Registration No. 2-71469
811-3158
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 34 X
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 X
Amendment No. 37 X
SMITH BARNEY FUNDAMENTAL VALUE FUND INC.
(Exact name of Registrant as Specified in Charter)
388 Greenwich Street, New York, New York 10013
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 720-9218
Christina T. Sydor
Secretary
Smith Barney Fundamental Value Fund Inc.
388 Greenwich Street
New York, New York 10013
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: Continuous
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
XXX on January 28, 2000 pursuant to paragraph (b) of Rule 485
60 days after filing pursuant to paragraph (a)(1)
on (date) pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered: Shares of Common Stock.
PART A
<PAGE>
[SB]Smith Barney
[MF]Mutual Funds
P R O S P E C T U S
Fundamental
Value Fund Inc.
Class A, B, L and Y Shares
- ----------------------------------------------------------------------------
January 28, 2000
The Securities and Exchange Commission has not approved or disapproved these
securities or determined whether this prospectus is accurate or complete. Any
statement to the contrary is a crime.
<PAGE>
Fundamental Value Fund
Contents
<TABLE>
<S> <C>
Investments, risks and performance.......................................... 2
More on the fund's investments.............................................. 6
Management.................................................................. 7
Choosing a class of shares to buy........................................... 8
Comparing the fund's classes................................................ 10
Sales charge................................................................ 11
More about deferred sales charges........................................... 13
Buying shares............................................................... 14
Exchanging shares........................................................... 15
Redeeming shares............................................................ 17
Other things to know about share transactions............................... 19
Smith Barney 401(k) and ExecChoice(TM) program.............................. 21
Distributions, dividends and taxes.......................................... 22
Share price................................................................. 23
Financial highlights........................................................ 24
</TABLE>
You should know: An investment in the fund is not a bank deposit and is not
insured or guaranteed by the FDIC or any other government agency.
Smith Barney Mutual Funds
1
<PAGE>
Investments, risks and performance
Investment objective
The fund seeks long-term capital growth. Current income is a secondary consid-
eration.
Principal Investment Strategies
Key investments The fund invests primarily in common stocks and common stock
equivalents, such as preferred stocks and securities convertible into common
stocks, of companies the manager believes are undervalued in the marketplace.
While the manager selects investments primarily for their capital appreciation
potential, secondary consideration is given to a company's dividend record and
the potential for an improved dividend return. The fund generally invests in
securities of large, well-known companies but may also invest a significant
portion of its assets in securities of small to medium-sized companies when the
manager believes smaller companies offer more attractive value opportunities.
Selection process The manager employs a two-step stock selection process in its
search for undervalued stocks of temporarily out of favor companies. First, the
manager uses proprietary models and fundamental research to try to identify
stocks that are underpriced in the market relative to their fundamental value.
Next, the manager looks for a positive catalyst in the company's near term out-
look which the manager believes will accelerate earnings or improve the value
of the company's assets. The manager also emphasizes companies in those sectors
of the economy which the manager believes are undervalued relative to other
sectors.
When evaluating an individual stock, the manager looks for:
. Low market valuations measured by the manager's valuation models
. Positive changes in earnings prospects because of factors such as:
. New, improved or unique products and services
. New or rapidly expanding markets for the company's products
. New management
. Changes in the economic, financial, regulatory or political environment
particularly affecting the company
. Effective research, product development and marketing
. A business strategy not yet recognized by the marketplace
Principal risks of investing in the fund
Investors could lose money on their investment in the fund, or the fund may not
perform as well as other investments, if:
. Stock prices decline generally
. The manager's judgment about the attractiveness, value or potential apprecia-
tion of a particular stock proves to be incorrect
Fundamental Value Fund Inc.
2
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. An adverse event, such as negative press reports about a company in which the
fund invests, depresses the value of the company's stock
. The markets strongly favor growth stocks over stocks with value characteris-
tics.
. Small or medium capitalization companies fall out of favor with investors
Compared to mutual funds that focus only on large capitalization companies, the
fund's share price may be more volatile because the fund also invests a signif-
icant portion of its assets in small and medium capitalization companies.
Compared to large companies, small and medium capitalization companies are more
likely to have:
. More limited product lines
. Fewer capital resources
. More limited management depth
Further, securities of small and medium capitalization companies are more
likely to:
. Experience sharper swings in market values
. Be harder to sell at times and at prices the manager believes appropriate
. Offer greater potential for gains and losses
Who may want to invest
The fund may be an appropriate investment if you:
. Are seeking to participate in the long-term growth potential of the U.S. stock
market
. Are looking for an investment with potentially greater return but higher risk
than fixed income investments
. Are willing to accept the risks of the stock market
Smith Barney Mutual Funds
3
<PAGE>
Risk return bar chart
This bar chart indicates the risks of investing in the fund by showing changes
in the fund's performance from year to year. Past performance does not neces-
sarily indicate how the fund will perform in the future.
Total Return for Class A Shares
[BAR CHART]
90 91 92 93 94 95 96 97 98 99
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
(8.41)% 31.44% 14.86% 19.75% 1.44% 27.88% 19.69% 15.27% 15.81% 30.87%
The bar chart shows the performance of the fund's Class A shares for each of
the past 10 calendar years. Class B, L and Y shares would have different per-
formance because of their different expenses. The performance information in
the chart does not reflect sales charges, which would reduce your return.
Quarterly returns:
Highest: 18.45% in 4th quarter 1998; Lowest: (19.09)% in 3rd quarter 1990
Risk return table
This table indicates the risks of investing in the fund by comparing the aver-
age annual total return of each class for the periods shown with that of the
S&P 500, a broad-based unmanaged index of 500 widely traded large capitaliza-
tion companies, and the Lipper Multi-Cap Value Funds Average (the "Lipper Aver-
age"), an average composed of the fund's peer group of mutual funds. This table
assumes imposition of the maximum sales charge applicable to the class, redemp-
tion of shares at the end of the period, and reinvestment of distributions and
dividends.
Average Annual Total Returns
Calendar Years Ended December 31, 1999
<TABLE>
<CAPTION>
Class 1 year 5 years 10 years Since inception Inception date
<S> <C> <C> <C> <C> <C>
A 24.29% 20.49% 15.62% 14.80% 11/12/81
B 24.92% 20.74% n/a 17.63% 11/6/92
L 27.66% 20.58% n/a 16.45% 8/10/93
Y 31.32% n/a n/a 20.23% 10/13/95
S&P 500 Index 21.03% 28.54% 18.19% 18.25% *
Lipper Average 10.85% 19.23% 13.77% 15.17% *
</TABLE>
* Index comparison begins on 11/30/81.
Fundamental Value Fund Inc.
4
<PAGE>
Fee table
This table sets forth the fees and expenses you will pay if you invest in fund
shares.
Shareholder fees
<TABLE>
<CAPTION>
(fees paid directly from your investment) Class A Class B Class L Class Y
<S> <C> <C> <C> <C>
Maximum sales charge (load) imposed on
purchases (as a % of offering price) 5.00% None 1.00% None
Maximum deferred sales charge (load) (as a %
of the lower of net asset value at purchase or
redemption) None* 5.00% 1.00% None
Annual fund operating expenses
<CAPTION>
(expenses deducted from fund assets) Class A Class B Class L Class Y
<S> <C> <C> <C> <C>
Management fees* 0.75% 0.75% 0.75% 0.75%
Distribution and service (12b-1) fees 0.25% 1.00% 1.00% None
Other expenses 0.17% 0.19% 0.20% 0.07%
----- ----- ----- -----
Total annual fund operating expenses 1.17% 1.94% 1.95% 0.82%
</TABLE>
*You may buy Class A shares in amounts of $500,000 or more at net asset value
(without an initial sales charge) but if you redeem those shares within 12
months of their purchase, you will pay a deferred sales charge of 1.00%.
Example
This example helps you compare the costs of investing in the fund with the
costs of investing in other mutual funds. Your actual costs may be higher or
lower. The example assumes:
. You invest $10,000 in the fund for the period shown
. Your investment has a 5% return each year
. You reinvest all distributions and dividends without a sales charge
. The fund's operating expenses remain the same
Number of years you own your shares
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Class A (with or without redemption) $613 $853 $1,111 $1,849
Class B (redemption at end of period) $697 $909 $1,147 $2,065
Class B (no redemption) $197 $609 $1,047 $2,065
Class L (redemption at end of period) $396 $706 $1,142 $2,352
Class L (no redemption) $296 $706 $1,142 $2,352
Class Y (with or without redemption) $ 84 $262 $ 455 $1,014
</TABLE>
Smith Barney Mutual Funds
5
<PAGE>
More on the fund's investments
Foreign investments The fund may invest up to 25% of its assets in securities
of foreign issuers which may involve greater risk than securities of U.S.
issuers. Many foreign countries the fund may invest in have markets that are
less liquid and more volatile than markets in the U.S. In some foreign coun-
tries, less information is available about foreign issuers and markets because
of less rigorous accounting and regulatory standards than in the U.S. Currency
fluctuations could erase investment gains or add to investment losses. The
risks of investing in foreign securities are greater for securities of emerging
market issuers because political or economic instability, lack of market
liquidity, and negative government actions like currency controls or seizure of
private businesses or property are more likely.
Derivatives and hedging techniques The fund may, but need not, use derivative
contracts, such as futures and options on securities, securities indices or
currencies; options on these futures; forward currency contracts; and interest
rate or currency swaps for any of the following purposes:
. To hedge against the economic impact of adverse changes in the market value of
its securities, because of changes in stock market prices, currency exchange
rates or interest rates.
. As a substitute for buying or selling securities
. To enhance return
A derivative contract will obligate or entitle the fund to deliver or receive
an asset or cash payment based on the change in value of one or more securi-
ties, currencies or indices. Even a small investment in derivative contracts
can have a big impact on the fund's stock market, currency and interest rate
exposure. Therefore, using derivatives can disproportionately increase losses
and reduce opportunities for gains when stock prices, currency rates or inter-
est rates are changing. The fund may not fully benefit from or may lose money
on derivatives if changes in their value do not correspond accurately to
changes in the value of the fund's holdings.
The other parties to certain derivative contracts present the same types of
credit risk as issuers of fixed income securities. Derivatives can also make
the fund less liquid and harder to value, especially in declining markets.
Defensive investing The fund may depart from its principal investment strate-
gies in response to adverse market, economic or political conditions by taking
temporary defensive positions in all types of money market and short-term debt
securities. If the fund takes a temporary defensive position, it may be unable
to achieve its investment goal.
Fundamental Value Fund Inc.
6
<PAGE>
Management
Manager The fund's investment adviser and administrator (the manager) is SSB
Citi Fund Management LLC, an affiliate of Salomon Smith Barney Inc. The manag-
er's address is 388 Greenwich Street, New York, New York 10013. The manager
selects the fund's investments and oversees its operations. The manager and
Salomon Smith Barney are subsidiaries of Citigroup Inc. Citigroup businesses
produce a broad range of financial services--asset management, banking and con-
sumer finance, credit and charge cards, insurance, investments, investment
banking and trading--and use diverse channels to make them available to con-
sumer and corporate customers around the world.
John G. Goode, Chairman and Chief Investment Officer of Davis Skaggs Investment
Management, a division of SSB Citi Fund Management LLC and managing director of
Salomon Smith Barney, has been responsible for the day-to-day management of the
fund's portfolio since November 1990. Mr. Goode has 16 years of experience with
the manager or its predecessors.
Management fees During the fiscal year ended September 30, 1999, the manager
received a management fee and administrative fee equal to 0.55% and 0.20%,
respectively, of the fund's average daily net assets.
Distributor The fund has entered into an agreement with CFBDS, Inc. to distrib-
ute the fund's shares. A selling group consisting of Salomon Smith Barney and
other broker-dealers sells fund shares to the public.
Distribution plans The fund has adopted Rule 12b-1 distribution plans for its
Class A, B and L shares. Under each plan, the fund pays distribution and serv-
ice fees. These fees are an ongoing expense and, over time, may cost you more
than other types of sales charges.
Transfer agent and shareholder servicing agent Smith Barney Private Trust Com-
pany serves as the fund's transfer agent and shareholder servicing agent (the
"transfer agent"). Pursuant to a sub-transfer agency and services agreement
with the transfer agent, PFPC Global Fund Services serves as the fund's sub-
transfer agent (the "sub-transfer agent") to render certain shareholder record
keeping and accounting services and functions.
Year 2000 issue As the year 2000 began, there were few problems caused by the
inability of certain computer systems to tell the difference between the year
2000 and the year 1900 (commonly known as the "Year 2000"
Smith Barney Mutual Funds
7
<PAGE>
issue). It is still possible that some computer systems could malfunction in
the future because of the Year 2000 issue or as a result of actions taken to
address the Year 2000 issue. Fund management does not anticipate that its serv-
ices or those of the fund's other service providers will be adversely affected,
but fund management will continue to monitor the situation. If malfunctions
related to the Year 2000 issue do arise, the fund and its investments could be
negatively affected.
Choosing a class of shares to buy
You can choose among four classes of shares: Classes A, B, L and Y. Each class
has different sales charges and expenses, allowing you to choose the class that
best meets your needs. Which class is more beneficial to an investor depends on
the amount and intended length of the investment.
. If you plan to invest regularly or in large amounts, buying Class A shares may
help you reduce sales charges and ongoing expenses.
. For Class B shares, all of your purchase amount and, for Class L shares, more
of your purchase amount (compared to Class A shares) will be immediately
invested. This may help offset the higher expenses of Class B and Class L
shares, but only if the fund performs well.
. Class L shares have a shorter deferred sales charge period than Class B
shares. However, because Class B shares convert to Class A shares, and Class
L shares do not, Class B shares may be more attractive to long term invest-
ors.
You may buy shares from:
. A Salomon Smith Barney Financial Consultant
. An investment dealer in the selling group or a broker that clears through Sal-
omon Smith Barney--a dealer representative
. The fund, but only if you are investing through certain qualified plans or
certain dealer representatives
Investment minimums Minimum initial and additional investment amounts vary
depending on the class of shares you buy and the nature of your investment
account.
Fundamental Value Fund Inc.
8
<PAGE>
<TABLE>
<CAPTION>
Initial Additional
Classes A, B, L Class Y All Classes
<S> <C> <C> <C>
General $1,000 $15 million $50
IRAs, Self Employed Retirement Plans,
Uniform Gift to Minor Accounts $250 $15 million $50
Qualified Retirement Plans* $25 $15 million $25
Simple IRAs $1 n/a $1
Monthly Systematic Investment Plans $25 n/a $25
Quarterly Systematic Investment Plans $50 n/a $50
</TABLE>
*Qualified Retirement Plans are retirement plans qualified under Section
403(b)(7) or Section 401(a) of the Internal Revenue Code, including 401(k)
plans
Smith Barney Mutual Funds
9
<PAGE>
Comparing the fund's classes
Your Salomon Smith Barney Financial Consultant or dealer representative can
help you decide which class meets your goals. They may receive different com-
pensation depending upon which class you choose.
<TABLE>
<CAPTION>
Class A Class B Class L Class Y
<S> <C> <C> <C> <C>
Key features .Initial .No initial .Initial .No initial
sales sales sales or
charge charge charge is deferred
.You may .Deferred lower than sales
qualify sales Class A charge
for reduc- charge .Deferred .Must
tion or declines sales invest
waiver of over time charge for at least
initial .Converts only 1 $15 million
sales to Class A year .Lower
charge after 8 .Does not annual
.Lower years convert to expenses
annual .Higher Class A than the
expenses annual .Higher other
than Class expenses annual classes
B and than Class expenses
Class L A than Class
A
- -------------------------------------------------------------------------
Initial sales charge Up to None 1.00% None
5.00%;
reduced for
large pur-
chases and
waived for
certain
investors.
No charge
for pur-
chases of
$500,000 or
more
- -------------------------------------------------------------------------
Deferred sales charge 1% on pur- Up to 5% 1% if you None
chases of charged redeem
$500,000 or when you within 1
more if you redeem year of
redeem shares. The purchase
within 1 charge is
year of reduced
purchase over time
and there
is no
deferred
sales
charge
after 6
years
- -------------------------------------------------------------------------
Annual distribution and 0.25% of 1% of aver- 1% of aver- None
service fees average age daily age daily
daily net net assets net assets
assets
- -------------------------------------------------------------------------
Exchange privilege* Class A Class B Class L Class Y
shares of shares of shares of shares of
most Smith most Smith most Smith most Smith
Barney Barney Barney Barney
funds funds funds funds
- -------------------------------------------------------------------------
</TABLE>
*Ask your Salomon Smith Barney Financial Consultant or dealer representative or
visit the web site for the Smith Barney funds available for exchange.
Fundamental Value Fund Inc.
10
<PAGE>
Sales charge
Class A shares
You buy Class A shares at the offering price, which is the net asset value plus
a sales charge. You pay a lower sales charge as the size of your investment
increases to certain levels called breakpoints. You do not pay a sales charge
on the fund's distributions or dividends you reinvest in additional Class A
shares.
<TABLE>
<CAPTION>
Sales Charge as a % of
Offering Net amount
Amount of purchase price (%) invested (%)
<S> <C> <C>
Less than $25,000 5.00 5.26
$25,000 but less than $50,000 4.00 4.17
$50,000 but less than $100,000 3.50 3.63
$100,000 but less than $250,000 3.00 3.09
$250,000 but less than $500,000 2.00 2.04
$500,000 or more -0- -0-
</TABLE>
Investments of $500,000 or more You do not pay an initial sales charge when you
buy $500,000 or more of Class A shares. However, if you redeem these Class A
shares within one year of purchase, you will pay a deferred sales charge of 1%.
Qualifying for a reduced Class A sales charge There are several ways you can
combine multiple purchases of Class A shares of Smith Barney funds to take
advantage of the breakpoints in the sales charge schedule.
. Accumulation privilege - lets you combine the current value of Class A shares
owned
. by you, or
. by members of your immediate family,
and for which a sales charge was paid, with the amount of your next purchase of
Class A shares for purposes of calculating the initial sales charge. Certain
trustees and fiduciaries may be entitled to combine accounts in determining
their sales charge.
. Letter of intent - lets you purchase Class A shares of the fund and other
Smith Barney funds over a 13-month period and pay the same sales
Smith Barney Mutual Funds
11
<PAGE>
charge, if any, as if all shares had been purchased at once. You may include
purchases on which you paid a sales charge within 90 days before you sign the
letter.
Waivers for certain Class A investors Class A initial sales charges are waived
for certain types of investors, including:
. Employees of members of the NASD.
. 403(b) or 401(k) retirement plans, if certain conditions are met
. Clients of newly employed Salomon Smith Barney Financial Consultants if cer-
tain conditions are met
. Investors who redeemed Class A shares of a Smith Barney fund in the past 60
days, if the investor's Salomon Smith Barney Financial Consultant or dealer
representative is notified
If you want to learn about additional waivers of Class A initial sales charges,
contact your Salomon Smith Barney Financial Consultant or dealer representative
or consult the Statement of Additional Information ("SAI").
Class B shares
You buy Class B shares at net asset value without paying an initial sales
charge. However, if you redeem your Class B shares within six years of pur-
chase, you will pay a deferred sales charge. The deferred sales charge
decreases as the number of years since your purchase increases.
