<PAGE>
[LOGO OF SMITH BARNEY MUTUAL FUNDS]
SMITH BARNEY
WORLD FUNDS, INC.
Global Government Bond Portfolio, European Portfolio,
Emerging Markets Portfolio, Pacific Portfolio
SEMI-ANNUAL REPORT
APRIL 30, 2000
[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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MARKET HIGHLIGHT
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"The investment landscape has continued to change with the passage of time. Yet,
we have not seen as many factors affecting the markets and investor decisions as
we do today, which may explain the marked increase in volatility. Clearly, we
are witnessing a unique period of remarkable global economic growth and
improving prosperity. A new era of technology is revolutionizing the
telecommunications and information storage and transfer industries, radically
impacting our lives, both in our homes and our offices."
Heath B. McLendon
Chairman
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The Global Government Bond Portfolio seeks as high a level of current income and
capital appreciation as is consistent with investing principally in high-quality
bonds of the U.S. and foreign governments.
NASDAQ Symbol
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Class A SBGLX
Class B SGGBX
The European Portfolio seeks long-term capital appreciation by investing
primarily in equity of issuers based in countries of Europe.
NASDAQ Symbol
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Class A SBEAX
Class B SBEBX
Class L SBELX
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
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Class A SMMAX
Class B SEMBX
Class L SEMLX
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WHAT'S INSIDE
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A Message from the Chairman.................................................. 1
Global Government Bond Portfolio
Portfolio Manager Commentary.............................................. 2
Historical Performance.................................................... 5
Portfolio at a Glance..................................................... 8
European Portfolio
Manager Commentary........................................................ 9
Historical Performance.................................................... 11
Portfolio at a Glance..................................................... 13
Emerging Markets Portfolio
Managers Commentary....................................................... 14
Historical Performance.................................................... 16
Portfolio at a Glance..................................................... 18
Pacific Portfolio
Manager Commentary........................................................ 19
Historical Performance.................................................... 22
Portfolio at a Glance..................................................... 24
Schedules of Investments..................................................... 25
Statements of Assets and Liabilities......................................... 33
Statements of Operations..................................................... 35
Statements of Changes in Net Assets.......................................... 36
Notes to Financial Statements................................................ 38
Financial Highlights......................................................... 48
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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
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Class A SBPPX
Class B SBPFX
Class L SBPCX
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A Message from the Chairman
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[PHOTO]
HEATH B.
MCLENDON
Chairman
Dear Shareholder:
The investment scene is always changing but never have we witnessed so many
factors which have greatly impacted the world's financial markets and investors'
decisions. The world's financial markets are converging and the flow of funds
into a myriad of investment choices has increased rapidly year after year,
largely contributing to the rapid growth of prosperity on a global scale.
While these remarkable events have positive implications for the creation and
growth of personal wealth, these changes do not come without risks and
challenges. For example, the seemingly limitless and in some cases justifiable
enthusiasm for new technologies and the companies that are developing them has
resulted in a historic rise in their share prices to often unsustainable
valuations.
Financial markets worldwide are currently undergoing the difficult process of
correcting the overvaluation of the share prices of many technology companies.
Meanwhile, the shares of many substantial and what have been deemed to be
"progressive" companies have underperformed relative to the market to the
disappointment of many investors and investment professionals.
In our opinion, the ongoing surge in trading volumes has overwhelmed the
traditional market-making systems. As a result, few market makers (one who
maintains firm bid and offer prices of a security) are willing to commit the
necessary capital to balance order flow. As a consequence, the market has been
characterized by a dramatic increase in volatility. As a result, daily price
swings are now the rule, rather than the exception.
In addition, the bond markets continue to remain challenging for most investors.
We are experiencing a historically unique circumstance wherein the U.S.
government is buying back U.S. Treasury securities in order to reduce federal
debt. This active buying of outstanding U.S. Treasury bonds by the government
has created a situation where Treasury yields are low compared to the income
return available from other fixed income instruments. These conditions have
added a new complexity to bond investing, which we believe makes professional
money management more valuable today than ever before.
Expanding yields have resulted in continued strength in the U.S. dollar versus
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.) The euro has
confounded most economists with its continued weakness. Its valuation is, in
effect, making European stocks and bonds more attractive to investors.
The numerous events shaping the world's financial markets require a sound
perspective by investors -- a balance between accepting the "new" rules without
forgetting the valuable lessons of the past and keeping a vigilant eye towards
the future. We here at SSB Citi Asset Management seek to offer our clients the
benefits of our professional expertise in challenging market conditions.
In volatile and unpredictable markets, we think the values of active management
will become more apparent in the days ahead. Thank you for your continued
confidence in our investment approach.
Sincerely,
/s/ Heath B. McLendon
Heath B. McLendon
Chairman
May 17, 2000
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Smith Barney World Funds, Inc. 1
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Global Government Bond Portfolio
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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
For the six months ended April 30, 2000, the Global Government Bond Portfolio's
("Portfolio") Class A shares returned 2.52%, without sales charges. The
Portfolio's Class A shares returned a negative 2.12%, with sales charges, for
the same period. In comparison, the Lipper, Inc. peer group of global income
funds returned a negative 1.41% for the same period. (Lipper is an independent
mutual fund-tracking organization.)
We are pleased to report that for the six-month, one-year, and five-year periods
ended April 30, 2000, the Portfolio has been ranked in the first quartile,
second, quartile and first quartile, respectively, for global income funds as
determined by Lipper Inc.1
Additional information about the Portfolio's other share classes can be found on
pages five through seven.
Market and Portfolio Update2
There were two investment decisions we made over the past six months which, in
our view, largely affected the Portfolio's performance during the period. One
was the decision to remain fully hedged to the U.S. Dollar. In our view, the
euro's widely expected strength is not likely to become apparent until the
European Central Bank ("ECB") increases its credibility with investors and
foreign exchange dealers. (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.)
We expect to remain fully hedged for the near term, until solid evidence for a
change in the strength of the Euro versus the U.S. dollar becomes evident. We
also intend on remaining hedged versus the Japanese yen, as we believe the
strength of this currency may soon abate, despite signs of continuing economic
recovery in Japan.
The second decision which largely impacted Portfolio performance was to
establish `curve flattening' positions in both the U.S. and European bond market
holdings within the Portfolio. A curve flattening position benefits from
increases in short term interest rates relative to longer term bond yields
(i.e., ten years and longer), as the U.S. Federal Reserve ("Fed") and the
European Central Bank ("ECB") tighten monetary policy. In addition, our strategy
is predicated on longer term yields remaining relatively stable due to our
expectations for low inflation combined with lower budget deficits in Europe and
the decision by the U.S. Treasury to buyback approximately $1 billion of
outstanding long-term debt.
1 Lipper Inc. rankings show a fund's one and five year annualized returns (at
NAV) as of a particular reporting period. Lipper also compares a fund's
returns to the average of its peer group. The rankings are subject to
change every month. Past performance is not a guarantee of future results.
For the six-month, one- and five-year periods, ended April 30, 2000, there
were 132, 131 and 82 funds in the Lipper global income funds category.
2 Please note that the Portfolio's holdings are subject to change and any
discussion of holdings is as of April 30, 2000. Please refer to pages 25 and
26 for a complete listing and percentage breakdown of the Portfolio's
holdings.
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2 2000 Semi-Annual Report to Shareholders
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Our view at the start of this year was that the U.S. and European bond markets
would recover from last year's decline and offer potentially better returns in
2000. In addition, we believe that the performance of the global bond market may
improve because we expect that short-term interest rates will continue to
increase and the threat of inflation will remain low.
Indeed, given the technical nature of the recent rally in U.S. Treasuries, we
believe that the performance of non-U.S. Treasury bonds may provide a better
indication as to the future direction of the U.S. economy. Presently, U.S.
Treasuries comprise approximately 25% of the total U.S. bond market. The
remainder of the U.S. bond market includes agency, mortgage-backed securities
and corporate bonds.
Spreads on agency, mortgage and corporate bonds are widening past historical
levels, indicating that the interest rate burden on the private economy is
higher than would be suggested by U.S. Treasury levels. In particular, at the
lower end of the income scale, debt repayments as a percent of disposable income
are rising fast. We further anticipate that economic growth will slow towards
the 3% range in the second half of 2000, with inflation also falling from close
to 3% presently to 2.5% as the recent drop in oil prices winds its way through
the economy. (Of course, no guarantees can be given that this in fact will
occur.)
In common with the U.S., bond markets throughout Euroland (as represented by the
countries of Belgium, Germany, Spain, France, Ireland, Italy, Luxembourg, the
Netherlands, Austria, Portugal and Finland) have improved this year. One measure
of relative performance is the difference between U.S. and Euroland ten-year
bond yields. This difference has narrowed from 120 basis points3 in January 2000
to the low 60s by mid-April.
Nevertheless, we believe that there are two major factors which should help to
moderate pressure on bond yields in Europe from a high rate of economic growth
and higher short-term interest rates. In our opinion, Euroland may be at the
beginning of a remarkable period of economic growth.
Our view, therefore, is that during the course of the year, Euroland bond yields
may remain in the 5.0% to 5.5% range, with a bias to the lower end of the range,
which should result in a widening gap between U.S. and Euroland ten-year yields.
However, as the year progresses, we may see further downward pressure on that
spread, reflecting the divergence between the accelerating growth of Euroland
and the moderating growth of the U.S. economy.
The Japanese economy continues to demonstrate signs of recovery. However,
recessionary signs have also become apparent periodically. Strong growth in the
first half of last year was followed by a decline in output in the final two
quarters, resulting in net real Japanese growth for 1999 of just 0.3%. By common
definition, two successive quarters of negative output growth qualifies as a
recession. Despite these anemic results, we believe that Japan's economy is
different.
For example, according to the Japanese Ministry of Finance, corporate recurring
profits outside of the financial sector are increasing at a rate of over 40% on
a year on year basis. Recurring profits have consistently been an extremely good
indicator of future capital investment, with an average lag of around two
quarters. This suggests to us that corporate capital spending in Japan should
remain strong throughout most of 2000.
The Bank of Japan ("BOJ"), has recently announced that it thinks that short-term
interest rates in Japan are too low, and that an end of the 0% interest-rate
policy
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3 A basis point is 0.01% or one one-hundredth of a percent.
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Smith Barney World Funds, Inc. 3
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may take place later on in the year. We think that the BOJ may increase rates to
0.25% later this year. However, we do not think that any change in monetary
policy by the BOJ will cause rates to rise. Instead, we think any rate increase
by the BOJ may mark a return towards a more `normal' monetary policy, following
a historic period of 0% short-term interest rates.
Japanese Government Bonds ("JGB") are, in our view, likely to start discounting
any rate increases, sooner rather than later, due in large part to recent
announcements by the BOJ. Although no guarantees can be given, we also
anticipate that ten-year JGB yields may break the 2% barrier within the next few
months. But given the moderate pace of Japan's recovery in addition to low, if
not negative levels of inflation, we believe that an ongoing bear market in JGBs
is unlikely. In our view, a new trading range at higher yield levels for JGBs is
the most likely outcome. (Of course, no guarantees can be made that this will
occur.)
As far as the Japanese yen is concerned, we think that the ongoing recovery in
Japan is likely to keep it from weakening much below 110 versus the U.S. dollar,
while the BOJ is unlikely to countenance Yen strength much above 100.
Thank you for your investment in the Global Government Bond Portfolio.
/s/ Denis P. Mangan
Denis P. Mangan
Vice President
May 23, 2000
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4 2000 Semi-Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
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Global Government Bond Portfolio
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Historical Performance -- Class A Shares
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Net Asset Value
--------------------------
Beginning End of Income Capital Gain Return Total
Period Ended of Period of Period Dividends Distributions of Capital Returns(1)
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
4/30/00 $11.18 $10.83 $0.62 $0.00 $0.00 2.52%+
---------------------------------------------------------------------------------------------------------------------------
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
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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
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10/31/94++ 12.92 11.68 0.23 0.00 0.42 (4.64)+
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12/31/93 11.84 12.92 0.52 0.59 0.00 19.13
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12/31/92 12.90 11.84 0.97 0.19 0.00 0.93
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Inception* -- 12/31/91 12.00 12.90 0.44 0.13 0.00 12.42+
===========================================================================================================================
Total $6.39 $1.59 $0.87
===========================================================================================================================
<CAPTION>
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Historical Performance -- Class B Shares
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Net Asset Value
--------------------------
Beginning End Income Capital Gain Return Total
Period Ended of Period of Period Dividends Distributions of Capital Returns(1)
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
4/30/00 $11.16 $10.81 $0.59 $0.00 $0.00 2.27%+
---------------------------------------------------------------------------------------------------------------------------
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
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10/31/97 12.50 12.22 1.10 0.08 0.00 7.62
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10/31/96 12.26 12.50 0.81 0.00 0.00 8.83
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Inception* -- 10/31/95 11.57 12.26 0.66 0.00 0.00 11.97+
===========================================================================================================================
Total $3.82 $0.68 $0.42
===========================================================================================================================
</TABLE>
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Smith Barney World Funds, Inc. 5
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
Global Government Bond Portfolio
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
Historical Performance -- Class L Shares
--------------------------------------------------------------------------------------------------------------------------------
Net Asset Value
------------------------
Beginning End Income Capital Gain Return Total
Period Ended of Period of Period Dividends Distributions of Capital Returns(1)
================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
4/30/00 $11.15 $10.81 $0.59 $0.00 $0.00 2.38%+
--------------------------------------------------------------------------------------------------------------------------------
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
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10/31/94++ 12.93 11.68 0.21 0.00 0.39 (5.09)+
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Inception* -- 12/31/93 11.83 12.93 0.47 0.59 0.00 18.89+
================================================================================================================================
Total $4.57 $1.27 $0.81
================================================================================================================================
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
Historical Performance -- Class Y Shares
--------------------------------------------------------------------------------------------------------------------------------
Net Asset Value
------------------------
Beginning End Income Capital Gain Return Total
Period Ended of Period of Period Dividends Distributions of Capital Returns(1)
================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
4/30/00 $11.03 $10.70 $0.62 $0.00 $0.00 2.77%+
--------------------------------------------------------------------------------------------------------------------------------
10/31/99 11.70 11.03 0.53 0.00 0.00 (1.28)
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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
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10/31/96 12.14 12.39 0.90 0.00 0.00 9.82
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10/31/95 11.68 12.14 0.81 0.00 0.00 11.27
--------------------------------------------------------------------------------------------------------------------------------
10/31/94++ 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 $4.97 $1.27 $0.89
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</TABLE>
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
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6 2000 Semi-Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
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Global Government Bond Portfolio
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Average Annual Total Return
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Without Sales Charge(1)
-------------------------------------------------------------------
Class A Class B Class L Class Y
==========================================================================================================================
<S> <C> <C> <C> <C>
Six Months Ended 4/30/00+ 2.52% 2.27% 2.38% 2.77%
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Year Ended 4/30/00 (0.98) (1.43) (1.33) (0.56)
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Five Years Ended 4/30/00 6.45 5.88 5.98 6.84
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Inception* through 4/30/00 7.38 6.52 6.53 6.96
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<CAPTION>
With Sales Charge(2)
-----------------------------------------------------------------
Class A Class B Class L Class Y
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<S> <C> <C> <C> <C>
Six Months Ended 4/30/00+ (2.12)% (2.08)% 0.42% 2.77%
--------------------------------------------------------------------------------------------------------------------------
Year Ended 4/30/00 (5.45) (5.54) (3.23) (0.56)
--------------------------------------------------------------------------------------------------------------------------
Five Years Ended 4/30/00 5.49 5.73 5.77 6.84
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Inception* through 4/30/00 6.82 6.52 6.38 6.96
==========================================================================================================================
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Cumulative Total Return
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<CAPTION>
Without Sales Charge(1)
==========================================================================================================================
<S> <C>
Class A (Inception* through 4/30/00) 86.90%
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Class B (Inception* through 4/30/00) 41.09
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Class L (Inception* through 4/30/00) 58.91
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Class Y (Inception* through 4/30/00) 62.32
==========================================================================================================================
</TABLE>
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A 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.
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Smith Barney World Funds, Inc. 7
<PAGE>
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Global Government Bond Portfolio at a Glance (unaudited)
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Growth of $10,000 Invested in Class A Shares of the
Global Government Bond Portfolio vs. J.P. Morgan Global Bond Market Index
--------------------------------------------------------------------------------
July 1991 -- April 2000
JP Morgan Global JP Morgan Global
Global Government Bond Market Index Bond Market Index
Fund Hedged Unhedged
Jul 1991 9,600 10,000 10,000
Oct 1991 10,422 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
Apr 2000 17,942 21,574 17,686
+ 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 April 30, 2000. 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.
Top Ten Holdings* As of April 30, 2000
------------------------------------------------------------------
1. Bundesrepublik Deutschland 24.7%
------------------------------------------------------------------
2. Japan Government 15.5
------------------------------------------------------------------
3. KFW International Finance 12.8
------------------------------------------------------------------
4. Inter-American Development Bank 11.0
------------------------------------------------------------------
5. Buoni Poliennali Del Tes 8.1
------------------------------------------------------------------
6. Kingdom of Spain 7.6
------------------------------------------------------------------
7. Republic of Cyprus 7.2
------------------------------------------------------------------
8. Canadian Government 4.3
------------------------------------------------------------------
9. AB Spintab 4.0
------------------------------------------------------------------
10. Barclays Bank PLC 3.8
------------------------------------------------------------------
* As a percentage of total bonds, excluding U.S. government obligations and
repurchase agreement.
Investment Allocation** As of April 30, 2000
-----------------------------------------------------------------
[GRAPH]
51.0% Europe
21.9% U.S. Treasury Obligations
14.5% Repurchase Agreement
9.8% Japan
2.8% The America
** As a percentage of total investments.
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8 2000 Semi-Annual Report to Shareholders
<PAGE>
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European Portfolio
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[PHOTO]
REIN W.
VAN DER DOES
Vice President
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.
Performance Update
The European Portfolio's ("Portfolio") Class A shares returned 21.91%, without
sales charges, for the six months ended April 30, 2000. The Portfolio's Class A
shares returned 15.80%, with sales charges, for the same period. In comparison,
the Portfolio's benchmark, the Morgan Stanley Capital International European
Market Index ("MSCI Index")1, returned 8.31% for the same period. For
performance information on the Portfolio's other classes of shares, please refer
to pages 11 and 12.
Investment Strategy
During the period, we continued to overweight the service sector (i.e.,
outsourcing of information technology as well as catering), telecommunications
stocks and growth stocks. We were underweighted in basic materials and
financials (preferably insurance over banking). Geographically, we were
overweighted in Continental Europe and remain underweighted in the United
Kingdom ("UK"). In our opinion, Britain's decision to stay out of the EMU may
hurt its economic growth prospects and the relatively strong pound versus the
Euro could further penalize corporate profits.
Market Review
In early February 2000, the European Central Bank ("ECB") raised, as expected,
the discount rate2 by 0.25%. Although the ECB seems to be well ahead of the
interest rate curve as inflation in Europe remains very subdued, another rise is
anticipated in the next few months.
Despite a heavy stock issuance calendar in October and November, the European
markets got a boost from better than anticipated corporate earnings as well as
the tremendously higher merger and acquisition ("M&A") activity. Actually, total
M&A activity during the last six months of 1999 was, for the first time in ten
years, larger in Europe than in the U.S.
Last year, the Portfolio advanced roughly 33% vs. about 14% for the Morgan
Stanley European Index (in U.S. dollars). Information Technology services,
telecommunications and Internet stocks were the Portfolio's top performing
sectors, while steel, real estate, tobacco, water, brewers and restaurants were
the worst performing sectors. Large capitalization stocks continue to be favored
over small cap stocks in most countries, except in the UK and Euro New Markets.
(The Euro New Markets include Germany, France, Italy, Holland and Belgium.)
Some of the small capitalization Internet stocks listed on the five Euro New
Markets (i.e., 350 companies listed with total market cap of $125 billion)
performed well during the period. Leadership came from telecommunications,
technology and growth stocks, while most cyclicals remained behind the averages.
(Growth investing consists of investing in companies with historically strong
and relatively predictable earnings growth rates.)
1 The Morgan Stanley Capital International European Market Index is an unmanaged
index of common stocks of companies located in Europe.
2 The discount rate is the interest rate that the ECB charges member banks for
loans, using government securities as collateral.
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Smith Barney World Funds, Inc. 9
<PAGE>
In our view, the introduction of the euro on January 1, 1999 eliminated many
country-specific risk factors and promoted a shift from a country- to a
sector-based investment approach, which resulted in the development of new
European stock indices. (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.) As a result, many European pension funds have, or are in the process of,
rebalancing their European portfolios. We think that development trend may well
accelerate investor preferences for large capitalization stocks.
Market Outlook
Stock price valuations in Europe are much more inexpensive than in the U.S. For
example, at the end of March 2000, Europe was selling at 13.4 times 2000
price-to-cash flow,3 while the U.S. was at 18.3 times price-to-cash flow.
Moreover, Europe's average dividend yield was around 1.9% versus only 1.1% for
the U.S.
Looking at incoming orders and business confidence in Germany, lower
unemployment and consumer confidence in France and a lower than expected
government budget deficit in Italy, the European economy in the second half of
1999 was stronger than anticipated. At this stage, the consensus for economic
growth in Europe is around 3.3% in 2000 as well as 2001 (from 2.1% and 2.7% in
1999 and 1998, respectively), while inflation is expected to rise slightly to
1.8% (3% in the UK) in 2000. This positive economic environment -- combined with
the heavy corporate restructuring -- should result in healthy earnings in the
next two years. While Salomon Smith Barney's research estimates that the
earnings of the Standard & Poor's 500 Index4 may rise 14% and 9% in 2000 and
2001 respectively, the consensus for Europe (ex-UK) as of this writing is for a
18% rise for 2000 and a 16% increase in 2001.
