Registration No. 2-71469
811-3158
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 28 X
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 X
Amendment No. 31 X
SMITH BARNEY FUNDAMENTAL VALUE FUND INC.
(Exact name of Registrant as Specified in Charter)
388 Greenwich Street, New York, New York 10013
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 720-9218
Christina T. Sydor
Secretary
Smith Barney Fundamental Value Fund Inc.
388 Greenwich Street
New York, New York 10013
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering:
As soon as possible after this Post-Effective Amendment
becomes effective.
It is proposed that this filing will become effective:
X immediately upon filing pursuant to Rule 485(b)
on pursuant to Rule 485(b)
60 days after filing pursuant to Rule 485(a)
on pursuant to Rule 485(a)
The Registrant has previously filed a declaration of indefinite
registration of its
shares pursuant to Rule 24f-2 under the Investment Company Act of 1940, as
amended.
Registrant's Rule 24f-2 Notice for the fiscal year ended September 30, 1995
was
filed on
or about November 30, 1995. )
The registrant, Smith Barney Fundamental Value Fund Inc., a Maryland
corporation, is
the successor to Smith Barney Fundamental Value Fund Inc., a Washington
corporation,
pursuant to Rule 414 of the Securities Act of 1933 (the "Act"), has, effective
with post-
effective amendment number 25 to this registration statement, adopted this
registration
statement for all purposes under the Act and the Securities Exchange Act of
1934.
SMITH BARNEY FUNDAMENTAL VALUE FUND INC.
FORM N-1A
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(a)
. Part A (Prospectus for Smith Barney Fundamental Value Fund Inc.) and
Part B (Statement of Additional Information for Smith Barney Fundamental Value
Fund Inc.) are incorporated by reference to Post-Effective Amendment No 28, as
filed with the Securities and Exchange Commission ("SEC") on January 31,
1996.
Part A
Item No. Prospectus Caption
1. Cover Page Cover Page
2. Synopsis Prospectus Summary
3. Financial Highlights Financial
Highlights
4. General Description of Registrant Cover Page; Prospectus Summary;
Investment Objective and Management
Policies; Additional Information
5. Management of the Fund Management of the Fund;
Distributor; Additional Information;
Annual Report
5A. Management's Discussion of Annual Report
Fund Performance
6. Capital Stock and Other Investment Objective and
Securities Policies; Dividends,Distributions
and
Taxes; Additional Information
7. Purchase of Securities Being Valuation of Shares; Purchase of
Offered Shares; Exchange Privilege;
Redemption of Shares; Minimum
Account Size;
Distributor;Additional
Information
8 Redemption or Repurchase Purchase of Shares; Redemption of
Shares; Exchange Privilege
9. Pending Legal Proceedings Not Applicable
Part B Statement of
Item No. Additional Information Caption
10. Cover Page Cover page
11. Table of Contents Table of Contents
12. General Information and Distributor; Additional Information
History
13. Investment Objectives and Investment Objective and
Management Policies
14. Management of the Fund Management of the Fund; Distributor
15. Control Persons and Principal Management of the Fund
Holders of Securities
16. Investment Advisory and Other Management of the Fund;
Distributor
Services
17. Brokerage Allocation and Investment Objective and
Other Services Management Policies; Distributor
18. Capital Stock and Other Investment Objective and
Securities Management Policies; Purchase of
Shares; Redemption of
Shares;Taxes
19. Purchase, Redemption and Purchase of Shares; Redemption
Pricing of Securities Being Offered of Shares; Valuation of Shares;
Distributor; Exchange Privilege
20. Tax Status Taxes
21. Underwriters Distributor
22. Calculation of Performance Performance Data
Data
23. Financial Statements Financial Statements
PROSPECTUS
SMITH BARNEY
Fundamental
Value
Fund Inc.
February 1, 1996
Prospectus begins on page one
[Logo] Smith Barney Mutual Funds
Investing for your future.
Every day.
<PAGE>
Smith Barney Fundamental Value Fund Inc.
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Prospectus February 1, 1996
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388 Greenwich Street
New York, New York 10013
(212) 723-9218
Smith Barney Fundamental Value Find, Inc. (the "Fund") is a mutual fund
with a primary investment objective of long-term capital growth. Current
income
is a secondary objective. The Fund seeks to achieve its primary objective by
investing in a diversified portfolio of common stocks and common stock
equivalents and, to a lesser extent, in bonds and other debt instruments. The
Fund's investment emphasis is on securities which, in the judgment of the
Fund's investment adviser, are undervalued in the marketplace and,
accordingly, have above-average potential for capital growth.
This Prospectus sets forth concisely certain information about the Fund,
including sales charges, distribution and service fees and expenses, that
prospective investors will find helpful in making an investment decision.
Investors are encouraged to read this Prospectus carefully and retain it for
future reference.
Additional information about the Fund is contained in a Statement of
Additional Information dated February 1, 1996, as amended or supplemented from
time to time, that is available upon request and without charge by calling or
writing the Fund at the telephone number or address set forth above or by
contacting a Smith Barney Financial Consultant. The Statement of Additional
Information has been filed with the Securities and Exchange Commission (the
"SEC") and is incorporated by reference into this Prospectus in its entirety.
Smith Barney Inc.
Distributor
Smith Barney Mutual Funds Management Inc.
Investment Adviser and Administrator
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A
CRIMINAL OFFENSE.
1
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Smith Barney Fundamental Value Fund Inc.
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Table of Contents
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Prospectus Summary 3
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Financial Highlights 10
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Investment Objective and Management Policies 14
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Valuation of Shares 19
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Dividends, Distributions and Taxes 19
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Purchase of Shares 21
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Exchange Privilege 30
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Redemption of Shares 34
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Minimum Account Size 36
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Performance 36
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Management of the Fund 37
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Distributor 38
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Additional Information 38
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====
No person has been authorized to give any information or to make any
representations in connection with this offering other than those contained in
this Prospectus and, if given or made, such other information or
representations must not be relied upon as having been authorized by the Fund
or the distributor. This Prospectus does not constitute an offer by the Fund
or the distributor to sell or a solicitation of an offer to buy any of the
securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such an offer or solicitation in such jurisdiction.
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====
2
<PAGE>
Smith Barney Fundamental Value Fund Inc.
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Prospectus Summary
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The following summary is qualified in its entirety by detailed information
appearing elsewhere in this Prospectus and in the Statement of Additional
Information. Cross references in this summary are to headings in the
Prospectus. See "Table of Contents."
Investment Objective The Fund is an open-end, diversified management
investment
company with a primary investment objective of long-term capital growth.
Current income is a secondary objective. The Fund seeks to achieve its
principal objective by investing in a diversified portfolio of common stocks
and common stock equivalents and, to a lesser extent, in bonds and other debt
instruments. The Fund's investment emphasis is on securities which, in the
judgment of the Fund's investment adviser, are undervalued in the marketplace
and, accordingly, have above-average potential for capital growth. See
"Investment Objective and Management Policies."
Alternative Purchase Arrangements The Fund offers several classes of shares
("Classes") to investors designed to provide them with the flexibility of
selecting an investment best suited to their needs. The general public is
offered three classes of shares: Class A shares, Class B shares and Class C
shares, which differ principally in terms of sales charges and rate of
expenses
to which they are subject. A fourth Class of shares, Class Y shares, are
offered to investors meeting an initial investment minimum of $5,000,000. See
"Purchase of Shares," and "Redemption of Shares."
Class A Shares. Class A shares are sold at net asset value plus an initial
sales charge of up to 5.00% and are subject to an annual service fee of 0.25%
of the average daily net assets of the Class. The initial sales charge may be
reduced or waived for certain purchases. Purchases of Class A shares, which
when combined with current holdings of Class A shares offered with sales
charge equal or exceed $500,000 in the aggregate, will be made at net asset
value with no sales charge, but will be subject to a contingent deferred sales
charge ("CDSC") of 1.00% on redemptions made within 12 months of purchase.
See "Prospectus
Summary -- Reduced or No Initial Sales Charge."
Class B Shares. Class B shares are offered at net asset value subject to a
maximum CDSC of 5.00% of redemption proceeds, declining by 1.00% each year
after the date of purchase to zero. This CDSC may be waived for certain
redemptions. Class B shares are subject to an annual service fee of 0.25% and
an annual distribution fee of 0.75% of the average daily net assets of the
Class. The
3
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Smith Barney Fundamental Value Fund Inc.
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Prospectus Summary (continued)
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Class B shares' distribution fee may cause that Class to have higher expenses
and pay lower dividends than Class A shares.
Class B Shares. Conversion Feature. Class B shares will convert
automatically to Class A shares, based on relative net asset value, eight
years
after the date of the original purchase. Upon conversion, these shares will no
longer be subject to an annual distribution fee. In addition, a certain
portion
of Class B shares that have been acquired through the reinvestment of
dividends
and distributions ("Class B Dividend Shares") will be converted at that time.
See "Purchase of Shares -- Deferred Sales Charge Alternatives."
Class C Shares. Class C shares are sold at net asset value with no
initial
sales charge. They are subject to an annual service fee of 0.25% and an annual
distribution fee of 0.75% of the average daily net assets of the Class, and
investors pay a CDSC of 1.00% if they redeem Class C shares within 12 months
of
purchase. The CDSC may be waived for certain redemptions. The Class C shares'
distribution fee may cause that Class to have higher expenses and pay lower
dividends than Class A shares. Purchases of Class C shares, which when
combined
with current holdings of Class C shares of the Fund equal or exceed $500,000
in
the aggregate, should be made in Class A shares at net asset value with no
sales charge, and will be subject to a CDSC of 1.00% on redemptions made
within 12 months of purchase.
Class Y Shares. Class Y shares are available only to investors meeting an
initial investment minimum of $5,000,000. Class Y shares are sold at net asset
value with no initial sales charge or CDSC. They are not subject to any
service
or distribution fees.
In deciding which Class of Fund shares to purchase, investors should
consider the following factors, as well as any other relevant facts and
circumstances:
Intended Holding Period. The decision as to which Class of shares is more
beneficial to an investor depends on the amount and intended length of his or
her investment. Shareholders who are planning to establish a program of
regular
investment may wish to consider Class A shares; as the investment accumulates
shareholders may qualify for reduced sales charges and the shares are subject
to lower ongoing expenses over the term of the investment. As an investment
alternative, Class B and Class C shares are sold without any initial sales
charge so the entire purchase price is immediately invested in the Fund. Any
investment return on these additional invested amounts may partially or wholly
offset the higher annual expenses of these Classes. Because the Fund's future
return cannot be predicted, however, there can be no assurance that this would
be the case.
4
<PAGE>
Smith Barney Fundamental Value Fund Inc.
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Prospectus Summary (continued)
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Finally, investors should consider the effect of the CDSC period and any
conversion rights of the Classes in the context of their own investment time
frame. For example, while Class C shares have a shorter CDSC period than
Class B shares, they do not have a conversion feature, and therefore, are
subject to an ongoing distribution fee. Thus, Class B shares may be more
attractive than Class C shares to investors with longer term investment
outlooks.
Investors investing a minimum of $5,000,000 must purchase Class Y shares,
which are not subject to an initial sales charge, CDSC or service or
distribution fee. The maximum purchase amount for Class A shares is
$4,999,999,
Class B shares is $249,999 and Class C shares is $499,999. There is no maximum
purchase amount for Class Y shares.
Reduced or No Initial Sales Charge. The initial sales charge on Class A
shares may be waived for certain eligible purchasers, and the entire purchase
price will be immediately invested in the Fund. In addition, Class A share
purchases, which when combined with current holdings of Class A shares offered
with a sales charge equal or exceed $500,000 in the aggregate, may be made at
net asset value with no initial sales charge, but will be subject to a CDSC of
1.00% on redemptions made within 12 months of purchase. The $500,000 aggregate
investment may be met by adding the purchase to the net asset value of all
Class A shares held in funds sponsored by Smith Barney listed under "Exchange
Privilege." Class A share purchases may also be eligible for a reduced initial
sales charge. See "Purchase of Shares." Because the ongoing expenses of Class
A
shares may be lower than those for Class B and Class C shares, purchasers
eligible to purchase Class A shares at net asset value or at a reduced sales
charge should consider doing so.
Smith Barney Financial Consultants may receive different compensation for
selling each Class of shares. Investors should understand that the purpose of
the CDSC on the Class B and Class C shares is the same as that of the initial
sales charge on the Class A shares.
See "Purchase of Shares" and "Management of the Trust and the Fund" for a
complete description of the sales charges and service and distribution fees
for
each Class of shares and "Valuation of Shares," "Dividends, Distributions and
Taxes" and "Exchange Privilege" for other differences between the Classes of
shares.
SMITH BARNEY 401(K) Program Investors may be eligible to participate in the
Smith Barney 401(k) Program, which is generally designed to assist plan
sponsors in the creation and operation of retirement plans under Section
401(a)
of the Internal Revenue Code of 1986, as amended (the "Code"), as well as
other types of participant directed, tax-qualified employee benefit plans
(collectively, "Participating Plans"). Class A, Class B, Class C and Class Y
shares are
5
<PAGE>
Smith Barney Fundamental Value Fund Inc.
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- -
Prospectus Summary (continued)
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- -
available as investment alternatives for Participating Plans.
See "Purchase of Shares - Smith Barney 401(k) Program."
PURCHASE OF SHARES Shares may be purchased through the Fund's distributor,
Smith Barney, a broker that clears securities transactions through Smith
Barney on a fully disclosed basis (an "Introducing Broker") or an investment
dealer in the selling group. Direct purchases by certain retirement plans may
be made through the Fund's transfer agent, First Data Investor Services
Group, Inc. ("First Data"), a subsidiary of First Data Corporation.
See "Purchase of Shares."
INVESTMENT MINIMUMS Investors in Class A, Class B and Class C shares may open
an account by making an initial investment of at least $1,000 for each
account, or $250 for an individual retirement account ("IRA") or a Self-
Employed Retirement Plan. Investors in Class Y shares may open an account for
an initial investment of $5,000,000. Subsequent investments of at least $50
may be made for all Classes. For participants in retirement plans qualified
under Section 403(b)(7) or Section 401(a) of the Code, the minimum initial
investment requirement for Class A, Class B and Class C shares and the
subsequent investment requirement for all Classes is $25. The minimum initial
investment for Class A, Class B and Class C shares and the subsequent
investment requirement for all Classes through the Systematic Investment
Plan described below is $100. See "Purchase of Shares."
SYSTEMATIC INVESTMENT PLAN The Fund offers shareholders a Systematic
Investment
Plan under which they may authorize the automatic placement of a purchase
order
each month or quarter for Fund shares in an amount of at least $100. See
"Purchase of Shares." Redemption of Shares Shares may be redeemed on each day
the New York Stock Exchange, Inc. ("NYSE") is open for business. See "Purchase
of Shares" and "Redemption of Shares."
MANAGEMENT OF THE FUND Smith Barney Mutual Funds Management Inc. ("SBMFM"), a
wholly owned subsidiary of Smith Barney Holdings Inc. ("Holdings"), serves as
the Fund's investment adviser and administrator. Holdings is a wholly owned
subsidiary of The Travelers Inc. ("Travelers"), a diversified financial
services holding company engaged, through its subsidiaries principally in four
business segments: Investment Services, Consumer Finance Services, Life
Insurance Services and Property & Casualty Insurance Services. See "Management
of the Fund."
EXCHANGE PRIVILEGE Shares of a Class may be exchanged for shares of the
same Class of certain other funds of the Smith Barney Mutual Funds at the
6
<PAGE>
Smith Barney Fundamental Value Fund Inc.
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Prospectus Summary (continued)
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respective net asset values next determined, plus any applicable sales charge
differential. See "Exchange Privilege."
VALUATION OF SHARES Net asset value of the Fund for the prior day generally is
quoted daily in the financial section of most newspapers and is also available
from a Smith Barney Financial Consultant. See "Valuation of Shares."
DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income are paid
monthly and distributions of net realized capital gains are paid annually. See
"Dividends, Distributions and Taxes."
REINVESTMENT OF DIVIDENDS Dividends and distributions paid on shares of a
Class
will be reinvested automatically, unless otherwise specified by an investor,
in
additional shares of the same Class at current net asset value. Shares
acquired
by dividend and distribution reinvestments will not be subject to any sales
charge or CDSC. Class B shares acquired through dividend and distribution
reinvestments will become eligible for conversion to Class A shares on a pro
rata basis. See "Dividends, Distributions and Taxes."
RISK FACTORS AND SPECIAL CONSIDERATIONS There can be no assurance that the
Fund's investment objective will be achieved. Certain of the investments held
by the Fund and certain of the investment strategies that the Fund may employ
might expose it to certain risks. The investments presenting the Fund with
risks are securities of less well-established companies or companies whose
capitalizations are less than the capitalizations of larger, better-known
companies and foreign securities. In addition, the Fund may assume additional
risk by entering into repurchase agreements, lending portfolio securities and
entering into transactions involving options. See "Investment Objective and
Management Policies."
7
<PAGE>
Smith Barney Fundamental Value Fund Inc.
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Prospectus Summary (continued)
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THE FUND'S EXPENSES The following expense table lists the costs and expenses
an
investor will incur either directly or indirectly as a shareholder of the
Fund,
based on the maximum sales charge or maximum CDSC that may be incurred at the
time of purchase or redemption and, unless otherwise noted, the Fund's
operating expenses for its most recent fiscal year:
Class A Class B Class C Class
Y
============================================================================
====
Shareholder Transaction Expenses
Maximum sales charge imposed
on purchases
(as a percentage of offering price) 5.00% None None None
Maximum CDSC
(as a percentage of original
cost or redemption
proceeds, whichever is lower) None* 5.00% 1.00% None
============================================================================
====
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management fees 0.75% 0.75% 0.75% 0.75%
12b-1 fees** 0.25% 1.00% 1.00% None
Other expenses*** 0.34% 0.34% 0.34% 0.34%
============================================================================
====
TOTAL FUND OPERATING EXPENSES 1.34% 2.09% 2.09% 1.09%
============================================================================
====
* Purchases of Class A shares, which when combined with current holdings of
Class A shares offered with a sales charge equal or exceed $500,000 in
the
aggregate, will be made at net asset value with no sales charge, but will
be subject to a CDSC of 1.00% on redemptions made within 12 months.
** Upon conversion of Class B shares to Class A shares, such shares will no
longer be subject to a distribution fee. Class C shares do not have a
conversion feature and, therefore, are subject to an ongoing distribution
fee. As a result, long-term shareholders of Class C shares may pay more
than the economic equivalent of the maximum front-end sales charge
permitted by the National Association of Securities Dealers, Inc.
*** For Class Y shares "other expenses" have been estimated based on expenses
incurred by the Class A share because there were no Class Y purchases for
the year ended September 30, 1995.
The sales charge and CDSC set forth in the above table are the maximum
charges imposed on purchases or redemptions of Fund shares and investors may
actually pay lower or no charges, depending on the amount purchased and, in
the
case of Class B, Class C and certain Class A shares, the length of time the
shares are held and whether the shares are held through the Smith Barney
401(k)
Program. See "Purchase of Shares" and "Redemption of Shares." Smith Barney
receives an annual 12b-1 service fee of 0.25% of the value of average daily
net
assets of Class A shares. Smith Barney also receives, with respect to Class B
8
<PAGE>
Smith Barney Fundamental Value Fund Inc.
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Prospectus Summary (continued)
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and Class C shares, an annual 12b-1 fee of 1.00% of the value of average daily
net assets of the respective Class, consisting of a 0.75% distribution fee
and a 0.25% service fee. "Other expenses" in the above table include fees for
shareholder services, custodial fees, legal and accounting fees, printing
costs
and registration fees.
EXAMPLE The following example is intended to assist an investor in
understanding the various costs that an investor in the Fund will bear
directly
or indirectly. The example assumes payment by the Fund of operating expenses
at
the levels set forth in the table above. See "Purchase of Shares," "Redemption
of Shares" and "Management of the Fund."
1 year 3 years 5 years 10 years*
============================================================================
An investor would pay the following
expenses on a $1,000
investment, assuming (1) 5.00%
annual return and (2) redemption
at the end of each time period:
Class A $63 $90 $120 $203
Class B 71 95 122 223
Class C 31 65 112 242
Class Y 11 35 60 133
An investor would pay the following
expenses on the same investment,
assuming the same annual return and
no redemption:
Class A 63 90 120 203
Class B 21 65 112 223
Class C 21 65 112 242
Class Y 11 35 60 133
============================================================================
====
*Ten-year figures assume conversion of Class B shares to Class A shares at the
end of the eighth year following the date of purchase.
The example also provides a means for the investor to compare expense
levels of funds with different fee structures over varying investment periods.
To facilitate such comparison, all funds are required to utilize a 5.00%
annual
return assumption. However, the Fund's actual return will vary and may be
greater or less than 5.00%. This example should not be considered a
representation of past or future expenses and actual expenses may be greater
or
less than those shown.
9
<PAGE>
Smith Barney Fundamental Value Fund Inc.
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Financial Highlights
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The following information has been audited by Deloitte & Touche LLP,
independent auditors, whose report thereon appears in the Fund's Annual
Reports.
The information set out below should be read in conjunction with the
financial
statements and related notes that also appear in the Fund's Annual Report
dated
September 30, 1995, which is incorporated by reference into the Statement of
Additional Information.
For a Class A share outstanding throughout each year:*
<TABLE>
<CAPTION>
Year ended September 30, 1995 1994 1993
1992 1991
==============================================================================
===========================
<S> <C> <C> <C>
<C> <C>
Net Asset Value, Beginning of Year $8.20 $8.42 $7.72
$6.47 $5.34
- ------------------------------------------------------------------------------
- ---------------------------
Income From Investment Operations:
Net investment income 0.17 0.09 0.07
0.11 0.15
Net realized and unrealized
gain (loss) on investments and
written options 1.23 0.30 1.65
0.78 1.50
- ------------------------------------------------------------------------------
- ---------------------------
Total Income From Operations 1.40 0.39 1.72
0.89 1.65
- ------------------------------------------------------------------------------
- ---------------------------
Less Distributions From:
Net investment income (0.13) (0.08) (0.06)
(0.14) (0.23)
Net realized gains (0.39) (0.53) (0.46)
- -- (0.29)
Overdistribution of Net
Realized Gains (0.42)
- ------------------------------------------------------------------------------
- ---------------------------
Total Distributions (0.94) (0.61) (0.52)
(0.14) (0.52)
- ------------------------------------------------------------------------------
- ---------------------------
Net Asset Value, End of Year $8.66 $8.20 $8.42
$7.22 $6.47
- ------------------------------------------------------------------------------
- ---------------------------
Total Return+ 19.94% 4.92% 25.23%
14.01% 33.47%
- ------------------------------------------------------------------------------
- ---------------------------
Net Assets, End of Year
Ratios to average net assets/
supplemental data:
Net Assets, End of Year (000s) $386,297 $264,765 $123,188
$77,842 $59,358
Ratios to Average Net Assets:
Expenses 1.34% 1.30% 1.45%
1.28% 1.30%
Net investment income 2.19% 1.90% 1.00%
1.57% 2.24%
- ------------------------------------------------------------------------------
- ---------------------------
Portfolio Turnover Rate 45% 108% 111%
142% 116%
==============================================================================
===========================
Average Commissions $0.05 -- --
- -- --
==============================================================================
===========================
</TABLE>
<TABLE>
<CAPTION>
Year ended September 30, 1990 1989 1988 1987 1986 1985
========================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year $7.15 $6.23 $8.36 $7.24 $6.91 $6.65
- ----------------------------------------------------------------------
Income From Investment Operations:
Net investment income 0.16 0.17 0.15 0.18 0.31 0.19
Net realized and unrealized
gain (loss) on investments and
written options (1.22) 1.18 (0.99) 2.00 0.55 0.59
- ----------------------------------------------------------------------------
Total Income From
Operations (1.06) 1.35 (0.84) 2.18 0.86 0.78
- --------------------------------------------------------------------
Less Distributions From:
Net investment income (0.18) (0.10) (0.26) (0.32) (0.19) (0.22)
Net realized gains (0.57) (0.33) (1.03) (0.74) (0.34) (0.30)
Overdistribution of Net
Realized Gains
- --------------------------------------------------------------------------
Total Distributions (0.75) (0.43) (1.29) (1.06) (0.53) (0.52)
- --------------------------------------------------------------------------
Net Asset Value,
End of Year $5.34 $7.15 $6.23 $8.36 $7.24 $6.91
- ---------------------------------
Total Return+ (16.25)% 23.26% (6.92)% 34.39% 12.94% 12.67%
- ------------------------------------------------------------------------------
Net Assets, End of Year
Ratios to average net assets/
supplemental data:
Net Assets,
End of Year (000s) $63,159 $89,048 $84,670 $111,693 $101,563 $114,529
Ratios to Average Net Assets:
Expenses 1.20% 1.10% 1.20% 1.00% 1.10% 1.20%
Net investment income 2.40% 2.50% 2.10% 2.10% 3.70% 4.00%
- ----------------------------------------------------------------------
Portfolio Turnover Rate 94% 62% 120% 66% 91% 64%
============================================
========================================================================
Average Commissions -- -- -- -- -- --
</TABLE>
* On November 6, 1992, the Fund commenced selling Class B shares. Those
shares
in existence prior to November 6, 1992 were designated Class A shares.
+ Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charge.
10-11
<PAGE>
Smith Barney Fundamental Value Fund Inc.
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Financial Highlights (continued)
- ------------------------------------------------------------------------------
For a Class B share outstanding throughout each period:
Year ended September 30, 1995 1994 1993*
============================================================================
====
Net Asset Value, Beginning of Period $8.16 $8.37 $7.31
- ------------------------------------------------------------------------------
- -
Income From Investment Operations
Net investment income 0.12 0.09 0.05
Net realized and unrealized
gain (loss) on investments
and written options 1.23 0.25 1.52
- ------------------------------------------------------------------------------
- -
Total Income From Investment Operations 1.35 0.34 1.57
- ------------------------------------------------------------------------------
- -
Less Distributions From:
Net investment income (0.08) (0.02)
(0.05)
Net Realized Capital Gains (0.39) (0.53)
(0.46)
Overdistribution of net
realized Gains (0.42)
- ------------------------------------------------------------------------------
- -
Total Distributions (0.89) (0.55)
(0.51)
- ------------------------------------------------------------------------------
- -
Net Asset Value, End of Period $8.62 $8.16 $8.37
- ------------------------------------------------------------------------------
- -
Total Return++ 19.19% 4.21%
22.82%
- ------------------------------------------------------------------------------
- -
Ratios to Average Net Assets/Supplemental Data:
Net Assets, End of Period (000s) $538,759 $361,254 $114,146
Ratios to Average Net Assets:
Expenses 2.09% 2.06%
2.26%+
Net investment income 1.44% 1.13%
0.19%+
- ------------------------------------------------------------------------------
- -
Portfolio Turnover Rate 45% 108%
111%
============================================================================
====
Average Commissions $0.05 -- --
============================================================================
====
* The Fund commenced selling Class B shares on November 6, 1992.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charge.
12
<PAGE>
Smith Barney Fundamental Value Fund Inc.
