<PAGE>
SMITH BARNEY
WORLD FUNDS, INC.
INTERNATIONAL ALL CAP
GROWTH PORTFOLIO
CLASSIC SERIES | ANNUAL REPORT | OCTOBER 31, 2000
[LOGO OF SMITH BARNEY]
NOT FDIC INSURED . NOT BANK GUARANTEED . MAY LOSE VALUE
<PAGE>
JAMES B. CONHEADY,
JEFFREY J. RUSSELL
Portfolio Managers
[GRAPHIC]
Classic Series
Annual Report . October 31, 2000
SMITH BARNEY INTERNATIONAL
ALL CAP GROWTH PORTFOLIO
JEFFREY J. RUSSELL
Jeffrey J. Russell, CFA, has more than 19 years of securities business
experience and has been co-managing the Fund since its inception.
Education: BS from the Massachusetts Institute of Technology, MBA from the
University of Pennsylvania's Wharton School of Finance.
JAMES B. CONHEADY
James B. Conheady has more than 39 years of securities business experience and
has been managing the Fund since its inception.
Education: BSS from Georgetown University.
FUND OBJECTIVE
The Fund seeks total return on its assets from growth of capital and income by
investing 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.
FUND FACTS
FUND INCEPTION
--------------------
November 22, 1991
MANAGERS' TENURE
--------------------
Since Inception
MANAGERS' INVESTMENT
INDUSTRY EXPERIENCE
--------------------
19 Years (Jeffrey J. Russell)
39 Years (James B. Conheady)
CLASS A CLASS B CLASS L
NASDAQ SBIEX SBIBX SBICX
INCEPTION 11/22/91 11/7/94 1/4/93
Average Annual Total Returns as of October 31, 2000
Without Sales Charges/(1)/
Class A Class B Class L
----------------------------------------------------
One-Year (1.62)% (2.43)% (2.42)%
----------------------------------------------------
Five-Year 9.17 8.28 8.28
----------------------------------------------------
Ten-Year 11.44 N/A N/A
----------------------------------------------------
Since Inception+ 10.92 5.77 9.75
----------------------------------------------------
With Sales Charges/(2)/
Class A Class B Class L
------------------------------------------------------
One-Year (6.55)% (7.00)% (4.30)%
------------------------------------------------------
Five-Year 8.06 8.13 8.07
------------------------------------------------------
Ten-Year 10.87 N/A N/A
------------------------------------------------------
Since Inception+ 10.53 5.77 9.61
------------------------------------------------------
/(1)/ Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect deduction of all 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 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.
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.
+ Inception dates for Class A, B and L shares are November 22, 1991,
November 7, 1994 and January 4, 1993, respectively.
What's Inside
Your Investment in the
International All Cap Growth Portfolio .................................... 1
A Message from the Chairman ............................................... 2
Fund at a Glance .......................................................... 3
A Letter from the Portfolio Manager ....................................... 4
Historical Performance .................................................... 9
Growth of $10,000 .........................................................12
Schedule of Investments ...................................................13
Statement of Assets and Liabilities .......................................16
Statement of Operations ...................................................17
Statements of Changes in Net Assets .......................................18
Notes to Financial Statements .............................................19
Financial Highlights ......................................................25
Tax Information ...........................................................27
Independent Auditors' Report ..............................................28
[LOGO OF SMITH BARNEY]
Investment Products: Not FDIC Insured . Not Bank Guaranteed . May Lose Value
<PAGE>
--------------------------------------------------------------------------------
YOUR INVESTMENT IN THE SMITH BARNEY INTERNATIONAL
ALL CAP GROWTH PORTFOLIO
--------------------------------------------------------------------------------
Portfolio managers Jeff Russell and James Conheady focus on identifying
companies headquartered outside the United States that they believe possess
strong financials and solid business plans. Traveling nearly half a million
miles on an annual basis, Jeff and James seek to invest in foreign companies
that are exhibiting above-average earnings growth and are led by an effective
management team.
[GRAPHIC]
Solid Companies Positioned for Rapid Growth
Jeff and James use a rigorous process in carefully evaluating companies, seeking
dynamic businesses that they believe show a potential for superior, consistent
revenue and earnings growth. Jeff and James also look to own companies they deem
to be strategically positioned to capitalize on the potential growth of the
global economy.
[GRAPHIC]
The Benefits of Investing Abroad
Jeff and James are firm believers that a world of opportunity exists beyond the
United States. Over the last 30 years, international stock markets have offered
returns similar to those offered by the U.S. stock market. In fact, while the
U.S. stock market, as measured by the Wilshire 5000 Total Market Index,/1/ has
experienced strong growth over the last five years, international markets, as
measured by the Morgan Stanley Capital International Europe, Australasia and Far
East Index/2/ posted better returns. Past performance is not indicative of
future returns.
[GRAPHIC]
Portfolio Manager-Driven Funds -- The Classic Series
The Classic Series is a selection of Smith Barney mutual funds that invest
across asset classes and sectors, utilizing a range of strategies in order to
achieve their objectives. Classic Series funds enable investors to participate
in a mutual fund in which investment decisions are determined by portfolio
managers based on each fund's investment objectives and guidelines. Classic
Series funds invest across asset classes and sectors, utilizing a range of
strategies in order to achieve their objectives.
[GRAPHIC]
A Distinguished History of Managing Your Serious Money
Founded in 1873 and 1892, respectively, the firms of Charles D. Barney and
Edward B. Smith were among the earliest providers of securities information,
research and transactions. Merged in 1937, Smith Barney & Co. offered its
clients a powerful, blue-chip investment capability able to provide timely
information, advice and insightful asset management. Today, SSB Citi Asset
Management Group ("SSB Citi") unites the distinguished history of Smith Barney
with the unparalleled global reach of its parent, Citigroup.
At SSB Citi, you gain access to blue-chip management, delivered professionally.
We are proud to offer you, the serious investor, a variety of managed solutions.
--------
1 The Wilshire 5000 Total Market Index tracks the performance of over 5,000
listed and unlisted stocks trading on the NYSE, AMEX and over the counter,
weighted by capitalization and including reinvested dividends. Please note,
an investor cannot invest directly in an index.
2 The Morgan Stanley Capital International Europe, Australasia and Far East
Index consists of stocks traded on 16 exchanges in Europe, Australia and
the Far East, weighted by capitalization. Please note, an investor cannot
invest directly in an index.
1 Smith Barney International All Cap Growth Fund
2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
A MESSAGE FROM THE CHAIRMAN
--------------------------------------------------------------------------------
The world's economies, so far in the new millennium, have faced a number of
challenges, such as the elimination of trade barriers and the deregulation of
international labor markets.
Over the past few months, the global economy has become more balanced. While the
U.S. economy has experienced a cooling period, other countries' economies such
as Brazil and China have been strong performers. Recently, we have also seen the
rationalization of stock prices, especially in the technology sector. Investor
enthusiasm over e-commerce and "New Economy"/1/ stocks has subsided, resulting
in what we believe are generally more reasonable valuations.
[PHOTO]
HEATH B. MCLENDON
CHAIRMAN
As the global economy becomes more balanced and the U.S. markets are marked by
higher volatility and concerns that the bull market in stocks may be running out
of steam, we at SSB Citi Asset Management Group ("SSB Citi") believe it has
become more important than ever to remain globally diversified. Despite the
tremendous returns of the U.S. stock market in the past few years, the U.S. has
yet to be the top-performing market in any one year over the last two decades.
Of course there are certain risks in international investing, which may pose a
greater risk than investing in the U.S., such risks include currency
fluctuations, different accounting standards and less financial regulation and
social and economic stability.
We believe that your serious money demands professional management. Since 1937,
Smith Barney has managed the serious money of individuals, their families and
their businesses. Today, with over $398.6 billion in assets under management,/2/
we believe that SSB Citi offers choices and solutions, uniting the distinguished
history of Smith Barney with the unparalleled global reach of its parent,
Citigroup.
The Smith Barney World Funds - International All Cap Growth Portfolio
("Portfolio") provides you with the opportunity to participate in foreign
markets and capitalize on expanding overseas opportunities by investing
principally in a diversified portfolio of stocks of foreign companies.
As international stock investors, portfolio managers Jeffrey Russell and James
Conheady look for what they deem to be promising companies that have experienced
and effective management teams that are committed to long-term growth, above
average earnings growth and competitive advantages. They believe that while a
sector or region may have winners and losers, great companies stand out for
reasons of marketplace strategy, leadership and management.
When you invest with SSB Citi you can do so with the confidence that your
interests come first, your investment success is paramount and that the ultimate
in resources is being committed to your financial success.
Thank you for your confidence in our investment management approach.
Sincerely,
/s/ Heath B. McLendon
Heath B. McLendon
Chairman
November 22, 2000
--------
1 The New Economy represents those companies in the technology,
telecommunications and Internet sectors.
--------
2 As of October 31, 2000. This figure represents SSB Citi's assets under
management for retail, institutional, money and separate accounts.
2 Smith Barney International All Cap Growth Fund
2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Smith Barney International All Cap Growth Portfolio at a Glance (unaudited)
--------------------------------------------------------------------------------
Top Ten Holdings*+
1. Tomra Systems ASA ..................................................... 5.3%
2. Serco Group PLC ....................................................... 5.1
3. Nokia Oyj ............................................................. 4.2
4. Capita Group PLC ...................................................... 4.1
5. Hutchison Whampoa Ltd. ................................................ 3.7
6. Misys PLC ............................................................. 3.0
7. Hays PLC .............................................................. 2.9
8. Vodafone AIrTouch PLC ................................................. 2.8
9. Celestica Inc. ........................................................ 2.7
10. Mettler-Toledo International Ic. ...................................... 2.7
Diversification of Common Stock*+
5.7% Canada
4.2% Finland
4.5% France
6.2% Hong Kong
5.8% Ireland
16.2% Japan
5.7% Norway
6.7% Switzerland
25.2% United Kingdom
19.8% Other
Investment Breakdown*++
22.1% The Americas
0.9% Australia
3.1% Africa/Middle East
20.8% Asia/Pacific
53.1% Europe
* All information is as of October 31, 2000. Please note that Portfolio
holdings are subject to change.
+ As a percentage of total common stock.
++ As a percentage of total investments.
3 Smith Barney International All Cap Growth Fund
2000 Annual Report to Shareholders
<PAGE>
Dear Shareholder,
We are pleased to provide the annual report for the Smith Barney World Funds,
Inc. - International All Cap Growth Portfolio ("Portfolio") for the period ended
October 31, 2000. In this report we have summarized the period's prevailing
economic and market conditions and outlined our investment strategy. A detailed
summary of the Portfolio's performance can be found in the appropriate sections
that follow. We hope you find this report to be useful and informative.
Performance Update
The past twelve months included a series of extraordinary financial market
events that influenced significantly the net asset value ("NAV")/1/ per share of
the Portfolio. For the year ended October 31, 2000, the Portfolio's Class A
shares, without and with sales charges, reported negative total returns of 1.62%
and 6.55%, respectively. In comparison, the Morgan Stanley Capital International
Europe, Australasia and Far East Index ("MSCI EAFE")/2/ returned a negative
2.90% for the same period.
The Portfolio's fiscal year began with several months of strong appreciation as
an unquenchable appetite by investors for telecommunications, media and
technology (TMT) stocks drove a very sharp rally of global markets. Year 2000
technology apprehensions and concerns of economic disruption were quickly
dispelled. The Y2K transition appeared to be a strong testament to the foresight
of capital and human resources dedicated to fix that potential technological
nightmare.
Overlooked by many during the favorable global capital markets environment of
late 1999, however, were several trends that unnerved many investors as 2000
progressed:
. The U.S. Federal Reserve Board ("Fed") began a series of short-term
interest rate increases, designed to break the strong growth trajectory of
the U.S. economy and cool stock market euphoria;
. The new European currency, the euro,/3/ continued the trend of weakness
established early in 1999, declining further versus the U.S. dollar during
the Portfolio's fiscal year. Moreover, the euro's fall caused corporate
earnings dislocations on both sides of the Atlantic;
. Energy prices rose dramatically, especially when denominated in euros,
raising inflationary expectations in Europe and dampening consumer
sentiment; and
. Subsequent interest rate increases moderated global growth expectations, in
turn causing several rounds of earnings downgrades, especially for high
profile technology names.
Selected industry sectors incurred new challenges. The European
telecommunications operators, for example, embarked on an aggressive competitive
bidding process to secure third generation wireless communications licenses. The
victorious bids, in many nationalities, were significantly above initial
expectations, causing investor apprehension about ultimate returns on capital
invested in paying for those licenses and capital spending.
1 NAV is calculated by subtracting total liabilities from the closing value
of all securities held by the Portfolio (plus all other assets) and
dividing the results (total net assets) by the total number of shares
outstanding for each class of shares. The NAV fluctuates with changes in
the value of the securities in which the Portfolio has invested.
2 MSCI EAFE is an unmanaged index of common stocks of companies located in
Europe, Australasia and the Far East. Please note, an investor cannot
invest directly in an index.
3 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.
4 Smith Barney International All Cap Growth Fund
2000 Annual Report to Shareholders
<PAGE>
Portfolio Outlook
The composition of the Portfolio shifted during the period, primarily due to the
outperformance of European stocks. The Portfolio's allocation of 54% Europe, 40%
Asia, and 6% Canada, Latin America and other emerging markets at the beginning
of the year changed to 63% Europe, 28% in Asia, and 8% in Canada, Latin America
and other emerging markets as of October 31, 2000.
--------------------------------------------------------------------------------
THE SILVER LINING OF THE EURO'S DECLINE HAS BEEN THE IMPROVEMENT IN EUROPEAN
EXPORT COMPETITIVENESS. HOWEVER, WE THINK THE POTENTIAL FOR IMPORTED INFLATION
CLEARLY EXISTS. MOREOVER, RECENT ROUNDS OF INTEREST RATE INCREASES HAVE COOLED
THE UPTICK IN ECONOMIC ACTIVITY. NEVERTHELESS, EUROPE'S GROWTH IS REDUCING ITS
CHRONICALLY HIGH LEVELS OF UNEMPLOYMENT.
--------------------------------------------------------------------------------
Europe
European stock markets showed relatively solid performance during much of the
period when measured in local currencies. Yet the fall of the euro dramatically
lowered returns for dollar-based investors. In addition, we think the decline of
the euro versus the U.S. dollar appears to be due to growth and interest rate
differentials favoring the U.S. currency. Global portfolio flows into the U.S.
also pressured the euro, as did inconsistent policy pronouncements from the
European Central Bank (ECB). At the end of the Portfolio's fiscal year, the ECB
intervened in the currency markets in order to stabilize the euro.
Asia
The Asian stock markets were relatively poor performers during the period. In
our opinion, several factors weighed on Asian markets. First, the monetary
policy of many Asian economies is tied to the U.S. interest rate cycle through
currency links. As rates rose in the U.S., Asian stock markets were pressured.
Second, many of these markets have high representation of technology shares,
such as the Korean stock market. As global technology earnings came under
question, the Asian economies, as key manufacturers and assemblers of components
and semiconductors, were subject to forecast downgrades. Finally, political
transitions in several Asian economies (e.g. Taiwan) caused regional investor
concerns to rise.
In contrast with our optimism about Japanese restructuring at this time a year
ago, the pace of change in Japan has slowed. The financial system is being
rationalized. Several high profile bankruptcies of insurance and other companies
can be positive for the economy in the long run. In the short term, however,
these events have been a stark reminder to Japanese consumers and savers of the
fragility of Japan's recovery.
Emerging Markets
Emerging markets suffered this year. While selected commodity prices firmed,
benefiting the generally commodity-dependent export economies, we feel that
investor-aversion to the heightened political risk in many less developed
economies weighed on these markets. We have limited emerging market investments
and we do not anticipate increasing our allocation.
5 Smith Barney International All Cap Growth Fund
2000 Annual Report to Shareholders
<PAGE>
Top Holdings Update
--------------------------------------------------------------------------------
OUR TOP HOLDINGS IN THE PORTFOLIO REFLECT AN ECLECTIC MIX OF INVESTMENT THEMES
AND PORTFOLIO EMPHASIS. AND THE PORTFOLIO'S TOP HOLDINGS ARE ILLUSTRATIVE OF OUR
GROWTH-ORIENTED STOCK SELECTION CRITERIA, WHICH INCLUDE STRONG FINANCIAL
STRUCTURES, LARGE BUSINESS OPPORTUNITIES AND WHAT WE DEEM TO BE STABLE AND
VISIONARY MANAGEMENTS.
--------------------------------------------------------------------------------
Tomra Systems ASA of Norway manufactures reverse vending machinery for global
beverage containers. The trend toward increased consumer deposit legislation,
especially in Germany, benefits deployment of Tomra's products and materials
recycling processes.
Serco Group PLC of the United Kingdom is a leader in contract government
outsourcing. Serco operates a diverse range of central government functions,
including defense maintenance and training, transportation and logistics
systems, and research facilities.
Nokia Oyj is Finland's leading exporter, with a world-class position in wireless
infrastructure and mobile handsets. Nokia's technology visionaries continue to
shape the wireless communications industry. The stock has been a core holding in
the Portfolio for ten years.
CapitaGroup PLC is a leader in business process outsourcing in the United
Kingdom to the private sector and local government institutions. A host of
services are provided to clients, including customer service functions, human
resources, training and software solutions.
Hutchison Whampoa Ltd. of Hong Kong is a conglomerate with special strengths in
telecommunications, property development and port operation. We think management
has an uncanny ability to opportunistically capture value in a diverse host of
business sectors.
Misys PLC of the United Kingdom develops software solutions that improve the
productivity of financial institutions, health care providers and insurance
intermediaries.
Hays PLC of the United Kingdom provides a range of specialist and quality
business to business services 24 hours a day to industrial, commercial and
professional customers throughout Europe.
Vodafone AirTouch PLC of the United Kingdom is the global leader in the
operation of wireless communications networks with concentration in Europe and
the United States. Systems controlled by the company or in which Vodafone has an
equity investment served 116 million subscribers at September 2000.
6 Smith Barney International All Cap Growth Fund
2000 Annual Report to Shareholders
<PAGE>
Celestica Inc. of Canada provides contract electronic manufacturing services to
original equipment manufacturers. Celestica manufactures, assembles and tests a
host of products for prominent global electronic companies.
Mettler-Toledo International Inc. of Switzerland manufactures precision weighing
and measurement instruments. A diverse customer base in the laboratory, retail
and industrial sectors increasingly demand Mettler's highly sophisticated
instruments and information management solutions.
In closing, the Portfolio's past fiscal year has been marked by exceptional
investment challenges from a combination of currency movements, government
policy changes and sharp swings of investor sentiment. The result: sharp stock
market volatility.
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. Russel /s/ James B. Conheady
Jeffrey J. Russell, CFA James B. Conheady
Vice President Vice President
November 22, 2000
The information provided in this letter represents the opinion of the manager
and is not intended to be a forecast of future events, a guarantee of future
results nor investment advice. Further, there is no assurance that certain
securities will remain in or out of the Portfolio. Please refer to pages 13
through 15 for a list and percentage breakdown of the Portfolio's holdings.
Also, please note any discussion of the Portfolio's holdings is as of October
31, 2000 and is subject to change.
7 Smith Barney International All Cap Growth Fund
2000 Annual Report to Shareholders
<PAGE>
Portfolio manager Jeff Russell as featured in our new national advertising
campaign appearing in The Wall Street Journal, Barron's and The New York Times.
JEFF RUSSELL
PORTFOLIO MANAGER
JEFF RUSSELL DOESN'T
RULE THE WORLD.
HIS INVESTORS, HOWEVER, MIGHT DISAGREE.
There's a world of opportunity out there. If anyone, Jeff Russell should know.
He's spent the last few years seizing it. Traveling nearly half a million miles,
he's found hundreds of foreign companies more than worthy of his fund's
investment. 80 of them make up his International All Cap Growth Portfolio. True,
it's hard work to build a fund as diversified as Jeff's; you have to hand-pick
the companies one at a time. Even if it means flying around the world to do it.
To learn more about the Smith Barney International All Cap Growth Portfolio and
Jeff Russell's investment philosophy, call us at 1-888-SERIOUS, ext. 1610 or
visit www.smithbarney.com/mutualfunds for a free prospectus. The prospectus
contains more complete information, including fees and expenses. Please read it
carefully before you invest or send money.
Your Serious Money. Professionally Managed.SM
[LOGO OF SMITH BARNEY MUTUAL FUNDS]
CALL 1-888-SERIOUS, EXT. 1610 OR VISIT WWW.SMITHBARNEY.COM/MUTUAL FUNDS
Investment Products: Not FDIC Insured . Not Bank Guaranteed . May Lose Value
(c) SALOMON SMITH BARNEY INC. Member NASD, SIPC. Your Serious Money.
Professionally Managed. is a service mark of Salomon Smith Barney Inc.