And while no guarantees can be made, we continue to believe that investing in
European stocks may be rewarding over the next few years due to:
. The creation of the European Monetary Union on January 1, 1999 which has
resulted in more deregulation, privatization, restructuring and
merger/acquisitions
. The creation of one currency, the euro which has resulted in increased price
transparency translating into lower inflation
. The creation of a stock culture in Europe through inexpensively-priced
privatization offerings, stock options and corporations buying back their own
shares
. The discovery by many European companies of the need to enhance shareholder
value
. Fundamental economic changes such as the introduction of tax reforms in
Germany, the more favorable climate politically for hostile takeovers (e.g.
Vodafone-Mannesmann) and the recognition of demographic challenges looming
with respect to future pension payments
Within this changing and dynamic environment in Europe, stock selection will
grow in importance. There should be many winners as well as losers as the change
in Europe accelerates.
Due to the region's relative undervaluation, and its underperformance versus the
U.S. stock market during the last few years, we continue to be very positive
about investing in European stocks over the long term.
Thank you for your investment in the European Portfolio. We look forward to
bringing you European stock opportunities in the new century.
/s/ Rein W. van der Does
Rein W. van der Does
Vice President
May 23, 2000
------------
3 This is the current share price divided by cash flow per share for the past
twelve months. Cash flow is a measure of a company's financial health. It
equals cash receipts minus cash payments over a given period of time.
4 The S&P 500 is a market capitalization-weighted measure of 500 widely held
common stocks.
--------------------------------------------------------------------------------
10 2000 Semi-Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
EUROPEAN PORTFOLIO
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
Historical Performance -- Class A Shares
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value
----------------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------------------
4/30/00 $22.58 $26.36 $0.00 $1.13 21.91%+
------------------------------------------------------------------------------------------------------------------------------------
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 $3.05
====================================================================================================================================
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Historical Performance -- Class B Shares
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value
--------------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
4/30/00 $21.83 $25.34 $0.00 $1.13 21.41%+
------------------------------------------------------------------------------------------------------------------------------------
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 $3.05
====================================================================================================================================
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Historical Performance -- Class L Shares
-----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value
----------------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
4/30/00 $21.79 $25.30 $0.00 $1.13 21.45%+
-----------------------------------------------------------------------------------------------------------------------------------
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 $3.05
====================================================================================================================================
</TABLE>
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 11
<PAGE>
--------------------------------------------------------------------------------
EUROPEAN PORTFOLIO
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Average Annual Total Return
--------------------------------------------------------------------------------
Without Sales Charges(1)
---------------------------------------
Class A Class B Class L
================================================================================
Six Months Ended 4/30/00+ 21.91% 21.41% 21.45%
--------------------------------------------------------------------------------
Year Ended 4/30/00 31.39 30.30 30.36
--------------------------------------------------------------------------------
Five Years Ended 4/30/00 18.00 17.09 17.15
--------------------------------------------------------------------------------
Inception* through 4/30/00 15.60 16.80 14.87
================================================================================
With Sales Charges(2)
---------------------------------------
Class A Class B Class L
================================================================================
Six Months Ended 4/30/00+ 15.80% 16.41% 19.23%
--------------------------------------------------------------------------------
Year Ended 4/30/00 24.84 25.30 28.03
--------------------------------------------------------------------------------
Five Years Ended 4/30/00 16.80 16.99 16.91
--------------------------------------------------------------------------------
Inception* through 4/30/00 14.65 16.80 14.68
================================================================================
--------------------------------------------------------------------------------
Cumulative Total Return
--------------------------------------------------------------------------------
Without Sales Charges(1)
--------------------------------------------------------------------------------
Class A (Inception* through 4/30/00) 146.75%
--------------------------------------------------------------------------------
Class B (Inception* through 4/30/00) 134.25
--------------------------------------------------------------------------------
Class L (Inception* through 4/30/00) 136.59
================================================================================
(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.
--------------------------------------------------------------------------------
12 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
European Portfolio at a Glance (unaudited)
--------------------------------------------------------------------------------
Growth of $10,000 Invested in Class A Shares of the
European Portfolio vs. MSCI European Market Index
--------------------------------------------------------------------------------
February 1994 -- April 2000
[GRAPH]
MSCI European
European Portfolio Market Index
Feb 7 1994 9,549 10,000
Oct 1994 9,840 10,064
Oct 1995 11,207 11,393
Oct 1996 13,298 13,383
Oct 1997 15,010 16,861
Oct 1998 16,377 20,812
Oct 1999 19,328 23,417
Apr 2000 23,563 25,363
+ Hypothetical illustration of $10,000 invested in Class A shares at
inception on February 7, 1994, assuming deduction of the maximum 4.50%
sales charge at the time of investment and the reinvestment of dividends
and capital gains, if any, at net asset value through April 30, 2000. 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 April 30, 2000
-------------------------------------------------------------------
1. Nokia Oyj 9.7%
-------------------------------------------------------------------
2. Vodafone AirTouch PLC 5.2
-------------------------------------------------------------------
3. CMG PLC 5.0
-------------------------------------------------------------------
4. Schering AG 4.1
-------------------------------------------------------------------
5. Schlumberger Ltd. 4.0
-------------------------------------------------------------------
6. Tomra Systems ASA 4.0
-------------------------------------------------------------------
7. Telefonica SA 3.6
-------------------------------------------------------------------
8. BP Amoco PLC ADR 3.4
-------------------------------------------------------------------
9. Fugro NV 3.4
-------------------------------------------------------------------
10. Alcatel 3.3
-------------------------------------------------------------------
* As a percentage of total investments.
Investment Allocation as of April 30, 2000*
-------------------------------------------------------------------
[GRAPH]
22.9% United Kingdom
22.0% France
11.2% Germany
10.8% Netherlands
10.7% Finland
6.4% Spain
6.3% Switzerland
5.1% Norway
4.6% Other
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 13
<PAGE>
--------------------------------------------------------------------------------
Emerging Markets Portfolio
--------------------------------------------------------------------------------
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.
[PHOTO]
James B.
Conheady
Vice President
Performance Update
For the six months ended April 30, 2000, the Emerging Markets Portfolio's
("Portfolio") Class A shares returned 19.05%, without sales charges. The
Portfolio's Class A shares returned 13.04%, with sales charges, for the same
period. In comparison, the Portfolio's benchmark, the Morgan Stanley Capital
International Emerging Markets Free Index ("MSCI Emerging Free Index"),1
returned 13.87% for the same period. For information on the Portfolio's other
share classes, please see pages 16 and 17.
Market Review
Emerging market stocks performed well compared to developed markets during the
period after a relatively dismal preceding five years. In our view, the
anxieties of 1998 have been alleviated by the prompt policy responses by many
central financial institutions. Additionally, ample financial liquidity helped
to fuel recovery in many troubled economies and the concurrent financial market
rallies.
The developing Asian stock markets turned in exceptional performance so far in
2000, led by renewed confidence in several of the smaller-sized markets. 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 causing 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 and Portfolio Update2
Our primary investment objective in selecting stocks in the Portfolio 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.
1 The Morgan Stanley Capital International Emerging Markets Free Index
consists of emerging market companies with an average size of $800 million.
The index measures the performance of emerging markets in South America,
South Africa, Asia and Eastern Europe.
2 Please note that the Portfolio's holdings are subject to change and any
discussion of holdings is as of April 30, 2000. Please refer to pages 29
and 30 for a complete listing and percentage breakdown of the Portfolio's
holdings.
--------------------------------------------------------------------------------
14 2000 Semi-Annual Report to Shareholders
<PAGE>
The composition of the Portfolio shifted over the last six months. Our regional
position at the end of the reporting period was 29.1% in Europe, Middle East and
Africa, 44.7% in Asia-Pacific and 26.2% in Latin America.
Emerging Europe has enjoyed solid returns in the past year as Russia and Turkey
led the performance pace following the debt debacle of last year. We have
relatively modest investments in the Europe, Middle East and Africa regions
except for our major commitments in South Africa, which has benefited from a
recovery in commodity prices.
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. And while no
guarantees can be given, we think that the opportunities over the next several
years bode well for the future performance of emerging market stocks. Global
economic recovery and low relative valuations are positive for emerging market
stocks given the historic high correlation between global growth and emerging
market equity returns.
Japan, a major trading partner with emerging Asia, has embarked upon a major
restructuring program after many years of ineffective policies. Japan's
financial system is being rationalized, interest rates are at very low levels
and many multinational companies have announced significant plans to lower
expenses, improve labor productivity and hopefully boost returns on invested
capital. The resurgence in Japan should bolster the recovery throughout the rest
of Asia.
Our outlook going forward is one of guarded optimism. Global economic growth is
expected by many investment professionals to accelerate for the rest of 2000,
and the prices of commodities, which are key exports for many emerging
economies, have in fact risen significantly during the period.
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.
/s/ Jeffrey J. Russell, /s/ James B. Conheady
JEFFREY J. RUSSELL, JAMES B. CONHEADY
Vice President Vice President
May 23, 2000
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 15
<PAGE>
--------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Historical Performance -- Class A Shares
--------------------------------------------------------------------------------
Net Asset Value
--------------------------
Beginning End Income Total
Period Ended of Period of Period Dividends Returns(1)
================================================================================
4/30/00 $ 9.03 $10.75 $0.00 19.05%+
10/31/99 7.03 9.03 0.00 28.45
10/31/98 12.45 7.03 0.00 (43.53)
10/31/97 12.08 12.45 0.00 3.06
10/31/96 11.06 12.08 0.00 9.22
Inception*-- 10/31/95 12.00 11.06 0.00 (7.83)+
================================================================================
Total $0.00
-------------------------------------------------------------------------------
Historical Performance -- Class B Shares
-------------------------------------------------------------------------------
Net Asset Value
-------------------------
Beginning End Income Total
Period Ended of Period of Period Dividends Returns(1)
================================================================================
4/30/00 $ 8.72 $10.34 $0.00 18.58%+
10/31/99 6.85 8.72 0.00 27.30
10/31/98 12.21 6.85 0.00 (43.90)
10/31/97 11.95 12.21 0.00 2.18
10/31/96 11.02 11.95 0.00 8.44
Inception*-- 10/31/95 12.00 11.02 0.00 (8.17)+
================================================================================
Total $0.00
================================================================================
Historical Performance -- Class L Shares
--------------------------------------------------------------------------------
Net Asset Value
-----------------------
Beginning End Income Total
Period Ended of Period of Period Dividends Returns(1)
================================================================================
4/30/00 $ 8.71 $10.34 $0.00 18.71%+
--------------------------------------------------------------------------------
10/31/99 6.84 8.71 0.00 27.34
--------------------------------------------------------------------------------
10/31/98 12.22 6.84 0.00 (44.03)
--------------------------------------------------------------------------------
10/31/97 11.95 12.22 0.00 2.26
--------------------------------------------------------------------------------
10/31/96 11.02 11.95 0.00 8.44
--------------------------------------------------------------------------------
Inception*-- 10/31/95 12.00 11.02 0.00 (8.17)+
================================================================================
Total $0.00
================================================================================
--------------------------------------------------------------------------------
16 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Historical Performance -- Class Y Shares
--------------------------------------------------------------------------------
Net Asset Value
-------------------------
Beginning End Income Total
Period Ended of Period of Period Dividends Returns(1)
================================================================================
4/30/00 $ 9.12 $10.89 $0.00 19.41%+
--------------------------------------------------------------------------------
10/31/99 7.07 9.12 0.00 29.00
--------------------------------------------------------------------------------
Inception* -- 10/31/98 12.16 7.07 0.00 (41.86)+
================================================================================
Total $0.00
================================================================================
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
--------------------------------------------------------------------------------
Average Annual Total Return
--------------------------------------------------------------------------------
Without Sales Charges(1)
-------------------------------------------------
Class A Class B Class L Class Y
================================================================================
Six Months Ended 4/30/00+ 19.05% 18.58% 18.71% 19.41%
--------------------------------------------------------------------------------
Year Ended 4/30/00 25.00 23.98 24.13 25.61
--------------------------------------------------------------------------------
Inception* through 4/30/00 (2.19) (2.95) (2.95) (5.02)
================================================================================
With Sales Charges(2)
-------------------------------------------------
Class A Class B Class L Class Y
================================================================================
Six Months Ended 4/30/00+ 13.04% 13.58% 16.50% 19.41%
--------------------------------------------------------------------------------
Year Ended 4/30/00 18.78 18.98 21.95 25.61
--------------------------------------------------------------------------------
Inception* through 4/30/00 (3.19) (3.14) (3.14) (5.02)
================================================================================
--------------------------------------------------------------------------------
Cumulative Total Return
--------------------------------------------------------------------------------
Without Sales Charges(1)
================================================================================
Class A (Inception* through 4/30/00) (10.42)%
--------------------------------------------------------------------------------
Class B (Inception* through 4/30/00) (13.83)
--------------------------------------------------------------------------------
Class L (Inception* through 4/30/00) (13.83)
--------------------------------------------------------------------------------
Class Y (Inception* through 4/30/00) (10.44)
================================================================================
(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 ("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 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.
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 17
<PAGE>
--------------------------------------------------------------------------------
Emerging Markets Portfolio at a Glance (unaudited)
--------------------------------------------------------------------------------
Growth of $10,000 Invested in Class A, B and L Shares of the
Emerging Markets Portfolio vs. MSCI Emerging Markets Free Index +
--------------------------------------------------------------------------------
May 1995 -- April 2000
[GRAPH]
Emerging Markets Emerging Markets Emerging Markets MSCI Emerging
Portfolio -- Portfolio-- Portfolio-- Markets Free
Class A Shares Class B Shares Class L Shares World Market Index
May 12, 1995 9,501 10,000 10,000 10,000
Oct 1995 8,757 8,724 9,092 9,453
Oct 1996 9,565 9,560 9,958 9,861
Oct 1997 10,375 9,875 10,183 8,844
Oct 1998 5,566 5,594 5,644 5,936
Oct 1999 7,150 7,194 7,187 7,611
Apr 30, 2000 8,511 8,531 8,531 8,215
+ 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% and
1.00% sales charges at the time of investment for Class A and L shares,
respectively, 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 April 30, 2000. 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 April 30, 2000
--------------------------------------------------------------------------------
1. Telefonos de Mexico S.A. ADR, Series L 6.2%
--------------------------------------------------------------------------------
2. Malayan Banking Berhad 4.9
--------------------------------------------------------------------------------
6. Yapi Ve Kredi Bankasi A.S. 4.9
--------------------------------------------------------------------------------
3. SK Telecom Co. Ltd. ADR 4.8
--------------------------------------------------------------------------------
4. Hon Hai Precision Industry Co. Ltd. 4.0
--------------------------------------------------------------------------------
5. Grupo Televisa S.A. GDR 3.7
--------------------------------------------------------------------------------
7. Taiwan Semiconductor Manufacturing Co. Ltd. 3.4
--------------------------------------------------------------------------------
8. Trigem Computer Inc. 3.3
--------------------------------------------------------------------------------
9. Comverse Technology Inc. 3.3
--------------------------------------------------------------------------------
10. Winbond Electronics Corp. 3.2
--------------------------------------------------------------------------------
* As a percentage of total investments.
Investment Allocation as of April 30, 2000*
[GRAPH]
Africa 7.9%
Europe 11.2%
Latin America 26.2%
Middle East 10.0%
Asia/Pacific 44.7%
--------------------------------------------------------------------------------
18 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Pacific Portfolio
--------------------------------------------------------------------------------
[PHOTO]
DAVID ISHIBASHI
Vice President
Portfolio Manager
David Ishibashi joined the 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.
Performance Update
For the six months ended April 30, 2000, the Smith Barney World Funds, Inc. --
Pacific Portfolio's ("Portfolio") Class A shares returned a negative 4.64%,
without sales charges. The Portfolio's Class A shares returned a negative 9.40%,
with sales charges, for the same period. In comparison, the Morgan Stanley
Capital International All-Country Asia Pacific Index ("MSCI Asia Pacific")1
returned 4.73% for the same period. We attribute the Portfolio's disappointing
underperformance relative to the benchmark during the period due to its
technology holdings and overall market volatility. For information on the
Portfolio's other share classes, please see pages 22 and 23.
Market Review
In our view, Asia has been adversely affected by higher volatility in global
stock markets and renewed concerns about rising U.S. interest rates. We believe
that weaker U.S. stock prices may negatively impact Asia's economy, but should
not be impactful enough to derail its recovery. In our opinion, the close of
1999 going into 2000 represented a period of strong relative performance for the
Pacific region, which we believe is a result of the restructuring, low inflation
and deregulation that continues in the region, all factors fostering its
economic recovery. However, the past few months were marked by a severe fallout
from the surge in technology stocks.
Overall, sentiment is improving in the Pacific Rim, particularly in Japan. The
recovery in the Japanese corporate sector is gradually spreading to worker
income. If these income gains can effectively translate into an increase in
consumer spending, we think the ensuing rising consumer sentiment would
reinforce the case for above-average Gross Domestic Product ("GDP") growth.
However, longer-term issues, such as a flawed pension system and the lack of
meaningful fiscal reform, continue to weigh on consumer spending. Also, stubborn
expectations of falling prices have left the Pacific region vulnerable to
setbacks. Therefore, we think a supportive monetary policy is still necessary to
sustain the improvements in consumer sentiment and secure growth prospects.
The Economic Planning Agency's Consumer Sentiment Index ("CSI")2 has gradually
risen to its long-term averages. On this basis, Japanese consumers are about as
optimistic about the near-term future as they have been in the past two decades.
-----------
1 The Morgan Stanley Capital International All Country Asia Pacific Index is
an unmanaged index of common stocks of companies located in Australia, New
Zealand and the countries in the Far East.
2 The CSI assembles consumer expectations of jobs, income, durable goods
purchasing plans and prices over the next six months.
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 19
<PAGE>
In addition, many Tokyo Stock Exchange listed companies continue to trade at low
price-to-book multiples,3 and there are 434 stocks now that carry dividend
yields greater than the 10-year Japanese government bond.
Investment Strategy 4
We employ a "bottom-up" investment strategy, emphasizing individual security
selection, while optimally allocating the Portfolio's assets among companies in
the Asia Pacific region. Our stock selection process involves exhaustive
analysis 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.
As always, our philosophy is based on the premise that earnings growth and
earnings momentum will drive stock performance. We are finding what we deem to
be viable investment opportunities in growth stocks, selling at reasonable
valuations and with a focus on recovering companies. We believe opportunities
can be identified among those companies whose core businesses are in basic
industry, as these companies are most likely to exhibit positive growth due to
the Pacific region's massive restructuring and deregulation.
In our view, excellent valuations can be found particularly in the Japanese real
estate and construction markets. One recent addition to the portfolio is Nippon
Sheet Glass Co., which we believe may perform well over the long-term. (Of
course, no guarantees can be given that our expectations will be met.)
Since the recent pullback in select technology issues that began to accelerate
toward the end of the reporting period, we have been altering the Portfolio to
reflect the recovery that we see occurring in the basic industry sector and
earnings-oriented companies. While we have also increased our exposure to
technology during the period, our focus is not on high-flying Internet and
telecom stocks, but rather, on `pure' technology investments such as
semiconductors, digital equipment and electronic components.
Moreover, we have overweighted our positions in Taiwan and South Korea, as
warranted by the greater growth prospects that we think have become more
apparent in these countries. We are currently underweight versus our benchmark
in Japan and Hong Kong.
Our strategy going forward is to maintain our basic philosophy of investing in
growth-oriented companies that can capitalize on Asia's recovering economy. We
will focus on those companies that do business, trade, network or outsource
within the Pacific region, as opposed to those who are more dependent on
exporting to the U.S. and Europe, where excessive market volatility persists.
Market Outlook
We are optimistic that the Pacific region will continue its recovery from the
1997 Asian currency crisis. And while no guarantees can be given, based on the
region's restructuring efforts, we see ample evidence that the underpinnings of
economic growth can be maintained over the long-term.
Looking forward, financial market deregulation and the information technology
revolution in Japan are creating a small class of entrepreneurs with high
incomes and high net worths.
-------------
3 A price-to-book multiple refers to the price paid to a stock in relation to
its book value. Book value is the difference between a company's assets and
liabilities.
4 Please note that the Portfolio's holdings are subject to change and any
discussion of holdings is as of April 30, 2000. Please refer to pages 31
and 32 for a complete listing and percentage breakdown of the Portfolio's
holdings.
--------------------------------------------------------------------------------
20 2000 Semi-Annual Report to Shareholders
<PAGE>
In addition, China's entry into the World Trade Organization ("WTO") should
create opportunities for positive economic change by way of tariff-reduction,
market widening and trade-expansion.
