SB
MF
SMITH BARNEY
SMALL CAP GROWTH
FUND
STYLE PURE SERIES
SEMI-ANNUAL REPORT
MARCH 31, 2000
[SBMF logo]
Smith Barney
Mutual Funds
NOT FDIC INSURED o NOT BANK GUARANTEED o MAY LOSE VALUE
<PAGE>
SSB CITI FUND MANAGEMENT LLC ("SSBC") REPRESENTS MORE THAN A CENTURY OF MANAGING
MONEY. OUR CLIENTS RANGE FROM FORTUNE 500 COMPANIES TO PRIVATE FAMILY BUSINESSES
AND INDIVIDUALS AROUND THE WORLD. WITH A TRADITION OF INTEGRITY AND HARD WORK
DATING TO OUR PRESENT COMPANY'S ORIGINS IN 1873, SSBC TODAY OFFERS
PROFESSIONALLY MANAGED SOLUTIONS FOR THE SERIOUS INVESTOR.
SMALL CAP GROWTH FUND
SMALL COMPANIES: BIG IDEAS
Small companies are agents of change. Often they are the driving force behind
innovative and lucrative ventures. From telecommunications to the Internet to
popular clothing chains, many successful small companies have been
growth-oriented or fast-growing.
The Smith Barney Small Cap Growth Fund seeks to invest in cutting-edge,
financially sound companies -- companies we believe are on track to offer
superior total return potential. More specifically, the manager of the Fund
looks for:
[GRAPHIC] COMPANIES WELL POSITIONED TO PARTICIPATE IN DYNAMIC TRENDS
Our goal is to identify small, innovative companies throughout
several industries that are participating in positive and dynamic
trends throughout several industries. We believe these companies
offer the potential for substantial long-term growth.
[GRAPHIC] FAST-GROWING COMPANIES
Investors will participate in some of the leading small-
capitalization growth stocks -- those that have exhibited
faster-than-average gains in sales and earnings with
the potential to sustain or accelerate this growth.
[GRAPHIC] ENTREPRENEURIAL MANAGEMENT
We believe that success is often a function of extraordinary
leadership. The companies we choose to own are those with
entrepreneurial, seasoned and forward-looking management.
<PAGE>
SMITH BARNEY
SMALL CAP GROWTH FUND
The SMITH BARNEY SMALL CAP GROWTH FUND ("Portfolio") seeks long-term growth of
capital by investing primarily in equity securities of high-growth companies.
These companies possess a market capitalization within the range of companies in
the Russell 2000 Growth Index ("Index") at the time of the Portfolio's
investment. As of March 31, 2000, the largest market capitalization of a company
in the Index was $10.45 billion. Equity securities include exchange-traded and
over-the-counter common stocks, preferred stocks, debt securities convertible
into equity securities and warrants and rights related to equity securities.
Please note that there can be no assurance that the Portfolio will achieve its
investment objective.
SMITH BARNEY SMALL CAP GROWTH FUND
AVERAGE ANNUAL TOTAL RETURNS
MARCH 31, 2000
WITHOUT SALES CHARGES(1)
-------------------------------------------
CLASS A CLASS B CLASS L
===============================================================
Since Inception+++ 55.63% 55.18% 55.27%
===============================================================
WITH SALES CHARGES(2)
-------------------------------------------
CLASS A CLASS B CLASS L
===============================================================
Since Inception+++ 47.85% 50.18% 52.65%
===============================================================
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to Class
B and L shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charge of 5.00% and 1.00%,
respectively; and Class B shares reflect the deduction of a 5.00% CDSC,
which applies if shares are redeemed within one year from purchase.
Thereafter, the CDSC declines by 1.00% per year until no CDSC is incurred.
Class L shares also reflect the deduction of a 1.00% CDSC which applies if
shares are redeemed within the first year of purchase. All figures
represent past performance and are not a guarantee of future results.
Investment returns and principal value will fluctuate, and redemption value
may be more or less than the original cost.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
++ Inception date for Class A, B and L shares is November 30, 1999.
FUND HIGHLIGHT
The Portfolio invests in small-cap companies that we believe to possess the most
attractive growth characteristics. In selecting individual companies for
investment, the manager usually looks for:
o High historic growth rates and high forecasted growth of sales, profits and
return on equity.
o Innovative companies at the cutting edge of positive and dynamic
demographic and economic trends, with products and services that may give
the company a competitive advantage.
o Skilled management committed to long-term growth.
NASDAQ SYMBOL
Class A SBSGX
Class B SBYBX
Class L SBSLX
WHAT'S INSIDE
A MESSAGE FROM THE CHAIRMAN.................................. 2
SHAREHOLDER LETTER........................................... 3
HISTORICAL PERFORMANCE ...................................... 5
SCHEDULE OF INVESTMENTS ..................................... 7
STATEMENT OF ASSETS AND LIABILITIES ......................... 11
STATEMENT OF OPERATIONS ..................................... 12
STATEMENT OF CHANGES IN NET ASSETS .......................... 13
NOTES TO FINANCIAL STATEMENTS ............................... 14
FINANCIAL HIGHLIGHTS ........................................ 19
--------------------------------------------------------------------------------
Smith Barney Small Cap Growth Fund 1
<PAGE>
A MESSAGE FROM THE CHAIRMAN
HEATH B. MCLENDON
Picture of
HEATH B.
MCLENDON
Chairman
The U.S. economy has continued its rate of historic growth in the new
millennium. Unemploy ment is at an all-time low as consumer confidence reaches
all-time highs. However, in recent weeks, the U.S. markets have been
characterized by record volatility, leaving many investors with no clear
indication of the future direction of the market.
At SSB Citi Asset Management, Citigroup's asset management division, we remain
firmly committed to our belief that individual company selection should continue
to be the primary focus of any investor in any market. We believe that those
companies with superior products, strong management and a sound business plan
should be well-positioned to deliver continued earnings growth in the evolving
global economy.
Placing our clients' needs first has been Citigroup's tradition for over a
century. We provide some 100 million people, businesses, governments and
institutions in over 100 countries with a broad range of financial products and
services. SSB Citi Asset Management offers you access to a broad range of
products including equities, fixed income and money markets. Our global
resources are extensive, far-reaching and powerful, with a strong presence in
the U.S., Europe, Japan, Latin America, Asia Pacific and Australia.
We invite you to explore our capabilities as a market leader in areas such as
retirement, tax and estate planning, and we encourage you to work closely with
your Salomon Smith Barney Financial Consultant to discuss the full range of
services we offer. He or she can further discuss the unique advantages of
professional investment management and how SSB Citi Asset Management can help
you develop a long-term disciplined plan to help you achieve your investment
goals.
When you invest with SSB Citi Asset Management, you can do so with the
confidence that your interests come first, your investment success is paramount,
and that the ultimate in resources is being committed to your financial future.
Thank you for investing with us.
Sincerely,
/S/ HEATH B. MCLENDON
HEATH B. MCLENDON
Chairman
April 10, 2000
--------------------------------------------------------------------------------
2 2000 Semi-Annual Report to Shareholders
<PAGE>
SHAREHOLDER LETTER
Picture of
TIMOTHY
WOODS, CFA
Vice President and
Investment Officer
We are proud to present the first semi-annual report for the Smith Barney Small
Cap Growth Fund ("Portfolio") for the period ended March 31, 2000. In this
report, we summarize the period's prevailing economic and market conditions and
outline our portfolio strategy. A detailed summary of the Portfolio's
performance can be found in the appropriate sections that follow. Any discussion
of the Portfolio's holdings is as of March 31, 2000. Please refer to pages seven
through ten for a list of the Portfolio's holdings. We hope you find this report
useful and informative.
PERFORMANCE UPDATE AND INVESTMENT STRATEGY
For the period since the Portfolio's inception, November 30, 1999, through March
31, 2000, the Portfolio's Class A, B and L shares, respectively, without sales
charges, returned 55.63%, 55.18% and 55.27%. The Portfolio's Class A, B and L
shares, with sales charges, returned 47.85%, 50.18% and 52.65%, respectively,
for the same time period. In comparison, the Russell 2000 Growth Index1 returned
28.56% for the same time period.
The Portfolio's investment strategy is to offer investors long-term capital
growth by investing in the stocks of companies with relatively small market
capitalizations. Small-cap growth stocks are typically issued by companies in
the early stages of growth. These companies tend to have rapidly rising revenue
earnings and are believed to have better growth prospects than the broader
market.
MARKET UPDATE
We utilize a bottom-up2 approach to identify companies at the cutting edge of
positive and dynamic trends that we believe should serve as catalysts to bring
select small-cap companies more success. We generally seek to target relatively
unknown and financially sound small-cap growth companies that exhibit the
potential to become much larger and more successful.
The increased volatility of the financial markets continued during the period,
in our view, is largely due to a change in monetary policy by the Federal
Reserve Board ("Fed"). Since the inception of the Portfolio, the Fed raised
interest rates by two 25-basis point increments, on February 2, 2000 and March
21, 2000, to 6.00%3, which had a somewhat negative impact on the stock market.
