<PAGE>
[GRAPHIC]
[GRAPHIC] Smith Barney
Fundamental
Value Fund Inc.
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SEMI-ANNUAL REPORT
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March 31, 1999
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.(R)
<PAGE>
Smith Barney Fundamental
Value Fund Inc.
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The Smith Barney Fundamental Value Fund Inc. seeks long-term growth of capital
with current income as a secondary objective. The Fund invests primarily in the
stocks of companies believed to be undervalued and to have above-average capital
growth potential.
Smith Barney Fundamental Value Fund Inc.
Average Annual Total Returns
March 31, 1999
Without Sales Charges(1)
---------------------------------------
Class A Class B Class L
====================================================================
Six Months+ 26.96% 26.49% 26.39%
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One-Year 13.95 13.15 13.06
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Five-Year 17.48 16.63 16.64
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Ten-Year 15.32 N/A N/A
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Since Inception++ 14.51 16.33 15.04
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With Sales Charges(2)
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Class A Class B Class L
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Six Months+ 20.61% 21.49% 24.14%
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One-Year 8.25 8.15 10.96
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Five-Year 16.28 16.52 16.40
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Ten-Year 14.73 N/A N/A
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Since Inception++ 14.17 16.33 14.84
====================================================================
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to
Class B and L shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charges of 5.00% and 1.00%,
respectively. Class B shares reflect the deduction of a 5.00% CDSC, which
applies if shares are redeemed within one year from purchase. Thereafter,
the CDSC declines by 1.00% per year until no CDSC is incurred. Class L
shares reflect the deduction of a 1.00% CDSC, which applies if shares are
redeemed within the first year of purchase. All figures represent past
performance and are not a guarantee of future results. Investment returns
and principal value will fluctuate, and redemption value may be more or
less than the original cost.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
++ Inception dates for Class A, B and L shares are November 12, 1981,
November 6, 1992 and August 10, 1993, respectively.
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FUND HIGHLIGHT
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We believe portfolios with representation in small and mid-cap sized companies
may outperform large capitalization only portfolios in the next three to five
years. The value disparity is now so extreme in favor of smaller companies that
a variety of forces are likely to cause many of them to perform well in the
coming years. Some are inexpensive enough that they will be acquired or taken
private. Many may use excess cash flows to repurchase shares. It will take only
modest money flows to cause this sector of the market to appreciate
significantly.
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NASDAQ SYMBOL
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Class A SHFVX
Class B SFVBX
Class L SFVCX
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WHAT'S INSIDE
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Shareholder Letter.............................................1
Historical Performance.........................................4
Smith Barney Fundamental Value Fund Inc.
at a Glance....................................................6
Schedule of Investments........................................7
Statement of Assets and Liabilities...........................11
Statement of Operations.......................................12
Statements of Changes in Net Assets...........................13
Notes to Financial Statements.................................14
Financial Highlights..........................................19
<PAGE>
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Shareholder Letter
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[PHOTO] [PHOTO]
HEATH B. MCLENDON JOHN G. GOODE
Chairman Vice President and
Investment Officer
Dear Shareholder:
We are pleased to provide the semi-annual report for the Smith Barney
Fundamental Value Fund Inc. ("Fund") for the period ended March 31, 1999. In
this report, we have summarized the period's prevailing economic and market
conditions and outlined our portfolio strategy. A detailed summary of the Fund's
performance can be found in the appropriate sections that follow.
Performance Update
During the six months ended March 31, 1999, the Fund's Class A shares
appreciated 26.96% compared with 27.34% for the S&P 500 Index ("S&P 500"). (The
S&P 500 Index is 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. Investors cannot invest directly in an Index.)
We consider this to be solid performance. For example, in 1998, the return for
the S&P 500 was about 15% if the 10 best performers were excluded rather than
28.6%. The median return for the S&P 500 index was only about 6%.
Since April, 1998, the advance-decline line for the New York stock exchange
companies has consistently fallen and as of the end of the reporting period, was
flirting with its October lows. For many stocks, the reporting period has been a
bear market regardless of the message being conveyed by the popular averages.
For example, the Value Line Index of 1800 companies, in which each company is
equally weighted in the index, has declined about 15% from its peak of 1000 in
April of last year.
A Classic Investor Series Fund
The Fund is part of the Classic Investor Series of Smith Barney Mutual Funds.
The Classic Investor Series are mutual funds whose investment decisions are
determined by experienced portfolio managers based on each fund's investment
objectives and guidelines. Funds in the Classic Investor Series invest across
asset classes and sectors, utilizing a range of strategies in order to achieve
their objectives.
Buy Leading Franchises at Out-of-Favor Prices
Historically, the Fund has tried to find leading business franchises available
at depressed prices for reasons that hopefully would prove temporary. A review
of the largest positions shows how successful his approach can be. Many of the
largest positions in the Fund were purchased when the companies had problems of
one kind or another and they were not highly regarded by investors. These
companies include American Telephone & Telegraph, Time Warner, American Express,
Adobe Systems, Cox Communications, IBM, Texas Instruments, BankAmerica, and
Intel. In recent times, we have added companies that also are leaders in their
industries, but were available at what we considered very attractive prices.
This list includes Archer Daniels Midland, ALCOA, Halliburton, Merrill Lynch,
Motorola, MGIC, Rouse, L.M. Ericsson, and Engelhard Minerals & Chemicals.
This approach to investing captures several of the most important disciplines
regarding so-called value investing. First, no matter how attractive a business
may seem, it is always important to recognize that there needs to be some
relationship between the price paid for a company's shares and its underlying
business attributes. In the current market environment, there often seems to be
a disconnect between some
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Smith Barney Fundamental Value Fund Inc. 1
<PAGE>
companies' fundamental outlooks and prices many investors seem willing to pay.
Secondly, in our opinion, successful investing is about risk management, the
marrying of upside potential with downside risk. Buying leading franchises when
they are out-of-favor means that the downside risk may be limited and the upside
potential large relative to this downside. Some of the best long-term buys are
when expectations are low.
