[PHOTO]
SMITH BARNEY
FUNDAMENTAL
VALUE
FUND, INC.
- --------------------
March 31, 1996
[LOGO] SMITH BARNEY MUTUAL FUNDS
INVESTING FOR YOUR FUTURE.
EVERY DAY.
SEMI-ANNUAL REPORT
<PAGE>
SMITH BARNEY FUNDAMENTAL VALUE FUND, INC.
Dear Shareholder:
We are pleased to provide you with the semi-annual report for the Smith Barney
Fundamental Value Fund Inc. for the six-month period ended March 31, 1996. For
your convenience, we have summarized the period's prevailing economic and market
conditions below and outlined our portfolio strategy during this time. A
detailed summary of performance and current holdings can be found in the
appropriate sections that follow in the semi-annual report.
Fund Performance Update
For the six months ended March 31, 1996, the Smith Barney Fundamental Value Fund
posted a total return of 10.66% for Class A shares which was modestly below the
total return of 11.70% for the Standard & Poor's 500 Stock Index ("S&P 500"), a
capitalization-weighted measure of 500 widely held common stocks listed on the
New York Stock Exchange, American Stock Exchange and over-the-counter market.
A Brief History of Inflation
The inflation of the 1970s actually ended in the early 1980s and ushered in a
period of the disinflation which has lasted roughly 15 years. (Disinflation is
the slowing down of the rate of price increases and should not be confused with
deflation, which is when prices actually go down.) Large increases in productive
capacity in the 1980s exerted downward pressure on prices. During this period of
disinflation, the average annual returns from financial assets such as common
stocks and bonds rose significantly. In addition, the growing trend towards the
internationalization of markets, moderate wage increases and high interest rates
helped keep inflation in check. In the early 1980s, a cover of National
Geographic magazine showed an Arab sheik standing in the desert and holding a
Waterford Crystal bowl filled with oil. The cover story inside questioned
whether oil prices were heading towards $100 per barrel. Today, the conventional
wisdom is that inflation has been conquered and will never return. However, in
our view, the reports of the death of inflation have been greatly exaggerated.
A Look Ahead at the Year 2000
In our opinion, we have probably seen the best news on inflation. We expect
moderate increases in the rate of inflation over the next few years, with a 1%
to 1.5% increase over the existing rate during the next three years. With the
arrival of the new millennium, we anticipate that investing in one area in
1
<PAGE>
particular, natural resources, will be much more popular than it is today. In
our view, strong demand in the global economy over the next three to five years
should exert strong upward pressure on the prices of many natural resources.
In addition, we believe technology will continue to be an important influence on
life in the 21st Century. Technology companies, which tend to be cyclical growth
companies rather than pure growth vehicles, and their products are helping to
transform the world and the way we live. We therefore expect that the technology
sector of the stock market will continue to be an important area of emphasis for
the Smith Barney Fundamental Value Fund.
Fund's Investment Strategy
Against this backdrop of possibly higher inflation and the dominance of
technology, the Smith Barney Fundamental Value Fund will continue to focus on
those sectors of the market that we believe can provide excellent opportunities
to investors without adding undue risk. Therefore, we are very sensitive about
the prices we pay for the stocks of companies under consideration. Even though
the Fund has a current emphasis on the natural resource and technology sectors,
there will be periods when the prices of these securities may simply not be
attractive on a relative basis. The Fund's relative-value approach to investing
is flexible and we constantly monitor the market for stocks that can provide
investors with upside potential with reasonable risk.
A good example of the Fund's relative-value approach to investing can be seen in
the recent addition of several retailing stocks to the portfolio. In our view,
consumer stocks will probably have a much more difficult time than they did
during most of the 1980s and early 1990s. Nevertheless, the stock prices of many
leading retailers have, in our view, reached levels where the bad news has been
factored into their valuations. We believe the risks of investing in the
retailing sector are limited and the upside potential is attractive.
At the present time, 16% of the Fund's assets are invested in the energy sector
and 7% is invested in select natural resource companies. In comparison, the S&P
500 has an energy weighting of 9% and energy company stocks now represent one of
the lowest weightings in the S&P 500 in 25 years. Our long-term outlook for the
energy sector is extremely favorable.
With the recent sharp correction in the technology sector, the Fund has added to
its holdings in this area. During the summer of 1995, many technology company
stocks fell by roughly 40% to 50% or more from their highs. Approximately 10% of
the Smith Barney Fundamental Value Fund's assets are in technology stocks as
compared to the Fund's 5% portfolio weighting at the beginning of the calendar
year.
2
<PAGE>
The Fund also has an emphasis on real estate company stocks which includes Real
Estate Investment Trusts ("REITs") as well as those of real estate operating
companies. Many REITs have yields that are 150 basis points higher than the long
bond and the ratio of REITs yields to 10-Year Treasuries now stands at an
historical high. We believe this sector of the market should provide extremely
attractive returns over the next few years. The real estate sector accounts for
about 8% of the Fund's assets at this time.
In addition to the above mentioned sectors, other important ones for the Fund
during the period covered by this report included consumer cyclicals (13%) and
financial services (11%). In the first quarter of 1996, the Fund increased its
holdings in consumer cyclical stocks, which includes retailing and entertainment
issues, and reduced its holdings in financial services from an overweighted
position to an underweighted position compared to the S&P 500.
We believe the stock market will be much more volatile for the remainder of 1996
and the Smith Barney Fundamental Value Fund has been positioned accordingly. At
the end of the period covered by this report, the Fund had a cash position of
roughly 21% and approximately 30% of its assets were invested in REITs, energy
companies and gold stocks. These are the types of securities that tend to
perform well in turbulent markets.
In closing, thank you for investing in the Smith Barney Fundamental Value Fund.
We look forward to helping you achieve your financial goals.
Sincerely,
/s/ Heath B. McLendon /s/ John G. Goode
Heath B. McLendon John G. Goode
Chairman and Investment Officer
Chief Executive Officer
May 1, 1996
3
<PAGE>
Smith Barney
Fundamental Value Fund Inc.
