<PAGE>
[LOGO OF SMITH BARNEY MUTUAL FUNDS]
SMITH BARNEY
FUNDAMENTAL VALUE
Fund Inc.
CLASSIC INVESTOR SERIES
SEMI-ANNUAL REPORT
MARCH 31, 2000
[LOGO OF SMITH BARNEY MUTUAL FUNDS]
NOT FDIC INSURED . NOT BANK GUARANTEED . MAY LOSE VALUE
<PAGE>
================================================================================
SSB Citi Fund Management LLC ("SSBC") represents more than a century of managing
money. Our clients range from Fortune 500 companies to private family businesses
and individuals around the world. With a tradition of integrity and hard work
dating back to our present company's origins in 1873, SSBC today offers
professionally managed solutions for the serious investor.
Fundamental Value FUND INC.
The Fund is managed by John Goode, an experienced and conservative portfolio
manager who employs strict research and analysis to seek to uncover relative
values not yet recognized by the marketplace. Seeking to minimize risk through
prudent top-down and bottom-up approaches, Mr. Goode's philosophy for managing
the Fund incorporates:
A Focused Approach to Value Investing
[GRAPHIC] We believe that the best long-term results can be achieved by
concentrating on a carefully selected group of securities. The
Fund avoids overdiversification by focusing on a core portfolio
that typically contains 30 to 50 stocks.
A Disciplined Investment Process
[GRAPHIC] We search for leading businesses with sound fundamentals that are
undervalued in the marketplace and, that we believe, have
above-average potential for capital growth.
Flexible Stock Selection
[GRAPHIC] We consider both the business fundamentals of prospective
companies as well as the outlook for their particular industry
and overall economic trends. The Fund has the flexibility to
invest across market capitalizations* and increase its cash
position if growth opportunities do not appear attractive.
*Historically, small- and mid-cap stocks have provided higher
long-term returns than large-cap stocks but with significantly
more price volatility.
<PAGE>
Smith Barney Fundamental Value Fund Inc.
The Smith Barney Fundamental Value Fund Inc. ("Fund") 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 in the
marketplace.
Smith Barney Fundamental Value Fund Inc.
Average Annual Total Returns
March 31, 2000
Without Sales Charges(1)
-----------------------------------------
Class A Class B Class L
====================================================================
Six Months+ 27.51% 27.08% 27.00%
- --------------------------------------------------------------------
One-Year 37.77 36.63 36.66
- --------------------------------------------------------------------
Five-Year 22.94 22.01 22.00
- --------------------------------------------------------------------
Ten-Year 17.85 N/A N/A
- --------------------------------------------------------------------
Since Inception++ 15.66 18.88 18.05
====================================================================
With Sales Charges(2)
-----------------------------------------
Class A Class B Class L
====================================================================
Six Months+ 21.13% 22.08% 24.72%
- --------------------------------------------------------------------
One-Year 30.86 31.63 34.29
- --------------------------------------------------------------------
Five-Year 21.68 21.92 21.74
- --------------------------------------------------------------------
Ten-Year 17.25 N/A N/A
- --------------------------------------------------------------------
Since Inception++ 15.34 18.88 17.88
====================================================================
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to Class
B and L shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charges of 5.00% and 1.00%,
respectively. Class B shares reflect the deduction of a 5.00% CDSC, which
applies if shares are redeemed within one year from purchase. Thereafter,
the CDSC declines by 1.00% per year until no CDSC is incurred. Class L
shares also reflect the deduction of a 1.00% CDSC, which applies if shares
are redeemed within the first year of purchase.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption value may be more or less than the original cost.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
++ Inception dates for Class A, B and L shares are November 12, 1981, November
6, 1992 and August 10, 1993, respectively.
- --------------------------------------------------------------------------------
FUND HIGHLIGHT
- --------------------------------------------------------------------------------
We continue to seek out leading companies whose share prices may be down for
reasons we consider to be temporary. We believe this process allows us to buy
company shares for the Fund at prices that already incorporate lowered
expectations and limited near term belief in a business' upside potential. This
approach allows us to develop, in many cases, outstanding risk and reward ratios
because much of the downside risk may already be reflected in share prices.
- --------------------------------------------------------------------------------
NASDAQ SYMBOL
- --------------------------------------------------------------------------------
Class A SHFVX
Class B SFVBX
Class L SFVCX
- --------------------------------------------------------------------------------
WHAT'S INSIDE
- --------------------------------------------------------------------------------
A Message from the Chairman .............................................. 2
Shareholder Letter ....................................................... 3
Historical Performance ................................................... 8
Smith Barney Fundamental Value Fund Inc.
at a Glance .............................................................. 11
Schedule of Investments .................................................. 12
Statement of Assets and Liabilities ...................................... 16
Statement of Operations .................................................. 17
Statements of Changes in Net Assets ...................................... 18
Notes to Financial Statements ............................................ 19
Financial Highlights ..................................................... 24
- --------------------------------------------------------------------------------
Smith Barney Fundamental Value Fund Inc. 1
<PAGE>
- --------------------------------------------------------------------------------
A Message from the Chairman Heath B. McLendon
- --------------------------------------------------------------------------------
[PHOTO]
Heath B. McLendon
Chairman
The U.S. economy has continued its rate of historic growth in the new
millennium. Unemployment is at an all-time low as consumer confidence reaches
all-time highs. However, in recent weeks, the U.S. markets have been
characterized by record volatility, leaving many investors with no clear
indication of the future direction of the market.
At SSB Citi Asset Management, Citigroup's asset management division, we remain
firmly committed to our belief that individual company selection should continue
to be the primary focus of any investor in any market. We believe that those
companies with superior products, strong management and a sound business plan
should be well-positioned to deliver continued earnings growth in the evolving
global economy.
Placing our clients' needs first has been Citigroup's tradition for over a
century. We provide some 100 million people, businesses, governments and
institutions in 100 countries with a broad range of financial products and
services. SSB Citi Asset Management offers you access to a broad range of
products including equities, fixed income and money markets. Our global
resources are extensive, far-reaching and powerful, with a strong presence in
the U.S., Europe, Japan, Latin America, Asia Pacific and Australia.
We invite you to explore our capabilities as a market leader in areas such as
retirement, tax and estate planning, and we encourage you to work closely with
your Salomon Smith Barney Financial Consultant to discuss the full range of
services we offer. He or she can further discuss the unique advantages of
professional investment management and how SSB Citi Asset Management can help
you develop a long-term disciplined plan to help you achieve your investment
goals.
When you invest with SSB Citi Asset Management, you can do so with the
confidence that your interests come first, your investment success is paramount
and that the ultimate in resources is being committed to your financial future.
Thank you for investing with us.
Sincerely,
/s/ Heath B. McLendon
Heath B. McLendon
Chairman
April 18, 2000
- --------------------------------------------------------------------------------
2 2000 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Shareholder Letter
- --------------------------------------------------------------------------------
[PHOTO]
John G. Goode
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, 2000. In
this report, we have summarized the period's prevailing economic and market
conditions and outlined our portfolio strategy. Any discussion of the Fund's
holdings is as of March 31, 2000. Please refer to pages twelve through fifteen
for a list of the Fund's holdings. We hope you find this report to be useful and
informative.