The Principal Objective of Alan
Greenspan-Robert Rubin
World Gross Domestic Product (GDP) growth, in 1999, is expected to be at the
lowest level since World War II. A major objective of monetary and fiscal
authorities in the U.S. and elsewhere is to find that combination of policies
which will cause the world economy to begin growing at a faster rate. For
example, inflation adjusted money supply is growing at high rates in the United
States, Japan and virtually every part of the world today. This and other policy
initiatives are designed to reflate the world economy. Reflation, when it
occurs, should cause significant changes in the investment landscape. In our
judgment, reflation should broaden the stock market and cause P/E ratios to stop
expanding and contract in some cases.
Most of the stock market gains in the last six months are attributable to less
than 25 companies. If the world economy begins to grow again, many more
companies will benefit and the low prices for many of them should attract
investor interest. In addition, reflation probably will cause the bond market to
be in a trading range rather than characterized by declining interest rates, as
has been the case in the last 18 years.
Since 1994, 15% of the annual returns to the S&P 500 have come from P/E ratio
expansion as they have doubled during this period of time. With P/E ratios
currently at about 30x earnings, it seems unlikely that a further doubling is in
store between now and 2003. It is likely that the overall progress of the S&P
500 will reflect the 5%-8% earnings growth anticipated in the coming years.
Reduced appreciation potential for the S&P 500 also will help broaden the market
and investor interest in other segments of the market besides the mega-caps
which have dominated in recent years.
All Capitalization vs. Large Capitalization
We believe portfolios with representation in small and mid-cap sized companies
may outperform large capitalization-only portfolios in the next three to five
years. The value disparity is now so extreme in favor of smaller companies that
a variety of forces are likely to cause many of them to perform well in the
coming years. Some are inexpensive enough that they will be acquired or taken
private. Many may use excess cash flows to repurchase shares. It will take only
modest money flows to cause this sector of the market to appreciate
significantly.
The Fund has about 20% of its assets committed to the small and mid-cap areas to
the market. We believe these sectors of the market should enhance returns in the
near future. In the next five years, we believe small and mid-cap stocks, in
general, can produce annual returns of 12% to14%, possibly double the returns we
project for the S&P 500.
Sectors-Is it Time to Look at the "Orphans"
Since 1990, the Fund's sector weightings for financial, technology, and health
care have increased dramatically reflecting outstanding performance. These
include many of the best business franchises in the United States and it is
clear that many have outstanding futures. However, when a sector within the S&P
500 sees its weight double or go up substantially, often it is time to be more
selective in this area of the market. That is what we strive to do in the
Fundamental Value Fund.
Conversely, when a sector seems to fall below investors' radar, this may
represent fertile ground for investing. Two sectors within the S&P 500 saw their
weightings within the index decline dramatically during this decade. Basic
materials (agriculture, forest products, chemicals, and metals) dropped from 8%
of the Index to 3%, and energy's weighting declined from 14% to about 5%. Many
companies in these sectors were adversely affected, in the last two years, by
inventory de-stocking associated with the economic
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2 1999 Semi-Annual Report to Shareholders
<PAGE>
crises in Asia and elsewhere. This is largely completed and these sectors have
been a focus of the Fund.
As stated earlier, we think that reflation is the objective of the monetary and
fiscal authorities around the world. If and when this occurs, some of the major
beneficiaries almost certainly will be companies in the basic materials and
energy sectors of the market. Currently, we have 13% of the Fund's assets
invested in basic materials and 12% in energy .
We believe our overweight positions will help capture the higher returns we
expect from these sectors of the market. We believe "hard assets," such as
natural resource companies, should gain favor with investors in the next 12
months.
Final Thoughts
Investors will see many changes in the next five years. Many investors now
believe that 20%+ returns are assured but in an environment where P/E ratios are
flat or even declining for some companies, these will be difficult to achieve.
Should equity returns regress to their lower historic levels, even yield stocks,
one of the market pariahs today, would become more attractive because a large
percentage of market returns would be assured up front.
In our opinion, reflation should be the big story in the next twelve-eighteen
months. With it will come profound changes and a need for successful investors
to modify some of their current asset allocation decisions. Many investors seem
to believe the only asset class needed in the future is that encompassing large
growth stocks at very high P/E ratios. We think these investors are ignoring
prudent risk management.
Finally, let us comment on the topic of the day, namely investing in Internet
companies. The Fund can and will invest in this area of the market but on terms
consistent with our disciplines. In the early 1980s, genetic engineering stocks
were the rage and there was a tremendous feeding frenzy for shares of anything
remotely involved with biotechnology. People then, who cautioned about valuation
extremes, were told that "one can't put a value on a cure for cancer."
Eighteen months after the love affair with genetic engineering companies began,
I visited the offices of Amgen in southern California. Amgen, at that time, had
seen its shares decline by more than 70%. In our opinion, we also will see a
shakeout of Internet shares and sometime in the future, the Fund undoubtedly
will be considering some of the Internet stocks with credible futures. We also
will be looking for companies where existing businesses can be enhanced using
the Internet as a resource.
Thank you for investing in the Smith Barney Fundamental Value Inc. We encourage
you to visit our Web site at www.smithbarney.com. We appreciate your confidence
in our investment management approach and we look forward to helping you pursue
your financial goals in the years to come.
Sincerely,
/s/ Heath B. McLendon /s/ John G. Goode
Heath B. McLendon John G. Goode
Chairman Vice President and
Investment Officer
April 5, 1999
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Top Ten Holdings* As of March 31, 1999
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1. American Telephone & Telegraph Corp. 7.5%
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2. Adobe Systems, Inc. 4.6
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3. Time Warner, Inc. 4.4
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4. American International Group, Inc. 4.1
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5. American Express Co. 4.0
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6. International Business Machines Corp. 3.6
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7. Cox Communications, Inc. 3.6
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8. Texas Instruments, Inc. 3.4
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9. BankAmerica Corp. 3.4
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10. Alcoa Inc. 3.4
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*As a percentage of total common stock.