<TABLE>
<CAPTION>
Year after purchase 1st 2nd 3rd 4th 5th 6th through 8th
<S> <C> <C> <C> <C> <C> <C>
Deferred sales charge 5% 4% 3% 2% 1% 0%
</TABLE>
Class B conversion After 8 years, Class B shares automatically convert into
Class A shares. This helps you because Class A shares have lower annual
expenses. Your Class B shares will convert to Class A shares as follows:
<TABLE>
<CAPTION>
Shares issued: Shares issued:
At initial Shares issued: Upon exchange from
purchase On reinvestment of another Smith
dividends and Barney
distributions mutual fund
<S> <C> <C>
Eight years after the date of purchase In same proportion On the date the
that the number of shares originally
Class B shares acquired would
converting is to have converted
total Class B into Class A
shares you own shares
(excluding shares
issued as a divi-
dend)
</TABLE>
Fundamental Value Fund Inc.
12
<PAGE>
Class L shares
You buy Class L shares at the offering price, which is the net asset value plus
a sales charge of 1% (1.01% of the net amount invested). In addition, if you
redeem your Class L shares within one year of purchase, you will pay a deferred
sales charge of 1%. If you held Class C shares of the fund on June 12, 1998,
you will not pay an initial sales charge on Class L shares you buy before June
22, 2001.
Class Y shares
You buy Class Y shares at net asset value with no initial sales charge and no
deferred sales charge when you redeem. You must meet the $15,000,000 initial
investment requirement. You can use a letter of intent to meet this requirement
by buying Class Y shares of the fund over a 13-month period. To qualify, you
must initially invest $5,000,000.
More about deferred sales charges
The deferred sales charge is based on the net asset value at the time of pur-
chase or redemption, whichever is less, and therefore you do not pay a sales
charge on amounts representing appreciation or depreciation.
In addition, you do not pay a deferred sales charge on:
. Shares exchanged for shares of another Smith Barney fund
. Shares representing reinvested distributions and dividends
. Shares no longer subject to the deferred sales charge
Each time you place a request to sell shares, the fund will first sell any
shares in your account that are not subject to a deferred sales charge and then
the shares in your account that have been held the longest.
If you redeemed shares of a Smith Barney fund in the past 60 days and paid a
deferred sales charge, you may buy shares of the fund at the current net asset
value and be credited with the amount of the deferred sales charge, if you
notify your Salomon Smith Barney Financial Consultant or dealer representative.
Salomon Smith Barney receives deferred sales charges as partial compensation
for its expenses in selling shares, including the payment of compensation to
your Salomon Smith Barney Financial Consultant or dealer representative.
Smith Barney Mutual Funds
13
<PAGE>
Deferred sales charge waivers
The deferred sales charge for each share class will generally be waived:
. On payments made through certain systematic withdrawal plans
. On certain distributions from a retirement plan
. For involuntary redemptions of small account balances
. For 12 months following the death or disability of a shareholder
If you want to learn more about additional waivers of deferred sales charges,
contact your Salomon Smith Barney Financial Consultant or dealer representative
or consult the SAI.
Buying shares
You should contact your Salomon Smith Barney Financial Con-
Through a sultant or dealer representative to open a brokerage account
Salomon Smith and make arrangements to buy shares.
Barney
Financial
Consultant or
dealer
representative
If you do not provide the following information, your order
will be rejected:
. Class of shares being bought
. Dollar amount or number of shares being bought
You should pay for your shares through your brokerage account
no later than the third business day after you place your
order. Salomon Smith Barney or your dealer representative may
charge an annual account maintenance fee.
- --------------------------------------------------------------------------------
Qualified retirement plans and certain other investors who
Through the are clients of the selling group are eligible to buy shares
fund's sub- directly from the fund.
transfer
agent
. Write the sub-transfer agent at the following address:
Smith Barney Fundamental Value Fund Inc.
(Specify class of shares)
c/o PFPC Global Fund Services
P.O. Box 9699
Providence, RI 02940-9699
. Enclose a check to pay for the shares. For initial pur-
chases, complete and send an account application
. For more information, call the transfer agent at 1-800-451-
2010
Fundamental Value Fund Inc.
14
<PAGE>
Systematic
investment You may authorize Salomon Smith Barney, your dealer represen-
plan tative or the sub-transfer agent to transfer funds automati-
cally from a regular bank account, cash held in a Salomon
Smith Barney brokerage account or Smith Barney money market
fund to buy shares on a regular basis.
. Amounts transferred should be at least: $25 monthly or $50
quarterly
. If you do not have sufficient funds in your account on a
transfer date, Salomon Smith Barney, your dealer represen-
tative or the sub-transfer agent may charge you a fee
For more information, contact your Salomon Smith Barney
Financial Consultant, dealer representative or the transfer
agent or consult the SAI.
Exchanging shares
Smith Barney You should contact your Salomon Smith Barney Financial Con-
offers a sultant or dealer representative to exchange into other Smith
distinctive Barney funds. Be sure to read the prospectus of the fund you
family of are exchanging into. An exchange is a taxable transaction.
funds
tailored to
help meet the
varying needs
of both large
and small
investors
. You may exchange shares only for shares of the same class of
another Smith Barney fund. Not all Smith Barney funds offer
all classes.
. Not all Smith Barney funds may be offered in your state of
residence. Contact your Salomon SmithBarney Financial Con-
sultant, dealer representative or the transfer agent.
. You must meet the minimum investment amount for each fund
. If you hold share certificates, the sub-transfer agent must
receive the certificates endorsed for transfer or with
signed stock powers (documents transferring ownership of
certificates) before the exchange is effective.
. The fund may suspend or terminate your exchange privilege if
you engage in an excessive pattern of exchanges
Smith Barney Mutual Funds
15
<PAGE>
Waiver of Your shares will not be subject to an initial sales charge at
additional the time of the exchange.
sales charges
Your deferred sales charge (if any) will continue to be mea-
sured from the date of your original purchase. If the fund
you exchange into has a higher deferred sales charge, you
will be subject to that charge. If you exchange at any time
into a fund with a lower charge, the sales charge will not be
reduced.
- --------------------------------------------------------------------------------
By telephone
If you do not have a brokerage account, you may be eligible
to exchange shares through the transfer agent. You must com-
plete an authorization form to authorize telephone transfers.
If eligible, you may make telephone exchanges on any day the
New York Stock Exchange is open. Call the transfer agent at
1-800-451-2010 between 9:00 a.m. and 4:00 p.m. (Eastern
time).
You can make telephone exchanges only between accounts that
have identical registrations.
- --------------------------------------------------------------------------------
By mail
If you do not have a Salomon Smith Barney brokerage account,
contact your dealer representative or write to the sub-trans-
fer agent at the address on the following page.
Smith Barney Mutual Funds
16
<PAGE>
Redeeming shares
Generally Contact your Salomon Smith Barney Financial Consultant or
dealer representative to redeem shares of the fund.
If you hold share certificates, the sub-transfer agent must
receive the certificates endorsed for transfer or with signed
stock powers before the redemption is effective.
If the shares are held by a fiduciary or corporation, other
documents may be required.
Your redemption proceeds will be sent within three business
days after your request is received in good order. However,
if you recently purchased your shares by check, your redemp-
tion proceeds will not be sent to you until your original
check clears which may take up to 15 days.
If you have a Salomon Smith Barney brokerage account, your
redemption proceeds will be placed in your account and not
reinvested without your specific instruction. In other cases,
unless you direct otherwise, your redemption proceeds will be
paid by check mailed to your address of record.
- --------------------------------------------------------------------------------
By mail
For accounts held directly at the fund, send written requests
to the sub-transfer agent at the following address:
Smith Barney Fundamental Value Fund Inc.
(Specify class of shares)
c/o PFPC Global Fund Services
P.O. Box 9699
Providence, RI 02940-9699
Your written request must provide the following:
. Your account number
. The class of shares and the dollar amount or number of
shares to be redeemed
. Signatures of each owner exactly as the account is regis-
tered
Fundamental Value Fund Inc.
17
<PAGE>
By telephone
If you do not have a brokerage account, you may be eligible
to redeem shares (except those held in retirement plans) in
amounts up to $10,000 per day through the transfer agent. You
must complete an authorization form to authorize telephone
redemptions. If eligible, you may request redemptions by tel-
ephone on any day the New York Stock Exchange is open. Call
the transfer agent at 1-800-451-2010 between 9:00 a.m. and
4:00 p.m. (Eastern time).
Your redemption proceeds can be sent by check to your address
of record or by wire transfer to a bank account designated on
your authorization form. You must submit a new authorization
form to change the bank account designated to receive wire
transfers and you may be asked to provide certain other docu-
ments.
- --------------------------------------------------------------------------------
Automatic You can arrange for the automatic redemption of a portion of
cash your shares on a monthly or quarterly basis. To qualify you
withdrawal must own shares of the fund with a value of at least $10,000
plans ($5,000 for retirement plans) and each automatic redemption
must be at least $50. If your shares are subject to a
deferred sales charge, the sales charge will be waived if
your automatic payments do not exceed 1% per month of the
value of your shares subject to a deferred sales charge.
The following conditions apply:
. Your shares must not be represented by certificates
. All dividends and distributions must be reinvested
For more information, contact your Salomon Smith Barney
Financial Consultant or dealer representative or consult the
SAI.
Smith Barney Mutual Funds
18
<PAGE>
Other things to know about share transactions
When you buy, exchange or redeem shares, your request must be in good order.
This means you have provided the following information without which your
request will not be processed:
. Name of the fund
. Account number
. Class of shares being bought, exchanged or redeemed
. Dollar amount or number of shares being bought, exchanged or redeemed
. Signature of each owner exactly as the account is registered
The transfer agent will try to confirm that any telephone exchange or redemp-
tion request is genuine by recording calls, asking the caller to provide a per-
sonal identification number for the account, sending you a written confirmation
or requiring other confirmation procedures from time to time.
Signature guarantees To be in good order, your redemption request must include
a signature guarantee if you:
. Are redeeming over $10,000 of shares
. Are sending signed share certificates or stock powers to the sub-transfer
agent
. Instruct the sub-transfer agent to mail the check to an address different from
the one on your account
. Changed your account registration
. Want the check paid to someone other than the account owner(s)
. Are transferring the redemption proceeds to an account with a different regis-
tration
You can obtain a signature guarantee from most banks, dealers, brokers, credit
unions and federal savings and loan institutions, but not from a notary public.
The fund has the right to:
. Suspend the offering of shares
. Waive or change minimum and additional investment amounts
. Reject any purchase or exchange order
. Change, revoke or suspend the exchange privilege
. Suspend telephone transactions
Fundamental Value Fund Inc.
19
<PAGE>
. Suspend or postpone redemptions of shares on any day when trading on the New
York Stock Exchange is restricted, or as otherwise permitted by the Securi-
ties and Exchange Commission
. Pay redemption proceeds by giving you securities. You may pay transaction
costs to dispose of the securities.
Small account balances If your account falls below $500 because of a redemption
of fund shares, the fund may ask you to bring your account up to $500. If your
account is still below $500 after 60 days, the fund may close your account and
send you the redemption proceeds.
Excessive exchange transactions The manager may determine that a pattern of
frequent exchanges is detrimental to the fund's performance and other share-
holders. If so, the fund may limit additional purchases and/or exchanges by the
shareholder.
Share certificates The fund does not issue share certificates unless a written
request signed by all registered owners is made to the sub-transfer agent. If
you hold share certificates it will take longer to exchange or redeem shares.
Smith Barney Mutual Funds
20
<PAGE>
Smith Barney 401(k) and ExecChoice(TM) programs
You may be eligible to participate in the Smith Barney 401(k) program or the
Smith Barney ExecChoice(TM) program. The fund offers Class A and Class L shares
to participating plans as investment alternatives under the programs. You can
meet minimum investment and exchange amounts by combining the plan's invest-
ments in any of the Smith Barney mutual funds.
There are no sales charges when you buy or sell shares and the class of shares
you may purchase depends on the amount of your initial investment. Once a class
of shares is chosen, all additional purchases must be of that class.
. Class A shares may be purchased by plans investing at least $1 million.
. Class L shares may be purchased by plans investing less than $1 million. Class
L shares are eligible for exchange into Class A shares not later than 8 years
after the plan joined the program. They are eligible for exchange in the fol-
lowing circumstances:
If the account was opened on or after June 21, 1996 and a total of $1 mil-
lion is invested in Smith Barney Funds Class L shares (other than money
market funds), all Class L shares are eligible for exchange after the plan
is in the program 5 years.
If the account was opened before June 21, 1996 and a total of $500,000 is
invested in Smith Barney Funds Class L shares (other than money market
funds) on December 31 in any year, all Class L shares are eligible for
exchange on or about March 31 of the following year.
For more information, call your Salomon Smith Barney Financial Consultant or
the transfer agent, or consult the SAI.
Fundamental Value Fund Inc.
21
<PAGE>
Distributions, dividends and taxes
Dividends The fund generally pays dividends and makes capital gain distribu-
tions, if any, once a year, typically in December. The fund may pay additional
distributions and dividends at other times if necessary for the fund to avoid a
federal tax. Capital gain distributions and dividends are reinvested in addi-
tional fund shares of the same class you hold. The fund expects distributions
to be primarily from capital gains. You do not pay a sales charge on reinvested
distributions or dividends. Alternatively, you can instruct your Salomon Smith
Barney Financial Consultant, dealer representative or the transfer agent to
have your distributions and/or dividends paid in cash. You can change your
choice at any time to be effective as of the next distribution or dividend,
except that any change given to the transfer agent less than five days before
the payment date will not be effective until the next distribution or dividend
is paid.
Taxes In general, redeeming shares, exchanging shares and receiving distribu-
tions (whether in cash or additional shares) are all taxable events.
<TABLE>
<CAPTION>
Transaction Federal tax status
<S> <C>
Redemption or exchange of shares Usually capital gain or loss;
long-term only if shares owned
more than one year
Long-term capital gain distributions Long-term capital gain
Short-term capital gain distributions Ordinary income
Dividends Ordinary income
</TABLE>
Long-term capital gain distributions are taxable to you as long-term capital
gain regardless of how long you have owned your shares. You may want to avoid
buying shares when the fund is about to declare a long-term capital gain dis-
tribution or a dividend, because it will be taxable to you even though it may
actually be a return of a portion of your investment.
After the end of each year, the fund will provide you with information about
the distributions and dividends you received and any redemptions of shares dur-
ing the previous year. If you do not provide the fund with your correct tax-
payer identification number and any required certifications, you may be subject
to back-up withholding of 31% of your distributions, dividends, and redemption
proceeds. Because each shareholder's circumstances are different and special
tax rules may apply, you should consult your tax adviser about your investment
in the fund.
Smith Barney Mutual Funds
22
<PAGE>
Share price
You may buy, exchange or redeem shares at their net asset value, plus applica-
ble sales charge, next determined after receipt of your request in good order.
The fund's net asset value is the value of its assets minus its liabilities.
Net asset value is calculated separately for each class of shares. The fund
calculates its net asset value every day the New York Stock Exchange is open.
This calculation is done when regular trading closes on the Exchange (normally
4:00 p.m., Eastern time).
The fund generally values its fund securities based on market prices or quota-
tions. The fund's currency conversions are done when the London stock exchange
closes, which is 12 noon Eastern time. When reliable market prices or quota-
tions are not readily available, or when the value of a security has been mate-
rially affected by events occurring after a foreign exchange closes, the fund
may price those securities at fair value. Fair value is determined in accor-
dance with procedures approved by the fund's board. A fund that uses fair value
to price securities may value those securities higher or lower than another
fund using market quotations to price the same securities.
International markets may be open on days when U.S. markets are closed and the
value of foreign securities owned by the fund could change on days when you
cannot buy or redeem shares.
In order to buy, redeem or exchange shares at that day's price, you must place
your order with your Salomon Smith Barney Financial Consultant or dealer repre-
sentative before the New York Stock Exchange closes. If the New York Stock
Exchange closes early, you must place your order prior to the actual closing
time. Otherwise, you will receive the next business day's price.
Salomon Smith Barney or members of the selling group must transmit all orders
to buy, exchange or redeem shares to the fund's agent before the agent's close
of business.
Fundamental Value Fund Inc.
23
<PAGE>
Financial highlights
The financial highlights tables are intended to help you understand the perfor-
mance of each class for the past 5 years (or since inception if less than 5
years). Certain information reflects financial results for a single share.
Total return represents the rate that a shareholder would have earned (or lost)
on a fund share assuming reinvestment of all dividends and distributions. The
information in the following tables was audited by Deloitte & Touche LLP, inde-
pendent auditors, whose report, along with the fund's financial statements, are
included in the annual report (available upon request).
For a Class A share of capital stock outstanding throughout each year ended
September 30:
<TABLE>
<CAPTION>
1999(/1/) 1998(/1/) 1997 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $10.07 $11.37 $ 9.31 $8.66 $8.20
- -------------------------------------------------------------------------------
Income (loss) from Operations:
Net investment income 0.04 0.09 0.11 0.20 0.17
Net realized and unrealized gain
(loss) 3.53 (0.76) 2.52 1.01 1.23
- -------------------------------------------------------------------------------
Total income (loss) from
operations 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 (0.72) (0.52) (0.44) (0.37) (0.81)
- -------------------------------------------------------------------------------
Total distributions (0.74) (0.63) (0.57) (0.56) (0.94)
- -------------------------------------------------------------------------------
Net asset value, end of year $12.90 $10.07 $11.37 $9.31 $8.66
- -------------------------------------------------------------------------------
Total return 37.17% (6.04)% 29.53% 14.73% 19.94%
- -------------------------------------------------------------------------------
Net assets, end of year (millions) $ 681 $521 $606 $458 $386
- -------------------------------------------------------------------------------
Ratios to average net assets:
Expenses 1.17% 1.15% 1.14% 1.22% 1.34%
Net investment income 0.35 0.81 1.14 2.32 2.19
- -------------------------------------------------------------------------------
Portfolio turnover rate 43% 41% 46% 57% 45%
- -------------------------------------------------------------------------------
</TABLE>
(/1/) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method,
because it more accurately reflects the per share data for the period.
Smith Barney Mutual Funds
24
<PAGE>
For a Class B share of capital stock outstanding throughout each year ended
September 30:
<TABLE>
<CAPTION>
1999(/1/) 1998(/1/) 1997 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $10.01 $11.31 $ 9.26 $8.62 $8.16
- -------------------------------------------------------------------------------
Income (loss) from operations:
Net investment income (loss) (0.05) -- 0.03 0.13 0.12
Net realized and unrealized gain
(loss) 3.49 (0.75) 2.52 1.01 1.23
- -------------------------------------------------------------------------------
Total income (loss) from
operations 3.44 (0.75) 2.55 1.14 1.35
- -------------------------------------------------------------------------------
Less distribution from:
Net investment income -- (0.03) (0.06) (0.13) (0.08)
Net realized gains (0.72) (0.52) (0.44) (0.37) (0.81)
- -------------------------------------------------------------------------------
Total distributions (0.72) (0.55) (0.50) (0.50) (0.89)
- -------------------------------------------------------------------------------
Net asset value, end of year $12.73 $10.01 $11.31 $9.26 $8.62
- -------------------------------------------------------------------------------
Total return 36.00% (6.79)% 28.62% 13.82% 19.19%
- -------------------------------------------------------------------------------
Net assets, end of year (millions) $ 884 $716 $930 $704 $539
- -------------------------------------------------------------------------------
Ratios to average net assets:
Expenses 1.94% 1.92% 1.90% 1.97% 2.09%
Net investment income (loss) (0.42) 0.04 0.38 1.56 1.44
- -------------------------------------------------------------------------------
Portfolio turnover rate 43% 41% 46% 57% 45%
- -------------------------------------------------------------------------------
</TABLE>
(/1/) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method,
because it more accurately reflects the per share data for the period.