8 Smith Barney International All Cap Growth Fund
2000 Annual Report to Shareholders
<PAGE>
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Historical Performance -- Class A Shares
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
==============================================================================================================
<S> <C> <C> <C> <C> <C>
10/31/00 $26.75 $24.49 $0.38 $1.86 (1.62)%
--------------------------------------------------------------------------------------------------------------
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
==============================================================================================================
</TABLE>
--------------------------------------------------------------------------------
Historical Performance -- Class B Shares
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
=============================================================================================================
<S> <C> <C> <C> <C> <C>
10/31/00 $26.13 $23.89 $0.12 $1.86 (2.43)%
-------------------------------------------------------------------------------------------------------------
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
=============================================================================================================
</TABLE>
--------------------------------------------------------------------------------
Historical Performance -- Class L Shares
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
--------------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
===========================================================================================================
<S> <C> <C> <C> <C> <C>
10/31/00 $25.76 $23.53 $0.12 $1.86 (2.42)%
-----------------------------------------------------------------------------------------------------------
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>
9 Smith Barney International All Cap Growth Fund
| 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Historical Performance -- Class Y Shares
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
-----------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
<S> <C> <C> <C> <C> <C>
=====================================================================================================
10/31/00 $26.88 $24.60 $0.49 $1.86 (1.31)%
-----------------------------------------------------------------------------------------------------
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
=====================================================================================================
</TABLE>
--------------------------------------------------------------------------------
Historical Performance -- Class Z Shares
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
------------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
=====================================================================================================
<S> <C> <C> <C> <C> <C>
10/31/00 $26.85 $24.58 $0.49 $1.86 (1.28)%
------------------------------------------------------------------------------------------------------
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
======================================================================================================
</TABLE>
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
--------------------------------------------------------------------------------
Average Annual Total Returns
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Without Sales Charges(1)
---------------------------------------------------------------------
Class A Class B Class L Class Y Class Z
<S> <C> <C> <C> <C> <C>
================================================================================================================
Year Ended 10/31/00 (1.62)% (2.43)% (2.42)% (1.31)% (1.28)%
----------------------------------------------------------------------------------------------------------------
Five Years Ended 10/31/00 9.17 8.28 8.28 9.55 9.55
----------------------------------------------------------------------------------------------------------------
Ten Years Ended 10/31/00 11.44 N/A N/A N/A N/A
----------------------------------------------------------------------------------------------------------------
Inception* through 10/31/00 10.92 5.77 9.75 7.24 6.99
================================================================================================================
With Sales Charges(2)
---------------------------------------------------------------------
Class A Class B Class L Class Y Class Z
================================================================================================================
Year Ended 10/31/00 (6.55)% (7.00)% (4.30)% (1.31)% (1.28)%
----------------------------------------------------------------------------------------------------------------
Five Years Ended 10/31/00 8.06 8.13 8.07 9.55 9.55
----------------------------------------------------------------------------------------------------------------
Ten Years Ended 10/31/00 10.87 N/A N/A N/A N/A
----------------------------------------------------------------------------------------------------------------
Inception* through 10/31/00 10.53 5.77 9.61 7.24 6.99
</TABLE>
10 Smith Barney International All Cap Growth Fund
2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Cumulative Total Returns
--------------------------------------------------------------------------------
Without Sales Charges(1)
================================================================================
Class A (10/31/90 through 10/31/00)(3) 195.37%
--------------------------------------------------------------------------------
Class B (Inception* through 10/31/00) 39.92
--------------------------------------------------------------------------------
Class L (Inception* through 10/31/00) 107.12
--------------------------------------------------------------------------------
Class Y (Inception* through 10/31/00) 56.20
--------------------------------------------------------------------------------
Class Z (Inception* through 10/31/00) 49.82
================================================================================
(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 also 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.
11 Smith Barney International All Cap Growth Fund
2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Historical Performance (unaudited)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Growth of $10,000 Invested in Class A Shares of the
International All Cap Growth Portfolio vs. MSCI EAFE Index+
--------------------------------------------------------------------------------
October 1990 -- October 2000
[GRAPH]
MSCI
International EAFE
Date Equity Index
10/90 9,497 10,000
10/91 12,274 10,731
10/92 12,488 9,346
10/93 17,757 12,887
10/94 19,540 14,225
10/95 18,087 14,215
10/96 19,856 15,751
10/97 21,703 16,526
10/98 21,735 18,171
10/99 28,515 22,357
10/00 28,052 21,709
+ Hypothetical illustration of $10,000 invested in Class A shares on October
31, 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 October 31, 2000. Illustration
includes historical return information related to the Fenimore
International Fund, which was the predecessor fund, for the period from
October 31, 1990 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.
12 Smith Barney International All Cap Growth Fund
2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments October 31, 2000
--------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
STOCK -- 84.1%
Australia -- 0.9%
2,790,000 ERG Ltd. $ 13,662,579
--------------------------------------------------------------------------------
Canada -- 4.8%
196,500 BCE Emergis Inc.++ 9,134,747
140,000 C-MAC Industries Inc.++ 7,883,192
485,000 Celestica Inc.++ 34,549,859
496,000 Patheon, Inc.++ 4,481,634
560,000 The Toronto Dominion Bank 15,381,392
--------------------------------------------------------------------------------
71,430,824
--------------------------------------------------------------------------------
Finland -- 3.5%
1,229,000 Nokia Oyj 52,539,830
--------------------------------------------------------------------------------
France -- 3.8%
174,416 Axa+ 23,062,295
363,400 Credit Lyonnais+ 12,416,218
149,800 Groupe Danone+ 20,924,766
--------------------------------------------------------------------------------
56,403,279
--------------------------------------------------------------------------------
Germany -- 3.4%
65,400 Aixtron AG 9,118,748
40,000 Allianz AG 13,449,737
108,000 SAP AG+ 21,191,727
19,000 SAP AG ADR+ 969,000
274,000 Stinnes AG++ 6,502,797
--------------------------------------------------------------------------------
51,232,009
--------------------------------------------------------------------------------
Hong Kong -- 5.2%
1,233,495 HSBC Holdings PLC+ 17,160,211
3,751,000 Hutchison Whampoa Ltd.+ 46,532,196
7,904,000 Li & Fung Ltd. 14,695,028
--------------------------------------------------------------------------------
78,387,435
--------------------------------------------------------------------------------
Ireland -- 4.9%
2,151,496 Bank of Ireland++ 16,558,388
4 CRH PLC++ 60
1,342,000 Grafton Group PLC 27,299,542
6,574,000 Independent News & Media PLC 20,616,885
1,579,402 Irish Continental Group PLC 8,701,570
--------------------------------------------------------------------------------
73,176,445
--------------------------------------------------------------------------------
Israel -- 1.1%
200,000 Amdocs Ltd.+++ 12,962,500
514,000 BATM Advanced Communications Ltd. 3,806,522
--------------------------------------------------------------------------------
16,769,022
--------------------------------------------------------------------------------
Italy -- 0.9%
1,552,000 Telecom Italia Mobiles S.p.A.+ 13,273,164
--------------------------------------------------------------------------------
See Notes to Financial Statements.
13 Smith Barney International All Cap Growth Fund
2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (continued) October 31, 2000
--------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Japan -- 13.6%
576,000 Canon, Inc. $22,841,652
385,000 Hosiden Corp. 12,270,354
150,000 Matsushita Communication Industrial Co., Ltd.+ 19,644,656
211,000 Murata Manufacturing Co., Ltd. 25,237,292
1,675,000 Nippon Sheet Glass Co.+ 25,464,786
1,857 NTT Data Communication Corp.+ 14,455,994
300 Seven-Eleven Japan Co., Ltd. 19,507
1,159,000 Sharp Corp. 14,754,189
113,700 SOFTBANK CORP. 6,820,542
380,200 SONY CORP. 30,363,073
821,000 Terumo Corp. 23,233,721
92,800 Trend Micro Inc.+ 8,753,915
--------------------------------------------------------------------------------
203,859,681
--------------------------------------------------------------------------------
Mexico -- 1.4%
9,313,000 Wal-Mart de Mexico SA de CV++ 21,164,803
--------------------------------------------------------------------------------
Netherlands -- 0.1%
57,000 United Pan-Europe Communication N.V.++ 997,669
42,000 VIA NET.WORKS, Inc.++ 302,593
--------------------------------------------------------------------------------
1,300,262
--------------------------------------------------------------------------------
Norway -- 4.8%
369,000 Petroleum Geo-Services ASA++ 5,050,687
1,676,400 Tomra Systems ASA+ 67,232,643
--------------------------------------------------------------------------------
72,283,330
--------------------------------------------------------------------------------
Singapore -- 2.0%
1,067,000 DelGro Corp. Ltd. 2,953,927
7,514,500 Singapore Technologies Engineering Ltd. 12,113,947
1,491,000 Venture Manufacturing (Singapore) Ltd. 14,438,621
--------------------------------------------------------------------------------
29,506,495
--------------------------------------------------------------------------------
South Africa -- 2.0%
193,000 Anglo American Platinum Corp. Ltd.+ 7,527,273
2,624,000 Dimension Data Holdings Ltd.+ 22,634,156
--------------------------------------------------------------------------------
30,161,429
--------------------------------------------------------------------------------
Spain -- 2.8%
1,146,000 Amadeus Global Travel Distribution SA -
Class A Shares++ 9,354,110
1,602,000 Indra Sistemas SA 16,104,187
882,000 Telefonica SA+++ 16,798,220
--------------------------------------------------------------------------------
42,256,517
--------------------------------------------------------------------------------
Sweden -- 2.0%
400,000 Enea Data AB+ 1,936,127
485,000 Framtidsfabriken AB+++ 1,273,003
697,000 Securitas AB+ 14,816,467
650,000 Skandia Forsakrings AB 10,995,508
--------------------------------------------------------------------------------
29,021,105
--------------------------------------------------------------------------------
See Notes to Financial Statements.
14 Smith Barney International All Cap Growth Fund
2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (continued) October 31, 2000
--------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Switzerland -- 5.7%
4,100 Julius Baer Holding Ltd. $ 20,293,643
727,800 Mettler-Toledo International Inc.++ 33,979,162
20,000 Novartis AG 30,332,017
--------------------------------------------------------------------------------
84,604,822
--------------------------------------------------------------------------------
United Kingdom -- 21.2%
6,645,000 Capita Group PLC 51,044,129
935,500 Colt Telecom Group PLC++ 29,790,484
930,000 Energis PLC++ 7,927,133
3,157,700 Granada Compass PLC++ 27,351,204
829,375 Guardian IT PLC 11,200,283
6,569,000 Hays PLC+ 36,247,495
550,000 Logica PLC 16,132,779
3,658,955 Misys PLC 38,042,165
7,000,000 Serco Group PLC 64,291,522
8,366,736 Vodafone AirTouch PLC 34,898,889
--------------------------------------------------------------------------------
316,926,083
--------------------------------------------------------------------------------
TOTAL STOCK
(Cost -- $728,677,033) 1,257,959,114
================================================================================
WARRANTS++ -- 0.0%
Venezuela -- 0.0%
7,140 Republic of Venezuela Warrants,
Expire 4/15/20 (Cost -- $0) 0
================================================================================
SUB-TOTAL INVESTMENTS
(Cost -- $728,677,033) 1,257,959,114
================================================================================
FACE
AMOUNT SECURITY VALUE
================================================================================
REPURCHASE AGREEMENT -- 15.9%
$237,800,000 CIBC Wood Gundy Securities Inc., 6.400%
due 11/1/00; Proceeds at maturity --
$237,842,276; (Fully collateralized by
U.S. Treasury Notes, 5.000% to 6.500%
due 2/28/01 to 10/31/01; Market value --
$242,556,383) (Cost -- $237,800,000) 237,800,000
================================================================================
TOTAL INVESTMENTS
(Cost -- $966,477,033*) $1,495,759,114
================================================================================
++ Non-income producing security.
+ All or a portion of this security is on loan (See Note 7).
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
15 Smith Barney International All Cap Growth Fund
2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Statement of Assets and Liabilities October 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments, at cost $ 728,677,033
Repurchase agreement, at cost 237,800,000
Foreign currency, at cost 36,772
============================================================================================================================
Investments, at value $1,257,959,114
Repurchase agreement, at value 237,800,000
Foreign currency, at value 37,239
Collateral for securities on loan (Note 7) 213,135,677
Receivable for Fund shares sold 61,125,622
Dividends and interest receivable 912,179
Receivable for securities sold 695,000
----------------------------------------------------------------------------------------------------------------------------
Total Assets 1,771,664,831
----------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities on loan (Note 7) 213,135,677
Payable to bank 8,811,354
Payable for Fund shares purchased 1,034,756
Management fees payable 1,021,104
Distribution fees payable 169,480
Accrued expenses 868,864
----------------------------------------------------------------------------------------------------------------------------
Total Liabilities 225,041,235
----------------------------------------------------------------------------------------------------------------------------
Total Net Assets $1,546,623,596
============================================================================================================================
NET ASSETS:
Par value of capital shares $ 63,584
Capital paid in excess of par value 791,837,120
Overdistributed net investment income (438,362)
Accumulated net realized gain from security transactions and foreign currencies 225,893,597
Net unrealized appreciation of investments and foreign currencies 529,267,657
----------------------------------------------------------------------------------------------------------------------------
Total Net Assets $1,546,623,596
============================================================================================================================
Shares Outstanding:
Class A 27,890,843
-------------------------------------------------------------------------------------------------------------------------
Class B 8,066,592
-------------------------------------------------------------------------------------------------------------------------
Class L 8,082,490
-------------------------------------------------------------------------------------------------------------------------
Class Y 13,747,972
-------------------------------------------------------------------------------------------------------------------------
Class Z 5,796,172
-------------------------------------------------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $ 24.49
-------------------------------------------------------------------------------------------------------------------------
Class B * $ 23.89
-------------------------------------------------------------------------------------------------------------------------
Class L ** $ 23.53
-------------------------------------------------------------------------------------------------------------------------
Class Y (and redemption price) $ 24.60
-------------------------------------------------------------------------------------------------------------------------
Class Z (and redemption price) $ 24.58
-------------------------------------------------------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 5.26% of net asset value per share) $ 25.78
-------------------------------------------------------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset value per share) $ 23.77
============================================================================================================================
</TABLE>
* Redemption price is NAV of Class B shares reduced by a 5.00% CDSC 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.
16 Smith Barney International All Cap Growth Fund
2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Statement of Operations For the Year Ended October 31, 2000
--------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $10,917,733
Interest 5,057,704
Less: Foreign withholding tax (1,411,616)
--------------------------------------------------------------------------------
Total Investment Income 14,563,821
--------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 13,571,951
Distribution fees (Note 2) 5,900,106
Shareholder and system servicing fees 1,024,742
Custody 578,000
Audit and legal 99,000
Registration fees 65,000
Shareholder communications 63,400
Directors' fees 30,300
Other 9,846
--------------------------------------------------------------------------------
Total Expenses 21,342,345
--------------------------------------------------------------------------------
Net Investment Loss (6,778,524)
--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCIES (NOTE 3):
Realized Gain (Loss) From:
Security transactions (excluding short-term securities) 232,659,344
Foreign currency transactions (857,570)
--------------------------------------------------------------------------------
Net Realized Gain 231,801,774
--------------------------------------------------------------------------------
Decrease in Net Unrealized Appreciation (Note 8) (78,543,209)
--------------------------------------------------------------------------------
Net Gain on Investments and Foreign Currencies 153,258,565
--------------------------------------------------------------------------------
Increase in Net Assets From Operations $146,480,041
================================================================================
See Notes to Financial Statements.
17 Smith Barney International All Cap Growth Fund
2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Statements of Changes in Net Assets For the Years Ended October 31,
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
===================================================================================================================
<S> <C> <C>
OPERATIONS:
Net investment loss $ (6,778,524) $ (3,339,566)
Net realized gain 231,801,774 127,118,653
Increase (decrease) in net unrealized appreciation (78,543,209) 266,998,258
-------------------------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 146,480,041 390,777,345
-------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (17,892,638) --
Net realized gains (95,653,094) --
-------------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From Distributions to Shareholders (113,545,732) --
-------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 9):
Net proceeds from sale of shares 15,294,970,621 7,522,591,959
Net asset value of shares issued in connection with
the transfer of the Smith Barney World Funds, Inc.--
International Balanced Portfolio net assets (Note 8) 13,062,062 --
Net asset value of shares issued for reinvestment of dividends 81,854,129 --
Cost of shares reacquired (15,344,024,190) (7,683,231,190)
-------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Fund Share Transactions 45,862,622 (160,639,231)
-------------------------------------------------------------------------------------------------------------------
Increase in Net Assets 78,796,931 230,138,114
NET ASSETS:
Beginning of year 1,467,826,665 1,237,688,551
-------------------------------------------------------------------------------------------------------------------
End of year* $ 1,546,623,596 $ 1,467,826,665
===================================================================================================================
* Includes undistributed (overdistributed) net investment income of: $ (438,362) $ 4,178,735
===================================================================================================================
</TABLE>
See Notes to Financial Statements.
18 Smith Barney International All Cap Growth Fund
2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements
--------------------------------------------------------------------------------
1. Significant Accounting Policies
The International All Cap Growth Portfolio ("Portfolio"), formerly known as the
International Equity 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, 2000, reclassification's 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. Accordingly, a portion of
overdistributed net investment income amounting to $14,828,402 was reclassified
to paid-in-capital. 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.
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.
19 Smith Barney International All Cap Growth Fund
2000 Annual Report to Shareholders
<PAGE>
Notes to Financial Statements (continued)
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"), another subsidiary of Citigroup, acts as
the Portfolio's transfer agent and PFPC Global Fund Services ("PFPC") acts as
the Portfolio's 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 year ended October 31, 2000,
the Portfolio paid transfer agent fees of $844,282 to CFTC.
Effective June 5, 2000, Salomon Smith Barney Inc. ("SSB"), another subsidiary of
SSBH, became the Fund's distributor replacing CFBDS, Inc. ("CFBDS"). In
addition, SSB acts as the primary broker for the Fund's portfolio agency
transactions. Certain other broker-dealers continue to sell Portfolio shares to
the public as members of the selling group. For the year ended October 31, 2000,
SSB and its affiliates received $134,402 in brokerage commissions.
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 year ended October 31, 2000, CDSCs received by SSB were approximately:
Class A Class B Class L
================================================================================
CDSCs $13,000 $230,000 $38,000
================================================================================
For the year ended October 31, 2000, sales charges received by SSB and CFBDS
were approximately:
Class A Class L
================================================================================
Sales Charges $2,031,000 $400,000
================================================================================
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
year ended October 31, 2000, total Distribution Plan fees incurred were:
Class A Class B Class L
================================================================================
Distribution Plan Fees $1,500,417 $2,344,221 $2,055,468
================================================================================
All officers and one Director of the Fund are employees of SSB.
3. Investments
During the year ended October 31, 2000, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases $383,191,722
--------------------------------------------------------------------------------
Sales 635,868,253
================================================================================
At October 31, 2000, aggregate gross unrealized appreciation and depreciation of
investments for Federal income tax purposes were substantially as follows:
================================================================================
Gross unrealized appreciation $571,871,010
Gross unrealized depreciation (42,588,929)
--------------------------------------------------------------------------------
Net unrealized appreciation $529,282,081
================================================================================
20 Smith Barney International All Cap Growth Fund
2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
4. 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 October 31, 2000, the Portfolio held no purchased call or put option
contracts.
When a Portfolio writes a call or put option, an amount equal to the premium
received by the Portfolio is recorded as a liability, the value of which is
marked-to-market daily. When a written option expires, the Portfolio realizes a
gain. When the Portfolio enters into a closing purchase transaction, the
Portfolio realizes a gain or loss depending upon whether the cost of the closing
transaction is greater or less than the premium originally received, without
regard to any unrealized gain or loss on the underlying security, and the
liability related to such option is eliminated. When a written call option is
exercised the cost of the security sold will be decreased by the premium
originally received. When a written put option is exercised, the amount of the
premium originally received will reduce the cost of the security which the
Portfolio purchased upon exercise. When written index options are exercised,
settlement is made in cash.
The risk associated with purchasing options is limited to the premium originally
paid. The Portfolio enters into options for hedging purposes. The risk in
writing a call option is that the Portfolio gives up the opportunity to
participate in any increase in the price of the underlying security beyond the
exercise price. The risk in writing a put option is that the Portfolio is
exposed to the risk of loss if the market price of the underlying security
declines.
During the year ended October 31, 2000, the Portfolio did not enter into any
written covered call or put option contracts.
5. Futures Contracts
Initial margin deposits made upon entering into futures contracts are recognized
as assets. Securities equal to the initial margin amount are segregated by the
custodian in the name of the broker. Additional securities are also segregated
up to the current market value of the futures contract. During the period the
futures contract is open, changes in the value of the contract are recognized as
unrealized gains or losses by "marking-to-market" on a daily basis to reflect
the market value of the contract at the end of each day's trading. Variation
margin payments are received or made and recognized as assets due from or
liabilities due to broker, depending upon whether unrealized gains or losses are
incurred. When the contract is closed, the Portfolio records a realized gain or
loss equal to the difference between the proceeds from (or cost of) the closing
transactions and the Portfolio's basis in the contract.
The Portfolio enters into such contracts to hedge a portion of its portfolio.
The Portfolio bears the market risk that arises from changes in the value of the
financial instruments and securities indices (futures contracts).
At October 31, 2000, the Portfolio had no open futures contracts.
6. 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.
21 Smith Barney International All Cap Growth Fund
2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
7. Lending of Portfolio Securities
The Portfolio has an agreement with their custodian whereby the custodian may
lend securities owned by the Portfolio to brokers, dealers, and other
financial organizations. Fees earned by the 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 October 31, 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 $204,118,322.