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
May 22, 2000
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 21
<PAGE>
--------------------------------------------------------------------------------
PACIFIC PORTFOLIO
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Historical Performance -- Class A Shares
--------------------------------------------------------------------------------
Net Asset Value
------------------------
Beginning End Income Total
Period Ended of Period of Period Dividends Returns(1)
================================================================================
4/30/00 $11.80 $11.13 $0.15 (4.64)%+
--------------------------------------------------------------------------------
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 $0.15
================================================================================
--------------------------------------------------------------------------------
Historical Performance -- Class B Shares
--------------------------------------------------------------------------------
Net Asset Value
------------------------
Beginning End Income Total
Period Ended of Period of Period Dividends Returns(1)
================================================================================
4/30/00 $11.31 $10.72 $0.03 (5.01)%+
--------------------------------------------------------------------------------
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 $0.03
================================================================================
--------------------------------------------------------------------------------
Historical Performance -- Class L Shares
--------------------------------------------------------------------------------
Net Asset Value
------------------------
Beginning End Income Total
Period Ended of Period of Period Dividends Returns(1)
================================================================================
4/30/00 $11.27 $10.65 $0.06 (5.04)%+
-----------------------------------------------------------------------
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 $0.06
================================================================================
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
--------------------------------------------------------------------------------
22 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
PACIFIC PORTFOLIO
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Average Annual Total Return
--------------------------------------------------------------------------------
Without Sales Charges(1)
-------------------------------------------
Class A Class B Class L
--------------------------------------------------------------------------------
Six Months Ended 4/30/00+ (4.64)% (5.01)% (5.04)%
--------------------------------------------------------------------------------
Year Ended 4/30/00 33.48 32.31 32.29
--------------------------------------------------------------------------------
Five Years Ended 4/30/00 1.15 0.33 0.31
--------------------------------------------------------------------------------
Inception* through 4/30/00 (1.67) (2.92) (2.47)
================================================================================
With Sales Charges(2)
-------------------------------------------
Class A Class B Class L
================================================================================
Six Months Ended 4/30/00+ (9.40)% (9.74)% (6.89)%
--------------------------------------------------------------------------------
Year Ended 4/30/00 26.86 27.31 29.99
--------------------------------------------------------------------------------
Five Years Ended 4/30/00 0.11 0.13 0.10
--------------------------------------------------------------------------------
Inception* through 4/30/00 (2.48) (2.92) (2.63)
================================================================================
--------------------------------------------------------------------------------
Cumulative Total Return
--------------------------------------------------------------------------------
Without Sales Charges(1)
================================================================================
Class A (Inception* through 4/30/00) (9.98)%
--------------------------------------------------------------------------------
Class B (Inception* through 4/30/00) (15.00)
--------------------------------------------------------------------------------
Class L (Inception* through 4/30/00) (14.38)
================================================================================
(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.
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 23
<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 -- April 2000
[GRAPH]
Pacific Portfolio MSCI All Country
Asia Pacific Index
Feb 7, 1994 9,549 10,000
Oct 1994 9,870 10,716
Oct 1995 7,693 9,438
Oct 1996 7,777 9,650
Oct 1997 6,463 7,703
Oct 1998 5,141 6,634
Oct 1999 9,015 10,231
Apr 30, 2000 8,596 10,715
+ Hypothetical illustration of $10,000 invested in Class A shares at
inception on February 7, 1994, assuming deduction of the maximum 4.50%
sales charge at the time of investment and the reinvestment of dividends
and capital gains, if any, at net asset value through April 30, 2000. 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 April 30, 2000
--------------------------------------------------------------------------------
1. Murata Manufacturing Co., Ltd. 6.7%
--------------------------------------------------------------------------------
2. Trend Micro, Inc. 5.2
--------------------------------------------------------------------------------
3. Sony Corp. 4.8
--------------------------------------------------------------------------------
4. Drake Beam Morin - Japan Inc. 4.4
--------------------------------------------------------------------------------
5. Seven-Eleven Co., Ltd. 4.3
--------------------------------------------------------------------------------
6. Nichii Gakkan Co. 3.6
--------------------------------------------------------------------------------
7. Nomura Securities Co. Ltd. 3.5
--------------------------------------------------------------------------------
8. NTT Corp. 3.2
--------------------------------------------------------------------------------
9. NTT Docomo Inc. 2.9
--------------------------------------------------------------------------------
10. Marubeni Corp. 2.8
--------------------------------------------------------------------------------
* As a percentage of total investments.
Investment Allocation as of April 30, 2000*
--------------------------------------------------------------------------------
2000 Semi-Annual Report to Shareholders
[GRAPH]
Hong Kong 7.2%
Japan 68.9%
Australia 1.4%
Taiwan 11.2%
South Korea 3.2%
Singapore 5.9%
Other 2.2%
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (unaudited) April 30, 2000
--------------------------------------------------------------------------------
GLOBAL GOVERNMENT BOND PORTFOLIO
FACE
AMOUNT+ SECURITY VALUE
================================================================================
U.S. TREASURY OBLIGATIONS -- 21.9%
U.S. Treasury Notes:
6,000,000 6.000% due 8/15/04 $ 5,879,700
12,000,000 6.000% due 8/15/09 11,740,080
7,000,000 6.250% due 5/15/30 7,281,960
--------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost -- $25,115,514) 24,901,740
================================================================================
BONDS -- 63.6%
Canada -- 2.8%
4,700,000 Canadian Government, 6.000% due 6/1/08(a) 3,127,306
--------------------------------------------------------------------------------
Denmark -- 0.6%
5,000,000 Kingdom of Denmark, 7.000% due 11/15/07 662,470
--------------------------------------------------------------------------------
Germany -- 15.7%
19,500,000 Bundesrepublik Deutschland, 5.375% due 1/4/10 17,864,590
--------------------------------------------------------------------------------
Greece -- 4.6%
6,000,000 Republic of Cyprus, 5.375% due 7/28/08 5,233,795
--------------------------------------------------------------------------------
Italy -- 5.2%
6,900,000 Buoni Poliennali Del Tes, 3.250% due 4/15/04 5,874,240
--------------------------------------------------------------------------------
Japan -- 9.8%
1,200,000,000 Japan Government, 1.800% due 3/22/10 11,168,910
--------------------------------------------------------------------------------
Spain -- 4.8%
6,000,000USD Kingdom of Spain, 5.875% due 7/28/08(a) 5,455,500
--------------------------------------------------------------------------------
Sweden -- 2.5%
26,000,000 AB Spintab, 5.500% due 9/17/03 2,872,691
--------------------------------------------------------------------------------
United Kingdom -- 17.6%
3,000,000 Barclays Bank PLC, 7.500% due 4/29/49 2,733,362
5,000,000 Inter-American Development Bank, 7.125% due 11/26/04 7,967,953
5,000,000 KFW International Finance, 9.438% due 2/27/08 9,241,699
--------------------------------------------------------------------------------
19,943,014
--------------------------------------------------------------------------------
TOTAL BONDS 72,202,516
(Cost -- $79,958,461)
================================================================================
SUB-TOTAL INVESTMENTS
(Cost -- $105,073,975) 97,104,256
================================================================================
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 25
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) April 30, 2000
--------------------------------------------------------------------------------
GLOBAL GOVERNMENT BOND PORTFOLIO
FACE
AMOUNT SECURITY VALUE
================================================================================
REPURCHASE AGREEMENT-- 14.5%
$ 16,525,000 CIBC Wood Gundy Securities Inc., 5.600% due 5/1/00;
Proceeds at maturity -- $16,532,712; (Fully collateralized
by U.S. Treasury Notes, 4.625% due 11/30/00;
Market value -- $16,704,000) (Cost -- $16,525,000) $ 16,525,000
================================================================================
TOTAL INVESTMENTS-- 100%
(Cost -- $121,598,975*) $113,629,256
================================================================================
+ Represents local currency, unless otherwise indicated.
(a) All or a portion of this security is on loan (See note 9).
* Aggregate cost for Federal income tax purposes is substantially the same.
Currency Abbreviation:
----------------------
USD -- U.S. Dollar
See Notes to Financial Statements.
--------------------------------------------------------------------------------
26 2000 Semi-Annual Report in Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) April 30, 2000
--------------------------------------------------------------------------------
EUROPEAN PORTFOLIO
SHARES SECURITY VALUE
================================================================================
STOCK -- 100.0%
Austria -- 0.7%
12,000 VA Technologie AG $ 716,065
--------------------------------------------------------------------------------
Finland -- 10.7%
26,000 Fortum Corp.(a) 971,449
180,000 Nokia Oyj(a) 10,192,532
--------------------------------------------------------------------------------
11,163,981
--------------------------------------------------------------------------------
France -- 22.0%
15,000 Alcatel(a) 3,485,734
20,000 Atos S.A.(b) 2,167,078
20,000 Axa 2,972,670
25,000 Banque Nationale de Paris 2,025,371
15,000 Cap Gemini S.A. 2,952,621
10,000 Groupe Danone(a) 2,191,683
8,655 Pinault-Printemps-Redoute S.A.(a) 1,750,198
55,000 Schlumberger Ltd. 4,210,938
20,000 Sidel S.A.(a) 1,253,953
--------------------------------------------------------------------------------
23,010,246
--------------------------------------------------------------------------------
Germany -- 11.2%
8,000 Allianz AG 3,010,945
21,104 DaimlerChrysler AG(a) 1,238,550
4,000 SAP AG(a) 2,320,177
30,000 Schering AG(a) 4,251,228
25,000 T-Online International AG(b) 922,694
--------------------------------------------------------------------------------
11,743,594
--------------------------------------------------------------------------------
Ireland -- 2.3%
50,000 SmartForce PLC ADR(b) 2,387,500
--------------------------------------------------------------------------------
Netherlands -- 10.8%
75,034 Fugro NV(a) 3,521,503
43,116 Hunter Douglas NV 986,223
81,592 IHC Caland NV 3,308,799
41,235 ING Groep NV 2,255,406
60,526 Koninklijke Ahrend NV 661,890
50,640 Vedior NV 537,629
--------------------------------------------------------------------------------
11,271,450
--------------------------------------------------------------------------------
Norway -- 5.1%
57,142 Orkla ASA 884,561
200,000 Tomra Systems ASA(a) 4,135,464
6,776 Transocean Sedco Forex Inc. 318,472
--------------------------------------------------------------------------------
5,338,497
--------------------------------------------------------------------------------
Spain -- 6.4%
100,000 Amper S.A. 835,665
122,500 Azkoyen S.A. 1,082,856
39,000 Indra Sistemas S.A.(b) 918,019
170,640 Telefonica S.A. 3,806,756
--------------------------------------------------------------------------------
6,643,296
--------------------------------------------------------------------------------
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 27
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) April 30, 2000
--------------------------------------------------------------------------------
EUROPEAN PORTFOLIO
SHARES SECURITY VALUE
================================================================================
Sweden -- 1.6%
150,000 Mandator AB $ 1,675,416
--------------------------------------------------------------------------------
Switzerland -- 6.4%
8,000 Geberit International AG(b) 2,599,244
51,000 Mettler-Toledo International Inc.(b) 1,759,500
1,664 Novartis AG 2,329,890
--------------------------------------------------------------------------------
6,688,634
--------------------------------------------------------------------------------
United Kingdom -- 22.8%
300,000 Allied Zurich PLC 2,999,718
70,000 BP Amoco PLC ADR 3,570,000
80,000 CMG PLC(b) 5,228,930
240,000 Compass Group PLC 3,451,319
200,000 SEMA Group PLC 3,248,521
1,179,292 Vodafone AirTouch PLC 5,416,114
--------------------------------------------------------------------------------
23,914,602
--------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $68,916,254*) $104,553,281
================================================================================
(a) All or 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.
--------------------------------------------------------------------------------
28 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) April 30, 2000
--------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO
SHARES SECURITY VALUE
================================================================================
STOCK -- 100.0%
Brazil -- 12.9%
25,600 Comphania Cervejaria Brahma ADR(a) $ 396,800
19,700 Petroleo Brasileiro S.A. ADR 466,720
18,096 Tele Norte Leste Participacoes S.A. ADR 322,351
2,565 Telecomunicacoes Brasileiras S.A. ADR, Preferred(a) 303,150
6,650 Telecomunicacoes de Sao Paulo S.A. 164,171
14,440 Uniao de Bancos Brasileiros S.A. GDR 360,097
--------------------------------------------------------------------------------
2,013,289
--------------------------------------------------------------------------------
Greece -- 2.6%
8,200 Hellenic Telecommunications Organization S.A. 184,466
5,180 National Bank of Greece S.A. 220,990
--------------------------------------------------------------------------------
405,456
--------------------------------------------------------------------------------
Hong Kong -- 1.8%
1,900 China Telecom Ltd. ADR(b) 278,706
--------------------------------------------------------------------------------
Hungary -- 1.6%
7,125 Magyar Tavkozlesi Rt. ADR 248,039
--------------------------------------------------------------------------------
India -- 3.2%
11,400 ICICI Ltd.(b) 273,600
11,200 Pentamedia Graphics Ltd. GDR(b) 229,600
--------------------------------------------------------------------------------
503,200
--------------------------------------------------------------------------------
Indonesia -- 1.0%
364,000 PT Telekomunikasi Indonesia 158,461
--------------------------------------------------------------------------------
Israel -- 10.0%
6,150 Amdocs Ltd.(b) 416,278
5,700 Comverse Technology Inc.(b) 508,369
4,650 Gilat Satellite Networks Ltd.(a)(b) 399,319
5,300 Teva Pharmaceutical Industries Ltd. ADR(b) 233,200
--------------------------------------------------------------------------------
1,557,166
--------------------------------------------------------------------------------
Malaysia -- 7.6%
204,000 Berjaya Sports Toto Berhad 426,789
184,000 Malayan Banking Berhad 765,053
--------------------------------------------------------------------------------
1,191,842
--------------------------------------------------------------------------------
Mexico -- 13.3%
28,500 Grupo Carso SA de C.V., Series A-1(b) 96,882
9,000 Grupo Televisa S.A. GDR(b) 570,938
16,500 Telefonos de Mexico S.A. ADR, Series L 970,406
186,000 Wal-Mart de Mexico S.A. de CV, Series V Shares(b) 430,743
--------------------------------------------------------------------------------
2,068,969
--------------------------------------------------------------------------------
Philippines -- 0.6%
744,000 SM Prime Holdings Inc. 97,314
--------------------------------------------------------------------------------
Poland -- 2.1%
48,800 Budimex S.A.(b) 320,895
--------------------------------------------------------------------------------
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 29
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) April 30, 2000
--------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO
SHARES SECURITY VALUE
================================================================================
Singapore -- 1.2%
9,500 Singapore Press Holdings Ltd. $ 185,827
--------------------------------------------------------------------------------
South Africa -- 7.9%
4,750 Anglo American Platinum Corp. Ltd. 114,905
16,500 Bidvest Group Ltd. 121,690
39,600 Dimension Data Holdings Ltd.(b) 259,931
14,820 Fedsure Holdings Ltd. 82,194
7,600 Investec Group Ltd. 281,153
60,000 Iscor Ltd. 132,753
6,860 Nedcor Ltd. 130,127
19,000 Sasol Ltd. 111,542
--------------------------------------------------------------------------------
1,234,295
--------------------------------------------------------------------------------
South Korea -- 14.4%
7,520 Housing & Commercial Bank of Korea 128,750
5,450 Korea Electric Power Corp. 159,609
3,500 Korea Telecom Corp. 239,063
3,500 Korea Telecom Corp. ADR 120,750
8,200 Pohang Iron & Steel Co. Ltd. ADR 172,200
13,200 Samsung Corp. 149,872
23,500 SK Telecom Co. Ltd. ADR 753,469
8,990 Trigem Computer Inc. 519,269
--------------------------------------------------------------------------------
2,242,982
--------------------------------------------------------------------------------
Taiwan -- 13.8%
56,800 Cathay Life Insurance Co. Ltd. 137,268
126,350 China Motor Co. Ltd. 133,280
64,200 Hon Hai Precision Industry Co. Ltd.(b) 618,507
64,260 President Chain Store Corp. 228,747
82,410 Taiwan Semiconductor Manufacturing Co. Ltd.(b) 530,193
164,000 Winbond Electronics Corp.(b) 506,132
--------------------------------------------------------------------------------
2,154,127
--------------------------------------------------------------------------------
Thailand -- 1.1%
161,000 Thai Farmers Bank Public Co. Ltd.(b) 169,095
--------------------------------------------------------------------------------
Turkey -- 4.9%
2,992,875 Yapi Ve Kredi Bankasi A.S. 764,376
--------------------------------------------------------------------------------
TOTAL INVESTMENTS-- 100%
(Cost-- $10,426,126*) $15,594,039
--------------------------------------------------------------------------------
(a) All or 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.
--------------------------------------------------------------------------------
30 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) April 30, 2000
--------------------------------------------------------------------------------
PACIFIC PORTFOLIO
SHARES SECURITY VALUE
================================================================================
STOCK -- 100.0%
Australia -- 1.4%
28,600 Computershare Ltd.(a) $ 116,599
12,656 Telstra Corp. Ltd. 46,999
--------------------------------------------------------------------------------
163,598
--------------------------------------------------------------------------------
Hong Kong -- 7.2%
20,000 China Telecom Ltd. 144,430
60,000 Computer & Technologies Holdings Ltd.(a) 68,941
16,949 HSBC Holdings PLC 189,308
15,000 Hutchison Whampoa 218,571
90,000 I100 Ltd. 21,144
126,000 Softbank Investment International Ltd.(a) 52,572
100,000 Sunevision Holdings(a) 130,308
--------------------------------------------------------------------------------
825,274
--------------------------------------------------------------------------------
India -- 0.1%
1,800 SSI Ltd. GDR(a)(b) 16,425
--------------------------------------------------------------------------------
Japan -- 68.9%
7,000 Canon Inc. 319,962
2,100 Drake Beam Morin Japan Inc. 512,977
6,000 Fujitsu Ltd. 169,882
1,000 Hirose Electric Co. Ltd. 120,842
4,000 Hosiden Corp. 186,537
1,700 Internet Initiative Inc. ADR 102,000
3,000 Ito Yokado Co. Ltd. 219,014
1,000 Jafco Co. Ltd. 175,803
113,000 Marubeni Corp.(c) 327,263
6,000 Matsushita Electric Industrial Co. 158,778
4,000 Murata Manufacturing Co. Ltd. 777,238
4,500 Nichii Gakkan Co.(c) 412,213
22,000 Nippon Sheet Glass Co. 195,419
16,000 Nomura Securities Co. Ltd. 402,683
30 NTT Corp. 371,963
24 NTT Data Corp. 319,777
10 NTT Docomo Inc. 334,027
200 Oracle Corp.(c) 170,252
4,914 Pasona Softbank Inc. 227,342
8,000 Sailor Pen Co. Ltd. 139,902
4,000 Seven-Eleven Co., Ltd. 492,250
5,000 Sharp Corp. 96,460
4,800 Sony Corp. 551,172
4,000 Takeda Chemical Ind. 263,150
5,000 Terumo Corp. 151,283
10,000 Tostem Corp. 147,212
4,000 Trend Micro Inc. 599,583
--------------------------------------------------------------------------------
7,944,984
--------------------------------------------------------------------------------
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 31
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) April 30, 2000
--------------------------------------------------------------------------------
PACIFIC PORTFOLIO
SHARES SECURITY VALUE
================================================================================
Malaysia -- 1.9%
12,000 Telekom Malaysia Berhad $ 41,684
55,000 Tenaga Nasional Berhad 182,368
--------------------------------------------------------------------------------
224,052
--------------------------------------------------------------------------------
Singapore -- 5.9%
39,173 Datacraft Asia Ltd. 293,797
17,200 NatSteel Electronics Ltd.(c) 98,717
37,000 Star Cruises PLC(c) 284,900
--------------------------------------------------------------------------------
677,414
--------------------------------------------------------------------------------
South Korea -- 3.2%
2,500 Korea Electric Power Corp. 73,214
1,600 Korea Telecom Corp. 109,285
6,500 Samsung Corp. 73,800
4,511 Kookmin Bank 48,778
3,150 Pohang Iron & Steel ADR 66,150
--------------------------------------------------------------------------------
371,227
--------------------------------------------------------------------------------
Taiwan -- 11.2%
27,600 Cathay Life Insurance 66,700
25,480 Hon Hai Precision Industry(a) 245,504
15,600 Ritek Corp. GDR(a)(b) 297,535
11,000 Synnex Technology International Corp. 297,000
25,830 Taiwan Semiconductor Manufacturing Co., Ltd.(a) 166,179
2,500 Winbond Electronics Corp. 79,125
40,000 Zyxel Communication Corp. 134,550
--------------------------------------------------------------------------------
1,286,593
--------------------------------------------------------------------------------
Thailand -- 0.2%
57,100 National Finance Public Co. Ltd.(a) 13,343
54,900 National Finance Public Co. Ltd. ADR(a) 13,117
--------------------------------------------------------------------------------
26,460
--------------------------------------------------------------------------------
TOTAL INVESTMENTS-- 100%
(Cost -- $8,255,263*) $11,536,027
================================================================================
(a) Non-income producing security.
(b) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. This security may be sold in transactions that are exempt from
registration, normally to qualified institutional buyers.
(c) 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.