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Smith Barney Fundamental Value Fund Inc. 3
<PAGE>
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Historical Performance -- Class A Shares
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<TABLE>
<CAPTION>
Net Asset Value
--------------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
3/31/99 $10.07 $11.94 $0.02 $0.72 26.96%+
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9/30/98 11.37 10.07 0.11 0.52 (6.04)
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9/30/97 9.31 11.37 0.13 0.44 29.53
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9/30/96 8.66 9.31 0.19 0.37 14.73
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9/30/95 8.20 8.66 0.13 0.81 19.94
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9/30/94 8.42 8.20 0.08 0.53 4.92
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9/30/93 7.22 8.42 0.06 0.46 25.23
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9/30/92 6.47 7.22 0.14 0.00 14.01
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9/30/91 5.34 6.47 0.23 0.29 33.47
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9/30/90 7.15 5.34 0.18 0.57 (16.25)
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9/30/89 6.23 7.15 0.10 0.33 23.26
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Total $1.37 $5.04
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</TABLE>
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Historical Performance -- Class B Shares
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<TABLE>
<CAPTION>
Net Asset Value
--------------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
3/31/99 $10.01 $11.84 $0.00 $0.72 26.49%+
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9/30/98 11.31 10.01 0.03 0.52 (6.79)
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9/30/97 9.26 11.31 0.06 0.44 28.62
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9/30/96 8.62 9.26 0.13 0.37 13.82
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9/30/95 8.16 8.62 0.08 0.81 19.19
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9/30/94 8.37 8.16 0.02 0.53 4.21
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Inception* -- 9/30/93 7.31 8.37 0.05 0.46 22.82+
====================================================================================================================================
Total $0.37 $3.85
====================================================================================================================================
</TABLE>
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Historical Performance -- Class L Shares
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<TABLE>
<CAPTION>
Net Asset Value
--------------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
3/31/99 $10.01 $11.83 $0.00 $0.72 26.39%+
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9/30/98 11.30 10.01 0.03 0.52 (6.70)
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9/30/97 9.26 11.30 0.06 0.44 28.52
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9/30/96 8.62 9.26 0.13 0.37 13.82
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9/30/95 8.16 8.62 0.09 0.81 19.33
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9/30/94 8.37 8.16 0.02 0.53 4.24
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Inception* -- 9/30/93 8.15 8.37 0.00 0.00 2.70+
====================================================================================================================================
Total $0.33 $3.39
====================================================================================================================================
</TABLE>
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4 1999 Semi-Annual Report to Shareholders
<PAGE>
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Historical Performance -- Class Y Shares
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<TABLE>
<CAPTION>
Net Asset Value
--------------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
3/31/99 $10.10 $11.96 $0.06 $0.72 27.25%+
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9/30/98 11.40 10.10 0.16 0.52 (6.78)
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9/30/97 9.32 11.40 0.16 0.44 30.06
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Inception* -- 9/30/96 8.54 9.32 0.00 0.00 9.13+++
====================================================================================================================================
Total $0.38 $1.68
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</TABLE>
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
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Average Annual Total Return
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<TABLE>
<CAPTION>
Without Sales Charge(1)
----------------------------------------------------------------
Class A Class B Class L Class Y
=========================================================================================================
<S> <C> <C> <C> <C>
Six Months Ended 3/31/99+ 26.96% 26.49% 26.39% 27.25%
- ---------------------------------------------------------------------------------------------------------
Year Ended 3/31/99 13.95 13.15 13.06 14.44
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Five Years Ended 3/31/99 17.48 16.63 16.64 N/A
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Ten Years Ended 3/31/99 15.32 N/A N/A N/A
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Inception* through 3/31/99 14.51 16.33 15.04 17.88++
=========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
With Sales Charge(2)
----------------------------------------------------------------
Class A Class B Class L Class Y
=========================================================================================================
<S> <C> <C> <C> <C>
Six Months Ended 3/31/99+ 20.61% 21.49% 24.14% 27.25%
- ---------------------------------------------------------------------------------------------------------
Year Ended 3/31/99 8.25 8.15 10.96 14.44
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Five Years Ended 3/31/99 16.28 16.52 16.40 N/A
- ---------------------------------------------------------------------------------------------------------
Ten Years Ended 3/31/99 14.73 N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------
Inception* through 3/31/99 14.17 16.33 14.84 17.88++
=========================================================================================================
</TABLE>
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Cumulative Total Return
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Without Sales Charge(1)
================================================================================
Class A (3/31/89 through 3/31/99) 315.90%
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Class B (Inception* through 3/31/99) 163.32
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Class L (Inception* through 3/31/99) 120.37
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Class Y (Inception* through 3/31/99) 68.37++
================================================================================
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to
Class B and L shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charges of 5.00% and 1.00%,
respectively; and Class B shares reflect the deduction of a 5.00% CDSC,
which applies if shares are redeemed within one year from purchase.
Thereafter, the CDSC declines by 1.00% per year until no CDSC is incurred.
Class L shares 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, L 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.
++ During November 1995 Class Y shares were fully redeemed, therefore
performance for Class Y shares represents performance for the period
beginning January 31, 1996, which represents the date new share purchases
were made into this class.
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Smith Barney Fundamental Value Fund Inc. 5
<PAGE>
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Smith Barney Fundamental Value Fund Inc. at a Glance (unaudited)
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Growth of $10,000 Invested in Class A Shares of the
Smith Barney Fundamental Value Fund Inc. vs. Standard &Poor's 500 Index+
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March 1989--March 1999
[GRAPHIC]
Smith Barney Standard & Poor's
Fundamental Value Fund 500 Index
Mar 89 9,503 10,000
Sep 89 11,103 12,045
Sep 90 9,299 10,931
Sep 91 12,411 14,330
Sep 92 14,149 15911
Sep 93 17,718 17,976
Sep 94 18,589 18,637
Sep 95 22,296 24,174
Sep 96 25,580 29,084
Sep 97 33,132 40,843
Sep 98 31,131 44,554
Mar 99 39,524 56,727
+ Hypothetical illustration of $10,000 invested in Class A shares on March
31, 1989, 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, 1999, 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 as 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 values may be more or less than the original cost. No
adjustment has been made for shareholder tax liability on dividends or
capital gains.
Industry Diversification of Common Stock*
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[GRAPHIC]
Financial Services 12.0%
Energy 11.9
Healthcare 8.2
Insurance 6.3
Foods and Beverages 3.2
Real Estate 5.1
Entertainment 6.2
Technology and Computers 16.9
Telecommunications 14.9
Basic Materials 5.1
Other 10.2
* As a percentage of total common stock.