Investors continued to demonstrate concerns about inflationary pressures and the
pricing power of companies in a potentially inflationary marketplace. Despite
these concerns, the small-cap growth sector of the market outperformed the
overall stock market, as evidenced by the 28.56% performance of the Russell 2000
Growth Index from November 30, 1999 through March 31, 2000 versus the 0.17%
performance of the Standard & Poor's 500 Index ("S&P 500")4 for the same time
period.
In our opinion, the small-cap growth sector of the market is at the early stage
of its positive performance relative to the overall market. (Of course, no
guarantees can be given that our expectations will be met.) Many companies in
the technology, health care, biotechnology and energy sectors have demonstrated
strong sales and earnings growth in excess of 20% and, as a result, have been
stellar performers.
-----------
1 The Russell 2000 Growth Index measures the performance of those Russell
2000 companies with higher price-to-book ratios and higher forecasted
growth values. Please note that the Index is unmanaged and is not subject
to the same management and trading expenses of a mutual fund.
2 Bottom-up investing is a search for outstanding performance of individual
stocks before considering the impact of economic trends.
3 Please note that on May 16, 2000, after this letter was written, the Fed
raised interest rates 50 basis points to 6.50%.
4 The S&P 500 is a market capitalization-weighted measure of 500 widely held
common stocks
--------------------------------------------------------------------------------
Smith Barney Small Cap Growth Fund 3
<PAGE>
PORTFOLIO UPDATE
We look to participate in many of the important economic and demographic trends
shaping the global marketplace, looking to own those companies that we believe
can take advantage of these trends and generate long-term growth. The Portfolio
is overweighted in the technology and energy sectors, and underweighted in
financials relative to its benchmark. The Portfolio has maintained a neutral
weighting in the consumer sector and has identified opportunities in the retail
sector that we believe may positively benefit the Portfolio.
In the technology sectors we are focusing on four areas: semiconductors,
semiconductor equipment, communications and those companies that should benefit
from higher Internet usage. In the semiconductor industry, the Portfolio has
benefited from its holdings in Photronics and PRI Automation. In the
communications segment of the technology sector, the Portfolio is invested in
TranSwitch Corp., a company that designs, develops, markets and supports highly
integrated digital and mixed-signal semiconductor solutions for the data
communications and telecommunications markets. In addition, the Portfolio
maintains a position in Copper Mountain Networks, a supplier of DSL (Digital
Subscriber Line) technology which allows telecommunications service providers to
deliver high-speed data and voice services.
In the health care sector, we look for companies that can enhance the efficiency
of health services while reducing the associated costs of providing service,
such as Cytyc Corp., a company that manufactures and markets a sample
preparation system for medical diagnostic applications.
The energy sector, in our view, should continue to benefit from higher capital
spending in the oil service business. In this sector, the Portfolio's holdings
include: BJ Services Co., a company that provides a variety of oil-field
services to the petroleum industry and Smith International, a firm which
supplies products to the oil & gas drilling and production industry.
MARKET OUTLOOK
Because we are bottom-up investors, we tend not to forecast the general
direction of the stock market. However, in the small-cap arena, we continue to
believe that companies in the technology, energy and health care sectors should
demonstrate the strongest earnings over the near term.
Thank you for investing in the Smith Barney Small Cap Growth Fund. We look
forward to continuing to help you pursue your financial goals in the new
century.
Sincerely,
/S/ TIMOTHY WOODS
TIMOTHY WOODS, CFA
Vice President and
Investment Officer
April 10, 2000
--------------------------------------------------------------------------------
4 2000 Semi-Annual Report to Shareholders
<PAGE>
HISTORICAL PERFORMANCE -- CLASS A SHARES
<TABLE>
<CAPTION>
NET ASSET VALUE
-------------------------
BEGINNING END INCOME CAPITAL GAIN TOTAL
PERIOD ENDED OF PERIOD OF PERIOD DIVIDEND DISTRIBUTION RETURN(1)
===============================================================================================================================
<S> <C> <C> <C> <C> <C>
Inception*-- 3/31/00 $11.40 $17.72 $0.02 $0.00 55.63%+
===============================================================================================================================
HISTORICAL PERFORMANCE -- CLASS B SHARES
NET ASSET VALUE
-------------------------
BEGINNING END INCOME CAPITAL GAIN TOTAL
PERIOD ENDED OF PERIOD OF PERIOD DIVIDEND DISTRIBUTION RETURN(1)
===============================================================================================================================
Inception*-- 3/31/00 $11.40 $17.68 $0.01 $0.00 55.18%+
===============================================================================================================================
HISTORICAL PERFORMANCE -- CLASS L SHARES
NET ASSET VALUE
-------------------------
BEGINNING END INCOME CAPITAL GAIN TOTAL
PERIOD ENDED OF PERIOD OF PERIOD DIVIDEND DISTRIBUTION RETURN(1)
===============================================================================================================================
Inception*-- 3/31/00 $11.40 $17.69 $0.01 $0.00 55.27%+
===============================================================================================================================
HISTORICAL PERFORMANCE -- CLASS Y SHARES
NET ASSET VALUE
-------------------------
BEGINNING END INCOME CAPITAL GAIN TOTAL
PERIOD ENDED OF PERIOD OF PERIOD DIVIDEND DISTRIBUTION RETURN(1)
===============================================================================================================================
Inception*-- 3/31/00 $18.59 $17.72 $0.00 $0.00 (4.68)%+
===============================================================================================================================
IT IS THE FUND'S POLICY TO DISTRIBUTE DIVIDENDS AND CAPITAL GAINS, IF ANY, ANNUALLY.
AVERAGE ANNUAL TOTAL RETURNS
WITHOUT SALES CHARGES(1)
-------------------------------------------------------------------
CLASS A CLASS B CLASS L CLASS Y
===============================================================================================================================
Inception* through 3/31/00+ 55.63% 55.18% 55.27% (4.68)%
===============================================================================================================================
WITH SALES CHARGES(2)
-------------------------------------------------------------------
CLASS A CLASS B CLASS L CLASS Y
===============================================================================================================================
Inception* through 3/31/00+ 47.85% 50.18% 52.65% (4.68)%
===============================================================================================================================
</TABLE>
--------------------------------------------------------------------------------
Smith Barney Small Cap Growth Fund 5
<PAGE>
CUMULATIVE TOTAL RETURNS
WITHOUT SALES CHARGES(1)
================================================================================
Class A (Inception* through 3/31/00) 55.63%
--------------------------------------------------------------------------------
Class B (Inception* through 3/31/00) 55.18
--------------------------------------------------------------------------------
Class L (Inception* through 3/31/00) 55.27
--------------------------------------------------------------------------------
Class Y (Inception* through 3/31/00) (4.68)
================================================================================
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to Class
B and L shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charge of 5.00% and 1.00%,
respectively; Class B shares reflect the deduction of a 5.00% CDSC, which
applies if shares are redeemed within one year from purchase. Thereafter,
the CDSC declines by 1.00% per year until no CDSC is incurred. Class L
shares also reflect the deduction of a 1.00% CDSC, which applies if shares
are redeemed within the first year of purchase.