--------------------------------------------------------------------------------
32 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Statements of Assets and Liabilities (unaudited) April 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Global
Government Emerging
Bond European Markets Pacific
Portfolio Portfolio Portfolio Portfolio
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments -- Cost $105,073,975 $ 68,916,254 $ 10,426,126 $ 8,255,263
Repurchase agreements -- Cost 16,525,000 -- -- --
Foreign currency -- Cost -- 590 504,065 25,145
--------------------------------------------------------------------------------------------------------------------------------
Investments -- Value $ 97,104,256 $104,553,281 $ 15,594,039 $11,536,027
Repurchase agreements -- Value 16,525,000 -- -- --
Foreign currency -- Value -- 566 503,735 24,541
Cash 4,166,268 8,444,351 46,792 --
Collateral for securities on loan (Note 9) 8,284,000 11,976,078 999,030 1,079,015
Dividends and interest receivable 2,529,378 172,605 32,205 13,295
Receivable for open forward foreign
currency contracts (Note 4) 1,421,562 -- 194 --
Receivable for Fund shares sold 147,251 29,110 3,483 9,107
Receivable from Manager -- -- -- 34,215
Receivable for securities sold -- 385,545 -- --
--------------------------------------------------------------------------------------------------------------------------------
Total Assets 130,177,715 125,561,536 17,179,478 12,696,200
--------------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities on loan (Note 9) 8,284,000 11,976,078 999,030 1,079,015
Payable for securities purchased 2,710,561 517,874 -- --
Dividends payable 285,216 -- -- --
Management fees payable 98,671 69,269 12,585 --
Payable for open forward foreign
currency contracts (Note 4) 24,848 -- -- --
Distribution fees payable 12,229 89,603 15,679 13,119
Payable for Fund shares purchased 9,573 -- 16,859 10
Payable to bank, foreign currency 298 -- -- --
Payable to bank -- -- -- 240,431
Accrued expenses 79,902 80,195 35,461 48,511
--------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 11,505,298 12,733,019 1,079,614 1,381,086
--------------------------------------------------------------------------------------------------------------------------------
Total Net Assets $118,672,417 $112,828,517 $ 16,099,864 $11,315,114
================================================================================================================================
NET ASSETS:
Par value of capital shares $ 11,013 $ 4,373 $ 1,528 $ 1,046
Capital paid in excess of par value 124,235,847 68,217,556 21,762,144 10,830,508
Accumulated net investment loss -- (236,286) (115,553) --
Undistributed (overdistributed)
net investment income 2,088,411 -- -- (309,837)
Accumulated net realized gain (loss) from
security transactions and foreign securities (5,675,836) 9,347,280 (10,715,575) (2,486,650)
Net unrealized appreciation (depreciation)
of investments and foreign currencies (1,987,018) 35,495,594 5,167,320 3,280,047
--------------------------------------------------------------------------------------------------------------------------------
Total Net Assets $118,672,417 $112,828,517 $ 16,099,864 $11,315,114
================================================================================================================================
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 33
<PAGE>
--------------------------------------------------------------------------------
Statements of Assets and Liabilities (unaudited)(continued) April 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Global
Government Emerging
Bond European Markets Pacific
Portfolio Portfolio Portfolio Portfolio
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares Outstanding:
Class A 5,674,048 1,996,108 524,198 323,134
------------------------------------------------------------------------------------------------------------------
Class B 678,955 1,699,452 614,189 395,034
------------------------------------------------------------------------------------------------------------------
Class L 157,884 677,761 225,079 327,350
------------------------------------------------------------------------------------------------------------------
Class Y 4,501,860 -- 164,043 --
------------------------------------------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $10.83 $26.36 $10.75 $11.13
------------------------------------------------------------------------------------------------------------------
Class B* $10.81 $25.34 $10.34 $10.72
------------------------------------------------------------------------------------------------------------------
Class L** $10.81 $25.30 $10.34 $10.65
------------------------------------------------------------------------------------------------------------------
Class Y (and redemption price) $10.70 -- $10.89 --
------------------------------------------------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 4.71% of
net asset value per share) $11.34 -- -- --
------------------------------------------------------------------------------------------------------------------
Class A (net asset value plus 5.26% of
net asset value per share) -- $27.75 $11.32 $11.72
------------------------------------------------------------------------------------------------------------------
Class L (net asset value plus 1.01% of
net asset value per share) $10.92 $25.56 $10.44 $10.76
=======================================================================================================================
</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 European, Emerging Markets
and Pacific Portfolios 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 redeemded within the first year of purchase.
See Notes to Financial Statements.
--------------------------------------------------------------------------------
34 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Statements of Operations (unaudited) For the Six Months Ended April 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Global
Government Emerging
Bond European Markets Pacific
Portfolio Portfolio Portfolio Portfolio
============================================================================================================================
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 3,911,343 $ 38,911 $ 21,288 $ 34,931
Dividends -- 402,802 95,093 23,144
Less: Foreign withholding tax -- (39,850) (12,225) (2,391)
----------------------------------------------------------------------------------------------------------------------------
Total Investment Income 3,911,343 401,863 104,156 55,684
----------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 457,132 433,305 90,803 60,602
Distribution fees (Note 2) 116,771 347,552 56,734 52,550
Shareholder and system servicing fees 40,550 77,022 20,095 14,515
Custody 17,192 21,383 12,349 11,265
Audit and legal 16,018 18,709 16,409 15,489
Shareholder communications 15,850 20,935 7,458 6,465
Registration fees 9,972 32,217 32,402 24,863
Directors' fees 2,799 1,989 1,258 1,488
Pricing service fees 1,700 1,989 1,740 3,059
Other 887 1,492 2,678 913
----------------------------------------------------------------------------------------------------------------------------
Total Expenses 678,871 956,593 241,926 191,209
Less: Management fee waiver (Note 2) -- -- -- (51,956)
----------------------------------------------------------------------------------------------------------------------------
Net Expenses 678,871 956,593 241,926 139,253
----------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) 3,232,472 (554,730) (137,770) (83,569)
----------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN
CURRENCIES (NOTES 3 AND 4):
Realized Gain (Loss) From:
Security transactions (3,347,065) 9,651,473 370,400 917,576
Foreign currency transactions 2,650,737 15,399 16,742 1,911
----------------------------------------------------------------------------------------------------------------------------
Net Realized Gain (Loss) (696,328) 9,666,872 387,142 919,487
----------------------------------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation (Depreciation)
of Investments and Foreign Currencies:
Beginning of period (2,525,074) 24,992,588 2,708,960 4,545,856
End of period (1,987,018) 35,495,594 5,167,320 3,280,047
----------------------------------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation (Depreciation) 538,056 10,503,006 2,458,360 (1,265,809)
----------------------------------------------------------------------------------------------------------------------------
Net Gain (Loss) on Investments and Foreign Currencies (158,272) 20,169,878 2,845,502 (346,322)
----------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Operations $ 3,074,200 $19,615,148 $2,707,732 $ (429,891)
============================================================================================================================
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 35
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets (unaudited) For the Six Months Ended April 30, 2000
---------------------------------------------------------------------------------------------------------------------------------
Global
Government Emerging
Bond European Markets Pacific
Portfolio Portfolio Portfolio Portfolio
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ 3,232,472 $ (554,730) $ (137,770) $ (83,569)
Net realized gain (loss) (696,328) 9,666,872 387,142 919,487
Change in net unrealized appreciation (depreciation) 538,056 10,503,006 2,458,360 (1,265,809)
---------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in
Net Assets From Operations 3,074,200 19,615,148 2,707,732 (429,891)
---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (6,935,582) -- -- (93,592)
Net realized gains -- (4,140,556) -- --
---------------------------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (6,935,582) (4,140,556) -- (93,592)
---------------------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 10):
Net proceeds from sale of shares 3,952,216 226,784,962 13,802,774 32,970,004
Net asset value of shares issued
for reinvestment of dividends 2,828,483 3,926,750 -- 90,575
Cost of shares reacquired (11,703,553) (214,475,385) (14,146,533) (34,135,733)
---------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From
Fund Share Transactions (4,922,854) 16,236,327 (343,759) (1,075,154)
---------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets (8,784,236) 31,710,919 2,363,973 (1,598,637)
NET ASSETS:
Beginning of period 127,456,653 81,117,598 13,735,891 12,913,751
---------------------------------------------------------------------------------------------------------------------------------
End of period* $118,672,417 $ 112,828,517 $ 16,099,864 $ 11,315,114
=================================================================================================================================
* Includes accumulated net investment income (loss) of: -- $(236,286) $(115,553) --
---------------------------------------------------------------------------------------------------------------------------------
* Includes undistributed (overdistributed)
net investment income of: $2,088,411 -- -- $(309,837)
=================================================================================================================================
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
36 2000 Semi-Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets (continued) For the Year Ended October 31, 1999
------------------------------------------------------------------------------------------------------------------------------
Global
Government Emerging
Bond European Markets Pacific
Portfolio Portfolio Portfolio Portfolio
===============================================================================================================================
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ 6,068,866 $ (415,689) $ (234,568) $ (84,047)
Net realized gain (loss) 1,789,311 4,192,014 (4,648,121) 585,644
Increase (decrease) in
net unrealized appreciation (9,884,141) 10,944,921 8,457,364 4,080,418
-------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in
Net Assets From Operations (2,025,964) 14,721,246 3,574,675 4,582,015
-------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (6,073,273) -- -- --
Net realized gains -- (1,344,312) -- --
-------------------------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (6,073,273) (1,344,312) -- --
-------------------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 10):
Net proceeds from sale of shares 18,556,991 339,884,177 17,353,837 50,017,389
Net asset value of shares issued
for reinvestment of dividends 2,636,510 1,277,397 -- --
Cost of shares reacquired (28,490,266) (351,836,377) (21,161,899) (46,615,096)
-------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From
Fund Share Transactions (7,296,765) (10,674,803) (3,808,062) 3,402,293
-------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets (15,396,002) 2,702,131 (233,387) 7,984,308
NET ASSETS:
Beginning of year 142,852,655 78,415,467 13,969,278 4,929,443
-------------------------------------------------------------------------------------------------------------------------------
End of year* $127,456,653 $ 81,117,598 $ 13,735,891 $ 12,913,751
===============================================================================================================================
* Includes accumulated net
investment income (loss) of: $3,140,784 -- -- $(134,587)
===============================================================================================================================
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 37
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)
--------------------------------------------------------------------------------
1. Significant Accounting Policies
The Global Government Bond, European, Emerging Markets 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 the International Equity
Portfolio. The financial statements and financial highlights for the
International Equity Portfolio 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.
--------------------------------------------------------------------------------
38 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
--------------------------------------------------------------------------------
In addition, the Portfolios may enter into forward exchange contracts in order
to hedge against foreign currency risk. These contracts are marked-to-market
daily by recognizing the difference between the contract exchange rate and the
current market rate as an unrealized gain or loss. Realized gains or losses are
recognized when contracts are settled.
2. Management Agreement and Other Transactions
SSB Citi Fund Management LLC ("SSBC"), 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 Global
Government Bond Portfolio pays SSBC a management fee calculated at an annual
rate of 0.75% of the daily net assets of the portfolio. 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 six months ended April 30, 2000, SSBC waived a portion
of its management fee for the Pacific Portfolio totaling $51,956.
Citi Fiduciary Trust Company ("CFTC"), formerly known as Smith Barney Private
Trust Company, another subsidiary of Citigroup, acts as the Fund's transfer
agent and PFPC Global Fund Services ("PFPC") acts as the sub-transfer agent.
CFTC receives account fees and asset-based fees that vary according to the
account size and type of account. PFPC is responsible for shareholder
recordkeeping and financial processing for all shareholder accounts and is paid
by CFTC. During the six months ended April 30, 2000, the Portfolios paid
transfer agent fees of $87,915 to CFTC.
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 April 30, 2000, SSB received brokerage commissions of
$9,605.
For the Global Government Bond Portfolio, there are maximum initial sales
charges of 4.50% and 1.00% for Class A and L shares, respectively. 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 European, Emerging Markets and Pacific Portfolios,
there are maximum initial sales charges of 5.00% and 1.00% for Class A and L
shares, respectively. There is a CDSC of 5.00% on Class B shares, which applies
if redemption occurs within one year from initial purchase. Thereafter this CDSC
declines by 1.00% per year until no CDSC is incurred. For each Portfolio, 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 six months ended April 30, 2000, CDSC's received by CFBDS were
approximately:
Portfolio Class B Class L
================================================================================
Global Government Bond $ 3,000 --
--------------------------------------------------------------------------------
European 34,000 $1,000
--------------------------------------------------------------------------------
Emerging Markets 9,000 --
--------------------------------------------------------------------------------
Pacific 8,000 4,000
================================================================================
For the six months ended April 30, 2000, sales charges received by SSB and CFBDS
were approximately:
Portfolio Class A Class L
================================================================================
Global Government Bond -- --
--------------------------------------------------------------------------------
European $78,000 $29,000
--------------------------------------------------------------------------------
Emerging Markets 7,000 7,000
--------------------------------------------------------------------------------
Pacific 44,000 12,000
================================================================================
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 39
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
--------------------------------------------------------------------------------
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 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 European, Emerging Markets and Pacific
Portfolios 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 six months ended April 30, 2000, total
Distribution Plan fees incurred by the Portfolios were:
Portfolio Class A Class B Class L
================================================================================
Global Government Bond $80,072 $ 30,634 $ 6,065
--------------------------------------------------------------------------------
European 54,073 218,929 74,550
--------------------------------------------------------------------------------
Emerging Markets 8,306 36,052 12,376
--------------------------------------------------------------------------------
Pacific 6,263 25,481 20,806
================================================================================
All officers and one Director of the Fund are employees of SSB.
3. Investments
During the six months ended April 30, 2000, 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 Portfolio $57,878,870 $75,709,451
--------------------------------------------------------------------------------
European Portfolio 17,574,004 18,847,692
--------------------------------------------------------------------------------
Emerging Markets Portfolio 1,001,288 1,748,838
--------------------------------------------------------------------------------
Pacific Portfolio 5,687,606 4,460,048
================================================================================
At April 30, 2000, 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 Portfolio $ 619,569 $(8,589,288) $ (7,969,719)
--------------------------------------------------------------------------------
European Portfolio 42,904,389 (7,267,362) 35,637,027
--------------------------------------------------------------------------------
Emerging Markets Portfolio 5,803,798 (635,885) 5,167,913
--------------------------------------------------------------------------------
Pacific Portfolio 4,357,471 (1,076,707) 3,280,764
================================================================================
--------------------------------------------------------------------------------
40 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
--------------------------------------------------------------------------------
4. Forward Foreign Currency Contracts
At April 30, 2000, the Portfolios had open forward foreign currency contracts as
described below. The Portfolios bear the market risk that arises from changes in
foreign currency exchange rates. The unrealized gain (loss) on the contracts
reflected in the accompanying financial statements were as follows:
<TABLE>
<CAPTION>
Local Market Settlement Unrealized
Foreign Currency Currency Value Date Gain (Loss)
======================================================================================================================
<S> <C> <C> <C> <C>
Global Government Bond Portfolio
To Sell:
British Pound 11,250,000 $17,753,738 5/26/00 $ 147,429
Canadian Dollar 4,820,000 3,268,772 5/26/00 13,527
Danish Krona 5,610,000 706,149 5/26/00 19,339
Euro 35,690,000 33,484,536 5/26/00 893,954
Japanese Yen 1,210,000,000 11,547,179 5/26/00 295,328
Swedish Krona 26,680,000 3,037,859 5/26/00 51,985
----------------------------------------------------------------------------------------------------------------------
1,421,562
----------------------------------------------------------------------------------------------------------------------
To Buy:
Euro 3,000,000 2,764,320 5/26/00 (24,848)
----------------------------------------------------------------------------------------------------------------------
Net Unrealized Gain on Forward
Foreign Currency Contracts $1,396,714
======================================================================================================================
Emerging Markets Portfolio
To Sell:
South African Rand 63,858 $9,419 4/28/00 $194
======================================================================================================================
</TABLE>
5. Option Contracts
Premiums paid when put or call options are purchased by the Portfolios represent
investments, which are marked-to-market daily. When a purchased option expires,
the Portfolio will realize a loss in the amount of the premium paid. When the
Portfolio enters into a closing sales transaction, the Portfolio will realize a
gain or loss depending on whether the proceeds from the closing sales
transaction are greater or less than the premium paid for the option. When the
Portfolio exercises a put option, it will realize a gain or loss from the sale
of the underlying security and the proceeds from such sale will be decreased by
the amount of the premium originally paid. When the Portfolio exercises a call
option, the cost of the security that the Portfolio purchases upon exercise will
be increased by the premium originally paid.
At April 30, 2000, the Portfolios had no open purchased call or put options.
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 41
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
--------------------------------------------------------------------------------
When a Portfolio writes a call or put option, an amount equal to the premium
received by the Portfolio is recorded as a liability, the value of which is
marked-to-market daily. When a written option expires, the Portfolio realizes a
gain equal to the amount of the premium received. When the Portfolio enters into
a closing purchase transaction, the Portfolio realizes a gain or loss depending
upon whether the cost of the closing transaction is greater or less than the
premium originally received without regard to any unrealized gain or loss on the
underlying security, and the liability related to such option is eliminated.
When a written call option is exercised, the cost of the security sold will be
decreased by the premium originally received. When a written put option is
exercised, the amount of the premium originally received will reduce the cost of
the security that the Portfolio purchased upon exercise. When written index
options are exercised, settlement is made in cash.
The risk associated with purchasing options is limited to the premium originally
paid. The Portfolio enters into options for hedging purposes. The risk in
writing a call option is that the Portfolio gives up the opportunity to
participate in any increase in the price of the underlying security beyond the
exercise price. The risk in writing a put option is that the Portfolio is
exposed to the risk of a loss if the market price of the underlying security
declines.
During the six months ended April 30, 2000, the Portfolios did not write any
call or put options.
6. Futures Contracts
Initial margin deposits made upon entering into futures contracts are recognized
as assets. Securities equal to the initial margin amount are segregated by the
custodian in the name of the broker. Additional securities are also segregated
up to the current market value of the futures contract. During the period the
futures contract is open, changes in the value of the contract are recognized as
unrealized gains or losses by "marking-to-market" on a daily basis to reflect
the market value of the contract at the end of each day's trading. Variation
margin payments are received or made and recognized as assets due from or
liabilities due to broker, depending upon whether unrealized gains or losses are
incurred. When the contract is closed, the Portfolio records a realized gain or
loss equal to the difference between the proceeds from (or cost of) the closing
transactions and the Portfolio's basis in the contract. The Portfolio enters
into such contracts to hedge a portion of its portfolio. The Portfolio bears the
market risk that arises from changes in the value of the financial instruments
and securities indices (futures contracts).
At April 30, 2000, the Portfolios had no open futures contracts.
7. Concentration of Risk
The Portfolios' investments in foreign securities may involve risks not present
in domestic investments. Since securities may be denominated in a foreign
currency 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
April 30, 2000, 68.9% 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.
--------------------------------------------------------------------------------
42 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
--------------------------------------------------------------------------------
8. Capital Loss Carryforwards
At October 31, 1999, Global Government Bond, Emerging Markets and Pacific
Portfolios had, for Federal income tax purposes, approximately $2,148,000,
$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>
<CAPTION>
Portfolio 10/31/03 10/31/04 10/31/05 10/31/06 10/31/07 Total
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Global Government Bond -- -- -- -- $2,148,000 $ 2,148,000
-----------------------------------------------------------------------------------------------------------------------------------
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 April 30, 2000, the Portfolios listed below had loaned common stocks and
bonds which were collateralized by cash. In addition, the European Portfolio had
loaned common stocks collateralized by securities. The market value for the
securities on loan for each portfolio was as follows:
<TABLE>
<CAPTION>
Portfolio Value
===================================================================================================================================
<S> <C>
Global Government Bond $ 7,967,052
-----------------------------------------------------------------------------------------------------------------------------------
European 12,664,103
-----------------------------------------------------------------------------------------------------------------------------------
Emerging Markets 1,013,399
-----------------------------------------------------------------------------------------------------------------------------------
Pacific 1,022,718
===================================================================================================================================
</TABLE>
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 43
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
--------------------------------------------------------------------------------
At April 30, 2000, the Portfolios held the following collateral for loaned
securities:
<TABLE>
<CAPTION>
Global Government Portfolio
Security Descriptions Value
----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Time Deposits:
Abbey National, London, 6.080% due 5/2/00 $ 418,033
ABN Amro Bank, London, 6.080% due 5/2/00 418,033
Allied Irish, London, 6.080% due 5/2/00 418,033
Banco Bilbao Viz, Aregentaria, Milan, 6.080% due 5/2/00 418,033
Banco Santander, London, 6.060% due 5/1/00 418,033
Bayerische Landesbank, London, 6.080% due 5/2/00 418,033
Bayerische Hypo-Und Vereinsbk, 6.060% due 5/1/00 418,033
Caisse de Depots et Consign, Paris, 6.060% due 5/1/00 418,033
Commerzbank AG, Frankfurt, 6.080% due 5/2/00 418,033
Credit Commerciale, London, 6.120% due 5/2/00 418,033
Credit Communal de Belgique, 6.060% due 5/1/00 418,033
Dresdner Bank, 6.080% due 5/1/00 418,033
Fortis Bank, London, 6.080% due 5/2/00 418,034
Halifax PLC, 6.080% due 5/2/00 418,034
National Bank of Australia, London, 6.080% due 5/2/00 418,034
Rabobank, London, 6.080% due 5/2/00 418,034
Societe Generale, 6.090% due 5/2/00 418,034
Toronto Dominion, London, 6.080% due 5/2/00 418,034
Unibank G.C., 6.060% due 5/1/00 216,822
Union Bank of Switzerland, G.C., 6.060% due 5/1/00 124,545
Westdeutsche Landesbank, London, 6.060% due 5/1/00 418,033
----------------------------------------------------------------------------------------------------------------------------------
Total $ 8,284,000
==================================================================================================================================
<CAPTION>
European Portfolio
Security Descriptions Value
==================================================================================================================================
<S> <C>
Time Deposits:
Abbey National, London, 6.080% due 5/2/00 $ 604,346
ABN Amro Bank, London, 6.080% due 5/2/00 604,346
Allied Irish, London, 6.080% due 5/2/00 604,346
Banco Bilbao Viz, Aregentaria, Milan, 6.080% due 5/2/00 604,346
Banco Santander, London, 6.060% due 5/1/00 604,346
Bayerische Landesbank, London, 6.080% due 5/2/00 604,346
Bayerische Hypo-Und Vereinsbk, 6.060% due 5/1/00 604,346
Caisse de Depots et Consign, Paris, 6.060% due 5/1/00 604,346
Commerzbank AG, Frankfurt, 6.080% due 5/2/00 604,346
Credit Commerciale, London, 6.120% due 5/2/00 604,346
Credit Communal de Belgique, 6.060% due 5/1/00 604,346
Dresdner Bank, 6.080% due 5/1/00 604,346
Fortis Bank, London, 6.080% due 5/2/00 604,345
Halifax PLC, 6.080% due 5/2/00 604,345
National Bank of Australia, London, 6.080% due 5/2/00 604,345
Rabobank, London, 6.080% due 5/2/00 604,345
Societe Generale, 6.090% due 5/2/00 604,345
Toronto Dominion, London, 6.080% due 5/2/00 604,345
Unibank G.C., 6.060% due 5/1/00 313,457
Union Bank of Switzerland, G.C., 6.060% due 5/1/00 180,053
Westdeutsche Landesbank, London, 6.060% due 5/1/00 604,346
----------------------------------------------------------------------------------------------------------------------------------
Total $11,976,078
==================================================================================================================================
</TABLE>
--------------------------------------------------------------------------------
44 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Emerging Markets Portfolio
Security Descriptions Value
==================================================================================================================================
<S> <C>
Time Deposits:
Abbey National, London, 6.080% due 5/2/00 $ 50,414
ABN Amro Bank, London, 6.080% due 5/2/00 50,414
Allied Irish, London, 6.080% due 5/2/00 50,414
Banco Bilbao Viz, Aregentaria, Milan, 6.080% due 5/2/00 50,414
Banco Santander, London, 6.060% due 5/1/00 50,414
Bayerische Landesbank, London, 6.080% due 5/2/00 50,414
Bayerische Hypo-Und Vereinsbk, 6.060% due 5/1/00 50,414
Caisse de Depots et Consign, Paris, 6.060% due 5/1/00 50,414
Commerzbank AG, Frankfurt, 6.080% due 5/2/00 50,414
Credit Commerciale, London, 6.120% due 5/2/00 50,414
Credit Communal de Belgique, 6.060% due 5/1/00 50,414
Dresdner Bank, 6.080% due 5/1/00 50,414
Fortis Bank, London, 6.080% due 5/2/00 50,414
Halifax PLC, 6.080% due 5/2/00 50,414
National Bank of Australia, London, 6.080% due 5/2/00 50,413
Rabobank, London, 6.080% due 5/2/00 50,413
Societe Generale, 6.090% due 5/2/00 50,413
Toronto Dominion, London, 6.080% due 5/2/00 50,413
Unibank G.C., 6.060% due 5/1/00 26,148
Union Bank of Switzerland, G.C., 6.060% due 5/1/00 15,020
Westdeutsche Landesbank, London, 6.060% due 5/1/00 50,414
----------------------------------------------------------------------------------------------------------------------------------
Total $ 999,030
==================================================================================================================================
<CAPTION>
Pacific Portfolio
Security Descriptions Value
==================================================================================================================================
<S> <C>
Time Deposits:
Abbey National, London, 6.080% due 5/2/00 $ 54,450
ABN Amro Bank, London, 6.080% due 5/2/00 54,450
Allied Irish, London, 6.080% due 5/2/00 54,450
Banco Bilbao Viz, Aregentaria, Milan, 6.080% due 5/2/00 54,450
Banco Santander, London, 6.060% due 5/1/00 54,450
Bayerische Landesbank, London, 6.080% due 5/2/00 54,450
Bayerische Hypo-Und Vereinsbk, 6.060% due 5/1/00 54,450
Caisse de Depots et Consign, Paris, 6.060% due 5/1/00 54,450
Commerzbank AG, Frankfurt, 6.080% due 5/2/00 54,450
Credit Commerciale, London, 6.120% due 5/2/00 54,450
Credit Communal de Belgique, 6.060% due 5/1/00 54,450
Dresdner Bank, 6.080% due 5/1/00 54,450
Fortis Bank, London, 6.080% due 5/2/00 54,450
Halifax PLC, 6.080% due 5/2/00 54,450
National Bank of Australia, London, 6.080% due 5/2/00 54,450
Rabobank, London, 6.080% due 5/2/00 54,450
Societe Generale, 6.090% due 5/2/00 54,451
Toronto Dominion, London, 6.080% due 5/2/00 54,451
Unibank G.C., 6.060% due 5/1/00 28,241
Union Bank of Switzerland, G.C., 6.060% due 5/1/00 16,222
Westdeutsche Landesbank, London, 6.060% due 5/1/00 54,450
----------------------------------------------------------------------------------------------------------------------------------
Total $1,079,015
==================================================================================================================================
</TABLE>
In addition to the above noted cash collateral, the European Portfolio held
securities collateral with a market value of $516,834 as of April 30, 2000.