- ------------------------------------------------------------------------------
- -
Financial Highlights (continued)
- ------------------------------------------------------------------------------
- -
For a Class C share outstanding throughout each period:
Year ended September 30, 1995 1994 1993*
============================================================================
====
Net Asset Value, Beginning of Period $8.16 $8.37 $8.15
- ------------------------------------------------------------------------------
- -
Income From Investment Operations
Net investment income 0.12 0.05
0.00#
Net realized and unrealized
gain (loss) on investments
and written options 1.24 0.29 0.22
- ------------------------------------------------------------------------------
- -
Total Income From Investment Operations 1.36 0.34 0.22
- ------------------------------------------------------------------------------
- -
Less Distributions From:
Net investment income (0.09) (0.02) --
Net Realized Capital Gains (0.39) (0.53) --
Overdistribution of Net Realized Gains (0.42) -- --
- ------------------------------------------------------------------------------
- -
Total Distributions (0.90) (0.55) --
- ------------------------------------------------------------------------------
- -
Net Asset Value, End of Period $8.62 $8.16 $8.37
- ------------------------------------------------------------------------------
- -
Total Return++ 19.33% 4.24%
2.70%
- ------------------------------------------------------------------------------
- -
Ratios to Average Net Assets/Supplemental Data:
Net Assets, End of Period (000s) $21,812 $1,652 $308
Ratios to Average Net Assets:
Expenses 2.09% 2.23%
2.25%+
Net investment income 1.44% 0.96%
0.20%+
- ------------------------------------------------------------------------------
- -
Portfolio Turnover Rate 45% 108%
111%
============================================================================
====
Average Commissions $0.05 -- --
============================================================================
====
* The Fund commenced selling Class C (previously designated as Class D
shares) shares on August 10, 1993.
+ Annualized.
++ Total return represents aggregate total return for the period and does not
reflect any applicable sales charge.
# Amount represents less than $.01 per Fund share.
For the year ended September 30, 1995 there were no purchases of Class Y
shares.
13
<PAGE>
Smith Barney Fundamental Value Fund Inc.
- ------------------------------------------------------------------------------
Investment Objective and Management Policies
- ------------------------------------------------------------------------------
- -
The Fund's primary objective is long-term capital growth. Current income
is
only a secondary consideration. The Fund's primary objective is fundamental
and
may not be changed without the approval of the holders of a majority of the
Fund's outstanding shares. There is no guarantee that the Fund will achieve
its
investment objective.
The Fund seeks to achieve its primary investment objective by investing
in
a diversified portfolio of common stocks and common stock equivalents,
including preferred stocks and other securities convertible into common
stocks.
The Fund also invests to a lesser extent in bonds and other debt instruments.
In pursuing the Fund's investment objective, SBMFM emphasizes securities
which, in its judgment, are undervalued in the marketplace and, accordingly,
have above-average capital growth potential. In general, the Fund invests in
securities of companies which are temporarily unpopular among investors but
which SBMFM regards as possessing favorable prospects for earnings growth
and/or improvements in the value of their assets and, consequently, as having
a
reasonable likelihood of experiencing a recovery in market price.
When SBMFM believes that a defensive investment posture is warranted or
when opportunities for capital growth do not appear attractive, the Fund may
temporarily invest all or a portion of its assets in short-term money market
instruments, including repurchase agreements with respect to those
instruments.
The Fund is authorized to borrow money in an amount up to 10% of its total
assets for temporary or emergency purposes.
Further information about the Fund's investment policies, including a
list
of those restrictions on its investment activities that cannot be changed
without the approval of the Fund's shareholders, appears in the Statement of
Additional Information.
RISK FACTORS AND SPECIAL CONSIDERATIONS
An investment in the Fund includes certain risks and special
considerations, such as those described below:
Short-Term Investments. As noted above, in certain circumstances the Fund
may invest in short-term money market instruments, such as obligations of the
U.S. government, its agencies and instrumentalities ("U.S. government
securities"), high-quality commercial paper and bank certificates of deposit
and time deposits, and may engage in repurchase agreement transactions with
respect to such instruments.
14
<PAGE>
Smith Barney Fundamental Value Fund Inc.
- ------------------------------------------------------------------------------
- -
Investment Objective and Management Policies (continued)
- ------------------------------------------------------------------------------
- -
Repurchase Agreements. The Fund may enter into repurchase agreements with
certain member banks of the Federal Reserve System and certain dealers on the
Federal Reserve Bank of New York's list of reporting dealers. Under the terms
of a typical repurchase agreement, the Fund would acquire securities for a
relatively short period (usually not more than one week) subject to an
obligation of the seller to repurchase, and the Fund to resell, the securities
at an agreed-upon price and time, thereby determining the yield during the
Fund's holding period. This arrangement results in a fixed rate of return that
is not subject to market fluctuations during the Fund's holding period.
Repurchase agreements could involve certain risks in the event of default or
insolvency of the other party, including possible delays or restrictions upon
the Fund's ability to dispose of the underlying securities, the risk of a
possible decline in the value of the underlying securities during the period
in
which the Fund seeks to assert its rights to them, the risk of incurring
expenses associated with asserting those rights and the risk of losing all or
part of the income from the agreement. SBMFM, acting under the supervision of
the Board of Directors, reviews on an ongoing basis the value of the
collateral
and the creditworthiness of those dealers and banks with which the Fund enters
into repurchase agreements to evaluate potential risks.
Lending of Portfolio Securities. From time to time, the Fund may lend its
portfolio securities to brokers, dealers and other financial organizations.
These loans will not exceed 20% of the Fund's total assets, taken at value.
Loans of portfolio securities by the Fund will be collateralized by cash,
letters of credit or U.S. government securities which are maintained at all
times in an amount equal to at least 100% of the current market value of the
loaned securities. The risks in lending portfolio securities, like those
associated with other extensions of secured credit, consist of possible delays
in receiving additional collateral or in the recovery of the securities or
possible loss of rights in the collateral should the borrower fail
financially.
Loans will be made to firms deemed by SBMFM to be of good standing and will
not
be made unless, in the judgement of SBMFM, the consideration to be earned from
such loans would justify the risk.
Options on Securities. The Fund may write covered call options with
respect to its portfolio securities. The Fund realizes a fee (referred to as a
"premium") for granting the rights evidenced by a call option. A call option
embodies the right of its purchaser to compel the writer of the option to sell
to the option holder an underlying security at a specified price at any time
during the option period. Thus, the purchaser of a call option written by the
Fund has the right to purchase from the Fund the underlying security owned by
the Fund at the agreed-upon price for a specified time period.
15
<PAGE>
Smith Barney Fundamental Value Fund Inc.
- ------------------------------------------------------------------------------
- -
Investment Objective and Management Policies (continued)
- ------------------------------------------------------------------------------
- -
Upon the exercise of a call option written by the Fund, the Fund may suffer
a loss equal to the excess of the security's market value at the time of the
option exercise over the Fund's cost of the security, less the premium
received
for writing the option.
The Fund will write only covered options with respect to its portfolio
securities. Accordingly, whenever the Fund writes a call option on its
securities, it will continue to own or have the present right to acquire the
underlying security for as long as it remains obligated as the writer of the
option. To support its obligation to purchase the underlying security if a
call
option is exercised, the Fund will either (a) deposit with its custodian in a
segregated account, cash, U.S. government securities or other high grade debt
obligations having a value at least equal to the exercise price of the
underlying securities or (b) continue to own an equivalent number of puts of
the same "series" (that is, puts on the same underlying security) with
exercise
prices greater than those that it has written (or, if the exercise prices of
the puts that it holds are less than the exercise prices of those that it has
written, it will deposit the difference with its custodian in a segregated
account).
The Fund may engage in a closing purchase transaction to realize a
profit,
to prevent an underlying security from being called or to unfreeze an under-
lying security (thereby permitting its sale or the writing of a new option on
the security prior to the outstanding option's expiration). To effect a
closing
purchase transaction, the Fund would purchase, prior to the holder's exercise
of an option that the Fund has written, an option of the same series as that
on
which the Fund desires to terminate its obligation. The obligation of the Fund
under an option that it has written would be terminated by a closing purchase
transaction, but the Fund would not be deemed to own an option as a result of
the transaction. There can be no assurances that the Fund will be able to ef-
fect closing purchase transactions at a time when it wishes to do so. To
facilitate closing purchase transactions, however, the Fund ordinarily will
write options only if a secondary market for the options exists on a domestic
securities exchange or in the over-the-counter market.
The Fund may also, for hedging purposes, purchase put options on securities
traded on national securities exchanges as well as in the over-the-counter
market. The Fund may purchase put options on particular securities in order to
protect against a decline in the market value in the underlying securities
below the exercise price less the premium paid for the option. The ability to
purchase put options allows the Fund to protect the unrealized gain on an
appreciated security in its portfolio without actually selling the security.
Prior to expiration, most options may be sold in a closing sale transaction.
Profit or loss from such a sale will depend on whether the amount received is
more or less than the premium paid for the option plus the related
transaction
cost.
16
<PAGE>
Smith Barney Fundamental Value Fund Inc.
- ------------------------------------------------------------------------------
- -
Investment Objective and Management Policies (continued)
- ------------------------------------------------------------------------------
- -
The Fund may purchase options in the over-the-counter market ("OTC
options") to the same extent that it may engage in transactions in exchange
traded options. OTC options differ from exchange traded options in that they
are negotiated individually and terms of the contract are not standardized as
in the case of exchange traded options. Moreover, because there is no clearing
corporation involved in an OTC option, there is a risk of non-performance by
the counterparty to the option. However, OTC options generally are much more
available for securities in a wider range of expiration dates and exercise
prices than exchange traded options. It is the current position of the staff
of
the SEC that OTC options (and securities underlying the OTC options) are
illiquid securities. Accordingly, the Fund will treat OTC options as subject
to
the Fund's limitation on illiquid securities until such time as there is a
change in the SEC's position. State securities laws also may impose further
limitations.
Options on Broad-Based Domestic Stock Indexes. The Fund may, for hedging
purposes only, write call options and purchase put options on broad-based
domestic stock indexes and enter into closing transitions with respect to such
options. Options on stock indexes are similar to options on securities except
that, rather than having the right to take or make delivery of stock at the
specified exercised price, an option on a stock index gives the holder the
right to receive, upon exercise of the option, an amount of cash if the
closing
level of the stock index upon which the option is based is "in the money."
This
amount of cash is equal to the difference between the closing level of the
index
and the exercise price of the option, expressed in dollars times a specified
multiple. The writer of the option is obligated, in return for the premium
received, to make delivery of this amount. Unlike stock options, all
settlements are in cash, and gain or loss depends on price movements in the
stock market generally rather than price movements in the individual stocks.
The effectiveness of purchasing puts and writing calls on stock index
options depends to a large extent on the ability of SBMFM to predict the price
movement of the stock index selected. Therefore, whether the Fund realizes a
gain or loss from the purchase of options on an index depends upon movements
in
the level of stock prices in the stock market generally. Additionally, because
exercises of index options are settled in cash, a call writer such as the Fund
cannot determine the amount of the settlement obligations in advance and it
cannot provide in advance for, or cover, its potential settlement obligations
by acquiring and holding the underlying securities. When the Fund has written
the call, there is also a risk that the market may decline between the time
the
Fund has a call exercised against it, at a price which is fixed as of the
clos-
ing level of the index on the date of exercise, and the time the Fund is able
to
17
<PAGE>
Smith Barney Fundamental Value Fund Inc.
- ------------------------------------------------------------------------------
- -
Investment Objective and Management Policies (continued)
- ------------------------------------------------------------------------------
- -
exercise the closing transaction with respect to the long call position it
holds.
Futures Contracts and Options on Futures Contracts. A futures contract
provides for the future sale by one party and the purchase by the other party
of a certain amount of a specified security at a specified price, date, time
and place. The Fund may enter into futures contracts to sell securities when
SBMFM believes that the value of the Fund's securities will decrease. An
option
on a futures contract, as contrasted with the direct investment in a futures
contract, gives the purchaser the right, in return for the premium paid, to
assume a position in a futures contract at a specified exercise price at any
time prior to the expiration date of the option. A call option gives the
purchaser of the option the right to enter into a futures contract to buy and
obliges the writer to enter into a futures contract to sell the underlying
securities. A put option gives the purchaser the right to sell and obliges the
writer to buy the underlying contract. The Fund may enter into futures
contracts to purchase securities when SBMFM anticipates purchasing the
underlying securities and believes that prices will rise before the purchases
will be made. When the Fund enters into a futures contract to purchase an
under-
lying security, an amount of cash, U.S. government securities or other high
grade debt securities, equal to the market value of the contract, will be
deposited in a segregated account with the Fund's custodian to collateralize
the position, thereby insuring that the use of the contract is unleveraged.
The
Fund will not enter into futures contracts for speculation and will only enter
into futures contracts that are traded on a U.S. exchange or board of trade.
The Fund may purchase options on futures contracts to hedge its portfolio
against the risk of a decline in the market value of securities held, and may
purchase call options on futures contracts to hedge against an increase in the
price of securities it is committed to purchase. The Fund may write put and
call options on futures contracts in entering into closing sale transactions
and
to increase its ability to hedge against changes in the market value of the
securities it holds or is committed to purchase. The Fund will write put and
call options only on futures contracts that are traded on a domestic exchange
or board of trade.
In entering into transactions involving futures contracts and options on
futures contracts, the Fund will comply with applicable requirements of the
Commodities Futures Trading Commission (the "CFTC") which require that its
transactions in futures and options be engaged in for "bona fide hedging"
purposes or other permitted purposes, provided that aggregate initial margin
deposits and premiums required to establish positions, other than those
considered by the CFTC to be "bona fide hedging," will not exceed 5% of the
Fund's net asset value, after taking into account unrealized profits and
unrealized losses on any such contracts.
18
<PAGE>
Smith Barney Fundamental Value Fund Inc.
- ------------------------------------------------------------------------------
Investment Objective and Management Policies (continued)
- ------------------------------------------------------------------------------
Portfolio Transactions. Portfolio securities transactions or options on
behalf of the Fund are placed by SBMFM with a number of brokers and dealers,
including Smith Barney. Smith Barney has advised the Fund that, in
transactions
with the Fund, Smith Barney charges a commission rate at least as favorable as
the rate Smith Barney charges its comparable unaffiliated customers in similar
transactions.
Foreign Securities and American Depositary Receipts. The Fund can invest up
to 25% of its assets in foreign securities and American Depositary Receipts
("ADRs"). ADRs are dollar-denominated receipts issued generally by domestic
banks representing the deposit with the bank of a security of a foreign
issuer.
ADRs are publicly traded on exchanges or over the counter in the United
States.
- ------------------------------------------------------------------------------
- -
Valuation of Shares
- ------------------------------------------------------------------------------
The Fund's net asset value per share is determined as of the close of
regular trading on the NYSE on each day that the NYSE is open, by dividing the
value of the Fund's net assets attributable to each Class by the total number
of shares of the Class outstanding.
Generally, the Fund's investments are valued at market value or, in the
absence of a market value with respect to any securities, at fair value as
determined by or under the direction of the Fund's Board of Directors. Short-
term investments that mature in 60 days or less are valued at amortized cost
whenever the Directors determine that amortized cost is fair value. Further
information regarding the Fund's valuation policies is contained in the
Statement of Additional Information.
- ------------------------------------------------------------------------------
Dividends, Distributions and Taxes
- ------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
The Fund's policy is to distribute substantially all its net investment
income (that is, its net income other than its net realized capital gains) and
net realized capital gains, if any, once a year, normally at the end of the
year in which earned or at the beginning of the next year.
If a shareholder does not otherwise instruct, dividends and capital gains
distributions will be reinvested automatically in additional shares of the
same
Class at net asset value, subject to no sales charge or CDSC. In order to
avoid
19
<PAGE>
Smith Barney Fundamental Value Fund Inc.
- ------------------------------------------------------------------------------
Dividends, Distributions and Taxes (continued)
- ------------------------------------------------------------------------------
the application of a 4.00% nondeductible excise tax on certain undistributed
amounts of ordinary income and capital gains, the Fund may make an additional
distribution shortly before December 31 in each year of any undistributed
ordinary income or capital gains and expects to pay any other dividends and
distributions necessary to avoid the application of this tax.
The per share dividends on Class B and Class C shares of the Fund may be
lower than the per share dividends on Class A and Class Y shares principally
as
a result of the distribution fee applicable with respect to Class B and Class
C
shares. The per share dividends on Class A shares of the Fund may be lower
than
the per share dividends on Class Y shares principally as a result of the
service fee applicable to Class A shares. Distributions of capital gains, if
any, will be in the same amount for Class A, Class B, Class C and Class Y
shares.
TAXES
The Fund has qualified and intends to continue to qualify each year as a
regulated investment company under the Code. Dividends paid from net
investment
income and distributions of net realized short-term capital gains are taxable
to shareholders as ordinary income, regardless of how long shareholders have
held their Fund shares and whether such dividends and distributions are
received
in cash or reinvested in additional Fund shares. Distributions of net
realized
long-term capital gains will be taxable to shareholders as long-term capital
gains, regardless of how long shareholders have held Fund shares and whether
such distributions are received in cash or are reinvested in additional Fund
shares. Furthermore, as a general rule, a shareholder's gain or loss on a sale
or redemption of Fund shares will be a long-term capital gain or loss if the
shareholder has held the shares for more than one year and will be a short-
term
capital gain or loss if the shareholder has held the shares for one year or
less. Some of the Fund's dividends declared from net investment income may
qualify for the Federal dividends-received deduction for corporations.
Statements as to the tax status of each shareholder's dividends and
distributions are mailed annually. Each shareholder also will receive, if
appropriate, various written notices after the close of the Fund's prior tax-
able year as to the Federal income tax status of his or her dividends and
distributions which were received from the Fund during the Fund's prior
taxable
year. Shareholders should consult their tax advisors about the status of the
Fund's dividends and distributions for state and local tax liabilities.
20
<PAGE>
Smith Barney Fundamental Value Fund Inc.
- ------------------------------------------------------------------------------
Purchase of Shares
- ------------------------------------------------------------------------------
GENERAL
The Fund currently offers a number of Classes of shares. Class A shares are
sold to investors with an initial sales charge and Class B and Class C shares
are sold without an initial sales charge but are subject to a CDSC payable
upon
certain redemptions. Class Y shares are sold without an initial sales charge
or
CDSC and will be available only to investors investing a minimum of
$5,000,000.
See "Prospectus Summary--Alternative Purchase Arrangements" for a discussion
of
factors to consider in selecting which Class of shares to purchase.
Purchases of Fund shares must be made through a brokerage account
maintained with Smith Barney, an Introducing Broker or an investment dealer in
the selling group, except for investors purchasing shares of the Fund through
a
qualified retirement plan who may do so directly through First Data. When
purchasing shares of the Fund, investors must specify whether the purchase is
for Class A, Class B, Class C or Class Y shares. No maintenance fee will be
charged by the Fund in connection with a brokerage account through which an
investor purchases or holds shares.
Investors in Class A, Class B and Class C shares may open an account by
making an initial investment in the Fund of at least $1,000 for each account,
or $250 for an IRA or a Self-Employed Retirement Plan. Investors in Class Y
shares
may open an account by making an initial investment of $5,000,000. Subsequent
investments of at least $50 may be made for all Classes. For participants in
retirement plans qualified under Section 403(b)(7) or Section 401(a) of the
Code, the minimum initial investment requirement for Class A, Class B and
Class
C shares and the subsequent investment requirement for all Classes in the Fund
is $25. For the Fund's Systematic Investment Plan, the minimum initial
investment requirement for Class A, Class B and Class C shares and the
subsequent investment requirement for all classes is $100. There are no
minimum
investment requirements for Class A shares for employees of Travelers and its
subsidiaries, including Smith Barney, Directors of the Fund and their spouses
and children. The Fund reserves the right to waive or change minimums, to
decline any order to purchase its shares and to suspend the offering of shares
from time to time. Shares purchased will be held in the shareholder's account
by
the Fund's transfer agent, First Data. Share certificates are issued only upon
a
shareholder's written request to First Data.
Purchase orders received by Smith Barney prior to the close of regular
trading on the NYSE, on any day the Fund calculates its net asset value, are
priced according to the net asset value determined on that day. Orders
received
by dealers or Introducing Brokers prior to the close of regular trading on the
21
<PAGE>
Smith Barney Fundamental Value Fund Inc.
- ------------------------------------------------------------------------------
- -
Purchase of Shares (continued)
- ------------------------------------------------------------------------------
NYSE on any day the Fund calculates its net asset value, are priced according
to the net asset value determined on that day, provided the order is received
by Smith Barney prior to Smith Barney's close of business (the "trade date").
Currently, payment for Fund shares is due on the third business day (the
"settlement date") after the trade date.
SYSTEMATIC INVESTMENT PLAN
Shareholders may make additions to their accounts at any time by purchasing
shares through a service known as the Systematic Investment Plan. Under the
Systematic Investment Plan, Smith Barney or First Data is authorized through
preauthorized transfers of $100 or more to charge the regular bank account or
other financial institution indicated by the shareholder on a monthly or
quarterly basis to provide systematic additions to the shareholder's Fund
account. A shareholder who has insufficient funds to complete the transfer
will
be charged a fee of up to $25 by Smith Barney or First Data. The Systematic
Investment Plan also authorizes Smith Barney to apply cash held in the
shareholder's Smith Barney brokerage account or redeem the shareholder's
shares
of a Smith Barney money market fund to make additions to the account.
Additional
information is available from the Fund or a Smith Barney Financial Consultant.
INITIAL SALES CHARGE ALTERNATIVE -- CLASS A SHARES
The sales charges applicable to purchases of Class A shares of the Fund
are
as follows:
Sales
Charge as Sales Dealers
% of Charge as
Reallowance
Offering % of as % of
Amount of Investment Price Amount Invested Offering
Price
============================================================================
====
Less than $25,000 5.00% 5.26% 4.50%
$25,000 - $49,999 4.00% 4.17% 3.60%
$50,000 - $99,999 3.50% 3.63% 3.15%
$100,000 - $249,999 3.00% 3.09% 2.70%
$250,000 - $499,999 2.00% 2.04% 1.80%
$500,000 and over * * *
============================================================================
====
* Purchases of Class A shares, which when combined with current holdings of
Class A shares offered with a sales charge, equal or exceed $500,000 in the
aggregate, will be made at net asset value without any initial sales charge,
but will be subject to a CDSC of 1.00% on redemptions made within 12 months
of
purchase. The CDSC on Class A shares is payable to Smith Barney, which
compensates Smith Barney Financial Consultants and other dealers whose
clients
make purchases of $500,000 or more. The CDSC is waived in the same
circumstances in which the CDSC applicable to Class B and Class C shares is
waived. See "Deferred Sales Charge Alternatives" and "Waivers of CDSC."
22
<PAGE>
Smith Barney Fundamental Value Fund Inc.
- ------------------------------------------------------------------------------
- -
Purchase of Shares (continued)
- ------------------------------------------------------------------------------
- -
Members of the selling group may receive up to 90% of the sales charge
and
may be deemed to be underwriters of the Fund as defined in the Securities Act
of 1933, as amended.
The reduced sales charges shown above apply to the aggregate of purchases
of Class A shares of the Fund made at one time by "any person," which includes
an individual, his or her spouse and children, or a trustee or other fiduciary
of a single trust estate or single fiduciary account. The reduced sales charge
minimums may also be met by aggregating the purchase with the net asset value
of
all Class A shares offered with a sales charge held in funds sponsored by
Smith
Barney listed under "Exchange Privilege."
INITIAL SALES CHARGE WAIVERS
Purchases of Class A shares may be made at net asset value without a
sales
charge in the following circumstances: (a) sales of Class A shares to
Directors
of the Fund and employees of Travelers and its subsidiaries, or the spouses
and
children of such persons (including the surviving spouse of a deceased
Director
or employee, and retired Directors or employees), or sales to any trust,
pension, profit-sharing or other benefit plan for such persons provided such
sales are made upon the assurance of the purchaser that the purchase is made
for
investment purposes and that the securities will not be re-sold except through
redemption or repurchase; (b) offers of Class A shares to any other investment
company in connection with the combination of such company with the Fund by
merger, acquisition of assets or otherwise; (c) purchases of Class A shares by
any client of a newly employed Smith Barney Financial Consultant (for a period
up to 90 days from the commencement of the Financial Consultant's employment
with Smith Barney), on the condition the purchase of Class A shares is made
with
the proceeds of the redemption of shares of a mutual fund which (i) was
sponsored by the Financial Consultant's prior employer, (ii) was sold to the
client by the Financial Consultant and (iii) was subject to a sales charge;
(d)
shareholders who have redeemed Class A shares of the Fund (or Class A shares
of
another of the Smith Barney Mutual Funds that are offered with a sales charge
equal to or greater than the maximum sales charge of the Fund) and who wish to
reinvest their redemption proceeds in the Fund, provided the reinvestment is
made within 60 calendar days of the redemption; and (e) accounts managed by
registered investment advisory subsidiaries of Travelers. In order to obtain
such discounts, the purchaser must provide sufficient information at the time
of
purchase to permit verification that the purchase would qualify for the
elimination of the sales charge.
23
<PAGE>
Smith Barney Fundamental Value Fund Inc.
- ------------------------------------------------------------------------------
- -
Purchase of Shares (continued)
- ------------------------------------------------------------------------------
- -
RIGHT OF ACCUMULATION
Class A shares of the Fund may be purchased by "any person" (as defined
above) at a reduced sales charge or at net asset value determined by
aggregating
the dollar amount of the new purchase and the total net asset value of all
Class
A shares of the Fund and of funds sponsored by Smith Barney, that are offered
with a sales charge listed under "Exchange Privilege" then held by such person
and applying the sales charge applicable to such aggregate. In order to obtain
such discount, the purchaser must provide sufficient information at the time
of
purchase to permit verification that the purchase qualifies for the reduced
sales charge. The right of accumulation is subject to modification or
discontinuance at any time with respect to all shares purchased thereafter.
GROUP PURCHASES
Upon completion of certain automated systems, a reduced sales charge or
purchase at net asset value will also be available to employees (and partners)
of the same employer purchasing as a group, provided each participant makes
the
minimum initial investment required. The sales charge applicable to purchases
by
each member of such a group will be determined by the table set forth above
under "Initial Sales Charge Alternative--Class A Shares," and will be based
upon
the aggregate sales of Class A shares of Smith Barney Mutual Funds offered
with
a sales charge to, and share holdings of, all members of the group. To be
eligible for such reduced sales charges or to purchase at net asset value, all
purchases must be pursuant to an employer- or partnership-sanctioned plan
meeting certain requirements. One such requirement is that the plan must be
open
to specified partners or employees of the employer and its subsidiaries, if
any.
Such plan may, but is not required to, provide for payroll deductions, IRAs or
investments pursuant to retirement plans under Sections 401 or 408 of the
Code.
Smith Barney may also offer a reduced sales charge or net asset value purchase
for aggregating related fiduciary accounts under such conditions that Smith
Barney will realize economies of sales efforts and sales related expenses. An
individual who is a member of a qualified group may also purchase Class A
shares
at the reduced sales charge applicable to the group as a whole. The sales
charge
is based upon the aggregate dollar value of Class A shares offered with a
sales
charge that have been previously purchased and are still owned by the group,
plus the amount of the current purchase. A "qualified group" is one which (a)
has been in existence for more than six months, (b) has a purpose other than
acquiring Fund shares at a discount, and (c) satisfies uniform criteria which
enable Smith Barney to realize economies of scale in its costs of distributing
shares. A qualified group must have more than 10 members, must be able to
arrange for group meetings between representatives of the Fund and the
members,
24
<PAGE>
Smith Barney Fundamental Value Fund Inc.
- ------------------------------------------------------------------------------
- -
Purchase of Shares (continued)
- ------------------------------------------------------------------------------
- -
and must agree to include sales and other materials related to the Fund in its
publications and mailings to members at no cost to Smith Barney. In order to
obtain such reduced sales charge or to purchase at net asset value, the
purchaser must provide sufficient information at the time of purchase to
permit
verification that the purchase qualifies for the reduced sales charge.
Approval
of group purchase reduced sales charge plans is subject to the discretion of
Smith Barney.