Investment Breakdown
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[GRAPHIC]
0.4% Options Purchased
8.5% Repurchase Agreements
91.1% Common Stock
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6 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) March 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
====================================================================================================================================
<S> <C> <C>
COMMON STOCK -- 91.1%
Basic Material -- 4.7%
1,200,000 Alcoa Inc. $ 49,425,000
1,425,000 Asia Pulp & Paper Co. Ltd. ADR+++ 11,934,375
575,800 Oregon Steel Mills, Inc. 6,009,912
388,700 Wolverine Tube, Inc.++ 8,211,287
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75,580,574
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Capital Goods -- 0.7%
220,930 Belden Inc. 3,769,618
270,000 Crown Cork & Seal Co., Inc. 7,711,875
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11,481,493
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Chemicals -- 2.2%
400,000 E.I. du Pont de Nemours & Co. 23,225,000
680,500 Engelhard Corp. 11,525,968
- ------------------------------------------------------------------------------------------------------------------------------------
34,750,968
- ------------------------------------------------------------------------------------------------------------------------------------
Energy -- 10.9%
8,390,000 Abacan Resource Corp.++ 1,442,031
200,000 Apache Corp. 5,212,500
500,000 Baker Hughes, Inc. 12,156,250
200,000 Burlington Resources Inc. 7,987,500
400,000 Chevron Corp. 35,375,000
200,000 Conoco Inc., Class A Shares 4,912,500
326,400 Equitable Resources, Inc. 8,506,800
800,000 Halliburton Co. 30,800,000
637,316 Louis Dreyfus Natural Gas Corp.++ 9,241,082
2,525,900 Ocean Energy, Inc.++ 17,207,693
700,000 Royal Dutch Petroleum Co., NY Shares+ 36,400,000
550,000 Union Pacific Resources Group Inc. 6,531,250
- ------------------------------------------------------------------------------------------------------------------------------------
175,772,606
- ------------------------------------------------------------------------------------------------------------------------------------
Entertainment -- 5.6%
1,000,000 Fox Entertainment Group, Inc., Class A Shares++ 27,125,000
900,000 Time Warner, Inc.+ 63,956,250
- ------------------------------------------------------------------------------------------------------------------------------------
91,081,250
- ------------------------------------------------------------------------------------------------------------------------------------
Financial Services -- 11.0%
500,000 American Express Co.@ 58,750,000
700,000 BankAmerica Corp. 49,437,500
300,000 Merrill Lynch & Co., Inc. 26,531,250
500,000 Bank Of New York Co., Inc. 17,968,750
300,000 Chase Manhattan Corp. 24,393,750
- ------------------------------------------------------------------------------------------------------------------------------------
177,081,250
- ------------------------------------------------------------------------------------------------------------------------------------
Foods and Beverages -- 3.0%
1,230,000 Archer-Daniels-Midland Co. 18,065,625
713,100 Fleming Cos., Inc. 6,105,918
600,000 PepsiCo, Inc. 23,512,500
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47,684,043
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</TABLE>
See Notes to Financial Statements
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Smith Barney Fundamental Value Fund Inc. 7
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) March 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
====================================================================================================================================
<S> <C> <C>
Healthcare -- 7.5%
1,060,000 Advanced Polymer Systems, Inc. $ 4,637,500
50,000 American Home Products Corp. 3,262,500
1,669,664 Aphton Corp.+++ 27,132,040
225,000 Aphton Corp. Warrants, Expire 6/16/04 2
109,600 C.R. Bard, Inc. 5,527,950
750,000 Foundation Health Systems, Inc., Class A Shares+++ 9,140,625
500,000 Johnson & Johnson 46,843,750
300,000 Merck & Co., Inc. 24,056,250
266 Molecular Biosystems, Inc.++ 714
- ------------------------------------------------------------------------------------------------------------------------------------
120,601,331
- ------------------------------------------------------------------------------------------------------------------------------------
Hotels -- 0.2%
1,175,000 MeriStar Hotels & Resorts, Inc.++ 3,231,250
- ------------------------------------------------------------------------------------------------------------------------------------
Insurance -- 5.8%
500,000 American International Group, Inc. 60,312,500
50,000 First American Financial Corp. 790,625
920,200 MGIC Investment Corp. 32,264,512
- ------------------------------------------------------------------------------------------------------------------------------------
93,367,637
- ------------------------------------------------------------------------------------------------------------------------------------
Manufacturing -- 0.5%
945,000 RTI International Metals, Inc.+++ 8,859,375
- ------------------------------------------------------------------------------------------------------------------------------------
Paper Products -- 1.5%
631,250 Consolidated Papers, Inc. 14,834,375
500,000 Smurfit-Stone Container Corp.+++ 9,656,250
- ------------------------------------------------------------------------------------------------------------------------------------
24,490,625
- ------------------------------------------------------------------------------------------------------------------------------------
Real Estate -- 4.6%
942,500 Del E. Webb Corp. 20,440,468
822,300 Spieker Properties, Inc. 28,986,075
1,140,000 The Rouse Co. 25,293,750
- ------------------------------------------------------------------------------------------------------------------------------------
74,720,293
- ------------------------------------------------------------------------------------------------------------------------------------
Retail -- 0.7%
95,000 Rexall Sundown, Inc.++ 1,822,812
500,000 Toys `R' Us Inc.++ 9,406,250
- ------------------------------------------------------------------------------------------------------------------------------------
11,229,062
- ------------------------------------------------------------------------------------------------------------------------------------
Technology and Computers -- 15.4%
1,200,000 Adobe Systems, Inc.+@ 68,100,000
1,200,000 Cypress Semiconductor Corp.++ 10,800,000
200,000 Inprise Corp.+++ 775,000
300,000 Intel Corp.@ 35,737,500
300,000 International Business Machines Corp. 53,175,000
380,000 Motorola, Inc. 27,835,000
750,000 Seeq Technology Inc.++ 2,085,937
500,000 Texas Instruments, Inc.+@ 49,625,000
- ------------------------------------------------------------------------------------------------------------------------------------
248,133,437
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
- --------------------------------------------------------------------------------
8 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) March 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