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 45
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
--------------------------------------------------------------------------------
Interest income earned by the Portfolios from securities loaned for the six
months ended April 30, 2000 was as follows:
<TABLE>
<CAPTION>
Global
Government Emerging
Bond European Markets Pacific
Portfolio Portfolio Portfolio Portfolio
===================================================================================================================================
<S> <C> <C> <C> <C>
Income $334,212 $22,206 $3,009 $3,418
===================================================================================================================================
</TABLE>
10. Capital Shares
At April 30, 2000, the Fund had one billion shares of capital stock authorized
with a par value of $0.001 per share. The Portfolios have the ability to issue
multiple classes of shares. Each share of a class represents an identical legal
interest in a Portfolio and has the same rights, except that each class bears
certain expenses specifically related to the distribution of its shares.
At April 30, 2000, total paid-in capital amounted to the following for each
Portfolio:
<TABLE>
<CAPTION>
Portfolio Class A Class B Class L Class Y
===================================================================================================================================
<S> <C> <C> <C> <C>
Global Government Bond Portfolio $63,229,129 $ 6,658,170 $ 2,136,320 $52,223,241
-----------------------------------------------------------------------------------------------------------------------------------
European Portfolio 33,626,317 20,302,492 14,293,120 --
-----------------------------------------------------------------------------------------------------------------------------------
Emerging Markets Portfolio 7,309,930 9,836,021 3,272,928 1,344,793
-----------------------------------------------------------------------------------------------------------------------------------
Pacific Portfolio 3,494,617 4,176,911 3,160,026 --
===================================================================================================================================
</TABLE>
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
April 30, 2000 October 31, 1999
------------------------------------- ------------------------------------
Shares Amount Shares Amount
===================================================================================================================================
<S> <C> <C> <C> <C>
Global Government Portfolio
Class A
Shares sold 120,659 $ 1,311,969 379,601 $ 4,408,169
Shares issued on reinvestment 208,598 2,247,968 185,035 2,147,392
Shares reacquired (785,250) (8,575,050) (1,913,231) (22,315,455)
-----------------------------------------------------------------------------------------------------------------------------------
Net Decrease (455,993) $ (5,015,113) (1,348,595) $ (15,759,894)
===================================================================================================================================
Class B
Shares sold 1,887 $ 20,181 56,587 $ 669,157
Shares issued on reinvestment 31,913 343,173 31,703 367,804
Shares reacquired (204,899) (2,231,043) (465,281) (5,410,347)
-----------------------------------------------------------------------------------------------------------------------------------
Net Decrease (171,099) $ (1,867,689) (376,991) $ (4,373,386)
===================================================================================================================================
Class L
Shares sold 14,831 $ 164,260 13,517 $ 157,346
Shares issued on reinvestment 6,878 79,025 5,766 66,804
Shares reacquired (19,038) (210,501) (65,706) (764,464)
-----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 2,671 $ 32,784 (46,423) $ (540,314)
===================================================================================================================================
Class Y
Shares sold 226,853 $ 2,455,806 1,151,897 $ 13,322,319
Shares issued on reinvestment 13,794 158,317 4,892 54,510
Shares reacquired (63,695) (686,959) -- --
-----------------------------------------------------------------------------------------------------------------------------------
Net Increase 176,952 $ 1,927,164 1,156,789 $ 13,376,829
===================================================================================================================================
</TABLE>
--------------------------------------------------------------------------------
46 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
April 30, 2000 October 31, 1999
------------------------------------ ------------------------------------
Shares Amount Shares Amount
===================================================================================================================================
<S> <C> <C> <C> <C>
European Portfolio
Class A
Shares sold 7,996,975 $ 214,720,561 14,508,592 $ 302,669,958
Shares issued on reinvestment 61,729 1,577,803 21,291 439,883
Shares reacquired (7,477,444) (203,416,086) (14,533,239) (304,802,469)
-----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 581,260 $ 12,882,278 (3,356) $ 1,692,628
===================================================================================================================================
Class B
Shares sold 289,444 $ 7,676,978 953,658 $ 19,317,878
Shares issued on reinvestment 71,251 1,756,339 32,746 658,501
Shares reacquired (382,467) (9,869,298) (1,380,533) (28,069,881)
-----------------------------------------------------------------------------------------------------------------------------------
Net Decrease (21,772) $ (435,981) (394,129) $ (8,093,502)
===================================================================================================================================
Class L
Shares sold 167,892 $ 4,387,423 887,776 $ 17,896,341
Shares issued on reinvestment 24,080 592,608 8,919 179,013
Shares reacquired (46,397) (1,190,001) (933,531) (18,964,027)
-----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 145,575 $ 3,790,030 (36,836) $ (888,673)
===================================================================================================================================
Emerging Markets Portfolio
Class A
Shares sold 711,069 $ 8,171,131 1,636,720 $ 13,139,320
Shares reacquired (737,447) (8,634,826) (1,899,726) (15,412,364)
-----------------------------------------------------------------------------------------------------------------------------------
Net Decrease (26,378) $ (463,695) (263,006) $ (2,273,044)
===================================================================================================================================
Class B
Shares sold 418,921 $ 4,747,585 315,062 $ 2,527,606
Shares reacquired (446,018) (5,017,654) (549,267) (4,314,145)
-----------------------------------------------------------------------------------------------------------------------------------
Net Decrease (27,097) $ (270,069) (234,205) $ (1,786,539)
===================================================================================================================================
Class L
Shares sold 66,595 $ 785,603 156,610 $ 1,264,649
Shares reacquired (43,753) (494,053) (179,799) (1,435,390)
-----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 22,842 $ 291,550 (23,189) $ (170,741)
===================================================================================================================================
Class Y
Shares sold 9,025 $ 98,455 54,732 $ 422,262
-----------------------------------------------------------------------------------------------------------------------------------
Net Increase 9,025 $ 98,455 54,732 $ 422,262
===================================================================================================================================
Pacific Portfolio
Class A
Shares sold 1,801,114 $ 23,289,620 3,886,615 $ 32,085,747
Shares issued on reinvestment 4,540 60,387 -- --
Shares reacquired (1,898,201) (24,576,984) (3,736,734) (30,751,044)
-----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (92,547) $ (1,226,977) 149,881 $ 1,334,703
===================================================================================================================================
Class B
Shares sold 281,399 $ 3,570,953 807,310 $ 7,262,774
Shares issued on reinvestment 780 10,022 -- --
Shares reacquired (208,424) (2,581,489) (817,705) (7,303,299)
-----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 73,755 $ 999,486 (10,395) $ (40,525)
===================================================================================================================================
Class L
Shares sold 502,879 $ 6,109,431 1,353,683 $ 10,668,868
Shares issued on reinvestment 1,580 20,166 -- --
Shares reacquired (565,402) (6,977,260) (1,117,046) (8,560,753)
-----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (60,943) $ (847,663) 236,637 $ 2,108,115
===================================================================================================================================
</TABLE>
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 47
<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 2000(1)(2) 1999(2) 1998(2) 1997(2) 1996(2) 1995
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $11.18 $11.88 $12.22 $12.55 $12.30 $11.68
------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.28 0.51 0.54 0.59 0.70 0.92*
Net realized and unrealized gain (loss) (0.01) (0.69) 0.39 0.38 0.42 0.48
------------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.27 (0.18) 0.93 0.97 1.12 1.40
------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income(3) (0.62) (0.52) (0.22) (1.22) (0.87) (0.78)
Net realized gains -- -- (0.60) (0.08) -- --
Capital -- -- (0.45) -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.62) (0.52) (1.27) (1.30) (0.87) (0.78)
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.83 $11.18 $11.88 $12.22 $12.55 $12.30
------------------------------------------------------------------------------------------------------------------------------------
Total Return 2.52%++ (1.62)% 8.08% 8.21% 9.41% 12.40%
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $61,467 $68,532 $88,836 $94,957 $106,536 $123,917
------------------------------------------------------------------------------------------------------------------------------------
Ratio to Average Net Assets:
Expenses(4) 1.22%+ 1.26% 1.22% 1.26% 1.26% 1.38%
Net investment income 5.21+ 4.39 4.58 4.82 5.69 7.44
------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 52% 164% 287% 367% 133% 195%
====================================================================================================================================
</TABLE>
(1) For the six months ended April 30, 2000 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(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 A
would have been 1.24% and 1.32% 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.
--------------------------------------------------------------------------------
48 2000 Semi-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 2000(1)(2) 1999(2) 1998(2) 1997(2) 1996(2) 1995(3)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $11.16 $11.87 $12.22 $12.50 $12.26 $11.57
------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.25 0.45 0.47 0.52 0.63 0.78*
Net realized and unrealized gain (loss) (0.01) (0.69) 0.39 0.38 0.42 0.57
------------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.24 (0.24) 0.86 0.90 1.05 1.35
------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income(4) (0.59) (0.47) (0.19) (1.10) (0.81) (0.66)
Net realized gains -- -- (0.60) (0.08) -- --
Capital -- -- (0.42) -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.59) (0.47) (1.21) (1.18) (0.81) (0.66)
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.81 $11.16 $11.87 $12.22 $12.50 $12.26
------------------------------------------------------------------------------------------------------------------------------------
Total Return 2.27%++ (2.11)% 7.46% 7.62% 8.83% 11.97%++
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $7,337 $9,485 $14,569 $19,690 $25,970 $35,159
------------------------------------------------------------------------------------------------------------------------------------
Ratio to Average Net Assets:
Expenses(5) 1.80%+ 1.81% 1.77% 1.80% 1.81% 1.92%+
Net investment income 4.61+ 3.86 3.93 4.24 5.15 6.65+
------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 52% 164% 287% 367% 133% 195%
====================================================================================================================================
</TABLE>
(1) For the six months ended April 30, 2000 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) For the period from November 18, 1994 (inception date) to October 31, 1995.
(4) Distributions from net investment income include short-term capital gains,
if any, for Federal income tax purposes.
(5) During the years 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 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. 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 L Shares
----------------------------------------------------------------------------------
Global Government Bond Portfolio 2000(1)(2) 1999(2) 1998(2)(3) 1997(2) 1996(2) 1995(4)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $11.15 $11.86 $12.19 $12.47 $12.23 $11.68
------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.26 0.46 0.48 0.53 0.64 0.85*
Net realized and unrealized gain (loss) (0.01) (0.70) 0.40 0.38 0.41 0.42
------------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.25 (0.24) 0.88 0.91 1.05 1.27
------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income(5) (0.59) (0.47) (0.19) (1.11) (0.81) (0.72)
Net realized gains -- -- (0.60) (0.08) -- --
Capital -- -- (0.42) -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.59) (0.47) (1.21) (1.19) (0.81) (0.72)
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.81 $11.15 $11.86 $12.19 $12.47 $12.23
------------------------------------------------------------------------------------------------------------------------------------
Total Return 2.38%++ (2.11)% 7.67% 7.73% 8.90% 11.25%
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $1,706 $1,731 $2,391 $3,257 $3,986 $4,141
------------------------------------------------------------------------------------------------------------------------------------
Ratio to Average Net Assets:
Expenses(6) 1.68%+ 1.72% 1.68% 1.69% 1.74% 1.84%
Net investment income 4.78+ 3.98 4.01 4.33 5.22 7.15
------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 52% 164% 287% 367% 133% 195%
====================================================================================================================================
</TABLE>
(1) For the six months ended April 30, 2000 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) On June 12, 1998, Class C shares were renamed Class L shares.
(4) On November 7, 1994, Class B shares were renamed Class C shares.
(5) Distributions from net investment income include short-term capital gains,
if any, for Federal income tax purposes.
(6) During the years ended October 31, 1996 and October 31, 1995, the Portfolio
had earned credits from the custodian which reduced service fees incurred.
If the credits are taken into consideration, the expense ratios for Class L
would have been 1.71% and 1.78%, 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.
--------------------------------------------------------------------------------
50 2000 Semi-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 2000(1)(2) 1999(2) 1998(2) 1997(2) 1996(2) 1995(3)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $11.03 $11.70 $12.03 $12.39 $12.14 $11.68
------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.30 0.54 0.59 0.63 0.73 0.78*
Net realized and unrealized gain (loss) (0.01) (0.68) 0.37 0.37 0.42 0.49
------------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.29 (0.14) 0.96 1.00 1.15 1.27
------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income(4) (0.62) (0.53) (0.23) (1.28) (0.90) (0.81)
Net realized gains -- -- (0.60) (0.08) -- --
Capital -- -- (0.46) -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.62) (0.53) (1.29) (1.36) (0.90) (0.81)
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.70 $11.03 $11.70 $12.03 $12.39 $12.14
------------------------------------------------------------------------------------------------------------------------------------
Total Return 2.77%++ (1.28)% 8.50% 8.61% 9.82% 11.27%
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $48,162 $47,708 $37,057 $28,097 $15,105 $62
------------------------------------------------------------------------------------------------------------------------------------
Ratio to Average Net Assets:
Expenses(5) 0.84%+ 0.91% 0.83% 0.89% 0.84% 0.98%
Net investment income 5.62+ 4.69 5.06 5.19 6.12 6.38
------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 52% 164% 287% 367% 133% 195%
====================================================================================================================================
</TABLE>
(1) For the six months ended April 30, 2000 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) On November 7, 1994, Class C shares were renamed Class Y 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 A
would have been 0.81% and 0.93% 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. 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 A Shares
-------------------------------------------------------------------------------------
European Portfolio 2000(1)(2) 1999(2) 1998(2) 1997(2) 1996 1995
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $22.58 $19.44 $18.23 $17.25 $14.67 $12.88
------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss)(3) (0.08) (0.00)* 0.06 (0.08) (0.08) 0.07
Net realized and unrealized gain 4.99 3.47 1.54 2.22 2.79 1.72
------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 4.91 3.47 1.60 2.14 2.71 1.79
------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- -- -- (0.09) --
Net realized gains (1.13) (0.33) (0.39) (1.16) (0.04) --
------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.13) (0.33) (0.39) (1.16) (0.13) --
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $26.36 $22.58 $19.44 $18.23 $17.25 $14.67
------------------------------------------------------------------------------------------------------------------------------------
Total Return 21.91%++ 18.02% 9.10% 12.88% 18.65% 13.90%
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $52,615 $31,946 $27,563 $14,118 $10,528 $11,870
------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(3) 1.40%+ 1.51% 1.56% 1.80% 1.85% 2.06%
Net investment income (loss) (0.58)+ (0.00)** 0.30 (0.42) (0.49) 0.51
------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 18% 17% 27% 28% 39% 34%
====================================================================================================================================
</TABLE>
(1) For the six months ended April 30, 2000 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) 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 Ratio
Per Share Decreases to Without Fee Waiver
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%.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
--------------------------------------------------------------------------------
52 2000 Semi-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 2000(1)(2) 1999(2) 1998(2) 1997(2) 1996 1995(3)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $21.83 $18.95 $17.92 $17.09 $14.56 $12.62
------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss)(4) (0.19) (0.16) (0.11) (0.20) (0.20) 0.02
Net realized and unrealized gain 4.83 3.37 1.53 2.19 2.77 1.92
------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 4.64 3.21 1.42 1.99 2.57 1.94
------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net realized gains (1.13) (0.33) (0.39) (1.16) (0.04) --
------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.13) (0.33) (0.39) (1.16) (0.04) --
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $25.34 $21.83 $18.95 $17.92 $17.09 $14.56
------------------------------------------------------------------------------------------------------------------------------------
Total Return 21.41%++ 17.10% 8.24% 12.08% 17.72% 15.37%++
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $43,068 $37,575 $40,090 $29,221 $26,384 $24,825
------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(4) 2.22%+ 2.28% 2.32% 2.52% 2.59% 3.31%+
Net investment income (loss) (1.47)+ (0.81) (0.56) (1.13) (1.22) 0.26+
------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 18% 17% 27% 28% 39% 34%
====================================================================================================================================
</TABLE>
(1) For the six months ended April 30, 2000 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) For the period from November 7, 1994 (inception date) to October 31,
1995.
(4) The Manager waived all or part of its fees for the year ended October 31,
1995. If such fees were not waived, the per share effect on net investment
income and the expense ratio would have been as follows:
<TABLE>
<CAPTION>
Expense Ratio
Per Share Decrease to Without Fee Waivers
Net Investment Income and Custody Credits
--------------------- -------------------
1995 1995
---- ----
<S> <C> <C>
Class B $0.00* 3.35%+
</TABLE>
In addition, during the year ended October 31, 1996 and the period ended
October 31, 1995, the Portfolio had earned credits from the custodian which
reduced service fees incurred. If the credits are taken into consideration,
the expense ratios for Class B would have been 2.56% 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. 53
<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
-----------------------------------------------------------------------------------------
European Portfolio 2000(1)(2) 1999(2) 1998(2)(3) 1997(2) 1996 1995(4)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $21.79 $18.91 $17.86 $17.04 $14.51 $12.83
------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss(5) (0.20) (0.15) (0.07) (0.21) (0.14) (0.08)
Net realized and unrealized gain 4.84 3.36 1.51 2.19 2.71 1.76
------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 4.64 3.21 1.44 1.98 2.57 1.68
------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net realized gains (1.13) (0.33) (0.39) (1.16) (0.04) --
------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.13) (0.33) (0.39) (1.16) (0.04) --
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $25.30 $21.79 $18.91 $17.86 $17.04 $14.51
------------------------------------------------------------------------------------------------------------------------------------
Total Return 21.45%++ 17.14% 8.38% 12.06% 17.78% 13.09%
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $17,146 $11,597 $10,762 $3,110 $2,011 $1,311
------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(5) 2.21%+ 2.24% 2.18% 2.54% 2.52% 2.51%
Net investment loss (1.38)+ (0.74) (0.37) (1.18) (1.17) (0.64)
------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 18% 17% 27% 28% 39% 34%
====================================================================================================================================
</TABLE>
(1) For the six months ended April 30, 2000 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) On June 12, 1998, Class C shares were renamed Class L shares.