LETTER OF INTENT
A Letter of Intent for amounts of $50,000 or more provides an opportunity
for an investor to obtain a reduced sales charge by aggregating investments
over
a 13-month period, provided that the investor refers to such Letter when
placing
orders. For purposes of a Letter of Intent, the "Amount of Investment" as
referred to in the preceding sales charge table includes purchases of all
Class
A shares of the Fund and other funds of the Smith Barney Mutual Funds offered
with a sales charge over the 13-month period based on the total amount of
intended purchases plus the value of all Class A shares previously purchased
and
still owned. An alternative is to compute the 13-month period starting up to
90
days before the date of execution of a Letter of Intent. Each investment made
during the period receives the reduced sales charge applicable to the total
amount of the investment goal. If the goal is not achieved within the period,
the investor must pay the difference between the sales charges applicable to
the
purchases made and the charges previously paid, or an appropriate number of
escrowed shares will be redeemed. Please contact a Smith Barney Financial
Consultant or First Data to obtain a Letter of Intent application.
DEFERRED SALES CHARGE ALTERNATIVES
"CDSC Shares" are sold at net asset value next determined without an
initial sales charge so that the full amount of an investor's purchase payment
may be immediately invested in the Fund. A CDSC, however may be imposed on
certain redemptions of these shares. "CDSC Shares" are: (a) Class B shares;
(b)
Class C shares; and (c) Class A shares which when combined with Class A shares
offered with a sales charge currently held by an investor equal or exceed
$500,000 in the aggregate.
Any applicable CDSC will be assessed on an amount equal to the lesser of
the cost of the shares being redeemed or their net asset value at the time of
redemption. CDSC Shares that are redeemed will not be subject to a CDSC to the
extent that the value of such shares represents: (a) capital appreciation of
Fund assets; (b) reinvestment of dividends or capital gain distributions; (c)
with respect to Class B shares, shares redeemed more than five years after
their
25
<PAGE>
Smith Barney Fundamental Value Fund Inc.
- ------------------------------------------------------------------------------
- -
Purchase of Shares (continued)
- ------------------------------------------------------------------------------
- -
purchase; or (d) with respect to Class C shares and Class A shares that are
CDSC
shares redeemed more than 12 months after their purchase.
Class C shares and Class A shares that are CDSC Shares are subject to a
1.00% CDSC if redeemed within 12 months of purchase. In circumstances in which
the CDSC is imposed on Class B shares, the amount of the charge will depend on
the number of years since the shareholder made the purchase payment from which
the amount is being redeemed. Solely for purposes of determining the number of
years since a purchase payment, all purchase payments made during a month will
be aggregated and deemed to have been made on the last day of the preceding
Smith Barney statement month. The following table sets forth the rates of the
charge for redemptions of Class B shares by shareholders, except in the case
of
purchases by Participating Plans, as described below. See "Purchase of
Shares--Smith Barney 401(k) Program."
Year Since Purchase
Payment Was Made CDSC
============================================================================
====
First 5.00%
Second 4.00%
Third 3.00%
Fourth 2.00%
Fifth 1.00%
Sixth 0.00%
Seventh 0.00%
Eighth 0.00%
============================================================================
====
Class B shares will convert automatically to Class A shares eight years
after the date on which they were purchased and thereafter will no longer be
subject to any distribution fees. There also will be converted at that time
such
proportion of Class B Dividend Shares owned by the shareholder as the total
number of his or her Class B shares converting at the time bears to the total
number of outstanding Class B shares (other than Class B Dividend Shares)
owned
by the shareholder. Shareholders who held Class B shares of Smith Barney
Shearson Short-Term World Income Fund (the "Short-Term World Income Fund") on
July 15, 1994 and who subsequently exchanged those shares for Class B shares
of
the Fund will be offered the opportunity to exchange all such Class B shares
for
Class A shares of the Fund four years after the date on which those shares
were
deemed to have been purchased. Holders of such Class B shares will be notified
of the pending exchange in writing approximately 30 days before the fourth
anniversary of the purchase date and, unless the exchange has been rejected in
26
<PAGE>
Smith Barney Fundamental Value Fund Inc.
- ------------------------------------------------------------------------------
- -
Purchase of Shares (continued)
- ------------------------------------------------------------------------------
- -
writing, the exchange will occur on or about the fourth anniversary date. See
"Prospectus Summary--Alternative Purchase Arrangements--Class B Shares
Conversion Feature."
The length of time that CDSC Shares acquired through an exchange have
been
held will be calculated from the date that the shares exchanged were initially
acquired in one of the other Smith Barney Mutual Funds, and Fund shares being
redeemed will be considered to represent, as applicable, capital appreciation
or
dividend and capital gain distribution reinvestments in such other funds. For
Federal income tax purposes, the amount of the CDSC will reduce the gain or
increase the loss, as the case may be, on the amount realized on redemption.
The
amount of any CDSC will be paid to Smith Barney.
To provide an example, assume an investor purchased 100 Class B shares at
$10 per share for a cost of $1,000. Subsequently, the investor acquired 5
additional shares through dividend reinvestment. During the fifteenth month
after the purchase, the investor decided to redeem $500 of his or her
investment. Assuming at the time of the redemption the net asset value had
appreciated to $12 per share, the value of the investor's shares would be
$1,260
(105 shares at $12 per share). The CDSC would not be applied to the amount
which
represents appreciation ($200) and the value of the reinvested dividend shares
($60). Therefore, $240 of the $500 redemption proceeds ($500 minus $260) would
be charged at a rate of 4.00% (the applicable rate for Class B shares) for a
total deferred sales charge of $9.60.
WAIVERS OF CDSC
The CDSC will be waived on: (a) exchanges (see "Exchange Privilege"); (b)
automatic cash withdrawals in amounts equal to or less than 1.00% per month of
the value of the shareholder's shares at the time the withdrawal plan
commences
(see below) (provided, however, that automatic cash withdrawals in amounts
equal
to or less than 2.00% per month of the value of the shareholder's shares will
be
permitted for withdrawal plans that were established prior to November 7,
1994);
(c) redemptions of shares within 12 months following the death or disability
of
the shareholder; (d) redemption of shares made in connection with qualified
distributions from retirement plans or IRAs upon the attainment of age 59 1/2;
(e) involuntary redemptions; and (f) redemptions of shares in connection with
a
combination of the Fund with any investment company by merger, acquisition of
assets or otherwise. In addition, a shareholder who has redeemed shares from
other funds of the Smith Barney Mutual Funds may, under certain circumstances,
reinvest all or part of the redemption proceeds within 60 days and receive pro
rata credit for any CDSC imposed on the prior redemption.
27
<PAGE>
Smith Barney Fundamental Value Fund Inc.
- ------------------------------------------------------------------------------
- -
Purchase of Shares (continued)
- ------------------------------------------------------------------------------
- -
CDSC waivers will be granted subject to confirmation (by Smith Barney in
the case of shareholders who are also Smith Barney clients or by First Data in
the case of all other shareholders) of the shareholder's status or holdings,
as
the case may be.
SMITH BARNEY 401(K) PROGRAM
Investors may be eligible to participate in the Smith Barney 401(k)
Program, which is generally designed to assist plan sponsors in the creation
and
operation of retirement plans under Section 401(a) of the Code. To the extent
applicable, the same terms and conditions are offered to all Participating
Plans
in the Smith Barney 401(k) Program.
The Fund offers to Participating Plans Class A, Class B, Class C and
Class
Y shares as investment alternatives under the Smith Barney 401(k) Program.
Class
A, Class B and Class C shares acquired through the Smith Barney 401(k) Program
are subject to the same service and/or distribution fees as, but different
sales
charge and CDSC schedules than, the Class A, Class B and Class C shares
acquired
by other investors. Similar to those shares available to other investors,
Class
Y shares acquired through the Smith Barney 401(k) Program will not be subject
to
any initial sales charge, CDSC or service or distribution fee. Once a
Participating Plan has made an initial investment in the Fund, all of its
subsequent investments in the Fund must be in the same Class of shares, except
as otherwise described below.
Class A Shares. Class A shares of the Fund are offered without any
initial
sales charge to any Participating Plan that purchases from $500,000 to
$4,999,999 of Class A shares of one or more funds of the Smith Barney Mutual
Funds. Class A shares acquired through the Smith Barney 401(k) Program after
November 7, 1994 are subject to a CDSC of 1.00% of redemption proceeds, if the
Participating Plan terminates within four years of the date the Participating
Plan first enrolled in the Smith Barney 401(k) Program.
Class B Shares. Class B shares of the Fund are offered to any
Participating
Plan that purchases less than $250,000 of one or more funds of the Smith
Barney
Mutual Funds. Class B shares acquired through the Smith Barney 401(k) Program
are subject to a CDSC of 3.00% of redemption proceeds, if the Participating
Plan
terminates within eight years of the date the Participating Plan first
enrolled
in the Smith Barney 401(k) Program.
Eight years after the date the Participating Plan enrolled in the Smith
Barney 401(k) Program, it will be offered the opportunity to exchange all of
its
Class B shares for Class A shares of the Fund. Such Plans will be notified of
the pending exchange in writing approximately 60 days before the eighth
28
<PAGE>
Smith Barney Fundamental Value Fund Inc.
- ------------------------------------------------------------------------------
- -
Purchase of Shares (continued)
- ------------------------------------------------------------------------------
- -
anniversary of the enrollment date and, unless the exchange has been rejected
in
writing, the exchange will occur on or about the eighth anniversary date. Once
the exchange has occurred, a Participating Plan will not be eligible to
acquire
additional Class B shares of the Fund but instead may acquire Class A shares
of
the Fund. If the Participating Plan elects not to exchange all of its Class B
shares at that time, each Class B share held by the Participating Plan will
have
the same conversion feature as Class B shares held by other investors. See
"Purchase of Shares-- Deferred Sales Charge Alternatives."
Class C Shares. Class C shares of the Fund are offered to any
Participating
Plan that purchases from $250,000 to $499,999 of one or more funds of the
Smith
Barney Mutual Funds. Class C shares acquired through the Smith Barney 401(k)
Program after November 7, 1994 are subject to a CDSC of 1.00% of redemption
proceeds, if the Participating Plan terminates within four years of the date
the
Participating Plan first enrolled in the Smith Barney 401(k) Program. Each
year
after the date a Participating Plan enrolled in the Smith Barney 401(k)
Program,
if its total Class C holdings equal at least $500,000 as of the calendar
year-end, the Participating Plan will be offered the opportunity to exchange
all
of its Class C shares for Class A shares of the Fund. Such Plans will be
notified in writing within 30 days after the last business day of the calendar
year, and unless the exchange offer has been rejected in writing, the exchange
will occur on or about the last business day of the following March. Once the
exchange has occurred, a Participating Plan will not be eligible to acquire
Class C shares of the Fund but instead may acquire Class A shares of the Fund.
Class C shares not converted will continue to be subject to the distribution
fee.
Class Y Shares. Class Y shares of the Fund are offered without any
service
or distribution fee, sales charge or CDSC to any Participating Plan that
purchases $5,000,000 or more of Class Y shares of one or more funds of the
Smith
Barney Mutual Funds.
No CDSC is imposed on redemptions of CDSC Shares to the extent that the
net
asset value of the shares redeemed does not exceed the current net asset value
of the shares purchased through reinvestment of dividends or capital gain
distributions, plus (a) with respect to Class A and Class C shares, the
current
net asset value of such shares purchased more than one year prior to
redemption
and, with respect to Class B shares, the current net asset value of Class B
shares purchased more than eight years prior to the redemption, plus (b) with
respect to Class A and Class C shares, increases in the net asset value of the
shareholder's Class A or Class C shares above the purchase payments made
during
the preceding year and, with respect to Class B shares, increases in the net
29
<PAGE>
Smith Barney Fundamental Value Fund Inc.
- ------------------------------------------------------------------------------
- --
Purchase of Shares (continued)
- ------------------------------------------------------------------------------
- --
asset value of the shareholder's Class B shares above the purchase payments
made
during the preceding eight years. Whether or not the CDSC applies to a
Participating Plan depends on the number of years since the Participating Plan
first became enrolled in the Smith Barney 401(k) Program, unlike the
applicability of the CDSC to other shareholders, which depends on the number
of
years since those shareholders made the purchase payment from which the amount
is being redeemed.
The CDSC will be waived on redemptions of CDSC Shares in connection with
lump-sum or other distributions made by a Participating Plan as a result of:
(a)
the retirement of an employee in the Participating Plan; (b) the termination
of
employment of an employee in the Participating Plan; (c) the death or
disability
of an employee in the Participating Plan; (d) the attainment of age 59 1/2 by
an
employee in the Participating Plan; (e) hardship of an employee in the
Participating Plan to the extent permitted under Section 401(k) of the Code;
or
(f) redemptions of shares in connection with a loan made by the Participating
Plan to an employee.
Participating Plans wishing to acquire shares of the Fund through the
Smith
Barney 401(k) Program must purchase such shares directly from First Data. For
further information regarding the Smith Barney 401(k) Program, investors
should
contact a Smith Barney Financial Consultant.
- ------------------------------------------------------------------------------
- --
Exchange Privilege
- ------------------------------------------------------------------------------
- --
Except as otherwise noted below, shares of each Class may be exchanged at
the net asset value next determined for shares of the same Class in the
following funds of the Smith Barney Mutual Funds, to the extent shares are
offered for sale in the shareholder's state of residence. Exchanges of Class
A,
Class B and Class C shares are subject to minimum investment requirements and
all shares are subject to the other requirements of the fund into which
exchanges are made and a sales charge differential may apply.
FUND NAME
- ------------------------------------------------------------------------------
- --
Growth Funds
Smith Barney Aggressive Growth Fund, Inc.
Smith Barney Appreciation Fund Inc.
Smith Barney Growth Opportunity Fund
Smith Barney Managed Growth Fund
Smith Barney Natural Resources Fund Inc.
30
<PAGE>
Smith Barney Fundamental Value Fund Inc.
- ------------------------------------------------------------------------------
- --
Exchange Privilege (continued)
- ------------------------------------------------------------------------------
- --
Smith Barney Special Equities Fund
Smith Barney Telecommunications Growth Fund
Smith Barney World Funds, Inc. -- European Portfolio
Smith Barney World Funds, Inc. -- International Equity Portfolio
Smith Barney World Funds, Inc. -- Pacific Portfolio
Growth and Income Funds
Smith Barney Convertible Fund
Smith Barney Growth and Income Fund
Smith Barney Premium Total Return Fund
Smith Barney Strategic Investors Fund
Smith Barney Utilities Fund
Smith Barney World Funds, Inc. -- International Balanced Portfolio
Income Funds
** Smith Barney Adjustable Rate Government Income Fund
Smith Barney Diversified Strategic Income Fund
* Smith Barney Funds, Inc. -- Income Return Account Portfolio
Smith Barney Funds, Inc. -- Monthly Payment Government Portfolio
+++ Smith Barney Funds, Inc. -- Short-Term U.S. Treasury Securities
Portfolio
Smith Barney Funds, Inc. -- U.S. Government Securities Portfolio
Smith Barney Global Bond
Smith Barney Government Securities Fund
Smith Barney High Income Fund
Smith Barney Investment Grade Bond Fund
Smith Barney Managed Governments Fund Inc.
Smith Barney World Funds, Inc. -- Global Government Bond Portfolio
International Funds
Smith Barney World Funds, Inc. -- Emerging Markets Portfolio
Smith Barney World Funds, Inc. -- European Portfolio
Smith Barney World Funds, Inc. -- Global Government Bond Portfolio
Smith Barney World Funds, Inc. -- International Balanced Portfolio
Smith Barney World Funds, Inc. -- International Equity Portfolio
Smith Barney World Funds, Inc. -- Pacific Portfolio
31
<PAGE>
Smith Barney Fundamental Value Fund Inc.
- ------------------------------------------------------------------------------
- --
Exchange Privilege (continued)
- ------------------------------------------------------------------------------
- --
Municipal Bond Funds
Smith Barney Arizona Municipals Fund Inc.
Smith Barney California Municipals Fund Inc.
Smith Barney Florida Municipals Fund
* Smith Barney Intermediate Maturity California Municipals Fund
* Smith Barney Intermediate Maturity New York Municipals Fund
Smith Barney Managed Municipals Fund Inc.
Smith Barney Massachusetts Municipals Fund
* Smith Barney Muni Funds -- Florida Limited Term Portfolio
Smith Barney Muni Funds -- Florida Portfolio
Smith Barney Muni Funds -- Georgia Portfolio
* Smith Barney Muni Funds-- Limited Term Portfolio
Smith Barney Muni Funds-- National Portfolio
Smith Barney Muni Funds-- New York Portfolio
Smith Barney Muni Funds-- Ohio Portfolio
Smith Barney Muni Funds-- Pennsylvania Portfolio
Smith Barney New Jersey Municipals Fund Inc.
Smith Barney Oregon Municipals Fund
Smith Barney Tax-Exempt Income Fund
Money Market Funds
+ Smith Barney Exchange Reserve Fund
++ Smith Barney Money Funds, Inc. -- Cash Portfolio
++ Smith Barney Money Funds, Inc. -- Government Portfolio
*** Smith Barney Money Funds, Inc. -- Retirement Portfolio
+++ Smith Barney Municipal Money Market Fund, Inc.
+++ Smith Barney Muni Funds -- California Money Market Portfolio
+++ Smith Barney Muni Funds -- New York Money Market Portfolio
============================================================================
====
* Available for exchange with Class A, Class C and Class Y shares of the
Fund.
** Available for exchange with Class A, Class B and Class Y shares of the
Fund.
In addition, shareholders who own Class C shares of the Fund through the
Smith Barney 401(k) Program may exchange those shares for Class C shares
of
this fund.
*** Available for exchange with Class A shares of the Fund.
+ Available for exchange with Class B and Class C shares of the Fund.
++ Available for exchange with Class A and Class Y shares of the Fund. In
addition, shareholders who own Class C shares of the Fund through the
Smith
Barney 401(k) Program may exchange those shares for Class C shares of this
fund.
+++ Available for exchange with Class A and Class Y shares of the Fund.
Class A Exchanges. Class A shares of Smith Barney Mutual Funds sold
without
a sales charge or with a maximum sales charge of less than the maximum charged
by other Smith Barney Mutual Funds will be subject to the appropriate "sales
charge differential" upon the exchange of such shares for Class A shares of a
fund sold with a higher sales charge. The "sales charge differential" is
limited
to a percentage rate no greater than the excess of the sales charge rate
applicable to purchases of shares of the mutual fund being acquired in the
32
<PAGE>
Smith Barney Fundamental Value Fund Inc.
- ------------------------------------------------------------------------------
- --
Exchange Privilege (continued)
- ------------------------------------------------------------------------------
- --
exchange over the sales charge rate(s) actually paid on the mutual fund shares
relinquished in the exchange and on any predecessor of those shares. For
purposes of the exchange privilege, shares obtained through automatic
reinvestment of dividends and capital gain distributions are treated as having
paid the same sales charges applicable to the shares on which the dividends or
distributions were paid; however, except in the case of the Smith Barney
401(k)
Program, if no sales charge was imposed upon the initial purchase of the
shares,
any shares obtained through automatic reinvestment will be subject to a sales
charge differential upon exchange.
Class B Exchanges. In the event a Class B shareholder (unless such
shareholder was a Class B shareholder of the Short-Term World Income Fund on
July 15, 1994) wishes to exchange all or a portion of his or her shares in any
of the funds imposing a higher CDSC than that imposed by the Fund, the
exchanged
Class B shares will be subject to the higher applicable CDSC. Upon an
exchange,
the new Class B shares will be deemed to have been purchased on the same date
as
the Class B shares of the Fund that have been exchanged.
Class C Exchanges. Upon an exchange, the new Class C shares will be
deemed
to have been purchased on the same date as the Class C shares of the Fund that
have been exchanged.
Class Y Exchanges. Class Y shareholders of the Fund who wish to exchange
all or a portion of their Class Y shares for Class Y shares in any of the
funds
identified above may do so without imposition of any charge.
Additional Information Regarding the Exchange Privilege. Although the
exchange privilege is an important benefit, excessive exchange transactions
can
be detrimental to the Fund's performance and its shareholders. SBMFM may
determine that a pattern of frequent exchanges is excessive and contrary to
the
best interests of the Fund's other shareholders. In this event, SBMFM will
notify Smith Barney and Smith Barney may, at its discretion, decide to limit
additional purchases and/or exchanges by a shareholder. Upon such a
determination, Smith Barney will provide notice in writing or by telephone to
the shareholder at least 15 days prior to suspending the exchange privilege
and
during the 15-day period the shareholder will be required to (a) redeem his or
her shares in the Fund or (b) remain invested in the Fund or exchange into any
of the funds of the Smith Barney Mutual Funds ordinarily available, which
position the shareholder would be expected to maintain for a significant
period
of time. All relevant factors will be considered in determining what
constitutes
an abusive pattern of exchanges.
Exchanges will be processed at the net asset value next determined, plus
any applicable sales charge differential. Redemption procedures discussed
below
are also applicable for exchanging shares, and exchanges will be made upon
33
<PAGE>
Smith Barney Fundamental Value Fund Inc.
- ------------------------------------------------------------------------------
- --
Exchange Privilege (continued)
- ------------------------------------------------------------------------------
- --
receipt of all supporting documents in proper form. If the account
registration
of the shares of the fund being acquired is identical to the registration of
the
shares of the fund exchanged, no signature guarantee is required. A capital
gain
or loss for tax purposes will be realized upon the exchange, depending upon
the
cost or other basis of shares redeemed. Before exchanging shares, investors
should read the current prospectus describing the shares to be acquired. The
Fund reserves the right to modify or discontinue exchange privileges upon 60
days' prior notice to shareholders.
- ------------------------------------------------------------------------------
- --
Redemption of Shares
- ------------------------------------------------------------------------------
- --
The Fund is required to redeem the shares of the Fund tendered to it, as
described below, at a redemption price equal to their net asset value per
share
next determined after receipt of a written request in proper form at no charge
other than any applicable CDSC. Redemption requests received after the close
of
regular trading on the NYSE are priced at the net asset value next determined.
If a shareholder holds shares in more than one Class, any request for
redemption must specify the Class being redeemed. In the event of a failure to
specify which Class, or if the investor owns fewer shares of the Class than
specified, the redemption request will be delayed until the Fund's transfer
agent receives further instructions from Smith Barney, or if the shareholder's
account is not with Smith Barney, from the shareholder directly. The
redemption
proceeds will be remitted on or before the seventh day following receipt of
proper tender, except on any days on which the NYSE is closed or as permitted
under the Investment Company Act of 1940 ("1940 Act") in extraordinary
circumstances. Generally, if the redemption proceeds are remitted to a Smith
Barney brokerage account, these funds will not be invested for the
shareholder's
benefit without specific instruction and Smith Barney will benefit from the
use
of temporarily uninvested funds. Redemption proceeds for shares purchased by
check, other than a certified or official bank check, will be remitted upon
clearance of the check, which may take up to ten days or more.
Shares held by Smith Barney as custodian must be redeemed by submitting a
written request to a Smith Barney Financial Consultant. Shares other than
those
held by Smith Barney as custodian may be redeemed through an investor's
Financial Consultant, Introducing Broker or dealer in the selling group or by
submitting a written request for redemption to:
34
<PAGE>
Smith Barney Fundamental Value Fund Inc.
- ------------------------------------------------------------------------------
- --
Redemption of Shares (continued)
- ------------------------------------------------------------------------------
- --
Smith Barney Fundamental Value
Fund Inc. Class A, B, C or Y (please specify)
c/o First Data Investor Services Group, Inc.
P.O. Box 91340 Boston, Massachusetts 02205-9134
A written redemption request must (a) state the Class and number or
dollar
amount of shares to be redeemed, (b) identify the shareholder's account number
and (c) be signed by each registered owner exactly as the shares are
registered.
If the shares to be redeemed were issued in certificate form, the certificates
must be endorsed for transfer (or be accompanied by an endorsed stock power)
and
must be submitted to First Data together with the redemption request. Any
signature appearing on a redemption request, share certificate or stock power
must be guaranteed by an eligible guarantor institution such as a domestic
bank,
savings and loan institution, domestic credit union, member bank of the
Federal
Reserve System or member firm of a national securities exchange. First Data
may
require additional supporting documents for redemptions made by corporations,
executors, administrators, trustees or guardians. A redemption request will
not
be deemed properly received until First Data receives all required documents
in
proper form.
AUTOMATIC CASH WITHDRAWAL PLAN
The Fund offers shareholders an automatic cash withdrawal plan, under
which
shareholders who own shares with a value of at least $10,000 may elect to
receive cash payments of at least $100 monthly or quarterly. Retirement plan
accounts are eligible for automatic cash withdrawal plans only where the
shareholder is eligible to receive qualified distributions and has an account
value of at least $5,000. The withdrawal plan will be carried over on
exchanges
between funds or Classes of the Fund. Any applicable CDSC will not be waived
on
amounts withdrawn by a shareholder that exceed 1.00% per month of the value of
the shareholder's shares subject to the CDSC at the time the withdrawal plan
commences. (With respect to withdrawal plans in effect prior to November 7,
1994, any applicable CDSC will be waived on amounts withdrawn that do not
exceed
2.00% per month of the value of the shareholder's shares subject to the CDSC.)
For further information regarding the automatic cash withdrawal plan,
shareholders should contact a Smith Barney Financial Consultant.
35
<PAGE>
Smith Barney Fundamental Value Fund Inc.
- ------------------------------------------------------------------------------
- --
Minimum Account Size
- ------------------------------------------------------------------------------
- --
The Fund reserves the right to involuntarily liquidate any shareholder's
account in the Fund if the aggregate net asset value of the shares held in the
Fund account is less than $500. (If a shareholder has more than one account in
this Fund, each account must satisfy the minimum account size.) The Fund,
however, will not redeem shares based solely on market reductions in net asset
value. Before the Fund exercises such right, shareholders will receive written
notice and will be permitted 60 days to bring accounts up to the minimum to
avoid automatic redemption.
- ------------------------------------------------------------------------------
- --
Performance
- ------------------------------------------------------------------------------
- --
From time to time the Fund may include its total return, average annual total
return and current dividend return in advertisements and/or other types of
sales
literature. These figures are computed separately for Class A, Class B, Class
C
and Class Y shares of the Fund. These figures are based on historical earnings
and are not intended to indicate future performance. Total return is computed
for a specified period of time assuming deduction of the maximum sales charge,
if any, from the initial amount invested and reinvestment of all income
dividends and capital gain distributions on the reinvestment dates at prices
calculated as stated in this Prospectus, then dividing the value of the
investment at the end of the period so calculated by the initial amount
invested
and subtracting 100%. The standard average annual total return, as prescribed
by
the SEC, is derived from this total return, which provides the ending
redeemable
value. Such standard total return information may also be accompanied with
nonstandard total return information for differing periods computed in the
same
manner but without annualizing the total return or taking sales charges into
account. The Fund calculates current dividend return for each Class by
annualizing the most recent monthly distribution and dividing by the net asset
value or the maximum public offering price (including sales charge) on the
last
day of the period for which current dividend return is presented. The current
dividend return for each Class may vary from time to time depending on market
conditions, the composition of its investment portfolio and operating
expenses.
These factors and possible differences in the methods used in calculating
current dividend return should be considered when comparing a Class' current
return to yields published for other investment companies and other investment
vehicles. The Fund may also include comparative performance information in
advertising or marketing its shares. Such performance information may include
data from Lipper Analytical Services, Inc. and other financial publications.
The
Fund will include performance data for Class A, Class B, Class C and Class Y
shares in any advertisement or information including performance data of the
Fund.
36
<PAGE>
Smith Barney Fundamental Value Fund Inc.
- ------------------------------------------------------------------------------
- --
Management of the Fund
- ------------------------------------------------------------------------------
- --
BOARD OF DIRECTORS
Overall responsibility for management and supervision of the Fund rests
with the Fund's Board of Directors. The Directors approve all significant
agreements between the Fund and the companies that furnish services to the
Fund,
including agreements with the Fund's distributor, investment adviser,
administrator, custodian and transfer agent. The day-to-day operations of the
Fund are delegated to the Fund's investment adviser and administrator. The
Statement of Additional Information contains general background information
regarding each Director and executive officer of the Fund.