====================================================================================================================================
<S> <C> <C>
Telecommunications -- 13.6%
1,375,700 AT&T Corp.+ $ 109,798,056
750,000 COMSAT Corp. 21,703,125
700,000 Cox Communications, Inc., Class A Shares+++ 52,937,500
774,500 Scientific-Atlanta, Inc. 21,105,125
600,000 Telefonaktiebolaget LM Ericsson ADR+ 14,287,500
800 Ziff-Davis Inc. - ZDNet++ 28,600
- ------------------------------------------------------------------------------------------------------------------------------------
219,859,906
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation -- 2.3%
400,000 General Motors Corp. 34,750,000
250,000 Wisconsin Central Transportation Corp.+++ 3,312,500
- ------------------------------------------------------------------------------------------------------------------------------------
38,062,500
- ------------------------------------------------------------------------------------------------------------------------------------
Utilities -- 0.9%
750,000 K N Energy Inc. 14,953,125
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost -- $899,689,854) 1,470,940,725
====================================================================================================================================
OPTIONS PURCHASED -- 0.4%
Electronics -- 0.2%
250,000 Intel Corp. Put @ $90, Expire 1/22/00 1,359,381
50,000 Intel Corp. Put @ $120, Expire 1/22/00 850,000
50,000 Texas Instruments, Inc. Put @ $90, Expire 1/22/00 550,000
- ------------------------------------------------------------------------------------------------------------------------------------
2,759,381
- ------------------------------------------------------------------------------------------------------------------------------------
Index -- 0.2%
28,000 S&P 500 Index Put @ $1,225, Expire 12/18/99 1,722,000
4,000 S&P 500 Index Put @ $1,275, Expire 12/18/99 352,000
4,500 S&P 500 Index Put @ $1,275, Expire 12/18/99 396,000
5,500 S&P 500 Index Put @ $1,325, Expire 12/18/99 550,000
- ------------------------------------------------------------------------------------------------------------------------------------
3,020,000
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL OPTIONS PURCHASED
(Cost -- $6,868,784) 5,779,381
====================================================================================================================================
</TABLE>
See Notes to Financial Statements
- --------------------------------------------------------------------------------
Smith Barney Fundamental Value Fund Inc. 9
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) March 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
====================================================================================================================================
<S> <C> <C>
REPURCHASE AGREEMENTS -- 8.5%
$ 37,285,000 Morgan Stanley Dean Witter & Co., 4.930% due 4/1/99;
Proceeds at maturity -- $37,290,106; (Fully collateralized
by U.S. Treasury Note, 4.875% due 3/31/01;
Market value -- $38,214,219) $ 37,285,000
100,000,000 Warburg, Dillon Read LLC, 4.891% due 4/1/99; Proceeds at
maturity -- $100,013,586; (Fully collateralized by
U.S. Treasury Note, 5.750% due 11/15/00;
Market value -- $102,056,216) 100,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost -- $137,285,000) 137,285,000
====================================================================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $1,043,843,638*) $1,614,005,106
====================================================================================================================================
</TABLE>
+ All or a portion of this security is on loan (Note 6).
++ Non-income producing security.
@ Security segregated by Custodian to cover written call options.
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements
- --------------------------------------------------------------------------------
10 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) March 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost -- $1,043,843,638) $1,614,005,106
Collateral for securities on loan (Note 6) 217,151,283
Receivable for securities sold 8,334,757
Dividends and interest receivable 1,567,123
Receivable for Fund shares sold 763,700
- ------------------------------------------------------------------------------------------------------------
Total Assets 1,841,821,969
- ------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities on loan (Note 6) 217,151,283
Payable for securities purchased 11,430,776
Options written (Note 5) 8,406,250
Administration fees payable 547,675
Investment advisory fees payable 514,470
Distribution fees payable 267,699
Payable for Fund shares purchased 110,187
Payable to bank 19,353
Accrued expenses 719,216
- ------------------------------------------------------------------------------------------------------------
Total Liabilities 239,166,909
- ------------------------------------------------------------------------------------------------------------
Total Net Assets $1,602,655,060
============================================================================================================
NET ASSETS:
Par value of capital shares $ 134,844
Capital paid in excess of par value 974,836,321
Undistributed net investment income 1,750,778
Accumulated net realized gain from security transactions,
options and foreign currencies 57,225,396
Net unrealized appreciation of investments and options 568,707,721
- ------------------------------------------------------------------------------------------------------------
Total Net Assets $1,602,655,060
============================================================================================================
Shares Outstanding:
Class A 52,669,960
-------------------------------------------------------------------------------------------------------
Class B 69,343,727
-------------------------------------------------------------------------------------------------------
Class L 5,848,842
-------------------------------------------------------------------------------------------------------
Class Y 6,981,141
-------------------------------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $11.94
-------------------------------------------------------------------------------------------------------
Class B* $11.84
-------------------------------------------------------------------------------------------------------
Class L** $11.83
-------------------------------------------------------------------------------------------------------
Class Y (and redemption price) $11.96
-------------------------------------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
(net asset value plus 5.26% of net asset value per share) $12.57
-------------------------------------------------------------------------------------------------------
(net asset value plus 1.01% of net asset value per share) $11.95
============================================================================================================
</TABLE>
* Redemption price is NAV of Class B shares reduced by a 5.00% CDSC if
shares are redeemed within one year from purchase (See Note 3).