(4) On November 7, 1994, the former Class B shares were renamed Class C shares.
(5) 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 Decreases 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.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
--------------------------------------------------------------------------------
54 2000 Semi-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
------------------------------------------------------------------------------------
Emerging Markets Portfolio 2000(1)(2) 1999(2) 1998(2) 1997(2) 1996 1995(3)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $9.03 $7.03 $12.45 $12.08 $11.06 $12.00
------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss(4) (0.07) (0.10) (0.06) (0.05) (0.02) (0.05)#
Net realized and unrealized gain (loss) 1.79 2.10 (5.36) 0.42 1.04 (0.89)
------------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 1.72 2.00 (5.42) 0.37 1.02 (0.94)
------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Total Distributions -- -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.75 $9.03 $7.03 $12.45 $12.08 $11.06
------------------------------------------------------------------------------------------------------------------------------------
Total Return 19.05%++ 28.45% (43.53)% 3.06% 9.22% (7.83)%++
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $5,634 $4,969 $5,723 $14,046 $10,691 $7,069
------------------------------------------------------------------------------------------------------------------------------------
Ratio to Average Net Assets:
Expenses(4) 2.30%+ 2.87% 2.46% 2.11% 2.25% 1.45%+
Net investment loss (1.15)+ (1.25) (0.63) (0.34) (0.19) (0.63)+
------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 6% 153% 97% 99% 78% 17%
====================================================================================================================================
</TABLE>
(1) For the six months ended April 30, 2000 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(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 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.
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 55
<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 2000(1)(2) 1999(2) 1998(2) 1997(2) 1996 1995(3)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $8.72 $6.85 $12.21 $11.95 $11.02 $12.00
------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss(4) (0.11) (0.17) (0.14) (0.14) (0.10) (0.09)#
Net realized and unrealized gain (loss) 1.73 2.04 (5.22) 0.40 1.03 (0.89)
------------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 1.62 1.87 (5.36) 0.26 0.93 (0.98)
------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Total Distributions -- -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.34 $8.72 $6.85 $12.21 $11.95 $11.02
------------------------------------------------------------------------------------------------------------------------------------
Total Return 18.58%++ 27.30% (43.90)% 2.18% 8.44% (8.17)%++
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $6,353 $5,591 $5,994 $18,107 $13,062 $7,630
------------------------------------------------------------------------------------------------------------------------------------
Ratio to Average Net Assets:
Expenses(4) 3.06%+ 3.63% 3.24% 2.88% 3.06% 2.00%+
Net investment loss (1.91)+ (2.11) (1.42) (1.00) (0.94) (1.17)+
------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 6% 153% 97% 99% 78% 17%
====================================================================================================================================
</TABLE>
(1) For the six months ended April 30, 2000 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(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 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.
--------------------------------------------------------------------------------
56 2000 Semi-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
-----------------------------------------------------------------------------------
Emerging Markets Portfolio 2000(1)(2) 1999(2) 1998(2)(3) 1997(2) 1996 1995(4)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $8.71 $6.84 $12.22 $11.95 $11.02 $12.00
------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss(5) (0.11) (0.16) (0.15) (0.15) (0.10) (0.08)#
Net realized and unrealized gain (loss) 1.74 2.03 (5.23) 0.42 1.03 (0.90)
------------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 1.63 1.87 (5.38) 0.27 0.93 (0.98)
------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Total Distributions -- -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.34 $8.71 $6.84 $12.22 $11.95 $11.02
------------------------------------------------------------------------------------------------------------------------------------
Total Return 18.71%++ 27.34% (44.03)% 2.26% 8.44% (8.17)%++
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $2,327 $1,762 $1,543 $4,332 $2,448 $1,604
------------------------------------------------------------------------------------------------------------------------------------
Ratio to Average Net Assets:
Expenses(5) 3.06%+ 3.62% 3.31% 2.86% 3.02% 1.95%+
Net investment loss (1.91)+ (2.10) (1.47) (1.03) (0.92) (1.08)+
------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 6% 153% 97% 99% 78% 17%
====================================================================================================================================
</TABLE>
(1) For the six months ended April 30, 2000 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) On June 12, 1998, Class C shares were renamed Class L shares.
(4) For the period from May 12, 1995 (inception date) to October 31, 1995.
(5) 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.
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 57
<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 2000(1)(2) 1999(2) 1998(2)(3)
================================================================================
Net Asset Value, Beginning of Period $9.12 $7.07 $12.16
--------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss (0.04) (0.07) (0.01)
Net realized and unrealized gain (loss) 1.81 2.12 (5.08)
--------------------------------------------------------------------------------
Total Income (Loss) From Operations 1.77 2.05 (5.09)
--------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- --
--------------------------------------------------------------------------------
Total Distributions -- -- --
--------------------------------------------------------------------------------
Net Asset Value, End of Period $10.89 $9.12 $7.07
--------------------------------------------------------------------------------
Total Return 19.41%++ 29.00% (41.86)%++
--------------------------------------------------------------------------------
Net Assets, End of Period (000s) $1,786 $1,414 $709
--------------------------------------------------------------------------------
Ratio to Average Net Assets:
Expenses 1.91%+ 2.32% 1.89%+
Net investment loss (0.77)+ (0.80) (0.16)+
--------------------------------------------------------------------------------
Portfolio Turnover Rate 6% 153% 97%
================================================================================
(1) For the six months ended April 30, 2000 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) 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.
--------------------------------------------------------------------------------
58 2000 Semi-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
------------------------------------------------------------------------------------
Pacific Portfolio 2000(1)(2) 1999(2) 1998(2) 1997 1996(2) 1995
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $11.80 $6.73 $8.46 $10.18 $10.07 $12.92
------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss(3) (0.04) (0.05) (0.12) (0.17) (0.14) (0.01)
Net realized and unrealized gain (loss) (0.48) 5.12 (1.61) (1.55) 0.25 (2.84)
------------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.52) 5.07 (1.73) (1.72) 0.11 (2.85)
------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.15) -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.15) -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $11.13 $11.80 $6.73 $8.46 $10.18 $10.07
------------------------------------------------------------------------------------------------------------------------------------
Total Return (4.64)%++ 75.33% (20.45)% (16.90)% 1.09% (22.06)%
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $3,596 $4,905 $1,788 $4,750 $4,929 $4,409
------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(3) 1.47%+ 1.72% 3.47% 3.37% 2.64% 1.97%
Net investment loss (0.72)+ (0.64) (1.66) (2.36) (1.38) (0.71)
------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 34% 128% 135% 154% 86% 31%
====================================================================================================================================
</TABLE>
(1) For the six months ended April 30, 2000 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) The Manager waived all or part of its fees for the period ended April 30,
2000 and 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:
<TABLE>
<CAPTION>
Expense Ratios
Per Share Decreases to Without Fee Waivers
Net Investment Loss and Custody Credits
------------------------------------------------------- ---------------------------------------------------------
2000(1) 1999 1998 1997 1996 1995 2000(1) 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A $0.04 $0.13 N/A N/A N/A $0.14 2.20%+ 3.39% N/A N/A N/A 3.18%
</TABLE>
In addition, during the years ended October 31, 1996 and October 31, 1995,
the Portfolio had earned credits from the custodian which reduced service
fees incurred. If the credits are taken into consideration, the expense
ratios for Class A would have been 2.51% and 1.70%, respectively; numbers
prior to October 31, 1995 have not been restated to reflect these credits.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 59
<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 2000(1)(2) 1999(2) 1998(2) 1997 1996(2) 1995(3)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $11.31 $6.51 $8.25 $10.01 $ 9.99 $12.64
------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss(4) (0.08) (0.14) (0.22) (0.27) (0.23) (0.01)
Net realized and unrealized gain (loss) (0.48) 4.94 (1.52) (1.49) 0.25 (2.64)
------------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.56) 4.80 (1.74) (1.76) 0.02 (2.65)
------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.03) -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.03) -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.72 $11.31 $6.51 $8.25 $10.01 $9.99
Total Return (5.01)%++ 73.73% (21.09)% (17.58)% 0.20% (20.97)%++
Net Assets, End of Period (000s) $4,233 $3,633 $2,159 $3,558 $4,009 $1,031
Ratios to Average Net Assets:
Expenses(4) 2.23%+ 2.64% 4.45% 4.24% 3.65% 3.39%+
Net investment loss (1.40)+ (1.62) (3.14) (3.07) (2.26) (1.47)+
------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 34% 128% 135% 154% 86% 31%
====================================================================================================================================
</TABLE>
(1) For the six months ended April 30, 2000 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) For the period from November 7, 1994 (inception date) to October 31, 1995.
(4) The Manager waived all or part of its fees for the period ended April 30,
2000, the year ended October 31, 1999 and the 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:
<TABLE>
<CAPTION>
Expense Ratios
Per Share Decreases to Without Fee Waivers
Net Investment Loss and Custody Credits
----------------------- ----------------------
2000(1) 1999 1998 1997 1996 1995 2000(1) 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class B $0.04 $0.13 N/A N/A N/A $0.16 2.96%+ 4.31% N/A N/A N/A 4.90%+
</TABLE>
In addition, during the year ended October 31, 1996 and the period ended
October 31, 1995, the Portfolio had earned credits from the custodian which
reduced service fees incurred. If the credits are taken into consideration,
the expense ratios for Class B would have been 3.47% and 3.06%
(annualized), respectively; numbers prior to October 31, 1995 have not been
restated to reflect these credits.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
--------------------------------------------------------------------------------
60 2000 Semi-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
------------------------------------------------------------------------------------
Pacific Portfolio 2000(1)(2) 1999(2) 1998(2)(3) 1997 1996(2) 1995(4)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $11.27 $6.48 $8.21 $9.98 $9.95 $12.86
------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss(5) (0.08) (0.12) (0.20) (0.27) (0.24) (0.02)
Net realized and unrealized gain (loss) (0.48) 4.91 (1.53) (1.50) 0.27 (2.89)
------------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.56) 4.79 (1.73) (1.77) 0.03 (2.91)
------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.06) -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.06) -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.65 $11.27 $6.48 $8.21 $9.98 $9.95
------------------------------------------------------------------------------------------------------------------------------------
Total Return (5.04)%++ 73.92% (21.07)% (17.74)% 0.30% (22.63)%
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $3,486 $4,375 $982 $1,493 $1,612 $1,952
------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(5) 2.23%+ 2.38% 4.28% 4.44% 3.46% 2.69%
Net investment loss (1.46)+ (1.44) (2.90) (3.21) (2.22) (1.45)
------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 34% 128% 135% 154% 86% 31%
====================================================================================================================================
</TABLE>
(1) For the six months ended April 30, 2000 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) On June 12, 1998, Class C shares were renamed Class L shares.
(4) On November 7, 1994, the former Class B shares were renamed Class C shares.
(5) The Manager waived all or part of its fees for the period ended April 30,
2000 and 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:
<TABLE>
<CAPTION>
Expense Ratios
Per Share Decreases to Without Fee Waivers
Net Investment Loss and Custody Credits
---------------------- -------------------
2000(1) 1999 1998 1997 1996 1995 2000(1) 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class L $0.04 $0.13 N/A N/A N/A $0.13 2.96%+ 4.04% N/A N/A N/A 3.88%
</TABLE>
In addition, during the years ended October 31, 1996 and October 31, 1995,
the Portfolio had earned credits from the custodian which reduced service
fees incurred. If the credits are taken into consideration, the expense
ratios for Class L would have been 3.29% and 2.42%, 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.
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 61
<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
Denis P. Mangan
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.
Transfer Agent
Citi Fiduciary Trust Company
388 Greenwich Street
22nd Floor
New York, New York 10013
Sub-Transfer Agent
PFPC Global Fund Services
P.O. Box 9699
Providence, Rhode Island 02940-9699
This report is submitted for the general information of the shareholders of
Smith Barney World Funds, Inc. -- Global Government, European, Emerging Markets
and Pacific Portfolios, but it may also be used as sales literature when
proceeded or accompanied by the current Prospectus, which gives details about
charges, expenses, investment objectives and operating policies of the Fund. If
used as sales material after July 31, 2000, this report must be accompanied by
performance information for the most recently completed calendar quarter.
[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
FD01935 6/00
<PAGE>
[LOGO OF SMITH BARNEY MUTUAL FUNDS]
SMITH BARNEY
WORLD FUNDS, INC.
International Equity Portfolio
CLASSIC INVESTOR SERIES
SEMI-ANNUAL REPORT
APRIL 30, 2000
[LOGO OF SMITH BARNEY MUTUAL FUNDS]
NOT FDIC INSURED . NOT BANK GUARANTEED . MAY LOSE VALUE
<PAGE>
Smith Barney World Funds, Inc.--
International Equity Portfolio
--------------------------------------------------------------------------------
The Smith Barney International Equity Portfolio seeks total return on its assets
from growth of capital and income. The Portfolio invests primarily in equity
securities of foreign companies. Equity securities include exchange-traded and
over-the-counter common stocks and preferred shares, debt securities convertible
into equity securities and warrants and rights relating to equity securities.
Smith Barney International Equity Portfolio
Average Annual Total Returns
April 30, 2000
Without Sales Charges(1)
------------------------------------------------
Class A Class B Class L
================================================================================
Six Months+ 17.10% 16.64% 16.58%
--------------------------------------------------------------------------------
One-Year 31.89 30.87 30.79
--------------------------------------------------------------------------------
Five-Year 14.19 13.30 13.26
--------------------------------------------------------------------------------
Ten-Year 12.89 N/A N/A
--------------------------------------------------------------------------------
Since Inception++ 12.70 9.84 13.17
================================================================================
Without Sales Charges(2)
------------------------------------------------
Class A Class B Class L
================================================================================
Six Months+ 11.23% 11.64% 14.41%
--------------------------------------------------------------------------------
One-Year 25.29 25.87 28.50
--------------------------------------------------------------------------------
Five-Year 13.02 13.17 13.03
--------------------------------------------------------------------------------
Ten-Year 12.31 N/A N/A
--------------------------------------------------------------------------------
Since Inception++ 12.30 9.84 13.02
================================================================================
(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,
the 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.
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.
+ 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 November 22, 1991,
November 7, 1994 and January 4, 1993, respectively.
--------------------------------------------------------------------------------
FUND HIGHLIGHT
--------------------------------------------------------------------------------
We continue to 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 out those 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.
--------------------------------------------------------------------------------
NASDAQ SYMBOL
--------------------------------------------------------------------------------
Class A SBIEX
Class B SBIBX
Class L SBICX
--------------------------------------------------------------------------------
WHAT'S INSIDE
--------------------------------------------------------------------------------
A Message from the Chairman................................................ 1
Shareholder Letter......................................................... 2
Historical Performance..................................................... 5
International Equity Portfolio
at a Glance................................................................ 8
Schedule of Investments.................................................... 9
Statement of Assets and Liabilities........................................ 12
Statement of Operations.................................................... 13
Statements of Changes in Net Assets........................................ 14
Notes to Financial Statements.............................................. 15
Financial Highlights....................................................... 22
<PAGE>
--------------------------------------------------------------------------------
A Message from the Chairman
--------------------------------------------------------------------------------
[PHOTO]
HEATH B. MCLENDON
Chairman
Dear Shareholder:
The investment scene is always changing but never have we witnessed so many
factors which have greatly impacted the world's financial markets and investors'
decisions. The world's financial markets are converging and the flow of funds
into a myriad of investment choices has increased rapidly year after year,
largely contributing to the rapid growth of prosperity on a global scale.
While these remarkable events have positive implications for the creation and
growth of personal wealth, these changes do not come without risks and
challenges. For example, the seemingly limitless and in some cases justifiable
enthusiasm for new technologies and the companies that are developing them has
resulted in a historic rise in their share prices to often unsustainable
valuations.
Financial markets worldwide are currently undergoing the difficult process of
correcting the overvaluation of the share prices of many technology companies.
Meanwhile, the shares of many substantial and what are deemed to be
"progressive" companies have underperformed relative to the market to the
disappointment of many investors and investment professionals.
In our opinion, the ongoing surge in trading volumes has overwhelmed the
traditional market-making systems. As a result, few market makers (one who
maintains firm bid and offer prices for a given security) are willing to commit
the necessary capital to balance order flow. As a consequence, the market has
been characterized by a dramatic increase in volatility. As a result, daily
stock price swings are now the rule rather than the exception.
Numerous events shaping the world's financial markets require a sound
perspective by investors -- a balance between accepting the "new" rules without
forgetting the valuable lessons of the past and keeping a vigilant eye towards
the future. We here at SSB Citi Asset Management seek to offer our clients the
benefits of our professional expertise in challenging market conditions.
In volatile and unpredictable markets, we think the values of active management
will become more apparent in the days ahead. Thank you for your continued
confidence in our investment approach.
Sincerely,
/s/ Heath B. McLendon
Heath B. McLendon
Chairman
May 17, 2000
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 1
<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.
[PHOTO]
JAMES B. CONHEADY
Vice President
Dear Shareholder:
We are pleased to provide the semi-annual report for the Smith Barney
International Equity Portfolio ("Portfolio") for the six months ended April 30,
2000. In this report, we have summarized the period's prevailing economic and
market conditions and outlined our portfolio strategy. We hope you find this
report to be useful and informative.
Special Notice
On April 7, 2000, shareholders of the Smith Barney World Funds, Inc. -
International Balanced Portfolio ("Balanced Portfolio") approved a proposed
reorganization in which the Smith Barney World Funds, Inc. - International
Equity Portfolio ("International Portfolio") would acquire the assets of the
Balanced Portfolio in exchange for shares of the International Portfolio. This
merger occurred on April 14, 2000.
Performance Update
For the six months ended April 30, 2000, Class A, B and L shares of the
International Equity Portfolio ("Portfolio") returned 17.10%, 16.64%, 16.58%,
respectively, excluding the effects of sales charges. For the same period, the
Class A, B and L shares of the Portfolio returned 11.23%, 11.64% and 14.41%,
respectively, including the effects of sales charges. In comparison, the Morgan
Stanley Capital International EAFE Index ("MSCI EAFE",)1 returned 6.84% for the
same time period.
Investment Strategy 3
The Portfolio seeks total return on its assets from growth of capital and
income. We pursue a "bottom-up"2 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.
1 The Morgan Stanley Capital International Europe, Australasia and Far East
Index ("MSCI EAFE") is an unmanaged index of common stocks of companies
located in Europe, Australasia and the Far East. Please note that an
investor cannot invest directly in an Index.
2 Bottom-up investing is a search for outstanding performance of individual
stocks before considering the impact of economic trends.
3 Please note that the Portfolio's holdings are subject to change and any
discussion of holdings is as of April 30, 2000. Please refer to pages nine
through 11 for a complete list and percentage breakdown of the Portfolio's
holdings.
--------------------------------------------------------------------------------
2 2000 Semi-Annual Report to Shareholders
<PAGE>
During the past year, we have adjusted our stock positions as industry and
company trends have warranted. Our common aim has been to position the Portfolio
in the highest-quality growth stocks of the international marketplace,
consistent with prudent investing.
Market Update
The six months ended April 30, 2000 featured very volatile global stock markets.
The period began with a sharp uplift of stock markets at the end of 1999, as
investors correctly anticipated a smooth "Y2K" transition. That euphoria gave
way to a sharp downward move in the past two months of the period, especially in
technology-oriented growth stocks, as inflation and interest rate worries have
predominated.
As the period progressed, the prognosis for global economic growth improved.
From many perspectives, the outlook for the global economy is the strongest
witnessed in more than a decade. The United States economy has consistently
surpassed forecasts, while the European resurgence and Asian recovery have set
the stage for robust earnings gains in many industries. Concerns over
accelerating price increases, however, have resulted in a number of interest
rate increases around the world. Yet, there are few signs of the desired
slowdown of U.S. growth.
The new European currency, the euro, continued to fall sharply during the period
versus the U.S. dollar and Japanese yen, despite efforts to stabilize the
currency. (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.) The currency
declines reduced Portfolio returns during the period. Major capital flows out of
Europe likely account for the majority of the weakness. Meanwhile, merger and
acquisitions fireworks continue to color the European investment scene. Several
of the telecommunications issues in the Portfolio (including some Asian
securities) benefited from these developments, as the clear value of broadband
capacity, value-added services and enabling technologies crystallized.
European companies across a swath of industries have embarked on merger and
acquisition initiatives. Given the favorable cost of capital and deregulation of
many industries, progressive managements have launched strategic alliance
actions to build geographic breadth and also to achieve economies of scale. The
banking, telecommunications, insurance, automotive, pharmaceutical and defense
industries among others, have been affected by the consolidation trend. In our
view, these mergers and acquisitions should help European managements
dramatically improve the return on investment of their basic businesses.
The Asian markets have shown a range of performances in the period, with the
traditionally U.S. interest rate sensitive markets (i.e. Hong Kong) suffering
sharp declines recently. The Japanese stock market has corrected in sympathy
with the U.S. in recent months after a strong close to 1999. Yet evidence is
growing of a modest Japanese economic rebound following the contractions of the
fourth calendar quarter.
Since mid-March investor choice has shifted markedly from the trio of emerging
technology, media and telecommunications ("TMT") stocks to large-capitalization
companies with earnings, dividends and relatively stable businesses. Preference
for "defensive" stocks -- such as health care and financial services -- and
value shares has occurred. (Value investing consists of identifying securities
of companies that are believed to be undervalued but have good longer term
business prospects.) Investors have taken profits from aggressively positioned
and financed emerging growth stocks. Whether this rotation is sustainable is
anyone's guess. That the spectacular rise of more speculative securities
stretched as far as it did prior to the recent sharp correction is, in our
opinion, a greater surprise than the speed and magnitude of recent declines.