Fundamental Value Fund Inc.
25
<PAGE>
For a Class L share of capital stock outstanding throughout each year ended
September 30:(/1/)
<TABLE>
<CAPTION>
1999(/2/) 1998(/1/)(/2/) 1997 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year $10.01 $11.30 $ 9.26 $8.62 $8.16
- -------------------------------------------------------------------------------
Income (loss) from operations:
Net investment income (loss) (0.05) -- 0.03 0.14 0.12
Net realized and unrealized
gain (loss) 3.49 (0.74) 2.51 1.00 1.24
- -------------------------------------------------------------------------------
Total income (loss) from
operations 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 (0.72) (0.52) (0.44) (0.37) (0.81)
- -------------------------------------------------------------------------------
Total distributions (0.72) (0.55) (0.50) (0.50) (0.90)
- -------------------------------------------------------------------------------
Net asset value, end of year $12.73 $10.01 $11.30 $9.26 $8.62
- -------------------------------------------------------------------------------
Total return 36.00% (6.70)% 28.52% 13.82% 19.33%
- -------------------------------------------------------------------------------
Net assets, end of year
(millions) $84 $57 $72 $45 $22
- -------------------------------------------------------------------------------
Ratios to average net assets:
Expenses 1.95% 1.93% 1.92% 1.96% 2.09%
Net investment income (loss) (0.43) 0.03 0.36 1.52 1.44
- -------------------------------------------------------------------------------
Portfolio turnover rate 43% 41% 46% 57% 45%
- -------------------------------------------------------------------------------
</TABLE>
(/1/) On June 12, 1998 Class C shares were renamed Class L shares.
(/2/) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method,
because it more accurately reflects the per share data for the period.
Smith Barney Mutual Funds
26
<PAGE>
For a Class Y share of capital stock outstanding throughout each year ended
September 30:
<TABLE>
<CAPTION>
1999(/1/) 1998(/1/) 1997 1996(/2/)
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of year $10.10 $11.40 $ 9.32 $8.54
- -----------------------------------------------------------------------------
Income from operations:
Net investment income 0.09 0.12 0.14 0.23
Net realized and unrealized gain 3.52 (0.74) 2.54 0.55
- -----------------------------------------------------------------------------
Total income (loss) from operations 3.61 (0.62) 2.68 0.78
- -----------------------------------------------------------------------------
Less distribution from:
Net investment income (0.06) (0.16) (0.16) --
Net realized gains (0.72) (0.52) (0.44) --
- -----------------------------------------------------------------------------
Total distributions (0.78) (0.68) (0.60) --
- -----------------------------------------------------------------------------
Net asset value, end of year $12.93 $10.10 $11.40 $9.32
- -----------------------------------------------------------------------------
Total return 37.57% (6.78)% 30.06% 9.13%*+
- -----------------------------------------------------------------------------
Net assets, end of year (millions) $81 $63 $109 $45
- -----------------------------------------------------------------------------
Ratios to average net assets:
Expenses 0.82% 0.79% 0.78% 0.75%++
Net investment income 0.71 1.15 1.48 2.58++
- -----------------------------------------------------------------------------
Portfolio turnover rate 43% 41% 46% 57%
- -----------------------------------------------------------------------------
</TABLE>
(/1/) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method,
because it more accurately reflects the per share data for the period.
(/2/) For the period from October 13, 1995 (inception date) to September 30,
1996.
* During November 1995 Class Y shares were fully redeemed, therefore perfor-
mance for Class Y shares represents performance for the period beginning Jan-
uary 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.
Fundamental Value Fund Inc.
27
<PAGE>
(This page is intentionally left blank.)
<PAGE>
SalomonSmithBarney
----------------------------
A member of citigroup [LOGO]
Fundamental Value Fund Inc.
Shareholder reports Annual and semiannual reports to shareholders provide addi-
tional information about the fund's investments. These reports discuss the mar-
ket conditions and investment strategies that affected the fund's performance.
The fund sends only one report to a household if more than one account has the
same address. Contact your Salomon Smith Barney Financial Consultant, dealer
representative or the transfer agent if you do not want this policy to apply to
you.
Statement of additional information The statement of additional information
provides more detailed information about the fund and is incorporated by refer-
ence into (is legally part of) this prospectus.
You can make inquiries about the fund or obtain shareholder reports or the
statement of additional information (without charge) by contacting your Salomon
Smith Barney Financial Consultant or dealer representative, by calling the fund
at 1-800-451-2010, or by writing to the fund at Smith Barney Mutual Funds, 388
Greenwich Street, MF2, New York, New York 10013.
Visit our web site. Our web site is located at www.smithbarney.com
Information about the fund (including the SAI) can be reviewed and copied at
the Securities and Exchange Commission's (the "Commission") Public Reference
Room in Washington, D.C. In addition, information on the operation of the Pub-
lic Reference Room may be obtained by calling the Commission at 1-202-942-8090.
Reports and other information about the fund are available on the EDGAR Data-
base on the Commission's Internet site at http://www.sec.gov. Copies of this
information may be obtained for a duplicating fee by electronic request at the
following E-mail address: [email protected], or by writing the Commission's
Public Reference Section, Washington, D.C. 20549-0102.
If someone makes a statement about the fund that is not in this prospectus, you
should not rely upon that information. Neither the fund nor the distributor is
offering to sell shares of the fund to any person to whom the fund may not law-
fully sell its shares.
SM Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
(Investment Company Act
file no. 811-3158)
FD0206 1/00
PART B
SMITH BARNEY FUNDAMENTAL VALUE FUND INC.
388 Greenwich Street
New York, New York 10013
800-451-2010
Statement of Additional Information
January 28, 2000
This Statement of Additional Information (the
"SAI") expands upon and supplements the information
contained in the current prospectus of Smith Barney
Fundamental Value Fund Inc. (the "fund"), dated January
28, 2000, as amended or supplemented from time to time,
and should be read in conjunction with the fund's
prospectus. The fund's prospectus may be obtained from
any Salomon Smith Barney Financial Consultant or by
writing or calling the fund at the address or phone
number listed above. This SAI, although not in itself a
prospectus, is incorporated by reference into the
prospectus in its entirety.
TABLE OF CONTENTS
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES 2
DIRECTORS AND EXECUTIVE OFFICERS 14
COMPENSATION TABLE 15
DISTRIBUTION 19
PURCHASE OF SHARES 21
REDEMPTION OF SHARES 29
VALUATION OF SHARES 31
EXCHANGE PRIVILEGE 31
PERFORMANCE DATA 32
TAXES 34
ADDITIONAL INFORMATION 38
FINANCIAL STATEMENTS 39
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The prospectus discusses the fund's investment
objective and policies. The following discussion
supplements the description of the fund's investment
policies in the prospectus. SSB Citi Fund Management LLC
("SSB" or "the manager") serves as investment manager
and administrator of the fund.
The fund's primary investment objective is long-
term capital growth. Current income is a secondary
objective. The fund seeks to achieve its objective
through investment in common stocks and common stock
equivalents, including preferred stocks and other
securities convertible into common stocks. The fund also
invests to a lesser extent in bonds and other debt
instruments. There is no guarantee that the fund will
achieve its investment objective.
When SSB believes that a defensive investment
posture is warranted or when opportunities for capital
growth to do not appear attractive, the fund may
temporarily invest all or a portion of its assets in
short-term money market instruments, including
repurchase agreements with respect to those instruments.
The fund is authorized to borrow money in an amount up
to 10% of its total assets for temporary or emergency
purposes.
Foreign Securities and American Depository
Receipts The fund has the authority to invest up to
25% of its assets in foreign securities (including
European Depository Receipts ("EDRs") and Global
Depository Receipts ("GDRs")) and American Depository
Receipts ("ADRs") or other securities representing
underlying shares of foreign companies. EDRs are
receipts issued in Europe which evidence ownership of
underlying securities issued by a foreign corporation.
ADRs are receipts typically issued by an American bank
or trust company which evidence a similar ownership
arrangement. Generally, ADRs which are issued in
registered form, are designed for use in the United
States securities markets and EDRs, which are issued in
bearer form, are designed for use in European securities
markets. GDRs are tradeable both in the U.S. and Europe
and are designed for use throughout the world.
Investing in the securities of foreign companies
involves special risks and considerations not typically
associated with investing in U.S. companies. These
include differences in accounting, auditing and
financial reporting standards, generally higher
commission rates on foreign portfolio transactions, the
possibility of expropriation or confiscatory taxation,
adverse changes in investment or exchange control
regulations, political instability which could affect
U.S. investments in foreign countries, and potential
restrictions on the flow of international capital.
Additionally, foreign securities often trade with less
frequency and volume than domestic securities and
therefore may exhibit greater price volatility. Many of
the foreign securities held by the fund will not be
registered with, nor will the issuers thereof be subject
to the reporting requirements of, the SEC. Accordingly,
there may be less publicly available information about
the securities and about the foreign company issuing
them than is available about a domestic company and its
securities. Moreover, individual foreign economies may
differ favorably or unfavorably from the U.S. economy in
such respects as growth of gross domestic product, rate
of inflation, capital reinvestment, resource self-
sufficiency and balance of payment positions. The fund
may invest in securities of foreign governments (or
agencies or subdivisions thereof), and therefore many,
if not all, of the foregoing considerations apply to
such investments as well.
Repurchase Agreements The fund may enter into
repurchase agreements with certain member banks of the
Federal Reserve System and certain dealers on the
Federal Reserve Bank of New York's list of reporting
dealers. Under the terms of a typical repurchase
agreement, the fund would acquire securities for a
relatively short period (usually not more than one week)
subject to an obligation of the seller to repurchase,
and the fund to resell, the securities at an agreed-upon
price and time, thereby determining the yield during the
fund's holding period. This arrangement results in a
fixed rate of return that is not subject to market
fluctuations during the fund's holding period.
Repurchase agreements could involve certain risks in the
event of default or insolvency of the other party,
including possible delays or restrictions upon the
fund's ability to dispose of the underlying securities,
the risk of a possible decline in the value of the
underlying securities during the period in which the
fund seeks to assert its rights to them, the risk of
incurring expenses associated with asserting those
rights and the risk of losing all or part of the income
from the agreement. SSB, acting under the supervision
of the Board of Directors, reviews on an ongoing basis
the value of the collateral and the creditworthiness of
those dealers and banks with which the Fund enters into
repurchase agreements to evaluate potential risks.
Lending of Portfolio Securities The fund has
the ability to lend securities from its portfolio to
brokers, dealers and other financial organizations. Such
loans, if and when made, will be consistent with
applicable regulatory requirements. The fund may not
lend its portfolio securities to Salomon Smith Barney or
its affiliates unless it has applied for and received
specific authority from the SEC. Loans of portfolio
securities by the fund will be collateralized by cash,
letters of credit or securities issued or guaranteed by
the U.S. government, its agencies or instrumentalities
("U.S. government securities"), which will be maintained
at all times in an amount equal to at least 100% of the
current market value of the loaned securities. From time
to time, the fund may return a part of the interest
earned from the investment of collateral received for
securities loaned to the borrower and/or a third party,
which is unaffiliated with the fund or with Salomon
Smith Barney, and which is acting as a "finder."
In lending its portfolio securities, the fund can
increase its income by continuing to receive interest on
the loaned securities, as well as by either investing
the cash collateral in short-term instruments or
obtaining yield in the form of interest paid by the
borrower when government securities are used as
collateral. Requirements of the SEC, which may be
subject to future modifications, currently provide that
the following conditions must be met whenever portfolio
securities are loaned: (a) the fund must receive at
least 100% cash collateral or equivalent securities from
the borrower; (b) the borrower must increase such
collateral whenever the market value of the securities
rises above the level of such collateral; (c) the fund
must be able to terminate the loan at any time; (d) the
fund must receive reasonable interest on the loan, as
well as an amount equal to any dividends, interest or
other distributions on the loaned securities, and any
increase in market value; (e) the fund may pay only
reasonable custodian fees in connection with the loan;
and (f) voting rights on the loaned securities may pass
to the borrower; however, if a material event adversely
affecting the investment occurs, the fund's Board of
Directors must terminate the loan and regain the right
to vote the securities. The risks in lending portfolio
securities, as with other extensions of secured credit,
consist of possible delay in receiving additional
collateral or in the recovery of the securities or
possible loss of rights in the collateral should the
borrower fail financially. Loans will be made to firms
deemed by the manager to be of good standing and will
not be made unless, in the judgment of the manager, the
consideration to be earned from such loans would justify
the risk.
Money Market Instruments As stated in the
prospectus, the fund may invest for temporary defensive
purposes or when opportunities for capital growth do not
appear attractive, in short-term corporate and
government money market instruments. Money market
instruments in which the fund may invest include: U.S.
government securities; certificates of deposit, time
deposits and bankers' acceptances issued by domestic
banks (including their branches located outside the
United States and subsidiaries located in Canada),
domestic branches of foreign banks, savings and loan
associations and similar institutions; high grade
commercial paper; and repurchase agreements with respect
to the foregoing types of instruments. The following is
a more detailed description of such money market
instruments.
Certificates of Deposit ("CDs") are short-term
negotiable obligations of commercial banks. Time
Deposits ("TDs") are non-negotiable deposits maintained
in banking institutions for specified periods of time at
stated interest rates. Bankers' acceptances are time
drafts drawn on commercial banks by borrowers usually in
connection with international transactions.
Domestic commercial banks organized under Federal
law are supervised and examined by the Comptroller of
the Currency and are required to be members of the
Federal Reserve System and to be insured by the Federal
Deposit Insurance Corporation (the "FDIC"). Domestic
banks organized under state law are supervised and
examined by state banking authorities but are members of
the Federal Reserve System only if they elect to join.
Most state banks are insured by the FDIC (although such
insurance may not be of material benefit to the fund,
depending upon the principal amounts of CDs of each bank
held by the fund) and are subject to Federal examination
and to a substantial body of Federal law and regulation.
As a result of governmental regulations, domestic
branches of domestic banks are generally required to,
among other things, maintain specified levels of
reserves, and are subject to other supervision and
regulation designed to promote financial soundness.
Obligations of foreign branches of domestic
banks, such as CDs and TDs, may be general obligations
of the parent bank in addition to the issuing branch, or
may be limited by the terms of a specific obligation and
government regulation. Such obligations are subject to
different risks than are those of domestic banks or
domestic branches of foreign banks. These risks include
foreign economic and political developments, foreign
governmental restrictions that may adversely affect
payment of principal and interest on the obligations,
foreign exchange controls and foreign withholding and
other taxes on interest income. Foreign branches of
domestic banks are not necessarily subject to the same
or similar regulatory requirements that apply to
domestic banks, such as mandatory reserve requirements,
loan limitations, and accounting, auditing and financial
recordkeeping requirements. In addition, less
information may be publicly available about a foreign
branch of a domestic bank than about a domestic bank.
CDs issued by wholly owned Canadian subsidiaries of
domestic banks are guaranteed as to repayment of
principal and interest (but not as to sovereign risk) by
the domestic parent bank.
Obligations of domestic branches of foreign banks
may be general obligations of the parent bank in
addition to the issuing branch, or may be limited by the
terms of a specific obligation and by governmental
regulation as well as governmental action in the country
in which the foreign bank has its head office. A
domestic branch of a foreign bank with assets in excess
of $1 billion may or may not be subject to reserve
requirements imposed by the Federal Reserve System or by
the state in which the branch is located if the branch
is licensed in that state. In addition, branches
licensed by the Comptroller of the Currency and branches
licensed by certain states ("State Branches") may or may
not be required to: (a) pledge to the regulator by
depositing assets with a designated bank within the
state, an amount of its assets equal to 5% of its total
liabilities; and (b) maintain assets within the state in
an amount equal to a specified percentage of the
aggregate amount of liabilities of the foreign bank
payable at or through all of its agencies or branches
within the state. The deposits of State Branches may not
necessarily be insured by the FDIC. In addition, there
may be less publicly available information about a
domestic branch of a foreign bank than about a domestic
bank.
In view of the foregoing factors associated with
the purchase of CDs and TDs issued by foreign branches
of domestic banks or by domestic branches of foreign
banks, SSB will carefully evaluate such investments on
a case-by-case basis.
Savings and loan associations whose CDs may be
purchased by the fund are supervised by the Office of
Thrift Supervision and are insured by the Savings
Association Insurance fund, which is administered by the
FDIC and is backed by the full faith and credit of the
U.S. government. As a result, such savings and loan
associations are subject to regulation and examination.
Options, Futures and Currency Strategies The
fund may use forward currency contracts and certain
options and futures strategies to attempt to hedge its
portfolio, i.e., reduce the overall level of investment
risk normally associated with the fund. There can be no
assurance that such efforts will succeed.
In order to assure that the fund will not be
deemed to be a "commodity pool" for purposes of the
Commodity Exchange Act, regulations of the Commodity
Futures Trading Commission ("CFTC") require that the
fund enter into transactions in futures contracts and
options on futures only (i) for bona fide hedging
purposes (as defined in CFTC regulations), or (ii) for
non-hedging purposes, provided that the aggregate
initial margin and premiums on such non-hedging
positions do not exceed 5% of the liquidation value of
the fund's assets. To attempt to hedge against adverse
movements in exchange rates between currencies, the fund
may enter into forward currency contracts for the
purchase or sale of a specified currency at a specified
future date. Such contracts may involve the purchase or
sale of a foreign currency against the U.S. dollar or
may involve two foreign currencies. The fund may enter
into forward currency contracts either with respect to
specific transactions or with respect to its portfolio
positions. For example, when the investment manager
anticipates making a purchase or sale of a security, it
may enter into a forward currency contract in order to
set the rate (either relative to the U.S. dollar or
another currency) at which the currency exchange
transaction related to the purchase or sale will be made
("transaction hedging"). Further, when the investment
manager believes that a particular currency may decline
compared to the U.S. dollar or another currency, the
fund may enter into a forward contract to sell the
currency the investment manager expects to decline in an
amount approximating the value of some or all of the
fund's securities denominated in that currency, or when
the investment manager believes that one currency may
decline against a currency in which some or all of the
portfolio securities held by the fund are denominated,
it may enter into a forward contract to buy the currency
expected to decline for a fixed amount ("position
hedging"). In this situation, the fund may, in the
alternative, enter into a forward contract to sell a
different currency for a fixed amount of the currency
expected to decline where the investment manager
believes that the value of the currency to be sold
pursuant to the forward contract will fall whenever
there is a decline in the value of the currency in which
portfolio securities of the fund are denominated ("cross
hedging"). The fund will segregate (i) cash, (ii) U.S.