** Redemption price is NAV of Class L shares reduced by a 1.00% CDSC if
shares are redeemed within the first year of purchase.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Fundamental Value Fund Inc. 11
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations (unaudited) For the Six Months Ended March 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 3,935,102
Dividends 8,225,284
Less: Foreign withholding tax (74,571)
- ----------------------------------------------------------------------------------------------------
Total Investment Income 12,085,815
- ----------------------------------------------------------------------------------------------------
EXPENSES:
Distribution fees (Note 3) 4,960,124
Investment advisory fees (Note 3) 4,128,942
Administration fees (Note 3) 1,504,668
Shareholder and system servicing fees 803,095
Shareholder communications 174,520
Registration fees 77,286
Audit and legal 40,937
Directors' fees 40,389
Custody 35,901
Other 33,410
- ----------------------------------------------------------------------------------------------------
Total Expenses 11,799,272
- ----------------------------------------------------------------------------------------------------
Net Investment Income 286,543
- ----------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)ON INVESTMENTS,
OPTIONS AND FOREIGN CURRENCIES (NOTES 4 AND 5):
Realized Gain (Loss) From:
Security transactions (excluding short-term securities) 104,475,296
Options purchased 26,111,066
Options written (11,027,372)
Foreign currency transactions (264,409)
- ----------------------------------------------------------------------------------------------------
Net Realized Gain 119,294,581
- ----------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation
of Investments and Options Written:
Beginning of period 337,894,723
End of period 568,707,721
- ----------------------------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 230,812,998
- ----------------------------------------------------------------------------------------------------
Net Gain on Investments, Options and Foreign Currencies 350,107,579
- ----------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations $350,394,122
====================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Six Months Ended March 31, 1999 (unaudited)
and the Year Ended September 30, 1998
1999 1998
=================================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 286,543 $ 5,776,692
Net realized gain 119,294,581 62,245,606
Increase (decrease) in net unrealized appreciation 230,812,998 (163,321,697)
- -------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Operations 350,394,122 (95,299,399)
- -------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (1,332,997) (10,249,004)
Net realized gains (94,905,195) (75,151,678)
- -------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (96,238,192) (85,400,682)
- -------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 7):
Net proceeds from sale of shares 101,864,025 212,118,825
Net asset value of shares issued for
reinvestment of dividends 87,370,633 79,452,277
Cost of shares reacquired (197,519,555) (471,028,743)
- -------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Fund Share Transactions (8,284,897) (179,457,641)
- -------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets 245,871,033 (360,157,722)
NET ASSETS:
Beginning of period 1,356,784,027 1,716,941,749
- -------------------------------------------------------------------------------------------------
End of period* $1,602,655,060 $1,356,784,027
=================================================================================================
* Includes undistributed net investment income of: $1,750,778 $3,061,641
=================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Fundamental Value Fund Inc. 13
<PAGE>
- --------------------------------------------------------------------------------
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)
security 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) securities
maturing within 60 days are valued at cost plus accreted discount, or minus
amortized premium, which approximates value; (d) dividend income is recorded on
the ex-dividend date; foreign dividends are recorded on the earlier of the
ex-dividend date or as soon as practical after the Fund determines the existence
of a dividend declaration after exercising reasonable due diligence; interest
income is recorded on the accrual basis; (e) realized gains or losses on the
sale of securities are calculated based on the specific identification method;
(f) direct expenses are charged to each class; management fees and general fund
expenses are allocated on the basis of relative net assets by class; (g)
dividends and distributions to shareholders are recorded by the Fund on the
ex-dividend date; (h) the character of income and gains to be distributed are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. At September 30, 1998,
reclassifications were made to the Fund's capital accounts to reflect permanent
book/tax differences and income and gains available for distributions under
income tax regulations. Net investment income, net realized gains and net assets
were not affected by this adjustment; (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; (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.
In addition, the Fund may enter into forward foreign currency 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. Investment Advisory Agreement and Other Transactions
SSBC Fund Management Inc., formerly known as Mutual Management Corp., a
subsidiary of Salomon
- --------------------------------------------------------------------------------
14 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
Smith Barney Holdings Inc. ("SSBH"), acts as investment adviser of the Fund. The
Fund pays SSBC an advisory fee calculated at an annual rate of 0.55% of the
average daily net assets up to $1.5 billion and 0.50% of the average daily net
assets in excess of $1.5 billion. This fee is calculated daily and paid monthly.
SSBC 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.
On October 8, 1998, CFBDS, Inc. ("CFBDS"), became the Fund's distributor. Prior
to that date, Salomon Smith Barney Inc. ("SSB"), another subsidiary of SSBH, was
the Fund's distributor. SSB, as well as certain other broker-dealers, continues
to sell Fund shares to the public as a member of the selling group.
For the six months ended March 31, 1999, SSB or CFBDS received sales charges of
approximately $168,000 and $25,000 on sales of the Fund's Class A and L shares,
respectively.
There is a contingent deferred sales charge ("CDSC") of 5.00% on Class B shares,
which applies if redemption occurs within one year from purchase and declines
thereafter by 1.00% per year until no CDSC is incurred. Class L shares also have
a 1.00% CDSC, which applies if redemption occurs within the first year of
purchase. In certain cases, 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 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, 1999,
CDSCs paid to SSB or CFBDSwere approximately:
Class B Class L
================================================================================
CDSCs $475,000 $3,000
================================================================================
Pursuant to a Distribution Plan, the Fund pays a service fee with respect to its
Class A, B and L 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 L 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, 1999, total Distribution Plan fees incurred were:
Class A Class B Class L
================================================================================
Distribution Plan Fees $730,975 $3,910,446 $318,703
================================================================================
All officers and one Director of the Fund are employees of SSB.
For the six months ended March 31, 1999, SSB received no brokerage commissions.
4. Investments
During the six months ended March 31, 1999, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases $442,800,317
- --------------------------------------------------------------------------------
Sales 396,970,636
================================================================================
At March 31, 1999, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were as follows:
================================================================================
Gross unrealized appreciation $612,900,194
Gross unrealized depreciation (42,738,726)
- --------------------------------------------------------------------------------
Net unrealized appreciation $570,161,468
================================================================================
5. 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
- --------------------------------------------------------------------------------
Smith Barney Fundamental Value Fund Inc. 15
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
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.
At March 31, 1999, the Fund held purchased put options with a total cost of
$6,868,784.
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 depending upon whether the cost of
the closing transaction is greater or less than the premium originally received
without regard to any unrealized gain or loss on the underlying security, and
the liability related to such option is eliminated. When a call option is
exercised the proceeds 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. When written index options are exercised, settlement is
made in cash.
The risk associated with purchasing options is limited to the premium originally
paid. The Fund enters into options for hedging purposes. The risk in writing a
call option is that the Fund gives up the opportunity to participate in any
increase in the price of the underlying security beyond the exercise price. The
risk in writing a put option is that the Fund is exposed to the risk of loss if
the market price of the underlying security declines.