* Inception date for Class A, B and L shares is November 30, 1999. Inception
date for Class Y shares is February 23, 2000.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
--------------------------------------------------------------------------------
6 2000 Semi-Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS (UNAUDITED) MARCH 31, 2000
SHARES SECURITY VALUE
=========================================================================================================
<S> <C>
COMMON STOCK -- 93.2%
ADVERTISING -- 1.7%
15,600 Catalina Marketing Corp. $ 1,579,500
35,900 Getty Images, Inc. 1,290,156
44,200 Modem Media Poppe Tyson, Inc. 1,430,975
--------------------------------------------------------------------------------------------------------
4,300,631
--------------------------------------------------------------------------------------------------------
BIOTECHNOLOGY -- 5.6%
12,100 Abgenix, Inc. 1,671,313
11,100 Affymetrix, Inc. 1,647,656
27,800 Alkermes, Inc. 2,571,500
35,600 Cephalon, Inc. 1,335,000
34,600 CuraGen Corp. 1,617,550
5,333 Diversa Corp. 250,651
9,200 IDEC Pharmaceuticals Corp. 903,900
22,500 Invitrogen Corp. 1,306,406
40,600 Neurocrine Biosciences, Inc. 943,950
21,100 QLT PhotoTherapeutics Inc. 1,165,775
22,100 Sequenom Inc. 870,188
--------------------------------------------------------------------------------------------------------
14,283,889
--------------------------------------------------------------------------------------------------------
CASINOS AND GAMING -- 0.5%
64,100 Station Casinos, Inc. 1,398,181
--------------------------------------------------------------------------------------------------------
COMPUTER HARDWARE -- 0.5%
9,800 SanDisk Corp. 1,200,500
--------------------------------------------------------------------------------------------------------
COMPUTER SERVICES -- 2.2%
1,875 Inforte Corp. 91,875
18,000 Register.com, Inc. 1,251,000
25,400 Safeguard Scientifics, Inc. 1,785,938
16,600 Ventro Corp. 939,975
10,700 VerticalNet, Inc. 1,455,200
--------------------------------------------------------------------------------------------------------
5,523,988
--------------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 17.1%
1,350 724 Solutions Inc. 168,075
24,200 Active Software, Inc. 1,539,347
52,400 Actuate Corp. 2,819,775
47,400 Advent Software, Inc. 2,174,475
143,000 American Software, Inc., Class A Shares 2,002,000
53,900 Aspect Development, Inc. 3,469,813
66,800 Avid Technology, Inc. 1,194,050
28,300 Business Objects S.A., Sponsored ADR 2,815,850
22,800 Clarent Corp. 2,056,275
21,300 Emulex Corp. 2,324,362
12,000 HNC Software Inc. 864,750
89,900 ION Networks, Inc. 3,022,887
8,050 MatrixOne, Inc. 321,497
32,700 Mercury Interactive Corp. 2,591,475
25,100 Micromuse Inc. 3,484,194
15,800 OnDisplay, Inc. 1,305,475
13,500 Primus Knowledge Solutions, Inc. 1,161,000
--------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
Smith Barney Small Cap Growth Fund 7
<PAGE>
<CAPTION>
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED) MARCH 31, 2000
SHARES SECURITY VALUE
=========================================================================================================
<S> <C> <C>
COMPUTER SOFTWARE -- 17.1% (CONTINUED)
30,700 Project Software & Development, Inc. $ 1,734,550
34,800 TSI International Software Ltd. 2,890,575
10,700 Universal Access, Inc. 358,450
10,200 Vignette Corp. 1,634,550
3,000 webMethods, Inc. 724,125
40,100 WebTrends Corp. 2,887,200
---------------------------------------------------------------------------------------------------------
43,544,750
---------------------------------------------------------------------------------------------------------
ELECTRONIC INSTRUMENTS & CONTROLS -- 2.2%
42,000 Advanced Energy Industries, Inc. 2,142,000
13,200 Conductus, Inc. 428,175
24,950 Orbotech, Ltd. 2,120,750
10,200 Silicon Laboratories, Inc. 902,700
---------------------------------------------------------------------------------------------------------
5,593,625
---------------------------------------------------------------------------------------------------------
FIBER OPTICS -- 2.3%
6,600 Avanex Corp. 1,001,550
19,200 Harmonic Inc. 1,598,400
37,000 MRV Communications, Inc. 3,390,125
---------------------------------------------------------------------------------------------------------
5,990,075
---------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES -- 3.3%
26,000 Dain Rauscher Corp.+ 1,714,375
37,400 Eaton Vance Corp.+ 1,605,862
35,500 Metris Cos. Inc.+ 1,380,063
73,200 National Discount Broker Group, Inc. 3,614,250
---------------------------------------------------------------------------------------------------------
8,314,550
---------------------------------------------------------------------------------------------------------
INSURANCE -- 1.3%
76,700 Oxford Health Plans, Inc. 1,169,675
60,800 Trigon Healthcare, Inc. 2,173,600
---------------------------------------------------------------------------------------------------------
3,343,275
---------------------------------------------------------------------------------------------------------
MEDICAL PRODUCTS AND SUPPLIES -- 2.4%
71,500 Cytyc Corp. 3,449,875
20,200 MiniMed Inc. 2,615,900
---------------------------------------------------------------------------------------------------------
6,065,775
---------------------------------------------------------------------------------------------------------
OIL AND GAS -- 11.5%
59,200 BJ Services Co. 4,373,400
57,300 Cal Dive International, Inc. 2,907,975
44,800 Cooper Cameron Corp. 2,996,000
88,100 ENSCO International Inc.+ 3,182,612
82,900 Marine Drilling Cos., Inc. 2,274,569
53,900 Smith International, Inc. 4,177,250
47,900 Stone Energy Corp. 2,359,075
39,000 Tidewater Inc.+ 1,240,687
68,600 UTI Energy Corp. 2,589,650
51,100 Weatherford International, Inc. 3,011,706
---------------------------------------------------------------------------------------------------------
29,112,924
---------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
8 2000 Semi-Annual Report to Shareholders
<PAGE>
<CAPTION>
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED) MARCH 31, 2000
=========================================================================================================
<S> <C> <C>
SHARES SECURITY VALUE
---------------------------------------------------------------------------------------------------------
RETAIL -- 6.4%
74,400 BJ's Wholesale Club, Inc. $ 2,873,700
42,500 Linens 'n Things, Inc. 1,455,625
118,100 Pacific Sunwear of California, Inc. 4,546,850
58,100 The Talbots, Inc.+ 3,420,638
124,700 Williams-Sonoma, Inc. 3,865,700
---------------------------------------------------------------------------------------------------------
16,162,513
---------------------------------------------------------------------------------------------------------
SEMICONDUCTORS -- 19.1%
24,700 Alpha Industries, Inc. 2,346,500
24,700 Applied Micro Circuits Corp. 3,706,544
48,700 ASM International N.V. 1,412,300
53,300 ATMI, Inc. 2,545,075
57,650 Burr-Brown Corp. 3,134,719
21,300 Cree, Inc. 2,404,237
26,800 GlobeSpan, Inc. 2,731,925
29,500 hi/fn, Inc. 1,919,344
53,700 Lam Research Corp. 2,419,856
39,000 Lattice Semiconductor Corp. 2,639,812
44,500 Mattson Technology, Inc. 1,896,813
32,200 Micrel, Inc. 3,091,200
57,100 Novellus Systems, Inc. 3,204,738
94,200 Oak Technology, Inc. 1,813,350
73,000 Photronics, Inc. 2,577,812
38,800 PRI Automation, Inc. 2,371,650
12,100 Quantum Effect Devices, Inc. 963,463
49,850 TranSwitch Corp. 4,791,831
34,000 TriQuint Semiconductor, Inc. 2,499,000
---------------------------------------------------------------------------------------------------------
48,470,169
---------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS -- 0.8%
18,300 Commonwealth Telephone Enterprises, Inc. 858,956
17,100 Powertel, Inc. 1,183,106
---------------------------------------------------------------------------------------------------------
2,042,062
---------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 15.1%
61,800 Advanced Fibre Communications, Inc. 3,874,088
31,900 ANADIGICS, Inc. 2,105,400
3,750 ArrowPoint Communications, Inc. 444,316
23,000 BreezeCom Ltd. 859,625
59,800 Com21, Inc. 2,810,600
30,600 Copper Mountain Networks, Inc. 2,507,288
64,800 Digital Microwave Corp. 2,195,100
43,300 DSP Group, Inc. 2,857,800
25,100 Efficient Networks, Inc. 3,909,325
46,000 MCK Communications, Inc. 2,202,250
37,300 Natural MicroSystems Corp. 3,198,475
35,700 Orckit Communications Ltd. 2,391,900
15,200 Powerwave Technologies, Inc. 1,900,000
25,600 RSA Security Inc. 1,326,400
17,700 Turnstone Systems, Inc. 2,035,500
115,200 Westell Technologies, Inc. 3,672,000
---------------------------------------------------------------------------------------------------------
38,290,067
---------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
Smith Barney Small Cap Growth Fund 9
<PAGE>
<CAPTION>
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED) MARCH 31, 2000
<S> <C> <C>
SHARES SECURITY VALUE
=========================================================================================================
UTILITIES -- 1.2%
32,400 Calpine Corp. $ 3,045,600
---------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost-- $219,526,867) 236,682,574
=========================================================================================================
FACE
AMOUNT SECURITY VALUE
=========================================================================================================
REPURCHASE AGREEMENT -- 6.8%
$17,319,000 Goldman, Sachs & Co., 6.090% due 4/3/00; Proceeds at maturity-- $17,327,789;
(Fully collateralized by U.S. Treasury Bills, Notes and Bonds, 0.000% to 6.875% due
4/6/00 to 5/15/30; Market value-- $17,665,427) (Cost-- $17,319,000) 17,319,000
=========================================================================================================
TOTAL INVESTMENTS -- 100%
(Cost-- $236,845,867*) $254,001,574
=========================================================================================================
</TABLE>
+ Income producing security. Securities that are not denoted are non-income
producing.