INVESTMENT ADVISOR AND ADMINISTRATOR
SBMFM, located at 388 Greenwich Street, New York, New York 10013, serves
as
the Fund's investment adviser and administrator. SBMFM (through its
predecessor
entities) has been in the investment counseling business since 1940 and
renders
investment management and administration services to a wide variety of
individual, institutional and investment company clients having aggregate
assets
under management as of November 30, 1995 in excess of $71 billion.
Subject to the supervision and direction of the Fund's Board of
Directors,
SBMFM manages the Fund's portfolio in accordance with the Fund's stated
investment objective and policies, makes investment decisions for the Fund,
places orders to purchase and sell securities and employs professional
portfolio
managers and securities analysts who provide research services to the Fund.
Under an investment advisory agreement, the Fund pays SBMFM a monthly fee at
the
annual rate of 0.55% of the value of its average daily net assets.
PORTFOLIO MANAGEMENT
John G. Goode, President and Chief Executive Officer of Davis Skaggs
Investment Management, a division of SBMFM, has served as Vice President and
Investment Officer of the Fund since November 1990 and manages the day-to-day
operations of the Fund, including making all investment decisions.
Mr. Goode's management discussion and analysis of the Fund's performance
during the fiscal year ended September 30, 1995 is included in the Fund's
Annual
Report to Shareholders dated September 30, 1995. The Fund's Annual Report may
be
obtained upon request and without charge from a Smith Barney Financial
Consultant or by writing or calling the Fund at the address or phone number
listed on page one of this Prospectus.
37
<PAGE>
Smith Barney Fundamental Value Fund Inc.
- ------------------------------------------------------------------------------
- --
Distributer
- ------------------------------------------------------------------------------
- --
Smith Barney is located at 388 Greenwich Street, New York, New York
10013.
Smith Barney distributes shares of the Fund as principal underwriter and as
such
conducts a continuous offering pursuant to a "best efforts" arrangement
requiring Smith Barney to take and pay for only such securities as may be sold
to the public. Pursuant to a plan of distribution adopted by the Fund under
Rule
12b-1 under the 1940 Act (the "Plan"), Smith Barney is paid a service fee with
respect to Class A, Class B and Class C shares of the Fund at the annual rate
of
0.25% of the average daily net assets of the respective Class. Smith Barney is
also paid a distribution fee with respect to Class B and Class C shares at the
annual rate of 0.75% of the average daily net assets attributable to those
Classes. Class B shares that automatically convert to Class A shares eight
years
after the date of original purchase will no longer be subject to a
distribution
fee. The fees are used by Smith Barney to pay its Financial Consultants for
servicing shareholder accounts and, in the case of Class B and Class C shares,
to cover expenses primarily intended to result in the sale of those shares.
These expenses include: advertising expenses; the cost of printing and mailing
prospectuses to potential investors; payments to and expenses of Smith Barney
Financial Consultants and other persons who provide support services in
connection with the distribution of shares; interest and/or carrying charges;
and indirect and overhead costs of Smith Barney associated with the sale of
Fund
shares, including lease, utility, communications and sales promotion expenses.
The payments to Smith Barney Financial Consultants for selling shares of
a
Class include a commission or fee paid by the investor or Smith Barney at the
time of sale and, with respect to Class A, Class B and Class C shares, a
continuing fee for servicing shareholder accounts for as long as a shareholder
remains a holder of that Class. Smith Barney Financial Consultants may receive
different levels of compensation for selling different Classes of shares.
Payments under the Plan are not tied exclusively to the distribution and
shareholder service expenses actually incurred by Smith Barney and the
payments
may exceed distribution expenses actually incurred. The Fund's Board of
Directors will evaluate the appropriateness of the Plan and its payment terms
on
a continuing basis and in so doing will consider all relevant factors,
including
expenses borne by Smith Barney, amounts received under the Plan and the
proceeds
of the CDSC.
- ------------------------------------------------------------------------------
- --
Additional Information
- ------------------------------------------------------------------------------
- --
The Fund was originally incorporated under the laws of the State of
Washington on March 17, 1981, and is registered with the SEC as a diversified,
open-end management investment company. On January 27, 1995 shareholders
approved the reincorporation of the Fund as a Maryland corporation which
subsequently occurred on May 24, 1995.
38
<PAGE>
Smith Barney Fundamental Value Fund Inc.
- ------------------------------------------------------------------------------
- --
Additional Information (continued)
- ------------------------------------------------------------------------------
- --
The Fund currently offers shares of common stock classified into four
Classes, A, B, C and Y. Each Class of shares represents an identical pro rata
interest in the Fund's investment portfolio. As a result, the Classes have the
same rights, privileges and preferences, except with respect to: (a) the
designation of each Class; (b) the effect of the respective sales charges, if
any, for each Class; (c) the distribution and/or service fees borne by each
Class; (d) the expenses allocable exclusively to each Class; (e) voting rights
on matters exclusively affecting a single Class; (f) the exchange privilege of
each Class; and (g) the conversion feature of the Class B shares. The Board of
Directors does not anticipate that there will be any conflicts among the
interests of the holders of the different Classes of shares of the Fund. The
Directors, on an ongoing basis, will consider whether any such conflict exists
and, if so, take appropriate action.
The Fund is not required to hold annual meetings, however the Directors
will call a meeting for any purpose upon written request of shareholders
holding
at least 10% of the Fund's outstanding shares and the Fund will assist
shareholders in calling such a meeting as required by the 1940 Act. When
matters
are submitted for shareholder vote, shareholders of each Class will have one
vote for each full share owned and proportionate, fractional votes for
fractional shares held.
PNC Bank, National Association, located at 17th and Chestnut Streets,
Philadelphia, Pennsylvania serves as custodian of the Fund's investments.
First Data, located at Exchange Place, Boston, Massachusetts, serves as
the
Fund's transfer agent.
The Fund sends its shareholders a semi-annual report and an audited
annual
report, which include listings of investment securities held by the Fund at
the
end of the reporting period. In an effort to reduce the Fund's printing and
mailing costs, the Fund plans to consolidate the mailing of its semi-annual
and
annual reports by household. This consolidation means that a household having
multiple accounts with the identical address of record will receive a single
copy of each report. In addition, the Fund also plans to consolidate the
mailing
of its Prospectus so that a shareholder having multiple accounts (that is,
individual, IRA and/or Self-Employed Retirement Plan accounts) will receive a
single Prospectus annually. When the Fund's annual report is combined with the
Prospectus into a single document, the Fund will mail the combined document to
each shareholder to comply with legal requirements. Any shareholder who does
not
want this consolidation to apply to his or her account should contact his or
her
Smith Barney Financial Consultant or First Data.
39
<PAGE>
SMITH
BARNEY
----------
- --
A Member of Travelers Group
[LOGO]
Smith
Barney
Fundamental
Value
Fund
Inc.
388 Greenwich
Street
New York, New York
10013
FD0206
1/96
SMITH BARNEY
FUNDAMENTAL VALUE FUND INC.
388 Greenwich Street - New York, New York 10013
(212) 723-9218
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 1, 1996
This Statement of Additional Information expands upon and supplements
the
information contained in the current Prospectus of Smith Barney Fundamental
Value Fund Inc. (the "Fund"), dated February 1, 1996, as amended or
supplemented
from time to time, and should be read in conjunction with the Fund's
Prospectus.
The Fund's Prospectus may be obtained from any Smith Barney Financial
Consultant
or by writing or calling the Fund at the address or phone number listed above.
This Statement of Additional Information, although not in itself a prospectus,
is incorporated by reference into the Prospectus in its entirety.
TABLE OF CONTENTS
For ease of reference, the same section headings are used in both the
Prospectus and this Statement of Additional Information, except where shown
below.
Management of the Fund 1
Investment Objective and Management Policies 5
Purchase of Shares 16
Redemption of Shares 16
Distributor 17
Valuation of Shares 19
Exchange Privilege 19
Performance Data (See in the Prospectus "Performance") 20
Taxes (See in the Prospectus "Dividends, Distributions and Taxes")
22
Additional Information 25
Financial Statements 25
MANAGEMENT OF THE FUND
The executive officers of the Fund are employees of certain of the
organizations that provide services to the Fund. These organizations are as
follows:
Name
Service
Smith Barney Inc. Distributor
("Smith Barney")
Smith Barney Mutual Funds Management Inc.
("SBMFM") Investment Adviser
and Administrator
PNC Bank, National Association ("PNC") Custodian
First Data Investors Group, Inc.(Formerly The Shareholder
Services Group Inc.)("First Data"), a subsidiary of First
Data Corporation Transfer Agent
These organizations and the functions they perform for the Fund are
discussed in the Prospectus and in this Statement of Additional Information.
Directors and Executive Officers of the Fund
The Directors and executive officers of the Fund, together with
information
as to their principal business occupations during the past five years, are set
forth below. Each Director who is an "interested person" of the Fund, as
defined
in the Investment Company Act of 1940, as amended (the "1940 Act"), is
indicated
by an asterisk.
Lloyd J. Andrews, age 74, Director. Private investor; Director of North
Coast Life Insurance Company and Flow Systems, Inc.; Past Vice Chairman and
Director of Chem-Nuclear Systems, Inc. His address is East 10110 Green Bluff
Road, Mead, Washington 98021.
Robert M. Frayn, Jr., age 60, Director. President and Director of Book
Publishing Company. His address is 201 Westlake No., Seattle, Washington
98109.
Leon P. Gardner, age 66, Director. Private investor; Chairman of Fargo's
Pizza Company. His address is 2310 N.E. Blue Ridge Drive, Seattle, Washington
98117.
Howard J. Johnson, age 56, Director. President and Chairman of Howard
Johnson & Co., an actuary and pension consultant; Secretary and Director of
Wurts Johnson and Company; Director of Spring Street Securities, Inc.;
Director
of Rainier Trust Company; Director ex-officio of American Society of Pension
Actuaries. His address is Suite 370, 375 Park Avenue, New York, New York
10152.
David E. Maryatt, age 58, Director. Director of ALS Co., a textile
rental
services firm; Private Investor. His address is 771 Valley Street, Seattle,
Washington 98109.
*Heath B. McLendon, age 61, Chairman of the Board and Investment
Officer.
Managing Director of Smith Barney and Chairman of the Board of Smith Barney
Strategy Advisers Inc.; prior to July 1993, Senior Executive Vice President of
Shearson Lehman Brothers Inc. ("Shearson Lehman Brothers"); Vice Chairman of
Shearson Asset Management; a Director of PanAgora Asset Management, Inc. and
PanAgora Asset Management Limited. His address is 388 Greenwich Street, New
York, New York 10013.
Frederick O. Paulsell, age 55, Director. Olympic Capital Partners. His
address is 1325 Fourth Avenue Suite 1900, Seattle, Washington 98101.
Jerry A. Viscione, age 50, Director. Dean of Albers School of Business
and
Economics, Seattle University. His address is 3480 Northeast 155 Street,
Seattle, Washington 98155.
Julie W. Weston, age 51, Director. Attorney; prior to 1987, Secretary
and
General Counsel of Skinner Corporation, a distributor of consumer and
industrial
products. Her address is 416 34th Avenue, Seattle, Washington 98122.
Jessica M. Bibliowicz, age 36, President. Executive Vice President of
Smith
Barney; prior to January 1994, Director of Marketing and Sales of Prudential
Mutual Funds. Her address is 388 Greenwich Street, New York, New York 10013.
Lewis E. Daidone, age 38, Senior Vice President and Treasurer. Managing
Director of Smith Barney; Director and Senior Vice President of SBMFM. His
address is 388 Greenwich Street, New York, New York 10013.
John G. Goode, age 51, Vice President and Investment Officer. President
and
Chief Executive Officer of Davis Skaggs Investment Management, a division of
SBMFM. His address is One Sansome Street, 38th Floor, San Francisco,
California
94104.
Peter Hable, age 37 Investment Officer. Investment Officer of SBMFM. His
address is One Sansome Street, 38th Floor, San Francisco, California 94104.
Christina T. Sydor, age 44, Secretary. Managing Director of Smith
Barney;
General Counsel and Secretary of SBMFM. Her address is 388 Greenwich Street,
New
York, New York 10013.
No officer, director or employee of Smith Barney or of its parent or any
subsidiary receives any compensation from the Fund for serving as an officer
or
Director of the Fund. The Fund pays each Director who is not an officer or
employee of Smith Barney or any of its affiliates a fee of $3,000 per annum
plus
$500 for each Board meeting attended and reimburses them for travel and out-
of-
pocket expenses. During the fiscal year ended September 30, 1995, such fees
and
expenses totalled $35,000.
For the calendar year ended December 31, 1995, the Directors of the Fund were
paid the following compensation:
Compensation
Aggregate Compensation from all Smith Barney
Director from the Fund Mutual Funds
Lloyd J. Andrews $3,850 $3,850
Robert M. Frayn, Jr. 3,750 3,750
Leon P. Gardner 3,850 3,850
Howard J. Johnson 3,850 3,850
David E. Maryatt 3,750 3,750
Heath B. McLendon - -
Frederick O. Paulsell 3,750 3,750
Jerry A. Viscione 3,850 3,850
Julie W. Weston 3,850 3,850
Mr. McLendon also serves as trustee and/or director of 29 other mutual funds
for
which Smith Barney serves as distributor, all other Directors of this Fund do
not serve as trustee and/or director of any other Smith Barney distributed
fund.
As of October 31, 1995, the Directors and officers of the Fund, as a group,
owned less than 1.00% of the outstanding common stock of the Fund.
Investment Adviser and Administrator -- SBMFM
SBMFM serves as investment adviser to the Fund pursuant to an investment
advisory agreement dated July 30, 1993 (the "Advisory Agreement"), which was
first approved by the Fund's Board of Directors, including a majority of the
Directors who are not "interested persons" of the Fund or SBMFM, on April 7,
1993 and which was approved by shareholders on June 22, 1993. The services
provided by SBMFM under the Advisory Agreement are described in the Prospectus
under "Management of the Fund". SBMFM bears all expenses in connection with
the
performance of its services and pays the salary of any officer or employee who
is employed by both it and the Fund. SBMFM is a wholly owned subsidiary of
Smith
Barney Holdings Inc. ("Holdings"), which is in turn a wholly owned subsidiary
of
The Travelers Group Inc. ("Travelers"). As compensation for investment
advisory
services, the Fund pays SBMFM a fee, computed daily and paid monthly, at the
annual rate of 0.55% of the value of the Fund's average daily net assets.
SBMFM
bears all of its expenses in connection with the performance of its services.
For the fiscal years ended September 30, 1995, 1994 and 1993, the Fund
incurred $4,135,113, $2,559,267 and $759,836, respectively, in investment
advisory fees.
SBMFM also serves as administrator to the Fund pursuant to a written
agreement dated June 28, 1994 (the "Administration Agreement"), which was
approved by the Fund's Board of Directors, including a majority of the
Directors
who are not "interested persons" of the Fund or SBMFM, on June 28, 1994. The
services provided by SBMFM under the Administration Agreement are described in
the Prospectus under "Management of the Fund." SBMFM pays the salary of any
officer and employee who is employed by both it and the Fund and bears all
expenses in connection with the performance of its services. As compensation
for
administrative services rendered to the Fund, SBMFM receives a fee, computed
daily and paid monthly, at the annual rate of 0.20% of the value of the Fund's
average daily net assets.
Certain services provided to the Fund by SBMFM pursuant to the
Administration Agreement are described in the Prospectus under "Management of
the Fund." In addition to those services, SBMFM pays the salaries of all
officers and employees who are employed by both it and the Fund, maintains
office facilities for the Fund, furnishes the Fund with statistical and
research
data, clerical help and accounting, data processing, bookkeeping, internal
auditing and legal services and certain other services required by the Fund,
prepares reports to the Fund's shareholders and prepares tax returns, reports
to
and filings with the Securities and Exchange Commission (the "SEC") and state
Blue Sky authorities. SBMFM bears all expenses in connection with the
performance of its services.
The Fund bears expenses incurred in its operation, including taxes,
interest, brokerage fees and commissions, if any; fees of Directors who are
not
officers, directors, shareholders or employees of Smith Barney or SBMFM; SEC
fees and state Blue Sky qualification fees; charges of custodians; transfer
and
dividend disbursing agent's fees; certain insurance premiums; outside auditing
and legal expenses; costs of maintenance of corporate existence; investor
services (including allocated telephone and personnel expenses); costs of
preparation and printing of prospectuses and statements of additional
information for regulatory purposes and for distribution to existing
shareholders; costs of shareholders' reports and corporate meetings.
SBMFM has agreed that if in any fiscal year the aggregate expenses of
the
Fund (including fees paid pursuant to the Advisory Agreement and
Administration
Agreement, but excluding interest, taxes, brokerage fees paid pursuant to the
Fund's services and distribution plan and, with the prior written consent of
the
necessary state securities commissions, extraordinary expenses) exceed the
expense limitation of any state having jurisdiction over the Fund, SBMFM will,
to the extent required by state law, reduce its management fees by such excess
expense. Such fee reductions, if any, will be reconciled on a monthly basis.
The
most restrictive state expense limitation currently applicable to the Fund
would
require SBMFM to reduce its fees in any year that such excess expenses exceed
2.50% of the first $30 million of average daily net assets, 2.00% of the next
$70 million of average daily net assets and 1.50% of the remaining average
daily
net assets. No such fee reduction was required for the fiscal years ended
September 30, 1994, 1993 and 1992.
Counsel and Auditors
Willkie Farr & Gallagher serves as legal counsel to the Fund. The
Directors
who are not "interested persons" of the Fund have selected Stroock & Stroock &
Lavan as their legal counsel.
Deloitte & Touche LLP, independent public accountants, 125 Summer
Street,
Boston, Massachusetts 02110, serve as auditors of the Fund and render an
opinion
on the Fund's financial statements annually.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The Prospectus discusses the Fund's investment objective and the
policies
it employs to achieve its objective. This section contains supplemental
information concerning the types of securities and other instruments in which
the Fund may invest, the investment policies and portfolio strategies that the
Fund may utilize and certain risks attendant to such investments, policies and
strategies.
The Fund's primary investment objective is long-term capital growth.
Current income is a secondary objective. The Fund seeks to achieve its
objective
through investment in common stocks and common stock equivalents, including
preferred stocks and other securities convertible into common stocks. The Fund
also invests to a lesser extent in bonds and other debt instruments. There is
no
guarantee that the Fund will achieve its investment objective.
SBMFM places emphasis on securities which, in its judgment, are
undervalued
in the marketplace and, accordingly, have above-average growth potential.
Undervaluation of a security can result from a variety of factors, such as a
lack of investor recognition of (a) the underlying value of a company's fixed
assets, (b) the value of a consumer or commercial franchise, (c) changes in
the
economic or financial environment particularly affecting a company, (d) new,
improved or unique products or services, (e) new or rapidly expanding markets,
(f) changes in management of a company, (g) technological developments or
advancements affecting a company or its products or (h) changes in
governmental
regulations, political climate or competitive conditions. In general, the Fund
will invest in securities of companies which temporarily are unpopular among
investors but which SBMFM regards as possessing favorable prospects for
earnings
growth and/or improvement in the value of their assets and, consequently, as
having a reasonable likelihood of experiencing a recovery in market price.
Secondary consideration will be given to a company's dividend record and the
potential for an improved dividend return.
Because securities markets typically are influenced (and, to some
extent,
dominated) by institutional investors, undervalued securities in which the
Fund
invests may tend to be those of less well-established companies or companies
whose capitalizations are less than the capitalizations of larger, better-
known
companies. To the extent securities held in the Fund's portfolio do not
attract
investor interest, these investments may not participate in rising securities
markets. By the same token, in many instances the selection of undervalued
securities for investment may involve a smaller risk of capital loss because
such lack of investor interest is reflected in the price of the securities at
the time of purchase.
Foreign Securities and American Depository Receipts
The Fund has the authority to invest up to 25% of its assets in foreign
securities and American Depository Receipts ("ADRs"). ADRs are dollar-
denominated receipts issued generally by domestic banks representing the
deposit
with the bank of a security of a foreign issuer. ADRs are publicly traded on
national securities exchanges or over-the-counter in the United States.
Investing in the securities of foreign companies involves special risks
and
considerations not typically associated with investing in U.S. companies.
These
include differences in accounting, auditing and financial reporting standards,
generally higher commission rates on foreign portfolio transactions, the
possibility of expropriation or confiscatory taxation, adverse changes in
investment or exchange control regulations, political instability which could
affect U.S. investments in foreign countries, and potential restrictions on
the
flow of international capital. Additionally, foreign securities often trade
with
less frequency and volume than domestic securities and therefore may exhibit
greater price volatility. Many of the foreign securities held by the Fund will
not be registered with, nor will the issuers thereof be subject to, the
reporting requirements of the SEC. Accordingly, there may be less publicly
available information about the securities and about the foreign company
issuing
them than is available about a domestic company and its securities. Moreover,
individual foreign economies may differ favorably or unfavorably from the U.S.
economy in such respects as growth of gross domestic product, rate of
inflation,
capital reinvestment, resource self-sufficiency and balance of payment
positions. The Fund may invest in securities of foreign governments (or
agencies
or subdivisions thereof), and therefore many, if not all, of the foregoing
considerations apply to such investments as well.
Lending of Portfolio Securities
As discussed in the Prospectus, the Fund has the ability to lend
securities
from its portfolio to brokers, dealers and other financial organizations. Such
loans, if and when made, may not exceed 20% of the Fund's total assets. The
Fund
may not lend its portfolio securities to Smith Barney or its affiliates unless
it has applied for and received specific authority from the SEC. Loans of
portfolio securities by the Fund will be collateralized by cash, letters of
credit or securities issued or guaranteed by the U.S. government, its agencies
or instrumentalities ("U.S. government securities"), which will be maintained
at
all times in an amount equal to at least 100% of the current market value of
the
loaned securities. From time to time, the Fund may return a part of the
interest
earned from the investment of collateral received for securities loaned to the
borrower and/or a third party, which is unaffiliated with the Fund or with
Smith
Barney, and which is acting as a "finder."
In lending its portfolio securities, the Fund can increase its income by
continuing to receive interest on the loaned securities, as well as by either
investing the cash collateral in short-term instruments or obtaining yield in
the form of interest paid by the borrower when government securities are used
as
collateral. Requirements of the SEC, which may be subject to future
modifications, currently provide that the following conditions must be met
whenever portfolio securities are loaned: (a) the Fund must receive at least
100% cash collateral or equivalent securities from the borrower; (b) the
borrower must increase such collateral whenever the market value of the
securities rises above the level of such collateral; (c) the Fund must be able
to terminate the loan at any time; (d) the Fund must receive reasonable
interest
on the loan, as well as an amount equal to any dividends, interest or other
distributions on the loaned securities, and any increase in market value; (e)
the Fund may pay only reasonable custodian fees in connection with the loan;
and
(f) voting rights on the loaned securities may pass to the borrower; however,
if
a material event adversely affecting the investment occurs, the Fund's Board
of
Directors must terminate the loan and regain the right to vote the securities.
The risks in lending portfolio securities, as with other extensions of secured
credit, consist of possible delay in receiving additional collateral or in the
recovery of the securities or possible loss of rights in the collateral should
the borrower fail financially. Loans will be made to firms deemed by SBMFM to
be
of good standing and will not be made unless, in the judgment of SBMFM, the
consideration to be earned from such loans would justify the risk.
Money Market Instruments
As stated in the Prospectus, the Fund may invest for temporary defensive
purposes in corporate and government bonds and notes and money market
instruments. Money market instruments in which the Fund may invest include:
U.S.
government securities; certificates of deposit, time deposits and bankers'
acceptances issued by domestic banks (including their branches located outside
the United States and subsidiaries located in Canada), domestic branches of
foreign banks, savings and loan associations and similar institutions; high
grade commercial paper; and repurchase agreements with respect to the
foregoing
types of instruments. The following is a more detailed description of such
money
market instruments.
Certificates of deposit ("CDs") are short-term negotiable obligations of
commercial banks. Time Deposits ("TDs") are non-negotiable deposits maintained
in banking institutions for specified periods of time at stated interest
rates.
Bankers' acceptances are time drafts drawn on commercial banks by borrowers
usually in connection with international transactions.
Domestic commercial banks organized under Federal law are supervised and
examined by the Comptroller of the Currency and are required to be members of
the Federal Reserve System and to be insured by the Federal Deposit Insurance
Corporation (the "FDIC"). Domestic banks organized under state law are
supervised and examined by state banking authorities but are members of the
Federal Reserve System only if they elect to join. Most state banks are
insured
by the FDIC (although such insurance may not be of material benefit to the
Fund,
depending upon the principal amounts of CDs of each bank held by the Fund) and
are subject to Federal examination and to a substantial body of Federal law
and
regulation. As a result of governmental regulations, domestic branches of
domestic banks are generally required to, among other things, maintain
specified
levels of reserves, and are subject to other supervision and regulation
designed
to promote financial soundness.
Obligations of foreign branches of domestic banks, such as CDs and TDs,
may
be general obligations of the parent bank in addition to the issuing branch,
or
may be limited by the terms of a specific obligation and government
regulation.
Such obligations are subject to different risks than are those of domestic
banks
or domestic branches of foreign banks. These risks include foreign economic
and
political developments, foreign governmental restrictions that may adversely
affect payment of principal and interest on the obligations, foreign exchange
controls and foreign withholding and other taxes on interest income. Foreign
branches of domestic banks are not necessarily subject to the same or similar
regulatory requirements that apply to domestic banks, such as mandatory
reserve
requirements, loan limitations, and accounting, auditing and financial
recordkeeping requirements. In addition, less information may be publicly
available about a foreign branch of a domestic bank than about a domestic
bank.
CDs issued by wholly owned Canadian subsidiaries of domestic banks are
guaranteed as to repayment of principal and interest (but not as to sovereign
risk) by the domestic parent bank.
Obligations of domestic branches of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by governmental regulation
as
well as governmental action in the country in which the foreign bank has its
head office. A domestic branch of a foreign bank with assets in excess of $1
billion may or may not be subject to reserve requirements imposed by the
Federal
Reserve System or by the state in which the branch is located if the branch is
licensed in that state. In addition, branches licensed by the Comptroller of
the
Currency and branches licensed by certain states ("State Branches") may or may
not be required to: (a) pledge to the regulator by depositing assets with a
designated bank within the state, an amount of its assets equal to 5% of its
total liabilities; and (b) maintain assets within the state in an amount equal
to a specified percentage of the aggregate amount of liabilities of the
foreign
bank payable at or through all of its agencies or branches within the state.
The
deposits of State Branches may not necessarily be insured by the FDIC. In
addition, there may be less publicly available information about a domestic
branch of a foreign bank than about a domestic bank.
In view of the foregoing factors associated with the purchase of CDs and
TDs issued by foreign branches of domestic banks or by domestic branches of
foreign banks, SBMFM will carefully evaluate such investments on a case-by-
case
basis.
Savings and loan associations whose CDs may be purchased by the Fund are
supervised by the Office of Thrift Supervision and are insured by the Savings
Association Insurance Fund, which is administered by the FDIC and is backed by
the full faith and credit of the U.S. government. As a result, such savings
and
loan associations are subject to regulation and examination.
Options, Futures and Currency Strategies.
The Fund may use forward currency contracts and certain options and
futures
strategies to attempt to hedge its portfolio, i.e., reduce the overall level
of
investment risk normally associated with the Fund. There can be no assurance
that such efforts will succeed.