Government securities or (iii) equity securities or debt
securities (of any grade) in certain currencies provided
such assets are liquid, unencumbered and marked to
market daily, or other high-quality debt securities
denominated in certain currencies with a value equal to
the aggregate amount of the fund's commitments under
forward contracts entered into with respect to position
hedges and cross-hedges. If the value of the segregated
securities declines, additional cash or securities are
segregated on a daily basis so that the value of the
amount will equal the amount of the fund's commitments
with respect to such contracts.
For hedging purposes, the fund may write covered
call options and purchase put and call options on
currencies to hedge against movements in exchange rates
and on debt securities to hedge against the risk of
fluctuations in the prices of securities held by the
fund or which the investment manager intends to include
in its portfolio. The fund also may use interest rates
futures contracts and options thereon to hedge against
changes in the general level in interest rates.
The fund may write call options on securities and
currencies only if they are covered, and such options
must remain covered so long as the fund is obligated as
a writer. A call option written by the fund is
"covered" if the fund owns the securities or currency
underlying the option or has an absolute and immediate
right to acquire that security or currency without
additional cash consideration (or for additional cash
consideration which has been segregated by the fund)
upon conversion or exchange of other securities or
currencies held in its portfolio. A call option is also
covered if the fund holds on a share-for-share basis a
call on the same security or holds a call on the same
currency as the call written where the exercise price of
the call held is equal to less than the exercise price
of the call written or greater than the exercise price
of the call written if the difference is maintained by
the fund in cash, Treasury bills or other high-grade,
short-term obligations in a segregated account with its
custodian.
Although the portfolio might not employ the use
of forward currency contracts, options and futures, the
use of any of these strategies would involve certain
investment risks and transaction costs to which it might
not otherwise be subject. These risks include:
dependence on the investment manager's ability to
predict movements in the prices of individual debt
securities, fluctuations in the general fixed-income
markets and movements in interest rates and currency
markets, imperfect correlation between movements in the
price of currency, options, futures contracts or options
thereon and movements in the price of the currency or
security hedged or used for cover; the fact that skills
and techniques needed to trade options, futures
contracts and options thereon or to use forward currency
contracts are different from those needed to select the
securities in which the fund invests; lack of assurance
that a liquid market will exist for any particular
option, futures contract or options thereon at any
particular time and possible need to defer or accelerate
closing out certain options, futures contracts and
options thereon in order to continue to qualify for the
beneficial tax treatment afforded "regulated investment
companies" under the Internal Revenue Code of 1986, as
amended (the "Code"). See "Dividends, Distributions and
Taxes."
Options on Securities As discussed more
generally above, the fund may engage in the writing of
covered call options. The fund may also purchase put
options and enter into closing transactions.
The principal reason for writing covered call
options on securities is to attempt to realize, through
the receipt of premiums, a greater return than would be
realized on the securities alone. In return for a
premium, the writer of a covered call option forfeits
the right to any appreciation in the value of the
underlying security above the strike price for the life
of the option (or until a closing purchase transaction
can be effected). Nevertheless, the call writer retains
the risk of a decline in the price of the underlying
security. Similarly, the principal reason for writing
covered put options is to realize income in the form of
premiums. The writer of a covered put option accepts the
risk of a decline in the price of the underlying
security. The size of the premiums the fund may receive
may be adversely affected as new or existing
institutions, including other investment companies,
engage in or increase their option-writing activities.
Options written by the fund will normally have
expiration dates between one and six months from the
date written. The exercise price of the options may be
below, equal to, or above the current market values of
the underlying securities at the times the options are
written. In the case of call options, these exercise
prices are referred to as "in-the-money," "at-the-money"
and "out-of-the-money," respectively.
The fund may write (a) in-the-money call options
when the manager expects the price of the underlying
security to remain flat or decline moderately during the
option period, (b) at-the-money call options when the
manager expects the price of the underlying security to
remain flat or advance moderately during the option
period and (c) out-of-the-money call options when the
manager expects that the price of the security may
increase but not above a price equal to the sum of the
exercise price plus the premiums received from writing
the call option. In any of the preceding situations, if
the market price of the underlying security declines and
the security is sold at this lower price, the amount of
any realized loss will be offset wholly or in part by
the premium received. Out-of-the-money, at-the-money and
in-the-money put options (the reverse of call options as
to the relation of exercise price to market price) may
be utilized in the same market environments as such call
options are used in equivalent transactions.
So long as the obligation of the fund as the
writer of an option continues, the fund may be assigned
an exercise notice by the broker-dealer through which
the option was sold, requiring it to deliver, in the
case of a call, or take delivery of, in the case of a
put, the underlying security against payment of the
exercise price. This obligation terminates when the
option expires or the fund effects a closing purchase
transaction. The fund can no longer effect a closing
purchase transaction with respect to an option once it
has been assigned an exercise notice. To secure its
obligation to deliver the underlying security when it
writes a call option, or to pay for the underlying
security when it writes a put option, the fund will be
required to deposit in escrow the underlying security or
other assets in accordance with the rules of the Options
Clearing Corporation ("Clearing Corporation") or similar
clearing corporation and the securities exchange on
which the option is written.
An option position may be closed out only where
there exists a secondary market for an option of the
same series on a recognized securities exchange or in
the over-the-counter market. The fund expects to write
options only on national securities exchanges or in the
over-the-counter market. The fund may purchase put
options issued by the Clearing Corporation or in the
over-the-counter market.
The fund may realize a profit or loss upon
entering into a closing transaction. In cases in which
the fund has written an option, it will realize a profit
if the cost of the closing purchase transaction is less
than the premium received upon writing the original
option and will incur a loss if the cost of the closing
purchase transaction exceeds the premium received upon
writing the original option. Similarly, when the fund
has purchased an option and engages in a closing sale
transaction, whether it recognizes a profit or loss will
depend upon whether the amount received in the closing
sale transaction is more or less than the premium the
fund initially paid for the original option plus the
related transaction costs.
Although the fund generally will purchase or
write only those options for which the manager believes
there is an active secondary market so as to facilitate
closing transactions, there is no assurance that
sufficient trading interest to create a liquid secondary
market on a securities exchange will exist for any
particular option or at any particular time, and for
some options no such secondary market may exist. A
liquid secondary market in an option may cease to exist
for a variety of reasons. In the past, for example,
higher than anticipated trading activity or order flow,
or other unforeseen events, have at times rendered
certain of the facilities of the Clearing Corporation
and national securities exchanges inadequate and
resulted in the institution of special procedures, such
as trading rotations, restrictions on certain types of
orders or trading halts or suspensions in one or more
options. There can be no assurance that similar events,
or events that may otherwise interfere with the timely
execution of customers' orders, will not recur. In such
event, it might not be possible to effect closing
transactions in particular options. If, as a covered
call option writer, the fund is unable to effect a
closing purchase transaction in a secondary market, it
will not be able to sell the underlying security until
the option expires or it delivers the underlying
security upon exercise.
Securities exchanges generally have established
limitations governing the maximum number of calls and
puts of each class which may be held or written, or
exercised within certain periods, by an investor or
group of investors acting in concert (regardless of
whether the options are written on the same or different
securities exchanges or are held, written or exercised
in one or more accounts or through one or more brokers).
It is possible that the fund and other clients of SSB
and certain of their affiliates may be considered to be
such a group. A securities exchange may order the
liquidation of positions found to be in violation of
these limits, and it may impose certain other sanctions.
In the case of options written by the fund that
are deemed covered by virtue of the fund's holding
convertible or exchangeable preferred stock or debt
securities, the time required to convert or exchange and
obtain physical delivery of the underlying common stocks
with respect to which the fund has written options may
exceed the time within which the fund must make delivery
in accordance with an exercise notice. In these
instances, the fund may purchase or temporarily borrow
the underlying securities for purposes of physical
delivery. By so doing, the fund will not bear any market
risk because the fund will have the absolute right to
receive from the issuer of the underlying security an
equal number of shares to replace the borrowed stock,
but the fund may incur additional transaction costs or
interest expenses in connection with any such purchase
or borrowing.
Although the manager will attempt to take
appropriate measures to minimize the risks relating to
the fund's writing of call options and purchasing of put
and call options, there can be no assurance that the
fund will succeed in its option-writing program.
Stock Index Options As described generally
above, the fund may purchase put and call options and
write call options on domestic stock indexes listed on
domestic exchanges in order to realize its investment
objective of capital appreciation or for the purpose of
hedging its portfolio. A stock index fluctuates with
changes in the market values of the stocks included in
the index. Some stock index options are based on a broad
market index such as the New York Stock Exchange
Composite Index or the Canadian Market Portfolio Index,
or a narrower market index such as the Standard & Poor's
100. Indexes also are based on an industry or market
segment such as the American Stock Exchange Oil and Gas
Index or the Computer and Business Equipment Index.
Options on stock indexes are generally similar to
options on stock except that the delivery requirements
are different. Instead of giving the right to take or
make delivery of stock at a specified price, an option
on a stock index gives the holder the right to receive
a cash "exercise settlement amount" equal to (a) the
amount, if any, by which the fixed exercise price of the
option exceeds (in the case of a put) or is less than
(in the case of a call) the closing value of the
underlying index on the date of exercise, multiplied by
(b) a fixed "index multiplier." Receipt of this cash
amount will depend upon the closing level of the stock
index upon which the option is based being greater than,
in the case of a call, or less than, in the case of a
put, the exercise price of the option. The amount of
cash received will be equal to such difference between
the closing price of the index and the exercise price of
the option expressed in dollars or a foreign currency,
as the case may be, times a specified multiple. The
writer of the option is obligated, in return for the
premium received, to make delivery of this amount. The
writer may offset its position in stock index options
prior to expiration by entering into a closing
transaction on an exchange or it may let the option
expire unexercised.
The effectiveness of purchasing or writing stock
index options as a hedging technique will depend upon
the extent to which price movements in the portion of
the securities portfolio of the fund correlate with
price movements of the stock index selected. Because the
value of an index option depends upon movements in the
level of the index rather than the price of a particular
stock, whether the fund will realize a gain or loss from
the purchase or writing of options on an index depends
upon movements in the level of stock prices in the stock
market generally or, in the case of certain indexes, in
an industry or market segment, rather than movements in
the price of a particular stock. Accordingly, successful
use by the fund of options on stock indexes will be
subject to the manager's ability to predict correctly
movements in the direction of the stock market generally
or of a particular industry. This requires different
skills and techniques than predicting changes in the
price of individual stocks.
Futures Contracts and Options on Futures
Contracts As described generally above, the fund may
invest in stock index futures contracts and options on
futures contracts that are traded on a domestic exchange
or board of trade.
The purpose of entering into a futures contract
by the fund is to protect the fund from fluctuations in
the value of securities without actually buying or
selling the securities. For example, in the case of
stock index futures contracts, if the fund anticipates
an increase in the price of stocks it intends to
purchase at a later time, the fund could enter into
contracts to purchase the stock index (known as taking
a "long" position) as a temporary substitute for the
purchase of stocks. If an increase in the market occurs
that influences the stock index as anticipated, the
value of the futures contracts increases and thereby
serves as a hedge against the fund's not participating
in a market advance. The fund then may close out the
futures contracts by entering into offsetting futures
contracts to sell the stock index (known as taking a
"short" position) as it purchases individual stocks. The
fund can accomplish similar results by buying securities
with long maturities and selling securities with short
maturities. But by using futures contracts as an
investment tool to reduce risk, given the greater
liquidity in the futures market, it may be possible to
accomplish the same result more easily and more quickly.
No consideration will be paid or received by the
fund upon the purchase or sale of a futures contract.
Initially, the fund will be required to deposit with the
broker an amount of cash or cash equivalents equal to
approximately 1% to 10% of the contract amount (this
amount is subject to change by the exchange or board of
trade on which the contract is traded and brokers or
members of such board of trade may charge a higher
amount). This amount is known as "initial margin" and is
in the nature of a performance bond or good faith
deposit on the contract which is returned to the fund,
upon termination of the futures contract, assuming all
contractual obligations have been satisfied. Subsequent
payments, known as "variation margin," to and from the
broker, will be made daily as the price of the index or
securities underlying the futures contract fluctuates,
making the long and short positions in the futures
contract more or less valuable, a process known as
"marking-to-market." In addition, when the fund enters
into a long position in a futures contract or an option
on a futures contract, it must deposit into a segregated
account with the fund's custodian an amount of cash or
cash equivalents equal to the total market value of the
underlying futures contract, less amounts held in the
fund's commodity brokerage account at its broker. At any
time prior to the expiration of a futures contract, the
fund may elect to close the position by taking an
opposite position, which will operate to terminate the
fund's existing position in the contract.
There are several risks in connection with the
use of futures contracts as a hedging device. Successful
use of futures contracts by the fund is subject to the
ability of the manager to predict correctly movements in
the stock market or in the direction of interest rates.
These predictions involve skills and techniques that may
be different from those involved in the management of
investments in securities. In addition, there can be no
assurance that there will be a perfect correlation
between movements in the price of the securities
underlying the futures contract and movements in the
price of the securities that are the subject of the
hedge. A decision of whether, when and how to hedge
involves the exercise of skill and judgment, and even a
well-conceived hedge may be unsuccessful to some degree
because of market behavior or unexpected trends in
market behavior or interest rates.
Positions in futures contracts may be closed out
only on the exchange on which they were entered into (or
through a linked exchange) and no secondary market
exists for those contracts. In addition, although the
fund intends to enter into futures contracts only if
there is an active market for the contracts, there is no
assurance that an active market will exist for the
contracts at any particular time. Most futures exchanges
and boards of trade limit the amount of fluctuation
permitted in futures contract prices during a single
trading day. Once the daily limit has been reached in a
particular contract, no trades may be made that day at
a price beyond that limit. It is possible that futures
contract prices could move to the daily limit for
several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of
futures positions and subjecting some futures traders to
substantial losses. In such event, and in the event of
adverse price movements, the fund would be required to
make daily cash payments of variation margin; in such
circumstances, an increase in the value of the portion
of the portfolio being hedged, if any, may partially or
completely offset losses on the futures contract. As
described above, however, no assurance can be given that
the price of the securities being hedged will correlate
with the price movements in a futures contract and thus
provide an offset to losses on the futures contract.
Portfolio Turnover
While the fund does not intend to trade in
securities for short-term profits, securities may be
sold without regard to the amount of time they have
been held by the fund when warranted by the
circumstances. The fund's portfolio turnover rate is
calculated by dividing the lesser of purchases or
sales of portfolio securities for a year by the
monthly average value of portfolio securities for the
year. Securities with remaining maturities of one year
or less at the date of acquisition are excluded from
the calculation. A portfolio turnover rate of 100%
would occur, for example, if all the securities in the
fund's portfolio were replaced once during a period of
one year. A high rate of portfolio turnover in any
year will increase brokerage commissions paid and
could result in high amounts of realized investment
gain subject to the payment of taxes by shareholders.
Any realized short-term investment gain will be taxed
to shareholders as ordinary income. For the 1999, 1998
and 1997 fiscal years, the fund's portfolio turnover
rates were 43%, 41% and 46%, respectively.
Investment Restrictions
The fund has adopted the following investment
restrictions for the protection of shareholders.
Restrictions 1 through 7 cannot be changed without
approval by the holders of a majority of the outstanding
shares of the fund, defined as the lesser of (a) 67% or
more of the fund's shares present at a meeting, if the
holders of more than 50% of the outstanding shares are
present in person or by proxy, or (b) more than 50% of
the fund's outstanding shares. The remaining
restrictions may be changed by the fund's Board of
Directors at any time. The fund may not:
1. Invest in a manner that would cause it to fail
to be a "diversified company" under the 1940
Act and the rules, regulations and orders
thereunder.
2. Issue senior securities as defined in the 1940
Act, and any rules and orders thereunder,
except insofar as the fund may be deemed to
have issued senior securities by reason of:
(a) borrowing money or purchasing securities
on a when-issued or delayed-delivery basis;
(b) purchasing or selling futures contracts
and options on future contracts and other
similar instruments; and (c) issuing separate
classes of shares.
3. Invest more than 25% of its total assets in
securities, the issuers of which are in the
same industry. For purposes of this
limitation, U.S. government securities and
securities of state or municipal governments
and their political subdivisions are not
considered to be issued by members of any
industry.
4. Borrow money, except that (a) the fund may
borrow from banks for temporary or emergency
(not leveraging) purposes, including the
meeting of redemption requests which might
otherwise require the untimely disposition of
securities, and (b) the fund may, to the
extent consistent with its investment
policies, enter into reverse repurchase
agreements, forward roll transactions and
similar investment strategies and techniques.
To the extent that it engages in transactions
described in (a) and (b), the fund will be
limited so that no more than 33 -1/3% of the
value of its total assets (including the
amount borrowed), valued at the lesser of
cost or market, less liabilities (not
including the amount borrowed) valued at the
time the borrowing is made, is derived from
such transactions.
5. Engage in the business of underwriting
securities issued by other persons, except to
the extent that the fund may technically be
deemed to be an underwriter under the
Securities Act of 1933, as amended, in
disposing of portfolio securities.
6. Purchase or sell real estate, real estate
mortgages, commodities or commodity contracts,
but this restriction shall not prevent the
fund from (a) investing in securities of
issuers engaged in the real estate business or
the business of investing in real estate
(including interests in limited partnerships
owning or otherwise engaging in the real
estate business or the business of investing
in real estate) and securities which are
secured by real estate or interests therein;
(b) holding or selling real estate received in
connection with securities it holds or held;
(c) trading in futures contracts and options
on futures contracts (including options on
currencies to the extent consistent with the
fund's investment objective and policies); or
(d) investing in real estate investment trust
securities.
7. Make loans. This restriction does not apply
to: (a) the purchase of debt obligations in
which the fund may invest consistent with its
investment objectives and policies; (b)
repurchase agreements; and (c) loans of its
portfolio securities, to the fullest extent
permitted under the 1940 Act.
8. Invest more than 5.00% of the value of the
fund's total assets in the securities of any
issuer which has been in continuous operation
for less than three years. This restriction
does not apply to U.S. government securities.
9. Invest in other open-end investment companies
(except as part of a merger, consolidation,
reorganization or acquisition of assets). This
restriction does not apply to investment in
closed-end, publicly traded investment
companies.
10. Invest in interests in oil, gas or other
mineral exploration or development programs
(except that the fund may invest in the
securities of issuers which operate, invest in
or sponsor such programs).
11. Purchase or retain the securities of any
issuer if, to the knowledge of the fund, any
officer or Director of the fund or of SSB owns
beneficially more than 1/2 of 1.00% of the
outstanding securities of such issuer and the
persons so owning more than 1/2 of 1.00% of
such securities together own beneficially more
than 5.00% of such securities.
12. Purchase warrants if, thereafter, more than
2.00% of the value of the fund's net assets
would consist of such warrants, but warrants
attached to other securities or acquired in
units by the fund are not subject to this
restriction.
13. Purchase or otherwise acquire any security
if, as a result, more than 15% of its net
assets would be invested in securities that
are illiquid.