<TABLE>
<CAPTION>
Historical Performance -- Class A Shares
Net Asset Value
--------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
3/31/96 $8.66 $8.98 $0.13 $0.37 10.66%+
- ---------------------------------------------------------------------------------------------------------
9/30/95 8.20 8.66 0.13 0.81 19.94
- ---------------------------------------------------------------------------------------------------------
9/30/94 8.42 8.20 0.08 0.53 4.92
- ---------------------------------------------------------------------------------------------------------
9/30/93 7.22 8.42 0.06 0.46 25.23
- ---------------------------------------------------------------------------------------------------------
9/30/92 6.47 7.22 0.14 0.00 14.01
- ---------------------------------------------------------------------------------------------------------
9/30/91 5.34 6.47 0.23 0.29 33.47
- ---------------------------------------------------------------------------------------------------------
9/30/90 7.15 5.34 0.18 0.57 (16.25)
- ---------------------------------------------------------------------------------------------------------
9/30/89 6.23 7.15 0.10 0.33 23.26
- ---------------------------------------------------------------------------------------------------------
9/30/88 8.36 6.23 0.26 1.03 (6.92)
- ---------------------------------------------------------------------------------------------------------
9/30/87 7.24 8.36 0.32 0.74 34.39
- ---------------------------------------------------------------------------------------------------------
9/30/86 6.91 7.24 0.19 0.34 12.94
=========================================================================================================
Total $1.82 $5.47
=========================================================================================================
</TABLE>
Historical Performance -- Class B Shares
<TABLE>
<CAPTION>
Net Asset Value
---------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distribution Returns(1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
3/31/96 $8.62 $8.97 $0.08 $0.37 10.26%+
- ----------------------------------------------------------------------------------------------------------
9/30/95 8.16 8.62 0.08 0.81 19.19
- ----------------------------------------------------------------------------------------------------------
9/30/94 8.37 8.16 0.02 0.53 4.21
- ----------------------------------------------------------------------------------------------------------
Inception*- 9/30/93 7.31 8.37 0.05 0.46 22.82+
==========================================================================================================
Total $0.23 $2.17
==========================================================================================================
</TABLE>
4
<PAGE>
Smith Barney
Fundamental Value Fund Inc.
<TABLE>
<CAPTION>
Historical Performance -- Class C Shares
Net Asset Value
---------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
3/31/96 $ 8.62 $ 8.97 $ 0.09 $ 0.37 10.26%+
- -----------------------------------------------------------------------------------------------------
9/30/95 8.16 8.62 0.09 0.81 19.33
- -----------------------------------------------------------------------------------------------------
9/30/94 8.37 8.16 0.02 0.53 4.24
- -----------------------------------------------------------------------------------------------------
Inception*- 9/30/93 8.15 8.37 0.00 0.00 2.70+
=====================================================================================================
Total $ 0.20 $ 1.71
=====================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance -- Class Y Shares
Net Asset Value
---------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Inception*- 3/31/96 $ 8.78 $ 8.98 $ 0.00 $ 0.00 2.28%+
=====================================================================================================
</TABLE>
IT IS THE FUND'S POLICY TO DISTRIBUTE DIVIDENDS AND CAPITAL GAINS, IF ANY,
ANNUALLY.
<TABLE>
<CAPTION>
Average Annual Total Return
Without Sales Charge(1)
------------------------------------------
Class A Class B Class C Class Y
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Six Months Ended 3/31/96+ 10.66% 10.26% 10.26% N/A
- -------------------------------------------------------------------------------------------------------------
Year Ended 3/31/96 27.27 26.39 26.39 N/A
- -------------------------------------------------------------------------------------------------------------
Five Years Ended 3/31/96 16.48 N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Ten Years Ended 3/31/96 12.92 N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Inception* through 3/31/96 13.99 16.52 13.85 2.28%+
=============================================================================================================
<CAPTION>
With Sales Charge(1)
Class A Class B Class C Class Y
<S> <C> <C> <C> <C>
Six Months Ended 3/31/96+ 5.08% 5.26% 9.26% N/A
- -------------------------------------------------------------------------------------------------------------
Year Ended 3/31/96 20.85 21.39 25.39 N/A
- -------------------------------------------------------------------------------------------------------------
Five Years Ended 3/31/96 15.27 N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Ten Years Ended 3/31/96 12.34 N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Inception* through 3/31/96 13.59 16.12 13.85 2.28%+
=============================================================================================================
</TABLE>
5
<PAGE>
Smith Barney
Fundamental Value Fund Inc.
<TABLE>
<CAPTION>
Cumulative Total Return
Without Sales Charge(1)
- ---------------------------------------------------------------
<S> <C>
Class A (3/31/86 through 3/31/96) 237.06%
- ---------------------------------------------------------------
Class B (Inception* through 3/31/96) 68.20
- ---------------------------------------------------------------
Class C (Inception* through 3/31/96) 40.85
- ---------------------------------------------------------------
Class Y (Inception* through 3/31/96) 2.28+
===============================================================
</TABLE>
(1) Assumes reinvestment of all dividends and capital gain distributions,
if any, at net asset value and does not reflect the deduction of the
applicable sales charge with respect to Class A shares or the
applicable contingent deferred sales charges ("CDSC") with respect to
Class B and C shares.
(2) Assumes reinvestment of all dividends and capital gain distributions,
if any, at net asset value. In addition, Class A shares reflect the
deduction of the maximum initial sales charge of 5.00%; Class B shares
reflect the deduction of a 5.00% CDSC, which applies if shares are
redeemed less than one year from initial purchase and declines
thereafter by 1.00% per year until no CDSC is incurred. Class C shares
reflect the deduction of a 1.00% CDSC, which applies if shares are
redeemed within the first year of purchase.
* Inception dates for Class A, B, C and Y shares are November 12, 1981,
November 6, 1992, August 10, 1993 and October 13, 1995, respectively.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
6
<PAGE>
Smith Barney
Fundamental Value Fund Inc.
Historical Performance (unaudited)
GROWTH OF $10,000 INVESTED IN CLASS A SHARES OF THE
SMITH BARNEY FUNDAMENTAL VALUE FUND INC.
VS. STANDARD & POOR'S 500 INDEX+
- --------------------------------------------------------------------------------
March 1986 -- March 1996
[ CHART ]
<TABLE>
<CAPTION>
Smith Barney
Fundamental Standard
Value Fund Inc. & Poors
- ------------------------------------------------
<S> <C> <C>
3/86 $ 9,497.00 $10,000.00
9/86 $ 9,342.00 $ 9,851.00
9/87 $12,555.00 $14,129.00
9/88 $11,686.00 $12,379.00
9/89 $14,404.00 $16,459.00
9/90 $12,064.00 $14,937.00
9/91 $16,101.00 $19,581.00
9/92 $18,356.00 $21,743.00
9/93 $22,987.00 $24,564.00
9/94 $24,117.00 $25,467.00
9/95 $28,926.00 $33,033.00
3/96 $32,010.00 $36,898.00
</TABLE>
+ Hypothetical illustration of $10,000 invested in Class A shares on March 31,
1986, assuming deduction of the maximum 5.00% sales charge at the time of
investment and reinvestment of dividends and capital gains, if any, at net
asset value through March 31, 1996, compared to the Standard & Poor's 500
Index. The index is composed of 500 widely held common stocks listed on the
New York Stock Exchange, American Stock Exchange and over-the-counter market.