At October 31, 2000, the cash collateral received for these securities on loan
was invested as follows:
Security Description Value
================================================================================
Time Deposits:
Banco Santander CH S.A. - London, 6.66% due 11/1/00 $ 10,529,735
Bank of Austria, 6.66% due 11/1/00 10,529,735
Bank of Ireland, 6.69% due 11/1/00 10,529,735
Banque Bruxelles Lambert, 6.66% due 11/1/00 10,529,735
Barclays Bank PLC, 6.66% due 11/1/00 10,529,735
Caisse Des Depots Et Consignations, 6.66% due 11/1/00 10,529,735
FirstStar Bank, G.C., 6.66% due 11/1/00 10,559,992
Nordiutsche Landesbank Singapore, 6.66% due 11/1/00 10,529,735
Toronto Dominion - London, 6.66% due 11/1/00 10,529,735
Wells Fargo Bank Minnesota N.A., G.C., 6.66% due 11/1/00 10,559,992
Commercial Paper:
Associates Corp. of North America, 6.65% due 11/1/00 10,527,789
GE Capital International, 6.66% due 11/1/00 10,558,039
UBS Finance (Delaware) Inc., 6.65% due 11/1/00 10,527,789
Repurchase Agreements:
Bear Stearns, 6.68% due 11/1/00 20,247,675
CS First Boston Corp., 6.68% due 11/1/00 22,693,393
J.P. Morgan Securities, 6.70% due 11/1/00 10,529,735
Morgan Stanley Dean Witter, 6.61% due 11/1/00 22,693,393
--------------------------------------------------------------------------------
Total $213,135,677
================================================================================
In addition to the above noted cash collateral, the Portfolio received
securities collateral with a market value of $826,528.
Interest income earned by the Portfolio from securities loaned for the year
ended October 31, 2000 was $653,689.
22 Smith Barney International All Cap Growth Fund
2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
8. 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.
9. Capital Shares
At October 31, 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 October 31, 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 $201,093,940 $120,897,860 $120,464,830 $247,560,200 $101,883,874
============================================================================================================
</TABLE>
23 Smith Barney International All Cap Growth Fund
2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 2000 October 31, 1999
--------------------------------- ----------------------------------
Shares Amount Shares Amount
============================================================================================================================
<S> <C> <C> <C> <C>
Class A
Shares sold 480,276,808 $ 13,654,022,611 277,740,518 $ 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 (476,277,455) (13,724,226,820) (277,604,093) (6,489,021,477)
-----------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 5,532,516 $ (24,582,417) 136,425 $ (23,678,030)
=============================================================================================================================
Class B
Shares sold 8,942,491 $ 266,981,360 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 (9,117,949) (272,424,693) (14,915,091) (339,020,342)
-----------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 410,813 $ 11,699,250 (1,357,059) $ (32,312,192)
=============================================================================================================================
Class L
Shares sold 44,745,549 $ 1,236,921,792 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 (44,083,495) (1,230,756,176) (31,396,364) (712,272,205)
-----------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 1,161,800 $ 20,560,019 (788,271) $ (20,803,788)
=============================================================================================================================
Class Y
Shares sold 2,586,862 $ 74,498,741 1,660,086 $ 38,367,414
Shares issued on reinvestment 192,780 5,794,976 -- --
Shares reacquired (2,211,891) (63,676,019) (4,840,726) (107,071,746)
-----------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 567,751 $ 16,617,698 (3,180,640) $ (68,704,332)
=============================================================================================================================
Class Z
Shares sold 2,197,951 $ 62,546,117 905,454 $ 20,704,531
Shares issued on reinvestment 398,350 11,962,437 -- --
Shares reacquired (1,910,070) (52,940,482) (1,538,727) (35,845,420)
-----------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 686,231 $ 21,568,072 (633,273) $ (15,140,889)
=============================================================================================================================
</TABLE>
24 Smith Barney International All Cap Growth Fund
2000 Annual Report to Shareholders
<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(1) 1998(1) 1997(1) 1996(1)
==============================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 26.75 $ 20.39 $ 20.36 $ 18.64 $ 17.15
------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss) (0.08) (0.03) (0.00)* (0.04) 0.01
Net realized and unrealized gain 0.06 6.39 0.03 1.77 1.65
------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.02) 6.36 0.03 1.73 1.66
------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income(2) (0.38) -- -- (0.01) (0.17)
Net realized gains (1.86) -- -- -- --
------------------------------------------------------------------------------------------------------------------------------
Total Distributions (2.24) -- -- (0.01) (0.17)
------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 24.49 $ 26.75 $ 20.39 $ 20.36 $ 18.64
------------------------------------------------------------------------------------------------------------------------------
Total Return (1.62)% 31.19% 0.15% 9.30% 9.78%
------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $683,133 $598,043 $453,029 $464,796 $513,870
------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(3) 1.21% 1.28% 1.28% 1.31% 1.35%
Net investment income (loss) (0.29) (0.13) (0.00)** (0.18) 0.17
------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 26% 31% 25% 35% 46%
==============================================================================================================================
Class B Shares 2000(1) 1999(1) 1998(1) 1997(1) 1996(1)
==============================================================================================================================
Net Asset Value, Beginning of Year $ 26.13 $ 20.08 $ 20.22 $ 18.65 $ 17.17
------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss (0.33) (0.23) (0.18) (0.20) (0.08)
Net realized and unrealized gain 0.07 6.28 0.04 1.77 1.60
------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.26) 6.05 (0.14) 1.57 1.52
------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income(2) (0.12) -- -- -- (0.04)
Net realized gains (1.86) -- -- -- --
------------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.98) -- -- -- (0.04)
------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 23.89 $ 26.13 $ 20.08 $ 20.22 $ 18.65
------------------------------------------------------------------------------------------------------------------------------
Total Return (2.43)% 30.13% (0.69)% 8.42% 8.89%
------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $192,707 $200,071 $180,980 $231,148 $212,294
------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(3) 2.06% 2.08% 2.09% 2.11% 2.11%
Net investment loss (1.15) (1.01) (0.84) (0.95) (0.58)
------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 26% 31% 25% 35% 46%
==============================================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) Distributions from net investment income include short-term capital gains,
if any, for Federal income tax purposes.
(3) During the year ended October 31, 1996, the Portfolio had earned credits
from the custodian which reduced service fees incurred. If the credits are
taken into consideration, the expense ratios for Class A and B would have
been 1.29% and 2.04%, respectively.
* Amount represents less than $0.01.
** Amount represents less than 0.01%.
25 Smith Barney International All Cap Growth Fund
2000 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 2000(1) 1999(1) 1998(1)(2) 1997(1) 1996(1)
=================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 25.76 $ 19.79 $ 19.93 $ 18.38 $ 16.93
----------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss (0.31) (0.22) (0.17) (0.22) (0.13)
Net realized and unrealized gain 0.06 6.19 0.03 1.77 1.62
----------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.25) 5.97 (0.14) 1.55 1.49
----------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income(3) (0.12) -- -- -- (0.04)
Net realized gains (1.86) -- -- -- --
---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.98) -- -- -- (0.04)
---------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 23.53 $ 25.76 $ 19.79 $ 19.93 $ 18.38
---------------------------------------------------------------------------------------------------------------------------------
Total Return (2.42)% 30.17% (0.70)% 8.43% 8.85%
---------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $190,144 $178,259 $152,569 $200,849 $229,514
---------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(4) 2.04% 2.07% 2.07% 2.12% 2.15%
Net investment loss (1.13) (0.98) (0.81) (0.97) (0.63)
---------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 26% 31% 25% 35% 46%
=================================================================================================================================
<CAPTION>
Class Y Shares 2000(1) 1999(1) 1998(1) 1997(1) 1996(1)
=================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 26.88 $ 20.41 $ 20.38 $ 18.64 $ 17.13
---------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss) (0.00)* 0.03 0.08 0.04 0.18
Net realized and unrealized gain 0.07 6.44 0.01 1.76 1.54
---------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.07 6.47 0.09 1.80 1.72
---------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income(3) (0.49) -- (0.06) (0.06) (0.21)
Net realized gains (1.86) -- -- -- --
---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (2.35) -- (0.06) (0.06) (0.21)
---------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 24.60 $ 26.88 $ 20.41 $ 20.38 $ 18.64
---------------------------------------------------------------------------------------------------------------------------------
Total Return (1.31)% 31.70% 0.45% 9.68% 10.19%
---------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $338,192 $354,242 $333,979 $301,852 $200,427
---------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(4) 0.92% 0.92% 0.91% 0.94% 0.96%
Net investment income (loss) (0.01) 0.14 0.37 0.23 0.56
---------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 26% 31% 35% 35% 46%
=================================================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) On June 12, 1998, Class C shares were renamed Class L shares.
(3) Distributions from net investment income include short-term capital gains,
if any, for Federal income tax purposes.
(4) During the year ended October 31, 1996, 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 and Y would have
been 2.09% and 0.90%, respectively.
* Amount represents less than $0.01.
26 Smith Barney International All Cap Growth Fund
2000 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 Z Shares 2000(1) 1999(1) 1998(1) 1997(1) 1996(1)
===============================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 26.85 $ 20.39 $ 20.36 $ 18.62 $ 17.12
-------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss) (0.00)* 0.04 0.08 0.05 0.14
Net realized and unrealized gain 0.08 6.42 0.01 1.75 1.57
-------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.08 6.46 0.09 1.80 1.71
-------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income(2) (0.49) -- (0.06) (0.06) (0.21)
Net realized gains (1.86) -- -- -- --
-------------------------------------------------------------------------------------------------------------------------------
Total Distributions (2.35) -- (0.06) (0.06) (0.21)
-------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 24.58 $ 26.85 $ 20.39 $ 20.36 $ 18.62
-------------------------------------------------------------------------------------------------------------------------------
Total Return (1.28)% 31.68% 0.45% 9.69% 10.13%
-------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $142,448 $137,212 $117,132 $131,709 $119,408
-------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(3) 0.92% 0.92% 0.92% 0.94% 0.97%
Net investment income (loss) (0.00)** 0.16 0.36 0.22 0.55
-------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 26% 31% 25% 35% 46%
===============================================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) Distributions from net investment income include short-term capital gains,
if any, for Federal income tax purposes.
(3) During the year ended October 31, 1996, the Portfolio had earned credits
from the custodian which reduced service fees incurred. If the credits are
taken into consideration, the expense ratios for Class Z would have been
0.91% .
* Amount represents less than $0.01.
** Amount represents less than 0.01%.
--------------------------------------------------------------------------------
Tax Information (unaudited)
--------------------------------------------------------------------------------
For Federal tax purposes, the Portfolio hereby designates for the fiscal year
ended October 31, 2000:
. Long-term capital gain distributions paid of $95,653,094.
27 Smith Barney International All Cap Growth Fund
2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Independent Auditors' Report
--------------------------------------------------------------------------------
The Shareholders and Board of Directors of
Smith Barney World Funds, Inc.:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of the International All Cap Growth Portfolio,
formerly known as Smith Barney International Equity Portfolio, of Smith Barney
World Funds, Inc. as of October 31, 2000, the related statement of operations
for the year then ended, the statements of changes in net assets for each of the
years in the two-year period then ended, and the financial highlights for each
of the years in the five-year period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 2000, by correspondence with the custodian.
As to securities sold but not yet delivered, we performed other appropriate
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
International All Cap Growth Portfolio of Smith Barney World Funds, Inc. as of
October 31, 2000, the results of their operations for the year then ended, the
statement of changes in their net assets for each of the years in the two-year
period then ended, and the financial highlights for each of the years in the
five-year period then ended, in conformity with accounting principles generally
accepted in the United States of America.
KPMG LLP
New York, New York
December 11, 2000
28 Smith Barney International All Cap Growth Fund
2000 Annual Report to Shareholders
<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
Salomon Smith Barney Inc.
CUSTODIAN
Chase Manhattan Bank
TRANSFER AGENT
Citi Fiduciary Trust Company
125 Broad Street
11th Floor
New York, New York 10004
SUB-TRANSFER AGENT
PFPC Global Fund Services
P.O. Box 9699
Providence, Rhode Island
02940-9699
<PAGE>
Smith Barney World Funds, Inc.
This report is submitted for the general information of shareholders of Smith
Barney World Funds, Inc. -- International All Cap Growth 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 January 31,
2000, this report must be accompanied by performance information for the most
recently completed calendar quarter.
SMITH BARNEY WORLD FUNDS, INC.
Smith Barney Mutual Funds
388 Greenwich Street, MF-2
New York, New York 10013
For complete information on any Smith Barney Mutual Funds, including management
fees and expenses, call or write your financial professional for a free
prospectus. Read it carefully before you invest or send money.
www.smithbarney.com/mutualfunds
[LOGO OF SALOMON SMITH BARNEY]
Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
FD01936 12/00
<PAGE>
--------------------------------------------------------------------------------
SMITH BARNEY
WORLD FUNDS, INC.
GLOBAL GOVERNMENT BOND PORTFOLIO
EUROPEAN PORTFOLIO
EMERGING MARKETS PORTFOLIO
PACIFIC PORTFOLIO
--------------------------------------------------------------------------------
ANNUAL REPORT | OCTOBER 31, 2000
[SB] Smith Barney
[MF] Mutual Funds
Your Serious Money. Professionally Managed.(SM)
--------------------------------------------------------------------------------
NOT FDIC INSURED o NOT BANK GUARANTEED o MAY LOSE VALUE
--------------------------------------------------------------------------------
<PAGE>
Smith Barney
World Funds, Inc.
MARKET HIGHLIGHT
Over the past few months, the global economy has become more balanced. While the
U.S. economy has experienced a cooling period, other countries' economies such
as Brazil and China have been strong performers. Recently, we have also seen the
rationalization of stock prices, especially in the technology sector. Investor
enthusiasm over e-commerce and "New Economy" stocks has subsided, resulting in
what we believe are generally more reasonable valuations.
Heath B. McLendon
Chairman
--------------------------------------------------------------------------------
The Global Government Bond Portfolio seeks as high a level of current income and
capital appreciation as is consistent with its policy of investing principally
in high-quality bonds issued or guaranteed by the U.S. or foreign governments,
their political subdivisions or their agencies, authorities or
instrumentalities.
NASDAQ SYMBOL
-------------
Class A SBGLX
Class B SBGBX
Class L SGGLX
The European Portfolio seeks long-term capital appreciation by investing
primarily in equity securities of companies based in Western Europe and in the
emerging markets of Eastern Europe. Equity securities include common and
preferred stocks, debt securities convertible into equity securities, depository
receipts and warrants and rights relating to equity securities.
NASDAQ SYMBOL
-------------
Class A SBEAX
Class B SBEBX
Class L SBELX
The Emerging Markets Portfolio seeks long-term capital appreciation by investing
primarily in equity securities of issuers in emerging market countries, (all
countries other than Australia, Austria, Belgium, Canada, Denmark, Finland,
France, Germany, the Netherlands, Ireland, Italy, Japan, Luxembourg, New
Zealand, Norway, Sweden, Switzerland, Spain, the United Kingdom and the United
States).
NASDAQ SYMBOL
-------------
Class A SMMAX
Class B SEMBX
Class L SEMLX
WHAT'S INSIDE
A Message from the Chairman............................................... 1
Global Government Bond Portfolio
Portfolio Manager Commentary........................................... 2
Historical Performance................................................. 5
Portfolio at a Glance.................................................. 8
European Portfolio
Portfolio Manager Commentary........................................... 9
Historical Performance................................................. 12
Portfolio at a Glance.................................................. 14
Emerging Markets Portfolio
Portfolio Managers Commentary.......................................... 15
Historical Performance................................................. 17
Portfolio at a Glance.................................................. 19
Pacific Portfolio
Portfolio Manager Commentary........................................... 20
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
Independent Auditors' Report.............................................. 62
Tax Information........................................................... 63
--------------------------------------------------------------------------------
The Pacific Portfolio seeks long-term capital appreciation. In seeking to
achieve its objective, the Portfolio will invest in a diversified portfolio of
equity securities of companies in the Pacific Rim.
NASDAQ SYMBOL
-------------
Class A SBPPX
Class B SBPFX
Class L SBPCX
<PAGE>
A Message from the Chairman
[PHOTO] HEATH B. MCLENDON
The world's economies, so far in the new millenium, have faced a number of
challenges, such as the elimination of trade barriers and the deregulation of
international labor markets.
Over the past few months, the global economy has become more balanced. While the
U.S. economy has experienced a cooling period, other countries' economies such
as Brazil and China have been strong performers. Recently, we have also seen the
rationalization of stock prices, especially in the technology sector. Investor
enthusiasm over e-commerce and "New Economy"/1/ stocks has subsided, resulting
in what we believe are generally more reasonable valuations.
As the global economy becomes more balanced and the U.S. markets are marked by
higher volatility and concerns that the bull market in stocks may be running out
of steam, we at SSB Citi Asset Management Group ("SSB Citi") believe it has
become more important than ever to remain globally diversified. Despite the
tremendous returns of the U.S. stock market in the past few years, the U.S. has
yet to be the top-performing market in any one year over the last two decades.
Of course there are certain risks in international investing, which may pose a
greater risk than investing in the U.S., such risks include currency
fluctuations, different accounting standards and less financial regulation and
social and economic instability.
We believe that your serious money demands professional management. Since 1937,
Smith Barney has managed the serious money of individuals, their families and
their businesses. Today, with over $398.6 billion in assets under
management,/2/ we believe that SSB Citi offers choices and solutions, uniting
the distinguished history of Smith Barney with the unparalleled global reach of
its parent, Citigroup.
When you invest with SSB Citi you can do so with the confidence that your
interests come first, your investment success is paramount and that the ultimate
in resources is being committed to your financial success.
Sincerely,
/s/ Heath B. McLendon
Chairman
November 16, 2000
The information provided in the commentaries on pages two through 21 represent
the opinion of the managers and are not intended to be a forecast of future
events, a guarantee of future results or investment advice. Further, there is no
assurance that certain securities will remain in or out of the Portfolios.
Please refer to pages 25 through 32 for lists and percentage breakdowns of the
Portfolios' holdings. Also, please note any discussion of the Portfolios'
holdings is as of October 31, 2000 and is subject to change.
----------
1 The New Economy represents those companies in the technology,
telecommunications, and Internet sectors.
2 As of October 31, 2000. This figure represents SSB Citi's assets under
management for retail, institutional, money and separate accounts.
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 1
<PAGE>
Global Government Bond Portfolio
Portfolio Manager
DENIS P. MANGAN
[PHOTO] DENIS P. MANGAN
Denis P. Mangan is a Global Fixed Income Portfolio Manager and Research
Specialist. He joined Smith Barney Capital Management in 1994. He was previously
at J.P. Morgan as a Proprietary Fixed Income Trader and a Researcher of Fixed
Income Options and Trading for three years. Prior to that, Mr. Mangan spent two
years at Citibank, N.A., London as a Fixed Income and Currency Strategist for
the Strategic Positioning Desk. He also was at Citicorp for seven years in
Treasury management, doing analysis and strategic positioning. Mr. Mangan
graduated with honors from Trinity College, Dublin, and holds an M.A. in
Mathematics from Columbia University, and a Ph.D. in Financial Economics from
Columbia University.
Performance Update
For the year ended October 31, 2000, the Smith Barney World Funds, Inc. --
Global Government Bond Portfolio ("Portfolio") Class A shares, without and with
sales charges, returned 6.13% and 1.33%, respectively. In comparison, the J.P.
Morgan Global Bond Market Index -- Hedged and the J.P. Morgan Bond Market Index
-- Unhedged returned 7.80% and a negative 4.65%, respectively, for the same
period./1/ Additional information about the Portfolio's other share classes can
be found on pages five through seven. Past performance is not indicative of
future results.
Market and Portfolio Update
The primary focus of our management activity during the period has been on
preserving portfolio value during the extremely high gross domestic product
("GDP")/2/ growth of the fourth quarter of 1999 and the first quarter of 2000.
At the same time we wanted to position the Portfolio to take advantage of the
long-term slowdown in U.S. economic growth.
Correspondingly, we positioned the Portfolio short of overall duration/3/ in the
final quarter of 1999, with short positions in the U.S. dollar and Euroland/4/
blocs, but the dominant short position in the U.S. to reflect the much stronger
GDP growth rate there than in Euroland.
As the first quarter of 2000 drew to a close we began to increase duration --
more so in Euroland than in the U.S. -- to reflect the view that much of the
first quarter of 2000's very high growth rate was driven by one time events: the
Federal Reserve Board's ("Fed's") flooding the financial system with liquidity
to ward off Y2K problems, and the dramatic surge in the Nasdaq Composite
Index/5/ that eased in November.
We have been disappointed by the weakness of the
European currency, the euro,/6/ so far in 2000. We have,
on occasion, taken positions in the euro against the
U.S. dollar and the Japanese yen, expecting an
----------
1 The J.P. Morgan Global Bond Market Index is a daily, market-capitalization
weighted, international fixed-income index consisting of 13 countries.
Please note an investor cannot invest directly in an index.
2 GDP is the market value of the goods and services produced by labor and
property. GDP is comprised of consumer and government purchases, private
domestic investments and net exports of goods and services.
3 Duration is a common gauge of the price sensitivity of a fixed-income asset
or portfolio to a change in interest rates.
4 Euroland refers to those countries which make up the European Monetary
Union ("EMU"). The EMU members include Austria, Belgium, Finland, France,
Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain.