14 Invest in any company for the purpose of
exercising control or management.
15. Purchase or sell real estate limited
partnership interests.
16. Purchase any securities on margin (except
for such short-term credits as are necessary
for the clearance of purchases and sales of
portfolio securities) or sell any securities
short (except "against the box"). For purposes
of this restriction, the deposit or payment by
the fund of underlying securities and other
assets in escrow and collateral agreements
with respect to initial or maintenance margin
in connection with futures contracts and
related options and options on securities,
indexes or similar items is not considered to
be the purchase of a security on margin.
17. Write, purchase or sell puts, calls,
straddles, spreads or combinations thereof or
engage in transactions involving futures
contracts and related options, except as
permitted under the fund's investment goals
and policies, as set forth in the current
prospectus and the Statement of Additional
Information.
Certain restrictions listed above permit the fund
without shareholder approval to engage in investment
practices that the fund does not currently pursue. The
fund has no present intention of altering its current
investment practices as otherwise described in the
prospectus and this SAI and any future change in those
practices would require Board approval. If any
percentage restriction described above is complied with
at the time of an investment, a later increase or
decrease in percentage resulting from a change in values
or assets will not constitute a violation of the
restriction.
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is a list of each Director and
executive officers of the fund, including a description
of principal occupation in the last five years, ages and
addresses of each such person.
Lloyd J. Andrews, (Age 79), Director. Private
investor; Chairman Emeritus of Flow International. His
address is East 10110 Greenbluff Road, Mead, Washington
99021.
Robert M. Frayn, Jr., (Age 65), Director.
President and Director of Book Publishing Company. His
address is 201 Westlake Avenue North, Seattle,
Washington 98109.
Leon P. Gardner, (Age 71), Director. Private
investor; Former Chairman of Fargo's Pizza Company. His
address is 2310 N.E. Blue Ridge Drive, Seattle,
Washington 98177.
David E. Maryatt, (Age 63), Director. Director of
ALS Co., a real estate management and development firm;
Private Investor. His address is 1326 Fifth Avenue,
Seattle, Washington 98101.
*Heath B. McLendon, (Age 66), Managing Director of
Salomon Smith Barney Inc. ("Salomon Smith Barney");
President and Director of SSB and Travelers Investment
Advisers, Inc. ("TIA"); Director of 64 investment
companies associated with Citigroup Inc. ("Citigroup").
His address is 7 World Trade Center, New York, New York
10048.
Frederick O. Paulsell, (Age 60), Director.
Principal of Olympic Capital Partners. His address is
1325 Fourth Avenue Suite 1900, Seattle, Washington
98101.
Jerry A. Viscione, (Age 55), Director. Executive
Vice President of Marquette University; Former Dean of
Albers School of Business and Economics, Seattle
University. His address is 615 North 11 Street,
Milwaukee, WI 53233.
Julie W. Weston, (Age 56), Director. Attorney;
Her address is 416 34th Avenue, Seattle, Washington
98122.
Lewis E. Daidone, (Age 42), Senior Vice President
and Treasurer. Managing Director of Salomon Smith
Barney; Director and Senior Vice President of SSB and
TIA. Mr. Daidone serves as Senior Vice President and
Treasurer of 59 Smith Barney Mutual funds associated
with Citigroup. His address is 388 Greenwich Street,
New York, New York 10013.
John G. Goode, (Age 55), Vice President and
Investment Officer. Managing Director of Salomon Smith
Barney. Chairman and Chief Investment Officer of Davis
Skaggs Investment Management ("Davis Skaggs"), a
division of SSB. His address is One Sansome Street, 36th
Floor, San Francisco, California 94104.
Peter Hable, (Age 41), Investment Officer.
Managing Director of Salomon Smith Barney and President
of Davis Skaggs. His address is One Sansome Street, 36th
Floor, San Francisco, California 94104.
Christina T. Sydor, (Age 48), Secretary. Managing
Director of Salomon Smith Barney; General Counsel and
Secretary of SSB and TIA. Ms. Sydor serves as Secretary
of 59 Smith Barney Mutual Funds associated with
Citigroup. Her address is 388 Greenwich Street, New
York, New York 10013.
*Designates a Director that is an "interested
person" as defined in the Investment Company Act of
1940, as amended (the "Act"). Such persons are
compensated by Salomon Smith Barney and are not
separately compensated by the fund for serving as a
fund officer or Director.
The following table shows the compensation paid
by the fund to each person who was a Director during
the fund's last fiscal year. None of the officers of
the fund received any compensation from the fund for
such period. Officers and interested Directors of the
fund are compensated by Salomon Smith Barney.
COMPENSATION TABLE
Director
Aggregate
Compensation
From the Fund
Pension or
Retirement
Benefits
Accrued as
Expenses
of the
Fund
Total
Compensation
from Smith
Barney
Mutual Funds
Complex
Total
Number
of Funds
Served
in
Complex
Lloyd J. Andrews
$11,000
$0
$11,000
1
Robert M. Frayn,
Jr.+
11,000
0
11,000
1
Leon P. Gardner
11,000
0
11,000
1
David E. Maryatt+
11,000
0
11,000
1
Heath B. McLendon*
0
0
0
64
Frederick O.
Paulsell+
9,000
0
9,000
1
Jerry A. Viscione
11,000
0
11,000
1
Julie W. Weston
10,000
0
10,000
1
__________________
* Designates a Director who is an "interested
person".
+ Pursuant to a deferred compensation plan, the
indicated Directors have elected to defer payment of
the following amounts of their compensation from the
fund: Robert M. Frayn, Jr. - $11,000, David E.
Maryatt- $11,000 and Frederick O. Paulsell - $9,000.
No officer, director or employee of Salomon Smith
Barney or of its parent or any subsidiary receives any
compensation from the fund for serving as an officer or
Director of the fund. The fund pays each Director who is
not an officer or employee of Salomon Smith Barney or
any of its affiliates a fee of $6,000 per annum plus
$1,000 for each in-person meeting and $100 per
telephonic meeting. All Directors are reimbursed for
travel and out-of-pocket expenses. During the calendar
year ended December 31, 1998, such expenses totaled
$15,112.
As of January 7, 2000, the Directors and Officers
of the fund as a group, owned less than 1.00% of the
outstanding common stock of the fund.
As of January 7, 2000, the following shareholders
beneficially owned 5% or more of a class of shares of a
fund:
Class Y
Smith Barney Concert Series, Inc.
Balanced Portfolio
PNC Bank, NA
Attn: Beverly Timson
200 Stevens Drive Suite 440
Lester, PA 19113-1522
owned 4,024,262.812 (64.33%) shares*
Smith Barney Concert Series, Inc.
Select Balanced Portfolio
PNC Bank, NA
Attn: Beverly Timson
200 Stevens Drive Suite 440
Lester, PA 19113-1522
owned 1,408,766.665 (22.52%) shares*
Smith Barney Concert Series, Inc.
Conservative Portfolio
PNC Bank, NA
Attn: Beverly Timson
200 Stevens Drive Suite 440
Lester, PA 19113-1522
owned 610,283.57 (9.76%) shares*
* The Fund believes that these entities are not
the beneficial owners of shares held of record by
them.
Investment Manager and Administrator
SSB Citi Fund Management LLC (successor to
Mutual Management Corp.) ("SSB") serves as investment
manager to the fund pursuant to an investment advisory
agreement dated July 30, 1993 (the "Advisory
Agreement"), which was first approved by the fund's
Board of Directors, including a majority of the
Directors who are not "interested persons" of the fund
or SSB ("Independent Directors"), on April 7, 1993 and
by shareholders on June 22, 1993 and was most recently
approved by the Board, including a majority of the
Independent Directors, on June 22, 1999 and amended as
of September 21, 1999. The services provided by SSB
under the Advisory Agreement are described in the
prospectus under "Management." SSB bears all expenses
in connection with the performance of its services and
pays the salary of any officer or employee who is
employed by both it and the fund. SSB is a wholly
owned subsidiary of Salomon Smith Barney Holdings Inc.
("Holdings"), which is in turn a wholly owned
subsidiary of Citigroup. On September 21, 1999, the
Board of Directors approved a management fee
reduction. Consequently, the fund pays SSB a fee,
computed daily and paid monthly on the average daily
net assets, according to the following table:
First $1.5 Billion 0.55%
Next $0.5 Billion 0.50
Next $0.5 Billion 0.49
Next $1.0 Billion 0.46
Over $3.5 Billion 0.38
SSB bears all of its expenses in connection with
the performance of its services. For the fiscal years
ended September 30, 1999, 1998 and 1997, the fund
incurred $8,940,574, $8,577,966 and $8,151,351,
respectively, in investment advisory fees.
SSB also serves as administrator to the fund
pursuant to a written agreement dated June 28, 1994
(the "Administration Agreement"), which was first
approved by the fund's Board, including a majority of
the Independent Directors on June 28, 1994 and was
most recently approved by the Board, including a
majority of the Independent Directors, on June 22,
1999 and amended as of September 21, 1999. SSB pays
the salary of any officer and employee who is employed
by both it and the fund and bears all expenses in
connection with the performance of its services. As
compensation for administrative services rendered to
the fund, SSB receives a fee, computed daily and paid
monthly on the average daily net assets, at the
following rates:
First $2.0 Billion 0.20%
Next $0.5 Billion 0.16
Next $1.0 Billion 0.14
Over $3.5 Billion 0.12
For the fiscal years ended September 30, 1999,
1998 and 1997, the fund incurred $3,278,909, $3,134,642
and $2,972,630, respectively, in administration fees.
Certain services provided to the fund by SSB
pursuant to the Administration Agreement are described
in the prospectus under "Management." In addition to
those services, SSB pays the salaries of all officers
and employees who are employed by both it and the fund,
maintains office facilities for the fund, furnishes the
fund with statistical and research data, clerical help
and accounting, data processing, bookkeeping, internal
auditing and legal services and certain other services
required by the fund, prepares reports to the fund's
shareholders and prepares tax returns, reports to and
filings with the Securities and Exchange Commission (the
"SEC") and state Blue Sky authorities. SSB bears all
expenses in connection with the performance of its
services. SSB renders investment advice to investment
companies that had aggregate assets under management as
of December 31, 1999 in excess of $124 billion.
The fund bears expenses incurred in its
operation, including taxes, interest, brokerage fees and
commissions, if any; fees of Directors who are not
officers, directors, shareholders or employees of
Salomon Smith Barney or SSB; SEC fees and state Blue Sky
qualification fees; charges of custodians; transfer and
dividend disbursing agent's fees; certain insurance
premiums; outside auditing and legal expenses; costs of
maintenance of corporate existence; investor services
(including allocated telephone and personnel expenses);
costs of preparation and printing of prospectuses and
statements of additional information for regulatory
purposes and for distribution to existing shareholders
and costs of shareholders' reports and corporate
meetings.
Portfolio Transactions
Decisions to buy and sell securities for the
fund are made by the manager, subject to the overall
supervision and review of the fund's Board of
Directors. Portfolio securities transactions for the
fund are effected by or under the supervision of SSB.
Transactions on stock exchanges involve the
payment of negotiated brokerage commissions. There
generally is no stated commission in the case of
securities traded in the over-the-counter markets, but
the price of those securities includes an undisclosed
commission or mark-up. Over-the-counter purchases and
sales are transacted directly with principal market
makers except in those cases in which better prices
and executions may be obtained elsewhere. The cost of
securities purchased from underwriters includes an
underwriting commission or concession, and the prices
at which securities are purchased from and sold to
dealers include a dealer's mark-up or mark-down. For
the fiscal years ended September 30, 1999, 1998 and
1997, the fund paid total brokerage commissions of
$3,075,905, $2,284,354 and $2,983,857, respectively.
In executing portfolio transactions and
selecting brokers or dealers, it is the fund's policy
to seek the best overall terms available. The Advisory
Agreement between the fund and the manager provides
that, in assessing the best overall terms available
for any transaction, the manager shall consider the
factors it deems relevant, including the breadth of
the market in the security, the price of the security,
the financial condition and execution capability of
the broker or dealer, and the reasonableness of the
commission, if any, for the specific transaction and
on a continuing basis. In addition, the Advisory
Agreement authorizes the manager, in selecting brokers
or dealers to execute a particular transaction and in
evaluating the best overall terms available, to
consider the brokerage and research services (as those
terms are defined in Section 28(e) of the Securities
Exchange Act of 1934) provided to the fund and/or
other accounts over which the Manager or an affiliate
exercises investment discretion. For the fiscal year
ended September 30, 1999, the fund directed brokerage
transactions totaling approximately $178,677,300 to
brokers because of research services provided. The
amount of brokerage commissions paid on such
transactions totaled approximately $583,000.
The fund's Board of Directors periodically will
review the commissions paid by the fund to determine
if the commissions paid over representative periods of
time were reasonable in relation to the benefits
inuring to the fund. It is possible certain of the
services received will primarily benefit one or more
other accounts for which investment discretion is
exercised. Conversely, the fund may be the primary
beneficiary of services received as a result of
portfolio transactions effected for other accounts.
SSB's fee under the Advisory Agreement is not reduced
by reason of SSB's receiving such brokerage and
research services. Further, Salomon Smith Barney will
not participate in commissions from brokerage given by
the fund to other brokers or dealers and will not
receive any reciprocal brokerage business resulting
therefrom.
The fund's Board of Directors has determined
that any portfolio transaction for the fund may be
executed through Salomon Smith Barney if, in SSB's
judgment, the use of Salomon Smith Barney is likely to
result in price and execution at least as favorable as
those of other qualified brokers, and if in the
transaction, Salomon Smith Barney charges the fund a
commission rate consistent with those charged by
Salomon Smith Barney to comparable unaffiliated
customers in similar transactions. In addition,
Salomon Smith Barney may directly execute such
transactions for the fund on the floor of any national
securities exchange, provided: (i) the Board of
Directors has expressly authorized Salomon Smith
Barney to effect such transactions; and (ii) Salomon
Smith Barney annually advises the fund of the
aggregate compensation it earned on such transactions.
For the fiscal years ended September 30, 1999, 1998
and 1997, the fund paid $140,412, $161,040 and $27,396
respectively, in brokerage commissions to Salomon
Smith Barney. The percentage of registrant's
aggregate brokerage commissions paid to Salomon Smith
Barney for the fiscal year ended September 30, 1999
was 4.56% and the percentage of registrant's aggregate
dollar amount of transactions involving the payment of
commissions to Salomon Smith Barney for the fiscal
year ended September 30, 1999 was 2.70%.
While investment decisions for the fund are made
independently from those of the other accounts managed
by SSB, or certain affiliates of SSB, investments of the
type the fund may make also may be made by such other
accounts. In such instances, available investments or
opportunities for sales will be allocated in a manner
believed by SSB to be equitable to each. In some cases,
this procedure may adversely affect the price paid or
received by the fund or the size of the position
obtained for or disposed of by the fund.
DISTRIBUTION
Distributor. CFBDS serves as the fund's
distributor on a best efforts basis pursuant to a
written agreement dated October 8, 1998 (the
"Distribution Agreement"), which was most recently
approved by the fund's Board of Directors on July 15,
1998. Prior to October 8, 1998 Salomon Smith Barney
served as the fund's distributor on a best efforts
basis pursuant to a written agreement dated July 30,
1993, which was most recently approved by the fund's
Board of Directors on July 15, 1998.
For the fiscal year ended September 30, 1999,
Salomon Smith Barney and CFBDS received $448,000 in
sales charges from the sale of Class A shares. For
the fiscal years ended September 30, 1998 and 1997,
Salomon Smith Barney received $466,000 and $817,000,
respectively, in sales charges from the sale of Class
A shares. For the fiscal year ended September 30,
1999, Salomon Smith Barney and CFBDS received $126,000
in sales charges from the sale of Class L shares. For
the fiscal period ended September 30, 1998, Salomon
Smith Barney received $10,000 in sales charges from
the sale of Class L shares. For the fiscal years ended
September 30, 1999, 1998 and 1997, Salomon Smith
Barney received $0, $14,000 and $4,000, respectively,
representing contingent deferred sales charges
("Deferred Sales Charge") on redemptions of the fund's
Class A shares. For the fiscal years ended September
30, 1999, 1998 and 1997, Salomon Smith Barney received
$770,000, $1,177,000 and $1,133,000, respectively,
representing Deferred Sales Charges on redemptions of
the fund's Class B shares. For the fiscal years ended
September 30, 1999, 1998 and 1997, Salomon Smith
Barney received $5,000, $11,000 and 11,000,
respectively, representing Deferred Sales Charges on
redemptions of the fund's Class L shares.
When payment is made by the investor before
settlement date, unless otherwise directed by the
investor, the funds will be held as a free credit
balance in the investor's brokerage account and Salomon
Smith Barney may benefit from the temporary use of the
funds. The fund's Board of Directors has been advised of
the benefits to Salomon Smith Barney resulting from
these settlement procedures and will take such benefits
into consideration when reviewing the Advisory,
Administration and Distribution Agreements for
continuance.
Services and Distribution Plan
To compensate Salomon Smith Barney for the
services it provides and for the expenses it bears, the
fund has adopted a services and distribution plan (the
"Plan") pursuant to Rule 12b-1 under the 1940 Act. Under
the Plan, the fund pays Salomon Smith Barney a service
fee, accrued daily and paid monthly, calculated at the
annual rate of 0.25% of the value of the fund's average
daily net assets attributable to the Class A, Class B
and Class L shares. In addition, the fund pays Salomon
Smith Barney a distribution fee with respect to the
Class B and Class L shares primarily intended to
compensate Salomon Smith Barney for its initial expense
of paying Financial Consultants a commission upon sales
of those shares. The Class B and Class L distribution
fee is calculated at the annual rate of 0.75% of the
value of the fund's average daily net assets
attributable to the shares.
For the fiscal year ended September 30, 1999,
Salomon Smith Barney incurred distribution expenses
for the following: advertising, printing and mailing
prospectuses, support services and overhead expenses
to Salomon Smith Barney Financial Consultants and
accruals for interest on the excess of Salomon Smith
Barney expenses incurred in the distribution of the
fund's shares over the sum of the distribution fees
and Deferred Sales Charges received by Salomon Smith
Barney are expressed in the following table:
Financial
Consultant
Compensation
Branch
Expenses
Advertisin
g
Expenses
Printing
Expenses
s
Interes
t
Expenses
s
$1,301,121
$791,725
$69,115
$19,092
$69,428
The following shows the total distribution fees
paid by each Class for the fiscal year ended September
30, 1999:
9/30/99
Class A
$1,601,018
Class B
8,455,412
Class L
Total
727,153
$
10,783,583
Under its terms, the Plan continues from year to
year, provided such continuance is approved annually by
vote of the fund's Board of Directors, including a
majority of the Independent Directors. The Plan may not
be amended to increase the amount of the service and
distribution fees without shareholder approval, and all
material amendments of the Plan also must be approved by
the Directors and Independent Directors in the manner
described above. The Plan may be terminated with respect
to a class of the fund (a "Class") at any time, without
penalty, by the vote of a majority of the Independent
Directors or by a vote of a majority of the outstanding
voting securities of the Class (as defined in the 1940
Act). Pursuant to the Plan, Salomon Smith Barney will
provide the fund's Board of Directors with periodic
reports of amounts expended under the Plan and the
purpose for which such expenditures were made.