The index is unmanaged and is not subject to the same management and trading
expenses of a mutual fund. The performance of the Fund's other classes may be
greater or less than the Class A shares' performance indicated on this chart,
depending on whether greater or lesser sales charges and fees were incurred
by shareholders investing in the other classes.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption value may be more or less than original cost. No adjustment has
been made for shareholder tax liability on dividends or capital gains.
7
<PAGE>
Smith Barney
Fundamental Value Fund Inc.
Portfolio Highlights (unaudited) March 31, 1996
Portfolio Breakdown
[ Pie Chart ]
Banking and Finance 9.2%
Energy & Energy Services 16.5%
Healthcare 3.8%
Manufacturing 3.7%
Natural Resources 5.5%
Real Estate 8.1%
Retail 3.3%
Entertainment 3.1%
Technology-Computers 3.8%
Telecommunications 3.8%
Transportation 7.0%
Warrants 1.1%
Foreign Common Stocks 1.3%
Repurchase Agreements 21.6%
Other Common Stocks 8.2%
<TABLE>
<CAPTION>
Percentage of
Top Ten Holdings Total Investments
- -------------------------------------------------------------------
<S> <C>
BankAmerica Corp. 2.7%
American Express Co. 2.6
AMR Corp. 2.5
Tele-Communications Inc., Class A Shares 2.4
Amoco Corp. 2.3
TriNet Corporate Realty Trust Inc. 2.3
Delta Airlines Inc., Series C, Convertible Preferred 2.3
Royal Dutch Petroleum Co. 2.3
Citicorp 2.2
Minnesota Mining and Manufacturing 2.1
</TABLE>
8
<PAGE>
Smith Barney
Fundamental Value Fund Inc.
<TABLE>
<CAPTION>
Schedule of Investments (unaudited) March 31, 1996
Shares Security Value
- ----------------------------------------------------------------------------------
<S> <C>
COMMON STOCKS -- 71.4%
Banking and Finance -- 9.2%
575,000 American Express Co. $28,390,625
375,000 BankAmerica Corp. 29,062,500
300,000 Citicorp 24,000,000
750,000 Great Western Financial Corp. 18,093,750
- ----------------------------------------------------------------------------------
99,546,875
- ----------------------------------------------------------------------------------
Beverages -- 0.9%
143,400 Anheuser-Busch Cos. Inc. 9,661,575
5,736 Earthgrains Co.+ 171,363
- ----------------------------------------------------------------------------------
9,832,938
- ----------------------------------------------------------------------------------
Chemicals -- 1.9%
250,000 E.I. du Pont de Nemours & Co. 20,750,000
- ----------------------------------------------------------------------------------
Energy and Energy Services -- 16.5%
150,000 Amerada Hess Corp. 8,250,000
350,000 Amoco Corp. 25,287,500
175,000 Baker Hughes Inc. 5,118,750
500,000 Diamond Shamrock Inc. 16,250,000
725,000 Dresser Industries Inc. 22,112,500
502,000 Enron Oil & Gas Co. 13,240,250
1,200,000 Enserch Exploration Inc.+ 12,450,000
169,600 FINA Inc., Class A Shares 8,204,400
208,000 Mitchell Energy & Development Corp., Class A Shares 3,588,000
642,000 Mitchell Energy & Development Corp., Class B Shares 11,074,500
1,500,000 Oryx Energy Co.+ 20,812,500
175,000 Royal Dutch Petroleum Co. 24,718,750
90,000 Schlumberger Ltd. 7,121,250
- ----------------------------------------------------------------------------------
178,228,400
- ----------------------------------------------------------------------------------
Entertainment -- 3.1%
300,000 Time Warner Inc. 12,262,500
500,000 Viacom Inc., Class B Shares+ 21,062,500
- ----------------------------------------------------------------------------------
33,325,000
- ----------------------------------------------------------------------------------
Healthcare -- 3.8%
658,000 Advanced Polymer Systems Inc.+ 5,264,000
200,000 ALZA Corp.+ 6,150,000
210,000 Aphton Corp.+ 3,150,000
510,000 Calgene Inc.+ 2,932,500
150,000 Merck & Co. Inc. 9,337,500
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
Smith Barney
Fundamental Value Fund Inc.
<TABLE>
<CAPTION>
Schedule of Investments (unaudited) (continued) March 31, 1996
Shares Security Value
- ----------------------------------------------------------------------------------
<S> <C>
Healthcare -- 3.8% (continued)
266 Molecular Biosystems Inc. $ 2,294
514,200 Value Health Inc. 14,140,500
- ----------------------------------------------------------------------------------
40,976,794
- ----------------------------------------------------------------------------------
Insurance -- 2.7%
162,500 American International Group Inc. 15,214,063
100,000 General Re Corp. 14,575,000
- ----------------------------------------------------------------------------------
29,789,063
- ----------------------------------------------------------------------------------
Manufacturing -- 3.2%
1,343,000 Interlake Corp.+ 2,518,125
357,000 Minnesota Mining and Manufacturing 23,160,375
450,000 Westinghouse Electric Corp. 8,662,500
- ----------------------------------------------------------------------------------
34,341,000
- ----------------------------------------------------------------------------------
Natural Resources -- 4.9%
412,300 Amax Gold Inc.+ 2,834,563
1,250,000 Asia Pacific Resource International, Class A Shares+ 8,437,500
100,000 Cyprus Amax Minerals Co. 2,825,000
170,000 Driefontein Consolidated Ltd. ADR 2,698,750
1,098,700 Golden Star Resources Ltd.+ 15,244,463
400,000 Homestake Mining Co. 7,750,000
443,700 Nord Resources Corp.+ 942,863
804,400 Santa Fe Pacific Gold Corp. 12,870,400
- ----------------------------------------------------------------------------------
53,603,539
- ----------------------------------------------------------------------------------
Real Estate -- 6.9%
850,000 Del Webb Corp. 15,618,750
703,200 Irvine Apartment Communities Inc. 13,448,700
829,200 Spieker Properties Inc. 21,040,950
850,000 TriNet Corporate Realty Trust Inc. 24,437,500
- ----------------------------------------------------------------------------------
74,545,900
- ----------------------------------------------------------------------------------
Retail -- 3.3%
400,000 Sears Roebuck & Co. 19,500,000
602,000 Toys 'R' Us Inc.+ 16,254,000
- ----------------------------------------------------------------------------------
35,754,000
- ----------------------------------------------------------------------------------
Technology-Computers -- 3.8%
600,000 Adobe Systems Inc. 19,350,000
200,000 International Business Machines Corp. 22,225,000
- ----------------------------------------------------------------------------------
41,575,000
- ----------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
Smith Barney
Fundamental Value Fund Inc.