The following covered call option transactions occurred during the six months
ended March 31, 1999:
<TABLE>
<CAPTION>
Number of
Contracts Premiums
=======================================================================================================
<S> <C> <C>
Options written, outstanding at September 30, 1998 17,238 $ 12,862,347
Options written during the six months ended March 31, 1999 11,000 10,599,880
Options cancelled in closing purchase transactions (12,738) (15,563,757)
Options expired (5,500) (945,967)
- -------------------------------------------------------------------------------------------------------
Options written, outstanding at March 31, 1999 10,000 $ 6,952,503
=======================================================================================================
</TABLE>
The following represents the covered call option written contracts open as of
March 31, 1999:
<TABLE>
<CAPTION>
Number of Strike
Contracts Expiration Price Value
=======================================================================================================
<C> <S> <C> <C> <C>
500 Adobe Systems, Inc. 1/16/00 $ 75 $ (218,750)
5,000 American Express Co. 1/16/00 140 (4,406,250)
2,500 Intel Corp. 1/16/00 160 (2,281,250)
500 Intel Corp. 1/16/00 170 (362,500)
500 Texas Instruments, Inc. 1/16/00 120 (587,500)
1,000 Texas Instruments, Inc. 1/16/00 150 (550,000)
- -------------------------------------------------------------------------------------------------------
Total Call Options Written
(Premiums received -- $6,952,503) $(8,406,250)
=======================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
16 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
The following covered put option transactions occurred during the six months
ended March 31, 1999:
<TABLE>
<CAPTION>
Number of
Contracts Premiums
================================================================================================
<S> <C> <C>
Options written, outstanding at September 30, 1998 738 $1,217,700
Options written during the six months ended March 31, 1999 -- --
Options cancelled in closing purchase transactions (738) (1,217,700)
- ------------------------------------------------------------------------------------------------
Options written, outstanding at March 31, 1999 -- --
================================================================================================
</TABLE>
6. Lending of Portfolio Securities
The Fund has an agreement with its custodian whereby the custodian may lend
securities owned by the Fund to brokers, dealers and other financial
organizations, and receives a lenders fee. Fees earned by the Fund on securities
lending are recorded as interest income. Loans of securities by the Fund are
collateralized by cash, U.S. government securities or high quality money market
instruments that are maintained at all times in an amount at least equal to the
current market value of the securities loaned, plus a margin which may vary
depending on the type of securities loaned. The custodian establishes and
maintains the collateral in a segregated account. The Fund maintains exposure
for the risk of any losses in the investment of amounts received as collateral.
At March 31, 1999, the Fund loaned common stocks having a value of $210,265,534
and holds the following collateral for loaned securities:
Security Description Value
================================================================================
Time Deposits:
Bank Brussels Lambert, 5.187% due 4/1/99 $ 22,223,134
Deutsche Bank, 5.250% due 4/1/99 54,207,045
Bank of Montreal, 5.125% due 4/1/99 22,223,134
Societe Generale, 5.125% due 4/1/99 16,849,893
Westdeutsche Landesbank, 5.187% due 4/1/99 14,559,985
Westdeutsche Landesbank, 5.250% due 4/1/99 22,223,134
Repurchase Agreement:
Goldman Sachs, 5.125% due 4/1/99 33,352,204
Commercial Paper:
Morgan Stanley, 4.900% due 5/10/99 31,512,754
- --------------------------------------------------------------------------------
Total $217,151,283
================================================================================
Interest income earned by the Fund from securities loaned for the six months
ended March 31, 1999 was $91,982.
7. Capital Shares
At March 31, 1999, the Fund had one billion 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.
- --------------------------------------------------------------------------------
Smith Barney Fundamental Value Fund Inc. 17
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
At March 31, 1999, total paid-in capital amounted to the following for each
class:
<TABLE>
<CAPTION>
Class A Class B Class L Class Y
=============================================================================================================================
<S> <C> <C> <C> <C>
Total Paid-in Capital $395,206,343 $469,111,819 $49,104,070 $61,548,933
=============================================================================================================================
</TABLE>
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
March 31, 1999 September 30, 1998
------------------------------ -------------------------------
Shares Amount Shares Amount
==============================================================================================================
<S> <C> <C> <C> <C>
Class A
Shares sold 5,149,527 $ 58,724,461 7,551,987 $ 82,411,671
Shares issued on reinvestment 3,453,723 36,264,098 3,125,009 32,667,488
Shares reacquired (7,608,701) (85,964,479) (12,290,037) (132,952,544)
- --------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 994,549 $ 9,024,080 (1,613,041) $ (17,873,385)
==============================================================================================================
Class B
Shares sold 2,260,441 $ 27,094,815 6,360,722 $ 68,425,785
Shares issued on reinvestment 4,659,319 47,197,171 4,153,333 43,315,188
Shares reacquired (9,127,825) (101,332,967) (21,262,606) (228,805,770)
- --------------------------------------------------------------------------------------------------------------
Net Decrease (2,208,065) $ (27,040,981) (10,748,551) $(117,064,797)
==============================================================================================================
Class L+
Shares sold 656,202 $ 7,448,753 1,049,363 $ 11,275,499
Shares issued on reinvestment 374,819 3,909,364 332,717 3,469,601
Shares reacquired (915,212) (10,222,109) (2,007,609) (21,619,890)
- --------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 115,809 $ 1,136,008 (625,529) $ (6,874,790)
==============================================================================================================
Class Y
Shares sold 789,622 $ 8,595,996 4,624,764 $ 50,005,870
Shares issued on reinvestment -- -- -- --
Shares reacquired -- -- (7,955,204) (87,650,539)
- --------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 789,622 $ 8,595,996 (3,330,440) $ (37,644,669
==============================================================================================================
</TABLE>
+ On June 12, 1998, Class C shares were renamed Class L shares.