5 The Nasdaq Composite Index is a market value-weighted index that measures
all domestic and non-U.S. based securities listed on the NASDAQ stock
market. Please note an investor cannot invest directly in an index.
6 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.
--------------------------------------------------------------------------------
2 2000 Annual Report to Shareholders
<PAGE>
improvement in the Euroland currency's performance
to reflect slowing growth in the U.S. relative to
Europe.
1999 started off with much fanfare for the euro. The euro was expected to be
both stable and a potential additional reserve currency, shifting liquidity away
from dollar-denominated assets. However, the euro strengthened for just three
days, before starting its year-long 14.6% decline versus the dollar and 24.8%
decline versus the yen.
In 2000, the bond market suffered its second worst year since 1973, and the
worst since 1994. The year witnessed a complete change of sentiment; with wildly
optimistic "New Paradigm" thinking supplanted by concerns that ongoing economic
growth may result in inflationary pressures.
All European and North American bond markets generated local currency returns
above cash in the first quarter of 2000. The only two markets that failed to
register positive returns were the ones that had performed best in the latter
part of 1999, Japan and South Africa. The primary concern of excess growth
leading to inflation was supplanted, to some extent, by a more balanced view of
financial market prospects. The explosion in Internet-related stock valuations
has been questioned and the subsequent increase in stock market volatility and a
heavy supply of corporate debt issuance led to some defensive re-allocation into
government bond markets.
Economic and Market Outlook
We are moderately bullish on U.S. and European bond markets, and more so on the
latter than the former. We think the slowdown of global economic growth, led by
the U.S., is firmly entrenched, but may not, in our view, turn into an all-out
recession. We are more negative on prospects for Euroland growth, and therefore
more positive on prospects for better relative performance in the U.S., due to
the more tentative and less organic nature of the European recovery, which has
to date largely been driven by exports which should suffer as world economic
growth slows down.
We believe that the slowdown in the U.S. rate of economic growth carried with it
the possibility of a "golden scenario" of steady growth with low inflation and
unemployment, and no further interest rate hikes by the Fed. Our view is
predicated on the slowdown bringing growth to the 3.5% to 4% annual rate which
is now identified as the U.S. economy's long-run, non-inflationary "potential"
rate of growth, taking into account recent productivity gains which have
ratcheted up the economy's potential growth rate from the previous 3% to 3.5%
annual level.
We still adhere to that view. We think recent stock and credit market
disturbances are an over-pessimistic reaction to the impact of past interest
rate increases, high oil prices and over-investment in the telecommunication
sector. While it is true that the oil price shocks of the 1970s were followed by
significant economic slowdown and outright recession, at this stage we do not
expect history to repeat itself.
Evidence that the Japanese economy's long period of gestation is finally
starting to bear fruit continues to accumulate. It was never a sure thing that
the force-feeding of the Japanese economy through successive massive government
spending packages, which primarily boosted public works and infrastructure
spending, would trigger a genuine economic pickup. And as government deficits --
now running at over 10% of GDP -- ballooned with each spending package and
threatened to drive total accumulated public debt
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 3
<PAGE>
to unsustainable levels, the stakes grew ever higher.
We believe it appears that the Japanese government's fiscal public works
spending has helped boost corporate spending and investment. Moreover, it
appears that this corporate spending is, in turn, spilling over into the
consumer sector. Consumer income in Japan is being boosted by higher bonuses,
and the unemployment rate is expected to drop to 4.4% next year from the current
4.7% rate. As a result consumer confidence is recovering and Japanese households
are saving less and spending more.
Thank you for your confidence in our investment management approach.
/s/ Denis P. Mangan
Denis P. Mangan
Vice President
November 16, 2000
--------------------------------------------------------------------------------
4 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
GLOBAL GOVERNMENT BOND PORTFOLIO
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Historical Performance -- Class A Shares
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
-------------------------
Beginning End Income Capital Gain Return Total
Year Ended of Year of Year Dividends Distributions of Capital Returns(1)
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
10/31/00 $11.18 $10.95 $0.88 $0.00 $0.00 6.13%
-------------------------------------------------------------------------------------------------------------------
10/31/99 11.88 11.18 0.52 0.00 0.00 (1.62)
-------------------------------------------------------------------------------------------------------------------
10/31/98 12.22 11.88 0.22 0.60 0.45 8.08
-------------------------------------------------------------------------------------------------------------------
10/31/97 12.55 12.22 1.22 0.08 0.00 8.21
-------------------------------------------------------------------------------------------------------------------
10/31/96 12.30 12.55 0.87 0.00 0.00 9.41
-------------------------------------------------------------------------------------------------------------------
10/31/95 11.68 12.30 0.78 0.00 0.00 12.40
-------------------------------------------------------------------------------------------------------------------
10/31/94++ 12.92 11.68 0.23 0.00 0.42 (4.64)+
-------------------------------------------------------------------------------------------------------------------
12/31/93 11.84 12.92 0.52 0.59 0.00 19.13
-------------------------------------------------------------------------------------------------------------------
12/31/92 12.90 11.84 0.97 0.19 0.00 0.93
-------------------------------------------------------------------------------------------------------------------
Inception*-- 12/31/91 12.00 12.90 0.44 0.13 0.00 12.42+
-------------------------------------------------------------------------------------------------------------------
Total $6.65 $1.59 $0.87
-------------------------------------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
Historical Performance -- Class B Shares
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
-------------------------
Beginning End Income Capital Gain Return Total
Year Ended of Year of Year Dividends Distributions of Capital Returns(1)
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
10/31/00 $11.16 $10.92 $0.83 $0.00 $0.00 5.56%
---------------------------------------------------------------------------------------------------------------------------
10/31/99 11.87 11.16 0.47 0.00 0.00 (2.11)
---------------------------------------------------------------------------------------------------------------------------
10/31/98 12.22 11.87 0.19 0.60 0.42 7.46
---------------------------------------------------------------------------------------------------------------------------
10/31/97 12.50 12.22 1.10 0.08 0.00 7.62
---------------------------------------------------------------------------------------------------------------------------
10/31/96 12.26 12.50 0.81 0.00 0.00 8.83
---------------------------------------------------------------------------------------------------------------------------
Inception*-- 10/31/95 11.57 12.26 0.66 0.00 0.00 11.97+
---------------------------------------------------------------------------------------------------------------------------
Total $4.06 $0.68 $0.42
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 5
<PAGE>
--------------------------------------------------------------------------------
GLOBAL GOVERNMENT BOND PORTFOLIO
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Historical Performance -- Class L Shares
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
-----------------------
Beginning End Income Capital Gain Return Total
Year Ended of Year of Year Dividends Distributions of Capital Returns(1)
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
10/31/00 $11.15 $10.92 $0.83 $0.00 $0.00 5.67%
------------------------------------------------------------------------------------------------------------------
10/31/99 11.86 11.15 0.47 0.00 0.00 (2.11)
------------------------------------------------------------------------------------------------------------------
10/31/98 12.19 11.86 0.19 0.60 0.42 7.67
------------------------------------------------------------------------------------------------------------------
10/31/97 12.47 12.19 1.11 0.08 0.00 7.73
------------------------------------------------------------------------------------------------------------------
10/31/96 12.23 12.47 0.81 0.00 0.00 8.90
------------------------------------------------------------------------------------------------------------------
10/31/95 11.68 12.23 0.72 0.00 0.00 11.25
------------------------------------------------------------------------------------------------------------------
10/31/94++ 12.93 11.68 0.21 0.00 0.39 (5.09)+
------------------------------------------------------------------------------------------------------------------
Inception*-- 12/31/93 11.83 12.93 0.47 0.59 0.00 18.89+
------------------------------------------------------------------------------------------------------------------
Total $4.81 $1.27 $0.81
</TABLE>
Historical Performance -- Class Y Shares
<TABLE>
<CAPTION>
Net Asset Value
-----------------------
Beginning End Income Capital Gain Return Total
Year Ended of Year of Year Dividends Distributions of Capital Returns(1)
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
10/31/00 $11.03 $10.83 $0.89 $0.00 $0.00 6.59%
------------------------------------------------------------------------------------------------------------------
10/31/99 11.70 11.03 0.53 0.00 0.00 (1.28)
------------------------------------------------------------------------------------------------------------------
10/31/98 12.03 11.70 0.23 0.60 0.46 8.50
------------------------------------------------------------------------------------------------------------------
10/31/97 12.39 12.03 1.28 0.08 0.00 8.61
------------------------------------------------------------------------------------------------------------------
10/31/96 12.14 12.39 0.90 0.00 0.00 9.82
------------------------------------------------------------------------------------------------------------------
10/31/95 11.68 12.14 0.81 0.00 0.00 11.27
------------------------------------------------------------------------------------------------------------------
10/31/94++ 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 $5.24 $1.27 $0.89
</TABLE>
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
--------------------------------------------------------------------------------
6 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
GLOBAL GOVERNMENT BOND PORTFOLIO
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Average Annual Total Returns
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Without Sales Charges(1)
----------------------------------------------------
Class A Class B Class L Class Y
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year Ended 10/31/00 6.13% 5.56% 5.67% 6.59%
--------------------------------------------------------------------------------------
Five Years Ended 10/31/00 5.97 5.40 5.49 6.37
--------------------------------------------------------------------------------------
Inception* through 10/31/00 7.37 6.51 6.53 7.00
--------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
With Sales Charges(2)
----------------------------------------------------
Class A Class B Class L Class Y
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year Ended 10/31/00 1.33% 1.15% 3.66% 6.59%
--------------------------------------------------------------------------------------
Five Years Ended 10/31/00 5.00 5.25 5.29 6.37
--------------------------------------------------------------------------------------
Inception* through 10/31/00 6.83 6.51 6.39 7.00
--------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
Cumulative Total Returns
--------------------------------------------------------------------------------
Without Sales Charges(1)
--------------------------------------------------------------------------------
Class A (Inception* through 10/31/00) 93.49%
--------------------------------------------------------------------------------
Class B (Inception* through 10/31/00) 45.62
--------------------------------------------------------------------------------
Class L (Inception* through 10/31/00) 64.02
--------------------------------------------------------------------------------
Class Y (Inception* through 10/31/00) 68.36
--------------------------------------------------------------------------------
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to Class
B and L shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charges of 4.50% and 1.00%,
respectively; Class B shares reflect the deduction of a 4.50% CDSC, which
applies if shares are redeemed within one year from purchase. This CDSC
declines by 0.50% the first year after purchase and thereafter by 1.00% per
year until no CDSC is incurred. Class L shares reflect the deduction of a
1.00% CDSC, which applies if shares are redeemed within the first year of
purchase.
++ For the period from January 1, 1994 to October 31, 1994, which reflects a
change in the fiscal year end of the Portfolio.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
* Inception dates for Class A, B, L and Y shares are July 22, 1991, November
18, 1994, January 4, 1993 and February 19, 1993, respectively.
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 7
<PAGE>
--------------------------------------------------------------------------------
Global Government Bond Portfolio at a Glance (unaudited)
--------------------------------------------------------------------------------
Growth of $10,000 Invested in Class A Shares of the
Global Government Bond Portfolio vs. J.P. Morgan Global Bond Market Index+
--------------------------------------------------------------------------------
[LINE GRAPH]
<TABLE>
<CAPTION>
Global Government Bond Portfolio JP Morgan Global Bond Hedged JP Morgan Global Bond Unhedged
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
7/22/91 9,600 10,000 10,000
10/91 10,422 10,459 10,685
10/92 10,963 11,370 12,028
10/93 12,612 12,749 13,351
10/94 12,368 12,609 13,740
10/95 13,902 15,048 15,319
10/96 15,210 16,566 16,254
10/97 16,459 18,319 16,822
10/98 17,789 20,645 19,006
10/99 17,502 20,871 18,444
10/31/2000 18,575 22,476 17,587
</TABLE>
+ Hypothetical illustration of $10,000 invested in Class A shares at
inception on July 22, 1991, assuming deduction of the maximum initial sales
charge of 4.00% at the time of investment and the reinvestment of dividends
and capital gains, if any, at net asset value through October 31, 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
cannot invest directly in an index.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption values may be more or less than the original cost. No adjustment
has been made for shareholder tax liability on dividends or capital gains.
Top Ten Holdings* As of October 31, 2000
------------------------------------------------------------------
1. Bundesobligation 18.5%
------------------------------------------------------------------
2. Japan Government 12.6
------------------------------------------------------------------
3. KFW International Finance 9.9
------------------------------------------------------------------
4. Inter-American Development Bank 8.7
------------------------------------------------------------------
5. Bundesrepublik Deutscheland 7.9
------------------------------------------------------------------
6. France O.A.T. 7.8
------------------------------------------------------------------
7. Kingdom of Spain 6.6
------------------------------------------------------------------
8. Buoni Poliennali Del Tes 6.3
------------------------------------------------------------------
9. Helaba International Finance PLC 5.8
------------------------------------------------------------------
10. Republic of Cyprus 5.6
------------------------------------------------------------------
* As a percentage of total bonds, excluding U.S. government obligations and
repurchase agreement. Please note that the Portfolio's holdings are subject
to change.
[PIE CHART]
Investment Allocation** As of October 31, 2000
------------------------------------------------------
Europe 64%
------------------------------------------------------
Repurchase Agreement 6.3%
------------------------------------------------------
Japan 9.6%
------------------------------------------------------
The Americas 2.7%
------------------------------------------------------
U.S. Treasury Obligations 17.4%
------------------------------------------------------
** As a percentage of total investments. Please note that the Portfolio's
holdings are subject to change.
--------------------------------------------------------------------------------
8 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
European Portfolio
--------------------------------------------------------------------------------
[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
For the year ended October 31, 2000 the European Portfolio ("Portfolio") Class A
shares, without and with sales charges, returned 18.02% and 12.11%,
respectively. In comparison, the Morgan Stanley Capital International European
Market Index ("MSCI Index")/1/ returned 0.94% for the same period. For
performance information on the Portfolio's other classes of shares, please refer
to page 12 and 13. Past performance is not indicative of future results.
Investment Strategy
Due to many positive changes taking place in Europe, and the relative under-
valuation and under-performance of the European stock markets versus the U.S.
stock market the last few years, going forward we continue to remain very
positive about investing in Europe.
Because of the underweighting in European stocks by many institutional
portfolios, we believe that European stock markets are in a bullish trend. In
general, we continue to overweight the service sector (i.e., outsourcing of
information technology as well as catering); and growth stocks/2/ (i.e.,
preferably "old fashioned" growth stocks over pure Internet plays). During the
period, we were underweighted in basic materials and financials (i.e.,
preferably insurance over banking). Geographically, we were overweight in
continental Europe and we remained underweight in the United Kingdom. In our
opinion, Britain's decision to stay out of the European Monetary Union ("EMU")
should hurt its growth prospects and the relatively strong British pound versus
the euro/3/ (e.g., up roughly 10% since January 1, 1999), should penalize
corporate profits.
Market Review
Just like in the U.S., the European stock markets have been very volatile during
the period. European stock markets went down from March to May 2000, stabilized
in June and July, advanced sharply in August, but gave it all back in September
and October. Telecommunications, media and technology ("TMT") groups, the
favorites last year, dropped significantly from their record highs reached in
March 2000.
-------------------------
1 The MSCI Index is an unmanaged index of common stocks of companies located
in Europe. Please note an investor cannot invest directly in an index.
2 Growth stocks are shares of companies with the potential for faster-
than-average growth within their industries. Growth stocks generally
provide an opportunity for more capital appreciation than fixed-income
investments but are subject to greater market fluctuations.
3 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.
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 9
<PAGE>
The introduction of the euro on January 1, 1999 eliminated many
countries-specific risk factors and promoted a shift from a country-based to a
sector-based investment approach, resulting in the development of new European
stock indices. Substantial money flows -- direct (Unilever-Bestfoods,
Vivendi-Seagram, Deutsche Telecom-Voice Stream and Terra-Lycos), as well as
stock investments from Europe toward the U.S. has, in our opinion, resulted in
an excessively depressed euro (i.e., down roughly 27% versus the U.S. dollar
since January 1, 1999). Although the euro's achievements have been impressive
(namely, the currency has been the catalyst for economic reforms), its major
weakness during the period resulted in a coordinated intervention on
September 22, 2000 by the European Central Bank, the Bank of Japan and the U.S.
Treasury Department. As these major central banks cannot afford not to succeed,
the euro's current 0.85 level versus the U.S. dollar seems to be its support
level, despite the Danish "NO" vote on September 22, 2000.
European Market Outlook
Stock price valuations in Europe are much more inexpensive than in the U.S. For
example, at the end of October 2000, Europe (ex-U.K.) was selling at 10.2x 2000
price-to-cash flow, while the U.S. was at 15.5x price-to-cash flow. Moreover,
Europe's average dividend yield was around 1.9% versus only 1.2% for the U.S.
Looking at incoming orders and business confidence in Germany, lower
unemployment and stronger consumer confidence in France and a
lower-than-expected government budget in Italy, the European economy in the
first half of 2000 was stronger than anticipated. Although there has been some
slowing down of European economic activity in the second half of this year, the
consensus for economic growth in Europe is around 3.2% in 2000 and 2.9% in 2001
(from 2.1% and 2.7% in 1999 and 1998, respectively, while inflation is expected
to rise slightly to 2.2% (2.9% in U.K.) in 2000). This positive economic
environment -- combined with heavy corporate restructuring -- should result in
potentially healthy corporate profits in the next 18 months. While Salomon Smith
Barney's research estimates that the earnings of the Standard & Poor's 500 Index
("S&P 500") 4 may only rise 13% and 8% in 2000 and 2001, respectively, the
consensus for profits in EMU as of this writing is for a 27% rise for 2000 and a
13% increase in 2001.
And while no guarantee can be made, we continue to believe investing in Europe
may be exciting and potentially rewarding during the next few years due to:
o The creation of the EMU on January 1, 1999 which has resulted in more
deregulation, privatization, restructuring, and mergers and acquisitions;
o The creation of one currency, the euro, which has resulted in increased
price transparency translating into lower inflation and additional
economies of scale and, therefore, more mergers;
o The creation of a stock culture in Europe through inexpensively priced
privatization offerings, stock options and corporations buying back their
own shares;
--------------------
4 The S&P 500 is a market capitalization-weighted measure of 500 widely held
common stocks. Please note an investor cannot invest directly in an index.
--------------------------------------------------------------------------------
10 2000 Annual Report to Shareholders
<PAGE>
o The discovery by many European companies of the need to enhance shareholder
value; and
o Fundamental economic changes such as the introduction of tax reforms in
Germany, the fact that hostile takeovers are no longer potent political
issues (e.g., Vodafone-Mannesman) and the recognition of demographic
challenges looming with respect to future pension payments. (Actually
France and Italy are also in the process of introducing tax reforms that
are more favorable towards corporations).
Within Europe's changes and dynamic environment, stock selection will grow in
importance. With all these exciting structural changes taking place in Europe,
we believe "this time may be different" and that is why we are bullish on
European stock investing in the future.
Thank you for your investment in the European Portfolio.
/s/ Rein W. van der Does
Rein W. van der Does
Vice President
November 16, 2000
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 11
<PAGE>
--------------------------------------------------------------------------------
EUROPEAN PORTFOLIO
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Historical Performance -- Class A Shares
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
-----------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
10/31/00 $22.58 $25.52 $0.00 $1.13 18.02%
-------------------------------------------------------------------------------------------------
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
-------------------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
Historical Performance -- Class B Shares
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
-----------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
10/31/00 $21.83 $24.42 $0.00 $1.13 17.00%
-------------------------------------------------------------------------------------------------
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
-------------------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
Historical Performance -- Class L Shares
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
-----------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
10/31/00 $21.79 $24.38 $0.00 $1.13 17.03%
-------------------------------------------------------------------------------------------------
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.
--------------------------------------------------------------------------------
12 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
EUROPEAN PORTFOLIO
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Average Annual Total Returns
--------------------------------------------------------------------------------
Without Sales Charges(1)
-----------------------------------------------
Class A Class B Class L
--------------------------------------------------------------------------------
Year Ended 10/31/00 18.02% 17.00% 17.03%
--------------------------------------------------------------------------------
Five Years Ended 10/31/00 15.27 14.37 14.42
--------------------------------------------------------------------------------
Inception* through 10/31/00 13.80 14.57 13.06
--------------------------------------------------------------------------------
With Sales Charges(2)
------------------------------------------------
Class A Class B Class L
--------------------------------------------------------------------------------
Year Ended 10/31/00 12.11% 12.00% 14.86%
--------------------------------------------------------------------------------
Five Years Ended 10/31/00 14.10 14.25 14.18
--------------------------------------------------------------------------------
Inception* through 10/31/00 12.94 14.57 12.88
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Cumulative Total Returns
--------------------------------------------------------------------------------
Without Sales Charges(1)
--------------------------------------------------------------------------------
Class A (Inception* through 10/31/00) 138.89%
--------------------------------------------------------------------------------
Class B (Inception* through 10/31/00) 125.74
--------------------------------------------------------------------------------
Class L (Inception* through 10/31/00) 127.99
--------------------------------------------------------------------------------
(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 initial purchase.
Thereafter, this CDSC declines by 1.00% per year until no CDSC is incurred.
Class L shares also reflect the deduction of a 1.00% CDSC, which applies if
shares are redeemed within the first year of purchase.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
* Inception dates for Class A, B and L shares are February 7, 1994, November
7, 1994 and February 14, 1994, respectively.