In order to assure that the Fund will not be deemed to be a "commodity
pool" for purposes of the Commodity Exchange Act, regulations of the Commodity
Futures Trading Commission ("CFTC") require that the Fund enter into
transactions in futures contracts and options on futures only (i) for bona
fide
hedging purposes (as defined in CFTC regulations), or (ii) for non-hedging
purposes, provided that the aggregate initial margin and premiums on such non-
hedging positions due not exceed 5% of the liquidation value of the Fund's
assets. The Fund, however, does not intend to use such instruments for non-
hedging purposes. To attempt to hedge against adverse movements in exchange
rates between currencies, the Fund may enter into forward currency contracts
for
the purchase or sale of a specified currency at a specified future date. Such
contracts may involve the purpose or sale of a foreign currency against the
U.S.
dollar or may involve two foreign currencies. The Fund may enter into forward
currency contracts either with respect to specific transactions or with
respect
to its portfolio positions. For example, when the portfolio anticipates
making
a purchase or sale of a security, it may enter into a forward currency
contract
in order to set the rate (either relative to the U.S. dollar or another
currency) at which currency exchange transaction related to the purchase or
sale
will be made ("transaction hedging"). Further, when the investment manager
believes that a particular currency may decline compared to the U.S. dollar or
another currency, the Fund may enter into a forward contract to sell the
currency the investment manager expects to decline in an amount approximating
the value of some or all of the Fund's securities denominated in that
currency,
or when the investment manager believes that one currency may decline against
a
currency in which some or all of the portfolio securities held by the Fund are
denominated, it may enter into a forward contract to buy the currency expected
to decline for a fixed amount ("position hedging"). In this situation, the
Fund
may, in the alternative, enter into a forward contract to sell a different
currency for a fixed amount of the currency expected to decline where the
investment manager believes that the value of the currency to be sold pursuant
to the forward contract will fall whenever there is a decline in the value of
the currency in which portfolio securities of the Fund are denominated ("cross
hedging"). The Fund's custodian places cash or U.S. Government securities or
other high-quality debt securities denominated in certain currencies in a
separate account of the Fund having a value equal to the aggregate amount of
the
Fund's commitments under forward contract entered into with respect to
position
hedges and cross-hedges. If the value of the securities placed in a separate
account declines, additional cash or securities are placed in the account on a
daily basis so that the value of the amount will equal the amount of the
Fund's
commitments with respect to such contracts.
For hedging purposes, the Fund may write covered call options and
purchase
put and call options on currencies to hedge against movements in exchange
rates
and on debt securities to hedge against the risk of fluctuations in the prices
of securities held by the Fund or which the investment manager intends to
include in its portfolio. The Fund also may use interest rates futures
contracts and options thereon to hedge against changes in the general level in
interest rates.
The Fund may write call options on securities and currencies only if
they
are covered, and such options must remain covered so long as the Fund's is
obligated as a writer. A call option written by the Fund is "covered" if the
Fund owns the securities or currency underlying the option or has an absolute
and immediate right to acquire that security or currency without additional
cash
consideration (or for additional cash consideration held in a segregated
account
by its custodian) upon conversion or exchange of other securities or
currencies
held in its portfolio. A call option is also covered if the Fund holds on a
share-for-share basis a call on the same security or holds a call on the same
currency as the call written where the exercise price of the call held is
equal
to less than the exercise price of the call written or greater than the
exercise
price of the call written if the difference is maintained by the Fund in cash,
Treasury bills or other high-grade, short-term obligations in a segregated
account with its custodian.
Although the portfolio might not employ the use of forward currency
contracts, options and futures, the use of any of these strategies would
involve
certain investment risks and transaction costs to which it might not otherwise
be subject. These risks include: dependence on the investment manager's
ability
to predict movements in the prices of individual debt securities, fluctuations
in the general fixed-income markets and movements in interest rates and
currency
markets, imperfect correlation between movements in the price of currency,
options, futures contracts or options thereon and movements in the price of
the
currency or security hedged or used for cover; the fact that skills and
techniques needed to trade options, futures contracts and options thereon or
to
use forward currency contracts are different from those needed to select the
securities in which the Fund invests; lack of assurance that a liquid market
will exist for any particular option, futures contract or options thereon at
any
particular time and possible need to defer or accelerate closing out certain
options, futures contracts and options thereon in order to continue to qualify
for the beneficial tax treatment afforded "regulated investment companies"
under
the Internal Revenue Code of 1986, as amended (the "Code"). See "Dividends,
Distributions and Taxes."
Options on Securities
As discussed more generally above, the Fund may engage in the writing of
covered call options. The Fund may also purchase put options and enter into
closing transactions.
The principal reason for writing covered call options on securities is
to
attempt to realize, through the receipt of premiums, a greater return than
would
be realized on the securities alone. In return for a premium, the writer of a
covered call option forfeits the right to any appreciation in the value of the
underlying security above the strike price for the life of the option (or
until
a closing purchase transaction can be effected). Nevertheless, the call writer
retains the risk of a decline in the price of the underlying security.
Similarly, the principal reason for writing covered put options is to realize
income in the form of premiums. The writer of a covered put option accepts the
risk of a decline in the price of the underlying security. The size of the
premiums the Fund may receive may be adversely affected as new or existing
institutions, including other investment companies, engage in or increase
their
option-writing activities.
Options written by the Fund will normally have expiration dates between
one and six months from the date written. The exercise price of the options
may
be below, equal to, or above the current market values of the underlying
securities at the times the options are written. In the case of call options,
these exercise prices are referred to as "in-the-money," "at-the-money" and
"out-of-the-money," respectively.
The Fund may write (a) in-the-money call options when SBMFM expects the
price of the underlying security to remain flat or decline moderately during
the
option period, (b) at-the-money call options when SBMFM expects the price of
the
underlying security to remain flat or advance moderately during the option
period and (c) out-of-the-money call options when SBMFM expects that the price
of the security may increase but not above a price equal to the sum of the
exercise price plus the premiums received from writing the call option. In any
of the preceding situations, if the market price of the underlying security
declines and the security is sold at this lower price, the amount of any
realized loss will be offset wholly or in part by the premium received. Out-
of-
the-money, at-the-money and in-the-money put options (the reverse of call
options as to the relation of exercise price to market price) may be utilized
in
the same market environments as such call options are used in equivalent
transactions.
So long as the obligation of the Fund as the writer of an option
continues,
the Fund may be assigned an exercise notice by the broker-dealer through which
the option was sold, requiring it to deliver, in the case of a call, or take
delivery of, in the case of a put, the underlying security against payment of
the exercise price. This obligation terminates when the option expires or the
Fund effects a closing purchase transaction. The Fund can no longer effect a
closing purchase transaction with respect to an option once it has been
assigned
an exercise notice. To secure its obligation to deliver the underlying
security
when it writes a call option, or to pay for the underlying security when it
writes a put option, the Fund will be required to deposit in escrow the
underlying security or other assets in accordance with the rules of the
Options
Clearing Corporation ("Clearing Corporation") or similar clearing corporation
and the securities exchange on which the option is written.
An option position may be closed out only where there exists a secondary
market for an option of the same series on a recognized securities exchange or
in the over-the-counter market. The Fund expects to write options only on
national securities exchanges or in the over-the-counter market. The Fund may
purchase put options issued by the Clearing Corporation or in the over-the-
counter market.
The Fund may realize a profit or loss upon entering into a closing
transaction. In cases in which the Fund has written an option, it will realize
a
profit if the cost of the closing purchase transaction is less than the
premium
received upon writing the original option and will incur a loss if the cost of
the closing purchase transaction exceeds the premium received upon writing the
original option. Similarly, when the Fund has purchased an option and engages
in
a closing sale transaction, whether it recognizes a profit or loss will depend
upon whether the amount received in the closing sale transaction is more or
less
than the premium the Fund initially paid for the original option plus the
related transaction costs.
Although the Fund generally will purchase or write only those options
for
which SBMFM believes there is an active secondary market so as to facilitate
closing transactions, there is no assurance that sufficient trading interest
to
create a liquid secondary market on a securities exchange will exist for any
particular option or at any particular time, and for some options no such
secondary market may exist. A liquid secondary market in an option may cease
to
exist for a variety of reasons. In the past, for example, higher than
anticipated trading activity or order flow, or other unforeseen events, have
at
times rendered certain of the facilities of the Clearing Corporation and
national securities exchanges inadequate and resulted in the institution of
special procedures, such as trading rotations, restrictions on certain types
of
orders or trading halts or suspensions in one or more options. There can be no
assurance that similar events, or events that may otherwise interfere with the
timely execution of customers' orders, will not recur. In such event, it might
not be possible to effect closing transactions in particular options. If, as a
covered call option writer, the Fund is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell the underlying
security until the option expires or it delivers the underlying security upon
exercise.
Securities exchanges generally have established limitations governing
the
maximum number of calls and puts of each class which may be held or written,
or
exercised within certain periods, by an investor or group of investors acting
in
concert (regardless of whether the options are written on the same or
different
securities exchanges or are held, written or exercised in one or more accounts
or through one or more brokers). It is possible that the Fund and other
clients
of SBMFM and certain of their affiliates may be considered to be such a group.
A
securities exchange may order the liquidation of positions found to be in
violation of these limits, and it may impose certain other sanctions.
In the case of options written by the Fund that are deemed covered by
virtue of the Fund's holding convertible or exchangeable preferred stock or
debt
securities, the time required to convert or exchange and obtain physical
delivery of the underlying common stocks with respect to which the Fund has
written options may exceed the time within which the Fund must make delivery
in
accordance with an exercise notice. In these instances, the Fund may purchase
or
temporarily borrow the underlying securities for purposes of physical
delivery.
By so doing, the Fund will not bear any market risk because the Fund will have
the absolute right to receive from the issuer of the underlying security an
equal number of shares to replace the borrowed stock, but the Fund may incur
additional transaction costs or interest expenses in connection with any such
purchase or borrowing.
Although SBMFM will attempt to take appropriate measures to minimize the
risks relating to the Fund's writing of call options and purchasing of put and
call options, there can be no assurance that the Fund will succeed in its
option-writing program.
Stock Index Options
As described generally above, the Fund may purchase put and call options
and write call options on domestic stock indexes listed on domestic exchanges
in
order to realize its investment objective of capital appreciation or for the
purpose of hedging its portfolio. A stock index fluctuates with changes in the
market values of the stocks included in the index. Some stock index options
are
based on a broad market index such as the New York Stock Exchange Composite
Index or the Canadian Market Portfolio Index, or a narrower market index such
as
the Standard & Poor's 100. Indexes also are based on an industry or market
segment such as the American Stock Exchange Oil and Gas Index or the Computer
and Business Equipment Index.
Options on stock indexes are generally similar to options on stock
except
that the delivery requirements are different. Instead of giving the right to
take or make delivery of stock at a specified price, an option on a stock
index
gives the holder the right to receive a cash "exercise settlement amount"
equal
to (a) the amount, if any, by which the fixed exercise price of the option
exceeds (in the case of a put) or is less than (in the case of a call) the
closing value of the underlying index on the date of exercise, multiplied by
(b)
a fixed "index multiplier." Receipt of this cash amount will depend upon the
closing level of the stock index upon which the option is based being greater
than, in the case of a call, or less than, in the case of a put, the exercise
price of the option. The amount of cash received will be equal to such
difference between the closing price of the index and the exercise price of
the
option expressed in dollars or a foreign currency, as the case may be, times a
specified multiple. The writer of the option is obligated, in return for the
premium received, to make delivery of this amount. The writer may offset its
position in stock index options prior to expiration by entering into a closing
transaction on an exchange or it may let the option expire unexercised.
The effectiveness of purchasing or writing stock index options as a
hedging
technique will depend upon the extent to which price movements in the portion
of
the securities portfolio of the Fund correlate with price movements of the
stock
index selected. Because the value of an index option depends upon movements in
the level of the index rather than the price of a particular stock, whether
the
Fund will realize a gain or loss from the purchase or writing of options on an
index depends upon movements in the level of stock prices in the stock market
generally or, in the case of certain indexes, in an industry or market
segment,
rather than movements in the price of a particular stock. Accordingly,
successful use by the Fund of options on stock indexes will be subject to
SBMFM's ability to predict correctly movements in the direction of the stock
market generally or of a particular industry. This requires different skills
and
techniques than predicting changes in the price of individual stocks.
Futures Contracts and Options on Futures Contracts
As described generally above, the Fund may invest in stock index futures
contracts and options on futures contracts that are traded on a domestic
exchange or board of trade. These investments may be made by the Fund solely
for
the purpose of hedging against changes in the value of its portfolio
securities
due to anticipated changes in interest rates and market conditions and not for
purposes of speculation. In entering into transactions involving futures
contracts and options on futures contracts, the Fund will comply with
applicable
requirements of the Commodities Futures Trading Commission (the "CFTC") which
require that its transactions in futures and options be engaged in for "bona
fide hedging" purposes or other permitted purposes, provided that aggregate
initial margin deposits and premiums required to establish positions other
than
those considered by the CFTC to be "bona fide hedging" will not exceed 5.00%
of
the Fund's net asset value, after taking into account unrealized profits and
unrealized losses on any such contracts.
The purpose of entering into a futures contract by the Fund is to
protect
the Fund from fluctuations in the value of securities without actually buying
or
selling the securities. For example, in the case of stock index futures
contracts, if the Fund anticipates an increase in the price of stocks that it
intends to purchase at a later time, the Fund could enter into contracts to
purchase the stock index (known as taking a "long" position) as a temporary
substitute for the purchase of stocks. If an increase in the market occurs
that
influences the stock index as anticipated, the value of the futures contracts
increases and thereby serves as a hedge against the Fund's not participating
in
a market advance. The Fund then may close out the futures contracts by
entering
into offsetting futures contracts to sell the stock index (known as taking a
"short" position) as it purchases individual stocks. The Fund can accomplish
similar results by buying securities with long maturities and selling
securities
with short maturities. But by using futures contracts as an investment tool to
reduce risk, given the greater liquidity in the futures market than in the
cash
market, it may be possible to accomplish the same result more easily and more
quickly.
No consideration will be paid or received by the Fund upon the purchase
or
sale of a futures contract. Initially, the Fund will be required to deposit
with
the broker an amount of cash or cash equivalents equal to approximately 1% to
10% of the contract amount (this amount is subject to change by the exchange
or
board of trade on which the contract is traded and brokers or members of such
board of trade may charge a higher amount). This amount is known as "initial
margin" and is in the nature of a performance bond or good faith deposit on
the
contract which is returned to the Fund, upon termination of the futures
contract, assuming all contractual obligations have been satisfied. Subsequent
payments, known as "variation margin," to and from the broker, will be made
daily as the price of the index or securities underlying the futures contract
fluctuates, making the long and short positions in the futures contract more
or
less valuable, a process known as "marking-to-market." In addition, when the
Fund enters into a long position in a futures contract or an option on a
futures
contract, it must deposit into a segregated account with the Fund's custodian
an
amount of cash or cash equivalents equal to the total market value of the
underlying futures contract, less amounts held in the Fund's commodity
brokerage
account at its broker. At any time prior to the expiration of a futures
contract, the Fund may elect to close the position by taking an opposite
position, which will operate to terminate the Fund's existing position in the
contract.
There are several risks in connection with the use of futures contracts
as
a hedging device. Successful use of futures contracts by the Fund is subject
to
the ability of SBMFM to predict correctly movements in the stock market or in
the direction of interest rates. These predictions involve skills and
techniques
that may be different from those involved in the management of investments in
securities. In addition, there can be no assurance that there will be a
perfect
correlation between movements in the price of the securities underlying the
futures contract and movements in the price of the securities that are the
subject of the hedge. A decision of whether, when and how to hedge involves
the
exercise of skill and judgment, and even a well-conceived hedge may be
unsuccessful to some degree because of market behavior or unexpected trends in
market behavior or interest rates.
Positions in futures contracts may be closed out only on the exchange on
which they were entered into (or through a linked exchange) and no secondary
market exists for those contracts. In addition, although the Fund intends to
enter into futures contracts only if there is an active market for the
contracts, there is no assurance that an active market will exist for the
contracts at any particular time. Most futures exchanges and boards of trade
limit the amount of fluctuation permitted in futures contract prices during a
single trading day. Once the daily limit has been reached in a particular
contract, no trades may be made that day at a price beyond that limit. It is
possible that futures contract prices could move to the daily limit for
several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of futures positions and subjecting some futures traders to
substantial losses. In such event, and in the event of adverse price
movements,
the Fund would be required to make daily cash payments of variation margin; in
such circumstances, an increase in the value of the portion of the portfolio
being hedged, if any, may partially or completely offset losses on the futures
contract. As described above, however, no assurance can be given that the
price
of the securities being hedged will correlate with the price movements in a
futures contract and thus provide an offset to losses on the futures contract.
Investment Restrictions
The Fund has adopted the following investment restrictions for the
protection of shareholders. Restrictions 1 through 9 cannot be changed without
approval by the holders of a majority of the outstanding shares of the Fund,
defined as the lesser of (a) 67% of the Fund's shares present at a meeting, if
the holders of more than 50% of the outstanding shares are present in person
or
by proxy, or (b) more than 50% of the Fund's outstanding shares. The remaining
restrictions may be changed by the Fund's Board of Directors at any time. The
Fund may not:
1. With respect to 75% of the value of its total assets, invest more
than
5% of its total assets in securities of any one issuer, except securities
issued or guaranteed by the U.S. government, or purchase more than 10% of
the
outstanding voting securities of such issuer.
2. Issue senior securities as defined in the 1940 Act and any rules and
orders thereunder, except insofar as the Fund may be deemed to have issued
senior securities by reason of : (a) borrowing money or purchasing
securities on a when-issued or delayed-delivery basis; (b) purchasing or
selling futures contracts and options on future contracts and other similar
instruments; and (c) issuing separate classes of share
3. Invest more than 25% of its total assets in securities, the issuers
of
which are in the same industry. For purposes of this limitation, U.S.
government securities and securities of state or municipal governments and
their political subdivisions are not considered to be issued by members of
any industry.
4. Borrow money, except that the Fund may borrow from banks for
temporary
or emergency (not leveraging) purposes, including the meeting of redemption
requests which might otherwise require the untimely disposition of
securities, in an amount not exceeding 10% of the value of the Fund's total
assets (including the amount borrowed) valued at market less liabilities
(not including the amount borrowed) at the time the borrowing is made.
Whenever borrowings exceed 5% of the value of the Fund's total assets, the
Fund will not make any additional investments.
5. Engage in the business of underwriting securities issued by other
persons, except to the extent that the Fund may technically be deemed to be
an underwriter under the Securities Act of 1933, as amended, in disposing
of portfolio securities.
6. Purchase any securities on margin (except for such short-term
credits
as are necessary for the clearance of purchases and sales of portfolio
securities) or sell any securities short (except against the box). For
purposes of this restriction, the deposit or payment by the Fund of initial
or maintenance margin in connection with futures contracts and related
options and options on securities is not considered to be the purchase of a
security on margin.
7. Purchase or sell real estate, real estate mortgages, commodities or
commodity contracts, but this shall not prevent the Fund from: (a)
investing in real estate investment trust securities traded on the New York
Stock Exchange, Inc. ("NYSE"), American Stock Exchange or the National
Association of Securities Dealers, Inc.'s Automated Quotation System; (b)
investing in securities of issuers engaged in the real estate business and
securities which are secured by real estate or interests therein; or (c)
holding or selling real estate received as a result of a default on
securities it holds.
8. Make loans of its funds or securities. This restriction does not
apply
to: (a) the purchase of debt obligations in which the Fund may invest
consistent with its investment objective and policies; (b) repurchase
agreements; and (c) loans of its portfolio securities as described in the
Prospectus and this Statement of Additional Information under "Investment
Objective and Management Policies."
9. Write, purchase or sell puts, calls, straddles, spreads or
combinations
thereof or engage in transactions involving futures contracts and related
options, except as permitted under the Fund's investment goals and
policies, as set forth in the current Prospectus and the Statement of
Additional Information.
10. Invest more than 5.00% of the value of the Fund's total assets in
the
securities of any issuer which has been in continuous operation for less
than three years. This restriction does not apply to U.S. government
securities.
11. Invest in other open-end investment companies (except as part of a
merger, consolidation, reorganization or acquisition of assets). This
restriction does not apply to investment in closed-end, publicly traded
investment companies.
12. Invest in interests in oil, gas or other mineral exploration or
development programs (except that the Fund may invest in the securities of
issuers which operate, invest in or sponsor such programs).
13. Purchase or retain the securities of any issuer if, to the
knowledge
of the Fund, any officer or Director of the Fund or of SBMFM owns
beneficially more than 1/2 of 1.00% of the outstanding securities of such
issuer and the persons so owning more than 1/2 of 1.00% of such securities
together own beneficially more than 5.00% of such securities.
14. Purchase warrants if, thereafter, more than 2.00% of the value of
the
Fund's net assets would consist of such warrants, but warrants attached to
other securities or acquired in units by the Fund are not subject to this
restriction.
15. Purchase or otherwise acquire any security if, as a result, more
than
15% of its net assets would be invested in securities that are illiquid.
16. Invest in any company for the purpose of exercising control or
management.
17. Purchase or sell real estate limited partnership interests.
Certain restrictions listed above permit the Fund without shareholder
approval to engage in investment practices that the Fund does not currently
pursue. The Fund has no present intention of altering its current investment
practices as otherwise described in the Prospectus and this Statement of
Additional Information and any future change in those practices would require
Board approval. If any percentage restriction described above is complied with
at the time of an investment, a later increase or decrease in percentage
resulting from a change in values or assets will not constitute a violation of
the restriction. The Fund may make commitments more restrictive than the
fundamental restrictions listed above so as to permit the sale of Fund shares
in
certain states. Should the Fund determine that any such commitment is no
longer
in the best interests of the Fund and its shareholders, it will revoke the
commitment by terminating sales of its shares in the states involved.
Portfolio Turnover
While the Fund does not intend to trade in securities for short-term
profits, securities may be sold without regard to the amount of time they have
been held by the Fund when warranted by the circumstances. The Fund's
portfolio
turnover rate is calculated by dividing the lesser of purchases or sales of
portfolio securities for a year by the monthly average value of portfolio
securities for the year. Securities with remaining maturities of one year or
less at the date of acquisition are excluded from the calculation. A portfolio
turnover rate of 100% would occur, for example, if all the securities in the
Fund's portfolio were replaced once during a period of one year. A high rate
of
portfolio turnover in any year will increase brokerage commissions paid and
could result in high amounts of realized investment gain subject to the
payment
of taxes by shareholders. Any realized short-term investment gain will be
taxed
to shareholders as ordinary income. For the 1995 1994 and 1993, fiscal years,
the Fund's portfolio turnover rates were 45%, 108% and 111%, respectively.
Portfolio Transactions
Decisions to buy and sell securities for the Fund are made by SBMFM,
subject to the overall supervision and review of the Fund's Board of
Directors.
Portfolio securities transactions for the Fund are effected by or under the
supervision of SBMFM.
Transactions on stock exchanges involve the payment of negotiated
brokerage
commissions. There generally is no stated commission in the case of securities
traded in the over-the-counter markets, but the price of those securities
includes an undisclosed commission or mark-up. Over-the-counter purchases and
sales are transacted directly with principal market makers except in those
cases
in which better prices and executions may be obtained elsewhere. The cost of
securities purchased from underwriters includes an underwriting commission or
concession, and the prices at which securities are purchased from and sold to
dealers include a dealer's mark-up or mark-down. For the fiscal years ended
September 30, 1995, 1994, 1993, and 1992, the Fund paid total brokerage
commissions of $953,849, $1,334,383, $531,478 and $218,116 respectively.
In executing portfolio transactions and selecting brokers or dealers, it
is
the Fund's policy to seek the best overall terms available. The Advisory
Agreement between the Fund and SBMFM provides that, in assessing the best
overall terms available for any transaction, SBMFM shall consider the factors
it
deems relevant, including the breadth of the market in the security, the price
of the security, the financial condition and execution capability of the
broker
or dealer, and the reasonableness of the commission, if any, for the specific
transaction and on a continuing basis. In addition, the Advisory Agreement
authorizes SBMFM, in selecting brokers or dealers to execute a particular
transaction and in evaluating the best overall terms available, to consider
the
brokerage and research services (as those terms are defined in Section 28(e)
of
the Securities Exchange Act of 1934) provided to the Fund and/or other
accounts
over which SBMFM or an affiliate exercises investment discretion.
The Fund's Board of Directors periodically will review the commissions
paid
by the Fund to determine if the commissions paid over representative periods
of
time were reasonable in relation to the benefits inuring to the Fund. It is
possible certain of the services received will primarily benefit one or more
other accounts for which investment discretion is exercised. Conversely, the
Fund may be the primary beneficiary of services received as a result of
portfolio transactions effected for other accounts. SBMFM's fee under the
Advisory Agreement is not reduced by reason of SBMFM's receiving such
brokerage
and research services. Further, Smith Barney will not participate in
commissions
from brokerage given by the Fund to other brokers or dealers and will not
receive any reciprocal brokerage business resulting therefrom.
The Fund's Board of Directors has determined that any portfolio
transaction
for the Fund may be executed through Smith Barney if, in SBMFM's judgment, the
use of Smith Barney is likely to result in price and execution at least as
favorable as those of other qualified brokers, and if in the transaction,
Smith
Barney charges the Fund a commission rate consistent with those charged by
Smith
Barney to comparable unaffiliated customers in similar transactions. In
addition, under rules recently adopted by the SEC, Smith Barney may directly
execute such transactions for the Fund on the floor of any national securities
exchange, provided: (i) the Board of Directors has expressly authorized Smith
Barney to effect such transactions; and (ii) Smith Barney annually advises the
Fund of the aggregate compensation it earned on such transactions. For the
fiscal years ended September 30, 1995, 1994, 1993 and 1992, the Fund paid
$12,132, $3,000, $21,074, and $30,000, respectively, in brokerage commissions
to
Smith Barney (formerly Shearson Lehman Brothers.) For the 1993 fiscal year,
Smith Barney received 0.2% of the brokerage commissions paid by the Fund and
effected none of the total dollar amounts of the Fund's transactions involving
the payment of brokerage commissions.
While investment decisions for the Fund are made independently from
those
of the other accounts managed by SBMFM, or certain affiliates of SBMFM,
investments of the type the Fund may make also may be made by such other
accounts. In such instances, available investments or opportunities for sales
will be allocated in a manner believed by SBMFM to be equitable to each. In
some
cases, this procedure may adversely affect the price paid or received by the
Fund or the size of the position obtained for or disposed of by the Fund.
PURCHASE OF SHARES
Volume Discounts
The schedule of sales charges on Class A shares described in the
Prospectus
applies to purchases made by any "purchaser," which is defined to include the
following: (a) an individual; (b) an individual's spouse and his or her
children
purchasing shares for his or her own account; (c) a trustee or other fiduciary
purchasing shares for a single trust estate or single fiduciary account; (d) a
pension, profit-sharing or other employee benefit plan qualified under Section
401(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and
qualified employee benefit plans of employers who are "affiliated persons" of
each other within the meaning of the 1940 Act; (e) tax-exempt organizations
enumerated in Section 501(c)(3) or (13) of the Code; and (f) a trustee or
other
professional fiduciary (including a bank, or an investment adviser registered
with the SEC under the Investment Advisers Act of 1940, as amended) purchasing
shares of the Fund for one or more trust estates or fiduciary accounts.
Purchasers who wish to combine purchase orders to take advantage of volume
discounts on Class A shares should contact a Smith Barney Financial
Consultant.
Combined Right of Accumulation
Reduced sales charges, in accordance with the schedule in the
Prospectus,
apply to any purchase of Class A shares if the aggregate investment in Class A
shares of the Fund and in Class A shares of other funds of the Smith Barney
Mutual Funds that are offered with an initial sales charge, including the
purchase being made, of any purchaser is $25,000 or more. The reduced sales
charge is subject to confirmation of the shareholder's holdings through a
check
of appropriate records. The Fund reserves the right to terminate or amend the
combined right of accumulation at any time after written notice to
shareholders.
For further information regarding the combined right of accumulation,
shareholders should contact a Smith Barney Financial Consultant.