<TABLE>
<CAPTION>
Schedule of Investments (unaudited) (continued) March 31, 1996
Shares Security Value
- ------------------------------------------------------------------------------------------
<S> <C>
Technology-Semiconductors -- 2.7%
125,000 Intel Corp.+ $ 7,109,375
200,000 Motorola Inc. 10,600,000
225,000 Texas Instruments Inc. 11,446,875
- ------------------------------------------------------------------------------------------
29,156,250
- ------------------------------------------------------------------------------------------
Telecommunications -- 3.8%
664,900 Comsat Corp. 15,542,037
1,400,000 Tele-Communications Inc., Class A Shares+ 25,987,500
- ------------------------------------------------------------------------------------------
41,529,537
- ------------------------------------------------------------------------------------------
Transportation -- 4.7%
300,000 AMR Corp.+ 26,850,000
2,500,000 Fruehauf Trailer Corp.+ 1,718,750
425,000 General Motors Corp. 22,631,250
- ------------------------------------------------------------------------------------------
51,200,000
- ------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost -- $616,190,598) 774,154,296
==========================================================================================
CONVERTIBLE PREFERRED STOCKS -- 4.6%
Manufacturing -- 0.5%
4,000 Optical Coating Laboratory, Inc., Exchange 8.00%++ 5,428,571
- ------------------------------------------------------------------------------------------
Natural Resources -- 0.6%
50,000 Amax Gold Inc., Series B, Exchange 3.75% 2,862,500
128,000 American Exploration Co., Series C, Exchange 9.00% 3,584,000
- ------------------------------------------------------------------------------------------
6,446,500
- ------------------------------------------------------------------------------------------
Real Estate -- 1.2%
250,000 Rouse Co., Series A, Exchange 6.50% 13,593,750
- ------------------------------------------------------------------------------------------
Transportation -- 2.3%
400,000 Delta Airlines Inc., Series C, Exchange 3.50% 24,450,000
- ------------------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost -- $42,273,292) 49,918,821
==========================================================================================
FOREIGN COMMON STOCKS -- 1.3%
1,860,000 Cifra SA, Class B Shares 2,354,202
100,000 Grupo Iusacell S.A. ADR, Series L 1,087,500
903,000 Komatsu Ltd. 8,057,668
780,000 Pan African Resources Corp. 803,556
110,600 Western Areas Gold Mining ADR 1,807,053
- ------------------------------------------------------------------------------------------
TOTAL FOREIGN COMMON STOCKS
(Cost -- $13,244,841) 14,109,979
==========================================================================================
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
Smith Barney
Fundamental Value Fund Inc.
<TABLE>
<CAPTION>
Schedule of Investments (unaudited) (continued) March 31, 1996
Shares Security Value
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
WARRANTS -- 1.1%
1,300,000 Morgan Stanley Nikkei $225, Expire 8/15/97 $ 12,268,750
160,000 Nelson Gold Corp., Expire 4/30/96 2,348
571,429 UnionFed Financial Corp., Expire 12/29/98++ 0
- ------------------------------------------------------------------------------------------------
TOTAL WARRANTS
(Cost -- $7,376,850) 12,271,098
================================================================================================
SUB-TOTAL INVESTMENTS
(Cost -- $679,085,581) 850,454,194
================================================================================================
<CAPTION>
Face
Amount Security Value
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENTS -- 21.6%
$220,000,000 First Boston, 5.30% due 4/1/96;
Proceeds at maturity -- $220,097,105; (Fully
collateralized by U.S. Treasury Bills due 12/12/96;
Market value -- $224,495,500) 220,000,000
13,463,000 Citibank, 5.375% due 4/1/96;
Proceeds at maturity -- $13,469,027; (Fully
collateralized by U.S. Treasury Notes, 6.25% due 8/31/96;
Market value -- $13,734,591) 13,463,000
- ------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost -- $233,463,000) 233,463,000
================================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $912,548,581*) $1,083,917,194
================================================================================================
</TABLE>
+ Non-income producing security.
++ Illiquid security valued by the Board of Directors (See Note 10).
++ Restricted security (See Note 9).
* Aggregate cost for Federal income tax purposes is substantially the
same.
See Notes to Financial Statements.
12
<PAGE>
Smith Barney
Fundamental Value Fund Inc.
<TABLE>
<CAPTION>
Statement of Assets and Liabilities (unaudited) March 31, 1996
<S> <C>
ASSETS:
Investments, at value (Cost--$679,085,581) $ 850,454,194
Repurchase agreements (Cost--$233,463,000) 233,463,000
Receivable for securities sold 29,494,338
Receivable for Fund shares sold 2,488,030
Receivable for open forward foreign currency contracts 104,582
Dividends and interest receivable 1,754,822
- ------------------------------------------------------------------------------------------------
Total Assets 1,117,758,966
- ------------------------------------------------------------------------------------------------
LIABILITIES:
Investment advisory fees payable 508,334
Distribution fees payable 212,699
Administration fees payable 184,848
Accrued expenses 1,763,755
- ------------------------------------------------------------------------------------------------
Total Liabilities 2,669,636
- ------------------------------------------------------------------------------------------------
Total Net Assets $ 1,115,089,330
================================================================================================
NET ASSETS:
Par value of capital shares $ 124,240
Capital paid in excess of par value 910,351,610
Undistributed net investment income 4,539,178
Accumulated net realized gain on security transactions and options 28,618,005
Net unrealized appreciation of investments and foreign currencies 171,456,297
- ------------------------------------------------------------------------------------------------
Total Net Assets $ 1,115,089,330
================================================================================================
Shares Outstanding:
Class A 48,410,606
- ------------------------------------------------------------------------------------------------
Class B 71,183,407
- ------------------------------------------------------------------------------------------------
Class C 3,932,803
- ------------------------------------------------------------------------------------------------
Class Y 713,365
- ------------------------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $ 8.98
- ------------------------------------------------------------------------------------------------
Class B * $ 8.97
- ------------------------------------------------------------------------------------------------
Class C ** $ 8.97
- ------------------------------------------------------------------------------------------------
Class Y (and redemption price) $ 8.98
Class A Maximium Public Offering Price Per Share
(net asset value plus 5.26% of net asset value per share) $ 9.45
================================================================================================
</TABLE>
* Redemption price is NAV of Class B shares reduced by a 5.00% CDSC if shares
are redeemed less than one year from initial purchase (See Note 3).