Performance Update
For the six-month period ended March 31, 2000, the Fundamental Value Fund's
Class A, B and L shares returned 27.51%, 27.08% and 27.00%, without sales
charges, respectively. The Fund's Class A, B and L shares, with sales charges,
returned 21.13%, 22.08% and 24.72%, respectively, for the same time period. In
comparison, the return for the Standard & Poor's 500 Index ("S&P 500")/1/ was
17.50% for the same time period.
Portfolio Strategy & Recent Results
The primary investment approach used to select positions for the Fund's
portfolio is identifying leading franchises when their share prices are out of
favor for reasons believed to be temporary. In our view, even the best companies
sometimes stumble or are faced with business conditions that challenge their
near-term ability to meet investor expectations. These periods represent
opportunities for us. Of course, the art in the process is to identify the
"rubber balls," namely those companies that may bounce back and return to favor
with investors rather than "broken eggs," companies whose longer-term prospects
are not as favorable and whose share prices remain depressed for extended
periods of time. (Of course, past performance is not indicative of future
results.)
Our investment process means that we seek to buy companies when the downside
risk is believed to be low because much of the decline in their share prices may
have already occurred. To the extent that a company's upside potential prospects
are attractive, this means we think a favorable risk and reward ratio has been
obtained. There are many factors that a portfolio manager should consider but we
think that selecting leading companies whose upside potential far exceeds the
downside exposure should rank near the top of the priority list.
In our opinion, the highly rotational stock market during the reporting period
was actually helpful to value managers like us. (Value investing consists of
identifying securities of companies that are believed to be undervalued but have
good longer-term business prospects. Growth investing consists of investing in
companies with historically strong and relatively predictable earnings growth
rates.)
Stocks that reach and exceed our most optimistic goals permit "harvesting,"
namely the gradual selling of a position to lock in profits. Conversely, some
companies find their shares are sold indiscriminately, with the result that the
share price may go lower than most anyone would expect. In this instance, the
"love/hate" approach of many mutual funds and other large-sized investors can,
in our opinion, generate some outstanding buying opportunities.
- ------------
1 The S&P 500 is a market capitalization-weighted measure of 500 widely-held
common stocks. Please note that the Index is unmanaged and is not subject
to the same management and trading expenses of a mutual fund.
- --------------------------------------------------------------------------------
Smith Barney Fundamental Value Fund Inc. 3
<PAGE>
Portfolio Update 2
Included in the table on page four are the leading performers in the Fundamental
Value Fund from September 1999 to March 2000. Technology stocks we purchased in
1997 through 1998 contributed to our performance. (Again, past performance is
not indicative of future results.)
Companies such as Scientific-Atlanta, Cypress Semiconductor, Adobe Systems,
Intel and Texas Instruments all made our top 15 list. Each of these companies
was bought when it was out-of-favor. For example, Intel was purchased several
years ago when a well-publicized chip recall caused its shares to go down
substantially.
The Fund's top 15 performers also included companies not generally associated
with the euphoria and speculation in the technology arena. Health Management
Associates, Fleming Companies, United HealthCare, Merrill Lynch, Precision
Castparts, Ocean Energy and General Motors were outstanding Fund performers
during the period as well.
- --------------------------------------------------------------------------------
Top 15 Performers* Return
- --------------------------------------------------------------------------------
Scientific-Atlanta, Inc. 125.3%
A leading supplier of broadband
communications systems, satellite-based
video, voice and data communications
networks and worldwide customer service
and support
- --------------------------------------------------------------------------------
Cypress Semiconductor Corp. 118.0
Designs, develops, manufactures and
markets a broad line of high-performance
digital and mixed-signal integrated circuits
- --------------------------------------------------------------------------------
Health Management Associates, Inc. 113.7
A provider of general health services to
nonurban areas
- --------------------------------------------------------------------------------
Aphton Corp. 94.8
A biopharmaceutical company that
develops products using innovative,
vaccine-like technology
- --------------------------------------------------------------------------------
Adobe Systems Inc. 94.1
Provider of graphic design, publishing,
and imaging software for Web and print
production
- --------------------------------------------------------------------------------
Intel Corp. 67.9
Semiconductor chip maker
- --------------------------------------------------------------------------------
Texas Instruments Inc. 65.9
Global semiconductor company and the
world's leading designer and supplier of
digital signal Processors and analog
integrated circuits
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Bottom 15 Performers* Return
- --------------------------------------------------------------------------------
Del Webb Corp. -29.7%
A developer of active adult communities
and family and country club communities
- --------------------------------------------------------------------------------
Crown Cork & Seal Co., Inc. -26.0
Manufactures packaging products for
consumer marketing companies
- --------------------------------------------------------------------------------
Johnson & Johnson -20.0
Manufactures and sells a variety of health
care products worldwide
- --------------------------------------------------------------------------------
Smurfit-Stone Container Corp. -18.2
A manufacturer of paperboard and
packaging products
- --------------------------------------------------------------------------------
McKesson HBOC Inc. -18.1
A health care supply management company
- --------------------------------------------------------------------------------
Engelhard Corp. -11.9
Provides environmental technologies,
chemical products, engineered materials
and related services
- --------------------------------------------------------------------------------
Archer-Daniels-Midland Co. -10.6
One of the world's largest processors of
oilseeds, corn and wheat
- --------------------------------------------------------------------------------
- ----------
2 Please note that portfolio holdings are as of March 31, 2000 and are subject
to change.
* Source: Davis Skaggs Investment Management
- --------------------------------------------------------------------------------
4 2000 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Top 15 Performers* (cont.) Return
- --------------------------------------------------------------------------------
Fleming Companies, Inc. 65.8%
Operator of two major businesses,
distribution and retail operations
- --------------------------------------------------------------------------------
United HealthCare Corp. 65.4
Provider of health care management
services through organized health systems
and insurance products
- --------------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 50.2
Provider of investment, financing,
advisory, insurance and related products
and services
- --------------------------------------------------------------------------------
Precision Castparts Corp. 43.3
Manufacturer of complex structural
products for the gas, turbine, airframe, fluid
management, industrial metalworking tools
and machines product markets
- --------------------------------------------------------------------------------
Time Warner Inc. 38.1
Media and entertainment company
- --------------------------------------------------------------------------------
Ocean Energy Inc. 36.5
An energy company engaged in the
development, production, exploration
and acquisition of oil and natural gas
- --------------------------------------------------------------------------------
General Motors Corp. 35.1
Designer, manufacturer and marketer of
automobiles, trucks and related parts
- --------------------------------------------------------------------------------
American International Group, Inc. 32.5
A global insurance holding company
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Bottom 15 Performers* (cont.) Return
- --------------------------------------------------------------------------------
Merck & Co., Inc. -9.2%
A global research-driven pharmaceutical
company
- --------------------------------------------------------------------------------
MGIC Investment Corp. -8.8
A holding company that provides private
mortgage insurance coverage to the home
mortgage lending industry
- --------------------------------------------------------------------------------
E.I. du Pont de Nemours & Co. -3.8
A global science and technology company
- --------------------------------------------------------------------------------
Royal Dutch Petroleum Co. -3.7
A holding company that owns 60% of
Royal Dutch/Shell Group, the oil & gas
company
- --------------------------------------------------------------------------------
Baker Hughes Inc. -1.5
A leading supplier of products and services
to the worldwide oil and gas industry
- --------------------------------------------------------------------------------
AmeriSource Health Corp. -1.0
A wholesale distributor of pharmaceuticals
and related health care services
- --------------------------------------------------------------------------------
Chevron Corp. -0.9
A company operating in fully integrated
petroleum operations, chemicals operations,
and coal mining through subsidiaries and
affiliates worldwide
- --------------------------------------------------------------------------------
Rouse Company -0.8
A real estate investment trust company
(REIT)
- --------------------------------------------------------------------------------
* Source: Davis Skaggs Investment Management
The lagging stocks during the six-month period ended March 31, 2000 included a
variety of companies in the pharmaceutical, health care, financial services,
energy, basic materials, building and paper industries sectors. Yet, in some
cases, these stocks have rebounded nicely since the end of the first quarter of
2000.