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 13
<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+
[LINE GRAPH]
European Portfolio MSCI European Index
-------------------------------------------------------
2/7/94 9,549 10,000
10/94 9,840 10,064
10/95 11,207 11,393
10/96 13,298 13,383
10/97 15,010 16,861
10/98 16,377 20,812
10/99 19,328 23,417
10/31/2000 22,812 23,636
+ Hypothetical illustration of $10,000 invested in Class A shares at
inception on February 7, 1994, assuming deduction of the maximum 4.50%
sales charge at the time of investment and the reinvestment of dividends
and capital gains, if any, at net asset value through October 31, 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 October 31, 2000
------------------------------------------------------------
1. Tomra Systems ASA 8.2%
------------------------------------------------------------
2. Nokia Oyj 7.9
------------------------------------------------------------
3. CMG PLC 5.4
------------------------------------------------------------
4. Schering AG 5.1
------------------------------------------------------------
5. Vodafone Group PLC 5.0
------------------------------------------------------------
6. Alcatel 4.7
------------------------------------------------------------
7. Fugro NV 4.6
------------------------------------------------------------
8. Schlumberger Ltd. 4.3
------------------------------------------------------------
9. IHC Caland NV 3.8
------------------------------------------------------------
10. BP Amoco PLC ADR 3.6
------------------------------------------------------------
[PIE CHART]
Investment Allocation* As of October 31, 2000
------------------------------------------------------------
Switzerland 10.4%
------------------------------------------------------------
Sweden 0.3%
------------------------------------------------------------
Norway 9.2%
------------------------------------------------------------
Spain 5.5%
------------------------------------------------------------
Finland 9.1%
------------------------------------------------------------
United Kingdom 18.8%
------------------------------------------------------------
France 21%
------------------------------------------------------------
Germany 10.8%
------------------------------------------------------------
Netherlands 14.9%
------------------------------------------------------------
* As a percentage of total investments. Please note that the Portfolio's
holdings are subject to change.
--------------------------------------------------------------------------------
14 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Emerging Markets Portfolio
--------------------------------------------------------------------------------
[PHOTO]
JEFFREY J.
RUSSELL, CFA
Vice President
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 a
M.B.A. from the University of Pennsylvania's Wharton School of Finance.
[PHOTO]
James B. Conheady
Vice President
James B. Conheady has more than 35 years experience managing international and
global equity portfolios. He has been with the International Equity team since
its formation in 1968 at Drexel Burnham Lambert and moved to Salomon Smith
Barney in 1990. Mr. Conheady holds a B.S.S. degree from Georgetown University.
Performance Update
For the year ended October 31, 2000, the Emerging Markets Portfolio
("Portfolio") Class A shares, without and with sales charges, reported negative
total returns of 3.32% and 8.20%, respectively. In comparison, the Morgan
Stanley Capital International Emerging Markets Free Index ("MSCI Emerging
Markets Free Index")1 returned a negative 8.81% for the same period. For
information on the Portfolio's other share classes, please see pages 17 and 18.
Past performance is not indicative of future results.
Special Shareholder Notice
Please note that shareholders approved a reorganization of the Portfolio into
Smith Barney International Aggressive Growth Fund of Smith Barney Investment
Series. The merger will occur on Friday, December 8, 2000. Under the terms of
the Agreement and Plan of Reorganization, you will receive the same class of
shares of International Aggressive Growth Fund that are of equal value to your
aggregate investments in the Portfolio. The International Aggressive Growth Fund
invests principally in a diversified portfolio of equity securities of
established, non-U.S. issuers.
Please note you will not be charged a sales load when International Aggressive
Growth Fund shares are issued to you and it is anticipated that the
reorganization will occur on a tax-free basis.
Investment Objective
As previously noted, the Portfolio seeks long-term capital appreciation through
a portfolio invested primarily in emerging market issuers. The Portfolio invests
primarily in equity security issuers in emerging market countries, which are all
countries other than Australia, Austria, Belgium, Canada, Denmark, Finland,
France, Germany, Ireland, Italy, Japan, Luxembourg, the Netherlands, New
Zealand, Norway, Sweden, Switzerland, Spain, the United Kingdom and the United
States. Equity securities include common and preferred stocks, debt securities
convertible into equity securities, and warrants and rights relating to equity
securities.
The managers select investments for their capital appreciation potential. The
investment team initially assesses the relative attractiveness of different
------------
1 The MSCI 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. Please note an investor cannot invest directly in an index.
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 15
<PAGE>
emerging markets. After a country assessment is completed, specific investment
decisions are made. Depending on their outlook for long-term growth potential,
the Portfolio's emphasis among emerging markets and issuers may vary. In
addition, by diversifying the Portfolio's investments across many emerging
markets, the manager seeks to reduce volatility compared to investment in a
single region.
Economic and Market Outlook
With respect to developed markets, Japan's trade surplus had been shrinking
until recently, mainly because of rising import unit value (resulting from
higher crude oil quotes) and of high import volume growth (on the back of the
domestic demand recovery). The October import data suggest no change in these
patterns.
Now, however, the global economic slowdown, particularly in the U.S. and Western
Europe, is apparently beginning to cap Japan's export growth. We do not expect a
collapse of exports in Japan because the U.S. economy is likely to reaccelerate
in the second half of next year. Combined with political uncertainty, a risk of
a more rapid than expected decline in the external surplus increases a risk that
the yen will not strengthen as much as previously expected. In Europe, core
inflation remains in a global up-trend while inflation forecasts for the region
have been revised up consistently in recent months.
As the markets remain volatile, emerging markets have faced numerous challenges
during the period. Historically, emerging markets do not perform well in periods
of above average volatility, though they generally outperform in periods of
falling volatility. This summer was an important exception. Between mid-July and
late September, historical volatility remained below its long-term average
level, yet many emerging markets declined. Since that time, the typical inverse
relationship between volatility and emerging market performance has
re-established itself.
The vulnerability of the emerging markets to further bad news about the global
outlook cannot be denied. And the asset class remains exposed to the fallout
from any further declines in global technology and telecommunications -- in
part, because those sectors are globally integrated and, partly, because
declines in technology seem to reduce investors' appetite for any assets
perceived to be of higher risk.
Thank you for your investment in the Emerging Markets Portfolio.
/s/ Jeffrey J. Russell /s/ James B. Conheady
Jeffrey J. Russell James B. Conheady
Vice President Vice President
November 16, 2000
--------------------------------------------------------------------------------
16 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Historical Performance -- Class A Shares
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
-----------------------
Beginning End Income Total
Year Ended of Year of Year Dividends Returns(1)
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10/31/00 $9.03 $8.73 $0.00 (3.32)%
------------------------------------------------------------------------------------
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
------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
Historical Performance -- Class B Shares
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
-----------------------
Beginning End Income Total
Year Ended of Year of Year Dividends Returns(1)
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10/31/00 $8.72 $8.37 $0.00 (4.01)%
------------------------------------------------------------------------------------
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
------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
Historical Performance -- Class L Shares
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
-----------------------
Beginning End Income Total
Year Ended of Year of Year Dividends Returns(1)
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10/31/00 $8.71 $8.36 $0.00 (4.02)%
------------------------------------------------------------------------------------
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
------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 17
<PAGE>
--------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Historical Performance -- Class Y Shares
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
-----------------------
Beginning End Income Total
Year Ended of Year of Year Dividends Returns(1)
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10/31/00 $9.12 $8.86 $0.00 (2.85)%
------------------------------------------------------------------------------------
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
------------------------------------------------------------------------------------
</TABLE>
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
--------------------------------------------------------------------------------
Average Annual Total Returns
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Without Sales Charges(1)
--------------------------------------------------------
Class A Class B Class L Class Y
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year Ended 10/31/00 (3.32)% (4.01)% (4.02)% (2.85)%
-----------------------------------------------------------------------------------------
Five Years Ended 10/31/00 (4.62) (5.35) (5.38) N/A
-----------------------------------------------------------------------------------------
Inception* through 10/31/00 (5.64) (6.36) (6.38) (11.28)
-----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
With Sales Charges(2)
--------------------------------------------------------
Class A Class B Class L Class Y
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year Ended 10/31/00 (8.20)% (8.81)% (5.95)% (2.85)%
-----------------------------------------------------------------------------------------
Five Years Ended 10/31/00 (5.59) (5.54) (5.56) N/A
-----------------------------------------------------------------------------------------
Inception* through 10/31/00 (6.52) (6.36) (6.55) (11.28)
-----------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
Cumulative Total Returns
--------------------------------------------------------------------------------
Without Sales Charges(1)
--------------------------------------------------------------------------------
Class A (Inception* through 10/31/00) (27.25)%
--------------------------------------------------------------------------------
Class B (Inception* through 10/31/00) (30.25)
--------------------------------------------------------------------------------
Class L (Inception* through 10/31/00) (30.33)
--------------------------------------------------------------------------------
Class Y (Inception* through 10/31/00) (27.14)
--------------------------------------------------------------------------------
(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 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 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.
--------------------------------------------------------------------------------
18 2000 Annual Report to Shareholders
<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+
[LINE GRAPH]
<TABLE>
<CAPTION>
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
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5/12/95 9,501 10,000 9,900 10,000
10/95 8,757 8,724 9,002 9,453
10/96 9,565 9,560 9,860 9,861
10/97 9,857 9,875 10,083 8,844
10/98 5,566 5,594 5,644 5,936
10/99 7,150 7,194 7,187 7,611
10/31/2000 6,912 6,975 6,898 6,578
</TABLE>
+ Hypothetical illustration of $10,000 invested in Class A, B and L shares at
inception on May 12, 1995, assuming deduction of the maximum 5.00% 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 October 31, 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 October 31, 2000
------------------------------------------------------------------------------
1. Telefonos de Mexico S.A. ADR, Series L 8.0%
------------------------------------------------------------------------------
2. Comverse Technology Inc. 5.7
------------------------------------------------------------------------------
3. SK Telecom Co. Ltd. ADR 5.3
------------------------------------------------------------------------------
4. Grupo Televisa S.A. GDR 4.4
------------------------------------------------------------------------------
5. Companhia de Bebidas das Americas ADR 4.1
------------------------------------------------------------------------------
6. Wal-Mart de Mexico S.A. de CV, Series V 4.0
------------------------------------------------------------------------------
7. Hon Hai Precision Industry Co. Ltd. 3.9
------------------------------------------------------------------------------
8. Tele Norte Leste Partcipacoes S.A. ADR 3.7
------------------------------------------------------------------------------
9. Amdocs Ltd. 3.6
------------------------------------------------------------------------------
10. Taiwan Semiconductor Manufacturing Co. Ltd. 3.6
------------------------------------------------------------------------------
[PIE CHART]
Investment Allocation* As of October 31, 2000
------------------------------------------------------------------------------
Africa 8.9%
Europe 4.6%
Middle East 14.3%
Latin America 31.4%
Asia/Pacific 38.6%
* As a percentage of total investments. Please note that the Portfolio's
holdings are subject to change.
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 19
<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 Institute.
Performance Update
For the year ended October 31, 2000, the Pacific Portfolio ("Portfolio") Class A
shares, without and with sales charges, reported negative total returns of
36.25% and 39.44%, respectively. In comparison, the Morgan Stanley Capital
International All-Country Asia Pacific Index ("MSCI Asia Pacific Index")1
returned a negative 12.81% for the same period. For information on the
Portfolio's other share classes, please see pages 22 and 23. Past performance is
not indicative of future results.
Special Shareholder Notice
Please note that shareholders approved a reorganization of the Portfolio into
Smith Barney International Aggressive Growth Fund of Smith Barney Investment
Series. The merger will occur on Friday, December 15, 2000. Under the terms of
the Agreement and Plan of Reorganization, you will receive the same class of
shares of International Aggressive Growth Fund that are of equal value to your
aggregate investments in the Portfolio. The International Aggressive Growth Fund
invests principally in a diversified portfolio of equity securities of
established, non-U.S. issuers.
Please note you will not be charged a sales load when International Aggressive
Growth Fund shares are issued to you and it's anticipated that the
reorganization will occur on a tax-free basis.
Investment Strategy
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.
-----------------
1 The MSCI Asia Pacific Index is an unmanaged index of common stocks of
companies located in Australia, New Zealand and the countries in the Far
East. Please note an investor cannot invest directly in an index.
--------------------------------------------------------------------------------
20 2000 Annual Report to Shareholders
<PAGE>
Market Review & Outlook
Recently, a spate of high profile earnings disappointments, as well as growing
evidence of U.S. economic deceleration, led to lower stock prices among
international stocks as an asset class. The chasm between the performance of
international growth and value stocks continued to widen during the month and
exceeded sixteen percentage points year-to-date.
During the reporting period, the Japanese stock market (as represented by the
Topix Index, a market capitalization-weighted measure of approximately 1,800
Japanese stocks listed on the Tokyo Stock Exchange. Please note an investor
cannot invest directly in an index.) declined 9.5% in dollar terms. The reversal
of fortunes for the TMT (telecommunications, media and technology) sector
continued, while Old Economy and domestic value stocks staged a further rally in
continuation from the first quarter. Recent indicators confirmed that economic
recovery is underway in Japan, and, more importantly, is being led not by
consumers, but by the profits and capital expenditures of corporations. We
believe that a major wave of information technology investments has just begun
in Japan, and should continue to present major opportunities for Japanese
companies in areas such as mobile Internet, interactive TVs, and display
technologies. Moreover, even the Old Economy companies are rapidly implementing
reforms.
Many major Japanese companies have begun to focus on margins and returns. In the
process, they have made choices of which businesses should be the focus of their
resources, and which businesses to spin-off, divest, or merge with a competitor.
We believe that the enhanced efficiency of select Japanese corporations should
create surprisingly high shareholder returns over the next three to five years.
In our opinion, the risks in the Japanese market includes an increasingly
visible slowdown in the U.S. economy, which may hurt Japanese exports; an
eventual rise in Japanese interest rates; and currency volatility.
Deflationary pressures in Japan's economy appear to be causing a profit squeeze.
We believe stocks are correcting to account for next year's possible profit
growth slowdown. However, as we rate valuations fair rather than inexpensive,
the earnings revision trends may likely have to turn upward before the market
reverses its recent slide. Corporate earnings growth in Japan is overly
sensitive to a handful of semiconductor makers - just five of these firms are
responsible for nearly all downward revision to next fiscal year's profit
outlook.
/s/ David Ishibashi
David Ishibashi
Vice President
November 16, 2000
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 21
<PAGE>
--------------------------------------------------------------------------------
PACIFIC PORTFOLIO
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Historical Performance -- Class A Shares
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
-----------------------
Beginning End Income Total
Year Ended of Year of Year Dividends Returns(1)
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10/31/00 $11.80 $7.44 $0.15 (36.25)%
------------------------------------------------------------------------------------
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
------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
Historical Performance -- Class B Shares
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
-----------------------
Beginning End Income Total
Year Ended of Year of Year Dividends Returns(1)
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10/31/00 $11.31 $7.14 $0.03 (36.73)%
------------------------------------------------------------------------------------
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
------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
Historical Performance -- Class L Shares
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
-----------------------
Beginning End Income Total
Year Ended of Year of Year Dividends Returns(1)
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10/31/00 $11.27 $7.09 $0.06 (36.78)%
------------------------------------------------------------------------------------
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
------------------------------------------------------------------------------------
</TABLE>
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
--------------------------------------------------------------------------------
22 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
PACIFIC PORTFOLIO
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Average Annual Total Returns
--------------------------------------------------------------------------------
Without Sales Charges(1)
---------------------------------------------
Class A Class B Class L
--------------------------------------------------------------------------------
Year Ended 10/31/00 (36.25)% (36.73)% (36.78)%
--------------------------------------------------------------------------------
Five Years Ended 10/31/00 (5.67) (6.46) (6.46)
--------------------------------------------------------------------------------
Inception* through 10/31/00 (7.26) (9.07) (8.02)
--------------------------------------------------------------------------------
With Sales Charges(2)
---------------------------------------------
Class A Class B Class L
Year Ended 10/31/00 (39.44)% (39.89)% (38.02)%
--------------------------------------------------------------------------------
Five Years Ended 10/31/00 (6.63) (6.64) (6.65)
--------------------------------------------------------------------------------
Inception* through 10/31/00 (7.97) (9.07) (8.16)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Cumulative Total Returns
--------------------------------------------------------------------------------
Without Sales Charges(1)
-----------------------------------------------------------------
Class A (Inception* through 10/31/00) (39.82)%
-----------------------------------------------------------------
Class B (Inception* through 10/31/00) (43.39)
-----------------------------------------------------------------
Class L (Inception* through 10/31/00) (43.00)
-----------------------------------------------------------------
(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 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+
[LINE GRAPH]
February 1994 -- October 2000
MSCI All Country
Pacific Portfolio Asia Pacific Index
-------------------------------------------------------------------------------
2/7/94 9,549 10,000
10/94 9,870 10,716
10/95 7,693 9,438
10/96 7,777 9,650
10/97 6,463 7,703
10/98 5,141 6,634
10/99 9,015 10,231
10/31/2000 5,746 8,921
+ Hypothetical illustration of $10,000 invested in Class A shares at
inception on February 7, 1994, assuming deduction of the maximum 4.50%
sales charge at the time of investment and the reinvestment of dividends
and capital gains, if any, at net asset value through October 31, 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 October 31, 2000
--------------------------------------------------------------------------------
1. Nomura Securities Co. Ltd. 4.1%
--------------------------------------------------------------------------------
2. NTT Docomo Inc. 4.0
--------------------------------------------------------------------------------
3. Murata Manufacturing Co. 3.9
--------------------------------------------------------------------------------
4. Datacraft Asia Ltd. 3.5
--------------------------------------------------------------------------------
5. Nippon Sheet Glass Co. Ltd. 3.4
--------------------------------------------------------------------------------
6. Canon, Inc. 3.2
--------------------------------------------------------------------------------
7. Takeda Chemical Industries Ltd. 3.2
--------------------------------------------------------------------------------
8. Seven-Eleven Janpan Co. Ltd. 3.1
--------------------------------------------------------------------------------
9. Mitsui Fudosan Co. Ltd. 3.1
--------------------------------------------------------------------------------
10. NTT Data Corp. 3.0
--------------------------------------------------------------------------------
[PIE CHART]
Investment Allocation* As of October 31, 2000
--------------------------------------------------------------------------------
Singapore 4
South Korea 4.9
Taiwan 5.6
Australia 2.4
Hong Kong 7.3
Japan 75.8
* As a percentage of total investments. Please note that holdings are subject
to change.
--------------------------------------------------------------------------------
24 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments October 31, 2000
--------------------------------------------------------------------------------
GLOBAL GOVERNMENT BOND PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. TREASURY OBLIGATIONS-- 17.4%
U.S. Treasury Notes:
$6,000,000 6.250% due 7/31/02 $6,024,240
7,000,000 6.750% due 5/15/05 7,259,210
6,000,000 6.250% due 5/15/30 6,392,760
------------------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost -- $19,601,328) 19,676,210
------------------------------------------------------------------------------------------------------
FACE
AMOUNT+ SECURITY VALUE
------------------------------------------------------------------------------------------------------
BONDS-- 76.3%
Canada-- 2.7%
4,700,000 Canadian Government, 6.000% due 6/1/08++ 3,098,929
------------------------------------------------------------------------------------------------------
Denmark-- 0.6%
5,000,000 Kingdom of Denmark, 7.000% due 11/15/07++ 617,975
------------------------------------------------------------------------------------------------------
France-- 6.0%
8,000,000EUR France O.A.T., 5.250% due 4/25/08 6,761,146
------------------------------------------------------------------------------------------------------
Germany-- 20.1%
Bundesobligation:
12,000,000EUR 4.500% due 5/19/03 10,027,293
7,000,000EUR 5.000% due 8/19/05 5,914,709
8,000,000EUR Bundesrepublik Deutscheland, 5.250% due 7/14/10++ 6,786,913
------------------------------------------------------------------------------------------------------
22,728,915
------------------------------------------------------------------------------------------------------
Greece-- 4.3%
6,000,000EUR Republic of Cyprus, 5.375% due 7/28/08 4,865,289
------------------------------------------------------------------------------------------------------
Italy-- 4.8%
6,900,000EUR Buoni Poliennali Del Tes, 3.250% due 4/15/04 5,470,639
------------------------------------------------------------------------------------------------------
Japan -- 9.6%
1,200,000,000 Japan Government, 1.700% due 9/20/10 10,892,920
------------------------------------------------------------------------------------------------------
Luxembourg -- 4.4%
5,000,000USD Helaba International Finance PLC, 6.875% due 4/29/02 4,999,250
------------------------------------------------------------------------------------------------------
Spain -- 5.0%
6,000,000USD Kingdom of Spain, 5.875% due 7/28/08++ 5,680,500
------------------------------------------------------------------------------------------------------
Sweden -- 2.3%
26,000,000 AB Spintab, 5.500% due 9/17/03 2,619,202
-----------------------------------------------------------------------------------------------------
United Kingdom -- 16.5%
3,000,000EUR Barclays Bank PLC, 7.500% due 4/29/49++ 2,552,975
5,000,000 Inter - American Development Bank, 7.125% due 11/26/04 7,505,518
5,000,000 KFW International Finance, 9.438% due 2/27/08 8,587,692
------------------------------------------------------------------------------------------------------
18,646,185
------------------------------------------------------------------------------------------------------
TOTAL BONDS
(Cost -- $98,482,682) 86,380,950
------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 25
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 2000
--------------------------------------------------------------------------------
GLOBAL GOVERNMENT BOND PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT-- 6.3%
$ 7,091,000 CIBC Wood Gundy Securities Inc., 6.470% due 11/1/00; Proceeds at
maturity-- 7,092,274; (Fully $ collateralized by U.S. Treasury Notes,
6.500% due 8/31/01; Market value-- $7,233,490) (Cost-- $7,091,000) $ 7,091,000
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS-- 100%
(Cost-- $125,175,010*) $ 113,148,160
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Represents local currency, unless otherwise indicated.