** Redemption price is NAV of Class C shares reduced by a 1.00% CDSC if shares
are redeemed within the first year of purchase.
See Notes to Financial Statements.
13
<PAGE>
Smith Barney
Fundamental Value Fund Inc.
<TABLE>
<CAPTION>
Statement of Operations (unaudited)
For the Six Months Ended March 31, 1996
<S> <C>
INVESTMENT INCOME:
Dividends $ 9,244,848
Interest 5,035,750
- -------------------------------------------------------------------------------
Total Investment Income 14,280,598
- -------------------------------------------------------------------------------
EXPENSES:
Distribution fees (Note 3) 3,520,168
Investment advisory fees (Note 3) 2,764,961
Administration fees (Note 3) 1,005,440
Shareholder and system servicing fees 582,500
Shareholder communications 250,000
Registration fees 75,000
Audit and legal 57,050
Custody 36,000
Directors' fees 18,000
Other 489,609
- -------------------------------------------------------------------------------
Total Expenses 8,798,728
- -------------------------------------------------------------------------------
Net Investment Income 5,481,870
- -------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS,
OPTIONS AND FOREIGN CURRENCIES (NOTES 5 AND 6):
Realized Gain (Loss) From:
Security transactions (excluding short-term securities) 40,635,614
Options written (246,249)
Foreign currency transactions 5,691,470
- -------------------------------------------------------------------------------
Net Realized Gain 46,080,835
- -------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments
and Foreign Currencies:
Beginning of period 124,058,138
End of period 171,456,297
- -------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 47,398,159
- -------------------------------------------------------------------------------
Net Gain on Investments, Options and Foreign Currencies 93,478,994
- -------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 98,960,864
===============================================================================
</TABLE>
See Notes to Financial Statements.
14
<PAGE>
Smith Barney
Fundamental Value Fund Inc.
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
For the Six Months Ended March 31, 1996 (unaudited)
and the Year Ended September 30, 1995
1996 1995
- ----------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 5,481,870 $ 13,250,072
Net realized gain 46,080,835 30,805,367
Increase in net unrealized appreciation 47,398,159 103,644,618
- ----------------------------------------------------------------------------------------
Increase in Net Assets From Operations 98,960,864 147,700,057
- ----------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income (18,028,339) (7,661,803)
Net realized gains (41,415,528) (30,805,367)
Overdistribution of net realized gains -- (32,962,521)
- ----------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (59,443,867) (71,429,691)
- ----------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 7):
Net proceeds from sales 164,261,972 275,253,479
Net asset value of shares issued in connection
with the transfer of The Advisors Fund L.P.
net assets (Note 8) -- 46,719,996
Net asset value of shares issued for reinvestment
of dividends 57,520,991 69,267,663
Cost of shares reacquired (93,079,730) (148,313,554)
- ----------------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 128,703,233 242,927,584
- ----------------------------------------------------------------------------------------
Increase in Net Assets 168,220,230 319,197,950
NET ASSETS:
Beginning of period 946,869,100 627,671,150
- ----------------------------------------------------------------------------------------
End of period* $1,115,089,330 $ 946,869,100
========================================================================================
* Includes undistributed net investment income of: $ 4,539,178 $ 11,394,177
========================================================================================
</TABLE>
See Notes to Financial Statements.
15
<PAGE>
Smith Barney
Fundamental Value Fund Inc.
Notes to Financial Statements (unaudited)
1. Significant Accounting Policies
Smith Barney Fundamental Value Fund Inc. ("Fund"), a Maryland corporation,
is registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company.
The significant accounting policies consistently followed by the Fund are:
(a) securities transactions are accounted for on trade date; (b) securities
traded on national securities markets are valued at the closing prices on such
markets; securities for which no sales price was reported and U.S. Government
and Agency Obligations are valued at the mean between bid and ask price; (c)
short-term investments that have a maturity of more than 60 days are valued at
prices based on market quotations for securities of similar type, yield and
maturity; (d) short-term investments and securities maturing within 60 days are
valued at cost plus accreted discount, or minus amortized premium, as
applicable; (e) dividend income is recorded on the ex-dividend date and interest
income is recorded on the accrual basis; (f) realized gains or losses on the
sale of securities are calculated based on the specific identification method;
(g) direct expenses are charged to each class; management fees and general fund
expenses are allocated on the basis of relative net assets; (h) dividends and
distributions to shareholders are recorded by the Fund on the ex-dividend date;
(i) the accounting records of the Fund are maintained in U.S. dollars. All
assets and liabilities denominated in foreign currencies are translated into
U.S. dollars based on the rate of exchange of such currencies against U.S.
dollars on the date of valuation. Purchases and sales of securities, and income
and expenses are translated at the rate of exchange quoted on the respective
date that such transactions are recorded. Differences between income and expense
amounts recorded and collected or paid are adjusted when reported by the
custodian bank; (j) the Fund intends to comply with the applicable provisions of
the Internal Revenue Code of 1986, as amended, pertaining to regulated
investment companies and to make distributions of taxable income sufficient to
relieve it from substantially all Federal income and excise taxes; and (k)
estimates and assumptions are required to be made regarding assets, liabilities
and changes in net assets resulting from operations when financial statements
are prepared. Changes in the economic environment, financial markets and any
other parameters used in determining these estimates could cause actual results
to differ from these amounts.
16
<PAGE>
Smith Barney
Fundamental Value Fund Inc.
Notes to Financial Statements (unaudited) (continued)
In addition, the Fund may enter into forward contracts in order to hedge
against foreign currency risk. These contracts are marked-to-market daily, by
recognizing the difference between the contract exchange rate and the current
market rate as an unrealized gain or loss. Realized gains or losses are
recognized when contracts are settled.