The Rearview Mirror -- An Imperfect Guide to the Future
From a performance standpoint, the last two years have seen among the narrowest
stock markets in history, as a limited number of companies caused the leading
indexes to advance at the same time and put most share prices under pressure.
The Ned Davis Research organization did a study at year-end 1999 which analyzed
the performance of more than 7,000 companies in its database. Just over 4,700
(or approximately two-thirds) of them declined during a so-called bull market
year.
We think this pattern is unlikely to continue. In our opinion, the investment
landscape may likely incorporate many of the following trends in the next three
to five years. (Of course, no guarantees can be given that our expectations will
be met.)
- --------------------------------------------------------------------------------
Smith Barney Fundamental Value Fund Inc. 5
<PAGE>
. The S&P 500 had an average annual appreciation of 18% over the last decade.
This and another ten-year period in the 1950s are the high watermarks for S&P
500 performance since 1925. We believe it's likely that future stock returns
may regress toward the long-term average of 10%-12%. In such an environment,
the market should broaden out. Historically, this development has favored
value managers.
. The price-to-earnings ("P/E") ratio for the S&P 500 doubled between 1994
through 1999. (A P/E ratio is the price of a stock divided by its earnings
per share.) This means that 15% per year of performance came from P/E
expansion. We believe P/E ratios have peaked, for several reasons, and some
important components of the S&P 500 may actually experience some P/E
contraction in the coming years as many investors look to purchase shares of
companies that have more favorable valuations.
. Small- and mid-cap stocks dramatically underperformed larger companies in the
most recent five-year period. We expect them to outperform by a significant
margin in the next three to five years. We think that the Fund probably may
have 25%-35% of its assets in this area of the stock market. And while no
guarantees can be given, all-cap portfolios such as Fundamental Value may
outperform large-cap portfolios if our assessment proves to be correct.
. In our view, the best news may be behind us on inflation. After 20 years of
disinflation or deflation, tight labor markets at home and expanding
economies abroad, we think that prices may increase to 3%-3 1/2% in the next
12 to 18 months. Although this is only a moderate increase from recent
experience, movement at the margin of any market or indicator is what we
think counts. Somewhat higher inflation may be one factor causing P/E ratios
to contract for many of the leading companies and currently popular stocks.
This trend may also generate some additional interest in natural resources
and hard assets.
. One of the real stock market pariahs in recent years has been yield. This
year the stock market's yield is one of the lowest on record. Clearly the
focus of many investors has clearly been on capital appreciation. If overall
market returns go back to more "normal" levels, stocks that provide
significant up-front returns in the form of dividends may become more highly
prized. The irony could be that these stocks, at least for the next two to
three years, may also generate substantial capital gains.
A Word About Technology
In the last few years, technology shares have gone from being merely popular to
being the only thing many investors want to own. Terms such as "New Economy"
became popular as valuations for most technology issues went to levels difficult
for many people to comprehend and the technology weight in the S&P 500 went past
35% from less than 10% a decade earlier. Technology is transforming many aspects
of our economy and those around the world; however, this is a process that has
been in effect for more than 100 years! There has always been a "New Economy."
At the beginning of the 20th century, the telephone and electricity were all the
rage as the inventions of Alexander Graham Bell and Thomas Edison changed the
way people lived and worked as never before. Shortly thereafter, the automobile
and airplane also brought additional revolutionary products and social and
economic change. The introduction of radio and television further separated the
20th century from previous ones. Advances in electronics, first the transistor,
the semiconductor and then the microprocessor made possible the now ubiquitous
personal computer in the last half of the century. In the last quarter century,
gene splicing, genetic engineering and now the decoding of the human genome
offer the promise of a successful assault on many diseases and afflictions of
mankind.
Therefore, the present enthusiasm for technology and the Internet and things
labeled "New Economy" have
- --------------------------------------------------------------------------------
6 2000 Semi-Annual Report to Shareholders
<PAGE>
much in common with other periods in history. However, technological advances
bring both opportunity and risk. In our opinion, this is not a one-way street.
For example, at one point in the last century, there were several hundred
automobile manufacturers. However, within a few years, virtually all of them had
failed for one reason or another. As a result, many investors in automobiles
lost 100% of their capital. And while no one can predict the future with any
degree of certainty, the same process may also occur today with respect to
Internet stocks. It seems likely that for every Internet success story, there
will be many more that fail or need to be merged at fire-sale prices into the
industry survivors.
The noted economist, Joseph Schumpeter, characterized capitalism as embodying
the process of "creative destruction," where new products and ideas make old
ones obsolete. It is clear that this process works between industries as when
the automobile made horse drawn carriages and buggy whips obsolete. Moreover,
this "creative destruction" also operates within specific industries, especially
early in their history. Usually, too much money enters new markets and far too
many competitors are spawned. Order is restored only when the weak are winnowed
out and the strongest companies remain. This process has characterized every
"New Economy" era in the last 100 years.
Currently we are underweight in technology and have used the recent period of
speculative euphoria to reduce our positions meaningfully. The current
correction in the technology sector suggests to us that in the months and
quarters ahead, values may be created and once again we may be able to find
"leading franchises available at depressed prices." We plan to use these periods
to "sow" new commitments in technology rather than "harvest" them as was done
recently.
Final Thoughts
We think the next few years may be ones in which assets, earning power and price
may be much more important than in the last five years, when concepts and
speculation generally trumped traditional valuation parameters. There is now a
wide disparity between the valuations of "New Economy" and "Old Economy" stocks.
We think it is likely that market forces should work to narrow this spread in
the coming years through mergers, share repurchases and leveraged buyouts. The
recent merger agreement between America Online and Time Warner may be the first
of many marriages in the next few years, between New and Old economy companies.
And while no guarantees can be given, in our view, the "new" investing
environment of the next five years may be much more favorable to value
investors. Value investors generally are much more likely to connect appropriate
share prices with the underlying business fundamentals of a company. And while
the value discipline has not been very rewarding in the recent past, we think
that value investing may be at the center of the stock market's focus in the
coming years. If our expectations come true, we believe the Fundamental Value
Fund and its investment philosophy may be well-suited to achieve competitive
relative and absolute returns for our shareholders over time. (Of course, past
performance is not indicative of future results.)