* Aggregate cost for Federal income tax purposes is substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
10 2000 Semi-Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) MARCH 31, 2000
<S> <C>
ASSETS:
Investments, at value (Cost-- $236,845,867) $254,001,574
Cash 979
Interest receivable 2,930
Receivable for securities sold 6,249,720
Receivable for Fund shares sold 3,141,261
---------------------------------------------------------------------------------------------------------
TOTAL ASSETS 263,396,464
---------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 11,511,637
Management fees payable 162,502
Distribution fees payable 61,824
Accrued expenses 87,313
---------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 11,823,276
---------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $251,573,188
=========================================================================================================
NET ASSETS:
Par value of capital shares $ 14,212
Capital paid in excess of par value 240,582,166
Accumulated net investment loss (571,834)
Accumulated net realized loss from security transactions and futures contracts (5,607,063)
Net unrealized appreciation of investments 17,155,707
---------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $251,573,188
=========================================================================================================
SHARES OUTSTANDING:
Class A 2,666,987
---------------------------------------------------------------------------------------------------------
Class B 4,137,495
---------------------------------------------------------------------------------------------------------
Class L 3,194,337
---------------------------------------------------------------------------------------------------------
Class Y 4,212,953
---------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
Class A (and redemption price) $17.72
---------------------------------------------------------------------------------------------------------
Class B * $17.68
---------------------------------------------------------------------------------------------------------
Class L ** $17.69
---------------------------------------------------------------------------------------------------------
Class Y (and redemption price) $17.72
---------------------------------------------------------------------------------------------------------
MAXIMUM PUBLIC OFFERING PRICE PER SHARE:
Class A (net asset value plus 5.26% of net asset value per share) $18.65
---------------------------------------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset value per share) $17.87
=========================================================================================================
* Redemption price is NAV of Class B shares reduced by a 5.00% CDSC if shares
are redeemed within one year from purchase (See Note 2).
** Redemption price is NAV of Class L shares reduced by a 1.00% CDSC if shares
are redeemed within the first year of purchase.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
Smith Barney Small Cap Growth Fund 11
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS (UNAUDITED) FOR THE PERIOD ENDED MARCH 31, 2000(A)
<S> <C>
INVESTMENT INCOME:
Interest $ 218,852
Dividends 6,276
---------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 225,128
---------------------------------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 318,946
Distribution fees (Note 2) 285,756
Shareholder and system servicing fees 41,976
Shareholder communications 39,990
Registration fees 29,682
Audit and legal 13,432
Custody 11,415
Directors' fees 2,707
Other 3,162
---------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 747,066
---------------------------------------------------------------------------------------------------------
NET INVESTMENT LOSS (521,938)
---------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FUTURES CONTRACTS (NOTES 3 AND 8):
Realized Gain (Loss) From:
Security transactions (excluding short-term securities) (5,631,538)
Futures contracts 24,475
---------------------------------------------------------------------------------------------------------
NET REALIZED LOSS (5,607,063)
---------------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of period --
End of period 17,155,707
---------------------------------------------------------------------------------------------------------
INCREASE IN NET UNREALIZED APPRECIATION 17,155,707
---------------------------------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS AND FUTURES CONTRACTS 11,548,644
---------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS $11,026,706
=========================================================================================================
(a) For the period from November 30, 1999 (commencement of operations) to March
31, 2000.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
12 2000 Semi-Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED) FOR THE PERIOD ENDED MARCH 31, 2000(A)
<S> <C>
OPERATIONS:
Net investment loss $ (521,938)
Net realized loss (5,607,063)
Increase in net unrealized appreciation 17,155,707
---------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS 11,026,706
---------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 2):
Net investment income (49,896)
Net realized gains --
---------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (49,896)
---------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 9):
Net proceeds from sale of shares 257,791,442
Net asset value of shares issued for reinvestment of dividends 48,652
Cost of shares reacquired (17,243,716)
---------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS 240,596,378
---------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS 251,573,188
---------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period --
---------------------------------------------------------------------------------------------------------
END OF PERIOD* $251,573,188
=========================================================================================================
* Includes accumulated net investment loss of: $ (571,834)
=========================================================================================================
(a) For the period from November 30, 1999 (commencement of operations) to March
31, 2000.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
Smith Barney Small Cap Growth Fund 13
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
The Smith Barney Small Cap Growth Fund ("Portfolio"), a separate investment fund
of the Smith Barney Investment Funds Inc. ("Fund"), a Maryland Corporation, is
registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment com-pany. The Fund consists of this
Portfolio and eight other separate investment portfolios: Concert Peachtree
Growth Fund, Smith Barney Investment Grade Bond Fund, Smith Barney Contrarian
Fund, Smith Barney Government Securities Fund, Smith Barney Hansberger Global
Value Fund, Smith Barney Hansberger Global Small Cap Value Fund, Smith Barney
Premier Selections Fund and Smith Barney Small Cap Value Fund. The financial
statements and financial highlights for the other portfolios are presented in
separate shareholder reports.
The significant accounting policies consistently followed by the Portfolio are:
(a) security transactions are accounted for on trade date; (b) securities traded
on national securities markets are valued at the closing price on such markets;
securities traded in the over-the-counter market and listed securities for which
no sales prices were reported are valued at the mean between the bid and asked
price; (c) securities for which market quotations are not available will be
valued in good faith at fair value by or under the direction of the Board of
Directors; (d) short-term obligations with maturities of 60 days or less are
valued at cost plus accreted discount, or minus amortized premium, which
approximates value; (e) dividend income is recorded on ex-dividend date and
interest income is recorded on an accrual basis; (f) dividends and distributions
to shareholders are recorded on the ex-dividend date; (g) gains or losses on the
sale of securities are calculated using the specific identification method; (h)
the accounting records are maintained in U.S. dollars. All assets and
liabilities denominated in foreign currencies are translated into U.S. dollars
on the date of valuation. Purchases and sales of securities and income and
expenses are translated at the rate of exchange quoted on the respective date
that such transactions are recorded. Differences between income or expense
amounts recorded and collected or paid are adjusted when reported by the
custodian bank; (i) direct expenses are charged to each class; management fees
and general portfolio expenses are allocated on the basis of relative net
assets; (j) the Portfolio intends to comply with the applicable provisions of
the Internal Revenue Code of 1986, as amended, pertaining to regulated
investment companies and to make distributions of taxable income sufficient to
relieve it from substantially all Federal income and excise taxes; (k) the
character of income and gains distributed is determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles; and (l) estimates and assumptions are required to be made regarding
assets, liabilities and changes in net assets resulting from operations when
financial statements are prepared. Changes in the economic environment,
financial markets and any other parameters used in determining these estimates
could cause actual results to differ.
2. MANAGEMENT AGREEMENT AND OTHER TRANSACTIONS
SSB Citi Fund Management LLC ("SSBC"), a subsidiary of Salomon Smith Barney
Holdings Inc. ("SSBH"), which, in turn, is a subsidiary of Citigroup Inc.
("Citigroup"), acts as investment manager to the Fund. The Portfolio pays SSBC a
management fee calculated at an annual rate of 0.75% of the average daily net
assets. This fee is calculated daily and paid monthly.
Citi Fiduciary Trust Company ("CFTC"), another subsidiary of Citigroup, acts as
the Portfolio's transfer agent and PFPC Global Fund Services ("PFPC") is the
Portfolio's sub-transfer agent. CFTC receives fees and asset-based fees that
vary according to the account size and type of account. PFPC is responsible for
shareholder recordkeeping and financial processing
--------------------------------------------------------------------------------
14 2000 Semi-Annual Report to Shareholders
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
for all shareholder accounts and is paid by CFTC. During the period ended March
31, 2000, the Portfolio paid transfer agent fees of $34,929 to CFTC.
CFBDS, Inc. ("CFBDS") acts as the Fund's distributor. Salomon Smith Barney Inc.
("SSB"), another subsidiary of SSBH, as well as certain other broker-dealers,
continues to sell Fund shares to the public as a member of the selling group.
SSB acts as the primary broker for its portfolio agency transactions. For the
period ended March 31, 2000, SSB received total brokerage commissions of $3,069.
There are maximum initial sales charges of 5.00% and 1.00% for Class A and L
shares, respectively. There is a contingent deferred sales charge ("CDSC") of
5.00% on Class B shares, which applies if redemption occurs within one year from
purchase. This CDSC declines thereafter by 1.00% per year until no CDSC is
incurred. Class Lshares also have a 1.00% CDSC, which applies if redemption
occurs within the first year of purchase. In certain cases, Class A shares have
a 1.00% CDSC, which applies if redemption occurs within the first year of
purchase. This CDSC only applies to those purchases of Class A shares, which,
when combined with current holdings of Class A shares, equal or exceed $500,000
in the aggregate. These purchases do not incur an initial sales charge.
For the period ended March 31, 2000, CFBDS and SSB received sales charges of
approximately $503,000 and $392,000 on sales of the Portfolio's Class A and L
shares, respectively. In addition, CDSCs paid to SSB were approximately:
CLASS B CLASS L
================================================================
CDSCs $12,000 $2,000
================================================================
Pursuant to a Distribution Plan, the Portfolio pays a service fee with respect
to Class A, B and L shares calculated at the annual rate of 0.25% of the average
daily net assets for each respective class. The Portfolio also pays a
distribution fee with respect to Class B and L shares calculated at an annual
rate of 0.75% of the average daily net assets of each class.