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 3
<PAGE>
Portfolio Update
The commercial applications of the Internet and associated technologies continue
to challenge many traditional businesses and sectors. Our investment strategy
continues to emphasize high-quality, well-financed growth stocks across the
entire capitalization spectrum. In our view, strong earnings growth and the
creation of substantial new business franchises continue to be centered in the
broadly defined technology sector, given the challenges facing more traditional
industries. Notably, those technology stocks with substantial earnings growth
have demonstrated the best support during the recent market rotation. At
period-end our stock-driven asset allocation was 59% in Europe, 33% in Asia and
8% in the Americas and emerging markets.
During the period we purchased a position in Canada's BCE Emergis, 65% owned by
BCE and a leader in Canadian Business-to-Business ("B2B") commerce to four
vertical markets. We also purchased a position in Australia's ERG Limited, a
leader in smart card technology that has won several significant public
transportation system projects. Also note that the Portfolio is subject to
change. Please refer to pages nine through 11 for a list of the Fund's
investments.
We added Amdocs Ltd., a telecom billing and customer care software developer
with supplier relationships to wireline and wireless communications entities. We
also added opportunistically to existing positions in Spain's Indra Sistemas SA,
the leading Iberian systems integrator, and to Energis PLC, the leading
competitive broadband carrier in the U.K. In Asia, we added to our long-standing
major position in Hong Kong's Hutchison Whampoa Ltd. We established positions in
Japan's Sharp Corp., based on its strengths in flat-panel display technologies.
We harvested profits from several investments (such as the U.K.'s Colt Telecom
and Finland's Nokia) that had reached our 5% of assets risk control limit in
order to finance our purchases. We also trimmed positions in Japan's Softbank as
we felt valuations had become excessive. We reduced our position in Telecom
Italia Mobile. We also sold our positions in Italy's Alleanza and Hong Kong &
China Gas due to sluggish earnings.
In closing, we thank you for your confidence in our investment approach. We look
forward to helping you take advantage of the growing number of investment
opportunities available in today's global economy.
Sincerely,
/s/ Jeffrey J. Russell /s/ James B. Conheady
Jeffrey J. Russell James B. Conheady
Vice President Vice President
May 12, 2000
--------------------------------------------------------------------------------
4 2000 Semi-Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
Historical Performance -- Class A Shares
----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value
-------------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
4/30/00 $26.75 $29.15 $0.38 $1.86 17.10%+
----------------------------------------------------------------------------------------------------------------------------------
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 $0.70 $2.12
==================================================================================================================================
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
Historical Performance -- Class B Shares
----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value
-------------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
4/30/00 $26.13 $28.56 $0.12 $1.86 16.64%+
----------------------------------------------------------------------------------------------------------------------------------
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 $0.16 $1.96
==================================================================================================================================
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
Historical Performance -- Class L Shares
----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value
-------------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
4/30/00 $25.76 $28.11 $0.12 $1.86 16.58%+
----------------------------------------------------------------------------------------------------------------------------------
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 $0.16 $2.12
==================================================================================================================================
</TABLE>
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 5
<PAGE>
--------------------------------------------------------------------------------
Historical Performance -- Class Y Shares
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
-------------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
4/30/00 $26.88 $29.23 $0.49 $1.86 17.26%+
----------------------------------------------------------------------------------------------------------------------------------
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 $0.99 $1.96
==================================================================================================================================
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
Historical Performance -- Class Z Shares
----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value
-------------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
4/30/00 $26.85 $29.20 $0.49 $1.86 17.28%+
----------------------------------------------------------------------------------------------------------------------------------
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 $0.99 $1.96
==================================================================================================================================
<CAPTION>
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
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
Six Months Ended 4/30/00+ 17.10% 16.64% 16.58% 17.26% 17.28%
----------------------------------------------------------------------------------------------------------------------------------
Year Ended 4/30/00 31.89 30.87 30.79 32.32 32.30
----------------------------------------------------------------------------------------------------------------------------------
Five Years Ended 4/30/00 14.19 13.30 13.26 14.59 14.58
----------------------------------------------------------------------------------------------------------------------------------
Ten Years Ended 4/30/00 12.89 N/A N/A N/A N/A
----------------------------------------------------------------------------------------------------------------------------------
Inception* through 4/30/00 12.70 9.84 13.17 11.09 11.09
==================================================================================================================================
<CAPTION>
With Sales Charge(2)
----------------------------------------------------------------------------------
Class A Class B Class L Class Y Class Z
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
Six Months Ended 4/30/00+ 11.23% 11.64% 14.41% 17.26% 17.28%
----------------------------------------------------------------------------------------------------------------------------------
Year Ended 4/30/00 25.29 25.87 28.50 32.32 32.30
----------------------------------------------------------------------------------------------------------------------------------
Five Years Ended 4/30/00 13.02 13.17 13.03 14.59 14.58
----------------------------------------------------------------------------------------------------------------------------------
Ten Years Ended 4/30/00 12.31 N/A N/A N/A N/A
----------------------------------------------------------------------------------------------------------------------------------
Inception* through 4/30/00 12.30 9.84 13.02 11.09 11.09
==================================================================================================================================
</TABLE>
--------------------------------------------------------------------------------
6 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Cumulative Total Return
--------------------------------------------------------------------------------
Without Sales Charge(1)
================================================================================
Class A (4/30/90 through 4/30/00)(3) 236.30%
--------------------------------------------------------------------------------
Class B (Inception* through 4/30/00) 67.27
--------------------------------------------------------------------------------
Class L (Inception* through 4/30/00) 147.43
--------------------------------------------------------------------------------
Class Y (Inception* through 4/30/00) 85.59
--------------------------------------------------------------------------------
Class Z (Inception* through 4/30/00) 77.98
================================================================================
(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.
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 7
<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+
--------------------------------------------------------------------------------
April 1990--April 2000
[GRAPH]
International Equity MSCI EAFE Index
Portfolio
April 30, 1990 9,496 10,000
Oct. 1990 9,084 10,075
Oct. 1991 11,740 10,811
Oct. 1992 11,944 9,416
Oct. 1993 16,984 12,983
Oct. 1994 18,689 14,331
Oct. 1995 17,299 14,321
Oct. 1996 18,991 15,869
Oct. 1997 20,758 16,650
Oct. 1998 20,789 18,307
Oct. 1999 27,273 22,524
April 30, 2000 $31,936 $24,038
+ Hypothetical illustration of $10,000 invested in Class A shares on April 30,
1990, 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 April 30, 2000. 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 April 30, 2000
--------------------------------------------------------------------------------
1. Nokia Oyj 4.7%
--------------------------------------------------------------------------------
2. Capita Group PLC 3.9
--------------------------------------------------------------------------------
3. Serco Group PLC 3.7
--------------------------------------------------------------------------------
4. Hutchison Whampoa Ltd. 3.4
--------------------------------------------------------------------------------
5. Hays PLC 3.1
--------------------------------------------------------------------------------
6. Compass Group PLC 3.1
--------------------------------------------------------------------------------
7. Misys PLC 2.9
--------------------------------------------------------------------------------
8. Colt Telecom Group PLC 2.8
--------------------------------------------------------------------------------
9. Murata Manufacturing Co., Ltd. 2.8
--------------------------------------------------------------------------------
10. Vodafone AirTouch PLC 2.6
--------------------------------------------------------------------------------
Investment Allocation* As of April 30, 2000
--------------------------------------------------------------------------------
[GRAPH]
Africa/Middle East 2.4%
Asia/Pacific 32.8%
Australia 0.9%
The Americas 5.0%
Europe 58.6%
* As a percentage of total investments.
--------------------------------------------------------------------------------
8 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (unaudited) April 30, 2000
--------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
STOCKS -- 99.7%
Australia -- 0.9%
3,000,000 ERG Ltd. $14,266,543
--------------------------------------------------------------------------------
Canada -- 3.6%
137,700 BCE Emergis Inc.+ 6,663,353
150,000 C-MAC Industries Inc.+ 7,592,630
5,212,000 Celestica Inc.+ 28,492,408
600,000 The Toronto Dominion Bank 13,869,204
--------------------------------------------------------------------------------
56,617,595
--------------------------------------------------------------------------------
Finland -- 4.8%
1,316,000 Nokia Oyj 74,518,736
70,200 Stonesoft Oyj+ 1,311,455
--------------------------------------------------------------------------------
75,830,191
--------------------------------------------------------------------------------
France -- 4.8%
173,050 Axa 25,721,028
390,000 Credit Lyonnais++ 15,229,238
74,261 FI System++ 4,134,897
80,330 Groupe Danone++ 17,605,793
201,400 Sidel SA++ 12,627,304
--------------------------------------------------------------------------------
75,318,260
--------------------------------------------------------------------------------
Germany -- 3.0%
35,000 Aixtron AG 9,122,141
40,000 Allianz AG 15,054,724
27,065 SAP AG++ 15,698,900
30,000 SAP AG ADR 1,473,750
294,300 Stinnes AG+ 6,262,387
--------------------------------------------------------------------------------
47,611,902
--------------------------------------------------------------------------------
Hong Kong -- 6.2%
1,289,524 HSBC Holdings PLC 14,403,095
3,664,000 Hutchison Whampoa Ltd. 53,389,822
4,244,000 Li & Fung Ltd. 16,400,196
1,613,000 Sun Hung Kai Properties Ltd. 12,787,288
26,956 Sunevision Holdings Ltd.+ 35,125
--------------------------------------------------------------------------------
97,015,526
--------------------------------------------------------------------------------
India -- 0.1%
20,000 The India Magnum Fund 830,000
--------------------------------------------------------------------------------
Ireland -- 5.6%
2,271,060 Bank of Ireland 15,356,611
4 CRH PLC+ 64
1,411,976 Grafton Group PLC 29,273,286
3,516,063 Independent News & Media PLC 28,132,862
1,579,402 Irish Continental Group PLC 14,968,861
84 Irish Life & Permanent PLC 423
--------------------------------------------------------------------------------
87,732,107
--------------------------------------------------------------------------------
Israel -- 0.9%
150,000 Amdocs Ltd.+++ 10,153,125
55,000 BATM Advanced Communications Ltd. 3,915,907
--------------------------------------------------------------------------------
14,069,032
--------------------------------------------------------------------------------
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 9
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) April 30, 2000
--------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Italy -- 1.5%
2,490,000 Telecom Italia Mobile S.p.A.++ $ 23,837,359
--------------------------------------------------------------------------------
Japan -- 21.7%
617,000 Canon, Inc. 28,202,453
737,000 Hosiden Corp.++ 34,369,466
26,000 JAFCO Co., Ltd.++ 4,570,899
296 Japan Telecom Co., Ltd. 15,063,613
160,000 Matsushita Communication Industrial Co., Ltd.++ 25,078,880
226,000 Murata Manufacturing Co., Ltd. 43,913,949
2,030 NTT Data Communication Corp.++ 27,047,884
51,000 Seven-Eleven Japan Co., Ltd. 6,276,198
1,240,000 Sharp Corp. 23,922,276
120,600 SOFTBANK CORP.++ 29,682,721
203,600 Sony Corp. -- New+ 23,548,461
203,600 Sony Corp.++ 23,378,912
880,000 Terumo Corp. 26,625,955
1,100,000 Tostem Corp.++ 16,193,384
100,000 Trend Micro Inc. 14,989,590
--------------------------------------------------------------------------------
342,864,641
--------------------------------------------------------------------------------
Mexico -- 1.4%
10,118,800 Wal-Mart de Mexico SA de CV+ 21,552,232
--------------------------------------------------------------------------------
Netherlands -- 0.2%
1,854 Aalberts Industries N.V. 33,875
60,000 United Pan-Europe Communication N.V.+ 2,188,768
44,700 VIA NET.WORKS, Inc.+ 806,557
--------------------------------------------------------------------------------
3,029,200
--------------------------------------------------------------------------------
Norway -- 3.0%
400,000 Petroleum Geo-Services ASA+ 6,500,000
465,000 Tandberg Television ASA+ 4,209,791
1,798,400 Tomra Systems ASA++ 37,186,096
--------------------------------------------------------------------------------
47,895,887
--------------------------------------------------------------------------------
Singapore -- 4.8%
1,145,000 DelGro Corp. Ltd. 2,816,399
1,355,000 Singapore Press Holdings Ltd. 26,504,832
8,062,500 Singapore Technologies Engineering Ltd. 11,332,357
2,396,952 United Overseas Bank Foreign Ltd. 16,704,965
1,607,000 Venture Manufacturing (Singapore) Ltd. 18,822,841
--------------------------------------------------------------------------------
76,181,394
--------------------------------------------------------------------------------
South Africa -- 1.5%
207,000 Anglo American Platinum Corp. Ltd. 5,007,449
2,800,868 Dimension Data Holdings Ltd.++ 18,384,633
--------------------------------------------------------------------------------
23,392,082
--------------------------------------------------------------------------------
Spain -- 3.8%
1,231,000 Amadeus Global Travel Distribution SA -- Class A+++ 15,256,668
860,000 Indra Sistemas SA++ 20,243,500
221,500 Superdiplo SA+++ 3,169,102
949,420 Telefonica SA+++ 21,180,321
--------------------------------------------------------------------------------
59,849,591
--------------------------------------------------------------------------------
See Notes to Financial Statements.
--------------------------------------------------------------------------------
10 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) April 30, 2000
--------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Sweden -- 2.0%
17,000 Enea Data AB $ 2,998,213
511,000 Framtidsfabriken AB+++ 8,390,149
750,000 Securitas AB++ 19,434,827
--------------------------------------------------------------------------------
30,823,189
--------------------------------------------------------------------------------
Switzerland -- 2.7%
777,000 Mettler-Toledo International Inc.+ 26,806,500
1,500 Roche Holding AG 15,701,830
--------------------------------------------------------------------------------
42,508,330
--------------------------------------------------------------------------------
United States -- 0.0%
4,224 Telefonica SA ADR 279,840
--------------------------------------------------------------------------------
United Kingdom -- 27.2%
2,376,800 Capita Group PLC 61,255,432
1,008,500 Colt Telecom Group PLC+ 44,170,993
3,383,700 Compass Group PLC 48,659,286
200,000 Energis PLC+ 9,920,822
326,000 Filtronic PLC 8,901,669
712,000 Guardian IT PLC 14,344,505
7,044,200 Hays PLC 48,941,020
2,151,500 Invensys 10,411,407
3,922,347 Misys PLC 45,234,716
7,939,200 Serco Group PLC 57,768,097
6,042,545 TeleWest Communications PLC+ 37,206,858
498,000 365 Corp. PLC+ 1,083,184
8,968,515 Vodafone AirTouch PLC 41,189,547
--------------------------------------------------------------------------------
429,087,536
--------------------------------------------------------------------------------
Venezuela -- 0.0%
7,140 Republic of Venezuela Warrants, Expire 4/15/20 --
--------------------------------------------------------------------------------
TOTAL STOCKS
(Cost -- $826,626,890) 1,570,592,437
================================================================================
FACE
AMOUNT SECURITY VALUE
================================================================================
REPURCHASE AGREEMENT -- 0.3%
$5,500,000 CIBC Wood Gundy Securities Inc., 5.600% due 5/1/00;
due 5/1/00; Proceeds at maturity -- $5,502,567;
(Fully collateralized by U.S. Treasury Notes,
4.625% due 11/30/00; Market value -- $5,610,596)
(Cost -- $5,500,000) 5,500,000
================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $832,126,890*) $1,576,092,437
================================================================================
+ 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. 11
<PAGE>
--------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) April 30, 2000
--------------------------------------------------------------------------------
ASSETS:
Investments -- Cost $ 832,126,890
Foreign currency -- Cost 846
--------------------------------------------------------------------------------
Investments -- Value $1,576,092,437
Foreign currency -- Value 846
Cash 86,130,516
Collateral for securities on loan (Note 9) 215,814,549
Receivable for Fund shares sold 10,800,702
Receivable for securities sold 7,639,318
Dividends and interest receivable 2,649,183
--------------------------------------------------------------------------------
Total Assets 1,899,127,551
--------------------------------------------------------------------------------
LIABILITIES:
Payable for securities on loan (Note 9) 215,814,549
Payable for Fund shares purchased 85,183,936
Payable for securities purchased 17,020,883
Management fees payable 1,082,303
Distribution fees payable 876,955
Payable for open forward foreign currency contracts (Note 4) 108,098
Accrued expenses 1,059,202
--------------------------------------------------------------------------------
Total Liabilities 321,145,926
--------------------------------------------------------------------------------
Total Net Assets $1,577,981,625
================================================================================
NET ASSETS:
Par value of capital shares $ 54,523
Capital paid in excess of par value 658,149,710
Overdistributed net investment income (17,909,034)
Accumulated net realized gain
from security transactions and foreign currencies 194,456,194
Net unrealized appreciation
of investments and foreign currencies 743,230,232
--------------------------------------------------------------------------------
Total Net Assets $1,577,981,625
================================================================================
Shares Outstanding:
Class A 18,397,926
----------------------------------------------------------------------------
Class B 8,590,041
----------------------------------------------------------------------------
Class L 7,358,152
----------------------------------------------------------------------------
Class Y 14,301,805
----------------------------------------------------------------------------
Class Z 5,874,777
----------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $29.15
----------------------------------------------------------------------------
Class B* $28.56
----------------------------------------------------------------------------
Class L** $28.11
----------------------------------------------------------------------------
Class Y (and redemption price) $29.23
----------------------------------------------------------------------------
Class Z (and redemption price) $29.20
----------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 5.26% of net asset value per share) $30.68
----------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset value per share) $28.39
================================================================================
* Redemption price is NAV of Class B shares reduced by a 5.00% CDSC for the
Portfolio 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.
--------------------------------------------------------------------------------
12 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Statement of Operations (unaudited) For the Six Months Ended April 30, 2000
--------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 5,908,870
Interest 2,471,332
Less: Foreign withholding tax (798,195)
--------------------------------------------------------------------------------
Total Investment Income 7,582,007
--------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 7,247,883
Distribution fees (Note 2) 3,135,931
Shareholder and system servicing fees 668,388
Custody 285,927
Shareholder communications 54,441
Audit and legal 35,803
Registration fees 32,321
Directors' fees 12,927
Other 4,422
--------------------------------------------------------------------------------
Total Expenses 11,478,043
--------------------------------------------------------------------------------
Net Investment Loss (3,896,036)
--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCIES (NOTES 3 AND 4):
Realized Gain (Loss) From:
Security transactions 195,137,577
Foreign currency transactions (297,964)
--------------------------------------------------------------------------------
Net Realized Gain 194,839,613
--------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 138,623,418
--------------------------------------------------------------------------------
Net Gain on Investments and Foreign Currencies 333,463,031
--------------------------------------------------------------------------------
Increase in Net Assets From Operations $329,566,995
================================================================================
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 13
<PAGE>
--------------------------------------------------------------------------------
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
For the Six Months Ended April 30, 2000 (unaudited)
and for the Year Ended October 31, 1999
<TABLE>
<CAPTION>
2000 1999
====================================================================================================
<S> <C> <C>
OPERATIONS:
Net investment loss $ (3,896,036) $ (3,339,566)
Net realized gain 194,839,613 127,118,653
Increase in net unrealized appreciation 138,623,418 266,998,258
---------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 329,566,995 390,777,345
---------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (17,893,769) --
Net realized gains (95,651,963) --
---------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (113,545,732) --
---------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 11):
Net proceeds from sale of shares 7,872,182,113 7,522,591,959
Net asset value of shares issued in connection with
the transfer of the Smith Barney World Funds --
International Balanced Portfolio Net Assets (Note 10) 13,062,062 --
Net asset value of shares issued for
reinvestment of dividends 81,854,129 --
Cost of shares reacquired (8,072,964,607) (7,683,231,190)
---------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Fund Share Transactions (105,866,303) (160,639,231)
---------------------------------------------------------------------------------------------------
Increase in Net Assets 110,154,960 230,138,114
NET ASSETS:
Beginning of period 1,467,826,665 1,237,688,551
---------------------------------------------------------------------------------------------------
End of period* $ 1,577,981,625 $ 1,467,826,665
===================================================================================================
* Includes undistributed (overdistributed) net investment
income of: $(17,909,034) $4,178,735
===================================================================================================
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
14 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)
--------------------------------------------------------------------------------
1. Significant Accounting Policies
The International Equity Portfolio ("Portfolio") is a separate investment
portfolio of the Smith Barney World Funds, Inc. ("Fund"). The Fund, a Maryland
corporation, is registered under the Investment Company Act of 1940, as amended,
as an open-end investment management company and consists of this Portfolio and
four other separate investment portfolios: Emerging Markets, European, Global
Government Bond 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 Portfolio 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
Portfolio to reflect permanent book/tax differences and income and gains
available for distributions under tax regulations. Net investment income, net
realized gains and net assets were not affected by these changes; (k) the
Portfolio intends to comply with the applicable provisions of the Internal
Revenue Code of 1986, as amended, pertaining to regulated investment companies
and to make distributions of taxable income sufficient to relieve the Portfolio
from substantially all Federal income and excise taxes; and (l) estimates and
assumptions are required to be made regarding assets, liabilities and changes in
net assets resulting from operations when financial statements are prepared.
Changes in the economic environment, financial markets and any other parameters
used in determining these estimates could cause actual results to differ.
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 15
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
--------------------------------------------------------------------------------
In addition, the Portfolio may enter into forward exchange contracts in order to
hedge against foreign currency risk. These contracts are marked to market daily
by recognizing the difference between the contract exchange rate and the current
market rate as an unrealized gain or loss. Realized gains or losses are
recognized when contracts are settled.
2. Management Agreement and Other Transactions
SSB Citi Fund Management LLC ("SSBC"), 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 Portfolio pays SSBC a
management fee calculated at an annual rate of 0.85% of the average daily net
assets. This fee is calculated daily and paid monthly.