In closing, we believe there are more good values in the stock market than at
any time in the last decade and we are enthusiastic about the opportunities
before us. Thank you for investing in the Smith Barney Fundamental Value Fund
Inc. We look forward to continuing to help you pursue your financial goals.
Sincerely,
/s/ John G. Goode
John G. Goode
Vice President and
Investment Officer
April 18, 2000
- --------------------------------------------------------------------------------
Smith Barney Fundamental Value Fund Inc. 7
<PAGE>
- --------------------------------------------------------------------------------
Historical Performance--Class A Shares
- --------------------------------------------------------------------------------
Net Asset Value
--------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
================================================================================
3/31/00 $12.90 $15.48 $0.00 $0.83 27.51%+
- --------------------------------------------------------------------------------
9/30/99 10.07 12.90 0.02 0.72 37.17
- --------------------------------------------------------------------------------
9/30/98 11.37 10.07 0.11 0.52 (6.04)
- --------------------------------------------------------------------------------
9/30/97 9.31 11.37 0.13 0.44 29.53
- --------------------------------------------------------------------------------
9/30/96 8.66 9.31 0.19 0.37 14.73
- --------------------------------------------------------------------------------
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)
================================================================================
Total $1.27 $5.54
================================================================================
- --------------------------------------------------------------------------------
Historical Performance--Class B Shares
- --------------------------------------------------------------------------------
Net Asset Value
--------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
================================================================================
3/31/00 $12.73 $15.21 $0.00 $0.83 27.08%+
- --------------------------------------------------------------------------------
9/30/99 10.01 12.73 0.00 0.72 36.00
- --------------------------------------------------------------------------------
9/30/98 11.31 10.01 0.03 0.52 (6.79)
- --------------------------------------------------------------------------------
9/30/97 9.26 11.31 0.06 0.44 28.62
- --------------------------------------------------------------------------------
9/30/96 8.62 9.26 0.13 0.37 13.82
- --------------------------------------------------------------------------------
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 $0.37 $4.68
================================================================================
- --------------------------------------------------------------------------------
8 2000 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Historical Performance--Class L Shares
- --------------------------------------------------------------------------------
Net Asset Value
--------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
================================================================================
3/31/00 $12.73 $15.20 $0.00 $0.83 27.00%+
- --------------------------------------------------------------------------------
9/30/99 10.01 12.73 0.00 0.72 36.00
- --------------------------------------------------------------------------------
9/30/98 11.30 10.01 0.03 0.52 (6.70)
- --------------------------------------------------------------------------------
9/30/97 9.26 11.30 0.06 0.44 28.52
- --------------------------------------------------------------------------------
9/30/96 8.62 9.26 0.13 0.37 13.82
- --------------------------------------------------------------------------------
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 $0.33 $4.22
================================================================================
- --------------------------------------------------------------------------------
Historical Performance--Class Y Shares
- --------------------------------------------------------------------------------
Net Asset Value
--------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
================================================================================
3/31/00 $12.93 $15.55 $0.00 $0.83 27.77%+
- --------------------------------------------------------------------------------
9/30/99 10.10 12.93 0.06 0.72 37.57
- --------------------------------------------------------------------------------
9/30/98 11.40 10.10 0.16 0.52 (6.78)
- --------------------------------------------------------------------------------
9/30/97 9.32 11.40 0.16 0.44 30.06
- --------------------------------------------------------------------------------
Inception*--9/30/96 8.54 9.32 0.00 0.00 9.13+++
================================================================================
Total $0.38 $2.51
================================================================================
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
- --------------------------------------------------------------------------------
Average Annual Total Returns
- --------------------------------------------------------------------------------
Without Sales Charges(1)
----------------------------------------------
Class A Class B Class L Class Y
================================================================================
Six Months Ended 3/31/00+ 27.51% 27.08% 27.00% 27.77%
- --------------------------------------------------------------------------------
Year Ended 3/31/00 37.77 36.63 36.66 38.13
- --------------------------------------------------------------------------------
Five Years Ended 3/31/00 22.94 22.01 22.00 N/A
- --------------------------------------------------------------------------------
Ten Years Ended 3/31/00 17.85 N/A N/A N/A
- --------------------------------------------------------------------------------
Inception* through 3/31/00 15.66 18.88 18.05 22.43++
================================================================================
With Sales Charges(2)
----------------------------------------------
Class A Class B Class L Class Y
================================================================================
Six Months Ended 3/31/00+ 21.13% 22.08% 24.72% 27.77%
- --------------------------------------------------------------------------------
Year Ended 3/31/00 30.86 31.63 34.29 38.13
- --------------------------------------------------------------------------------
Five Years Ended 3/31/00 21.68 21.92 21.74 N/A
- --------------------------------------------------------------------------------
Ten Years Ended 3/31/00 17.25 N/A N/A N/A
- --------------------------------------------------------------------------------
Inception* through 3/31/00 15.34 18.88 17.88 22.43++
================================================================================
- --------------------------------------------------------------------------------
Smith Barney Fundamental Value Fund Inc. 9
<PAGE>
- --------------------------------------------------------------------------------
Cumulative Total Returns
- --------------------------------------------------------------------------------
Without Sales Charges(1)
================================================================================
Class A (3/31/90 through 3/31/00) 416.86%
- --------------------------------------------------------------------------------
Class B (Inception* through 3/31/00) 259.77
- --------------------------------------------------------------------------------
Class L (Inception* through 3/31/00) 201.16
- --------------------------------------------------------------------------------
Class Y (Inception* through 3/31/00) 132.57++
================================================================================
(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 also 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.
- --------------------------------------------------------------------------------
10 2000 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Smith Barney Fundamental Value Fund Inc. at a Glance (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 1990 -- March 2000
Smith Barney\rFundamental Value Fund Standard & Poor's 500 Index
March\90 9,498 10,000
Sep\90 8,383 9,169
Sep\91 11,189 12,019
Sep\92 12,756 13,346
Sep\93 15,974 15,078
Sep\94 16,759 15,632
Sep\95 20,101 20,277
Sep\96 23,061 24,395
Sep\97 29,870 34,258
Sep\98 28,066 37,371
Sep\99 38,497 47,757
March\00 49,090 56,114
+ Hypothetical illustration of $10,000 invested in Class A shares on March
31, 1990, 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, 2000, 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* Investment Breakdown
3.8% Aluminum 0.7% Options Purchased
10.1% Energy 0.1% Repurchase Agreement &
6.3% Entertainment Convertible Preferred Stock
9.3% Financial Services 99.2% Common Stock
3.1% Food and Beverages
12.0% Health Care
5.1% Insurance
2.5% Real Estate
23.4% Technology and Computers
8.4% Telecommunications
16.0% Other
* As a percentage of total common stock.