Determination of Public Offering Price
The Fund offers its shares to the public on a continuous basis. The
public
offering price for Class A shares of the Fund is equal to the net asset value
per share at the time of purchase plus an initial sales charge based on the
aggregate amount of the investment. The public offering price for Class B,
Class
C and Class Y shares (and Class A share purchases, including applicable rights
of accumulation, equaling or exceeding $500,000) is equal to the net asset
value
per share at the time of purchase and no sales charge is imposed at the time
of
purchase. A contingent deferred sales charge ("CDSC"), however, is imposed on
certain redemptions of Class B and Class C shares, and of Class A shares when
purchased in amounts equaling or exceeding $500,000. The method of computation
of the public offering price is shown in the Fund's financial statements
incorporated by reference in their entirety into this Statement of Additional
Information.
REDEMPTION OF SHARES
The right of redemption may be suspended or the date of payment
postponed
(a) for any period during which the NYSE is closed (other than for customary
weekend or holiday closings), (b) when trading in markets the Fund normally
utilizes is restricted, or an emergency, as determined by the SEC, exists so
that disposal of the Fund's investments or determination of net asset value is
not reasonably practicable or (c) for such other periods as the SEC by order
may
permit for protection of the Fund's shareholders.
Distributions in Kind
If the Board of Directors of the Fund determines that it would be
detrimental to the best interests of the remaining shareholders to make a
redemption payment wholly in cash, the Fund may pay, in accordance with the
SEC
rules, any portion of a redemption in excess of the lesser of $250,000 or
1.00%
of the Fund's net assets by distribution in kind of portfolio securities in
lieu
of cash. Securities issued as a distribution in kind may incur brokerage
commissions when shareholders subsequently sell those securities.
Automatic Cash Withdrawal Plan
An automatic cash withdrawal plan (the "Withdrawal Plan") is available
to
shareholders who own shares with a value of at least $10,000 ($5,000 for
retirement plan accounts) and who wish to receive specific amounts of cash
monthly or quarterly. Withdrawals of at least $100 may be made under the
Withdrawal Plan by redeeming as many shares of the Fund as may be necessary to
cover the stipulated withdrawal payment. Any applicable CDSC will not be
waived
on amounts withdrawn by shareholders that exceed 1.00% per month of the value
of
a shareholder's shares at the time the Withdrawal Plan commences. (With
respect
to Withdrawal Plans in effect prior to November 7, 1994, any applicable CDSC
will be waived on amounts withdrawn that do not exceed 2.00% per month of the
value of a shareholder's shares at the time the Withdrawal Plan commences.) To
the extent withdrawals exceed dividends, distributions and appreciation of a
shareholder's investment in the Fund, there will be a reduction in the value
of
the shareholder's investment and continued withdrawal payments will reduce the
shareholder's investment and ultimately may exhaust it. Withdrawal payments
should not be considered as income from investment in the Fund. Furthermore,
as
it generally would not be advantageous to a shareholder to make additional
investments in the Fund at the same time he or she is participating in the
Withdrawal Plan, purchases by such shareholders in amounts of less than $5,000
ordinarily will not be permitted.
Shareholders who wish to participate in the Withdrawal Plan and who hold
their shares in certificate form must deposit their share certificates with
First Data as agent for Withdrawal Plan members. All dividends and
distributions
on shares in the Withdrawal Plan are reinvested automatically at net asset
value
in additional shares of the Fund. A shareholder who purchases shares directly
through First Data may continue to do so and applications for participation in
the Withdrawal Plan must be received by First Data no later than the eighth
day
of the month to be eligible for participation beginning with that month's
withdrawal. For additional information, shareholders should contact a Smith
Barney Financial Consultant.
DISTRIBUTOR
Smith Barney serves as the Fund's distributor on a best efforts basis
pursuant to a written agreement dated July 30, 1993 (the "Distribution
Agreement") which was most recently approved by the Fund's Board of Directors
on
September 13, 1994. For the fiscal years ended September 30, 1995, 1994 and
1993, Smith Barney and/or Shearson Lehman Brothers received $808,600,
$793,438
and $568,544, respectively, in sales charges from the sale of Class A shares
and
did not reallow any portion thereof to dealers. For the period of November 6,
1992 (commencement of operations -- Class B) through September 30, 1993, and
the
fiscal year ended September 30, 1995, 1994, Smith Barney (formerly Shearson
Lehman Brothers) received $820,900 $36,283 and $656,110, respectively,
representing CDSC fees on redemptions of the Fund's Class B shares.
When payment is made by the investor before settlement date, unless
otherwise directed by the investor, the funds will be held as a free credit
balance in the investor's brokerage account and Smith Barney may benefit from
the temporary use of the funds. The investor may designate another use for the
funds prior to settlement date, such as an investment in a money market fund
(other than Smith Barney Exchange Reserve Fund) of the Smith Barney Mutual
Funds. If the investor instructs Smith Barney to invest the funds in a Smith
Barney money market fund, the amount of the investment will be included as
part
of the average daily net assets of both the Fund and the Smith Barney money
market fund, and affiliates of Smith Barney that serve the funds in an
investment advisory or administrative capacity will benefit from the fact that
they are receiving fees from both such investment companies for managing these
assets computed on the basis of their average daily net assets. The Fund's
Board
of Directors has been advised of the benefits to Smith Barney resulting from
these settlement procedures and will take such benefits into consideration
when
reviewing the Advisory, Administration and Distribution Agreements for
continuance.
Distributions Arrangements
To compensate Smith Barney for the services it provides and for the
expense
it bears under the Distribution Agreement, the Fund has adopted a services
and
distribution plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act.
Under
the Plan, the Fund pays Smith Barney a service fee, accrued daily and paid
monthly, calculated at the annual rate of 0.25% of the value of the Fund's
average daily net assets attributable to the Class A, Class B and Class C
shares. In addition, the Fund pays Smith Barney a distribution fee with
respect
to the Class B and Class C shares primarily intended to compensate Smith
Barney
for its initial expense of paying financial consultants a commission upon
sales
of Class B shares. The Class B and Class C distribution fee is calculated at
the
annual rate of 0.75% of the value of the Fund's average daily net assets
attributable to the shares of the respective Class.
For the period from November 6, 1992 through September 30, 1993, the
Fund's
Class A and Class B shares incurred $221,295 and $103,220, respectively, in
service fees. For the period from August 10, 1993 through September 30, 1993,
the Fund incurred $96 in service fees for its Class C shares. For the fiscal
year ended September 30, 1994, the Fund's Class A, Class B and Class C shares
incurred $369,623, $791,709 and $1,971, respectively, in service fees. In
addition, Class B and Class C shares pay a distribution fee primarily intended
to compensate Smith Barney for its initial expense of paying its Financial
Consultants a commission upon the sale of its Class B and Class C shares.
These
distribution fees are calculated at the annual rate of .75% of the value of
the
average daily net assets attributable to the respective Class. For the period
from November 6, 1992 through September 30, 1993, and the fiscal year ended
September 30, 1994, the Fund's Class B shares incurred $309,660 and
$2,375,126,
respectively, in distribution fees. For the same periods, the Fund's Class C
shares incurred $289 and $5,914, respectively, in distribution fees.
Under its terms, the Plan continues from year to year, provided such
continuance is approved annually by vote of the Fund's Board of Directors,
including a majority of the Directors who are not interested persons of the
Fund
and who have no direct or indirect financial interest in the operation of the
Plan or in the Distribution Agreement (the "Independent Directors"). The Plan
may not be amended to increase the amount of the service and distribution fees
without shareholder approval, and all material amendments of the Plan also
must
be approved by the Directors and Independent Directors in the manner described
above. The Plan may be terminated with respect to a class of the Fund (a
"Class") at any time, without penalty, by the vote of a majority of the
Independent Directors or by a vote of a majority of the outstanding voting
securities of the Class (as defined in the 1940 Act). Pursuant to the Plan,
Smith Barney
will provide the Fund's Board of Directors with periodic reports of amounts
expended under the Plan and the purpose for which such expenditures were made.
VALUATION OF SHARES
Each Class' net asset value per share is calculated on each day, Monday
through Friday, except days on which the NYSE is closed. The NYSE currently is
scheduled to be closed on New Year's Day, Presidents' Day, Good Friday,
Memorial
Day, Independence Day, Labor Day, Thanksgiving and Christmas, and on the
preceding Friday or subsequent Monday when one of these holidays falls on a
Saturday or Sunday, respectively. Because of the differences in distribution
fees and Class-specific expenses, the per share net asset value of each Class
may differ. The following is a description of the procedures used by the Fund
in
valuing its assets.
Securities listed on a national securities exchange will be valued on
the
basis of the last sale on the date on which the valuation is made or, in the
absence of sales, at the mean between the closing bid and asked prices. Over-
the-counter securities will be valued on the basis of the bid price at the
close
of business on each day, or, if market quotations for those securities are not
readily available, at fair value, as determined in good faith by the Fund's
Board of Directors. Short-term obligations with maturities of 60 days or less
are valued at amortized cost, which constitutes fair value as determined by
the
Fund's Board of Directors. Amortized cost involves valuing an instrument at
its
original cost to the Fund and thereafter assuming a constant amortization to
maturity of any discount or premium, regardless of the effect of fluctuating
interest rates on the market value of the instrument. All other securities and
other assets of the Fund will be valued at fair value as determined in good
faith by the Fund's Board of Directors.
EXCHANGE PRIVILEGE
Except as noted below and in the Prospectus, shareholders of any fund of
the Smith Barney Mutual Funds may exchange all or part of their shares for
shares of the same class of other funds of the Smith Barney Mutual Funds, to
the
extent such shares are offered for sale in the shareholder's state of
residence,
on the basis of relative net asset value per share at the time of exchange as
follows:
A. Class A shares of any fund purchased with a sales charge may be
exchanged for Class A shares of any the other funds, and the sales charge
differential, if any will be applied. Class A shares of any fund may be
exchanged without a sales charge for shares of the funds that are offered
without a sales charge. Class A shares of any fund purchased without a
sales charge may be exchanged for shares sold with a sales charge, and the
appropriate sales charge differential will be applied.
B. Class A shares of any fund acquired by a previous exchange of shares
purchased with a sales charge may be exchanged for Class A shares of any of
the other funds, and the sales charge differential, if any, will be
applied.
C. Class B shares of any fund may be exchanged without a sales charge.
Class B shares of the Fund exchanged for Class B shares of another fund
will be subject to the higher applicable CDSC of the two funds and, for
purposes of calculating CDSC rates, and conversion periods, will be deemed
to have been held since the date the shares being exchange were deemed to
be purchased.
Dealers other than Smith Barney must notify First Data of the investor's
prior ownership of Class A shares of Smith Barney High Income Fund and the
account number in order to accomplish an exchange of shares of Smith Barney
High
Income Fund under paragraph B above.
The exchange privilege enables shareholders to acquire shares of the
same
Class in a fund with different investment objectives when they believe that a
shift between funds is an appropriate investment decision. This privilege is
available to shareholders residing in any state in which the fund shares being
acquired may legally be sold. Prior to any exchange, the shareholder should
obtain and review a copy of the current prospectus of each fund into which an
exchange is being considered. Prospectuses may be obtained from a Smith Barney
Financial Consultant.
Upon receipt of proper instructions and all necessary supporting
documents,
shares submitted for exchange are redeemed at the then-current net asset value
and, subject to any applicable CDSC, the proceeds are immediately invested, at
a
price as described above, in shares of the fund being acquired. Smith Barney
reserves the right to reject any exchange request. The exchange privilege may
be
modified or terminated at any time after written notice to shareholders.
PERFORMANCE DATA
From time to time, the Fund may quote total return of a Class in
advertisements or in reports and other communications to shareholders. The
Fund
may include comparative performance information in advertising or marketing
the
Fund's shares. Such performance information may include the following industry
and financial publications: Barrons', Business Week, CDA Investment
Technologies, Inc., Changing Times, Forbes, Fortune, Institutional Investor,
Investors Daily, Money, Morningstar Mutual Fund Values, The New York Times,
USA
Today and The Wall Street Journal. To the extent any advertisement or sales
literature of the Fund describes the expenses or performance of any Class it
will also disclose such information for the other Classes.
Average Annual Total Return
"Average annual total return" figures are computed according to a formula
prescribed by the SEC. The formula can be expressed as follows:
P(1 + T)(N) = ERV
Where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = Ending Redeemable Value of a hypothetical $1,000
investment
made at the beginning of the 1-, 5- or 10-year period
at the
end of the 1-, 5- or 10-year period (or fractional
portion
thereof), assuming reinvestment of all dividends and
distributions.
Class A's average annual total return was as follows for the periods
indicated:
19.94% for the one-year period from October 1, 1994 through September 30,
1995;
19.11% for the five-year period from October 1, 1990 through September 30,
1995;
19.34% for the ten-year period from October 1, 1985 through September 30,
1995.
The average annual total return figures assume that the maximum 5.00%
sales charge has been deducted from the investment at the time of purchase. If
the maximum sales charge of 5.00% had not been deducted at the time of
purchase,
the average annual total return for the same periods would have been 4.92%,
10.86%, and 12.63% respectively.
Class B's average annual total return was as follows for the periods
indicated:
19.19% for the one-year period from October 1, 1994 through September 30,
1995.
22.82% for the period from November 6, 1992 (commencement of operations)
through
September 30, 1995.
The average annual total return figures assume that the maximum 5.00%
sales
charge has been deducted from the investment at the time of purchase. If the
maximum sales charge of 5.00% had not been deducted at the time of purchase,
the
average annual total return for the same periods would have been 4.21%, and
13.87%, respectively.
Class C's average annual total return was as follows for the period indicated:
19.33% for the one-year period from October 1, 1994 through September 30,
1995.
2.07% for the period from August 10, 1993 (commencement of operations) through
September 30, 1995
Aggregate Total Return
"Aggregate total return" figures represent the cumulative change in the value
of
an investment in the Class for the specified period and are computed by the
following formula:
AGGREGATE TOTAL RETURN =ERV-P
P
Where: P = a hypothetical initial payment of $10,000.
ERV = Ending Redeemable Value of a hypothetical $10,000
investment
made at the beginning of the 1-, 5- or 10-year period
at the
end of the 1-, 5- or 10-year period (or fractional
portion
thereof), assuming reinvestment of all dividends and
distributions.
Class A's aggregate total return was as follows for the periods
indicated:
19.94% for the one-year period from October 1, 1994 through September 30,
1995;
19.11% for the five-year period from October 1, 1990 through September 30,
1995;
13.34% for the ten-year period from October 1, 1984 through September 30,
1994.
These aggregate total return figures do not assume that the maximum
5.00%
sales charge has been deducted from the investment at the time of purchase. If
the maximum sales charge had been deducted at the time of purchase, the Class
A
shares aggregate total return for the same periods would have been 13.94%,
17.90% and 12.76%, respectively.
Class B's aggregate total return was as follows for the periods indicated:
19.19% for the one-year period beginning on October 1, 1994 through September
30, 1995;
52.55% for the period beginning November 6, 1992 (commencement of operations)
through September 30, 1995
Class B's aggregate total return figures assume that the maximum applicable
CDSC
has not been deducted from the investment at the time of purchase. If the
maximum applicable CDSC had been reflected, Class B's aggregate total return
for
the same periods would have been 14.19% and 49.55%, respectively.
Class C's aggregate total return was as follows for the period indicated:
19.33% for the period from October 1, 1993 through September 30, 1995.
27.74% for the period from August 10, 1993 (commencement of operations)
through
September 30, 1995.
Performance will vary from time to time depending upon market
conditions,
the composition of the Fund's portfolio, operating expenses and the expenses
exclusively attributable to the Class. Consequently, any given performance
quotation should not be considered representative of the Class' performance
for
any specified period in the future. Because performance will vary, it may not
provide a basis for comparing an investment in the Class with certain bank
deposits or other investments that pay a fixed yield for a stated period of
time. Investors comparing the Class' performance with that of other mutual
funds
should give consideration to the quality and maturity of the respective
investment companies' portfolio securities.
It is important to note that the total return figures set forth above
are
based on historical earnings and are not intended to indicate future
performance.
TAXES
The following is a summary of selected Federal income tax considerations
that may affect the Fund and its shareholders. The summary is not intended as
a
substitute for individual tax advice and investors are urged to consult their
own tax advisors as to the tax consequences of an investment in the Fund.
The Fund has qualified and intends to continue to qualify each year as a
regulated investment company under the Code. Provided the Fund (a) is a
regulated investment company and (b) distributes at least 90% of its net
investment income (including, for this purpose, net realized short-term
capital
gains), the Fund will not be liable for Federal income taxes to the extent its
net investment income and its net realized long- and short-term capital gains,
if any, are distributed to its shareholders. Although the Fund expects to be
relieved of all or substantially all Federal, state, and local income or
franchise taxes, depending upon the extent of its activities in states and
localities in which its offices are maintained, in which its agents or
independent contractors are located, or in which it is otherwise deemed to be
conducting business, that portion of the Fund's income which is treated as
earned in any such state or locality could be subject to state and local tax.
Any such taxes paid by the Fund would reduce the amount of income and gain
available for distribution to shareholders. All of a shareholder's dividends
and
distributions payable by the Fund will be reinvested automatically in
additional
shares of the same Class of the Fund at net asset value, unless the
shareholder
elects to receive dividends and distributions in cash.
Gain or loss on the sale of a security by the Fund generally will be
long-
term capital gain or loss if the Fund has held the securities for more than
one
year. Gain or loss on the sale of securities held for not more than one year
will be short-term. If the Fund acquires a debt security at a substantial
discount, a portion of any gain upon the sale or redemption will be taxed as
ordinary income, rather than capital gain to the extent it reflects accrued
market discount.
Dividends of net investment income and distributions of net realized
short-
term capital gains will be taxable to shareholders as ordinary income for
Federal income tax purposes, whether received in cash or reinvested in
additional shares. Dividends received by corporate shareholders will qualify
for
the dividends-received deduction only to the extent that the Fund designates
the
amount distributed as a dividend and the amount so designated does not exceed
the aggregate amount of dividends received by the Fund from domestic
corporations for the taxable year. The Federal dividends-received deduction
for
corporate shareholders may be further reduced or disallowed if the shares with
respect to which dividends are received are treated as debt-financed or are
deemed to have been held for less than 46 days.
Foreign countries may impose withholding and other taxes on dividends
and
interest paid to the Fund with respect to investments in foreign securities.
However, certain foreign countries have entered into tax conventions with the
United States to reduce or eliminate such taxes. Distributions of long-term
capital gains will be taxable to shareholders as such, whether paid in cash or
reinvested in additional shares and regardless of the length of time that the
shareholder has held his or her interest in the Fund. If a shareholder
receives
a distribution taxable as long-term capital gain with respect to his or her
investment in the Fund and redeems or exchanges the shares before he or she
has
held them for more than six months, any loss on the redemption or exchange
that
is less than or equal to the amount of the distribution will be treated as a
long-term capital loss.
If a shareholder (a) incurs a sales charge in acquiring or redeeming
shares
of the Fund, and (b) disposes of those shares and acquires within 90 days
after
the original acquisition shares in a mutual fund for which the otherwise
applicable sales charge is reduced by reason of a reinvestment right (i.e., an
exchange privilege), the original sales charge increases the shareholder's tax
basis in the original shares only to the extent the otherwise applicable sales
charge for the second acquisition is not reduced. The portion of the original
sales charge that does not increase the shareholder's tax basis in the
original
shares would be treated as incurred with respect to the second acquisition
and,
as a general rule, would increase the shareholder's tax basis in the newly
acquired shares. Furthermore, the same rule also applies to a disposition of
the
newly acquired or redeemed shares made within 90 days of the second
acquisition.
This provision prevents a shareholder from immediately deducting the sales
charge by shifting his or her investment in a family of mutual funds.
Investors considering buying shares of the Fund just prior to a record
date
for a taxable dividend or capital gain distribution should be aware that,
regardless of whether the price of the Fund shares to be purchased reflects
the
amount of the forthcoming dividend or distribution payment, any such payment
will be a taxable dividend or distribution payment.
If a shareholder fails to furnish a correct taxpayer identification
number,
fails to report his or her dividend or interest income in full, or fails to
certify that he or she has provided a correct taxpayer identification number,
and that he or she is not subject to such withholding, the shareholder may be
subject to a 31% "backup withholding" tax with respect to (a) any taxable
dividends and distributions and (b) any proceeds of any redemption of Fund
shares. An individual's taxpayer identification number is his or her social
security number. The 31% backup withholding tax is not an additional tax and
may be credited against a shareholder's regular Federal income tax liability.
Options Transactions. The tax consequences of options transactions
entered
into by the Fund will vary depending on the nature of the underlying security
and whether the "straddle" rules, discussed separately below, apply to the
transaction. When the Fund writes a call or put option on an equity or debt
security, it will receive a premium that will, subject to the "section 1256
contract" and straddle rules discussed below, be treated as follows for tax
purposes. If the option expires unexercised, or if the Fund enters into a
closing purchase transaction, the Fund will realize a gain (or loss if the
cost
of the closing purchase transaction exceeds the amount of the premium) without
regard to any unrealized gain or loss on the underlying security. Any such
gain
or loss will be short-term capital gain or loss, except that any loss on a
"qualified" covered call option not treated as part of a straddle may be
treated
as long-term capital loss. If a call option written by the Fund is exercised,
the Fund will recognize a capital gain or loss from the sale of the underlying
security, and will treat the premium as additional sales proceeds. Whether the
gain or loss will be long-term or short-term will depend on the holding period
of the underlying security. If a put option written by the Fund is exercised,
the amount of the premium will reduce the tax basis of the security the Fund
then purchases.
The Code imposes a special "mark-to-market" system for taxing section
1256
contracts which include options on nonconvertible debt securities (including
U.S. government securities). In general, gain or loss with respect to section
1256 contracts will be taken into account for tax purposes when actually
realized (by a closing transaction, by exercise, by taking delivery or by
other
termination). In addition, any section 1256 contracts held at the end of a
taxable year will be treated as sold at their year-end fair market value (that
is, marked-to-market), and the resulting gain or loss will be recognized for
tax
purposes. Provided section 1256 contracts are held as capital assets and are
not
part of a straddle, both the realized and unrealized year-end gain or loss
from
these investment positions (including premiums on options that expire
unexercised) will be treated as 60% long-term and 40% short-term capital gain
or
loss, regardless of the period of time particular positions are actually held
by
the Fund.
In order to continue to qualify as a regulated investment company, the
Fund
may have to limit its transactions in section 1256 contracts.
Straddles. The Code contains rules applicable to "straddles," that is,
"offsetting positions in actively traded personal property." Such personal
property includes offsetting puts of the same class, section 1256 contracts or
other investment contracts. Where applicable, the straddle rules generally
override the other provisions of the Code. In general, investment positions
will
be offsetting if there is a substantial diminution in the risk of loss from
holding one position by reason of holding one or more other positions
(although
certain covered call options would not be treated as part of a straddle). The
Fund is authorized to enter into covered call and covered put positions.
Depending on what other investments are held by the Fund, at the time it
enters
into one of the above transactions, the Fund may create a straddle for
purposes
of the Code.
If two (or more) positions constitute a straddle, recognition of a
realized
loss from one position (including a marked-to-market loss) must be deferred to
the extent of unrecognized gain in an offsetting position. Also, long-term
capital gain may be recharacterized as short-term capital gain, or short-term
capital loss as long-term capital loss. Furthermore, interest and other
carrying
charges allocable to personal property that is part of a straddle must be
capitalized.
If the Fund chooses to identify a particular offsetting position as
being
one component of a straddle, a realized loss on any component of the straddle
will be recognized no earlier than upon the liquidation of all of the
components
of the straddle. Special rules apply to "mixed" straddles (that is, straddles
consisting of a section 1256 contract and an offsetting position that is not a
section 1256 contract). If the Fund makes certain elections, the section 1256
contract components of such mixed straddles will not be subject to the
60%/40%
mark-to-market rules. If any such election is made, the amount, the nature (as
long- or short-term) and the timing of the recognition of the Fund's gains or
losses from the affected straddle positions will be determined under rules
that
will vary according to the type of election made.
Wash Sales. "Wash sale" rules will apply to prevent the recognition of
loss with respect to a position where an identical or substantially identical
position is or has been acquired within a prescribed period.
The foregoing is only a summary of certain Federal tax considerations
generally affecting the Fund and its shareholders and is not intended as a
substitute for careful tax planning. Shareholders are urged to consult their
tax
advisors with specific reference to their own tax situations, including their
state and local tax liabilities.
ADDITIONAL INFORMATION
The Fund was originally incorporated under the laws of the State of
Washington on March 17, 1981, under the name Foster & Marshall Growth Fund,
Inc. On May 22, 1984, December 18, 1987, November 21, 1989, August 12, 1992,
August 17, 1993 and October 14, 1994, the Fund changed its name to Shearson
Fundamental Value Fund Inc., Shearson Lehman Fundamental Value Fund Inc., SLH
Fundamental Value Fund Inc., Shearson Lehman Brothers Fundamental Value Fund
Inc., Smith Barney Shearson Fundamental Value Fund Inc., and Smith Barney
Fundamental Value Fund Inc. Without changing its name the Fund was
reincorporated as a Maryland corporation on May 24, 1995.
PNC is located at 17th and Chestnut Streets, Philadelphia, Pennsylvania,
and serves as the custodian of the Fund. Under its agreement with the Fund,
PNC
holds the Fund's portfolio securities and keeps all necessary accounts and
records. For its services, PNC receives a monthly fee based upon the month-end
market value of securities held in custody and also receives securities
transaction charges. The assets of the Fund are held under bank custodianship
in
compliance with the 1940 Act.
First Data is located at Exchange Place, Boston, Massachusetts 02109,
and
serves as the Fund's transfer agent. Under the transfer agency agreement,
First
Data maintains the shareholder account records for the Fund, handles certain
communications between shareholders and the Fund and distributes dividends and
distributions payable by the Fund. For these services, First Data receives a
monthly fee computed on the basis of the number of shareholder accounts it
maintains for the Fund during the month and is reimbursed for out-of-pocket
expenses.
FINANCIAL STATEMENTS
The Fund's Annual Report for the fiscal year ended September 30, 1995 is
incorporated herein by reference in its entirety.
SMITH BARNEY FUNDAMENTAL VALUE FUND INC.
PART C
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A:
Financial Highlights
Included in Part B:
The Registrant's Annual Report for the fiscal year ended September 30, 1995
and the
Report of Independent Accountants is incorporated by reference to the filing
of
such
report pursuant to Rule 30b2-1 under the Investment Company Act of 1940 as
filed
with
the Securities and Exchange Commission on January 11, 1996 (Accession #
0000091155-
96-000013).
Included in Part C:
Consent of Independent Accountants
(b) Exhibits
All references are to the Registrant's registration statement on Form N-1A as
filed with
the Securities and Exchange Commission ("SEC"), File Nos. 2-71469 and 811-3158
(the
"Registration Statement").
(1)(a) Registrant's Articles of Incorporation dated May 13, 1994 are
incorporated by
reference to post-effective amendment no. 27 to the Registration Statement as
filed with the SEC on May 26, 1995 ("Post-Effective Amendment No. 27").
(1)(b) Registrant's Articles of Amendment dated May 24, 1995 is filed
herein.
(2) Registrant's By-Laws are incorporated by reference to Post-Effective
Amendment
No. 27.
(3) Inapplicable.
(4)(a) Registrant's form of stock certificate relating to Class A shares
are
incorporated by
reference to Post-Effective Amendment No. 27.
(4)(b) Registrant's form of stock certificate relating to Class B shares
are
incorporated by
reference to Post-Effective Amendment No. 27.
(4)(c) Registrant's form of stock certificate relating to Class C shares
are
incorporated by
reference to Post-Effective Amendment No. 27.
(4)(d) Registrant's form of stock certificate relating to Class Y shares
are
incorporated by
reference to Post-Effective Amendment No. 27.
(5) Form of Investment Advisory Agreement with Smith Barney Mutual Funds
Management Inc. is incorporated by reference to Post-Effective Amendment No.
27.