++ 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 used in this schedule:
--------------------------------------------
EUR-- Euro
USD-- U.S. dollar
See Notes to Financial Statements.
--------------------------------------------------------------------------------
26 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 2000
--------------------------------------------------------------------------------
EUROPEAN PORTFOLIO
SHARES SECURITY VALUE
--------------------------------------------------------------------------------
STOCK -- 100.0%
Finland -- 9.1%
180,000 Nokia Oyj $7,695,013
173,000 Tecnomen Oyj+ 1,195,075
--------------------------------------------------------------------------------
8,890,088
--------------------------------------------------------------------------------
France -- 21.0%
75,000 Alcatel 4,570,689
20,000 Atos S.A.+* 1,639,260
21,666 Axa* 2,864,804
25,000 BNP Paribas S.A. 2,152,907
15,000 Cap Gemini S.A. 2,390,235
20,000 Groupe Danone* 2,793,693
55,000 Schlumberger Ltd. 4,186,878
--------------------------------------------------------------------------------
20,598,466
--------------------------------------------------------------------------------
Germany -- 10.8%
8,000 Allianz AG 2,689,947
12,000 SAP AG 2,354,636
90,000 Schering AG 4,996,609
25,000 T-Online International AG+* 509,621
--------------------------------------------------------------------------------
10,550,813
--------------------------------------------------------------------------------
Netherlands -- 14.9%
76,134 Fugro NV* 4,481,698
44,773 Hunter Douglas NV 1,282,698
83,796 IHC Caland NV 3,693,331
42,304 ING Groep NV 2,901,542
40,000 PinkRoccade NV+* 2,220,716
--------------------------------------------------------------------------------
14,579,985
--------------------------------------------------------------------------------
Norway -- 9.2%
57,142 Orkla ASA 1,029,115
200,000 Tomra Systems ASA 8,021,075
--------------------------------------------------------------------------------
9,050,190
--------------------------------------------------------------------------------
Spain -- 5.5%
100,000 Amadeus Global Travel Distribution S.A.+ 816,240
89,419 Azkoyen S.A. 515,383
78,000 Indra Sistemas S.A.* 784,099
170,640 Telefonica S.A.+* 3,249,942
--------------------------------------------------------------------------------
5,365,664
--------------------------------------------------------------------------------
Sweden -- 0.3%
150,000 Cell Network AB 344,311
--------------------------------------------------------------------------------
Switzerland -- 10.4%
8,000 Geberit International AG 1,913,130
51,000 Mettler-Toledo International Inc.+ 2,381,062
1,664 Novartis AG 2,523,623
6,988 Zurich Financial Services AG 3,381,103
--------------------------------------------------------------------------------
10,198,918
--------------------------------------------------------------------------------
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 27
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 2000
--------------------------------------------------------------------------------
EUROPEAN PORTFOLIO
SHARES SECURITY VALUE
--------------------------------------------------------------------------------
United Kingdom -- 18.8%
70,000 BP Amoco PLC ADR $3,565,625
320,000 CMG PLC 5,292,598
240,000 Granada Compass PLC+ 2,078,819
200,000 SEMA Group PLC 2,535,358
1,181,797 Vodafone Group PLC 4,929,446
--------------------------------------------------------------------------------
18,401,846
--------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost-- $60,118,782**) $97,980,281
--------------------------------------------------------------------------------
+ Non-income producing security.
* 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.
--------------------------------------------------------------------------------
28 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 2000
--------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO
SHARES SECURITY VALUE
--------------------------------------------------------------------------------
STOCK -- 100.0%
Brazil -- 15.1%
20,000 Companhia de Bebidas das Americas ADR $451,251
10,000 Petroleo Brasileiro S.A. ADR 265,195
18,396 Tele Norte Leste Participacoes S.A. ADR 407,012
2,565 Telecomunicacoes Brasileiras S.A. ADR, Preferred* 187,886
14,440 Uniao de Bancos Brasileiros S.A. GDR 364,611
--------------------------------------------------------------------------------
1,675,955
--------------------------------------------------------------------------------
Greece -- 3.1%
8,200 Hellenic Telecommunications Organization S.A. 142,924
5,180 National Bank of Greece S.A. 196,859
--------------------------------------------------------------------------------
339,783
--------------------------------------------------------------------------------
Hong Kong -- 3.2%
11,480 China Mobile Ltd. ADR+ 351,577
--------------------------------------------------------------------------------
Hungary -- 1.5%
7,125 Magyar Tavkozlesi Rt. ADR 167,437
--------------------------------------------------------------------------------
India -- 4.8%
19,660 ICICI Ltd. ADR 185,541
2,000 Infosys Technologies Ltd. ADR* 275,000
11,200 Pentamedia Graphics Ltd. GDR 78,400
--------------------------------------------------------------------------------
538,941
--------------------------------------------------------------------------------
Israel -- 14.2%
6,150 Amdocs Ltd.+ 398,598
5,700 Comverse Technology Inc.+ 636,977
4,650 Gilat Satellite Networks Ltd.+ 238,021
5,300 Teva Pharmaceutical Industries Ltd. ADR 313,363
--------------------------------------------------------------------------------
1,586,959
--------------------------------------------------------------------------------
Mexico -- 16.4%
9,000 Grupo Televisa S.A. GDR+ 487,126
16,500 Telefonos de Mexico S.A. ADR, Series L Shares 889,971
186,000 Wal-Mart de Mexico S.A. de CV, Series V Shares+ 447,971
--------------------------------------------------------------------------------
1,825,068
--------------------------------------------------------------------------------
Philippines -- 0.5%
744,000 SM Prime Holdings Inc. 58,181
--------------------------------------------------------------------------------
Singapore -- 1.2%
9,500 Singapore Press Holdings Ltd. 135,830
--------------------------------------------------------------------------------
South Africa -- 8.9%
4,750 Anglo American Platinum Corp. Ltd. 185,256
16,591 Bidvest Group Ltd. 93,067
39,600 Dimension Data Holdings PLC 341,583
7,600 Investec Group Ltd. 227,234
19,000 Sasol Ltd. 145,540
--------------------------------------------------------------------------------
992,680
--------------------------------------------------------------------------------
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 29
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 2000
--------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO
SHARES SECURITY VALUE
--------------------------------------------------------------------------------
South Korea -- 12.2%
8,800 Hyundai Electronics Industries Co. Ltd.+ $54,076
5,450 Korea Electric Power Corp. 121,696
3,500 Korea Telecom Corp. 206,153
3,500 Korea Telecom Corp. ADR 129,062
13,200 Samsung Corp. 73,107
1,500 Samsung Electronics 187,912
23,500 SK Telecom Co. Ltd. ADR 588,969
--------------------------------------------------------------------------------
1,360,975
--------------------------------------------------------------------------------
Spain -- 2.3%
4,357 Telefonica S.A. ADR+ 252,433
--------------------------------------------------------------------------------
Taiwan -- 16.6%
63,616 Cathay Life Insurance Co. Ltd. 114,017
132,667 China Motor Co. Ltd. 124,627
83,460 Hon Hai Precision Industry Co. Ltd. 435,857
75,055 President Chain Store Corp. 213,377
131,484 Taiwan Semiconductor Manufacturing Co. Ltd. 398,181
111,000 United Microelectronics Corp. 195,513
27,000 Via Technologies Inc. 193,566
182,040 Winbond Electronics Corp. 176,071
--------------------------------------------------------------------------------
1,851,209
--------------------------------------------------------------------------------
TOTAL INVESTMENTS-- 100%
(Cost-- $9,484,522**) $11,137,028
--------------------------------------------------------------------------------
* All or a portion of this security is on loan (See Note 9).
+ Non-income producing security.
** Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
--------------------------------------------------------------------------------
30 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 2000
--------------------------------------------------------------------------------
PACIFIC PORTFOLIO
SHARES SECURITY VALUE
--------------------------------------------------------------------------------
STOCK -- 100.0%
Australia -- 2.4%
34,300 Computershare Ltd. $148,414
--------------------------------------------------------------------------------
Hong Kong -- 7.3%
10,000 China Mobile Ltd.+ 64,430
60,000 Computer & Technologies Holdings Ltd. 41,158
8,000 HSBC Holdings PLC 111,295
12,000 Hutchison Whampoa Ltd. 148,864
400,000 PetroChina Co. Ltd. 84,112
--------------------------------------------------------------------------------
449,859
--------------------------------------------------------------------------------
Japan -- 75.8%
500 Advantest Corp. 65,161
5,000 Canon Inc. 198,278
16,000 Daibiru Corp. 122,356
10,000 Daifuku Co. Ltd. 82,425
1,000 Drake Beam Morin Japan Inc. 29,581
6,000 Fujitsu Ltd. 106,822
1,000 Hirose Electric Co. Ltd. 115,395
3,000 Hosiden Corp. 95,614
3,000 Ito Yokado Co. Ltd. 135,452
1,000 Matsushita Communication Industrial Co. Ltd. 130,965
6,000 Matsushita Electric Industrial Co . Ltd. 174,192
2,500 Meitec Corp. 104,864
16,000 Mitsubishi Estate Co. Ltd.* 169,978
16,000 Mitsui Fudosan Co. Ltd. 193,717
2,000 Murata Manufacturing Co. Ltd. 239,217
14,000 Nippon Sheet Glass Co. Ltd. 212,841
12,000 Nomura Securities Co. Ltd. 254,419
15 NTT Corp. 136,413
24 NTT Data Corp.* 186,831
10 NTT DoCoMo Inc. 246,360
25,000 Obayashi Corp. 103,489
15,000 OJI Paper Co., Ltd. 87,233
4,914 Pasona Softbank Inc. 73,806
3,000 Seven-Eleven Japan Co., Ltd. 195,073
5,000 Sharp Corp. 63,650
2,000 Shin-Etsu Chemical Co. Ltd. 82,058
1,100 Softbank Corp. 65,985
2,000 Sony Corp. 159,723
3,000 Takeda Chemical Industries Ltd. 197,546
5,000 Terumo Corp. 141,496
1,000 Tokyo Electron Ltd. 78,212
30,000 Tokyu Corp. 154,959
10,000 Tostem Corp.* 145,618
1,600 Trend Micro Inc.+ 150,930
--------------------------------------------------------------------------------
4,700,659
--------------------------------------------------------------------------------
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 31
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 2000
--------------------------------------------------------------------------------
PACIFIC PORTFOLIO
SHARES SECURITY VALUE
--------------------------------------------------------------------------------
Singapore -- 4.0%
31,739 Datacraft Asia Ltd. $217,412
46,500 Star Cruises PLC+ 34,642
--------------------------------------------------------------------------------
252,054
--------------------------------------------------------------------------------
South Korea -- 4.9%
2,500 Korea Electric Power Corp. 55,824
1,600 Korea Telecom Corp. 94,242
700 Samsung Electronics Corp. 87,692
300 SK Telecom Co. Ltd. 63,956
--------------------------------------------------------------------------------
301,714
--------------------------------------------------------------------------------
Taiwan -- 5.6%
30,912 Cathay Life Insurance Co. Ltd. 55,403
23,124 Hon Hai Precision Industry Co. Ltd. 120,762
33,062 Taiwan Semiconductor Manufacturing Co., Ltd. 100,125
7,000 Via Technologies, Inc. 50,184
7 Winbond Electronics Corp. 69
11,440 Zyxel Communication Corp. 23,332
--------------------------------------------------------------------------------
349,875
--------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost-- $6,103,413**) $6,202,575
--------------------------------------------------------------------------------
+ Non-income producing security.
* 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 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Statements of Assets and Liabilities October 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Global
Government Emerging
Bond European Markets Pacific
Portfolio Portfolio Portfolio Portfolio
-----------------------------------------------------------------------------------------------------------------------------
ASSETS:
<S> <C> <C> <C> <C>
Investments, at cost $125,175,010 $60,118,782 $9,484,522 $6,103,413
Foreign currency, at cost -- 554 445,374 129,980
Payable to bank, foreign currency 201 -- -- --
-----------------------------------------------------------------------------------------------------------------------------
Investments, at value $113,148,160 $97,980,281 $11,137,028 $6,202,575
Foreign currency, at value -- 558 436,899 124,787
Cash -- 160,426 43,437 --
Collateral for securities on loan (Note 9) 16,364,950 12,770,616 438,000 456,230
Dividends and interest receivable 2,752,490 41,640 12,432 8,426
Receivable for open forward foreign
currency contracts (Note 4) 134,568 -- -- --
Receivable for Fund shares sold 49,785 2,915,369 -- --
Receivable from Manager -- -- -- 34,741
Receivable for securities sold -- 16,852 -- 330,234
-----------------------------------------------------------------------------------------------------------------------------
Total Assets 132,449,953 113,885,742 12,067,796 7,156,993
-----------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities on loan (Note 9) 16,364,950 12,770,616 438,000 456,230
Payable for open forward foreign
currency contracts (Note 4) 872,944 -- -- --
Management fees payable 75,684 74,446 9,783 --
Payable for Fund shares purchased 14,188 263,474 2,223 11,629
Distribution fees payable 3,059 23,252 4,277 7,083
Payable to bank, foreign currency 699 -- -- --
Payable to bank 176 -- -- 351,681
Accrued expenses 101,538 89,248 41,254 45,033
-----------------------------------------------------------------------------------------------------------------------------
Total Liabilities 17,433,238 13,221,036 495,537 871,656
-----------------------------------------------------------------------------------------------------------------------------
Total Net Assets $115,016,715 $100,664,706 $11,572,259 $6,285,337
-----------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Par value of capital shares $10,553 $4,040 $1,354 $871
Capital paid in excess of par value 119,254,381 56,714,539 19,800,996 8,848,287
Undistributed net investment income 12,412,168 -- -- --
Accumulated net realized gain (loss) from
security transactions (3,785,188) 6,086,897 (9,873,275) (2,657,616)
Net unrealized appreciation (depreciation)
of investments and foreign currencies (12,875,199) 37,859,230 1,643,184 93,795
-----------------------------------------------------------------------------------------------------------------------------
Total Net Assets $115,016,715 $100,664,706 $11,572,259 $6,285,337
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 33
<PAGE>
--------------------------------------------------------------------------------
Statements of Assets and Liabilities (continued) October 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Global
Government Emerging
Bond European Markets Pacific
Portfolio Portfolio Portfolio Portfolio
---------------------------------------------------------------------------------------------------------------------
Shares Outstanding:
<S> <C> <C> <C> <C>
Class A 5,527,682 1,844,742 428,256 281,144
--------------------------------------------------------------------------------------------------------------
Class B 510,347 1,513,790 538,286 281,528
--------------------------------------------------------------------------------------------------------------
Class L 160,378 681,757 203,239 308,082
--------------------------------------------------------------------------------------------------------------
Class Y 4,354,224 -- 184,145 --
--------------------------------------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $10.95 $25.52 $8.73 $7.44
--------------------------------------------------------------------------------------------------------------
Class B * $10.92 $24.42 $8.37 $7.14
--------------------------------------------------------------------------------------------------------------
Class L ** $10.92 $24.38 $8.36 $7.09
--------------------------------------------------------------------------------------------------------------
Class Y (and redemption price) $10.83 -- $8.86 --
--------------------------------------------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 4.71% of
net asset value per share) $11.47 -- -- --
------------------------------------------------------------------------------------------------------------------
Class A (net asset value plus 5.26% of
net asset value per share) -- $26.86 $9.19 $7.83
------------------------------------------------------------------------------------------------------------------
Class L (net asset value plus 1.01% of
net asset value per share) $11.03 $24.63 $8.44 $7.16
---------------------------------------------------------------------------------------------------------------------
</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 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Statements of Operations For the Year Ended October 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Global
Government Emerging
Bond European Markets Pacific
Portfolio Portfolio Portfolio Portfolio
-----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
<S> <C> <C> <C> <C>
Interest $6,678,451 $261,479 $35,853 $35,628
Dividends -- 1,395,693 177,795 43,658
Less: Foreign withholding tax -- (169,301) (27,834) (7,525)
Less: Interest expense -- (73,415) -- --
-----------------------------------------------------------------------------------------------------------------------------------
Total Investment Income 6,678,451 1,414,456 185,814 71,761
-----------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 902,878 906,567 164,061 99,188
Distribution fees (Note 2) 225,022 708,235 102,444 86,479
Shareholder and system servicing fees 81,173 153,500 37,801 30,020
Audit and legal 37,000 37,000 35,000 26,000
Registration fees 31,000 55,000 45,000 37,000
Custody 26,000 55,000 28,500 21,000
Shareholder communications 18,213 35,000 15,000 12,500
Directors' fees 4,650 4,000 4,000 3,000
Pricing service fees -- 4,000 3,500 5,000
Other 2,989 3,000 4,500 1,009
-----------------------------------------------------------------------------------------------------------------------------------
Total Expenses 1,328,925 1,961,302 439,806 321,196
Less: Management fee waiver (Note 2) -- -- -- (91,069)
-----------------------------------------------------------------------------------------------------------------------------------
Net Expenses 1,328,925 1,961,302 439,806 230,127
-----------------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) 5,349,526 (546,846) (253,992) (158,366)
-----------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN
CURRENCIES (NOTES 3 AND 4):
Realized Gain (Loss) From:
Security transactions (3,640,918) 6,608,709 1,223,188 876,492
Foreign currency transactions 15,818,027 26,181 4,284 8,185
-----------------------------------------------------------------------------------------------------------------------------------
Net Realized Gain 12,177,109 6,634,890 1,227,472 884,677
-----------------------------------------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation (Depreciation)
of Investments and Foreign Currencies:
Beginning of year (2,525,074) 24,992,588 2,708,960 4,545,856
End of year (12,875,199) 37,859,231 1,643,184 93,795
-----------------------------------------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation (Depreciation) (10,350,125) 12,866,643 (1,065,776) (4,452,061)
-----------------------------------------------------------------------------------------------------------------------------------
Net Gain (Loss) on Investments and Foreign Currencies 1,826,984 19,501,533 161,696 (3,567,384)
-----------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Operations $7,176,510 $18,954,687 $(92,296) $(3,725,750)
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 35
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets For the Year Ended October 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Global
Government Emerging
Bond European Markets Pacific
Portfolio Portfolio Portfolio Portfolio
------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income (loss) $5,349,526 $(546,846) $(253,992) $(158,366)
Net realized gain 12,177,109 6,634,890 1,227,472 884,677
Change in net unrealized appreciation (depreciaion) (10,350,125) 12,866,643 (1,065,776) (4,452,061)
------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in
Net Assets From Operations 7,176,510 18,954,687 (92,296) (3,725,750)
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (9,711,668) -- -- (93,592)
Net realized gains -- (4,140,556) -- --
------------------------------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (9,711,668) (4,140,556) -- (93,592)
------------------------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 10):
Net proceeds from sale of shares 7,846,357 817,039,119 18,485,695 49,789,716
Net asset value of shares issued
for reinvestment of dividends 3,937,060 3,926,750 -- 90,577
Cost of shares reacquired (21,688,197) (816,232,892) (20,557,031) (52,689,365)
------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From
Fund Share Transactions (9,904,780) 4,732,977 (2,071,336) (2,809,072)
------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets (12,439,938) 19,547,108 (2,163,632) (6,628,414)
NET ASSETS:
Beginning of year 127,456,653 81,117,598 13,735,891 12,913,751
------------------------------------------------------------------------------------------------------------------------------------
End of year* $115,016,715 $100,664,706 $11,572,259 $6,285,337
------------------------------------------------------------------------------------------------------------------------------------
* Includes undistributed net investment income of: $12,412,168 -- -- --
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
36 2000 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
------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
<S> <C> <C> <C> <C>
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 loss of: -- -- -- $(134,587)
------------------------------------------------------------------------------------------------------------------------------------
* Includes undistributed net investment income of: $3,140,784 -- -- --
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 37
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements
--------------------------------------------------------------------------------
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 All Cap
Growth Portfolio, formerly known as the International Equity Portfolio. The
financial statements and financial highlights for the International All Cap
Growth Portfolio, formerly known as 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, 2000, reclassifications
were made to the capital accounts of the Global Government Bond Portfolio,
European Portfolio, Emerging Markets Portfolio and Pacific Portfolio to reflect
permanent book/tax differences and income and gains available for distributions
under income tax regulations. Accordingly, a portion of accumulated net
investment loss amounting to $233,745 and $248,478 was reclassified to paid in
capital for the Emerging Markets and Pacific Portfolios, respectively. Net
investment income, net realized gains and net assets were not affected by this
change. (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,
--------------------------------------------------------------------------------
38 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
liabilities and changes in net assets resulting from operations when financial
statements are prepared. Changes in the economic environment, financial markets
and any other parameters used in determining these estimates could cause actual
results to differ.