- --------------------------------------------------------------------------------
Smith Barney Fundamental Value Fund Inc. 11
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) March 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
====================================================================================================================================
COMMON STOCK -- 99.2%
Aerospace -- 0.5%
<S> <C> <C>
620,000 Raytheon Co., Class B Shares $ 11,005,000
- ------------------------------------------------------------------------------------------------------------------------------------
Aluminum -- 3.8%
1,200,000 Alcoa Inc.+ 84,300,000
- ------------------------------------------------------------------------------------------------------------------------------------
Bank and Credit Companies -- 1.2%
300,000 Chase Manhattan Corp. 26,156,250
- ------------------------------------------------------------------------------------------------------------------------------------
Basic Materials -- 0.5%
300,000 Crown Cork & Seal Co., Inc. 4,800,000
470,000 Wolverine Tube, Inc.* 6,021,875
- ------------------------------------------------------------------------------------------------------------------------------------
10,821,875
- ------------------------------------------------------------------------------------------------------------------------------------
Chemicals -- 2.3%
400,000 E.I. du Pont de Nemours & Co. 21,150,000
2,000,000 Engelhard Corp. 30,250,000
- ------------------------------------------------------------------------------------------------------------------------------------
51,400,000
- ------------------------------------------------------------------------------------------------------------------------------------
Construction -- 1.8%
950,000 Centex Corp. 22,621,875
773,700 Clayton Homes, Inc.+ 7,833,712
633,700 Del Webb Corp.* 9,386,681
- ------------------------------------------------------------------------------------------------------------------------------------
39,842,268
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Products -- 0.6%
370,000 American Greetings Corp. 6,752,500
100,000 Procter & Gamble Co. 5,625,000
- ------------------------------------------------------------------------------------------------------------------------------------
12,377,500
- ------------------------------------------------------------------------------------------------------------------------------------
Energy -- 10.0%
8,390,000 Abacan Resource Corp.*++ 272,675
3,333,334 Abacan Resource Corp.* 175,000
150,000 Apache Corp. 7,462,500
200,000 Atlantic Richfield Co. 17,000,000
500,000 Baker Hughes Inc. 15,125,000
100,000 Barrett Resources Corp.* 2,981,250
350,000 Burlington Resources Inc. 12,950,000
400,000 Chevron Corp. 36,975,000
300,000 EOG Resources, Inc. 6,356,250
773,300 Halliburton Co. 31,705,300
2,925,900 Ocean Energy Inc.* 42,059,812
700,000 Royal Dutch Petroleum Co., NY Shares* 40,293,750
750,000 Union Pacific Resources Group Inc. 10,875,000
- ------------------------------------------------------------------------------------------------------------------------------------
224,231,537
- ------------------------------------------------------------------------------------------------------------------------------------
Entertainment -- 6.3%
1,350,000 Carnival Corp. 33,496,875
1,000,000 Fox Entertainment Group, Inc., Class A Shares* 29,937,500
775,000 Time Warner Inc.+ 77,500,000
- ------------------------------------------------------------------------------------------------------------------------------------
140,934,375
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
- --------------------------------------------------------------------------------
12 2000 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited)(continued) March 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
====================================================================================================================================
Financial Services -- 9.2%
<S> <C> <C>
125,000 Ambac Financial Group, Inc. $ 6,296,875
500,000 American Express Co. 74,468,750
700,000 Bank of America Corp. 36,706,250
1,500,000 Countrywide Credit Industries, Inc. 40,875,000
706,000 First American Financial Corp. 10,016,375
140,000 MBIA, Inc.+ 7,288,750
300,000 Merrill Lynch & Co., Inc. 31,500,000
- ------------------------------------------------------------------------------------------------------------------------------------
207,152,000
- ------------------------------------------------------------------------------------------------------------------------------------
Food & Beverages -- 3.0%
3,500,000 Archer-Daniels-Midland Co. 36,312,500
713,100 Fleming Cos., Inc. 10,741,069
600,000 PepsiCo, Inc. 20,737,500
- ------------------------------------------------------------------------------------------------------------------------------------
67,791,069
- ------------------------------------------------------------------------------------------------------------------------------------
Health Care -- 11.9%
100,000 Abbott Laboratories 3,518,750
1,066,500 Advanced Polymer Systems, Inc.* 5,332,500
1,035,300 AmeriSource Health Corp., Class A Shares 15,529,500
1,910,224 Aphton Corp.+* 63,753,726
1,827,500 Foundation Health Systems, Inc., Class A Shares+* 14,620,000
3,350,000 Health Management Associates, Inc.* 47,737,500
550,000 Johnson & Johnson 38,534,375
2,000,000 McKesson HBOC, Inc. 42,000,000
400,000 Merck & Co., Inc. 24,850,000
266 Molecular Biosystems, Inc.* 333
200,000 United HealthCare Corp. 11,925,000
- ------------------------------------------------------------------------------------------------------------------------------------
267,801,684
- ------------------------------------------------------------------------------------------------------------------------------------
Industrials -- 2.3%
400,000 Deere & Co.+ 15,200,000
140,000 Honeywell International Inc. 7,376,250
819,100 Precision Castparts Corp. 29,897,150
- ------------------------------------------------------------------------------------------------------------------------------------
52,473,400
- ------------------------------------------------------------------------------------------------------------------------------------
Insurance -- 5.1%
600,000 American International Group, Inc. 65,700,000
1,115,000 MGIC Investment Corp. 48,641,875
- ------------------------------------------------------------------------------------------------------------------------------------
114,341,875
- ------------------------------------------------------------------------------------------------------------------------------------
Metals -- 1.9%
1,645,300 Brush Wellman Inc. 28,998,413
335,280 Cameco Corp. 3,478,530
945,000 RTI International Metals, Inc.* 8,327,812
100,000 USX-U.S. Steel Group 2,500,000
- ------------------------------------------------------------------------------------------------------------------------------------
43,304,755
- ------------------------------------------------------------------------------------------------------------------------------------
Natural Resources -- 0.2%
534,600 Arch Coal, Inc. 3,742,200
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
- --------------------------------------------------------------------------------
Smith Barney Fundamental Value Fund Inc. 13
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited)(continued) March 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
====================================================================================================================================
Paper Products -- 1.9%
<S> <C> <C>
2,000,000 Asia Pulp & Paper Co., Ltd.+* $ 14,750,000
500,000 Smurfit-Stone Container Corp.+* 8,468,750
360,000 Weyerhaeuser Co.+ 20,520,000
- ------------------------------------------------------------------------------------------------------------------------------------
43,738,750
- ------------------------------------------------------------------------------------------------------------------------------------
Real Estate -- 2.4%
1,050,000 The Rouse Co. 22,181,250
725,000 Spieker Properties, Inc. 32,262,500
- ------------------------------------------------------------------------------------------------------------------------------------
54,443,750
- ------------------------------------------------------------------------------------------------------------------------------------
Retail -- 0.7%
400,000 Albertson's, Inc. 12,400,000
150,000 May Department Stores Co.* 4,275,000
- ------------------------------------------------------------------------------------------------------------------------------------
16,675,000
- ------------------------------------------------------------------------------------------------------------------------------------
Technology and Computers -- 23.2%
1,200,000 Adobe Systems Inc. 133,575,000
425,000 Cypress Semiconductor Corp.* 20,957,813
2,850,000 Hitachi, Ltd. 33,872,666
600,000 Intel Corp. 79,162,500
600,000 International Business Machines Corp. 70,800,000
380,000 Motorola, Inc. 54,102,500
800,000 Texas Instruments Inc. 128,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
520,470,479
- ------------------------------------------------------------------------------------------------------------------------------------
Telecommunications -- 8.3%
1,650,000 AT&T Corp. 92,812,500
1,200,000 Cox Communications, Inc.+* 58,200,000
100,000 MCI WorldCom, Inc.* 4,531,250
480,000 Scientific-Atlanta, Inc.+ 30,450,000
- ------------------------------------------------------------------------------------------------------------------------------------
185,993,750
- ------------------------------------------------------------------------------------------------------------------------------------
Toys -- 0.5%
1,000,000 Mattel, Inc. 10,437,500
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation -- 1.5%
400,000 General Motors Corp. 33,125,000
- ------------------------------------------------------------------------------------------------------------------------------------
Waste Management -- 0.1%
415,900 Azurix Corp.* 3,119,250
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost-- $1,221,869,620) 2,225,679,267
====================================================================================================================================
</TABLE>
See Notes to Financial Statements