For the period ended March 31, 2000, total Distribution Plan fees incurred by
the Portfolio were:
CLASS A CLASS B CLASS L
================================================================
Distribution Plan Fees $25,608 $151,306 $108,842
================================================================
All officers and one Director of the Fund are employees of SSB.
3. INVESTMENTS
During the period ended March 31, 2000, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================
Purchases $261,890,559
----------------------------------------------------------------
Sales 36,732,154
================================================================
At March 31, 2000, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were substantially as follows:
================================================================
Gross unrealized appreciation $32,031,995
Gross unrealized depreciation (14,876,288)
----------------------------------------------------------------
Net unrealized appreciation $17,155,707
================================================================
4. REPURCHASE AGREEMENTS
The Portfolio purchases (and its custodian takes possession of) U.S. government
securities from banks and securities dealers subject to agreements to resell the
securities to the sellers at a future date (generally, the next business day),
at an agreed-upon higher repurchase price. The Portfolio requires continual
maintenance of the market value of the collateral in amounts at least equal to
the repurchase price.
--------------------------------------------------------------------------------
Smith Barney Small Cap Growth Fund 15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
5. REVERSE REPURCHASE AGREEMENTS
The Portfolio may enter into reverse repurchase agreement transactions for
leveraging purposes. A reverse repurchase agreement involves a sale by the
Portfolio of securities that it holds with an agreement by the Portfolio to
repurchase the same securities at an agreed upon price and date. A reverse
repurchase agreement involves the risk that the market value of the securities
sold by the Portfolio may decline below the repurchase price of the securities.
The Portfolio will establish a segregated account with its custodian, in which
the Portfolio will maintain cash, U.S. government securities or other liquid
high grade debt obligations as collateral under the reverse repurchase
agreement.
During the period ended March 31, 2000, the Portfolio did not enter into any
reverse repurchase agreements.
6. OPTION CONTRACTS
Premiums paid when put or call options are purchased by the Portfolio, represent
investments, which are marked-to-market daily. When a purchased option expires,
the Portfolio will realize a loss in the amount of the premium paid. When the
Portfolio enters into a closing sales transaction, the Portfolio will realize a
gain or loss depending on whether the sales proceeds from the closing sales
transaction are greater or less than the premium paid for the option. When the
Portfolio exercises a put option, it will realize a gain or loss from the sale
of the underlying security and the proceeds from such sale will be decreased by
the premium originally paid. When the Portfolio exercises a call option, the
cost of the security which the Portfolio purchases upon exercise will be
increased by the premium originally paid.
At March 31, 2000, the Portfolio had no open purchased call or put options.
When a Portfolio writes a covered call or put option, an amount equal to the
premium received by the Portfolio is recorded as a liability, the value of which
is marked-to-market daily. When a written option expires, the Portfolio realizes
a gain equal to the amount of the premium received. When the Portfolio enters
into a closing purchase transaction, the Portfolio realizes a gain or loss
depending upon whether the cost of the closing transaction is greater or less
than the premium originally received, without regard to any unrealized gain or
loss on the underlying security, and the liability related to such option is
eliminated. When a written call option is exercised, the cost of the security
sold will be decreased by the premium originally received. When a written put
option is exercised, the amount of the premium originally received will reduce
the cost of the security which the Portfolio purchased upon exercise. When a
written index option is exercised, settlement is made in cash. The risk
associated with purchasing options is limited to the premium originally paid.
The Portfolio enters into options for hedging purposes. The risk in writing a
covered call option is that the Portfolio gives up the opportunity to
participate in any increase in the price of the underlying security beyond the
exercise price. The risk in writing a put option is that the Portfolio is
exposed to the risk of loss if the market price of the underlying security
declines.
During the period ended March 31, 2000, the Portfolio did not write any call or
put options.
7. LENDING OF PORTFOLIO SECURITIES
The Portfolio has an agreement with its custodian whereby the custodian may lend
securities owned by the Portfolio to brokers, dealers and other financial
organizations. Fees earned by the Portfolio on securities lending are recorded
as interest income. Loans of securities by the Portfolio are collateralized by
cash, U.S. government securities or high quality money market instruments that
are maintained at all times in an amount at least equal to the current market
value of the loaned securities, plus a margin which may
--------------------------------------------------------------------------------
16 2000 Semi-Annual Report to Shareholders
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
vary depending on the type of securities loaned. The custodian establishes and
maintains the collateral in a segregated account. The Portfolio maintains
exposure for the risk of any losses in the investment of amounts received as
collateral.
At March 31, 2000, the Portfolio had no securities on loan.
8. FUTURES CONTRACTS
Initial margin deposits made upon entering into futures contracts are recognized
as assets. Securities equal to the initial margin amount are segregated by
custodian in the name of the broker. Additional securities are also segregated
up to the current market value of futures contracts. During the period the
futures contract is open, changes in the value of the contract are recognized as
unrealized gains or losses by "marking-to-market" on a daily basis to reflect
the market value of the contract at the end of each day's trading. Variation
margin payments are made or received and recognized as assets due from or
liabilities due to broker, depending upon whether unrealized gains or losses are
incurred. When the contract is closed, the Portfolio records a realized gain or
loss equal to the difference between the proceeds from (or cost of) the closing
transactions and the Portfolio's basis in the contract. The Portfolio enters
into such contracts to hedge a portion of its portfolio. The Portfolio bears the
market risk that arises from changes in the value of the financial instruments
and securities indices (futures contracts) and the credit risk should a
counterparty fail to perform under such contracts.
At March 31, 2000, the Portfolio had no open futures contracts.
9. CAPITAL SHARES
At March 31, 2000, the Fund had ten billion shares of capital stock authorized
with a par value of $0.001 per share. The Portfolio has the ability to issue
multiple classes of shares. Each share of a class represents an identical
interest and has the same rights, except that each class bears certain direct
expenses, including those specifically related to the distribution of its
shares.
At March 31, 2000, total paid-in capital amounted to the following for each
class:
AMOUNTS
===============================================================
Class A $40,284,289
---------------------------------------------------------------
Class B 63,351,780
---------------------------------------------------------------
Class L 50,607,553
---------------------------------------------------------------
Class Y 86,352,756
===============================================================
--------------------------------------------------------------------------------
Smith Barney Small Cap Growth Fund 17
<PAGE>
<TABLE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Transactions in shares of each class were as follows:
<CAPTION>
PERIOD ENDED
MARCH 31, 2000
---------------------------------
SHARES AMOUNT
=============================================================================================
<S> <C> <C>
CLASS A+
Shares sold 3,289,774 $ 52,081,764
Shares issued on reinvestment 1,603 22,118
Shares reacquired (624,390) (11,819,593)
---------------------------------------------------------------------------------------------
Net Increase 2,666,987 $ 40,284,289
=============================================================================================
CLASS B+
Shares sold 4,349,978 $ 67,245,223
Shares issued on reinvestment 1,152 15,895
Shares reacquired (213,635) (3,909,338)
---------------------------------------------------------------------------------------------
Net Increase 4,137,495 $ 63,351,780
=============================================================================================
CLASS L+
Shares sold 3,277,275 $ 52,111,699
Shares issued on reinvestment 771 10,639
Shares reacquired (83,709) (1,514,785)
---------------------------------------------------------------------------------------------
Net Increase 3,194,337 $ 50,607,553
=============================================================================================
CLASS Y++
Shares sold 4,212,953 $ 86,352,756
Shares issued on reinvestment -- --
Shares reacquired -- --
---------------------------------------------------------------------------------------------
Net Increase 4,212,953 $ 86,352,756
=============================================================================================
+ For the period from November 30, 1999 (inception date) to March 31, 2000.
++ For the period from February 23, 2000 (inception date) to March 31, 2000.
</TABLE>
--------------------------------------------------------------------------------
18 2000 Semi-Annual Report to Shareholders
<PAGE>
For a share of each class of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
CLASS A(1)(2) CLASS B(1)(2) CLASS L(1)(2) CLASS Y(2)(3)
====================================================================================================================================
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.40 $11.40 $11.40 $18.59
------------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment loss (0.05) (0.09) (0.09) (0.01)
Net realized and unrealized gain (loss) 6.39 6.38 6.39 (0.86)
------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM OPERATIONS 6.34 6.29 6.30 (0.87)
------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Net investment income (0.02) (0.01) (0.01) --
------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.02) (0.01) (0.01) --
------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $17.72 $17.68 $17.69 $17.72
------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN++ 55.63% 55.18% 55.27% (4.68)%
------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000S) $47,248 $73,168 $56,493 $74,664
------------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS+:
Expenses 1.34% 2.12% 2.09% 0.94%
Net investment loss (0.80) (1.58) (1.55) (0.48)
------------------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 27% 27% 27% 27%
====================================================================================================================================
</TABLE>
(1) For the period from November 30, 1999 (inception date) to March 31, 2000
(unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) For the period from February 23, 2000 (inception date) to March 31, 2000
(unaudited).
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
--------------------------------------------------------------------------------
Smith Barney Small Cap Growth Fund 19
<PAGE>
(This page intentionally left blank.)