(6) Form of Distribution Agreement between the Registrant and Smith Barney
Inc.
is
incorporated by reference to Post-Effective Amendment No. 27.
(7) Inapplicable.
(8) Custodian Agreement with PNC Bank, National Association to is
incorporated
by
reference to Post-Effective Amendment No. 27.
(9)(a) Form of Transfer Agency Agreement between the Registrant and The
Shareholder
Services Group Inc. is filed herein.
(9)(b) Form of Consent to Assignment between the Registrant and The
Shareholders
Services Group, Inc. is incorporated by reference to Post-Effective Amendment
No. 27.
(9)(d) Form of Administration Agreement between the Fund and Smith Barney
Mutual
Funds Management Inc. is incorporated by reference to Post-Effective
Amendment No. 27.
(10) Opinion of Maryland Counsel is incorporated by reference to Post-
Effective
Amendment No. 27.
(11) Consent of Independent Accountants is filed herein.
(12) Inapplicable.
(13) Inapplicable.
(14) Prototype Self-Employed Retirement Plan is incorporated by reference to
Post-
Effective Amendment No. 10 to the Registration Statement as filed with the
SEC.
(15) Services and Distribution Plan between the Registrant and Smith Barney
Inc.
is
incorporated by reference to Post-Effective Amendment No. 27.
(16) Performance Data is incorporated by reference to Post-Effective
Amendment
No.
11.
(17) Inapplicable.
(18) Form of Rule 18f-3(d) Multiple Class Plan of the Registrant is filed
herein.
Item 25. Persons Controlled by or Under Common Control with Registrant
Not applicable.
Item 26. Number of Holders of Securities
(1) (2)
Number of Record Title of Class Holders as of December 31, 1995
Common Stock par value $.001 per share
Class A Shares 35,604
Class B Shares 55,378
Class C Shares 2,528
Class Y Shares 0
Item 27. Indemnification
The response to this item is incorporated by reference to Post-Effective
Amendment No. 5 to the Registration Statement as filed with the SEC.
Item 28(a). Business and Other Connections of Investment Adviser
Investment Adviser - - Smith Barney Mutual Funds Management Inc. Smith Barney
Mutual Funds Management Inc. ("SBMFM"), formerly known as Smith, Barney
Advisers, Inc.,) was incorporated in December 1968 under the laws of the State
of
Delaware. SBMFM is a wholly owned subsidiary of Smith Barney Holdings Inc.
(formerly known as Smith Barney Shearson Holdings Inc.), which in turn is a
wholly
owned subsidiary of The Travelers Inc. (formerly known as Primerica
Corporation)
("Travelers"). SBMFM is registered as an investment adviser under the
Investment
Advisers Act of 1940 (the "Advisers Act"). The list required by this Item 28
of
officers
and directors of SBMFM together with information as to any other business,
profession,
vocation or employment of a substantial nature engaged in by such officers and
directors
during the past two years, is incorporated by reference to Schedules A and D
of
FORM
ADV filed by SBA pursuant to the Advisers Act (SEC File No. 801-8314).
Smith Barney Asset Management, Inc., ("SBAM") through its predecessors, has
been
in
the investment counseling business since 1940 and is a division of SBMFM.
SBMFM
was incorporated in 1968 under the laws of the state of Delaware. SBMFM is a
wholly
owned subsidiary of Smith Barney Holdings Inc. (formerly known as Smith Barney
Shearson Holdings Inc.), which is in turn a wholly owned subsidiary of The
Travelers
Inc. (formerly know as Primerica Corporation) ("Travelers").
The list required by this Item 28 of officers and directors of SBMFM, together
with
information as to any other business, profession, vocation or employment of a
substantial
nature engaged in by such officers and directors during the past two fiscal
years, is
incorporated by reference to Schedules A and D of FORM ADV filed by SBMFM
pursuant to the Advisers Act (SEC File No. 801-8314).
Prior to the close of business on July 30, 1993 (the "Closing"), Shearson
Asset
Management, a member of the Asset Management Group of Shearson Lehman Brothers
Inc. ("Shearson Lehman Brothers"), served as the Registrant's investment
adviser. On the
Closing, Travelers and Smith Barney Inc. (formerly known as Smith Barney
Shearson
Inc.) acquired the domestic retail brokerage and asset management business of
Shearson
Lehman Brothers which included the business of the Registrant's prior
investment
adviser. Shearson Lehman Brothers was a wholly owned subsidiary of Shearson
Lehman
Brothers Holdings Inc. ("Shearson Holdings"). All of the issued and
outstanding
common stock of Shearson Holdings (representing 92% of the voting stock) was
held by
American Express Company. Information as to any past business vocation or
employment of a substantial nature engaged in by officers and directors of
Shearson
Asset Management can be located in Schedules A and D of FORM ADV filed by
Shearson Lehman Brothers on behalf of Shearson Asset Management prior to July
30,
1993. (SEC FILE NO. 801-3701)
Item 29. Principal Underwriters
Item 29. Principal Underwriters
Smith Barney Inc. ("Smith Barney") currently acts as
distributor for Smith
Barney Managed Municipals Fund Inc., Smith Barney
California Municipals Fund Inc., Smith Barney
Massachusetts Municipals Fund, Smith Barney Aggressive
Growth Fund Inc.,
Smith Barney Appreciation Fund Inc., Smith Barney Principal
Return Fund,
Smith Barney Managed Governments Fund Inc., Smith Barney
Income Funds,
Smith Barney Equity Funds, Smith Barney Investment Funds
Inc.,
Smith Barney Natural Resources Fund Inc., Smith Barney
Telecommunications
Trust, Smith Barney Arizona Municipals Fund Inc., Smith
Barney New Jersey
Municipals Fund Inc., Smith Barney Fundamental Value Fund
Inc., Smith Barney
Series Fund, Consulting Group Capital Markets Funds, Smith
Barney Investment
Trust, Smith Barney Adjustable Rate Government Income Fund,
Smith Barney
Oregon Municipals Fund, Smith Barney Funds, Inc., Smith
Barney Muni Funds, Smith Barney World Funds, Inc., Smith
Barney Money
Funds, Inc., Smith Barney Municipal Money Market Fund, Inc.,
Smith Barney Variable
Account Funds, Smith Barney U.S. Dollar Reserve Fund
(Cayman), Worldwide
Special Fund, N.V., Worldwide Securities Limited, (Bermuda),
Smith Barney
Institutional Cash Management Fund, Inc. and various series
of unit investment trusts.
Smith Barney is a wholly owned subsidiary of Smith Barney
Holdings
Inc. (formerly known as Smith Barney Shearson Holdings
Inc.), which in turn is a
wholly owned subsidiary of The Travelers Inc. (formerly
known as Primerica
Corporation) ("Travelers"). On June 1, 1994, Smith Barney
changed its
name from Smith Barney Shearson Inc. to its current name.
The information
required by this Item 29 with respect to each director,
officer and partner
of Smith Barney is incorporated by reference to Schedule A
of FORM BD filed
by Smith Barney pursuant to the Securities Exchange Act of
1934 (SEC File
No. 812-8510).
Item 30. Location of Accounts and Records
(1) With respect to the Registrant, its Distributor,
Investment Adviser and Administrator:
Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
(2) With respect to the Registrant's Custodian:
PNC Bank, National Association
17th and Chestnut Streets
Philadelphia, Pennsylvania
(3) With respect to the Registrant's Transfer Agent:
First Data Investors Services Group Inc.
Exchange Place
Boston, Massachusetts 02109
Item 31. Management Services
Not applicable.
Item 32. Undertakings
Registrant hereby undertakes to call a meeting of its shareholders for the
purpose of
voting upon the question of removal of a director or directors of Registrant
when
requested in writing to do so by the holders of at least 10% of Registrant's
outstanding
shares. Registrant undertakes further to assist shareholders in communicating
with other
shareholders in accordance with the requirements of Section 16(c) of the
Investment
Company Act of 1940.
Registrant hereby undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to
shareholders,
upon request and without charge.
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant certifies that it meets all
the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of New York and State of New York, on the
31st day
of January 1996.
SMITH BARNEY FUNDAMENTAL VALUE FUND INC.
Registrant
By: /s/ Heath B. McLendon
Name: Heath B. McLendon
Title: Chairman of the Board
_________________________________________________________________
Pursuant to the requirement of the Securities Act of 1933, as amended, this
Amendment to the Registration Statement has been signed below by the
following
persons in the capacities and on the dates indicated. Further, the undersigned
each hereby revoke any previously granted power of attorney with respect to
the
following matters and constitute and appoint Heath B. McLendon, Christina T.
Sydor and Lee D. Augsburger, and each of them singly, true and lawful
attorneys,
with full power to each of them, to sign on behalf, any and all Registration
Statements on Forms N-1A and N-14 for the Smith Barney Fundamental Value Fund
Inc., and any amendments thereto, for the purpose of being filed with the
Securities and Exchange Commission, granting unto said attorneys, and each of
them acting alone, full authority and power to do and to perform each and
every
act and thing requisite or necessary to be done as fully to all intents and
purposes as each of the undersigned might or could do in person, hereby
ratifying and confirming all that said attorneys or any of them may lawfully
do
or cause to be done by virtue hereof.
Signature: Title: Date:
/s/Heath B. McLendon Chairman of the Board 1/31/96
Heath B. McLendon (Chief Executive Officer)
/s/Lewis E. Daidone Senior Vice President 1/31/96
Lewis E. Daidone and Treasurer
(Chief Financial and
Accounting Officer)
/s/Lloyd J. Andrews Director 1/31/96
Lloyd J. Andrews
/s/Robert M. Frayn Director 1/31/96
Robert M. Frayn
/s/Leon P. Gardner Director 1/31/96
Leon P. Gardner
/s/Howard J. Johnson Director 1/31/96
Howard J. Johnson
/s/David E. Maryatt Director 1/31/96
David E. Maryatt
/s/ Frederick O. Paulsell Director 1/31/96
Frederick O. Paulsell
/s/Jerry A. Viscione Director 1/31/96
Jerry A. Viscione
/s/Julie W. Weston Director 1/31/96
Julie W. Weston
ARTICLES OF AMENDMENT
OF
SMITH BARNEY SHEARSON FUNDAMENTAL VALUE FUND INC.
SMITH BARNEY SHEARSON FUNDAMENTAL VALUE FUNS INC., a
Maryland corporation having its principal place of business in Baltimore
City, Maryland(hereinafter called the "Corporation"), hereby certifies to
the State Department of Assessments and Taxation of Maryland that:
FIRST: The charter of the Corporation is hereby amended as follows:
(a) By striking Article II of the Articles of Incorporation and
inserting
in lieu thereof the following:
ARTICLE II
The name of the corporation (hereinafter called the
"Corporation") is Smith Barney Fundamental Value
Fund Inc.
(b) By striking the first paragraph of Article V Section
5.1 of the Articles of Incorporation and inserting in lieu thereof the
following:
Section 5.1 Authorized Common Shares: The total
number of shares of capital stock of all classes which
the Corporation shall have the authority to issue is one
billion (1,000,000,000) shares, of the par value of one-
tenth of one cent ($.001) per share (the "Shares"), and of
the aggregate par value of one million dollars
($1,000,000); the Shares shall be classified initially into
five classes, each with a par value of $.001 per share,
designated Class A Common Stock, Class B Common
Stock, Class C Common Stock, Class Y Common Stock
and Class Z Common Stock. The Corporation shall be
authorized to issue up to 1,000,000,000 share of each
class of capital stock less, at any time, the total number
of shares of all other such classes of capital stock then
issued and outstanding. At no time may the Corporation
cause to be issued and outstanding more than
1,000,000,000 shares of its capital stock of all such
classes in the aggregate unless such number be hereafter
increased in accordance with the Maryland General
Corporation Law."
SECOND: A majority of the entire Board of Directors of the Corporation
approved the forgoing amendments to the charter as set forth in Article FIRST
hereto, and no stock entitled to be voted on the matter was outstanding or
subscribed for at the time of approval.
The undersigned Senior Vice President and Treasurer acknowledges
these
Articles of Amendment to be the corporate act of the Corporation and states
that to the best of his knowledge, information and belief the matters and
facts set forth in these Articles of Amendment with respect to the
authorization and approval of the amendments of the Corporation's charter
are true in all materials respects, and that this statement made under the
penalties of perjury.
IN WITNESS WHEREOF, Smith Barney Shearson Fundamental Value Fund
Inc. has caused this instruments to be filed in its name and on behalf by
its Senior Vice President and Treasurer, Lewis E. Daidone, and witness by its
Assistant Secretary, Lee D. Augsburger, on the 24th day of May, 1995.
SMITH BARNEY SHEARSON
FUNDAMENTAL VALUE FUND INC.
By: /s/ Lewis E. Daidone
Senior Vice President and Treasurer
WITNESS
/s/ Lee D. Augsburger
Assistant secretary
g:\funds\value\1996\Edgar\Artmend.doc
FORM OF
TRANSFER AGENCY AND REGISTRAR AGREEMENT
AGREEMENT, dated as of ___________, 1995 between Smith Barney
Fundamental Value Inc.., (the "Fund"), a corporation organized under the laws
of Maryland and having its principal place of business at 388 Greenwich Street
New York, NY 10013, and The Shareholder Services Group, Inc.Inc. (MA) (the
"Transfer Agent"), a Massachusetts corporation with principal offices at One
Exchange Place, 53 State Street, Boston, Massachusetts 02109.
W I T N E S S E T H
That for and in consideration of the mutual covenants and promises
hereinafter set forth, the Fund and the Transfer Agent agree as follows:
1. Definitions. Whenever used in this Agreement, the following words
and phrases, unless the context otherwise requires, shall have the following
meanings:
(a) "Articles of Incorporation" shall mean the Articles of
Incorporation, Declaration of Trust, Partnership Agreement, or similar
organizational document as the case may be, of the Fund as the same may be
amended from time to time.
(b) "Authorized Person" shall be deemed to include any person,
whether or not such person is an officer or employee of the Fund,
duly authorized to give Oral Instructions or Written Instructions on behalf
of the Fund as indicated in a certificate furnished to the Transfer Agent
pursuant to Section 4(c) hereof as may be received by the Transfer Agent
from time to time.
(c) "Board of Directors" shall mean the Board of Directors, Board
of Trustees or, if the Fund is a limited partnership, the General Partner(s)
of the Fund, as the case may be.
(d) "Commission" shall mean the Securities and Exchange
Commission.
(e) "Custodian" refers to any custodian or subcustodian of
securities and other property which the Fund may from time to time deposit, or
cause to be deposited or held under the name or account of such a custodian
pursuant to a Custodian Agreement.
(f) "Fund" shall mean the entity executing this Agreement, and if
it is a series fund, as such term is used in the 1940 Act, such term shall
mean each series of the Fund hereafter created, except that appropriate
documentation with respect to each series must be presented to the Transfer
Agent before this Agreement shall become effective with respect to each
such series.
(g) "1940 Act" shall mean the Investment Company Act of 1940.
(h) "Oral Instructions" shall mean instructions, other than
Written
Instructions, actually received by the Transfer Agent from a person reasonably
believed by the Transfer Agent to be an Authorized Person;
(i) "Prospectus" shall mean the most recently dated Fund
Prospectus and Statement of Additional Information, including any supplements
thereto if any, which has become effective under the Securities Act of 1933
and
the 1940 Act.
(j) "Shares" refers collectively to such shares of capital stock,
beneficial interest or limited partnership interests, as the case may be,
of the Fund as may be issued from time to time and, if the Fund is a
closed-end or a series fund, as such terms are used in the 1940 Act any other
classes or series of stock, shares of beneficial interest or limited
partnership interests that may be issued
from time to time.
(k) "Shareholder" shall mean a holder of shares of capital stock,
beneficial interest or any other class or series, and also refers to
partners of limited partnerships.
(l) "Written Instructions" shall mean a written communication
signed by a person reasonably believed by the Transfer Agent to be an
Authorized Person and actually received by the Transfer Agent. Written
Instructions shall include manually executed originals and authorized
electronic transmissions, including telefacsimile of a manually executed
original or other process.
2. Appointment of the Transfer Agent. The Fund hereby appoints and
constitutes the Transfer Agent as transfer agent, registrar and dividend
disbursing agent for Shares of the Fund and as shareholder servicing agent
for the Fund. The Transfer Agent accepts such appointments and agrees to
perform the duties hereinafter set forth.
3. Compensation.
(a) The Fund will compensate or cause the Transfer Agent to
be compensated for the performance of its obligations hereunder in accordance
with the fees set forth in the written schedule of fees annexed hereto as
Schedule A and incorporated herein. The Transfer Agent will transmit an
invoice to the Fund as soon as practicable after the end of each calendar
month which will be detailed in accordance with Schedule A, and the Fund will
pay to the Transfer Agent the amount of such invoice within thirty (30) days
after the Fund's receipt of the invoice.
In addition, the Fund agrees to pay, and will be billed separately for,
reasonable out-of-pocket expenses incurred by the Transfer Agent in the
performance of its duties hereunder. Out-of-pocket expenses shall include, but
shall not be limited to, the items specified in the written schedule of
out-of-pocket charges annexed hereto as Schedule B and incorporated herein.
Unspecified out-of-pocket expenses shall be limited to those out-of-pocket
expenses reasonably incurred by the Transfer Agent in the performance of its
obligations hereunder. Reimbursement by the Fund for expenses incurred by
the Transfer Agent in any month shall be made as soon as practicable but no
later than 15 days after the receipt of an itemized bill from the Transfer
Agent.
(b) Any compensation agreed to hereunder may be adjusted from
time to time by attaching to Schedule A, a revised fee schedule executed and
dated by the parties hereto.
4. Documents. In connection with the appointment of the Transfer Agent
the Fund shall deliver or caused to be delivered to the Transfer Agent the
following documents on or before the date this Agreement goes into effect,
but in any case within a reasonable period of time for the Transfer Agent to
prepare to perform its duties hereunder:
(a) If applicable, specimens of the certificates for Shares of
the
Fund;
(b) All account application forms and other documents relating to
Shareholder accounts or to any plan, program or service offered by the Fund;
(c) A signature card bearing the signatures of any officer of the
Fund or other Authorized Person who will sign Written Instructions or is
authorized to give Oral Instructions.
(d) A certified copy of the Articles of Incorporation, as
amended;
(e) A certified copy of the By-laws of the Fund, as amended;
(f) A copy of the resolution of the Board of Directors
authorizing
the execution and delivery of this Agreement;
(g) A certified list of Shareholders of the Fund with the name,
address and taxpayer identification number of each Shareholder, and the number
of Shares of the Fund held by each, certificate numbers and denominations
(if any certificates have been issued), lists of any accounts against which
stop transfer orders have been placed, together with the reasons therefore,
and the number of Shares redeemed by the Fund; and
(h) An opinion of counsel for the Fund with respect to the
validity
of the Shares and the status of such Shares under the Securities Act of 1933,
as amended.
5. Further Documentation. The Fund will also furnish the Transfer
Agent
with copies of the following documents promptly after the same shall become
available:
(a) each resolution of the Board of Directors authorizing the
issuance of Shares;
(b) any registration statements filed on behalf of the Fund and
all
pre-effective and post-effective amendments thereto filed with the Commission;
(c) a certified copy of each amendment to the Articles of
Incorporation or the By-laws of the Fund;
(d) certified copies of each resolution of the Board of Directors
or
other authorization designating Authorized Persons; and
(e) such other certificates, documents or opinions as the
TransferAgent may reasonably request in connection with the performance of its
duties hereunder.
6. Representations of the Fund. The Fund represents to the Transfer
Agent that all outstanding Shares are validly issued, fully paid and
non-assessable. When Shares are hereafter issued in accordance with the terms
of the Fund'sArticles of Incorporation and its Prospectus, such Shares shall
be
validly issued, fully paid and non-assessable.
7. Distributions Payable in Shares. In the event that the Board of
Directors of the Fund shall declare a distribution payable in Shares, the
Fund shall deliver or cause to be delivered to the Transfer Agent written
notice of such declaration signed on behalf of the Fund by an officer
thereof, upon which the Transfer Agent shall be entitled to rely for all
purposes, certifying (i) the identity of the Shares involved, (ii) the
number of Shares involved, and (iii) that all appropriate action has been
taken.
8. Duties of the Transfer Agent. The Transfer Agent shall be
responsible
for administering and/or performing those functions typically performed by a
transfer agent; for acting as service agent in connection with dividend and
distribution functions; and for performing shareholder account and
administrative agent functions in connection with the issuance, transfer
and redemption or repurchase (including coordination with the Custodian) of
Shares in accordance with the terms of the Prospectus and applicable law.
The operating standards and
procedures to be followed shall be determined from time to time by agreement
between the Fund and the Transfer Agent and shall initially be as described in
Schedule C attached hereto. In addition, the Fund shall deliver to the
Transfer
Agent all notices issued by the Fund with respect to the Shares in accordance
with and pursuant to the Articles of Incorporation or By-laws of the Fund or
as
required by law and shall perform such other specific duties as are set forth
in the
9. Record Keeping and Other Information. The Transfer Agent shall
create and maintain all records required of it pursuant to its duties
hereunder and as set forth in Schedule C in accordance with all applicable
laws, rules and regulations, including records required by Section 31(a) of
the 1940 Act. All
records shall be available during regular business hours for inspection and
use
by the Fund. Where applicable, such records shall be maintained by the
Transfer Agent for the periods and in the places required by Rule 31a-2
under the 1940 Act.
Upon reasonable notice by the Fund, the Transfer Agent shall make
available during regular business hours such of its facilities and premises
employed in connection with the performance of its duties under this Agreement
for reasonable visitation by the Fund, or any person retained by the Fund as
may be necessary for the Fund to evaluate the quality of the services
performed by the Transfer Agent pursuant hereto.
10. Other Duties. In addition to the duties set forth in Schedule C,
the
Transfer Agent shall perform such other duties and functions, and shall be
paid
such amounts therefor, as may from time to time be agreed upon in writing
between the Fund and the Transfer Agent. The compensation for such other
duties and functions shall be reflected in a written amendment to Schedule A
or B and the duties and functions shall be reflected in an amendment to
Schedule C, both dated and signed by authorized persons of the parties hereto.
11. Reliance by Transfer Agent; Instructions
(a) The Transfer Agent will have no liability when acting upon
Written or Oral Instructions believed to have been executed or orally
communicated by an Authorized Person and will not be held to have any notice
of
any change of authority of any person until receipt of a Written Instruction
thereof from the Fund pursuant to Section 4(c). The Transfer Agent will
also have no liability when processing Share certificates which it reasonably
believes to bear the proper manual or facsimile signatures of the officers
of the Fund and the proper countersignature of the Transfer Agent.
(b) At any time, the Transfer Agent may apply to any Authorized
Person of the Fund for Written Instructions and may seek advice from legal
counsel for the Fund, or its own legal counsel, with respect to any matter
arising in connection with this Agreement, and it shall not be liable for
any action taken or not taken or suffered by it in good faith in accordance
with such Written Instructions or in accordance with the opinion of counsel
for the Fund or for the Transfer Agent. Written Instructions requested by the
Transfer Agent will be provided by the Fund within a reasonable period of
time. In addition, the Transfer Agent, its officers, agents or employees,
shall accept Oral Instructions or Written Instructions given to them by any
person representing or acting on behalf of the
Fund only if said representative is an Authorized Person. The Fund agrees
that all Oral Instructions shall be followed within one business day by
confirming Written Instructions, and that the Fund's failure to so confirm
shall not impair in any respect the Transfer Agent's right to rely on
Oral Instructions. The Transfer Agent
shall have no duty or obligation to inquire into, nor shall
the Transfer Agent be responsible for, the legality of any
act done by it upon the request or direction of a
person reasonably believed by the Transfer Agent to be an Authorized Person.
(c) Notwithstanding any of the foregoing provisions of this
Agreement, the Transfer Agent shall be under no duty or obligation to inquire
into, and shall not be liable for: (i) the legality of the issuance or sale
of any Shares or the sufficiency of the amount to be received therefor;
(ii) the legality of the redemption of any Shares, or the propriety of the
amount to be paid therefor; (iii) the legality of the declaration of any
dividend by the Board of Directors, or the legality of the issuance of any
Shares in payment of any dividend; or (iv) the legality of any
recapitalization or readjustment of the Shares.
12. Acts of God, etc. The Transfer Agent will not be liable or
responsible
for delays or errors by acts of God or by reason of circumstances beyond its
control, including acts of civil or military authority, national emergencies,
labor difficulties, mechanical breakdown, insurrection, war, riots, or
failure or unavailability of transportation, communication or power
supply, fire, flood or other catastrophe.
13. Duty of Care and Indemnification. Each party hereto (the
"Indemnifying Party') will indemnify the other party (the "Indemnified Party")
against and hold it harmless from any and all losses, claims, damages,
liabilities or expenses of any sort or kind (including reasonable counsel
fees and expenses) resulting from any claim, demand, action or suit or other
proceeding (a "Claim") unless such Claim has resulted from a negligent
failure to act or omission to act or bad faith of the Indemnified Party in
the performance of its duties hereunder. In
addition, the Fund will indemnify the Transfer Agent against and hold it
harmless from any Claim, damages, liabilities or expenses (including
reasonable counsel fees) that is a result of: (i) any action taken in
accordance with Written or Oral Instructions, or any other instructions, or
share certificates reasonably believed by the Transfer Agent to be genuine
and to be signed, countersigned or executed, or
orally communicated by an Authorized Person; (ii) any action taken in
accordance with written or oral advice reasonably believed by the Transfer
Agent to have been given by counsel for the Fund or its own counsel; or
(iii) any action taken as a result of any error or omission in any record
(including but not limited to magnetic tapes, computer printouts, hard
copies and microfilm copies) delivered, or caused to be delivered by the
Fund to the Transfer Agent in connection with this Agreement.
In any case in which the Indemnifying Party may be asked to indemnify or
hold the Indemnified Party harmless, the Indemnifying Party shall be advised
of
all pertinent facts concerning the situation in question. The Indemnified
Party will notify the Indemnifying Party promptly after identifying any
situation which it believes presents or appears likely to present a claim
for indemnification against
the Indemnifying Party although the failure to do so shall not prevent
recovery by the Indemnified Party. The Indemnifying Party shall have
the option to defend the Indemnified Party against any Claim which may
be the subject of this
indemnification, and, in the event that the Indemnifying Party so elects, such
defense shall be conducted by counsel chosen by the Indemnifying Party and
satisfactory to the Indemnified Party, and thereupon the Indemnifying Party
shall take over complete defense of the Claim and the Indemnified Party shall
sustain no further legal or other expenses in respect of such Claim. The
Indemnified Party will not confess any Claim or make any compromise in any
case in which the Indemnifying Party will be asked to provide
indemnification, except with the
Indemnifying Party's prior written consent. The obligations
of the parties hereto under this Section shall survive the termination of
this Agreement.
14. Consequential Damages. In no event and under no circumstances
shall either party under this Agreement be liable to the other party for
indirect loss of profits, reputation or business or any other special
damages under any provision of this Agreement or for any act or failure
to act hereunder.
15. Term and Termination.
(a) This Agreement shall be effective on the date first written
above and shall continue until September 2, 1994, and thereafter shall
automatically continue for successive annual periods ending
on the anniversary of
the date first written above, provided that it may be
terminated by either party
upon written notice given at least 60 days prior to termination.
(b) In the event a termination notice is given by the Fund, it
shall be accompanied by a resolution of the Board of Directors,
certified by the Secretary of the Fund, designating a successor
transfer agent or transfer agents.
Upon such termination and at the expense of the Fund, the Transfer Agent will
deliver to such successor a certified list of shareholders of the Fund
(with names and addresses), and all other relevant books, records,
correspondence and other Fund records or data in the possession of
the Transfer Agent, and the Transfer Agent will cooperate with the
Fund and any successor transfer agent or agents in
the substitution process.