Custodian
The fund securities and cash owned by the fund
will be held in the custody of PNC Bank, National
Association, 17th and Chestnut Streets, Philadelphia,
Pennsylvania 19103.
Auditors
Deloitte & Touche LLP, 2 World Financial Center,
New York, New York 10281, has been selected as
independent auditors to examine and report on the fund's
financial statements for the fiscal year ending
September 30, 2000.
PURCHASE OF SHARES
Sales Charge Alternatives
The following classes of shares are available for
purchase. See the Prospectus for a discussion of
factors to consider in selecting which Class of shares
to purchase.
Class A Shares. Class A shares are sold to investors
at the public offering price, which is the net asset
value plus an initial sales charge as follows:
Sales
Charge
Amount of
Investment
% of Offering
Price
% of Amount
Invested
Dealers'
Reallowance as %
of Offering Price
Less than $25,000
5.00%
5.26%
4.50%
$25,000 - 49,999
4.00
4.17
3.60
50,000 - 99,999
3.50
3.63
3.15
100,000-249,999
3.00
3.09
2.70
250,000-499,999
2.00
2.04
1.80
500,000 - and
over
*
*
*
* Purchases of Class A shares of $500,000 or more
will be made at net asset value without any initial
sales charge, but will be subject to a deferred sales
charge of 1.00% on redemptions made within 12 months
of purchase. The deferred sales charge on Class A
shares is payable to Salomon Smith Barney, which
compensates Salomon Smith Barney Financial Consultants
and other dealers whose clients make purchases of
$500,000 or more. The deferred sales charge is waived
in the same circumstances in which the deferred sales
charge applicable to Class B and Class L shares is
waived. See "Deferred Sales Charge Alternatives" and
"Waivers of Deferred Sales Charge."
Members of the selling group may receive up to 90% of
the sales charge and may be deemed to be underwriters
of the fund as defined in the 1933 Act. The reduced
sales charges shown above apply to the aggregate of
purchases of Class A shares of the fund made at one
time by "any person," which includes an individual and
his or her immediate family, or a trustee or other
fiduciary of a single trust estate or single fiduciary
account.
Class B Shares. Class B shares are sold without an
initial sales charge but are subject to a deferred
sales charge payable upon certain redemptions. See
"Deferred Sales Charge Provisions" below.
Class L Shares. Class L shares are sold with an
initial sales charge of 1.00% (which is equal to 1.01%
of the amount invested) and are subject to a deferred
sales charge payable upon certain redemptions. See
"Deferred Sales Charge Provisions" below. Until June
22, 2001 purchases of Class L shares by investors who
were holders of Class C shares of other Smith Barney
Mutual Funds on June 12, 1998 will not be subject to
the 1% initial sales charge.
Class Y Shares. Class Y shares are sold without an
initial sales charge or deferred sales charge and are
available only to investors investing a minimum of
$15,000,000 (except for purchases of Class Y shares
(i) of the International Equity Portfolio, for which
the minimum initial investment is $5,000,000 and (ii)
by Smith Barney Concert Allocation Series Inc., for
which there is no minimum purchase amount).
General
Investors may purchase shares from a Salomon Smith
Barney Financial Consultant or a broker that clears
through Salomon Smith Barney ("Dealer
Representative"). In addition, certain investors,
including qualified retirement plans purchasing
through certain Dealer Representatives, may purchase
shares directly from the fund. When purchasing shares
of the fund, investors must specify whether the
purchase is for Class A, Class B, Class L or Class Y
shares. Salomon Smith Barney and Dealer
Representatives may charge their customers an annual
account maintenance fee in connection with a brokerage
account through which an investor purchases or holds
shares. Accounts held directly at PFPC Global Fund
Services ("sub-transfer agent") are not subject to a
maintenance fee.
Investors in Class A, Class B and Class L shares may
open an account in the fund by making an initial
investment of at least $1,000 for each account, or
$250 for an IRA or a Self-Employed Retirement Plan, in
the fund. Investors in Class Y shares may open an
account by making an initial investment of
$15,000,000. Subsequent investments of at least $50
may be made for all Classes. For participants in
retirement plans qualified under Section 403(b)(7) or
Section 401(c) of the Code, the minimum initial
investment required for Class A, Class B and Class L
shares and the subsequent investment requirement for
all Classes in the fund is $25. For shareholders
purchasing shares of the fund through the Systematic
Investment Plan on a monthly basis, the minimum
initial investment requirement for Class A, Class B
and Class L shares and subsequent investment
requirement for all Classes is $25. For shareholders
purchasing shares of the fund through the Systematic
Investment Plan on a quarterly basis, the minimum
initial investment required for Class A, Class B and
Class L shares and the subsequent investment
requirement for all Classes is $50. There are no
minimum investment requirements for Class A shares for
employees of Citigroup and its subsidiaries, including
Salomon Smith Barney, unitholders who invest
distributions from a Unit Investment Trust ("UIT")
sponsored by Salomon Smith Barney, and
Directors/Trustees of any of the Smith Barney Mutual
Funds, and their spouses and children. The fund
reserves the right to waive or change minimums, to
decline any order to purchase its shares and to
suspend the offering of shares from time to time.
Shares purchased will be held in the shareholder's
account by the sub-transfer agent. Share certificates
are issued only upon a shareholder's written request
to the sub-transfer agent.
Purchase orders received by the fund or a Salomon
Smith Barney Financial Consultant prior to the close
of regular trading on the New York Stock Exchange
("NYSE"), on any day the fund calculates its net asset
value, are priced according to the net asset value
determined on that day (the ''trade date''). Orders
received by a Dealer Representative prior to the close
of regular trading on the NYSE on any day the fund
calculates its net asset value, are priced according
to the net asset value determined on that day,
provided the order is received by the fund or the
fund's agent prior to its close of business. For
shares purchased through Salomon Smith Barney or a
Dealer Representative purchasing through Salomon Smith
Barney, payment for shares of the fund is due on the
third business day after the trade date. In all other
cases, payment must be made with the purchase order.
Systematic Investment Plan. Shareholders may make
additions to their accounts at any time by purchasing
shares through a service known as the Systematic
Investment Plan. Under the Systematic Investment
Plan, Salomon Smith Barney or the sub-transfer agent
is authorized through preauthorized transfers of at
least $25 on a monthly basis or at least $50 on a
quarterly basis to charge the shareholder's account
held with a bank or other financial institution on a
monthly or quarterly basis as indicated by the
shareholder, to provide for systematic additions to
the shareholder's fund account. A shareholder who has
insufficient funds to complete the transfer will be
charged a fee of up to $25 by Salomon Smith Barney or
the sub-transfer agent. The Systematic Investment
Plan also authorizes Salomon Smith Barney to apply
cash held in the shareholder's Salomon Smith Barney
brokerage account or redeem the shareholder's shares
of a Smith Barney money market fund to make additions
to the account. Additional information is available
from the fund or a Salomon Smith Barney Financial
Consultant or a Dealer Representative.
Sales Charge Waivers and Reductions
Initial Sales Charge Waivers. Purchases of Class A
shares may be made at net asset value without a sales
charge in the following circumstances: (a) sales to
(i) Board Members and employees of Citigroup and its
subsidiaries and any Citigroup affiliated funds
including the Smith Barney Mutual Funds (including
retired Board Members and employees); the immediate
families of such persons (including the surviving
spouse of a deceased Board Member or employee); and to
a pension, profit-sharing or other benefit plan for
such persons and (ii) employees of members of the
National Association of Securities Dealers, Inc.,
provided such sales are made upon the assurance of the
purchaser that the purchase is made for investment
purposes and that the securities will not be resold
except through redemption or repurchase; (b) offers of
Class A shares to any other investment company to
effect the combination of such company with the fund
by merger, acquisition of assets or otherwise;
(c) purchases of Class A shares by any client of a
newly employed Salomon Smith Barney Financial
Consultant (for a period up to 90 days from the
commencement of the Financial Consultant's employment
with Salomon Smith Barney), on the condition the
purchase of Class A shares is made with the proceeds
of the redemption of shares of a mutual fund which (i)
was sponsored by the Financial Consultant's prior
employer, (ii) was sold to the client by the Financial
Consultant and (iii) was subject to a sales charge;
(d) purchases by shareholders who have redeemed Class
A shares in the fund (or Class A shares of another
Smith Barney Mutual Fund that is offered with a sales
charge) and who wish to reinvest their redemption
proceeds in the fund, provided the reinvestment is
made within 60 calendar days of the redemption; (e)
purchases by accounts managed by registered investment
advisory subsidiaries of Citigroup; (f) direct
rollovers by plan participants of distributions from a
401(k) plan offered to employees of Citigroup or its
subsidiaries or a 401(k) plan enrolled in the Smith
Barney 401(k) Program (Note: subsequent investments
will be subject to the applicable sales charge); (g)
purchases by a separate account used to fund certain
unregistered variable annuity contracts; (h)
investments of distributions from a UIT sponsored by
Salomon Smith Barney; (i) purchases by investors
participating in a Salomon Smith Barney fee-based
arrangement; and (j) purchases by Section 403(b) or
Section 401(a) or (k) accounts associated with
Copeland Retirement Programs. In order to obtain such
discounts, the purchaser must provide sufficient
information at the time of purchase to permit
verification that the purchase would qualify for the
elimination of the sales charge.
Right of Accumulation. Class A shares of the fund may
be purchased by ''any person'' (as defined above) at a
reduced sales charge or at net asset value determined
by aggregating the dollar amount of the new purchase
and the total net asset value of all Class A shares of
the fund and of most other Smith Barney Mutual Funds
that are offered with a sales charge then held by such
person and applying the sales charge applicable to
such aggregate. In order to obtain such discount, the
purchaser must provide sufficient information at the
time of purchase to permit verification that the
purchase qualifies for the reduced sales charge. The
right of accumulation is subject to modification or
discontinuance at any time with respect to all shares
purchased thereafter.
Letter of Intent - Class A Shares. A Letter of Intent
for an amount of $50,000 or more provides an
opportunity for an investor to obtain a reduced sales
charge by aggregating investments over a 13 month
period, provided that the investor refers to such
Letter when placing orders. For purposes of a Letter
of Intent, the ''Amount of Investment'' as referred to
in the preceding sales charge table includes (i) all
Class A shares of the fund and other Smith Barney
Mutual Funds offered with a sales charge acquired
during the term of the letter plus (ii) the value of
all Class A shares previously purchased and still
owned. Each investment made during the period
receives the reduced sales charge applicable to the
total amount of the investment goal. If the goal is
not achieved within the period, the investor must pay
the difference between the sales charges applicable to
the purchases made and the charges previously paid, or
an appropriate number of escrowed shares will be
redeemed. The term of the Letter will commence upon
the date the Letter is signed, or at the options of
the investor, up to 90 days before such date. Please
contact a Salomon Smith Barney Financial Consultant or
Smith Barney Private Trust Company (the "Transfer
Agent") to obtain a Letter of Intent application.
Letter of Intent - Class Y Shares. A Letter of Intent
may also be used as a way for investors to meet the
minimum investment requirement for Class Y shares
(except purchases of Class Y shares by Smith Barney
Concert Allocation Series Inc., for which there is no
minimum purchase amount). Investors must make an
initial minimum purchase of $5,000,000 in Class Y
shares of the fund and agree to purchase a total of
$15,000,000 of Class Y shares of the fund within 13
months from the date of the Letter. If a total
investment of $15,000,000 is not made within the 13-
month period, all Class Y shares purchased to date
will be transferred to Class A shares, where they will
be subject to all fees (including a service fee of
0.25%) and expenses applicable to the fund's Class A
shares, which may include a deferred sales charge of
1.00%. Please contact a Salomon Smith Barney Financial
Consultant or the Transfer Agent for further
information.
Deferred Sales Charge Provisions
''Deferred Sales Charge Shares'' are: (a) Class B
shares; (b) Class L shares; and (c) Class A shares
that were purchased without an initial sales charge
but are subject to a deferred sales charge. A
deferred sales charge may be imposed on certain
redemptions of these shares.
Any applicable deferred sales charge will be assessed
on an amount equal to the lesser of the original cost
of the shares being redeemed or their net asset value
at the time of redemption. Deferred Sales Charge
Shares that are redeemed will not be subject to a
deferred sales charge to the extent the value of such
shares represents: (a) capital appreciation of fund
assets; (b) reinvestment of dividends or capital gain
distributions; (c) with respect to Class B shares,
shares redeemed more than five years after their
purchase; or (d) with respect to Class L shares and
Class A shares that are Deferred Sales Charge Shares,
shares redeemed more than 12 months after their
purchase.
Class L shares and Class A shares that are Deferred
Sales Charge Shares are subject to a 1.00% deferred
sales charge if redeemed within 12 months of purchase.
In circumstances in which the deferred sales charge is
imposed on Class B shares, the amount of the charge
will depend on the number of years since the
shareholder made the purchase payment from which the
amount is being redeemed. Solely for purposes of
determining the number of years since a purchase
payment, all purchase payments made during a month
will be aggregated and deemed to have been made on the
last day of the preceding Salomon Smith Barney
statement month. The following table sets forth the
rates of the charge for redemptions of Class B shares
by shareholders, except in the case of Class B shares
held under the Smith Barney 401(k) Program, as
described below. See ''Purchase of Shares-Smith Barney
401(k) and ExecChoiceTM Programs.''
Year Since Purchase
Payment Was Made
Deferred Sales Charge
First
5.00%
Second
4.00
Third
3.00
Fourth
2.00
Fifth
1.00
Sixth and thereafter
0.00
Class B shares will convert automatically to Class A
shares eight years after the date on which they were
purchased and thereafter will no longer be subject to
any distribution fees. There will also be converted at
that time such proportion of Class B Dividend Shares
(Class B shares that were acquired through the
reinvestment of dividends and distributions) owned by
the shareholder as the total number of his or her
Class B shares converting at the time bears to the
total number of outstanding Class B shares (other than
Class B Dividend Shares) owned by the shareholder.
In determining the applicability of any deferred sales
charge, it will be assumed that a redemption is made
first of shares representing capital appreciation,
next of shares representing the reinvestment of
dividends and capital gain distributions and finally
of other shares held by the shareholder for the
longest period of time. The length of time that
Deferred Sales Charge Shares acquired through an
exchange have been held will be calculated from the
date that the shares exchanged were initially acquired
in one of the other Smith Barney Mutual Funds, and
fund shares being redeemed will be considered to
represent, as applicable, capital appreciation or
dividend and capital gain distribution reinvestments
in such other funds. For Federal income tax purposes,
the amount of the deferred sales charge will reduce
the gain or increase the loss, as the case may be, on
the amount realized on redemption. The amount of any
deferred sales charge will be paid to Salomon Smith
Barney.
To provide an example, assume an investor purchased
100 Class B shares of the fund at $10 per share for a
cost of $1,000. Subsequently, the investor acquired 5
additional shares of the fund through dividend
reinvestment. During the fifteenth month after the
purchase, the investor decided to redeem $500 of his
or her investment. Assuming at the time of the
redemption the net asset value had appreciated to $12
per share, the value of the investor's shares would be
$1,260 (105 shares at $12 per share). The deferred
sales charge would not be applied to the amount which
represents appreciation ($200) and the value of the
reinvested dividend shares ($60). Therefore, $240 of
the $500 redemption proceeds ($500 minus $260) would
be charged at a rate of 4.00% (the applicable rate for
Class B shares) for a total deferred sales charge of
$9.60.
Waivers of Deferred Sales Charge
The deferred sales charge will be waived on: (a)
exchanges (see ''Exchange Privilege''); (b) automatic
cash withdrawals in amounts equal to or less than
1.00% per month of the value of the shareholder's
shares at the time the withdrawal plan commences (see
''Automatic Cash Withdrawal Plan'') (provided,
however, that automatic cash withdrawals in amounts
equal to or less than 2.00% per month of the value of
the shareholder's shares will be permitted for
withdrawal plans that were established prior to
November 7, 1994); (c) redemptions of shares within 12
months following the death or disability of the
shareholder; (d) redemptions of shares made in
connection with qualified distributions from
retirement plans or IRAs upon the attainment of age
591/2; (e) involuntary redemptions; and (f) redemptions
of shares to effect a combination of the fund with any
investment company by merger, acquisition of assets or
otherwise. In addition, a shareholder who has redeemed
shares from other Smith Barney Mutual Funds may, under
certain circumstances, reinvest all or part of the
redemption proceeds within 60 days and receive pro
rata credit for any deferred sales charge imposed on
the prior redemption.
Deferred sales charge waivers will be granted subject
to confirmation (by Salomon Smith Barney in the case
of shareholders who are also Salomon Smith Barney
clients or by the Transfer Agent in the case of all
other shareholders) of the shareholder's status or
holdings, as the case may be.
Smith Barney 401(k) and ExecChoiceTM Programs
Investors may be eligible to participate in the Smith
Barney 401(k) Program or the Smith Barney ExecChoiceTM
Program. To the extent applicable, the same terms and
conditions, which are outlined below, are offered to
all plans participating (''Participating Plans'') in
these programs.
The fund offers to Participating Plans Class A and
Class L shares as investment alternatives under the
Smith Barney 401(k) and ExecChoiceTM Programs. Class A
and Class L shares acquired through the Participating
Plans are subject to the same service and/or
distribution fees as the Class A and Class L shares
acquired by other investors; however, they are not
subject to any initial sales charge or deferred sales
charge. Once a Participating Plan has made an initial
investment in the fund, all of its subsequent
investments in the fund must be in the same Class of
shares, except as otherwise described below.
Class A Shares. Class A shares of the fund are
offered without any sales charge or deferred sales
charge to any Participating Plan that purchases
$1,000,000 or more of Class A shares of one or more
funds of the Smith Barney Mutual Funds.
Class L Shares. Class L shares of the fund are
offered without any sales charge or deferred sales
charge to any Participating Plan that purchases less
than $1,000,000 of Class L shares of one or more funds
of the Smith Barney Mutual Funds.
401(k) and ExecChoiceTM Plans Opened On or After June
21, 1996. If, at the end of the fifth year after the
date the Participating Plan enrolled in the Smith
Barney 401(k) Program or the Smith Barney ExecChoiceTM
Program, a Participating Plan's total Class L and
Class O holdings in all non-money market Smith Barney
Mutual Funds equal at least $1,000,000, the
Participating Plan will be offered the opportunity to
exchange all of its Class L shares for Class A shares
of the fund. For Participating Plans that were
originally established through a Salomon Smith Barney
retail brokerage account, the five-year period will be
calculated from the date the retail brokerage account
was opened. Such Participating Plans will be notified
of the pending exchange in writing within 30 days
after the fifth anniversary of the enrollment date
and, unless the exchange offer has been rejected in
writing, the exchange will occur on or about the 90th
day after the fifth anniversary date. If the
Participating Plan does not qualify for the five-year
exchange to Class A shares, a review of the
Participating Plan's holdings will be performed each
quarter until either the Participating Plan qualifies
or the end of the eighth year.