<PAGE>
SMITH BARNEY
SMALL CAP GROWTH FUND
DIRECTORS
Paul R. Ades
Herbert Barg
Dwight B. Crane
Frank G. Hubbard
Heath B. McLendon, Chairman
Jerome Miller
Ken Miller
OFFICERS
Heath B. McLendon
President and Chief Executive Officer
Lewis E. Daidone
Senior Vice President and Treasurer
Timothy Woods, CFA
Vice President and Investment Officer
Paul A. Brook
Controller
Christina T. Sydor
Secretary
INVESTMENT MANAGER
SSB Citi Fund Management LLC
DISTRIBUTOR
CFBDS, Inc.
CUSTODIAN
PFPC Trust Company
TRANSFER AGENT
Citi Fiduciary Trust Company
388 Greenwich Street, 22nd Floor
New York, New York 10013
SUB-TRANSFER AGENT
PFPC Global Fund Services
P.O. Box 9699
Providence, Rhode Island 02940-9699
This report is submitted for the general information of shareholders of Smith
Barney Investment Funds Inc. - Smith Barney Small Cap Growth Fund, but it may
also be used as sales literature when proceeded or accompanied by the current
Prospectus, which gives details about charges, expenses, investment objectives
and operating polices of the Portfolio. If used as sales material after June 30,
2000, this report must be accompanied by performance information for the most
recently completed calender quarter.
[Salomon Smith Barney LOGO]
--------------------------------------------------------------------------------
A member of citigroup [umbrella logo]
Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
SMITH BARNEY
SMALL CAP GROWTH FUND
388 Greenwich Street, MF-2
New York, New York 10013
WWW.SMITHBARNEY.COM/MUTUALFUNDS
FD01884 5/00
<PAGE>
[SBMF logo]
SMITH BARNEY
SMALL CAP VALUE FUND
Style Pure Series
Semi-Annual Report
March 31, 2000
[SBMF logo]
Smith Barney
Mutual Funds
NOT FDIC INSURED o NOT BANK GUARANTEED o MAY LOSE VALUE
<PAGE>
SMITH BARNEY
SMALL CAP VALUE FUND
================================================================================
The SMALL CAP VALUE FUND ("Fund") seeks long-term capital appreciation by
investing primarily in common stocks and other equity securities of smaller
capitalized U.S. companies. Smaller capitalized com panies are those companies
whose market capitalization at the time of investment is no greater than the
market capitalization of companies in the Russell 2000 Value Index. The size of
companies in the index changes with market conditions and the composition of the
index. As of December 31, 1999, the largest market capitalization of the index
was $5.74 billion.
SMITH BARNEY SMALL CAP VALUE FUND
AVERAGE ANNUAL TOTAL RETURNS
MARCH 31, 2000
WITHOUT SALES CHARGES(1)
-------------------------------------------------------------
CLASS A CLASS B CLASS L
=============================================================
Six Months+ 8.25% 7.86% 7.86%
-------------------------------------------------------------
One Year 13.30 12.53 12.53
-------------------------------------------------------------
Since Inception++ 13.54 12.74 12.74
=============================================================
WITH SALES CHARGES(2)
-------------------------------------------------------------
CLASS A CLASS B CLASS L
=============================================================
Six Months+ 2.81% 2.86% 5.80%
-------------------------------------------------------------
One Year 7.62 7.53 10.37
-------------------------------------------------------------
Since Inception++ 8.34 9.12 11.67
=============================================================
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to Class
B and L shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charge of 5.00% and 1.00%
respectively; and Class B shares reflect the deduction of a 5.00% CDSC,
which applies if shares are redeemed within one year from purchase.
Thereafter, the CDSC declines by 1.00% per year until no CDSC is incurred.
Class L shares also reflect the deduction of a 1.00% CDSC which applies if
shares are redeemed within the first year of purchase.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption value may be more or less than the original cost.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
++ Inception date for Class A, B and L shares is February 26, 1999.
FUND HIGHLIGHT
As to the Fund's sector weightings versus the Russell 2000 Value Index, we are
overweight in financials, the Index's largest sector. In our view, this sector
represents outstanding opportunities. We look to own well-capitalized franchises
located in major metropolitan areas because we think they offer greater
potential as takeover candidates and the convenience they offer customers may
make them less vulnerable to the threat of Internet banking
NASDAQ SYMBOL
Class A SBVAX
Class B SBVBX
Class L SBVLX
WHAT'S INSIDE
A MESSAGE FROM THE CHAIRMAN................................................... 1
SHAREHOLDER LETTER............................................................ 2
HISTORICAL PERFORMANCE ....................................................... 5
SMITH BARNEY SMALL CAP VALUE FUND AT A GLANCE ................................ 7
SCHEDULE OF INVESTMENTS ...................................................... 8
STATEMENT OF ASSETS AND LIABILITIES ......................................... 11
STATEMENT OF OPERATIONS ..................................................... 12
STATEMENTS OF CHANGES IN NET ASSETS ......................................... 13
NOTES TO FINANCIAL STATEMENTS ............................................... 14
FINANCIAL HIGHLIGHTS ........................................................ 18
<PAGE>
A MESSAGE FROM THE CHAIRMAN
[Picture of McLendon]
HEATH B.
MCLENDON
Chairman
The U.S. economy has continued its rate of historic growth in the new
millennium. Unemployment is at an all-time low as consumer confidence reaches
all-time highs. However, in recent weeks, the U.S. markets have been
characterized by record volatility, leaving many investors with no clear
indication of the future direction of the market.
At SSB Citi Asset Management, Citigroup's asset management division, we remain
firmly committed to our belief that individual company selection should continue
to be the primary focus of any investor in any market. We believe that those
companies with superior products, strong management and a sound business plan
should be well-positioned to deliver continued earnings growth in the evolving
global economy.
Placing our clients' needs first has been Citigroup's tradition for over a
century. We provide some 100 million people, businesses, governments and
institutions in 100 countries with a broad range of financial products and
services. SSB Citi Asset Management offers you access to a broad range of
products including equities, fixed income and money markets. Our global
resources are extensive and far-reaching, with a strong presence in the U.S.,
Europe, Japan, Latin America, Asia Pacific and Australia.
We invite you to explore our capabilities as a market leader in areas such as
retirement, tax and estate planning, and we encourage you to work closely with
your Salomon Smith Barney Financial Consultant to discuss the full range of
services we offer. He or she can further discuss the unique advantages of
professional investment management and how SSB Citi Asset Management can help
you develop a long-term disciplined plan to help you achieve your investment
goals.
When you invest with SSB Citi Asset Management, you can do so with the
confidence that your interests come first, your investment success is paramount,
and that the ultimate in resources is being committed to your financial future.
Thank you for investing with us.
Sincerely,
/s/ Heath B. McLendon
HEATH B. MCLENDON
Chairman
April 10, 2000
--------------------------------------------------------------------------------
Smith Barney Small Cap Value Fund 1
<PAGE>
SHAREHOLDER LETTER
[Picture of Hable] [Picture of Goode]
PETER J. JOHN G.
HABLE GOODE
Vice President and Vice President and
Investment Officer Investment Officer
Dear Shareholder:
We are pleased to provide the semi-annual period report for the Smith Barney
Small Cap Value Fund ("Fund") for the period ended March 31, 2000. In this
report we have summarized the period's prevailing economic and market conditions
and outlined our portfolio strategy. A detailed summary of the Fund's
performance can be found in the appropriate sections that follow. Any discussion
the Fund's holdings is as of March 31, 2000. Please refer to pages eight through
ten for a list of the Fund's holdings. We hope that you find this report to be
useful and informative.
PERFORMANCE UPDATE AND INVESTMENT STRATEGY
For the six months ended March 31, 2000, the Class A, B and L shares of the Fund
returned 8.25%, 7.86% and 7.86%, respectively, excluding the effects of sales
charges. Including the effects of sales charges, the Class A, B and L shares of
the Fund returned 2.81%, 2.86% and 5.80%, respectively, for the same period. In
comparison, the Russell 2000 Value Index1 returned 5.41% for the six-month
period ended March 31, 2000.
We believe that the pricing inefficiencies inherent in the small-cap market
often enable us to find fundamental value and significant capital appreciation
potential. Our research team focuses on small-cap stocks that sell at low prices
relative to several measures of value and where we believe that some dynamic
change in a company or an industry may enhance stock price performance. We
prefer to invest in companies that generate significant free cash flow, maintain
strong balance sheets, produce a high return on equity and where there is
significant management ownership.
MARKET UPDATE
The U.S. stock market has been marked by the extraordinary divergence in
performance between small-cap value and small-cap growth stocks. (Value
investing consists of identifying securities of companies that are believed to
be undervalued but have good longer-term business prospects. Growth investing
consists of investing in companies with historically strong and relatively
predictable earnings growth rates.) In our view, this divergence was driven
exclusively by the historic rise of technology and biotechnology stocks during
the period and as a result, the small-cap growth stock asset class dominated the
returns of the overall market.