- --------------------------------------------------------------------------------
14 2000 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited)(continued) March 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
====================================================================================================================================
OPTIONS PURCHASED -- 0.7%
Index -- 0.6%
<S> <C> <C>
Nasdaq 100 Index:
80,500 Put @ $110, Expire 1/19/01 $ 1,449,000
197,000 Put @ $200, Expire 1/19/01 2,585,625
125,000 S&P 500 Index Put @ $1,400, Expire 12/15/00 7,750,000
- ------------------------------------------------------------------------------------------------------------------------------------
11,784,625
- ------------------------------------------------------------------------------------------------------------------------------------
Technology and Computers -- 0.1%
100,000 Texas Instruments Inc. Put @ $180, Expire 7/21/00 3,100,000
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL OPTIONS PURCHASED
(Cost -- $12,827,907) 14,884,625
====================================================================================================================================
CONVERTIBLE PREFERRED STOCK -- 0.0%
54,818 Webforia Inc. (Cost -- $500,000) 500,000
====================================================================================================================================
WARRANTS -- 0.0%
10,719 Webforia Inc., Expire 7/14/05* (Cost -- $0) 0
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
====================================================================================================================================
REPURCHASE AGREEMENT -- 0.1%
<S> <C> <C>
$2,439,000 J.P. Morgan, 6.080% due 4/3/00; Proceeds at maturity -- $2,440,236;
(Fully collateralized by U.S. Treasury Notes, 5.250% to 5.875% due
5/31/01 to 1/15/09; Market value -- $2,463,429) (Cost -- $2,439,000) 2,439,000
====================================================================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $1,237,636,527**) $2,243,502,892
====================================================================================================================================
</TABLE>
+ All or a portion of this security is on loan (See Note 6).
* Non-income producing security.
++ Security is exempt from registration under Rule 144A of the Securities Act
of 1933. This security may be resold in transactions that are exempt from
registration, normally to qualified institutional buyers.
** Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements
- --------------------------------------------------------------------------------
Smith Barney Fundamental Value Fund Inc. 15
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) March 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments, at value (Cost--$1,237,636,527) $2,243,502,892
Cash 174
Collateral for securities on loan (Note 6) 128,407,619
Receivable for Fund shares sold 6,641,285
Dividends and interest receivable 2,714,832
Receivable for securities sold 2,509,666
- ------------------------------------------------------------------------------------------------------------------------------------
Total Assets 2,383,776,468
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities on loan (Note 6) 128,407,619
Payable for securities purchased 6,290,040
Options written (Premium received-- $9,908,233) (Note 5) 5,923,438
Payable for Fund shares purchased 3,947,264
Distribution fees payable 436,474
Investment advisory fees payable 699,133
Administration fees payable 618,113
Accrued expenses 1,363,225
- ------------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 147,685,306
- ------------------------------------------------------------------------------------------------------------------------------------
Total Net Assets $2,236,091,162
====================================================================================================================================
NET ASSETS:
Par value of capital shares $ 145,856
Capital paid in excess of par value 1,122,191,312
Overdistributed net investment income (2,144,257)
Accumulated net realized gain from security transactions and options 106,049,562
Net unrealized appreciation of investments, options and foreign currencies 1,009,848,689
- ------------------------------------------------------------------------------------------------------------------------------------
Total Net Assets $2,236,091,162
====================================================================================================================================
Shares Outstanding:
Class A 57,396,330
----------------------------------------------------------------------------------------------------------------------------------
Class B 73,497,072
----------------------------------------------------------------------------------------------------------------------------------
Class L 9,281,249
----------------------------------------------------------------------------------------------------------------------------------
Class Y 5,680,947
----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $15.48
----------------------------------------------------------------------------------------------------------------------------------
Class B * $15.21
----------------------------------------------------------------------------------------------------------------------------------
Class L ** $15.20
----------------------------------------------------------------------------------------------------------------------------------
Class Y (and redemption price) $15.55
----------------------------------------------------------------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 5.26% of net asset value per share) $16.29
----------------------------------------------------------------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset value per share) $15.35
====================================================================================================================================
</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.
- --------------------------------------------------------------------------------
16 2000 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations (unaudited) For the Six Months Ended March 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Dividends $10,770,181
Interest 1,066,509
Less: Foreign withholding tax (12,009)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investment Income 11,824,681
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Distribution fees (Note 3) 6,398,182
Investment advisory fees (Note 3) 5,232,202
Administration fees (Note 3) 1,937,604
Shareholder and system servicing fees 1,048,875
Shareholder communications 175,479
Registration fees 84,330
Audit and legal 44,845
Directors' fees 40,785
Custody 36,098
Other 16,801
- ------------------------------------------------------------------------------------------------------------------------------------
Total Expenses 15,015,201
- ------------------------------------------------------------------------------------------------------------------------------------
Net Investment Loss (3,190,520)
- ------------------------------------------------------------------------------------------------------------------------------------
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) 138,008,806
Options written (6,441,928)
Options purchased (1,253,488)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Realized Gain 130,313,390
- ------------------------------------------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments, Options and Foreign Currencies:
Beginning of period 660,933,422
End of period 1,009,848,689
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 348,915,267
- ------------------------------------------------------------------------------------------------------------------------------------
Net Gain on Investments, Options and Foreign Currencies 479,228,657
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations $476,038,137
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Fundamental Value Fund Inc. 17
<PAGE>
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
For the Six Months Ended March 31, 2000 (unaudited)
and the Year Ended September 30, 1999
<TABLE>
<CAPTION>
2000 1999
====================================================================================================================================
OPERATIONS:
<S> <C> <C>
Net investment loss $(3,190,520) $(809,311)
Net realized gain 130,313,390 151,877,298
Increase in net unrealized appreciation 348,915,267 323,038,699
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 476,038,137 474,106,686
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- (1,279,510)
Net realized gains (114,538,420) (94,958,684)
- ------------------------------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From Distributions to Shareholders (114,538,420) (96,238,194)
- ------------------------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 7):
Net proceeds from sale of shares 344,765,150 311,525,828
Net asset value of shares issued for reinvestment of dividends 104,227,495 87,370,632
Cost of shares reacquired (304,478,806) (403,471,373)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Fund Share Transactions 144,513,839 (4,574,913)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets 506,013,556 373,293,579
NET ASSETS:
Beginning of period 1,730,077,606 1,356,784,027
- ------------------------------------------------------------------------------------------------------------------------------------
End of period* $2,236,091,162 $1,730,077,606
====================================================================================================================================
* Includes undistributed (overdistributed) net investment income of: $(2,144,257) $1,046,263
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
18 2000 Semi-Annual Report to Shareholders
<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, 1999,
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. Accordingly, a portion of undistributed net investment
income amounting to $857,820 was reclassified to paid in capital. 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
SSB Citi Fund Management LLC ("SSBC"), a subsidiary of Salomon Smith Barney
Holdings Inc. ("SSBH"), which, in turn, is a subsidiary of Citigroup Inc.