2. Repurchase Agreements
The Fund purchases, and its custodian takes possession of, U.S. Government
securities from banks and securities dealers subject to agreements to resell the
securities to the sellers at a future date, (generally, the next business day)
at an agreed-upon higher repurchase price. The Fund requires continual
maintenance of the market value of the collateral in amounts at least equal to
the repurchase price.
3. Management Agreement and Other Transactions
Smith Barney Mutual Funds Management Inc. ("SBMFM"), a subsidiary of Smith
Barney Holdings Inc. ("SBH"), acts as investment adviser of the Fund. The Fund
pays SBMFM an advisory fee calculated at annual rate of 0.55% of the average
daily net assets. This fee is calculated daily and paid monthly.
SBMFM also serves as administrator for the Fund and is paid a fee
calculated at an annual rate of 0.20% of the average daily net assets. This fee
is calculated daily and paid monthly.
Smith Barney Inc. ("SB"), another subsidiary of SBH, acts as distributor of
Fund shares. For the six months ended March 31, 1996,
SB received brokerage commissions of $74,904 and sales charges of approximately
$535,000 on sales of the Fund's Class A shares.
There is a contingent deferred sales charge ("CDSC") of 5.00% on Class B
shares, which applies if redemption occurs less than one year from initial
purchase and declines thereafter by 1.00% per year until no CDSC is incurred.
Class C shares have a 1.00% CDSC, which applies if redemption occurs within the
first year of purchase. In addition, Class A shares have a 1.00% CDSC, which
applies if redemption occurs within the first year of purchase. This CDSC only
applies to those purchases of Class A shares, which, when combined with current
holdings of Class A
17
<PAGE>
Smith Barney
Fundamental Value Fund Inc.
Notes to Financial Statements (unaudited) (continued)
shares equal or exceed $500,000 in the aggregate. These purchases do not incur
an initial sales charge. For the six months ended March 31, 1996, CDSCs paid to
SB were:
<TABLE>
<CAPTION>
Class A Class B Class C
- ---------------------------------------
<S> <C> <C> <C>
CDSCs $2,000 $409,000 $4,000
=======================================
</TABLE>
Pursuant to a Distribution Plan, the Fund pays a service fee with respect
to its Class A, B and C shares calculated at an annual rate of 0.25% of the
average daily net assets for each respective class. The Fund also pays a
distribution fee with respect to its Class B and C shares calculated at an
annual rate of 0.75% of the average daily net assets of each class,
respectively. For the six months ended March 31, 1996, total Distribution Plan
fees incurred were:
<TABLE>
<CAPTION>
Class A Class B Class C
- -------------------------------------------------------
<S> <C> <C> <C>
Distribution Plan Fees $500,867 $2,881,719 $137,582
=======================================================
</TABLE>
All officers and one Director of the Fund are employees of SB.
4. Investments
During the six months ended March 31, 1996, the aggregate cost of purchases
and proceeds from sales of investments (including maturities, but excluding
short-term investments) were as follows:
<TABLE>
<S> <C>
Purchases $195,686,326
- ----------------------------
Sales 233,312,422
============================
</TABLE>
At March 31, 1996, the gross unrealized appreciation and depreciation of
investments for Federal income tax purposes were approximately as follows:
<TABLE>
<S> <C>
Gross unrealized appreciation $185,334,162
Gross unrealized depreciation (13,965,549)
- -------------------------------------------
Net unrealized appreciation $171,368,613
===========================================
</TABLE>
18
<PAGE>
Smith Barney
Fundamental Value Fund Inc.
Notes to Financial Statements (unaudited) (continued)
5. Forward Foreign Currency Contracts
As of March 31, 1996, the Fund had open forward foreign currency contracts
as described below. The Fund bears the market risk that arises from changes in
foreign currency exchange rates. The unrealized gain (loss) on the contracts
reflected in the accompanying financial statement are as follows:
<TABLE>
<CAPTION>
Local Market Settlement Unrealized
Foreign Currency Currency Value Date Gain (Loss)
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
To Sell:
Japanese Yen 6,512,856,193 $61,234,364 4/2 - 6/24/96 $ 350,665
- ---------------------------------------------------------------------------------------
To Buy:
Japanese Yen 3,098,688,870 29,512,589 4/30 - 6/24/96 (246,083)
- ---------------------------------------------------------------------------------------
Total Market Value and
Unrealized Gain on Forward
Foreign Currency Contracts $90,746,953 $104,582
=======================================================================================
</TABLE>
6. Option Contracts
Premiums paid when put or call options are purchased by the Fund, represent
investments, which are marked-to-market daily. When a purchased option expires,
the Fund will realize a loss in the amount of the premium paid. When the Fund
enters into a closing sales transaction, the Fund will realize a gain or loss
depending on whether the proceeds from the closing sales transaction are greater
or less than the premium paid for the option. When the Fund exercises a put
option, it will realize a gain or loss from the sale of the underlying security
and the proceeds from such sale will be decreased by the premium originally
paid. When the Fund exercises a call option, the cost of the security which the
Fund purchases upon exercise will be increased by the premium originally paid.
19
<PAGE>
Smith Barney
Fundamental Value Fund Inc.
Notes to Financial Statements (unaudited) (continued)
When a Fund writes a call or put option, an amount equal to the premium
received by the Fund is recorded as a liability, the value of which is marked-
to-market daily. When a written option expires, the Fund realizes a gain equal
to the amount of the premium received. When the Fund enters into a closing
purchase transaction, the Fund realizes a gain (or loss if the cost of the
closing purchase transaction exceeds the premium received when the option was
sold) without regard to any unrealized gain or loss on the underlying security,
and the liability related to such option is eliminated. When a call option is
exercised the cost of the security sold will be increased by the premium
originally received. When a put option is exercised, the amount of the premium
originally received will reduce the cost of the security which the Fund
purchased upon exercise.
The following option transactions occurred during the six months ended
March 31, 1996:
<TABLE>
<CAPTION>
Number of
Premiums Contracts
- ------------------------------------------------------------------------------------
<S> <C> <C>
Options written, outstanding at September 30, 1995 $ -- --
Options written during the six months ended March 31, 1996 2,196,485 5,800
Options cancelled in closing purchase transactions (2,048,966) (4,250)
Options expired (147,519) (1,550)
- ------------------------------------------------------------------------------------
Options written, outstanding at March 31, 1996 $ -- --
====================================================================================
</TABLE>
7. Capital Shares
At March 31, 1996, the Fund had 1,000,000,000 shares of capital stock
authorized with a par value of $0.001 per share. The Fund has the ability to
issue multiple classes of shares. Each share of a class represents an identical
interest in the Fund and has the same rights, except that each class bears
certain expenses specifically related to the distribution of its shares.