Due to the fact that most technology stocks perform directly in line with their
projected earnings, this sector peaked in December, with one final rally in
February before beginning its decline. For this reason, as well as what we view
as unsustainable valuations of technology issues, the Fund's portfolio is
underweighted in this sector.
PORTFOLIO UPDATE
As of March 31, 2000, the Fund's portfolio was made up of 87 stocks, which
represents about 99% of the net asset value ("NAV"). We anticipate that the
number of holdings in the Fund's portfolio should stay at this level.
-----------
1 Russell 2000 Value Index measures the performance of those Russell 2000
companies with lower price-to-book ratios and lower forecasted growth values.
The index is unmanaged and is not subject to the same management and trading
expenses as a mutal fund.
--------------------------------------------------------------------------------
2 2000 Semi-Annual Report to Shareholders
<PAGE>
Turning to some investment characteristics of the Fund's portfolio as of March
31, 2000, the average capitalization of the stocks held in the Fund's portfolio
was $1.6 billion versus $944 million for the Russell 2000 Value Index. What
follows are some comparisons between the Fund and the Russell 2000 Value Index.
SMITH BARNEY
SMALL CAP RUSSELL 2000
VALUE FUND VALUE INDEX
-----------------------------------------
Average P/E ratio 17.1 23.8
Average price/cash flow 13.2 17.5
Average price/sales 3.0 3.0
Average return on equity 12.1% 7.6%
As to the Fund's sector weightings versus the Russell 2000 Value Index, we are
overweight in financial services, energy and basic materials. The Fund is
underweighted in technology and health care, especially in the area of
biotechnology.
In our view, the financial services sector, the largest sector of the Fund's
benchmark, (the Russell 2000 Value Index), represents many of the best buying
opportunities in the market. The average price of small-cap bank stocks is down
approximately 30% over the last six months, driven down by rising interest rates
and fears surrounding Y2K. In our opinion, this marks the best opportunity to
purchase bank stocks since the real estate crisis of the early 1990s. With our
bank holdings, we have generally owned well-capitalized franchises located in
major metropolitan areas because we think they offer greater potential as
takeover candidates and the convenience they offer consumers may make them less
vulnerable to the threat of Internet banking.
As of March 31, 2000, the Fund's largest bank and thrift holdings were Citi
National, Cullen/Frost Bankers and Golden State Bancorp, which have provided
solid downside protection. U.S. Trust, the Fund's largest position in this
sector, was taken over by The Charles Schwab Corp. during the period. We
anticipate that takeovers will continue, given the extraordinary valuations in
bank stocks.
The Fund's holdings in the utilities sector have also positively contributed to
its performance during the reporting period. The solid performance of this
sector was unusual because it has occurred in a period of rising interest rates,
which historically has negatively impacted the profitability of utility
companies. This move has been driven principally by investments utility
companies have made in non-utility businesses and through takeovers of several
utility companies. Several companies which have performed well during the period
include:
o Avista -- an electric and natural gas utility, up dramatically after Bill
Gates purchased 5% of the company in order to get exposure to their
Internet utility billing service and fuel-cell technology
o Idacorp -- a utility company benefited from its fuel-cell technology and
from takeover speculation
o Eastern Enterprises -- a utility company that provides barge transportation
through its subsidiaries and distributes natural gas, was recently acquired
by KeySpan Energy
In the consumer discretionary sector, the Fund's largest holdings were Pier I
Imports and Rexall Sundown. In our view, both companies have unique franchises
and strong balance sheets. The Fund's largest energy holding is in Tosco, a
refiner and marketer of petroleum products.
The Fund is currently underweighted in technology and health care. Despite the
sell-off in many technology stocks, the Fund's holdings in Cypress
Semiconductor, Geoworks and JDA Software performed very well during the period.
Additionally, the Fund's holding in disc-drive company Maxtor International
continued its stellar performance. In the health care sector, the Fund's largest
holding is in Health Management Associates, a company that provides general
health services to nonurban areas.
--------------------------------------------------------------------------------
Smith Barney Small Cap Value Fund 3
<PAGE>
MARKET OUTLOOK
All of the industry sectors represented by the Russell 2000 Value Index are
highly sensitive to the actions of the Federal Reserve Board ("Fed"). The change
in monetary policy during 1999 and early 2000 negatively impacted many stocks.
However, due to the fact that it is an election year, we are confident that Fed
chairman Alan Greenspan should complete any interest-rate hikes by the middle of
2000. Consequently, we expect that many stocks may rebound as the robust growth
of the U.S. economy begins to slow as the Fed likely adopts a neutral stance on
interest rates.
With the exception of the technology and utilities sectors, the Fund's holdings
in other sectors are presently reflecting valuations normally seen during a
recession. In our opinion, there are more buying opportunities today than at any
time since 1990, or possibly even since 1974. Looking ahead and while no
guarantees can be given, we believe that the small-cap value sector of the
market shows great promise over the long term.
Thank you for investing in the Smith Barney Small Cap Value Fund. We look
forward to continuing to help you pursue your financial goals in the new
century.
Sincerely,
/s/ Peter J. Hable /s/ John G. Goode
PETER J. HABLE JOHN G. GOODE
Vice President and Vice President and
Investment Officer Investment Officer
April 10, 2000
--------------------------------------------------------------------------------
4 2000 Semi-Annual Report to Shareholders
<PAGE>
HISTORICAL PERFORMANCE -- CLASS A SHARES
<TABLE>
<CAPTION>
NET ASSET VALUE
--------------------------
BEGINNING END INCOME CAPITAL GAIN TOTAL
PERIOD ENDED OF PERIOD OF PERIOD DIVIDEND DISTRIBUTION RETURN(1)
===================================================================================================================
<S> <C> <C> <C> <C> <C>
3/31/00 $12.10 $12.89 $0.19 $0.00 8.25%+
-------------------------------------------------------------------------------------------------------------------
Inception*-- 9/30/99 11.40 12.10 0.00 0.00 6.14+
===================================================================================================================
TOTAL $0.19 $0.00
===================================================================================================================
<CAPTION>
HISTORICAL PERFORMANCE -- CLASS B SHARES
NET ASSET VALUE
--------------------------
BEGINNING END INCOME CAPITAL GAIN TOTAL
PERIOD ENDED OF PERIOD OF PERIOD DIVIDEND DISTRIBUTION RETURN(1)
===================================================================================================================
<S> <C> <C> <C> <C> <C>
3/31/00 $12.05 $12.87 $0.12 $0.00 7.86%+
-------------------------------------------------------------------------------------------------------------------
Inception*-- 9/30/99 11.40 12.05 0.00 0.00 5.70+
===================================================================================================================
TOTAL $0.12 $0.00
===================================================================================================================
<CAPTION>
HISTORICAL PERFORMANCE -- CLASS L SHARES
NET ASSET VALUE
--------------------------
BEGINNING END INCOME CAPITAL GAIN TOTAL
PERIOD ENDED OF PERIOD OF PERIOD DIVIDEND DISTRIBUTION RETURN(1)
===================================================================================================================
<S> <C> <C> <C> <C> <C>
3/31/00 $12.05 $12.87 $0.12 $0.00 7.86%+
-------------------------------------------------------------------------------------------------------------------
Inception*-- 9/30/99 11.40 12.05 0.00 0.00 5.70+
===================================================================================================================
TOTAL $0.12 $0.00
===================================================================================================================
</TABLE>
IT IS THE FUND'S POLICY TO DISTRIBUTE DIVIDENDS AND CAPITAL GAINS, IF ANY,
ANNUALLY.
--------------------------------------------------------------------------------
Smith Barney Small Cap Value Fund 5
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
WITHOUT SALES CHARGES(1)
------------------------------------------------
CLASS A CLASS B CLASS L
<S> <C> <C> <C>
========================================================================================
Six Months Ended 3/31/00+ 8.25% 7.86% 7.86%
----------------------------------------------------------------------------------------
Year Ended 3/31/00 13.30 12.53 12.53
----------------------------------------------------------------------------------------
Inception* through 3/31/00 13.54 12.74 12.74
========================================================================================
<CAPTION>
WITH SALES CHARGES(2)
------------------------------------------------
CLASS A CLASS B CLASS L
<S> <C> <C> <C>
========================================================================================
Six Months Ended 3/31/00+ 2.81% 2.86% 5.80%
----------------------------------------------------------------------------------------
Year Ended 3/31/00 7.62 7.53 10.37
----------------------------------------------------------------------------------------
Inception* through 3/31/00 8.34 9.12 11.67
========================================================================================
<CAPTION>
CUMULATIVE TOTAL RETURNS
WITHOUT SALES CHARGES(1)
<S> <C>
========================================================================================
Class A (Inception* through 3/31/00) 14.89%
----------------------------------------------------------------------------------------
Class B (Inception* through 3/31/00) 14.01
----------------------------------------------------------------------------------------
Class L (Inception* through 3/31/00) 14.01
========================================================================================
</TABLE>
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to
Class B and L shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charge of 5.00% and 1.00%,
respectively; Class B shares reflect the deduction of a 5.00% CDSC, which
applies if shares are redeemed within one year from purchase. Thereafter,
the CDSC declines by 1.00% per year until no CDSC is incurred. Class L
shares also reflect the deduction of a 1.00% CDSC, which applies if shares
are redeemed within the first year of purchase.