In addition, the Portfolios may enter into forward exchange contracts in order
to hedge against foreign 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 year ended October 31, 2000, SSBC waived a portion of
its management fee for the Pacific Portfolio totaling $91,069.
Citi Fiduciary Trust Company ("CFTC"), another subsidiary of Citigroup, acts as
the Portfolios' transfer agent and PFPC Global Fund Services ("PFPC") acts as
the Portfolios' 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 year ended October 31,
2000, the Portfolios paid transfer agent fees of $225,421 to CFTC.
Effective June 5, 2000, Salomon Smith Barney Inc. ("SSB"), another subsidiary of
SSBH, became the Portfolios' distributor replacing CFBDS, Inc. ("CFBDS"). In
addition, SSB acts as the primary broker for the Portfolios' agency
transactions. Certain other broker-dealers, continue to sell Portfolios' shares
to the public as members of the selling group. For the year ended October 31,
2000, SSB and its affiliates received brokerage commissions of $3,450.
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 incur an initial
sales charge.
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 39
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
For the year ended October 31, 2000, CDSC's received by SSB were approximately:
Portfolio Class B Class L
------------------------------------------------
Global Government Bond $ 6,000 --
------------------------------------------------
European 76,000 $4,000
------------------------------------------------
Emerging Markets 16,000 1,000
------------------------------------------------
Pacific 17,000 6,000
------------------------------------------------
For the year ended October 31, 2000, sales charges received by SSB and CFBDS
were approximately:
Portfolio Class A Class L
------------------------------------------------
Global Government Bond $ 4,000 $1,000
------------------------------------------------
European 182,000 48,000
------------------------------------------------
Emerging Markets 9,000 8,000
------------------------------------------------
Pacific 61,000 13,000
------------------------------------------------
Pursuant to a Distribution Plan, the Portfolios pay a service fee with respect
to Class A, B and L shares calculated at the annual rate of 0.25% of the average
daily net assets of each respective class' shares. The 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 year ended October 31, 2000, total
Distribution Plan fees incurred by the Portfolios were:
Portfolio Class A Class B Class L
------------------------------------------------------------------
Global Government Bond $157,951 $54,753 $12,318
------------------------------------------------------------------
European 119,439 430,114 158,682
------------------------------------------------------------------
Emerging Markets 14,410 64,890 23,144
------------------------------------------------------------------
Pacific 10,085 41,507 34,887
------------------------------------------------------------------
All officers and one Director of the Fund are employees of SSB.
3. Investments
During the year ended October 31, 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 $ 132,732,517 $133,927,361
-----------------------------------------------------------
European 25,853,896 32,882,292
-----------------------------------------------------------
Emerging Markets 3,049,824 5,591,765
-----------------------------------------------------------
Pacific 9,492,540 10,373,737
-----------------------------------------------------------
--------------------------------------------------------------------------------
40 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
At October 31, 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 $ 121,405 $(12,148,255) $(12,026,850)
--------------------------------------------------------------------------------
European 41,424,194 (3,562,695) 37,861,499
--------------------------------------------------------------------------------
Emerging Markets 3,391,220 (1,738,714) 1,652,506
--------------------------------------------------------------------------------
Pacific 1,362,071 (1,262,909) 99,162
--------------------------------------------------------------------------------
4. Forward Foreign Currency Contracts
At October 31, 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)
-----------------------------------------------------------------------------------------------------------------------
Global Government Bond Portfolio
To Sell:
<S> <C> <C> <C> <C> <C>
British Pound 11,790,000 $17,128,798 11/27/00 $(124,549)
Canadian Dollar 4,890,000 3,203,626 11/27/00 17,718
Danish Krona 5,780,000 658,867 11/27/00 (10,885)
Euro 52,190,000 44,292,608 11/27/00 (705,607)
Japanese Yen 1,190,000,000 10,952,918 11/27/00 116,850
Swedish Krona 26,320,000 2,632,694 11/27/00 (31,903)
-----------------------------------------------------------------------------------------------------------------------
Total Unrealized Loss on Open
Forward Foreign Currency Contracts $(738,376)
-----------------------------------------------------------------------------------------------------------------------
European Portfolio
To Sell:
Euro 19,883 $16,857 11/6/00 --
-----------------------------------------------------------------------------------------------------------------------
</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 October 31, 2000, the Portfolios did not hold any purchased call or put
option contracts.
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
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 41
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
greater or less than the premium originally received without regard to any
unrealized gain or loss on the underlying security, and the liability related to
such option is eliminated. When a written call option is exercised, the cost of
the security sold will be decreased by the premium originally received. When a
written put option is exercised, the amount of the premium originally received
will reduce the cost of the security that the Portfolio purchased upon exercise.
When written index options are exercised, settlement is made in cash.
The risk associated with purchasing options is limited to the premium originally
paid. The Portfolio enters into options for hedging purposes. The risk in
writing a call option is that the Portfolio gives up the opportunity to
participate in any increase in the price of the underlying security beyond the
exercise price. The risk in writing a put option is that the Portfolio is
exposed to the risk of a loss if the market price of the underlying security
declines.
During the year ended October 31, 2000, the Portfolios did not enter into any
written covered call or put option contracts.
6. Futures Contracts
Initial margin deposits made upon entering into futures contracts are recognized
as assets. Securities equal to the initial margin amount are segregated by the
custodian in the name of the broker. Additional securities are also segregated
up to the current market value of the futures contract. During the period the
futures contract is open, changes in the value of the contract are recognized as
unrealized gains or losses by "marking-to-market" on a daily basis to reflect
the market value of the contract at the end of each day's trading. Variation
margin payments are received or made and recognized as assets due from or
liabilities due to broker, depending upon whether unrealized gains or losses are
incurred. When the contract is closed, the Portfolio records a realized gain or
loss equal to the difference between the proceeds from (or cost of) the closing
transactions and the Portfolio's basis in the contract. The Portfolio enters
into such contracts to hedge a portion of its portfolio. The Portfolio bears the
market risk that arises from changes in the value of the financial instruments
and securities indices (futures contracts).
At October 31, 2000, the Portfolios did not have any 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
October 31, 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 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
8. Capital Loss Carryforwards
At October 31, 2000, Global Government Bond, Emerging Markets and Pacific
Portfolios had, for Federal income tax purposes, approximately $3,785,000,
$9,870,000 and $2,651,000, 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 expiration of the carryforwards are indicated below.
Expiration occurs on October 31 of the year indicated:
<TABLE>
<CAPTION>
Portfolio 2003 2004 2005 2006 2007 2008 Total
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Global Government Bond -- -- -- -- $2,148,00 $1,637,000 $3,785,000
----------------------------------------------------------------------------------------------------------------------------------
Emerging Markets -- -- -- $5,252,00 4,618,000 -- 9,870,000
----------------------------------------------------------------------------------------------------------------------------------
Pacific $166,000 $246,000 $515,000 1,724,000 -- -- 2,651,000
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
9. Lending of Portfolio Securities
The Portfolios have an agreement with their custodian whereby the custodian may
lend securities owned by the Portfolios to brokers, dealers and other financial
organizations. Fees earned by the Portfolios on securities lending are recorded
as interest income. Loans of securities by the Portfolios are collateralized by
cash, U.S. government securities, high quality money market instruments or other
securities that are maintained at all times in an amount at least equal to the
current market value of the loaned securities, plus a margin depending on the
type of securities loaned. The custodian establishes and maintains the
collateral in a segregated account. The Portfolios maintain exposure for the
risk of any losses in the investment of amounts received as collateral.
At October 31, 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:
Portfolio Value
--------------------------------------------------------------------------------
Global Government Bond $15,799,945
--------------------------------------------------------------------------------
European 12,224,761
--------------------------------------------------------------------------------
Emerging Markets 458,125
--------------------------------------------------------------------------------
Pacific 438,668
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 43
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
At October 31, 2000, the Portfolios held the following collateral for loaned
securities:
Global Government Bond Portfolio
Security Descriptions Value
--------------------------------------------------------------------------------
Time Deposits:
Banco Santader ch sa-London, 6.660% due 11/1/00 $808,492
Bank of Austria, 6.656% due 11/1/00 808,492
Bank of Ireland, 6.688% due 11/1/00 808,492
Banque Bruxelles Lambert London, 6.656% due 11/1/00 808,492
Barclays Bank PLC, 6.660% due 11/1/00 808,492
Caisse de Depots et Consign, Paris, 6.656% due 11/1/00 808,492
Firstar Bank G.C., 6.656% due 11/1/00 810,816
Nordeutsche Landesbank, Singapore, 6.656% due 11/1/00 808,492
Toronto Dominion, London, 6.660% due 11/1/00 808,493
Wells Fargo Bank Minnesota N.A., GC, 6.656% due 11/1/00 810,816
Repurchase Agreements:
Bear Stearns & Co., 6.680% due 11/1/00 1,554,654
CS First Boston Corp., 6.680% due 11/1/00 1,742,441
J.P. Morgan Securities, 6.700% due 11/1/00 808,493
Morgan Stanley Dean Witter & Co., 6.605% due 11/1/00 1,742,441
Commercial Paper:
Associates Corp. of North America, 6.651% due 11/1/00 808,343
General Electric Capital International, 6.661% due 11/1/00 810,666
UBS Finance (Delaware) Inc., 6.651% due 11/1/00 808,343
--------------------------------------------------------------------------------
Total $16,364,950
--------------------------------------------------------------------------------
European Portfolio
Security Descriptions Value
--------------------------------------------------------------------------------
Time Deposits:
Banco Santader ch sa-London, 6.660% due 11/1/00 $630,918
Bank of Austria, 6.656% due 11/1/00 630,918
Bank of Ireland, 6.688% due 11/1/00 630,918
Banque Bruxelles Lambert London, 6.656% due 11/1/00 630,918
Barclays Bank PLC, 6.660% due 11/1/00 630,918
Caisse de Depots et Consign, Paris, 6.656% due 11/1/00 630,918
Firstar Bank G.C., 6.656% due 11/1/00 632,731
Nordeutsche Landesbank, Singapore, 6.656% due 11/1/00 630,918
Toronto Dominion, London, 6.660% due 11/1/00 630,919
Wells Fargo Bank Minnesota N.A., GC, 6.656% due 11/1/00 632,731
Repurchase Agreements:
Bear Stearns & Co., 6.680% due 11/1/00 1,213,196
CS First Boston Corp., 6.680% due 11/1/00 1,359,738
J.P. Morgan Securities, 6.700% due 11/1/00 630,919
Morgan Stanley Dean Witter & Co., 6.605% due 11/1/00 1,359,738
Commercial Paper:
Associates Corp. of North America, 6.651% due 11/1/00 630,802
General Electric Capital International, 6.661% due 11/1/00 632,614
UBS Finance (Delaware) Inc., 6.651% due 11/1/00 630,802
--------------------------------------------------------------------------------
Total $12,770,616
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
44 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
Emerging Markets Portfolio
Security Descriptions Value
--------------------------------------------------------------------------------
Time Deposits:
Banco Santader ch sa-London, 6.660% due 11/1/00 $21,639
Bank of Austria, 6.656% due 11/1/00 21,639
Bank of Ireland, 6.688% due 11/1/00 21,639
Banque Bruxelles Lambert London, 6.656% due 11/1/00 21,639
Barclays Bank PLC, 6.660% due 11/1/00 21,639
Caisse de Depots et Consign, Paris, 6.656% due 11/1/00 21,639
Firstar Bank G.C., 6.656% due 11/1/00 21,701
Nordeutsche Landesbank, Singapore, 6.656% due 11/1/00 21,639
Toronto Dominion, London, 6.660% due 11/1/00 21,639
Wells Fargo Bank Minnesota N.A., GC, 6.656% due 11/1/00 21,701
Repurchase Agreements:
Bear Stearns & Co., 6.680% due 11/1/00 41,610
CS First Boston Corp., 6.680% due 11/1/00 46,635
J.P. Morgan Securities, 6.700% due 11/1/00 21,639
Morgan Stanley Dean Witter & Co., 6.605% due 11/1/00 46,635
Commercial Paper:
Associates Corp. of North America, 6.651% due 11/1/00 21,635
General Electric Capital International, 6.661% due 11/1/00 21,697
UBS Finance (Delaware) Inc., 6.651% due 11/1/00 21,635
--------------------------------------------------------------------------------
Total $438,000
--------------------------------------------------------------------------------
Pacific Portfolio
Security Descriptions Value
--------------------------------------------------------------------------------
Time Deposits:
Banco Santader ch sa-London, 6.660% due 11/1/00 $22,540
Bank of Austria, 6.656% due 11/1/00 22,540
Bank of Ireland, 6.688% due 11/1/00 22,540
Banque Bruxelles Lambert London, 6.656% due 11/1/00 22,540
Barclays Bank PLC, 6.660% due 11/1/00 22,540
Caisse de Depots et Consign, Paris, 6.656% due 11/1/00 22,540
Firstar Bank G.C., 6.656% due 11/1/00 22,604
Nordeutsche Landesbank, Singapore, 6.656% due 11/1/00 22,539
Toronto Dominion, London, 6.660% due 11/1/00 22,539
Wells Fargo Bank Minnesota N.A., GC, 6.656% due 11/1/00 22,604
Repurchase Agreements:
Bear Stearns & Co., 6.680% due 11/1/00 43,341
CS First Boston Corp., 6.680% due 11/1/00 48,577
J.P. Morgan Securities, 6.700% due 11/1/00 22,539
Morgan Stanley Dean Witter & Co., 6.605% due 11/1/00 48,577
Commercial Paper:
Associates Corp. of North America, 6.651% due 11/1/00 22,535
General Electric Capital International, 6.661% due 11/1/00 22,600
UBS Finance (Delaware) Inc., 6.651% due 11/1/00 22,535
--------------------------------------------------------------------------------
Total $456,230
--------------------------------------------------------------------------------
In addition to the above noted cash collateral, the European Portfolio held
securities collateral with a market value of $30,579 as of October 31, 2000.
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 45
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
Income earned by the Portfolios from securities loaned for the year ended
October 31, 2000 was as follows:
<TABLE>
<CAPTION>
Global
Government Emerging
Bond European Markets Pacific
Portfolio Portfolio Portfolio Portfolio
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income $20,036 $50,904 $11,669 $6,157
---------------------------------------------------------------------------------------------------------
</TABLE>
10. Capital Shares
At October 31, 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 October 31, 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 $61,634,964 $4,82$,581 2,163,533 $50,642,856
---------------------------------------------------------------------------------------------------------
European 27,142,614 15,460,572 14,115,393 --
---------------------------------------------------------------------------------------------------------
Emerging Markets 6,235,772 8,989,734 3,040,678 1,536,166
---------------------------------------------------------------------------------------------------------
Pacific 2,900,376 3,085,369 2,863,413 --
---------------------------------------------------------------------------------------------------------
</TABLE>
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 2000 October 31, 1999
------------------------------ ------------------------------
Shares Amount Shares Amount
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Global Government Bond Portfolio
Class A
Shares sold 321,561 $3,504,170 379,601 $4,408,169
Shares issued on reinvestment 291,847 3,155,911 185,035 2,147,392
Shares reacquired (1,215,767) (13,269,359) (1,913,231) (22,315,455)
---------------------------------------------------------------------------------------------------------
Net Decrease (602,359) $(6,609,278) (1,348,595) $(15,759,894)
---------------------------------------------------------------------------------------------------------
Class B
Shares sold 7,104 $77,017 56,587 $669,157
Shares issued on reinvestment 40,906 440,956 31,703 367,804
Shares reacquired (387,717) (4,220,251) (465,281) (5,410,347)
---------------------------------------------------------------------------------------------------------
Net Decrease (339,707) $(3,702,278) (376,991) $(4,373,386)
---------------------------------------------------------------------------------------------------------
Class L
Shares sold 23,805 $262,077 13,517 $157,346
Shares issued on reinvestment 10,298 111,037 5,766 66,804
Shares reacquired (28,938) (313,117) (65,706) (764,464)
---------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 5,165 $59,997 (46,423) $(540,314)
---------------------------------------------------------------------------------------------------------
Class Y
Shares sold 370,344 $4,003,093 1,151,897 $13,322,319
Shares issued on reinvestment 21,456 229,156 4,892 54,510
Shares reacquired (362,484) (3,885,470) -- --
Net Increase 29,316 $346,779 1,156,789 $13,376,829
---------------------------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
46 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 2000 October 31, 1999
------------------------------ ------------------------------
Shares Amount Shares Amount
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
European Portfolio
Class A
Shares sold 28,890,006 $774,104,339 14,508,592 $302,669,958
Shares issued on reinvestment 61,729 1,577,803 21,291 439,883
Shares reacquired (28,521,841) (769,283,567) (14,533,239) (304,802,469)
--------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 429,894 $6,398,575 (3,356) $(1,692,628)
--------------------------------------------------------------------------------------------------------------
Class B
Shares sold 658,332 $17,200,691 953,658 $19,317,878
Shares issued on reinvestment 71,251 1,756,339 32,746 658,501
Shares reacquired (937,017) (24,234,931) (1,380,533) (28,069,881)
--------------------------------------------------------------------------------------------------------------
Net Decrease (207,434) $(5,277,901) (394,129) $(8,093,502)
--------------------------------------------------------------------------------------------------------------
Class L
Shares sold 1,015,248 $25,734,089 887,776 $17,896,341
Shares issued on reinvestment 24,080 592,608 8,919 179,013
Shares reacquired (889,757) (22,714,394) (933,531) (18,964,027)
--------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 149,571 $3,612,303 (36,836) $(888,673)
--------------------------------------------------------------------------------------------------------------
Emerging Markets Portfolio
Class A
Shares sold 908,870 $10,217,668 1,636,720 $13,139,320
Shares reacquired (1,031,190) (11,681,915) (1,899,726) (15,412,364)
--------------------------------------------------------------------------------------------------------------
Net Decrease (122,320) $(1,464,247) (263,006) $(2,273,044)
--------------------------------------------------------------------------------------------------------------
Class B
Shares sold 638,082 $6,991,981 315,062 $2,527,606
Shares reacquired (741,082) (8,002,223) (549,267) (4,314,145)
--------------------------------------------------------------------------------------------------------------
Net Decrease (103,000) $(1,010,242) (234,205) $(1,786,539)
--------------------------------------------------------------------------------------------------------------
Class L
Shares sold 84,682 $968,085 156,610 $1,264,649
Shares reacquired (83,680) (872,893) (179,799) (1,435,390)
--------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 1,002 $95,192 (23,189) $(170,741)
--------------------------------------------------------------------------------------------------------------
Class Y
Shares sold 29,127 $307,961 54,732 $422,262
--------------------------------------------------------------------------------------------------------------
Net Increase 29,127 $307,961 54,732 $422,262
--------------------------------------------------------------------------------------------------------------
Pacific Portfolio
Class A
Shares sold 3,375,808 $38,064,622 3,886,615 $32,085,747
Shares issued on reinvestment 4,540 60,388 -- --
Shares reacquired (3,514,885) (39,860,425) (3,736,734) (30,751,044)
--------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (134,537) $(1,735,415) 149,881 $1,334,703
--------------------------------------------------------------------------------------------------------------
Class B
Shares sold 300,077 $3,745,367 807,310 $7,262,774
Shares issued on reinvestment 781 10,023 -- --
Shares reacquired (340,609) (3,758,896) (817,705) (7,303,299)
--------------------------------------------------------------------------------------------------------------
Net Decrease (39,751) $(3,506) (10,395) $(40,525)
--------------------------------------------------------------------------------------------------------------
Class L
Shares sold 722,885 $7,979,727 1,353,683 $10,668,868
Shares issued on reinvestment 1,580 20,166 -- --
Shares reacquired (804,676) (9,070,044) (1,117,046) (8,560,753)
--------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (80,211) $(1,070,151) 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:
<TABLE>
<CAPTION>
Class A Shares
---------------------------------------------------------------------------------
Global Government Bond Portfolio 2000(1) 1999(1) 1998(1) 1997(1) 1996(1)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $11.18 $11.88 $12.22 $12.55 $12.30
------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.48 0.51 0.54 0.59 0.70
Net realized and unrealized gain (loss) 0.17 (0.69) 0.39 0.38 0.42
------------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.65 (0.18) 0.93 0.97 1.12
------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income(2) (0.88) (0.52) (0.22) (1.22) (0.87)
Net realized gains -- -- (0.60) (0.08) --
Capital -- -- (0.45) -- --
------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.88) (0.52) (1.27) (1.30) (0.87)
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $10.95 $11.18 $11.88 $12.22 $12.55
------------------------------------------------------------------------------------------------------------------------------------
Total Return 6.13% (1.62)% 8.08% 8.21% 9.41%
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $60,546 $68,532 $88,836 $94,957 $106,536
------------------------------------------------------------------------------------------------------------------------------------
Ratio to Average Net Assets:
Expenses(3) 1.21% 1.26% 1.22% 1.26% 1.26%
Net investment income 4.35 4.39 4.58 4.82 5.69
------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 121% 164% 287% 367% 133%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) Distributions from net investment income include short-term capital gains,
if any, for Federal income tax purposes.
(3) During the year ended October 31, 1996, the Portfolio had earned credits
from the custodian which reduced service fees incurred.
If the credits were taken into consideration, the expense ratio for
Class A shares would have been 1.24%.
