income and Custody Credits
--------------------- -------------------
1995 1995
---- ----
Class B $0.04 2.86%+
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.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
52 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended October 31, except where noted:
<TABLE>
<CAPTION>
Class L Shares
----------------------------------------------------------------------
International Balanced Portfolio 1999(1) 1998(1)(2) 1997(1) 1996(1) 1995(3)
=====================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $14.89 $13.35 $13.87 $12.63 $12.18
- ---------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(4) 0.08 0.40 0.08 0.15 0.28
Net realized and unrealized gain (loss) 0.99 1.18 (0.42) 1.35 0.46
- ---------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 1.07 1.58 (0.34) 1.50 0.74
- ---------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.04) (0.01) (0.08) (0.26) (0.29)
Net realized gains (1.86) (0.03) -- -- --
Capital -- -- (0.10) -- --
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions (1.90) (0.04) (0.18) (0.26) (0.29)
- ---------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $14.06 $14.89 $13.35 $13.87 $12.63
- ---------------------------------------------------------------------------------------------------------------------
Total Return 8.07% 11.90% (2.46)% 11.99% 6.29%
- ---------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $2,549 $2,940 $3,642 $4,869 $4,317
- ---------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(4) 3.20% 2.58% 2.51% 2.62% 2.37%
Net investment income 0.62 2.93 0.60 1.14 2.33
- ---------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 109% 141% 197% 189% 42%
=====================================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) On June 12, 1998, Class C shares were renamed Class L shares.
(3) On November 7, 1994, Class B shares were renamed Class C shares.
(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 ratios would have been as follows:
Expense Ratios
Per Share Decreases to Without Fee Waivers
Net Investment Income and Custody Credits
---------------------- -------------------
1995 1995
---- ----
Class L $0.04 2.71%
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 L would have been 2.53% and 2.27%, respectively; numbers
prior to October 31, 1995 have not been restated to reflect these credits.
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 53
<PAGE>
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
The Shareholders and Board of Directors of
Smith Barney World Funds, Inc.:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of the Global Government Bond, International
Equity and International Balanced Portfolios of Smith Barney World Funds, Inc.
as of October 31, 1999, the related statements of operations for the year then
ended, the statements of changes in net assets for each of the years in the
two-year period then ended and the financial highlights for each of the years in
the five-year period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1999, by correspondence with the custodian. As to securities
purchased and sold but not received and delivered, we performed other
appropriate auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Global Government Bond, International Equity and International Balanced
Portfolios of Smith Barney World Funds, Inc. as of October 31, 1999, the results
of their operations for the year then ended, the statements of changes in their
net assets for the each of the years in the two-year period then ended, and the
financial highlights for each of the years in the five-year period then ended,
in conformity with generally accepted accounting principles.
KPMG LLP
New York, New York
December 15, 1999
- --------------------------------------------------------------------------------
54 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Tax Information (unaudited)
- --------------------------------------------------------------------------------
For Federal tax purposes the Smith Barney World Funds, Inc. hereby designates
for the fiscal year ended October 31, 1999:
-- Long term capital gain distributions paid:
International Balanced Portfolio $2,750,084
-- Percentages of ordinary dividends paid by the Fund from net
investment income are derived from Federal obligations and may be
exempt from taxation at the state level:
Global Government Bond Portfolio 18.92%
International Balanced Portfolio 6.33
-- The total foreign sourced income received by International Balanced
Portfolio was $0.46841 per share (or a total amount of $452,680).
The total of foreign taxes paid was $0.01157 per share (or a total
amount of $11,180).
-- The total foreign sourced income received by International Equity
Portfolio was $0.2246 per share (or a total amount of $12,477,328).
The total of foreign taxes paid was $0.0181 per share (or a total
amount of $1,005,608).
- --------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 55
<PAGE>
[This page intentionally left blank]
<PAGE>
Smith Barney
World Funds, Inc.
Directors
Victor Atkins
Abraham E. Cohen
Robert A. Frankel
Michael Gellert
Rainer Greeven
Susan M. Heilbron
Heath B. McLendon, Chairman
Officers
Maurits E. Edersheim
Chairman of the Fund
& Advisory Director
Heath B. McLendon
President and
Chief Executive Officer
Lewis E. Daidone
Senior Vice President
and Treasurer
James B. Conheady
Vice President
Simon R. Hildreth
Vice President
Denis P. Mangan
Vice President
Jeffrey J. Russell
Vice President
Irving P. David
Controller
Christina T. Sydor
Secretary
Investment Manager and Administrator
SSB Citi Fund Management LLC
Distributor
CFBDS, Inc.
Custodian
Chase Manhattan Bank
Shareholder Servicing Agent
Smith Barney Private Trust
388 Greenwich Street
22nd Floor
New York, New York 10013
Sub-Shareholder Servicing Agent
PFPC Global Fund Services
P.O. Box 9699
Providence, Rhode Island 02940-9699
This report is submitted for the general information of shareholders of Smith
Barney World Fund, Inc. -- Global Government, International Equity and
International Balanced Portfolios. It is not authorized for distribution to
prospective investors unless accompanied or preceded by a current Prospectus for
the Fund, which contains information concerning the Fund's investment policies
and expenses as well as other pertinent information.
[LOGO OF SALOMON SMITH BARNEY]
Smith Barney
World Funds, Inc.
Smith Barney Mutual Funds
388 Greenwich Street, MF-2
New York, New York 10013
www.smithbarney.com/mutualfunds
FD01359 12/99