401(k) Plans Opened Prior to June 21, 1996. In any
year after the date a Participating Plan enrolled in
the Smith Barney 401(k) Program, if a Participating
Plan's total Class L holdings in all non-money market
Smith Barney Mutual Funds equal at least $500,000 as
of the calendar year-end, the Participating Plan will
be offered the opportunity to exchange all of its
Class L and Class O shares for Class A shares of the
fund. Such Plans will be notified in writing within 30
days after the last business day of the calendar year
and, unless the exchange offer has been rejected in
writing, the exchange will occur on or about the last
business day of the following March.
Any Participating Plan in the Smith Barney 401(k) or
the Smith Barney ExecChoiceTM Programs, whether opened
before or after June 21, 1996, that has not previously
qualified for an exchange into Class A shares will be
offered the opportunity to exchange all of its Class L
shares for Class A shares of the fund, regardless of
asset size, at the end of the eighth year after the
date the Participating Plan enrolled in the Smith
Barney 401(k) Program. Such Plans will be notified of
the pending exchange in writing approximately 60 days
before the eighth anniversary of the enrollment date
and, unless the exchange has been rejected in writing,
the exchange will occur on or about the eighth
anniversary date. Once an exchange has occurred, a
Participating Plan will not be eligible to acquire
additional Class L shares of the fund, but instead may
acquire Class A shares of the fund. Any Class L shares
not converted will continue to be subject to the
distribution fee.
Participating Plans wishing to acquire shares of the
fund through the Smith Barney 401(k) Program or the
Smith Barney ExecChoiceTM Program must purchase such
shares directly from the Transfer Agent. For further
information regarding these Programs, investors should
contact a Salomon Smith Barney Financial Consultant.
Determination of Public Offering Price
The fund offers its shares to the public on a
continuous basis. The public offering price for Class
A shares of the fund is equal to the net asset value
per share at the time of purchase plus an initial
sales charge based on the aggregate amount of the
investment. The public offering price for Class B,
Class L and Class Y shares (and Class A share
purchases, including applicable rights of
accumulation, equaling or exceeding $500,000) is equal
to the net asset value per share at the time of
purchase and no sales charge is imposed at the time of
purchase. Deferred Sales Charge, however, is imposed
on certain redemptions of Class B and Class L shares,
and of Class A shares when purchased in amounts
equaling or exceeding $500,000. The method of
computation of the public offering price is shown in
the fund's financial statements incorporated by
reference in their entirety into this SAI.
REDEMPTION OF SHARES
The right of redemption may be suspended or the
date of payment postponed (a) for any period during
which the NYSE is closed (other than for customary
weekend or holiday closings), (b) when trading in
markets the fund normally utilizes is restricted, or an
emergency, as determined by the SEC, exists so that
disposal of the fund's investments or determination of
net asset value is not reasonably practicable or (c) for
such other periods as the SEC by order may permit for
protection of the fund's shareholders.
If the shares to be redeemed were issued in
certificate form, the certificates must be endorsed for
transfer (or be accompanied by an endorsed stock power)
and must be submitted to sub-transfer agent together
with the redemption request. Any signature appearing on
a share certificate, stock power or written redemption
request in excess of $10,000 must be guaranteed by an
eligible guarantor institution such as a domestic bank,
savings and loan institution, domestic credit union,
member bank of the federal Reserve System or member firm
of a national securities exchange. Written redemption
requests of $10,000 or less do not require a signature
guarantee unless more than one such redemption request
is made in any 10-day period or the redemption proceeds
are to be sent to an address other than the address of
record. Unless otherwise directed, redemption proceeds
will be mailed to an investor's address of record. The
Transfer Agent may require additional supporting
documents for redemptions made by corporations,
executors, administrators, trustees or guardians. A
redemption request will not be deemed properly received
until the Transfer Agent receives all required documents
in proper form.
If a shareholder holds shares in more than one
Class, any request for redemption must specify the Class
being redeemed. In the event of a failure to specify
which Class, or if the investor owns fewer shares of the
Class than specified, the redemption request will be
delayed until the Transfer Agent receives further
instructions from Salomon Smith Barney, or if the
shareholder's account is not with Salomon Smith Barney,
from the shareholder directly. The redemption proceeds
will be remitted on or before the third business day
following receipt of proper tender, except on any days
on which the NYSE is closed or as permitted under the
1940 Act, in extraordinary circumstances. Generally, if
the redemption proceeds are remitted to a Salomon Smith
Barney brokerage account, these funds will not be
invested for the shareholder's benefit without specific
instruction and Salomon Smith Barney will benefit from
the use of temporarily uninvested funds. Redemption
proceeds for shares purchased by check, other than a
certified or official bank check, will be remitted upon
clearance of the check, which may take up to ten days or
more.
Distributions in Kind
If the Board of Directors of the fund determines
that it would be detrimental to the best interests of
the remaining shareholders to make a redemption payment
wholly in cash, the fund may pay, in accordance with the
SEC rules, any portion of a redemption in excess of the
lesser of $250,000 or 1.00% of the fund's net assets by
distribution in kind of portfolio securities in lieu of
cash. Securities issued as a distribution in kind may
incur brokerage commissions when shareholders
subsequently sell those securities.
Automatic Cash Withdrawal Plan
An automatic cash withdrawal plan (the
"Withdrawal Plan") is available to shareholders who own
shares with a value of at least $10,000 ($5,000 for
retirement plan accounts) and who wish to receive
specific amounts of cash monthly or quarterly.
Withdrawals of at least $50 may be made under the
Withdrawal Plan by redeeming as many shares of the fund
as may be necessary to cover the stipulated withdrawal
payment. Any applicable Deferred Sales Charge will not
be waived on amounts withdrawn by shareholders that
exceed 1.00% per month of the value of a shareholder's
shares at the time the Withdrawal Plan commences. (With
respect to Withdrawal Plans in effect prior to November
7, 1994, any applicable Deferred Sales Charge will be
waived on amounts withdrawn that do not exceed 2.00% per
month of the value of a shareholder's shares that are
subject to a Deferred Sales Charge). To the extent
withdrawals exceed dividends, distributions and
appreciation of a shareholder's investment in the fund,
there will be a reduction in the value of the
shareholder's investment and continued withdrawal
payments will reduce the shareholder's investment and
ultimately may exhaust it. Withdrawal payments should
not be considered as income from investment in the fund.
Furthermore, as it generally would not be advantageous
to a shareholder to make additional investments in the
fund at the same time he or she is participating in the
Withdrawal Plan, purchases by such shareholders in
amounts of less than $5,000 ordinarily will not be
permitted.
Shareholders who wish to participate in the
Withdrawal Plan and who hold their shares in certificate
form must deposit their share certificates with the sub-
transfer agent as agent for Withdrawal Plan members. All
dividends and distributions on shares in the Withdrawal
Plan are reinvested automatically at net asset value in
additional shares of the fund. A shareholder who
purchases shares directly through the sub-transfer agent
may continue to do so and applications for participation
in the Withdrawal Plan must be received by the sub-
transfer agent no later than the eighth day of the
month to be eligible for participation beginning with
that month's withdrawal. For additional information,
shareholders should contact a Salomon Smith Barney
Financial Consultant or their Financial Consultant, the
Introducing Broker or dealer in the selling group.
VALUATION OF SHARES
The prospectus states that the net asset value of
the fund's classes of shares will be determined on any
date that the New York Stock Exchange ("NYSE") is open.
The NYSE is closed on the following holidays: New
Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving and Christmas.
Securities listed on a national securities
exchange will be valued on the basis of the last sale on
the date on which the valuation is made or, in the
absence of sales, at the mean between the closing bid
and asked prices. Over-the-counter securities will be
valued on the basis of the bid price at the close of
business on each day, or, if market quotations for those
securities are not readily available, at fair value, as
determined in good faith by the fund's Board of
Directors. Short-term obligations with maturities of 60
days or less are valued at amortized cost, which
constitutes fair value as determined by the fund's Board
of Directors. Amortized cost involves valuing an
instrument at its original cost to the fund and
thereafter assuming a constant amortization to maturity
of any discount or premium, regardless of the effect of
fluctuating interest rates on the market value of the
instrument. All other securities and other assets of the
fund will be valued at fair value as determined in good
faith by the fund's Board of Directors.
EXCHANGE PRIVILEGE
Additional Information Regarding the Exchange
Privilege. Although the exchange privilege is an
important benefit, excessive exchange transactions can
be detrimental to either fund's performance and its
shareholders. The manager may determine that a pattern
of frequent exchanges is excessive and contrary to the
best interests of the fund's other shareholders. In
this event, each fund may, at its discretion, decide to
limit additional purchases and/or exchanges by a
shareholder. Upon such a determination, the fund will
provide notice in writing or by telephone to the
shareholder at least 15 days prior to suspending the
exchange privilege and during the 15 day period the
shareholder will be required to (a) redeem his or her
shares in the fund or (b) remain invested in the fund or
exchange into any of the funds of the Smith Barney
Mutual Funds ordinarily available, which position the
shareholder would be expected to maintain for a
significant period of time. All relevant factors will
be considered in determining what constitutes an abusive
pattern of exchanges.
Additional Information Regarding Telephone
Redemption and Exchange Program. Neither the fund nor
its agents will be liable for following instructions
communicated by telephone that are reasonably believed
to be genuine. The fund and its agents will employ
procedures designed to verify the identity of the caller
and legitimacy of instructions (for example, a
shareholder's name and account number will be required
and phone calls may be recorded). The fund reserves the
right to suspend, modify or discontinue the telephone
redemption and exchange program or to impose a charge
for this service at any time following at least seven
(7) days' prior notice to shareholders.
PERFORMANCE DATA
From time to time, the fund may quote total
return of a Class in advertisements or in reports and
other communications to shareholders. The fund may
include comparative performance information in
advertising or marketing the fund's shares. Such
performance information may include data from the
following industry and financial publications: Barrons',
Business Week, CDA Investment Technologies, Inc.,
Changing Times, Forbes, Fortune, Institutional Investor,
Investors Daily, Money, Morningstar Mutual fund Values,
The New York Times, USA Today and The Wall Street
Journal. To the extent any advertisement or sales
literature of the fund describes the expenses or
performance of any Class it will also disclose such
information for the other Classes.
Average Annual Total Return
"Average annual total return" figures are
computed according to a formula prescribed by the SEC.
The formula can be expressed as follows:
P(1 + T)n = ERV
Where: P = a hypothetical initial payment
of $1,000.
T = average annual total return.
n = number of years.
ERV = Ending Redeemable Value of a
hypothetical $1,000 investment
made at the beginning of the 1-,
5- or 10-year period at the end
of the 1-, 5- or 10-year period
(or fractional portion thereof),
assuming reinvestment of all
dividends and distributions.
The ERV assumes complete redemption of the
hypothetical investment at the end of the measuring
period. A fund's net investment income changes in
response to fluctuations in interest rates and the
expenses of the fund.
Average Annual Total Return
Class of Shares
1-Year
5-Year
10-Year
Life of
fund
Inception
date
Class A1
30.31%
16.90%
13.83%
14.24%
11/12/81
Class B2
31.00%
17.10%
N/A
16.28%
11/6/92
Class L3
33.66%
17.01%
N/A
14.91%
08/10/93
Class Y4
37.57%
N/A
N/A
17.74%
10/13/95
1 The average annual total return figure assumes that
the maximum 5.00% sales charge has been deducted from
the investment at the time of purchase. If no sales
charge had not been deducted, the average annual
total return for Class A shares for the same periods
would have been 37.17%, 18.10%,14.42% and 14.57%,
respectively.
2 The average annual total return figure assumes that
the maximum applicable Deferred Sales Charge has been
deducted from the investment at the time of
redemption. If no Deferred Sales Charge had not been
deducted, the average annual total return for Class
B shares for the same periods would have been 36.00%,
17.21% and 16.28%, respectively.
3 The average annual total return figure assumes that
the maximum applicable Deferred Sales Charge has been
deducted from the investment at the time of
redemption. If no Deferred Sales Charge had not been
deducted, the average annual total return for Class
L shares for the same period would have been 36.00%,
17.24% and 15.09%, respectively.
4 Class Y shares do not incur sales charges nor
Deferred Sales Charges. 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 of Class Y
shares.
Aggregate Total Return
"Aggregate total return" figures represent the
cumulative change in the value of an investment in the
Class for the specified period and are computed by the
following formula:
ERV - P
P
Where: P = a hypothetical initial payment
of $10,000
ERV = Ending Redeemable Value of a
hypothetical $10,000 investment
made at the beginning of a 1-,
5- or 10-year period at the end
of the 1-, 5- or 10-year period
(or fractional portion
thereof), assuming reinvestment
of all dividends and
distributions.
The ERV assumes complete redemption of the
hypothetical investment at the end of the measuring
period.
Aggregate Total Return
Class of Shares
1-Year
5-Year
10-
Year
Life of
fund
Inceptio
n
date
Class A1
30.31%
118.27%
265.2%
983.41%
11/12/81
Class B2
31.00%
120.2%
N/A
183.11%
11/6/92
Class L3
33.66%
119.36%
N/A
134.83%
08/10/93
Class Y4
37.57%
N/A
N/A%
82.03%
10/13/95
1 The average annual total return figure assumes that
the maximum 5.00% sales charge has been deducted from
the investment at the time of purchase. If no sales
charge had not been deducted, the average annual
total return for Class A shares for the same period
would have been 37.17%, 129.71%, 284.61% and
1,039.75%, respectively.
2 The average annual total return figure assumes that
the maximum applicable Deferred Sales Charge has been
deducted from the investment at the time of
redemption. If the no Deferred Sales Charge had not
been deducted, the average annual total return for
Class B shares for the same period would have been
36.00%, 121.20% and 183.11%, respectively.
3 The average annual total return figure assumes that
the maximum applicable Deferred Sales Charge has been
deducted from the investment at the time of
redemption. If no Deferred Sales Charge had not been
deducted, the average annual total return for Class
L shares for the same period would have been 36.00%,
121.51% and 137.13%, respectively.
4 Class Y shares do not incur sales charges nor
Deferred Sales Charges. 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 of Class Y
shares.
Performance will vary from time to time depending
upon market conditions, the composition of the fund's
portfolio, operating expenses and the expenses
exclusively attributable to the Class. Consequently, any
given performance quotation should not be considered
representative of the Class' performance for any
specified period in the future. Because performance will
vary, it may not provide a basis for comparing an
investment in the Class with certain bank deposits or
other investments that pay a fixed yield for a stated
period of time. Investors comparing the Class'
performance with that of other mutual funds should give
consideration to the quality and maturity of the
respective investment companies' portfolio securities.
It is important to note that the total return
figures set forth above are based on historical
earnings and are not intended to indicate future
performance. Each Class' net investment income
changes in response to fluctuations in interest rates
and expenses of the fund.
TAXES
The following is a summary of selected Federal
income tax considerations that may affect the fund and
its shareholders. The summary is not intended as a
substitute for individual tax advice and investors are
urged to consult their own tax advisors as to the tax
consequences of an investment in the fund.
The fund has qualified and intends to continue to
qualify each year as a regulated investment company
under the Code. Provided the fund (a) is a regulated
investment company and (b) distributes at least 90% of
its net investment income (including, for this purpose,
net realized short-term capital gains), the fund will
not be liable for Federal income taxes to the extent its
net investment income and its net realized long- and
short-term capital gains, if any, are distributed to its
shareholders. Although the fund expects to be relieved
of all or substantially all Federal, state, and local
income or franchise taxes, depending upon the extent of
its activities in states and localities in which its
offices are maintained, in which its agents or
independent contractors are located, or in which it is
otherwise deemed to be conducting business, that portion
of the fund's income which is treated as earned in any
such state or locality could be subject to state and
local tax. Any such taxes paid by the fund would reduce
the amount of income and gain available for distribution
to shareholders. All of a shareholder's dividends and
distributions payable by the fund will be reinvested
automatically in additional shares of the same Class of
the fund at net asset value, unless the shareholder
elects to receive dividends and distributions in cash.
Gain or loss on the sale of a security by the
fund generally will be long-term capital gain or loss if
the fund has held the securities for more than one year.
Gain or loss on the sale of securities held for not more
than one year will be short-term. If the fund acquires
a debt security at a substantial discount, a portion of
any gain upon the sale or redemption will be taxed as
ordinary income, rather than capital gain to the extent
it reflects accrued market discount.
Dividends of net investment income and
distributions of net realized short-term capital gains
will be taxable to shareholders as ordinary income for
Federal income tax purposes, whether received in cash or
reinvested in additional shares. Dividends received by
corporate shareholders will qualify for the dividends-
received deduction only to the extent that the fund
designates the amount distributed as a dividend and the
amount so designated does not exceed the aggregate
amount of dividends received by the fund from domestic
corporations for the taxable year. The Federal
dividends-received deduction for corporate shareholders
may be further reduced or disallowed if the shares with
respect to which dividends are received are treated as
debt-financed or are deemed to have been held for less
than 46 days.
Foreign countries may impose withholding and
other taxes on dividends and interest paid to the fund
with respect to investments in foreign securities.
However, certain foreign countries have entered into tax
conventions with the United States to reduce or
eliminate such taxes. Distributions of long-term
capital gains will be taxable to shareholders as such,
whether paid in cash or reinvested in additional shares
and regardless of the length of time that the
shareholder has held his or her interest in the fund. If
a shareholder receives a distribution taxable as long-
term capital gain with respect to his or her investment
in the fund and redeems or exchanges the shares before
he or she has held them for more than six months, any
loss on the redemption or exchange that is less than or
equal to the amount of the distribution will be treated
as a long-term capital loss.
If a shareholder (a) incurs a sales charge in
acquiring or redeeming shares of the fund, and (b)
disposes of those shares and acquires within 90 days
after the original acquisition shares in a mutual fund
for which the otherwise applicable sales charge is
reduced by reason of a reinvestment right (i.e., an
exchange privilege), the original sales charge increases
the shareholder's tax basis in the original shares only
to the extent the otherwise applicable sales charge for
the second acquisition is not reduced. The portion of
the original sales charge that does not increase the
shareholder's tax basis in the original shares would be
treated as incurred with respect to the second
acquisition and, as a general rule, would increase the
shareholder's tax basis in the newly acquired shares.
Furthermore, the same rule also applies to a disposition
of the newly acquired shares made within 90 days of the
second acquisition. This provision prevents a
shareholder from immediately deducting the sales charge
by shifting his or her investment in a family of mutual
funds.
Investors considering buying shares of the fund
just prior to a record date for a taxable dividend or
capital gain distribution should be aware that,
regardless of whether the price of the fund shares to be
purchased reflects the amount of the forthcoming
dividend or distribution payment, any such payment will
be a taxable dividend or distribution payment.
If a shareholder fails to furnish a correct
taxpayer identification number, fails to report his or
her dividend or interest income in full, or fails to
certify that he or she has provided a correct taxpayer
identification number, and that he or she is not subject
to such withholding, the shareholder may be subject to
a 31% "backup withholding" tax with respect to (a) any
taxable dividends and distributions and (b) any proceeds
of any redemption of fund shares. An individual's
taxpayer identification number is his or her social
security number. The 31% backup withholding tax is not
an additional tax and may be credited against a
shareholder's regular Federal income tax liability.