("Citigroup"), acts as investment adviser of the Fund. The Fund pays SSBC an
advisory fee calculated at an
- --------------------------------------------------------------------------------
Smith Barney Fundamental Value Fund Inc. 19
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
annual rate of 0.55% on the first $1.5 billion of average daily net assets;
0.50% on the next $0.5 billion; 0.49% on the next $0.5 billion; 0.46% on the
next $1.0 billion and 0.38% on the average daily net assets in excess of $3.5
billion. This fee is calculated daily and paid monthly.
SSBC also acts as the Fund's administrator for which it receives a fee
calculated at an annual rate of 0.20% on the first $2.0 billion of average daily
net assets; 0.16% on the next $0.5 billion; 0.14% on the next $1.0 billion and
0.12% on the average daily net assets in excess of $3.5 billion. This fee is
calculated daily and paid monthly.
Effective October 1999, Citi Fiduciary Trust Company ("CFTC"), another
subsidiary of Citigroup, became the Fund's transfer agent and PFPC Global Fund
Services ("PFPC") became the Fund's sub-transfer agent. CFTC receives fees and
asset-based fees that vary according to the account size and type of account.
PFPC is responsible for shareholder recordkeeping and financial processing for
all shareholder accounts and is paid by CFTC. During the period October 1, 1999
through March 31, 2000, the Fund paid transfer agent fees of $734,145 to CFTC.
CFBDS, Inc. ("CFBDS"), acts as the Fund's distributor. Salomon Smith Barney Inc.
("SSB"), another subsidiary of SSBH, as well as certain other broker-dealers,
continues to sell Fund shares to the public as a member of the selling group.
SSB acts as the primary broker for its portfolio agency transactions. For the
six months ended March 31, 2000, SSB received total brokerage commissions of
$1,687,805.
There are maximum initial sales charges of 5.00% and 1.00% for 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, 2000, CFBDS and SSB received sales charges of
$478,000 and $292,000 on sales of the Fund's Class A and L shares, respectively.
In addition, CDSCs paid to SSB were:
Class A Class B Class L
==============================================================
CDSCs $1,000 $320,000 $10,000
==============================================================
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, 2000, total Distribution Plan fees incurred were:
Class A Class B Class L
==============================================================
Distribution Plan Fees $962,505 $4,910,237 $525,440
==============================================================
All officers and one Director of the Fund are employees of SSB.
4. Investments
During the six months ended March 31, 2000, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
===================================================================
Purchases $378,166,111
- -------------------------------------------------------------------
Sales 311,078,539
===================================================================
At March 31, 2000, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were as follows:
================================================================================
Gross unrealized appreciation $1,069,126,480
Gross unrealized depreciation (63,260,115)
- --------------------------------------------------------------------------------
Net unrealized appreciation $1,005,866,365
================================================================================
- --------------------------------------------------------------------------------
20 2000 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
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
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, 2000, the Fund held purchased put options with a total cost of
$12,827,907.
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, 2000:
<TABLE>
<CAPTION>
Number of
Contracts Premiums
===================================================================================================================================
<S> <C> <C>
Options written, outstanding at September 30, 1999 6,000 $ 2,440,918
Options written during the six months ended March 31, 2000 55,300 13,934,018
Options cancelled in closing purchase transactions (17,800) (4,400,772)
Options expired (4,000) (2,065,931)
- -----------------------------------------------------------------------------------------------------------------------------------
Options written, outstanding at March 31, 2000 39,500 $ 9,908,233
===================================================================================================================================
</TABLE>
The following represents the covered call option written contracts open as of
March 31, 2000:
<TABLE>
<CAPTION>
Number of Strike
Contracts Security Expiration Price Value
===================================================================================================
<S> <C> <C> <C> <C>
12,000 Adobe Systems Inc. 4/20/00 $130.0 $3,600,000
4,250 Cypress Semiconductor Corp. 4/20/00 65.0 212,500
5,500 Precision Castparts Corp. 4/20/00 40.0 275,000
2,000 Scientific-Atlanta, Inc. 4/20/00 82.5 112,500
7,000 Texas Instruments Inc. 4/20/00 220.0 284,375
1,000 Texas Instruments Inc. 4/20/00 220.0 712,500
7,750 Time Warner Inc. 4/20/00 115.0 726,563
- ---------------------------------------------------------------------------------------------------
Total Covered Call Options Written
(Premiums received -- $9,908,233) $5,923,438
===================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Smith Barney Fundamental Value Fund Inc. 21
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
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, 2000, the Fund loaned common stocks having a value of approximately
$135,911,603 and holds the following collateral for loaned securities:
Security Description Value
================================================================================
Time Deposits:
Bank of Brussels, 6.340% due 4/3/00 $ 27,974,065
Banque Paribas, 6.310% due 4/3/00 27,955,729
Barclays Bank, 6.310% due 4/3/00 20,104,308
Credit Agricole, 6.080% due 4/3/00 10,447,417
Commercial Paper:
Grant Funding, 6.060% due 6/1/00 539,841
Morgan Stanley, 5.880% due 4/3/00 1,684,101
Floating Rate Commercial Paper:
American Home Products, 5.480% due 4/20/00 12,882,407
Repurchase Agreement:
Warburg Dillon Read, 6.100% due 4/3/00 2,315,150
Floating Rate Note:
AmSouth Bank, 5.730% due 1/25/01 2,123,283
Goldman, Sachs & Co., 5.280% due 8/23/00 22,381,318
- --------------------------------------------------------------------------------
Total $128,407,619
================================================================================
Income earned by the Fund from securities loaned for the six months ended March
31, 2000 was $351,545.
7. Capital Shares
At March 31, 2000, 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.