Citi Fiduciary Trust Company ("CFTC"), formerly known as Smith Barney Private
Trust Company, another subsidiary of Citigroup, acts as the Fund's transfer
agent and PFPC Global Fund Services ("PFPC") acts as the sub-transfer agent.
CFTC receives account fees and asset-based fees that vary according to the
account size and type of account. PFPC is responsible for shareholder
recordkeeping and financial processing for all shareholder accounts and is paid
by CFTC. For the six months ended April 30, 2000, the Portfolio paid transfer
agent fees of $459,221 to CFTC.
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
six months ended April 30, 2000, SSB received total brokerage commissions of
$100,989.
There are maximum initial sales charges of 5.00% and 1.00% for Class A and L
shares, respectively. 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 have a
1.00% CDSC, which applies if redemption occurs within the first year of
purchase. In addition, Class A shares have a 1.00% CDSC, which applies if
redemption occurs within the first year of purchase. This CDSC only applies to
those purchases of Class A shares that equal or exceed $500,000 in the
aggregate. These purchases do not incur an initial sales charge.
For the six months ended April 30, 2000, CDSCs received by SSB were
approximately:
Class A Class B Class L
--------------------------------------------------------------------------------
CDSCs $2,000 $112,000 $19,000
--------------------------------------------------------------------------------
For the six months ended April 30, 2000, sales charges received by SSB and CFBDS
were approximately:
Class A Class L
--------------------------------------------------------------------------------
Sales Charges $1,163,000 $233,000
--------------------------------------------------------------------------------
Pursuant to a Distribution Plan, the Portfolio pays 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 shares. The Portfolio pays 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 class. For the
six months ended April 30, 2000, total Distribution Plan fees incurred were:
Class A Class B Class L
--------------------------------------------------------------------------------
Distribution Plan Fees $811,284 $1,249,572 $1,075,075
--------------------------------------------------------------------------------
All officers and one Director of the Fund are employees of SSB.
--------------------------------------------------------------------------------
16 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
--------------------------------------------------------------------------------
3. Investments
During the six months ended April 30, 2000, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases $255,887,524
--------------------------------------------------------------------------------
Sales 369,651,241
================================================================================
At April 30, 2000, aggregate gross unrealized appreciation and depreciation of
investments for Federal income tax purposes were substantially as follows:
================================================================================
Gross unrealized appreciation $794,605,214
Gross unrealized depreciation (50,639,667)
--------------------------------------------------------------------------------
Net unrealized appreciation $743,965,547
================================================================================
4. Forward Foreign Currency Contracts
At April 30, 2000, the Portfolio had open forward foreign currency contracts as
described below. The Portfolio bears the market risk that arises from changes in
foreign currency exchange rates. The unrealized loss on the contracts reflected
in the accompanying financial statements were as follows:
Local Market Settlement Unrealized
Foreign Currency Currency Value Date Loss
================================================================================
To Sell:
Euro 60,165 $ 54,802 5/3/00 $ (46)
--------------------------------------------------------------------------------
To Buy:
Canadian Dollar 988,026 668,760 5/1/00 (1,892)
Euro 8,337,578 7,706,423 5/2/00 (106,160)
--------------------------------------------------------------------------------
(108,052)
--------------------------------------------------------------------------------
Net Unrealized Loss on Forward
Foreign Currency Contracts $(108,098)
================================================================================
5. Option Contracts
Premiums paid when put or call options are purchased by the Portfolio represent
investments, which are marked-to-market daily. When a purchased option expires,
the Portfolio will realize a loss in the amount of the premium paid. When the
Portfolio enters into a closing sales transaction, the Portfolio will realize a
gain or loss depending on whether the proceeds from the closing sales
transaction are greater or less than the premium paid for the option. When the
Portfolio exercises a put option, it will realize a gain or loss from the sale
of the underlying security and the proceeds from such sale will be decreased by
the amount of the premium originally paid. When the Portfolio exercises a call
option, the cost of the security that the Portfolio purchases upon exercise will
be increased by the premium originally paid.
At April 30, 2000, the Portfolio had no open purchased call or put options.
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 17
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
--------------------------------------------------------------------------------
When a Portfolio writes a call or put option, an amount equal to the premium
received by the Portfolio is recorded as a liability, the value of which is
marked-to-market daily. When a written option expires, the Portfolio realizes a
gain. When the Portfolio enters into a closing purchase transaction, the
Portfolio realizes a gain or loss depending upon whether the cost of the closing
transaction is greater or less than the premium originally received, without
regard to any unrealized gain or loss on the underlying security, and the
liability related to such option is eliminated. When a written call option is
exercised the cost of the security sold will be decreased by the premium
originally received. When a written put option is exercised, the amount of the
premium originally received will reduce the cost of the security which the
Portfolio purchased upon exercise. When written index options are exercised,
settlement is made in cash.
The risk associated with purchasing options is limited to the premium originally
paid. The Portfolio enters into options for hedging purposes. The risk in
writing a call option is that the Portfolio gives up the opportunity to
participate in any increase in the price of the underlying security beyond the
exercise price. The risk in writing a put option is that the Portfolio is
exposed to the risk of loss if the market price of the underlying security
declines.
During the six months ended April 30, 2000, the Portfolio did not write any
options.
6. Futures Contracts
Initial margin deposits made upon entering into futures contracts are recognized
as assets. Securities equal to the initial margin amount are segregated by the
custodian in the name of the broker. Additional securities are also segregated
up to the current market value of the futures contract. During the period the
futures contract is open, changes in the value of the contract are recognized as
unrealized gains or losses by "marking-to-market" on a daily basis to reflect
the market value of the contract at the end of each day's trading. Variation
margin payments are received or made and recognized as assets due from or
liabilities due to broker, depending upon whether unrealized gains or losses are
incurred. When the contract is closed, the Portfolio records a realized gain or
loss equal to the difference between the proceeds from (or cost of) the closing
transactions and the Portfolio's basis in the contract.
The Portfolio enters into such contracts to hedge a portion of its portfolio.
The Portfolio bears the market risk that arises from changes in the value of the
financial instruments and securities indices (futures contracts).
At April 30, 2000, the Portfolio had no open futures contracts.
7. Concentration of Risk
The Portfolios' investments in foreign securities may involve risks not present
in domestic investments. Since securities may be denominated in a foreign
currency and may require settlement in foreign currencies and pay interest or
dividends in foreign currencies, changes in the relationship of these foreign
currencies to the U.S. dollar can significantly affect the value of the
investments and earnings of the Portfolio. Foreign investments may also subject
the Portfolio to foreign government exchange restrictions, expropriation,
taxation or other political, social or economic developments, all of which could
affect the market and/or credit risk of the investments.
In addition to the risks described above, risks may arise from forward foreign
currency contracts with respect to the potential inability of counterparties to
meet the terms of their contracts.
--------------------------------------------------------------------------------
18 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
--------------------------------------------------------------------------------
8. Capital Loss Carryforwards
At October 31, 1999, the Portfolio had, for Federal income tax purposes,
approximately $338,000 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 Portfolio 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 Portfolio maintains exposure for the risk of any loss in the investment of
amounts received as collateral.
At April 30, 2000, the Portfolio had loaned common stocks and bonds which were
collateralized by cash and securities. The market value for the securities on
loan for the portfolio was $211,873,585.
At April 30, 2000, the cash collateral received for these securities on loan was
invested as follows:
Security Description Value
================================================================================
Time Deposits:
Abbey National London, 6.08% due 5/2/00 $ 10,890,593
ABN Amro Bank London, 6.08% due 5/2/00 10,890,593
Allied Irish London, 6.08% due 5/2/00 10,890,593
Banco Bilbao Viz Argentaria, Milan, 6.08% due 5/2/00 10,890,593
Banco Santander CHSA-London, 6.06% due 5/1/00 10,890,593
Bayerische Landesbank, London, 6.08% due 5/2/00 10,890,593
Bayrische Hypo-Und Vereinsbk, GC, 6.06% due 5/1/00 10,890,593
Caisse De Depots Et Consign, Paris, 6.06% due 5/1/00 10,890,593
Commerzbank AG, Frankfurt, 6.08% due 5/2/00 10,890,593
Credit Commerciale London, 6.12% due 5/2/00 10,890,593
Credit Communal De Belgique, 6.06% due 5/1/00 10,890,593
Dresdner Bank, 6.08% due 5/1/00 10,890,593
Fortis Bank, London, 6.08% due 5/2/00 10,890,593
Halifax PLC, 6.08% due 5/2/00 10,890,593
National Bank of Australia-London, 6.08% due 5/2/00 10,890,593
Rabobank, London, 6.08% due 5/2/00 10,890,593
Societe Generale, 6.09% due 5/2/00 10,890,593
Toronto Dominion-London, 6.08% due 5/2/00 10,890,593
UniBank G.C., 6.06% due 5/1/00 5,648,648
Union Bank of Switzerland, G.C., 6.06% due 5/1/00 3,244,634
Westdeutsche Landesbank, London, 6.06% due 5/1/00 10,890,593
--------------------------------------------------------------------------------
Total $215,814,549
================================================================================
In addition to the above noted cash collateral, the Portfolio received
securities collateral with a market value of $7,336,917.
Interest income earned by the Portfolio from securities loaned for the six
months ended April 30, 2000 was $313,833.
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 19
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)(continued)
--------------------------------------------------------------------------------
10. Transfer of Net Assets
On April 14, 2000, the International Equity Portfolio acquired the assets and
certain liabilities of the Smith Barney World Funds, Inc. - International
Balanced Portfolio ("International Balanced Portfolio") pursuant to a plan of
reorganization approved by International Balanced Portfolio shareholders on
April 7, 2000. Total shares issued by the International Equity Portfolio and the
total net assets of the International Balanced Portfolio and the International
Equity Portfolio on the date of the transfer were as follows:
<TABLE>
<CAPTION>
Shares Issued Total Net Assets Total Net Assets
by the of the of the
International Equity International Balanced International Equity
Acquired Portfolio Portfolio Portfolio Portfolio
==================================================================================================================================
<S> <C> <C> <C>
International Balanced Portfolio 461,226 $13,062,062 $1,471,355,620
==================================================================================================================================
</TABLE>
The total net assets of the International Balanced Portfolio before acquisition
included unrealized appreciation of $3,204,052. Total net assets of the
International Equity Portfolio immediately after the transfer were
$1,484,417,682. The transaction was structured to qualify as a tax-free
reorganization under the Internal Revenue Code of 1986, as amended.
11. Capital Shares
At April 30, 2000, the Fund had one billion shares of capital stock authorized
with a par value of $0.001 per share. The Portfolios have the ability to issue
multiple classes of shares. Each share of a class represents an identical legal
interest in a Portfolio and has the same rights, except that each class bears
certain expenses specifically related to the distribution of its shares.
At April 30, 2000, total paid-in capital amounted to the following for the
Portfolio:
<TABLE>
<CAPTION>
Class A Class B Class L Class Y Class Z
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
Total Paid-in Capital $39,519,680 $137,307,063 $110,017,845 $266,803,586 $104,556,059
==================================================================================================================================
</TABLE>
--------------------------------------------------------------------------------
20 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)(continued)
--------------------------------------------------------------------------------
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
April 30, 2000 October 31, 1999
------------------------------------------ ----------------------------------------
Shares Amount Shares Amount
====================================================================================================================================
<S> <C> <C> <C> <C>
Class A
Shares sold 222,670,146 $6,911,046,034 277,740,518 $ 6,465,343,447
Shares issued on reinvestment 1,253,215 37,608,998 -- --
Net asset value of shares issued
in connection with the transfer of
Smith Barney World Funds Inc.
International Balanced Portfolio's
Net Assets 279,948 8,012,794 -- --
Shares reacquired (228,163,710) (7,150,361,462) (277,604,093) (6,489,021,477)
-----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (3,960,401) $ (193,693,636) 136,425 $ (23,678,030)
===================================================================================================================================
Class B
Shares sold 7,646,524 $ 232,961,506 13,558,032 $ 306,708,150
Shares issued on reinvestment 485,099 14,305,559 -- --
Net asset value of shares issued
in connection with the transfer of
Smith Barney World Funds Inc.
International Balanced Portfolio's
Net Assets 101,172 2,837,024 -- --
Shares reacquired (7,298,533) (224,869,231) (14,915,091) (339,020,342)
-----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 934,262 $ 25,234,858 (1,357,059) $ (32,312,192)
===================================================================================================================================
Class L
Shares sold 22,028,387 $ 664,532,676 30,608,093 $ 691,468,417
Shares issued on reinvestment 419,640 12,182,159 -- --
Net asset value of shares issued
in connection with the transfer of
Smith Barney World Funds Inc.
International Balanced Portfolio's
Net Assets 80,106 2,212,244 -- --
Shares reacquired (22,090,671) (671,266,452) (31,396,364) (712,272,205)
-----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 437,462 $ 7,660,627 (788,271) $ (20,803,788)
===================================================================================================================================
Class Y
Shares sold 1,167,257 $ 36,688,108 1,660,086 $ 38,367,414
Shares issued on reinvestment 192,780 5,794,976 -- --
Shares reacquired (238,453) (10,253,054) (4,840,726) (107,071,746)
-----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 1,121,584 $ 32,230,030 (3,180,640) $ (68,704,332)
===================================================================================================================================
Class Z
Shares sold 854,626 $ 26,953,789 905,454 $ 20,704,531
Shares issued on reinvestment 398,350 11,962,437 -- --
Shares reacquired (488,140) (16,214,408) (1,538,727) (35,845,420)
-----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 764,836 $ 22,701,818 (633,273) $ (15,140,889)
===================================================================================================================================
</TABLE>
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 21
<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 2000(1) 1999(2) 1998(2) 1997(2) 1996(2) 1995
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $26.75 $20.39 $20.36 $18.64 $17.15 $18.79
-----------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss) (0.05) (0.03) -- (0.04) 0.01 0.08*
Net realized and unrealized gain (loss) 4.69 6.39 0.03 1.77 1.65 (1.50)
-----------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 4.64 6.36 0.03 1.73 1.66 (1.42)
-----------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income(3) (0.38) -- -- (0.01) (0.17) (0.12)
Net realized gains (1.86) -- -- -- -- (0.10)
-----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (2.24) -- -- (0.01) (0.17) (0.22)
-----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $29.15 $26.75 $20.39 $20.36 $18.64 $17.15
-----------------------------------------------------------------------------------------------------------------------------------
Total Return 17.10%++ 31.19% 0.15% 9.30% 9.78% (7.44)%
-----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $536,225 $598,043 $453,029 $464,796 $513,870 $489,533
-----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(4) 1.23%+ 1.28% 1.28% 1.31% 1.35% 1.36%
Net investment income (loss) (0.18)+ (0.13) 0.00 (0.18) 0.17 0.50
-----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 16% 31% 25% 35% 46% 42%
===================================================================================================================================
</TABLE>
(1) For the six months ended April 30, 2000 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(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 A
would have been 1.29% and 1.28%, 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.
--------------------------------------------------------------------------------
22 2000 Semi-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 2000(1) 1999(2) 1998(2) 1997(2) 1996(2) 1995(3)
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $26.13 $20.08 $20.22 $18.65 $17.17 $18.38
-----------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss) (0.14) (0.23) (0.18) (0.20) (0.08) 0.06*
Net realized and unrealized gain (loss) 4.55 6.28 0.04 1.77 1.60 (1.17)
-----------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 4.41 6.05 (0.14) 1.57 1.52 (1.11)
-----------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income(4) (0.12) -- -- -- (0.04) --
Net realized gains (1.86) -- -- -- -- (0.10)
-----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.98) -- -- -- (0.04) (0.10)
-----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $28.56 $26.13 $20.08 $20.22 $18.65 $17.17
-----------------------------------------------------------------------------------------------------------------------------------
Total Return 16.64%++ 30.13% (0.69)% 8.42% 8.89% (6.00)%++
-----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $245,309 $200,071 $180,980 $231,148 $212,294 $126,171
-----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(5) 2.04%+ 2.08% 2.09% 2.11% 2.11% 2.13%+
Net investment income (loss) (1.06)+ (1.01) (0.84) (0.95) (0.58) 0.34+
-----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 16% 31% 25% 35% 46% 42%
===================================================================================================================================
</TABLE>
(1) For the six months ended April 30, 2000 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) For the period from November 7, 1994 (inception date) to October 31, 1995.
(4) Distributions from net investment income included short-term capital gains,
if any, for Federal income tax purposes.
(5) During the year ended October 31, 1996 and the period ended October 31,
1995, the Portfolio had earned credits from the custodian which reduced
service fees incurred. If the credits are taken into consideration, the
expense ratios for Class B would have been 2.04% and 2.04% (annualized),
respectively.
* 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. 23
<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 2000(1) 1999(2) 1998(2)(3) 1997(2) 1996(2) 1995(4)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $25.76 $19.79 $19.93 $18.38 $16.93 $18.54
------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss (0.14) (0.22) (0.17) (0.22) (0.13) (0.06)*
Net realized and unrealized gain (loss) 4.47 6.19 0.03 1.77 1.62 (1.45)
------------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 4.33 5.97 (0.14) 1.55 1.49 (1.51)
------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income(5) (0.12) -- -- -- (0.04) --
Net realized gains (1.86) -- -- -- -- (0.10)
------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.98) -- -- -- (0.04) (0.10)
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $28.11 $25.76 $19.79 $19.93 $18.38 $16.93
------------------------------------------------------------------------------------------------------------------------------------
Total Return 16.58%++ 30.17% (0.70)% 8.43% 8.85% (8.11)%
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $206,842 $178,259 $152,569 $200,849 $229,514 $240,090
------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(6) 2.04%+ 2.07% 2.07% 2.12% 2.15% 2.16%
Net investment loss (1.05)+ (0.98) (0.81) (0.97) (0.63) (0.34)
------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 16% 31% 25% 35% 46% 42%
====================================================================================================================================
</TABLE>
(1) For the six months ended April 30, 2000 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) On June 12, 1998, Class C shares were renamed Class L shares.
(4) On November 7, 1994, Class B shares were renamed Class C shares.
(5) Distributions from net investment income include short-term capital gains,
if any, for Federal income tax purposes.
(6) During the years ended October 31, 1996 and October 31, 1995, the Portfolio
had earned credits from the custodian which reduced service fees incurred.
If the credits are taken into consideration, the expense ratios for Class L
would have been 2.09% and 2.08%, 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.
--------------------------------------------------------------------------------
24 2000 Semi-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 2000(1) 1999(2) 1998(2) 1997(2) 1996(2) 1995(3)
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $26.88 $20.41 $20.38 $18.64 $17.13 $18.80
-----------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.01 0.03 0.08 0.04 0.18 0.10*
Net realized and unrealized gain (loss) 4.69 6.44 0.01 1.76 1.54 (1.50)
-----------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 4.70 6.47 0.09 1.80 1.72 (1.40)
-----------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income(4) (0.49) -- (0.06) (0.06) (0.21) (0.17)
Net realized gains (1.86) -- -- -- -- (0.10)
-----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (2.35) -- (0.06) (0.06) (0.21) (0.27)
-----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $29.23 $26.88 $20.41 $20.38 $18.64 $17.13
-----------------------------------------------------------------------------------------------------------------------------------
Total Return 17.26%++ 31.70% 0.45% 9.68% 10.19% (7.11)%
-----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $418,070 $354,242 $333,979 $301,852 $200,427 $97,132
-----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(5) 0.91%+ 0.92% 0.91% 0.94% 0.96% 1.06%
Net investment income 0.06+ 0.14 0.37 0.23 0.56 0.91
-----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 16% 31% 25% 35% 46% 42%
===================================================================================================================================
</TABLE>
(1) For the six months ended April 30, 2000 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) On November 7, 1994, the Class D shares were renamed Class Y 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 Y
would have been 0.90% and 0.98%, 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. 25
<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 2000(1) 1999(2) 1998(2) 1997(2) 1996(2) 1995(3)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $26.85 $20.39 $20.36 $18.62 $17.12 $18.38
------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.01 0.04 0.08 0.05 0.14 0.13*
Net realized and unrealized gain (loss) 4.69 6.42 0.01 1.75 1.57 (1.12)
------------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 4.70 6.46 0.09 1.80 1.71 (0.99)
------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income(4) (0.49) -- (0.06) (0.06) (0.21) (0.17)
Net realized gains (1.86) -- -- -- -- (0.10)
------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (2.35) -- (0.06) (0.06) (0.21) (0.27)
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $29.20 $26.85 $20.39 $20.36 $18.62 $17.12
------------------------------------------------------------------------------------------------------------------------------------
Total Return 17.28%++ 31.68% 0.45% 9.69% 10.13% (5.03)%++
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $171,536 $137,212 $117,132 $131,709 $119,408 $94,387
------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(5) 0.91%+ 0.92% 0.92% 0.94% 0.97% 1.10%+
Net investment income 0.06+ 0.16 0.36 0.22 0.55 1.06+
------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 16% 31% 25% 35% 46% 42%
====================================================================================================================================
</TABLE>
(1) For the six months ended April 30, 2000 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) For the period from November 7, 1994 (inception date) to October 31, 1995.
(4) Distributions from net investment income include short-term capital gains,
if any, for Federal income tax purposes.
(5) During the years 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.
--------------------------------------------------------------------------------
26 2000 Semi-Annual Report to Shareholders
<PAGE>
(This page intentionally left blank.)
<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
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
Transfer Agent
Citi Fiduciary Trust Company
388 Greenwich Street
22nd Floor
New York, New York 10013
Sub-Transfer 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. -- International Equity Portfolio but it may also be
used as sales literature when preceded or accompanied by a current Prospectus,
which gives details about charges, expenses, investment objectives and operating
policies of the Fund. If used as sales material after July 31, 2000, this report
must be accompanied by performance information for the most recently completed
calendar quarter.
[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
FD01934 6/00