At March 31, 1996, total paid-in capital amounted to the following for each
class:
<TABLE>
<CAPTION>
Class A Class B Class C Class Y
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total Paid-in Capital $356,601,009 $515,511,109 $32,062,255 $6,301,477
==========================================================================
</TABLE>
20
<PAGE>
Smith Barney
Fundamental Value Fund Inc.
Notes to Financial Statements (unaudited) (continued)
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
March 31, 1996* September 30, 1995
-------------------------- ----------------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold 4,494,356 $ 39,714,887 8,923,632 $ 69,815,825
Net asset value of shares
issued in connection with
the transfer of Advisors
Fund L.P. net assets (Note
8) -- -- 6,431,222 44,760,999
Shares issued on
reinvestment 2,934,418 24,876,738 4,305,816 29,667,069
Shares redeemed (3,592,211) (30,945,875) (7,371,519) (57,261,926)
- --------------------------------------------------------------------------------------------------
Net Increase 3,836,563 $ 33,645,750 12,289,151 $ 86,981,967
==================================================================================================
Class B
Shares sold 11,238,643 $ 98,590,181 23,751,080 $185,650,163
Net asset value of shares
issued in connection with
the transfer of Advisors
Fund L.P. net assets (Note
8) -- -- 281,465 1,958,997
Shares issued on
reinvestment 3,695,941 31,218,519 5,698,862 39,265,165
Shares redeemed (6,203,735) (53,398,529) (11,543,825) (88,999,697)
- --------------------------------------------------------------------------------------------------
Net Increase 8,730,849 $ 76,410,171 18,187,582 $137,874,628
==================================================================================================
Class C
Shares sold 1,544,230 $ 13,572,709 2,540,546 $ 19,787,491
Shares issued on
reinvestment 168,804 1,425,734 48,683 335,429
Shares redeemed (309,476) (2,652,608) (262,289) (2,051,931)
- --------------------------------------------------------------------------------------------------
Net Increase 1,403,558 $ 12,345,835 2,326,940 $18,070,989
==================================================================================================
Class Y
Shares sold 1,430,000 $ 12,384,195 -- --
Shares issued on
reinvestment -- -- -- --
Shares redeemed (716,635) (6,082,718) -- --
- --------------------------------------------------------------------------------------------------
Net Increase 713,365 $ 6,301,477 -- --
==================================================================================================
</TABLE>
* For Class Y shares, transactions are for the period from October 13, 1995
(inception date) to March 31, 1996.
21
<PAGE>
Smith Barney
Fundamental Value Fund Inc.
Notes to Financial Statements (unaudited) (continued)
8. Transfer of Net Assets
On December 16, 1994, the Fund acquired the assets and certain liabilities
of The Advisors Fund, L.P. ("Advisors Fund"), pursuant to a taxable Plan of Sale
and Liquidation approved by the Advisors Fund shareholders on November 29, 1994.
Total shares issued by the Fund and the total net assets of the Advisors Fund on
the date of the transfer were as follows:
<TABLE>
<CAPTION>
Total Net
Shares Assets of Total Net
Issued by Acquired Assets of
Acquired Fund the Fund Fund the Fund
- -------------------------------------------------------
<S> <C> <C> <C>
Advisors Fund 6,712,687 $46,719,996 $622,030,355
=======================================================
</TABLE>
The total net assets of the Fund immediately after the acquisition of the
Advisors Fund was $668,750,351.
9. Restricted Security
The following security held by the Fund on March 31, 1996, is a restricted
security under the Federal securities laws and is valued at fair value in good
faith by, or under the direction of, the Fund's Board of Directors taking into
consideration such factors as the Board deems appropriate.
<TABLE>
<CAPTION>
Value Percentage
Per Fair of Total Acquisition
Security Shares Unit Value Net Assets Cost Date
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Warrants:
UnionFed Financial
Corp., Expire 12/29/98 571,429 $0.00 $0 0.00% $399,600 10/13/93
=========================================================================================
</TABLE>
The Fund may purchase securities which are subject to legal or contractual
restrictions on resale if not more than 15% of the value of the Fund's total
assets would be invested in such securities or in securities for which there is
no readily available market. In purchasing securities which could not be sold by
the Fund without registration under the Securities Act of 1933, as amended, the
Fund will endeavor to obtain the right to registration at the expense of the
issuer. There generally will be a lapse of time between the decision by the Fund
to sell any such security and the registration of the security permitting sale.
During any such period, the security will be subject to market fluctuations.
22
<PAGE>
Smith Barney
Fundamental Value Fund Inc.
Notes to Financial Statements (unaudited) (continued)
10. Illiquid Security Valued by the Board of Directors
The following security held by the Fund on March 31, 1996, is illiquid and
valued at fair value in good faith by, or under the direction of, the Fund's
Board of Directors taking into consideration such factors as the Board deems
appropriate.
<TABLE>
<CAPTION>
Value Percentage
Per Fair of Total Acquisition
Security Shares Unit Value Net Assets Cost Date
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Convertible
Preferred Stock:
Optical Coating
Laboratory Inc. 4,000 $1,357.14 $5,428,571 0.49% $4,000,000 5/1/95
======================================================================================
</TABLE>
23
<PAGE>
Smith Barney
Fundamental Value Fund Inc.
Financial Highlights
For a share of each class of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Class A Shares 1996(1) 1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 8.66 $ 8.20 $ 8.42 $ 7.22 $ 6.47 $ 5.34
- -------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.05 0.17 0.09 0.07 0.11 0.15
Net realized and unrealized gain 0.77 1.23 0.30 1.65 0.78 1.50
- -------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.82 1.40 0.39 1.72 0.89 1.65
- -------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.13) (0.13) (0.08) (0.06) (0.14) (0.23)
Net realized gains (0.37) (0.39) (0.53) (0.46) -- (0.29)
Overdistribution of net realized gains -- (0.42) -- -- -- --
- -------------------------------------------------------------------------------------------------------------
Total Distributions (0.50) (0.94) (0.61) (0.52) (0.14) (0.52)
- -------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 8.98 $ 8.66 $ 8.20 $ 8.42 $ 7.22 $ 6.47
- -------------------------------------------------------------------------------------------------------------
Total Return 10.66%++ 19.94% 4.92% 25.23% 14.01% 33.47%
- -------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $434,917 $386,297 $264,765 $123,118 $77,842 $59,358
- -------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.32%+ 1.34% 1.30% 1.45% 1.28% 1.30%
Net investment income 2.68+ 2.19 1.90 1.00 1.57 2.24
- -------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 24% 45% 108% 111% 142% 116%
=============================================================================================================
Average commissions paid on
equity security transactions $ 0.05 $ 0.05 -- -- -- --
=============================================================================================================
</TABLE>
(1) For the six months ended March 31, 1996 (unaudited).