At March 31, 2000, 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 $459,404,613 $523,733,129 $95,687,472 $43,511,954
=======================================================================================
</TABLE>
- --------------------------------------------------------------------------------
22 2000 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
March 31, 2000 September 30, 1999
------------------------------- ----------------------------------
Shares Amount Shares Amount
====================================================================================================================================
<S> <C> <C> <C> <C>
Class A
Shares sold 14,092,259 $ 195,689,440 13,343,016 $ 168,308,152
Shares issued on reinvestment 3,298,059 43,864,179 3,453,723 36,264,097
Shares reacquired (12,755,657) (176,405,073) (15,710,481) (194,184,251)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 4,634,661 $ 63,148,546 1,086,258 $ 10,387,998
====================================================================================================================================
Class B
Shares sold 7,424,737 $ 101,639,181 8,433,658 $ 106,180,906
Shares issued on reinvestment 4,174,899 54,691,182 4,525,136 47,197,171
Shares reacquired (7,528,082) (102,815,289) (15,085,068) (178,838,523)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 4,071,554 $ 53,515,074 (2,126,274) $ (25,460,446)
====================================================================================================================================
Class L+
Shares sold 3,370,728 $ 46,523,683 2,189,761 $ 27,588,163
Shares issued on reinvestment 433,318 5,672,134 374,819 3,909,364
Shares reacquired (1,153,779) (15,845,632) (1,666,631) (20,095,599)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 2,650,267 $ 36,350,185 897,949 $ 11,401,928
====================================================================================================================================
Class Y
Shares sold 69,495 $ 912,846 854,600 $ 9,448,607
Shares issued on reinvestment -- -- -- --
Shares reacquired (649,435) (9,412,812) (785,232) (10,353,000)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (579,940) $ (8,499,966) 69,368 $ (904,393)
====================================================================================================================================
</TABLE>
+ On June 12, 1998, Class C shares were renamed Class L shares.
- --------------------------------------------------------------------------------
Smith Barney Fundamental Value Fund Inc. 23
<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 2000(1)(2) 1999(2) 1998(2) 1997 1996 1995
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 12.90 $ 10.07 $ 11.37 $ 9.31 $ 8.66 $ 8.20
- ------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.00* 0.04 0.09 0.11 0.20 0.17
Net realized and unrealized gain (loss) 3.41 3.53 (0.76) 2.52 1.01 1.23
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 3.41 3.57 (0.67) 2.63 1.21 1.40
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- (0.02) (0.11) (0.13) (0.19) (0.13)
Net realized gains (0.83) (0.72) (0.52) (0.44) (0.37) (0.81)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.83) (0.74) (0.63) (0.57) (0.56) (0.94)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 15.48 $ 12.90 $ 10.07 $ 11.37 $ 9.31 $ 8.66
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return 27.51%++ 37.17% (6.04)% 29.53% 14.73% 19.94%
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $ 888,639 $ 680,603 $ 520,627 $ 606,054 $ 458,208 $ 386,297
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.13%+ 1.17% 1.15% 1.14% 1.22% 1.34%
Net investment income 0.09+ 0.35 0.81 1.14 2.32 2.19
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 16% 43% 41% 46% 57% 45%
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class B Shares 2000(1)(2) 1999(2) 1998(2) 1997 1996 1995
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.73 $10.01 $11.31 $9.26 $8.62 $8.16
- ------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss) (0.05) (0.05) 0.00* 0.03 0.13 0.12
Net realized and unrealized gain (loss) 3.36 3.49 (0.75) 2.52 1.01 1.23
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 3.31 3.44 (0.75) 2.55 1.14 1.35
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- (0.03) (0.06) (0.13) (0.08)
Net realized gains (0.83) (0.72) (0.52) (0.44) (0.37) (0.81)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.83) (0.72) (0.55) (0.50) (0.50) (0.89)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $15.21 $12.73 $10.01 $11.31 $9.26 $8.62
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return 27.08%++ 36.00% (6.79)% 28.62% 13.82% 19.19%
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $1,117,978 $884,088 $716,239 $930,436 $703,552 $538,759
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.90%+ 1.94% 1.92% 1.90% 1.97% 2.09%
Net investment income (loss) (0.68)+ (0.42) 0.04 0.38 1.56 1.44
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 16% 43% 41% 46% 57% 45%
====================================================================================================================================
</TABLE>
(1) For the six months ended March 31, 2000 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
* Amount represents less than $0.01 per share.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
24 2000 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended September 30, except where noted:
<TABLE>
<CAPTION>
Class L Shares 2000(1)(2) 1999(2) 1998(2)(3) 1997 1996 1995
====================================================================================================================================
Net Asset Value, Beginning of Period $12.73 $10.01 $11.30 $9.26 $8.62 $8.16
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income (Loss) From Operations:
Net investment income (loss) (0.05) (0.05) 0.00* 0.03 0.14 0.12
Net realized and unrealized gain (loss) 3.35 3.49 (0.74) 2.51 1.00 1.24
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 3.30 3.44 (0.74) 2.54 1.14 1.36
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- (0.03) (0.06) (0.13) (0.09)
Net realized gains (0.83) (0.72) (0.52) (0.44) (0.37) (0.81)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.83) (0.72) (0.55) (0.50) (0.50) (0.90)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $15.20 $12.73 $10.01 $11.30 $9.26 $8.62
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return 27.00%++ 36.00% (6.70)% 28.52% 13.82% 19.33%
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $141,109 $84,402 $57,367 $71,874 $44,539 $21,812
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.91%+ 1.95% 1.93% 1.92% 1.96% 2.09%
Net investment income (loss) (0.66)+ (0.43) 0.03 0.36 1.52 1.44
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 16% 43% 41% 46% 57% 45%
====================================================================================================================================
Class Y Shares 2000(1)(2) 1999(2) 1998(2) 1997 1996(4)
====================================================================================================================================
Net Asset Value, Beginning of Period $12.93 $10.10 $11.40 $9.32 $8.54
- ------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.03 0.09 0.12 0.14 0.23
Net realized and unrealized gain (loss) 3.42 3.52 (0.74) 2.54 0.55
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 3.45 3.61 (0.62) 2.68 0.78
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- (0.06) (0.16) (0.16) --
Net realized gains (0.83) (0.72) (0.52) (0.44) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.83) (0.78) (0.68) (0.60) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $15.55 $12.93 $10.10 $11.40 $9.32
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return 27.77%++ 37.57% (6.78)% 30.06% 9.13%#++
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $88,365 $80,984 $62,551 $108,578 $44,641
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.78%+ 0.82% 0.79% 0.78% 0.75%+
Net investment income 0.42+ 0.71 1.15 1.48 2.58+
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 16% 43% 41% 46% 57%
====================================================================================================================================
</TABLE>
(1) For the six months ended March 31, 2000 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) On June 12, 1998, Class C shares were renamed Class L shares.
(4) For the period from October 13, 1995 (inception date) to September 30,
1996.
* Amount represents less than $0.01 per share.
# 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.
- --------------------------------------------------------------------------------
Smith Barney Fundamental Value Fund Inc. 25
<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
SSB Citi Fund Management LLC
Distributor
CFBDS, Inc.
Custodian
PFPC Trust Company
Transfer Agent
Citi Fiduciary Trust Company
388 Greenwich Street, 22nd Floor
New York, New York 10013
Sub-Transfer Agent
PFPC Global Fund Services
P.O. Box 9699
Providence, Rhode Island 02940-9699
This report is submitted for the general information of shareholders of Smith
Barney Fundamental Value Fund Inc., but it may also be used as sales literature
when preceded or accompanied by the current Prospectus, which gives details
about charges, expenses, investment objectives and operating policies of the
Fund. If used as sales material after June 30, 2000, this report must be
accompanied by performance information for the most recently completed calendar
quarter.
[LOGO OF SALOMON SMITH BARNEY]
Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
Smith Barney Fundamental Value Fund Inc.
Smith Barney Mutual Funds
388 Greenwich Street, MF-2
New York, New York 10013
www.smithbarney.com/mutualfunds