- --------------------------------------------------------------------------------
18 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended September 30, except where noted:
<TABLE>
<CAPTION>
Class A Shares 1999(1)(2) 1998(2) 1997 1996 1995 1994
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.07 $11.37 $9.31 $8.66 $8.20 $8.42
- ---------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.03 0.09 0.11 0.20 0.17 0.09
Net realized and unrealized gain (loss) 2.58 (0.76) 2.52 1.01 1.23 0.30
- ---------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 2.61 (0.67) 2.63 1.21 1.40 0.39
- ---------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.02) (0.11) (0.13) (0.19) (0.13) (0.08)
Net realized gains (0.72) (0.52) (0.44) (0.37) (0.81) (0.53)
- ---------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.74) (0.63) (0.57) (0.56) (0.94) (0.61)
- ---------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $11.94 $10.07 $11.37 $9.31 $8.66 $8.20
- ---------------------------------------------------------------------------------------------------------------------------
Total Return 26.96%++ (6.04)% 29.53% 14.73% 19.94% 4.92%
- ---------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $629,132 $520,627 $606,054 $458,208 $386,297 $264,765
- ---------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.15%+ 1.15% 1.14% 1.22% 1.34% 1.30%
Net investment income 0.46+ 0.81 1.14 2.32 2.19 1.90
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 30% 41% 46% 57% 45% 108%
===========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class B Shares 1999(1)(2) 1998(2) 1997 1996 1995 1994
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.01 $11.31 $9.26 $8.62 $8.16 $8.37
- ---------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss) (0.02) -- 0.03 0.13 0.12 0.09
Net realized and unrealized gain (loss) 2.57 (0.75) 2.52 1.01 1.23 0.25
- ---------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 2.55 (0.75) 2.55 1.14 1.35 0.34
- ---------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- (0.03) (0.06) (0.13) (0.08) (0.02)
Net realized gains (0.72) (0.52) (0.44) (0.37) (0.81) (0.53)
- ---------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.72) (0.55) (0.50) (0.50) (0.89) (0.55)
- ---------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $11.84 $10.01 $11.31 $9.26 $8.62 $8.16
- ---------------------------------------------------------------------------------------------------------------------------
Total Return 26.49%++ (6.79)% 28.62% 13.82% 19.19% 4.21%
- ---------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $820,848 $716,239 $930,436 $703,552 $538,759 $361,254
- ---------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.92%+ 1.92% 1.90% 1.97% 2.09% 2.06%
Net investment income (0.32)+ 0.04 0.38 1.56 1.44 1.13
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 30% 41% 46% 57% 45% 108%
===========================================================================================================================
</TABLE>
(1) For the six months ended March 31, 1999 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method,
because it more accurately reflects the per share data for the period.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Smith Barney Fundamental Value Fund Inc. 19
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended September 30, except where noted:
<TABLE>
<CAPTION>
Class L Shares 1999(1)(2) 1998(2)(3) 1997 1996 1995 1994
======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.01 $11.30 $9.26 $8.62 $8.16 $8.37
- ----------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss) (0.02) -- 0.03 0.14 0.12 0.05
Net realized and unrealized gain (loss) 2.56 (0.74) 2.51 1.00 1.24 0.29
- ----------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 2.54 (0.74) 2.54 1.14 1.36 0.34
- ----------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- (0.03) (0.06) (0.13) (0.09) (0.02)
Net realized gains (0.72) (0.52) (0.44) (0.37) (0.81) (0.53)
- ----------------------------------------------------------------------------------------------------------------------
Total Distributions (0.72) (0.55) (0.50) (0.50) (0.90) (0.55)
- ----------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $11.83 $10.01 $11.30 $9.26 $8.62 $8.16
- ----------------------------------------------------------------------------------------------------------------------
Total Return 26.39%++ (6.70)% 28.52% 13.82% 19.33% 4.24%
- ----------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $69,207 $57,367 $71,874 $44,539 $21,812 $1,652
- ----------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.93%+ 1.93% 1.92% 1.96% 2.09% 2.23%
Net investment income (0.32)+ 0.03 0.36 1.52 1.44 0.96
- ----------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 30% 41% 46% 57% 45% 108%
======================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class Y Shares 1999(1)(2) 1998(2) 1997 1996(4)
===================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.10 $11.40 $9.32 $8.54
- ---------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.05 0.12 0.14 0.23
Net realized and unrealized gain (loss) 2.59 (0.74) 2.54 0.55
- ---------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 2.64 (0.62) 2.68 0.78
- ---------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.06) (0.16) (0.16) --
Net realized gains (0.72) (0.52) (0.44) --
- ---------------------------------------------------------------------------------------------------
Total Distributions (0.78) (0.68) (0.60) --
- ---------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $11.96 $10.10 $11.40 $9.32
- ---------------------------------------------------------------------------------------------------
Total Return 27.25%++ (6.78)% 30.06% 9.13%*++
- ---------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $83,468 $62,551 $108,578 $44,641
- ---------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.80%+ 0.79% 0.78% 0.75%+
Net investment income 0.82+ 1.15 1.48 2.58+
- -----------------------------------------------------------------------------------------------
Portfolio Turnover Rate 30% 41% 46% 57%
===================================================================================================
</TABLE>
(1) For the six months ended March 31, 1999 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method,
because it more accurately reflects the per share data for the period.
(3) On June 12, 1998, Class C shares were renamed Class L shares.
(4) For the period from October 13, 1995 (inception date) to September 30,
1996.
* During November 1995 Class Y shares were fully redeemed, therefore
performance for Class Y shares represents performance for the period
beginning January 31, 1996, which represents the date new share purchases
were made into this class.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
20 1999 Semi-Annual Report to Shareholders
<PAGE>
Smith Barney
Fundamental Value
Fund Inc.
Directors
Lloyd J. Andrews
Robert M. Frayn, Jr.
Leon P. Gardner
David E. Maryatt
Heath B. McLendon, Chairman
Frederick O. Paulsell
Jerry A. Viscione
Julie W. Weston
Officers
Heath B. McLendon
President and Chief Executive Officer
Lewis E. Daidone
Senior Vice President and Treasurer
John G. Goode
Vice President and Investment Officer
Peter Hable
Investment Officer
Irving P. David
Controller
Christina T. Sydor
Secretary
Investment Adviser and Administrator
SSBC Fund Management Inc.
Distributor
CFBDS, Inc.
Custodian
PNC Bank, N.A.
Shareholder Servicing Agent
First Data Investor Services Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is for the information of shareholders of Smith Barney Fundamental
Value Fund Inc. It is not authorized for distribution to prospective investors
unless accompanied by a current Prospectus for the Fund, which contains
information concerning the Fund's investment policies and expenses as well as
other pertinent information.
SALOMON SMITH BARNEY
- ---------------------------
A member of citigroup[LOGO]
Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
Member of NASD, SIPC
Smith Barney Fundamental
Value Fund Inc.
Smith Barney Mutual Funds
388 Greenwich Street, MF-2
New York, New York 10013
www.smithbarney.com
FD01118 5/99