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
24
<PAGE>
Smith Barney
Fundamental Value Fund Inc.
Financial Highlights (continued)
For a share of each class of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Class B Shares 1996(1) 1995 1994 1993(2)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 8.62 $ 8.16 $ 8.37 $ 7.31
- ---------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.03 0.12 0.09 0.05
Net realized and unrealized gain 0.77 1.23 0.25 1.52
- ---------------------------------------------------------------------------------------------
Total Income From Operations 0.80 1.35 0.34 1.57
- ---------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.08) (0.08) (0.02) (0.05)
Net realized gains (0.37) (0.39) (0.53) (0.46)
Overdistribution of net realized gains -- (0.42) -- --
- ---------------------------------------------------------------------------------------------
Total Distributions (0.45) (0.89) (0.55) (0.51)
- ---------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 8.97 $ 8.62 $ 8.16 $ 8.37
- ---------------------------------------------------------------------------------------------
Total Return 10.26%++ 19.19% 4.21% 22.82%++
- ---------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $ 638,486 $538,759 $361,254 $ 114,146
- ---------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 2.06%+ 2.09% 2.06% 2.26%+
Net investment income 1.91+ 1.44 1.13 0.19+
- ---------------------------------------------------------------------------------------------
Portfolio Turnover Rate 24% 45% 108% 111%
=============================================================================================
Average commissions paid on
equity security transactions $ 0.05 $ 0.05 -- --
=============================================================================================
</TABLE>
(1) For the six months ended March 31, 1996 (unaudited).
(2) For the period from November 6, 1992 (inception date) to September 30,
1993.
++ Total return is not annualized, as the result may not be representative of
the total return for the year.
+ Annualized.
25
<PAGE>
Smith Barney
Fundamental Value Fund Inc.
Financial Highlights (continued)
For a share of each class of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Class C Shares 1996(1) 1995 1994 1993(2)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 8.62 $ 8.16 $ 8.37 $ 8.15
- -----------------------------------------------------------------------------------------
Income From Operations
Net investment income 0.03 0.12 0.05 0.00
Net realized and unrealized gain 0.78 1.24 0.29 0.22
- -----------------------------------------------------------------------------------------
Total Income From Operations 0.81 1.36 0.34 0.22
- -----------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.09) (0.09) (0.02) --
Net realized gains (0.37) (0.39) (0.53) --
Overdistribution of net realized gains -- (0.42) -- --
- -----------------------------------------------------------------------------------------
Total Distributions (0.46) (0.90) (0.55) --
- -----------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 8.97 $ 8.62 $ 8.16 $ 8.37
- -----------------------------------------------------------------------------------------
Total Return 10.26%++ 19.33% 4.24% 2.70%++
- -----------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $ 35,278 $21,812 $1,652 $ 308
- -----------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 2.06%+ 2.09% 2.23% 2.25%+
Net investment income 1.90+ 1.44 0.96 0.20+
- -----------------------------------------------------------------------------------------
Portfolio Turnover Rate 24% 45% 108% 111%
=========================================================================================
Average commissions paid on
equity security transactions $ 0.05 $ 0.05 -- --
=========================================================================================
</TABLE>
(1) For the six months ended March 31, 1996 (unaudited).
(2) For the period from August 10, 1993 (inception date) to September 30, 1993.
++ Total return is not annualized, as the result may not be representative of
the total return for the year.
+ Annualized.
26
<PAGE>
Smith Barney
Fundamental Value Fund Inc.
Financial Highlights (continued)
For a share of each class of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Class Y Shares 1996(1)
- --------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period $ 8.78
- --------------------------------------------------
Income From Operations:
Net investment income 0.06
Net realized and unrealized gain 0.14
- --------------------------------------------------
Total Income From Operations 0.20
- --------------------------------------------------
Less Distributions From:
Net investment income --
- --------------------------------------------------
Total Distributions --
- --------------------------------------------------
Net Asset Value, End of Period $ 8.98
- --------------------------------------------------
Total Return 2.28%++
- --------------------------------------------------
Net Assets, End of Period (000s) $ 6,408
- --------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.05%+
Net investment income 3.10+
- --------------------------------------------------
Portfolio Turnover Rate 24%
==================================================
Average commissions paid on
equity security transactions $ 0.05
==================================================
</TABLE>
(1) For the period from October 13, 1995 (inception date) to March 31, 1996
(unaudited).
++ Total return is not annualized, as the result may not be representative of
the total return for the year.
+ Annualized.
27
<PAGE>
[This page intentionally left blank]
28
<PAGE>
Smith Barney
Fundamental
Value
Fund Inc.
Directors
Lloyd J. Andrews
Robert M. Frayn, Jr.
Leon P. Gardner
Howard J. Johnson
David E. Maryatt
Heath B. McLendon, Chairman
Frederick O. Paulsell
Jerry A. Viscione
Julie W. Weston
Officers
Heath B. McLendon
Chief Executive Officer
Jessica M. Bibliowicz
President
Lewis E. Daidone
Senior Vice President
and Treasurer
John G. Goode
Vice President and
Investment Officer
Peter Hable
Investment Officer
Thomas M. Reynolds
Controller
Christina T. Sydor
Secretary
[LOGO]
SMITH BARNEY
- ------------
A Member of Travelers Group [LOGO]
Investment Adviser and Administrator
Smith Barney Mutual
Funds Management Inc.
Distributor
Smith Barney Inc
Custodian
PNC Bank
Shareholder
Servicing Agent
First Data Investor Services Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is submitted for the general information of the shareholders of
Smith Barney Fundamental Value Fund Inc. It is not authorized for distribution
to prospective investors unless accompanied or preceded by an effective
Prospectus for the Fund, which contains information concerning the Fund's
investment policies and expenses as well as other pertinent information.
Smith Barney Fundamental
Value Fund Inc.
388 Greenwich Street
New York, New York 10013
FD01118 5/96