-------------------------------------------------------------------------------
48 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Financial Highlights (continued)
--------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended October 31:
<TABLE>
<CAPTION>
Class B Shares
---------------------------------------------------------------------------------
Global Government Bond Portfolio 2000(1) 1999(1) 1998(1) 1997(1) 1996(1)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $11.16 $11.87 $12.22 $12.50 $12.26
------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.42 0.45 0.47 0.52 0.63
Net realized and unrealized gain (loss) 0.17 (0.69) 0.39 0.38 0.42
------------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.59 (0.24) 0.86 0.90 1.05
------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income(2) (0.83) (0.47) (0.19) (1.10) (0.81)
Net realized gains -- -- (0.60) (0.08) --
Capital -- -- (0.42) -- --
------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.83) (0.47) (1.21) (1.18) (0.81)
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $10.92 $11.16 $11.87 $12.22 $12.50
------------------------------------------------------------------------------------------------------------------------------------
Total Return 5.56% (2.11)% 7.46% 7.62% 8.83%
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $5,574 $9,485 $14,569 $19,690 $25,970
------------------------------------------------------------------------------------------------------------------------------------
Ratio to Average Net Assets:
Expenses(3) 1.76% 1.81% 1.77% 1.80% 1.81%
Net investment income 3.88 3.86 3.93 4.24 5.15
------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 121% 164% 287% 367% 133%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) Distributions from net investment income include short-term capital gains,
if any, for Federal income tax purposes.
(3) During the year ended October 31, 1996, the Portfolio had earned credits
from the custodian which reduced service fees incurred.
If the credits were taken into consideration, the expense ratio for Class
B shares would have been 1.78%.
--------------------------------------------------------------------------------
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:
<TABLE>
<CAPTION>
Class L Shares
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Global Government Bond Portfolio 2000(1) 1999(1) 1998(1)(2) 1997(1) 1996(1)
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Year $11.15 $11.86 $12.19 $12.47 $12.23
------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.42 0.46 0.48 0.53 0.64
Net realized and unrealized gain (loss) 0.18 (0.70) 0.40 0.38 0.41
------------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.60 (0.24) 0.88 0.91 1.05
------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income(3) (0.83) (0.47) (0.19) (1.11) (0.81)
Net realized gains -- -- (0.60) (0.08) --
Capital -- -- (0.42) -- --
------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.83) (0.47) (1.21) (1.19) (0.81)
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $10.92 $11.15 $11.86 $12.19 $12.47
------------------------------------------------------------------------------------------------------------------------------------
Total Return 5.67% (2.11)% 7.67% 7.73% 8.90%
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $1,752 $1,731 $2,391 $3,257 $3,986
------------------------------------------------------------------------------------------------------------------------------------
Ratio to Average Net Assets:
Expenses(4) 1.67% 1.72% 1.68% 1.69% 1.74%
Net investment income 3.88 3.98 4.01 4.33 5.22
------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 121% 164% 287% 367% 133%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) On June 12, 1998, Class C shares were renamed Class L shares.
(3) Distributions from net investment income include short-term capital gains,
if any, for Federal income tax purposes.
(4) During the year ended October 31, 1996, the Portfolio had earned credits
from the custodian which reduced service fees incurred.
If the credits were taken into consideration, the expense ratio for Class
L shares would have been 1.71%.
--------------------------------------------------------------------------------
50 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Financial Highlights (continued)
--------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended October 31:
<TABLE>
<CAPTION>
Class Y Shares
---------------------------------------------------------------------------------
Global Government Bond Portfolio 2000(1) 1999(1) 1998(1) 1997(1) 1996(1)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $11.03 $11.70 $12.03 $12.39 $12.14
------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.51 0.54 0.59 0.63 0.73
Net realized and unrealized gain (loss) 0.18 (0.68) 0.37 0.37 0.42
Total Income (Loss) From Operations 0.69 (0.14) 0.96 1.00 1.15
Less Distributions From:
Net investment income(2) (0.89) (0.53) (0.23) (1.28) (0.90)
Net realized gains -- -- (0.60) (0.08) --
Capital -- -- (0.46) -- --
------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.89) (0.53) (1.29) (1.36) (0.90)
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $10.83 $11.03 $11.70 $12.03 $12.39
------------------------------------------------------------------------------------------------------------------------------------
Total Return 6.59% (1.28)% 8.50% 8.61% 9.82%
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $47,145 $47,708 $37,057 $28,097 $15,105
------------------------------------------------------------------------------------------------------------------------------------
Ratio to Average Net Assets:
Expenses(3) 0.85% 0.91% 0.83% 0.89% 0.84%
Net investment income 4.71 4.69 5.06 5.19 6.12
------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 121% 164% 287% 367% 133%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) Distributions from net investment income include short-term capital gains,
if any, for Federal income tax purposes.
(3) During the year ended October 31, 1996, the Portfolio had earned credits
from the custodian which reduced service fees incurred.
If the credits were taken into consideration, the expense ratio for Class
Y shares would have been 0.81%.
--------------------------------------------------------------------------------
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:
<TABLE>
<CAPTION>
Class A Shares
--------------------------------------------------------------------------------------
European Portfolio 2000(1) 1999(1) 1998(1) 1997(1) 1996
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $22.58 $19.44 $18.23 $17.25 $14.67
------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss) (0.01) (0.00)* 0.06 (0.08) (0.08)
Net realized and unrealized gain 4.08 3.47 1.54 2.22 2.79
------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 4.07 3.47 1.60 2.14 2.71
------------------------------------------------------------------------------------------------------------------------------------
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 Year $25.52 $22.58 $19.44 $18.23 $17.25
------------------------------------------------------------------------------------------------------------------------------------
Total Return 18.02% 18.02% 9.10% 12.88% 18.65%
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $47,080 $31,946 $27,563 $14,118 $10,528
------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Net investment income (loss) (0.04)% (0.00)%** 0.30% (0.42)% (0.49)%
Interest expense 0.07 -- -- -- --
Other expenses 1.39 1.51 1.56 1.80 1.85
Total expenses 1.46 1.51 1.56 1.80 1.85
------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 25% 17% 27% 28% 39%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
* Amount represents less than $0.01 per share.
** Amount represents less than 0.01%.
--------------------------------------------------------------------------------
52 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Financial Highlights (continued)
--------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended October 31:
<TABLE>
<CAPTION>
Class B Shares
----------------------------------------------------------------------------------------
European Portfolio 2000(1) 1999(1) 1998(1) 1997(1) 1996
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $21.83 $18.95 $17.92 $17.09 $14.56
------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss (0.24) (0.16) (0.11) (0.20) (0.20)
Net realized and unrealized gain 3.96 3.37 1.53 2.19 2.77
------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 3.72 3.21 1.42 1.99 2.57
------------------------------------------------------------------------------------------------------------------------------------
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 Year $24.42 $21.83 $18.95 $17.92 $17.09
------------------------------------------------------------------------------------------------------------------------------------
Total Return 17.00% 17.10% 8.24% 12.08% 17.72%
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $36,963 $37,575 $40,090 $29,221 $26,384
------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Net investment loss (0.93)% (0.81)% (0.56)% (1.13)% (1.22)%
Interest expense 0.07 -- -- -- --
Other expenses 2.24 2.28 2.32 2.52 2.59
Total expenses 2.31 2.28 2.32 2.52 2.59
------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 25% 17% 27% 28% 39%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
--------------------------------------------------------------------------------
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:
<TABLE>
<CAPTION>
Class L Shares
----------------------------------------------------------------------------------------
European Portfolio 2000(1) 1999(1) 1998(1)(2) 1997(1) 1996
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $21.79 $18.91 $17.86 $17.04 $14.51
------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss (0.22) (0.15) (0.07) (0.21) (0.14)
Net realized and unrealized gain 3.94 3.36 1.51 2.19 2.71
------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 3.72 3.21 1.44 1.98 2.57
------------------------------------------------------------------------------------------------------------------------------------
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 Year $24.38 $21.79 $18.91 $17.86 $17.04
------------------------------------------------------------------------------------------------------------------------------------
Total Return 17.03% 17.14% 8.38% 12.06% 17.78%
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $16,622 $11,597 $10,762 $3,110 $2,011
------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Net investment loss (0.84)% (0.74)% (0.37)% (1.18)% (1.17)%
Interest expense 0.07 -- -- -- --
Other expenses 2.21 2.24 2.18 2.54 2.52
Total expenses 2.28 2.24 2.18 2.54 2.52
------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 25% 17% 27% 28% 39%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) On June 12, 1998, Class C shares were renamed Class L shares.
--------------------------------------------------------------------------------
54 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Financial Highlights (continued)
--------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended October 31:
<TABLE>
<CAPTION>
Class A Shares
---------------------------------------------------------------------------------
Emerging Markets Portfolio 2000(1) 1999(1) 1998(1) 1997(1) 1996
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $9.03 $7.03 $12.45 $12.08 $11.06
------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss(2) (0.14) (0.10) (0.06) (0.05) (0.02)
Net realized and unrealized gain (loss) (0.16) 2.10 (5.36) 0.42 1.04
------------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.30) 2.00 (5.42) 0.37 1.02
------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Total Distributions -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $8.73 $9.03 $7.03 $12.45 $12.08
------------------------------------------------------------------------------------------------------------------------------------
Total Return (3.32)% 28.45% (43.53)% 3.06% 9.22%
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $3,738 $4,969 $5,723 $14,046 $10,691
------------------------------------------------------------------------------------------------------------------------------------
Ratio to Average Net Assets:
Expenses(2) 2.34% 2.87% 2.46% 2.11% 2.25%
Net investment loss (1.20) (1.25) (0.63) (0.34) (0.19)
------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 20% 153% 97% 99% 78%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) During the year ended October 31, 1996, the Portfolio had earned credits
from the custodian which reduced service fees incurred. If the credits were
taken into consideration, the expense ratios for Class A shares would have
been 2.16%.
--------------------------------------------------------------------------------
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:
<TABLE>
<CAPTION>
Class B Shares
------------------------------------------------------------------------------
Emerging Markets Portfolio 2000(1) 1999(1) 1998(1) 1997(1) 1996
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $8.72 $6.85 $12.21 $11.95 $11.02
-----------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss(2) (0.23) (0.17) (0.14) (0.14) (0.10)
Net realized and unrealized gain (loss) (0.12) 2.04 (5.22) 0.40 1.03
-----------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.35) 1.87 (5.36) 0.26 0.93
-----------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- -- -- --
-----------------------------------------------------------------------------------------------------------------------------------
Total Distributions -- -- -- -- --
-----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $8.37 $8.72 $6.85 $12.21 $11.95
-----------------------------------------------------------------------------------------------------------------------------------
Total Return (4.01)% 27.30% (43.90)% 2.18% 8.44%
-----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $4,504 $5,591 $5,994 $18,107 $13,062
-----------------------------------------------------------------------------------------------------------------------------------
Ratio to Average Net Assets:
Expenses(2) 3.10% 3.63% 3.24% 2.88% 3.06%
Net investment loss (1.96) (2.11) (1.42) (1.00) (0.94)
-----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 20% 153% 97% 99% 78%
-----------------------------------------------------------------------------------------------------------------------------------
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) During the year ended October 31, 1996, the Portfolio had earned credits
from the custodian which reduced service fees incurred. If the credits
were taken into consideration, the expense ratio for Class B shares would
have been 2.97%.
</TABLE>
--------------------------------------------------------------------------------
56 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Financial Highlights (continued)
--------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended October 31:
<TABLE>
<CAPTION>
Class L Shares
--------------------------------------------------------------------------------
Emerging Markets Portfolio 2000(1) 1999(1) 1998(1)(2) 1997(1) 1996
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $8.71 $6.84 $12.22 $11.95 $11.02
-----------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss(3) (0.22) (0.16) (0.15) (0.15) (0.10)
Net realized and unrealized gain (loss) (0.13) 2.03 (5.23) 0.42 1.03
-----------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.35) 1.87 (5.38) 0.27 0.93
-----------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- -- -- --
-----------------------------------------------------------------------------------------------------------------------------------
Total Distributions -- -- -- -- --
-----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $8.36 $8.71 $6.84 $12.22 $11.95
-----------------------------------------------------------------------------------------------------------------------------------
Total Return (4.02)% 27.34% (44.03)% 2.26% 8.44%
-----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $1,699 $1,762 $1,543 $4,332 $2,448
-----------------------------------------------------------------------------------------------------------------------------------
Ratio to Average Net Assets:
Expenses(3) 3.10% 3.62% 3.31% 2.86% 3.02%
Net investment loss (1.96) (2.10) (1.47) (1.03) (0.92)
-----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 20% 153% 97% 99% 78%
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) On June 12, 1998, Class C shares were renamed Class L shares.
(3) During the year ended October 31, 1996, the Portfolio had earned credits
from the custodian which reduced fees incurred. If the credits were taken
into consideration, the expense ratio for Class L shares would have been
2.92%.
--------------------------------------------------------------------------------
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:
<TABLE>
<CAPTION>
Class Y Shares
------------------------------------------------------
Emerging Markets Portfolio 2000(1) 1999(1) 1998(1)(2)
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Year $9.12 $7.07 $12.16
----------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss (0.09) (0.07) (0.01)
Net realized and unrealized gain (loss) (0.17) 2.12 (5.08)
----------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.26) 2.05 (5.09)
----------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- --
----------------------------------------------------------------------------------------------------------
Total Distributions -- -- --
----------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $8.86 $9.12 $7.07
----------------------------------------------------------------------------------------------------------
Total Return (2.85)% 29.00% (41.86)%++
----------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $1,631 $1,414 $709
----------------------------------------------------------------------------------------------------------
Ratio to Average Net Assets:
Expenses 1.93% 2.32% 1.89%+
Net investment loss (0.79) (0.80) (0.16)+
----------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 20% 153% 97%
----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from March 10, 1998 (inception date) to October 31, 1998.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
--------------------------------------------------------------------------------
58 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Financial Highlights (continued)
--------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended October 31:
<TABLE>
<CAPTION>
Class A Shares
------------------------------------------------------------------------------
Pacific Portfolio 2000(1) 1999(1) 1998(1) 1997 1996(1)
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $11.80 $6.73 $8.46 $10.18 $10.07
--------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss(2) (0.10) (0.05) (0.12) (0.17) (0.14)
Net realized and unrealized gain (loss) (4.11) 5.12 (1.61) (1.55) 0.25
--------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (4.21) 5.07 (1.73) (1.72) 0.11
--------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.15) -- -- -- --
--------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.15) -- -- -- --
--------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $7.44 $11.80 $6.73 $8.46 $10.18
--------------------------------------------------------------------------------------------------------------------------------
Total Return (36.25)% 75.33% (20.45)% (16.90)% 1.09%
--------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $2,091 $4,905 $1,788 $4,750 $4,929
--------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(2) 1.47% 1.72% 3.47% 3.37% 2.64%
Net investment loss (0.87) (0.64) (1.66) (2.36) (1.38)
--------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 88% 128% 135% 154% 86%
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) The Manager waived all or part of its fees for the years ended October
31, 2000 and October 31, 1999. In addition, the Manager agreed to
reimburse the Pacific Portfolio for $49,424 of the Portfolio's expenses
for the year ended October 31, 1999. 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:
Per Share Decreases to Expense Ratios
Net Investment Loss Without Fee Waivers
------------------------ ---------------------
2000 1999 2000 1999
------ ------ ------ ------
Class A $0.09 $0.13 2.27% 3.39%
In addition, during the year ended October 31, 1996, the Portfolio had earned
credits from the custodian which reduced service fees incurred. If the credits
were taken into consideration, the expense ratio for Class A shares would have
been 2.51%.
--------------------------------------------------------------------------------
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:
<TABLE>
<CAPTION>
Class B Shares
---------------------------------------------------------------------------------
Pacific Portfolio 2000(1) 1999(1) 1998(1) 1997 1996(1)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $11.31 $6.51 $8.25 $10.01 $9.99
-----------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss(2) (0.18) (0.14) (0.22) (0.27) (0.23)
Net realized and unrealized gain (loss) (3.96) 4.94 (1.52) (1.49) 0.25
-----------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (4.14) 4.80 (1.74) (1.76) 0.02
-----------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.03) -- -- -- --
-----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.03) -- -- -- --
-----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $7.14 $11.31 $6.51 $8.25 $10.01
-----------------------------------------------------------------------------------------------------------------------------------
Total Return (36.73)% 73.73% (21.09)% (17.58)% 0.20%
-----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $2,009 $3,633 $2,159 $3,558 $4,009
-----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(2) 2.25% 2.64% 4.45% 4.24% 3.65%
Net investment loss (1.61) (1.62) (3.14) (3.07) (2.26)
-----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 88% 128% 135% 154% 86%
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) The Manager waived all or part of its fees for the years ended October
31, 2000 and October 31, 1999. In addition, the Manager agreed to
reimburse the Pacific Portfolio for $49,424 of the Portfolio's expenses
for the year ended October 31, 1999. 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:
Per Share Decreases to Expense Ratios
Net Investment Loss Without Fee Waivers
------------------------ ---------------------
2000 1999 2000 1999
------ ------ ------ ------
Class B $0.09 $0.13 3.05% 4.31%
In addition, during the year ended October 31, 1996, the Portfolio had earned
credits from the custodian which reduced service fees incurred. If the credits
were taken into consideration, the expense ratio for Class B shares would have
been 3.47%.
--------------------------------------------------------------------------------
60 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Financial Highlights (continued)
--------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended October 31:
<TABLE>
<CAPTION>
Class L Shares
---------------------------------------------------------------------------------
Pacific Portfolio 2000(1) 1999(1) 1998(1)(2) 1997 1996(1)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $11.27 $6.48 $8.21 $9.98 $9.95
-----------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss(3) (0.18) (0.12) (0.20) (0.27) (0.24)
Net realized and unrealized gain (loss) (3.94) 4.91 (1.53) (1.50) 0.27
-----------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (4.12) 4.79 (1.73) (1.77) 0.03
-----------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.06) -- -- -- --
-----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.06) -- -- -- --
-----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $7.09 $11.27 $6.48 $8.21 $9.98
-----------------------------------------------------------------------------------------------------------------------------------
Total Return (36.78)% 73.92% (21.07)% (17.74)% 0.30%
-----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $2,185 $4,375 $982 $1,493 $1,612
-----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(2) 2.25% 2.38% 4.28% 4.44% 3.46%
Net investment loss (1.65) (1.44) (2.90) (3.21) (2.22)
-----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 88% 128% 135% 154% 86%
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) On June 12, 1998, Class C shares were renamed Class L shares.
(3) The Manager waived all or part of its fees for the years ended
October 31, 2000 and October 31, 1999. In addition, the Manager agreed to
reimburse the Pacific Portfolio for $49,424 of the Portfolio's expenses
for the year ended October 31, 1999. 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:
Per Share Decreases to Expense Ratios
Net Investment Loss Without Fee Waivers
------------------------ ---------------------
2000 1999 2000 1999
------ ------ ------ ------
Class L $0.08 $0.13 3.05% 4.04%
In addition, during the year ended October 31, 1996, the Portfolio had earned
credits from the custodian which reduced service fees incurred. If the credits
were taken into consideration, the expense ratio for Class L shares would have
been 3.29%.
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 61
<PAGE>
--------------------------------------------------------------------------------
Independent Auditors' Report
--------------------------------------------------------------------------------
The Shareholders and Board of Directors of
Smith Barney World Funds, Inc.:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of the Global Government Bond, European, Emerging
Markets, and Pacific Portfolios of Smith Barney World Funds, Inc. as of
October 31, 2000, and the related statements of operations for the year then
ended, the statements of changes in net assets for each of the years in the two-
year period then ended, and the financial highlights for each of the years in
the five-year period then ended. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosure in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 2000, by correspondence with the custodian.
As to securities sold but not yet delivered, we performed other appropriate
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Global Government Bond, European, Emerging Markets, and Pacific Portfolios of
Smith Barney World Funds, Inc. as of October 31, 2000, and the results of their
operations for the year then ended, the changes in their net assets for each of
the years in the two-year period then ended, and the financial highlights for
each of the years in the five-year period then ended in conformity with
accounting principles generally accepted in the United States of America.
KPMG LLP
New York, New York
December 11, 2000
--------------------------------------------------------------------------------
62 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Tax Information (unaudited)
--------------------------------------------------------------------------------
For Federal tax purposes, the Smith Barney World Funds, Inc. hereby designates
for the fiscal year ended October 31, 2000:
o Long term capital gain distributions paid:
European Portfolio $4,140,556
Percentage of ordinary dividends paid by the Portfolio from net investment
income are derived from Federal obligations and may be exempt from taxation at
the state level:
Global Government Bond Portfolio 8.20%
--------------------------------------------------------------------------------
Smith Barney World Funds, Inc. 63
<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
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
Salomon Smith Barney Inc.
Custodian
The Chase Manhattan Bank, N.A.
Transfer Agent
Citi Fiduciary Trust Company
125 Broad Street, 11th Floor
New York, New York 10004
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 January 31, 2001, this report must be accompanied
by performance information for the most recently completed calendar quarter.
Salomon Smith Barney
----------------------------
A member of citigroup [LOGO]
Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
Smith Barney
World Funds, Inc.
Smith Barney Mutual Funds
388 Greenwich Street, MF-2
New York, New York 10013
www.smithbarney.com/mutualfunds
FD01358 12/00