16. Confidentiality. Both parties hereto agree that any non public
information obtained hereunder concerning the other party is confidential and
may not be disclosed to any other person without the consent of the other
party, except as may be required by applicable law or at the request of
the Commission or other
governmental agency. The parties further agree that a breach of this
provision
would irreparably damage the other party and accordingly agree
that each of them is entitled, without bond or other security,
to an injunction or injunctions to prevent breaches of this provision.
17. Amendment. This Agreement may only be amended or modified by a
written instrument executed by both parties.
18. Subcontracting. The Fund agrees that the Transfer Agent may, in
its
discretion, subcontract for certain of the services described under this
Agreement or the Schedules hereto; provided that the appointment of any
such Transfer
Agent shall not relieve the Transfer Agent of its responsibilities hereunder.
19. Miscellaneous.
(a) Notices. Any notice or other instrument authorized or
required
by this Agreement to be given in writing to the Fund or the Transfer Agent,
shall be sufficiently given if addressed to that party and received by it
at its office set forth below or at such other place as it may from time
to time designate in writing.
To the Fund:
Smith Barney Concert Series Inc.
388 Greenwich Street, 22 Floor
New York, NY 10013
Attention:Heath B. McLendon
To the Transfer Agent:
The Shareholder Services Group
One Exchange Place
53 State Street
Boston, Massachusetts 02109
(b) Successors. This Agreement shall extend to and shall be
binding upon the parties hereto, and their respective successors and assigns,
provided, however, that this Agreement shall not be assigned to any person
other than a person controlling, controlled by or under common control with
the
assignor without the written consent of the other party, which consent shall
not be unreasonably withheld.
(c) Governing Law. This Agreement shall be governed
exclusively by the laws of the State of New York without
reference to the choice of law provisions thereof. Each
party hereto hereby agrees that (i) the Supreme
Court of New York sitting in New York County shall have exclusive jurisdiction
over any and all disputes arising hereunder; (ii) hereby consents
to the personal jurisdiction of such court over the parties hereto,
hereby waiving any defense of lack of personal jurisdiction; and (iii)
appoints the person to whom notices
hereunder are to be sent as agent for service of process.
(d) Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original; but such
counterparts shall, together, constitute only one instrument.
(e) Captions. The captions of this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hreof or otherwise affect their construction or effect.
(f) Use of Transfer Agent's Name. The Fund shall not use the
name of the Transfer Agent in any Prospectus, Statement of Additional
Information, shareholders' report, sales literature or other material
relating to the Fund in a manner not approved prior thereto in writing;
provided, that the Transfer Agent need only receive notice of all
reasonable uses of its name which merely refer in accurate terms
to its appointment hereunder or which are required
by any government agency or applicable law or rule. Notwithstanding the
foregoing, any reference to the Transfer Agent shall include a statement to
the
effect that it is a wholly owned subsidiary of First Data Corporation.
(g) Use of Fund's Name. The Transfer Agent shall not use the
name of the Fund or material relating to the Fund on any documents or forms
for
other than internal use in a manner not approved prior thereto in writing;
provided, that the Fund need only receive notice of all reasonable uses of
its name which merely refer in accurate terms to the appointment of the
Transfer Agent or which are required by any government agency or
applicable law or rule.
(h) Independent Contractors. The parties agree that they are
independent contractors and not partners or co-venturers.
(i) Entire Agreement; Severability. This Agreement and the
Schedules attached hereto constitute the entire agreement of the parties
hereto
relating to the matters covered hereby and supersede any previous agreements.
If any provision is held to be illegal, unenforceable or invalid for any
reason, the remaining provisions shall not be affected or impaired thereby.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their duly authorized officers,
as of the day and year first above written.
SMITH BARNEY FUNDAMENTAL VALUE FUND INC.
By: _______________
Heath B. McLendon
President
THE SHAREHOLDER SERVICES GROUP, INC.
By:__________________
Michael G. McCarthy
Vice President
A-1
Transfer Agent Fee
Schedule A
Class A shares
The Fund shall pay the Transfer Agent an annualized fee of $11.00 per
shareholder account that is open during any monthly period. Such fee shall be
billed by the Transfer Agent monthly in arrears on a prorated basis of 1/12
of the annualized fee for all accounts that are open during such a month.
The Fund shall pay the Transfer Agent an additional fee of $.125 per closed
account per month applicable to those shareholder accounts which close in a
given month and remain closed through the following month-end billing cycle.
Such fee shall be billed by the Transfer Agent monthly in arrears.
Class B shares
The Fund shall pay the Transfer Agent an annualized fee of $12.50 per
shareholder account that is open during any monthly period. Such fee shall be
billed by the Transfer Agent monthly in arrears on a prorated basis of 1/12
of the annualized fee for all accounts that are open during such a month.
The Fund shall pay the Transfer Agent an additional fee of $.125 per closed
account per month applicable to those shareholder accounts which close in a
given month and remain closed through the following month-end billing cycle.
Such fee shall be billed by the Transfer Agent monthly in arrears.
Class C shares
The Fund shall pay the Transfer Agent an annualized fee of $8.50 per
shareholder account that is open during any monthly period. Such fee
shall be billed by the
Transfer Agent monthly in arrears on a prorated basis of 1/12 of the
annualized
fee for all accounts that are open during such a month.
The Fund shall pay the Transfer Agent an additional fee of $.125 per closed
account per month applicable to those shareholder accounts which close in a
given month and remain closed through the following month-end billing cycle.
Such fee shall be billed by the Transfer Agent monthly in arrears.
A-2
Class D shares
The Fund shall pay the Transfer Agent an annualized fee of $9.50 per
shareholder account that is open during any monthly period. Such fee
shall be billed by the Transfer Agent monthly in arrears on a prorated
basis of 1/12 of the annualized fee for all accounts that are open
during such a month.
The Fund shall pay the Transfer Agent an additional fee of $.125 per closed
account per month applicable to those shareholder accounts which close in a
given month and remain closed through the following month-end billing cycle.
Such fee shall be billed by the Transfer Agent monthly in arrears.
B-1
Schedule B
OUT-OF-POCKET EXPENSES
The Fund shall reimburse the Transfer Agent monthly for applicable
out-of-pocket expenses, including, but not limited to the following items:
- Microfiche/microfilm production
- Magnetic media tapes and freight
- Printing costs, including certificates, envelopes, checks and
stationery
- Postage (bulk, pre-sort, ZIP+4, barcoding, first class) direct
pass
through to the Fund
- Due diligence mailings
- Telephone and telecommunication costs, including
all lease, maintenance and line costs
- Proxy solicitations, mailings and tabulations
- Daily & Distribution advice mailings
- Shipping, Certified and Overnight mail and insurance
- Year-end form production and mailings
- Terminals, communication lines, printers and other equipment
and any expenses incurred in connection with such terminals and lines
- Duplicating services
- Courier services
- Incoming and outgoing wire charges
- Federal Reserve charges for check clearance
- Record retention, retrieval and destruction costs, including,
but
not limited to exit fees charged by third party record keeping vendors
- Third party audit reviews
- Insurance
- Such other miscellaneous expenses reasonably incurred by the
Transfer Agent in performing its duties and responsibilities under
this Agreement.
The Fund agrees that postage and mailing expenses will be paid on the
day
of or prior to mailing as agreed with the Transfer Agent. In addition, the
Fund will promptly reimburse the Transfer Agent for any other unscheduled
expenses incurred by the Transfer Agent whenever the Fund and the Transfer
Agent mutually agree that such expenses are not otherwise properly borne by
the
Transfer Agent as part of its duties and obligations under the Agreement.
C-1
Schedule C
DUTIES OF THE TRANSFER AGENT
1. Shareholder Information. The Transfer Agent or its agent
shall
maintain a record of the number of Shares held by each holder of record which
shall include name, address, taxpayer identification and which shall indicate
whether such Shares are held in certificates or uncertificated form.
2. Shareholder Services. The Transfer Agent or its agent will
investigate all inquiries from shareholders of the Fund relating to
Shareholder
accounts and will respond to all communications from Shareholders and others
relating to its duties hereunder and such other correspondence as may from
time
to time be mutually agreed upon between the Transfer Agent and the Fund. The
Transfer Agent shall provide the Fund with reports concerning shareholder
inquires and the responses thereto by the Transfer Agent, in such form and at
such times as are agreed to by the Fund and the Transfer Agent.
3. Share Certificates.
(a) At the expense of the Fund, it shall supply the Transfer
Agent or its agent with an adequate supply of blank share certificates
to meet the Transfer Agent or its agent's requirements therefor. Such
Share certificates shall be properly signed by facsimile. The Fund
agrees that, notwithstanding the death, resignation, or removal of
any officer of the Fund whose signature appears on
such certificates, the Transfer Agent or its agent may continue to countersign
certificates which bear such signatures until otherwise directed by Written
Instructions.
(b) The Transfer Agent or its agent shall issue replacement Share
certificates in lieu of certificates which have been lost, stolen or
destroyed, upon receipt by the Transfer Agent or its agent of properly
executed affidavits and lost
certificate bonds, in form satisfactory to the
Transfer Agent or its agent, with the
Fund and the Transfer Agent or its agent as obligees under the bond.
(c) The Transfer Agent or its agent shall also maintain a record
of
each certificate issued, the number of Shares represented thereby and the
holder of record. With respect to Shares held in open accounts or
uncertificated form, i.e., no certificate being issued with respect
thereto, the Transfer Agent or its agent
shall maintain comparable records of the record holders
thereof, including their
names, addresses and taxpayer identification. The Transfer Agent or its agent
shall further maintain a stop transfer record on lost and/or replaced
certificates.
C-2
4. Mailing Communications to Shareholders; Proxy Materials. The
Transfer Agent or its agent will address and mail to
Shareholders of the Fund, all reports to Shareholders,
dividend and distribution
notices and proxy material for the Fund's
meetings of Shareholders. In connection
with meetings of Shareholders, the Transfer Agent or its Agent will prepare
Shareholder lists, mail and certify as to the mailing of proxy materials,
process and tabulate returned proxy cards, report on proxies voted
prior to meetings, act as
inspector of election at meetings and certify Shares voted at meetings.
5. Sales of Shares
(a) Suspension of Sale of Shares. The Transfer Agent or its
agent
shall not be required to issue any Shares of the Fund where it has received a
Written Instruction from the Fund or official notice from any appropriate
authority that the sale of the Shares of the Fund has been suspended or
discontinued. The existence of such Written Instructions or such official
notice shall be conclusive evidence of the right of the Transfer Agent or
its agent to rely on such Written Instructions or official notice.
(b) Returned Checks. In the event that any check or other order
for the payment of money is returned unpaid for any reason, the Transfer
Agent or its agent will: (i) give prompt notice of such return to
the Fund or its designee; (ii) place a stop transfer order
against all Shares issued as a result of such check or
order; and (iii) take such actions as the Transfer Agent may from time to time
deem appropriate.
6. Transfer and Repurchase
(a) Requirements for Transfer or Repurchase of Shares. The
Transfer Agent or its agent shall process all requests to
transfer or redeem Shares in accordance with the
transfer or repurchase procedures set forth in the Fund's
Prospectus.
The Transfer Agent or its agent will transfer or repurchase Shares
upon receipt of Oral or Written Instructions or otherwise pursuant to the
Prospectus and Share certificates, if any, properly endorsed for transfer or
redemption, accompanied by such documents as the Transfer Agent or its agent
reasonably may deem necessary.
The Transfer Agent or its agent reserves the right to refuse to
transfer or repurchase Shares until it is satisfied that the endorsement on
the
instructions is valid and genuine. The Transfer Agent or its agent also
reserves the right to refuse to transfer or repurchase Shares until it
is satisfied that the requested transfer or repurchase is legally
authorized, and it shall incur no liability
for the refusal, in good faith, to make transfers or
repurchases which the Transfer Agent or its agent, in
C-3
its good judgement, deems improper or unauthorized, or until it is reasonably
satisfied that there is no basis to any claims adverse
to such transfer or repurchase.
(b) Notice to Custodian and Fund. When Shares are redeemed, the
Transfer Agent or its agent shall, upon receipt of the instructions
and documents in proper form, deliver to the Custodian and the Fund
or its designee a notification
setting forth the number of Shares to be repurchased. Such repurchased shares
shall be reflected on appropriate accounts maintained by the Transfer Agent
or its agent reflecting outstanding Shares of the Fund and Shares
attributed to individual accounts.
(c) Payment of Repurchase Proceeds. The Transfer Agent or its
agent shall, upon receipt of the moneys paid to it by the Custodian for the
repurchase of Shares, pay such moneys as are received from the Custodian, all
in accordance with the procedures described in the written instruction
received by the Transfer Agent or its agent from the Fund.
The Transfer Agent or its agent shall not process or effect any
repurchase with respect to Shares of the Fund after receipt by the
Transfer Agent or its agent of notification of the suspension of
the determination of the net asset value of the Fund.
7. Dividends
(a) Notice to Agent and Custodian. Upon the declaration of each
dividend and each capital gains distribution by the Board of Directors
of the Fund with respect to Shares of the Fund, the Fund shall furnish
or cause to be furnished
to the Transfer Agent or its agent a copy
of a resolution of the Fund's Board of
Directors certified by the Secretary of the Fund setting forth the date of the
declaration of such dividend or distribution, the ex-dividend date, the date
of
payment thereof, the record date as of which shareholders entitled to payment
shall be determined, the amount payable per Share to the
shareholders of record as
of that date, the total amount payable to
the Transfer Agent or its agent on the
payment date and whether such dividend or
distribution is to be paid in Shares of
such class at net asset value.
On or before the payment date specified in such resolution of the
Board of Directors, the Custodian of the Fund will pay to the Transfer Agent
sufficient cash to make payment to the shareholders of record as of such
payment date.
(b) Insufficient Funds for Payments. If the Transfer Agent or
its agent does not receive sufficient cash from the Custodian to make total
dividend and/or distribution payments to all shareholders of the Fund as of
the
record date, the Transfer
C-4
Agent or its agent will, upon notifying the Fund, withhold payment to all
Shareholders of record as of the record date until sufficient cash is
provided to the Transfer Agent or its agent.
C-5
Exhibit
1
to
Schedule C
Summary of Services
The services to be performed by the Transfer Agent or its agent shall be
as
follows:
A. DAILY RECORDS
Maintain daily the following information with respect to each
Shareholder account as received:
o Name and Address (Zip Code)
o Class of Shares
o Taxpayer Identification Number
o Balance of Shares held by Agent
o Beneficial owner code: i.e., male, female, joint tenant,
etc.
o Dividend code (reinvestment)
o Number of Shares held in certificate form
B. OTHER DAILY ACTIVITY
o Answer written inquiries relating to Shareholder accounts
(matters relating to portfolio management, distribution of
Shares and other management policy questions will be
referred to the Fund).
o Process additional payments into established Shareholder
accounts in accordance with Written Instruction from the
Agent.
o Upon receipt of proper instructions and all required
documentation, process requests for repurchase of Shares.
o Identify redemption requests made with respect to accounts
in which Shares have been purchased within an
agreed-upon period of time for determining whether good
funds have been collected with respect to such purchase
and process as agreed by the Agent in accordance with
written instructions set forth by the Fund.
o Examine and process all transfers of Shares, ensuring that
all transfer requirements and legal documents have been
supplied.
C-6
o Issue and mail replacement checks.
o Open new accounts and maintain records of exchanges
between accounts
C. DIVIDEND ACTIVITY
o Calculate and process Share dividends and distributions as
instructed by the Fund.
o Compute, prepare and mail all necessary reports to
Shareholders or various authorities as requested by the
Fund. Report to the Fund reinvestment plan share
purchases and determination of the reinvestment price.
D. MEETINGS OF SHAREHOLDERS
o Cause to be mailed proxy and related material for all
meetings of Shareholders. Tabulate returned proxies
(proxies must be adaptable to mechanical equipment of the
Agent or its agents) and supply daily reports when
sufficient proxies have been received.
o Prepare and submit to the Fund an Affidavit of Mailing.
o At the time of the meeting, furnish a certified list of
Shareholders, hard copy, microfilm or microfiche and, if
requested by the Fund, Inspection of Election.
E. PERIODIC ACTIVITIES
o Cause to be mailed reports, Prospectuses, and any other enclosures
requested by the Fund (material must be adaptable to mechanical
equipment of Agent or its agents).
o Receive all notices issued by the Fund with respect to the
Preferred
Shares in accordance with and pursuant to the Articles of
Incorporation and the Indenture and perform such other specific
duties as are set forth in the Articles of Incorporation including a
giving of notice of a special meeting and notice of redemption in
the circumstances and otherwise in accordance with all relevant
provisions of the Articles of Incorporation.
EXHIBIT 11
INDEPENDENT AUDITORS CONSENT
We consent to the incorporation by reference in this Post-Effective Amendment
No. 28 to the Registration Statement No. 2-71469 of Smith
Barney Fundamental Value Fund Inc. of our report dated October 26, 1995,
appearing in the annual report to shareholders for the year ended September
30, 1995, and to the reference to us under the heading Financial Highlights
in the Prospectus, which is a part of such Registration Statement.
Deloitte & Touche LLP
Boston, Massachusetts
January 25, 1996
EXHIBIT 18
Rule 18f-3 (d) Multiple Class Plan
for Smith Barney Mutual Funds
Introduction
This plan (the "Plan") is adopted pursuant to Rule 18f-3 (d) of
the Investment Company Act of 1940, as amended (the "1940 Act").
The purpose of the Plan is to restate the existing arrangements
previously approved by the Boards of Directors and Trustees of
certain of the open-end investment companies set forth on
Schedule A (the "Funds" and each a "Fund") distributed by Smith
Barney Inc. ("Smith Barney") under the Funds' existing order of
exemption (Investment Company Act Release Nos. 20042 (January 28,
1994) (notice) and 20090 (February 23, 1994)). Shares of the
Funds are distributed pursuant to a system (the "Multiple Class
System") in which each class of shares (a "Class") of a Fund
represents a pro rata interest in the same portfolio of
investments of the Fund and differs only to the extent outlined
below.
I. Distribution Arrangements and Service Fees
One or more Classes of shares of the Funds are offered for
purchase by investors with the following sales load structure.
In addition, pursuant to Rule 12b-1 under the 1940 Act (the
"Rule"), the Funds have each adopted a plan (the "Services and
Distribution Plan") under which shares of the Classes are subject
to the services and distribution fees described below.
1. Class A Shares
Class A shares are offered with a front-end sales load and under
the Services and Distribution Plan are subject to a service fee
of up to 0.25% of average daily net assets. In addition, the
Funds are permitted to asses a contingent deferred sales charge
("CDSC") on certain redemptions of Class A shares sold pursuant
to a complete waiver of front-end sales loads applicable to large
purchases, if the shares are redeemed within one year of the date
of purchase. This waiver applies to sales of Class A shares
where the amount of purchase is equal to or exceeds $500,000
although this amount may be changed in the future.
2. Class B Shares
Class B shares are offered without a front-end sales load, but
are subject to a five-year declining CDSC and under the Services
and Distribution Plan are subject to a service fee at an annual
rate of up to 0.25% of average daily net assets and a
distribution fee at an annual rate of up to 0.75% of average
daily net assets.
3. Class C Shares
Class C shares are offered without a front-end load, but are
subject to a one-year CDSC and under the Services and
Distribution Plan are subject to a service fee at an annual rate
of up to 0.25% of average daily net assets and a distribution fee
at an annual rate of up to 0.75% of average daily net assets.
Unlike Class B shares, Class C shares do not have the conversion
feature as discussed below and accordingly, these shares are
subject to a distribution fee for an indefinite period of time.
The Funds reserve the right to impose these fees at such higher
rates as may be determined.
4. Class Y Shares
Class Y shares are offered without impositions of either a sales
charge or a service or distribution fee for investments where the
amount of purchase is equal to or exceeds $5 million.
5. Class Z Shares
Class Z shares are offered without imposition of either a sales
charge or a service or distribution fee for purchase (i) by
employee benefit and retirement plans of Smith Barney and its
affiliates, (ii) by certain unit investment trusts sponsored by
Smith Barney and its affiliates, and (iii) although not currently
authorized by the governing boards of the Funds, when and if
authorized, (x) by employees of Smith Barney and its affiliates
and (y) by directors, general partners or trustees of any
investment company for which Smith Barney serves as a distributor
and, for each of (x) and (y), their spouses and minor children.
6. Additional Classes of Shares
The Boards of Directors and Trustees of the Funds have the
authority to create additional classes, or change existing
Classes, from time to time, in accordance with Rule 18f-3 of the
1940 Act.
II. Expense Allocations
Under the Multiple Class System, all expenses incurred by a Fund
are allocated among the various Classes of shares based on the
net assets of the Fund attributable to each Class, except that
each Class's net assets value and expenses reflect the expenses
associated with that Class under the Fund's Services and
Distribution Plan, including any costs associated with obtaining
shareholder approval of the Services and Distribution Plan (or an
amendment thereto) and any expenses specific to that Class. Such
expenses are limited to the following:
(I) transfer agency fees as identified by the transfer
agent as being attributable to a specific Class;
(ii) printing and postage expenses related to preparing and
distributing materials such as shareholder reports,
prospectuses and proxies to current shareholders;
(iii) Blue Sky registration fees incurred by a Class of
shares;
(iv) Securities and Exchange Commission registration fees
incurred by a Class of shares;
(v) the expense of administrative personnel and services as
required to support the shareholders of a specific Class;
(vi) litigation or other legal expenses relating solely to
one Class of shares; and
(vii) fees of members of the governing boards of the funds
incurred as a result of issues relating to one Class of
shares.
Pursuant to the Multiple Class System, expenses of a Fund
allocated to a particular Class of shares of that Fund are borne
on a pro rata basis by each outstanding share of that Class.
III. Conversion Rights of Class B Shares
All Class B shares of each Fund will automatically convert to
Class A shares after a certain holding period, expected to be, in
most cases, approximately eight years but may be shorter. Upon
the expiration of the holding period, Class B shares (except
those purchases through the reinvestment of dividends and other
distributions paid in respect of Class B shares) will
automatically convert to Class A shares of the Fund at the
relative net asset value of each of the Classes, and will, as a
result, thereafter be subject to the lower fee under the Services
and Distribution Plan. For purposes of calculating the holding
period required for conversion, newly created Class B shares
issued after the date of implementation of the Multiple Class
System are deemed to have been issued on (i) the date on which
the issuance of the Class B shares occurred or (ii) for Class B
shares obtained through an exchange, or a series of exchanges,
the date on which the issuance of the original Class B shares
occurred.
Shares purchased through the reinvestment of dividends and other
distributions paid in respect of Class B shares are also Class B
shares. However, for purposes of conversion to Class A, all
Class B shares in a shareholder's Fund account that were
purchased through the reinvestment of dividends and other
distributions paid in respect of Class B shares (and that have
not converted to Class A shares as provided in the following
sentence) are considered to be held in a separate sub-account.
Each time any Class B shares in the shareholder's Fund account
(other than those in the sub-account referred to in the preceding
sentence) convert to Class A, a pro rata portion of the Class B
shares then in the sub-account also converts to Class A. The
portion is determined by the ratio that the shareholder's Class B
shares converting to Class A bears to the shareholder's total
Class B shares not acquired through dividends and distributions.
The conversion of Class B shares to Class A shares is subject to
the continuing availability of a ruling of the Internal Revenue
Service that payment of different dividends on Class A and Class
B shares does not result in the Fund's dividends or distributions
constituting "preferential dividends" under the Internal Revenue
Code of 1986, as amended (the "Code"), and the continuing
availability of an opinion of counsel to the effect that the
conversion of shares does not constitute a taxable event under
the Code. The conversion of Class B shares to Class A shares may
be suspended if this opinion is no longer available, In the
event that conversion of Class B shares of not occur, Class B
shares would continue to be subject to the distribution fee and
any incrementally higher transfer agency costs attending the
Class B shares for an indefinite period.
IV. Exchange Privileges
Shareholders of a Fund may exchange their shares at net asset
value for shares of the same Class in certain other of the Smith
Barney Mutual Funds as set forth in the prospectus for such Fund.
Class A shareholders who wish to exchange all or part of their
shares for Class A shares of a Fund sold subject to a sales
charge equal to or lower that that assessed with respect to the
shares of the Fund being exchanged may do so without paying a
sales charge. Class A shareholders of a Fund who wish to
exchange all or part of their shares for Class A shares of a Fund
sold subject to a sales charge higher than that assessed with
respect to the shares of the Fund being exchanged are charged the
appropriate "sales charge differential." Funds only permit
exchanges into shares of money market funds having a plan under
the Rule if, as permitted by paragraph (b) (5) of Rule 11a-3
under the 1940 Act, either (i) the time period during which the
shares of the money market funds are held is included in the
calculations of the CDSC or (ii) the time period is not included
but the amount of the CDSC is reduced by the amount of any
payments made under a plan adopted pursuant to the Rule by the
money market funds with respects to those shares. Currently, the
Funds include the time period during which shares of the money
market fund are held in the CDSC period. The exchange privileges
applicable to all Classes of shares must comply with Rule 11a-3
under the 1940 Act.
Smith Barney Sponsored Investment Companies
Operating under Rule 18f-3 - Schedule A
(as of August 25, 1995)
Smith Barney Adjustable Rate Government Income Fund
Smith Barney Aggressive Growth Fund Inc.
Smith Barney Appreciation Fund Inc.
Smith Barney Arizona Municipals Fund Inc.
Smith Barney California Municipals Fund
Smith Barney Equity Funds -
Smith Barney Strategic Investors Fund
Smith Barney Growth and Income Fund
Smith Barney Florida Municipals Fund
Smith Barney Fundamental Value Fund Inc.
Smith Barney Funds, Inc. -
Income and Growth Portfolio
Utilities Portfolio
Income Return Account Portfolio
Monthly Payment Government Portfolio
Short-Term U.S. Treasury Securities Portfolio
U.S. Government Securities Portfolio
Smith Barney Income Funds -
Smith Barney Premium Total Return Fund
Smith Barney Convertible Fund
Smith Barney Diversified Strategic Income Fund
Smith Barney High Income Fund
Smith Barney Tax-Exempt Income Fund
Smith Barney Exchange Reserve Fund
Smith Barney Utilities Fund
Smith Barney Income Trust -
Smith Barney Limited Maturity Municipals Fund
Smith Barney Limited Maturity Treasury Fund
Smith Barney Intermediate Maturity
California Municipals Fund
Smith Barney Intermediate Maturity
New York Municipals Fund
Smith Barney Investment Funds Inc. -
Smith Barney Special Equities Fund
Smith Barney Government Securities Fund
Smith Barney Investment Grade Bond Fund
Smith Barney Growth Opportunity Fund
Smith Barney Managed Growth Fund
Smith Barney Institutional Cash Management Fund Inc.
Smith Barney Managed Governments Fund Inc.
Smith Barney Managed Municipals Fund Inc.
Smith Barney Massachusetts Municipals Fund
Smith Barney Money Funds, Inc. -
Cash Portfolio
Government Portfolio
Retirement Portfolio
Smith Barney Municipal Money Market Fund, Inc.
Smith Barney Muni Funds -
California Portfolio
California Limited Portfolio
California Money Market Portfolio
Florida Portfolio
Florida Limited Portfolio
Georgia Portfolio
Limited Term Portfolio
National Portfolio
New Jersey Portfolio
New York Portfolio
New York Money Market Portfolio
Ohio Portfolio
Pennsylvania Portfolio
Smith Barney New Jersey Municipals Fund Inc.
Smith Barney New York Municipals Fund Inc.
Smith Barney Oregon Municipals Fund
Smith Barney Precious Metals and Minerals Fund Inc.
Smith Barney Telecommunications Trust -
Smith Barney Telecommunications Growth Fund
Smith Barney Telecommunications Income Fund
Smith Barney World Funds, Inc. -
International Equity Portfolio
International Balanced Portfolio
European Portfolio
Pacific Portfolio
Global Government Bond Portfolio