Options Transactions. The tax consequences of
options transactions entered into by the fund will vary
depending on the nature of the underlying security and
whether the "straddle" rules, discussed separately
below, apply to the transaction. When the fund writes a
call or put option on an equity or debt security, it
will receive a premium that will, subject to the
"section 1256 contract" and straddle rules discussed
below, be treated as follows for tax purposes. If the
option expires unexercised, or if the fund enters into
a closing purchase transaction, the fund will realize a
gain (or loss if the cost of the closing purchase
transaction exceeds the amount of the premium) without
regard to any unrealized gain or loss on the underlying
security. Any such gain or loss will be short-term
capital gain or loss, except that any loss on a
"qualified" covered call option not treated as part of
a straddle may be treated as long-term capital loss. If
a call option written by the fund is exercised, the fund
will recognize a capital gain or loss from the sale of
the underlying security, and will treat the premium as
additional sales proceeds. Whether the gain or loss will
be long-term or short-term will depend on the holding
period of the underlying security. If a put option
written by the fund is exercised, the amount of the
premium will reduce the tax basis of the security the
fund then purchases.
The Code imposes a special "mark-to-market"
system for taxing section 1256 contracts which include
options on nonconvertible debt securities (including
U.S. government securities). In general, gain or loss
with respect to section 1256 contracts will be taken
into account for tax purposes when actually realized (by
a closing transaction, by exercise, by taking delivery
or by other termination). In addition, any section 1256
contracts held at the end of a taxable year will be
treated as sold at their year-end fair market value
(that is, marked-to-market), and the resulting gain or
loss will be recognized for tax purposes. Provided
section 1256 contracts are held as capital assets and
are not part of a straddle, both the realized and
unrealized year-end gain or loss from these investment
positions (including premiums on options that expire
unexercised) will be treated as 60% long-term and 40%
short-term capital gain or loss, regardless of the
period of time particular positions are actually held by
the fund.
Straddles. The Code contains rules applicable to
"straddles," that is, "offsetting positions in actively
traded personal property." Such personal property
includes section 1256 contracts or other investment
contracts. Where applicable, the straddle rules
generally override the other provisions of the Code. In
general, investment positions will be offsetting if
there is a substantial diminution in the risk of loss
from holding one position by reason of holding one or
more other positions (although certain covered call
options would not be treated as part of a straddle). The
fund is authorized to enter into covered call and
covered put positions. Depending on what other
investments are held by the fund, at the time it enters
into one of the above transactions, the fund may create
a straddle for purposes of the Code.
If two (or more) positions constitute a straddle,
recognition of a realized loss from one position
(including a marked-to-market loss) must be deferred to
the extent of unrecognized gain in an offsetting
position. Also, long-term capital gain may be
recharacterized as short-term capital gain, or short-
term capital loss as long-term capital loss.
Furthermore, interest and other carrying charges
allocable to personal property that is part of a
straddle must be capitalized.
If the fund chooses to identify a particular
offsetting position as being one component of a
straddle, a realized loss on any component of the
straddle will be recognized no earlier than upon the
liquidation of all of the components of the straddle.
Special rules apply to "mixed" straddles (that is,
straddles consisting of a section 1256 contract and an
offsetting position that is not a section 1256
contract). If the fund makes certain elections, the
section 1256 contract components of such mixed straddles
will not be subject to the 60%/40% mark-to-market
rules. If any such election is made, the amount, the
nature (as long- or short-term) and the timing of the
recognition of the fund's gains or losses from the
affected straddle positions will be determined under
rules that will vary according to the type of election
made.
Wash Sales. "Wash sale" rules will apply to
prevent the recognition of loss with respect to a
position where an identical or substantially identical
position is or has been acquired within a prescribed
period.
The foregoing is only a summary of certain
Federal tax considerations generally affecting the fund
and its shareholders and is not intended as a substitute
for careful tax planning. Shareholders are urged to
consult their tax advisors with specific reference to
their own tax situations, including their state and
local tax liabilities.
ADDITIONAL INFORMATION
The fund was originally incorporated under the
laws of the State of Washington on March 17, 1981,
under the name Foster & Marshall Growth Fund, Inc. On
May 22, 1984, December 18, 1987, November 21, 1989,
August 12, 1992, August 17, 1993 and October 14, 1994,
the fund changed its name to Shearson Fundamental Value
Fund Inc., Shearson Lehman Fundamental Value Fund Inc.,
SLH Fundamental Value Fund Inc., Shearson Lehman
Brothers Fundamental Value Fund Inc., Smith Barney
Shearson Fundamental Value Fund Inc., and Smith Barney
Fundamental Value fund Inc. Without changing its name,
the fund was reincorporated as a Maryland corporation on
May 24, 1995.
The fund currently offers shares of common stock
classified into four Classes, A, B, L and Y. Each
Class of shares represents an identical pro rata
interest in the Fund's investment portfolio. As a
result, the Classes have the same rights, privileges
and preferences, except with respect to: (a) the
designation of each Class; (b) the effect of the
respective sales charges, if any, for each Class; (c)
the distribution and/or service fees borne by each
class; (d) the expenses allocable exclusively to each
Class; (e) voting rights on matters exclusively
affecting a single Class; (f) the exchange privilege
of each Class; and (g) the conversion feature of the
Class B shares. The Board of Directors does not
anticipate that there will be any conflicts among the
interests of the holders of the different share
Classes of the fund. The Directors, on an ongoing
basis, will consider whether any such conflict exists
and, if so, take appropriate action.
The fund is not required to hold annual
meetings, however the Directors will call a meeting
for any purpose upon written request of shareholders
holding at least 10% of the fund's outstanding shares
and the fund will assist shareholders in calling such
a meeting as required by the 1940 Act. When matters
are submitted for shareholder vote, shareholders of
each Class will have one vote for each full share
owned and proportionate, fractional votes for
fractional shares held.
The fund sends its shareholders a semi-annual
report and an audited annual report, which include
listings of investment securities held by the fund at
the end of the reporting period. In an effort to
reduce the fund's printing and mailing costs, the fund
plans to consolidate the mailing of its semi-annual
and annual reports by household. This consolidation
means that a household having multiple accounts with
the identical address of record will receive a single
copy of each report. Any shareholder who does not
want this consolidation to apply to his or her account
should contact his or her Salomon Smith Barney
Financial Consultant or the Transfer Agent.
PNC Bank, National Association, located at 17th
and Chestnut Streets, Philadelphia, Pennsylvania, 19103,
serves as the custodian of the fund. Under its agreement
with the fund, PNC holds the fund's portfolio securities
and keeps all necessary accounts and records. For its
services, PNC receives a monthly fee based upon the
month-end market value of securities held in custody and
also receives securities transaction charges. The assets
of the fund are held under bank custodianship in
compliance with the 1940 Act.
Smith Barney Private Trust Company, located at 388
Greenwich Street, New York, NY 10013 serves as the
Transfer Agent and shareholder services agent of the
fund. PFPC Global Fund Services, located at P.O. Box
9699, Providence, RI 02940-9699, serves as the fund's
sub-transfer agent to render certain shareholder
record keeping and accounting services functions.
FINANCIAL STATEMENTS
The fund's Annual Report for the fiscal year ended
September 30, 1999 is incorporated herein by reference
in its entirety. The Annual Report was filed on November
30, 1999, Accession Number 91155-99-758.
PART C
Item 23. Exhibits
All references are to the Registrant's registration statement
on Form N-1A as filed with the Securities and Exchange Commission
("SEC"), File Nos. 2-71469 and 811-3158 (the "Registration Statement").
(a)(1) Registrant's Articles of Incorporation dated May 13, 1994 are
incorporated by reference to post-effective amendment no. 27 to the
Registration Statement as filed with the SEC on May 26, 1995
("Post-Effective Amendment No. 27").
(a)(2) Registrant's Articles of Amendment dated May 24, 1995 are
incorporated by reference to post-effective amendment no. 28 to the
Registration Statement as filed with the SEC on February 1, 1996
("Post-Effective Amendment No. 28").
(a)(3) Registrant's Articles of Amendment dated June 11, 1998 are
incorporated by reference to post-effective amendment no. 31 to the
Registration Statement as filed with the SEC on November 24, 1998
("Post-Effective Amendment No. 31").
(b) Registrant's By-Laws are incorporated by reference
to Post-Effective Amendment No. 27.
(c)(1) Registrant's form of stock certificate relating to Class A
shares are incorporated by reference to Post-Effective Amendment No. 27.
(c)(2) Registrant's form of stock certificate relating to Class B shares
are incorporated by reference to Post-Effective Amendment No. 27.
(c)(3) Registrant's form of stock certificate relating to Class C shares
are incorporated by reference to Post-Effective Amendment No. 27.
(c)(4) Registrant's form of stock certificate relating to Class Y shares
are incorporated by reference to Post-Effective Amendment No. 27.
(d) Form of Investment Advisory Agreement with Smith Barney
Mutual Funds Management Inc. (currently, SSB Citi Fund Management LLC)
is incorporated by reference to Post-Effective Amendment No. 27.
(e)(1) Form of Distribution Agreement between the Registrant
and Smith Barney Inc. is incorporated by reference to Post-Effective
Amendment No. 27.
(e)(2) Distribution Agreement between the Registrant and
CFBDS, Inc. is incorporated by reference to Post-Effective
Amendment No. 31.
(f) Inapplicable.
(g) Custodian Agreement with PNC Bank, National
Association to is incorporated by reference to Post-Effective Amendment
No. 27.
(h)(1) Form of Transfer Agency Agreement between the Registrant and The
Transfer Agent is incorporated by reference to Post-Effective Amendment No.
28.
(h)(2) Form of Consent to Assignment between the Registrant
and The Shareholder Services Group, Inc. is incorporated by reference
to Post-Effective Amendment No. 27.
(h)(3) Form of Administration Agreement between the Fund and
Smith Barney Mutual Funds Management Inc. is incorporated by
reference to Post-Effective Amendment No. 27.
(i) Opinion of Maryland Counsel is incorporated by reference to Post-
Effective Amendment No. 27.
(j) Consent of Independent Accountants is filed herein.
(k) Inapplicable.
(l) Inapplicable.
(14) Prototype Self-Employed Retirement Plan is incorporated by
reference to post-effective amendment no. 10 to the Registration Statement
as filed with the SEC on November 29, 1987.
(m)(1) Services and Distribution Plan between the Registrant and
Smith Barney Inc. is incorporated by reference to Post-Effective
Amendment No. 27.
(m)(2) Amended and Restated Shareholder Services and Distribution Plan
pursuant to Rule 12b-1 is incorporated by reference to Post-Effective
Amendment No. 31.
(n) Financial Data Schedule is filed herein.
(o)(1) Form of Rule 18f-3(d) Multiple Class Plan of the Registrant is
incorporated by reference to Post Effective Amendment No. 28.
(o)(2) Amended Rule 18f-3(d) Multiple Class Plan of the Registrant is
incorporated by reference to Post-Effective
Amendment No. 31.
Item 24. Persons Controlled by or Under Common Control
with Registrant
Not applicable.
Item 25. Indemnification
The response to this item is incorporated by reference to Post-Effective
Amendment No. 5 to the Registration Statement as filed with the SEC.
Item 26(a). Business and Other Connections of Investment Adviser
Investment Adviser - SSB Citi Fund Management LLC ("SSB Citi")
(formerly known as Mutual Management Corp. Smith Barney Mutual Funds
Management Inc. and Smith, Barney Advisers, Inc.) was incorporated in December
1968 under the laws of the State of Delaware. SSB Citi is a wholly owned
subsidiary of Salomon Smith Barney Holdings Inc. ("Holdings"), which in turn is
a wholly owned subsidiary of Citigroup Inc. (formerly known as Travelers Group
Inc.). SSB Citi is registered as an investment
adviser under the Investment Advisers Act of 1940 (the "Advisers Act")
and has, through its predecessors, been in the investment counseling
business since 1968. The list required by this Item 26 of officers and
directors of SSB Citi together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by such
officers and directors during the past two fiscal years, is incorporated by
reference to Schedules A and D of FORM ADV filed by SSB Citi pursuant to the
Advisers Act (SEC File No. 801-8314).
Item 27. Principal Underwriters
(a) CFBDS, Inc. the Registrant's Distributor, is also
the distributor for
CitiFundsSM International Growth & Income Portfolio,
CitiFundsSM International Equity Portfolio, CitiFundsSM Large Cap
Growth
Portfolio, CitiFundsSM Intermediate Income Portfolio,
CitiFundsSM Short-Term U.S. Government Income Portfolio,
CitiFundsSM Emerging Asian Markets Equity Portfolio,
CitiFundsSM U.S. Treasury Reserves, CitiFundsSM Cash Reserves,
CitiFundsSM Premium U.S. Treasury Reserves,
CitiFundsSM Premium Liquid Reserves, CitiFundsSM Institutional U.S.
Treasury Reserves, CitiFundsSM Institutional Liquid Reserves,
SM Institutional Cash Reserves, CitiFundsSM Tax Free Reserves,
CitiFundsSM Institutional Tax Free Reserves,
CitiFundsSM California Tax Free Reserves,
CitiFundsSM Connecticut Tax Free Reserves,
CitiFundsSM New York Tax Free Reserves, CitiFundsSM Balanced Portfolio,
CitiFundsSM Small Cap Value Portfolio, CitiFundsSM Growth & Income
Portfolio,
CitiFundsSM Small Cap Growth Portfolio, CitiFundsSM National
Tax Free Income Portfolio, CitiFundsSM New York Tax Free Income
Portfolio,
CitiSelect VIP Folio 200, Citiselect VIP Folio 300,
CitiSelect VIP Folio 400, CitiSelect VIP Folio 500,
CitiFundsSM Small Cap Growth VIP Portfolio, CitiSelect Folio 200,
CitiSelect Folio 300, CitiSelect Folio 400, and CitiSelect Folio
500.
CFBDS is also the placement agent for Large Cap Value Portfolio,
International Portfolio, Foreign Bond Portfolio,
Intermediate Income Portfolio, Short-Term Portfolio,
Growth & Income Portfolio, Large Cap Growth Portfolio,
Small Cap Growth Portfolio, International Equity Portfolio,
Balanced Portfolio, Government Income Portfolio, Emerging
Asian Markets Equity Portfolio, Tax Free Reserves Portfolio,
Cash Reserves Portfolio and U.S. Treasury Reserves Portfolio.
CFBDS, Inc. is also the distributor for the following
Smith Barney Mutual Fund registrants:
Concert Investment Series
Consulting Group Capital Markets Funds
Greenwich Street Series Fund
Smith Barney Adjustable Rate Government Income Fund
Smith Barney Aggressive Growth Fund Inc.
Smith Barney Appreciation Fund Inc.
Smith Barney Arizona Municipals Fund Inc.
Smith Barney California Municipals Fund Inc.
Smith Barney Concert Allocation Series Inc.
Smith Barney Equity Funds
Smith Barney Funds, Inc.
Smith Barney Income Funds
Smith Barney Institutional Cash Management Fund, Inc.
Smith Barney Investment Trust
Smith Barney Investment Funds Inc.
Smith Barney Managed Governments Fund Inc.
Smith Barney Managed Municipals Fund Inc.
Smith Barney Massachusetts Municipals Fund
Smith Barney Money Funds, Inc.
Smith Barney Muni Funds
Smith Barney Municipal Money Market Fund, Inc.
Smith Barney Natural Resources Fund Inc.
Smith Barney New Jersey Municipals Fund Inc.
Smith Barney Oregon Municipals Fund Inc.
Smith Barney Principal Return Fund
Smith Barney Small Cap Blend Fund, Inc.
Smith Barney Telecommunications Trust
Smith Barney Variable Account Funds
Smith Barney World Funds, Inc.
Travelers Series Fund Inc.
And various series of unit investment trusts.
CFBDS, Inc. is also the distributor for the following
Salomon Brothers funds;
Salomon Brothers Opportunity Fund Inc
Salomon Brothers Investors Fund Inc
Salomon Brothers Capital Fund Inc
Salomon Brothers Series Funds Inc
Salomon Brothers Institutional Series Funds Inc
Salomon Brothers Variable Series Funds Inc
The information required by this Item 27 with respect
to each director, officer and partner of CFBDS, Inc.
is incorporated by reference to Schedule A of Form BD
filed by CFBDS, Inc. pursuant to the Securities
Exchange Act of 1934 (SEC File No. 8-32417).
Item 28. Location of Accounts and Records
(1) With respect to the Registrant,
Investment Adviser and Administrator:
c/o Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
(2) With respect to the Registrant's Custodian:
PNC Bank, National Association
17th and Chestnut Streets
Philadelphia, Pennsylvania
(3) With respect to the Registrant's Transfer Agent:
Smith Barney Private Trust Company
388 Greenwich Street
New York, New York 10013
(4) With respect to the Registrant's Sub-Transfer Agent:
PFPC Global Fund Services
Exchange Place
Boston, Massachusetts 02109
Item 29. Management Services
Not applicable.
Item 30. Undertakings
Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant certifies that it meets all
the requirements for effectiveness of this Registration Statement
pursuant to Rule 485(b) under the 1933 Act and the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, this Post-Effective Amendment, and where applicable,
the true and lawful attorney-in-fact,
thereto duly authorized, in the City of New York
and State of New York, on the 28th day of January 2000.
SMITH BARNEY FUNDAMENTAL VALUE FUND INC.
Registrant
By: /s/ Heath B. McLendon
Name: Heath B. McLendon
Title: Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the date indicated.
Signature: Title: Date:
/s/Heath B. McLendon Chairman of the Board 1/28/00
Heath B. McLendon (Chief Executive Officer)
/s/Lewis E. Daidone Senior Vice President 1/28/00
Lewis E. Daidone and Treasurer
(Chief Financial and
Accounting Officer)
/s/Lloyd J. Andrews* Director 1/28/00
Lloyd J. Andrews
/s/Robert M. Frayn* Director 1/28/00
Robert M. Frayn
/s/Leon P. Gardner* Director 1/28/00
Leon P. Gardner
/s/David E. Maryatt* Director 1/28/00
David E. Maryatt
/s/ Frederick O. Paulsell* Director 1/28/00
Frederick O. Paulsell
/s/Jerry A. Viscione* Director 1/28/00
Jerry A. Viscione
/s/Julie W. Weston* Director 1/28/00
Julie W. Weston
* Signed pursuant to power of attorney filed May 26, 1995, as an exhibit
to Post-Effective Amendment No. 27.
/s/ Heath B. McLendon
Heath B. McLendon
EXHIBIT INDEX
Exhibit No. Exhibit
Auditor's Consent
Financial Data Schedules
CONSENT OF INDEPENDENT AUDITORS
Smith Barney Fundamental Value Fund, Inc.:
We consent to the use in Post-Effective Amendment No. 34 to
Registration Statement No. 2-71469 of our report dated November 12, 1999,
appearing in the Annual Report to Shareholders for the
year ended September 30, 1999, which is incorporated by reference in
the Statement of Additional Information, which is included in such
Registration Statement, and to the references to us under the
captions "Financial Highlights" in the Prospectus and "Auditors"
in the Statement of Additional Information, which are also included
in such Registration Statement.
DELOITTE & TOUCHE LLP
New York, New York
January 24, 2000
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