* Inception date for Class A, B and L shares is February 26, 1999.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
--------------------------------------------------------------------------------
6 2000 Semi-Annual Report to Shareholders
<PAGE>
SMITH BARNEY SMALL CAP VALUE FUND AT A GLANCE (UNAUDITED)
GROWTH OF $10,000 INVESTED IN CLASS A, B AND L SHARES OF THE
SMITH BARNEY SMALL CAP VALUE FUNDS VS. RUSSELL 2000 INDEX+
--------------------------------------------------------------------------------
February 1999 -- March 2000
[Line chart]
<TABLE>
<CAPTION>
Smith Barney Small Cap Russell 2000 Smith Barney Small Cap Smith Barney Small Cap
Date Value Fund - Class A Index Value Fund - Class B Value Fund - Class L
<S> <C> <C> <C> <C>
Feb. 26, 1999 9500 10000 10000 10000
March 1999 9633 10156 9632 9926
June 1999 11092 11735 11149 11428
Sept. 1999 10083 10994 10070 10360
Dec. 1999 10229 13021 10201 10490
March 31, 2000 10915 13943 11001 11282
</TABLE>
+ The above chart represents a hypothetical illustration of $10,000 invested
in Class A, B and L shares at inception on February 26, 1999, assuming
deduction of the maximum 5.00% sales charge at the time of investment for
Class A shares, the deduction of the maximum 5.00% CDSC for Class B shares
and the deduction of the 1.00% CDSC for Class L shares at the time of
investment and reinvestment of dividends and capital gains, if any, through
March 31, 2000. The Russell 2000 Index is composed of the 2,000 smallest
companies in the Russell 3000 Index. The Russell 3000 Index is composed of
3,000 of the largest U.S. companies by market capitalization. The Index is
unmanaged and is not subject to the same management and trading expenses as
a mutual fund. An investor may not invest directly in an Index. The
performance of the Fund's other classes may be greater or less than the
Class A shares' performance indicated on this chart, depending on whether
greater or lesser sales charges and fees were incurred by shareholders
investing in other classes.
ALL FIGURES REPRESENT PAST PERFORMANCE AND ARE NOT A GUARANTEE OF FUTURE
RESULTS. Investment returns and principal value will fluctuate, and
redemption values may be more or less than the original cost. No adjustment
has been made for shareholder tax liability on dividends or capital gains.
INDUSTRY DIVERSIFICATION OF COMMON STOCK*
--------------------------------------------------------------------------------
[Bar graph]
17.1% TECHNOLOGY
16.6% FINANCIAL SERVICES
13.6% CONSUMER DISCRETIONARY
12.5% REAL ESTATE
8.1% UTILITIES
7.1% CAPITAL GOODS
6.4% ENERGY
5.5% MATERIALS AND PROCESSING
3.8% HEALTHCARE
3.3% AUTOS AND TRANSPORTATION
6.0% OTHER
* As a percentage of total common stock.
INVESTMENT BREAKDOWN**
--------------------------------------------------------------------------------
[Pie Graph]
1.1% REPURCHASE AGREEMENT
98.9% COMMON STOCK
** As a percentage of total investments.
--------------------------------------------------------------------------------
Smith Barney Small Cap Value Fund 7
<PAGE>
SCHEDULE OF INVESTMENTS (UNAUDITED) MARCH 31, 2000
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
=====================================================================================================
<S> <C> <C>
COMMON STOCK -- 98.9%
AUTOS AND TRANSPORTATION -- 3.2%
34,000 CNF Transportation Inc. $ 943,500
84,000 Kirby Corp.+ 1,659,000
130,000 Wisconsin Central Transportation Corp.+ 1,592,500
-----------------------------------------------------------------------------------------------------
4,195,000
-----------------------------------------------------------------------------------------------------
BROADCASTING -- 0.4%
37,500 Cumulus Media Inc., Class A Shares+ 539,062
-----------------------------------------------------------------------------------------------------
CAPITAL GOODS -- 7.1%
50,000 Crane Co. 1,178,125
82,500 Federal Signal Corp. 1,490,156
61,700 IDEX Corp. 1,681,325
200,000 Input/Output, Inc.+ 1,225,000
49,000 Precision Castparts Corp. 1,788,500
51,500 Roper Industries, Inc. 1,747,781
-----------------------------------------------------------------------------------------------------
9,110,887
-----------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 13.5%
152,000 Ambassadors International, Inc.+ 1,976,000
71,500 American Greetings Corp., Class A Shares 1,304,875
184,500 Buffets, Inc.+ 1,666,266
33,000 Corn Products International, Inc. 794,062
40,500 Footstar, Inc.+ 1,144,125
103,500 Interstate Bakeries Corp. 1,474,875
47,500 Lancaster Colony Corp. 1,451,719
40,000 Liz Claiborne, Inc. 1,832,500
180,000 Pier 1 Imports, Inc. 1,845,000
148,000 Rexall Sundown, Inc.+ 2,090,500
110,500 Scientific Games Holdings Corp.+ 1,823,250
-----------------------------------------------------------------------------------------------------
17,403,172
-----------------------------------------------------------------------------------------------------
ENERGY -- 6.3%
60,000 Barrett Resources Corp.+ 1,788,750
37,500 Peoples Energy Corp. 1,028,906
65,000 Tosco Corp. 1,978,438
125,000 Union Pacific Resources Group Inc. 1,812,500
120,000 Varco International, Inc.+ 1,515,000
-----------------------------------------------------------------------------------------------------
8,123,594
-----------------------------------------------------------------------------------------------------
FINANCIAL SERVICES -- 16.4%
48,000 Chittenden Corp. 1,425,000
87,000 The CIT Group, Inc., Class A Shares 1,696,500
45,000 City National Corp. 1,515,937
25,000 Countrywide Credit Industries, Inc. 681,250
75,000 Cullen/Frost Bankers, Inc. 1,982,812
48,000 FirstMerit Corp. 885,000
115,000 Golden State Bancorp Inc.+ 1,717,813
49,500 GreenPoint Financial Corp. 971,438
26,500 Investors Financial Services Corp. 1,560,188
70,000 Peoples Heritage Financial Group, Inc. 1,050,000
37,500 Radian Group Inc. 1,785,938
SEE NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
8 2000 Semi-Annual Report to Shareholders
<PAGE>
<CAPTION>
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED) MARCH 31, 2000
SHARES SECURITY VALUE
=====================================================================================================
<S> <C> <C>
FINANCIAL SERVICES -- 16.4% (CONTINUED)
55,000 Sky Financial Group, Inc. $ 893,750
52,500 Waddell & Reed Financial, Inc. 2,221,406
45,000 Webster Financial Corp. 1,035,000
35,000 Wilmington Trust Corp. 1,701,875
-----------------------------------------------------------------------------------------------------
21,123,907
-----------------------------------------------------------------------------------------------------
HEALTHCARE -- 3.8%
130,000 AmeriSource Health Corp., Class A Shares+ 1,950,000
196,000 Health Management Associates, Inc., Class A Shares+ 2,793,000
65,000 Omega Protein Corp.+ 166,563
-----------------------------------------------------------------------------------------------------
4,909,563
-----------------------------------------------------------------------------------------------------
MACHINERY -- 1.4%
134,000 AGCO Corp. 1,524,250
40,000 CTB International Corp.+ 275,000
-----------------------------------------------------------------------------------------------------
1,799,250
-----------------------------------------------------------------------------------------------------
MATERIALS AND PROCESSING -- 5.4%
61,200 Carpenter Technology Corp. 1,273,725
58,000 Cleveland-Cliffs Inc. 1,381,125
90,000 Engelhard Corp. 1,361,250
14,500 IMC Global Inc. 212,969
77,000 Lyondell Chemical Co. 1,135,750
65,000 RPM, Inc. 715,000
75,000 Wolverine Tube, Inc.+ 960,938
-----------------------------------------------------------------------------------------------------
7,040,757
-----------------------------------------------------------------------------------------------------
PAPER AND RELATED PRODUCTS -- 1.7%
105,000 Caraustar Industries, Inc. 1,483,125
36,800 Pope & Talbot, Inc. 676,200
-----------------------------------------------------------------------------------------------------
2,159,325
-----------------------------------------------------------------------------------------------------
PRODUCER DURABLES -- 2.5%
113,000 Cooper Tire & Rubber Co. 1,419,562
49,500 United Stationers Inc.+ 1,766,531
-----------------------------------------------------------------------------------------------------
3,186,093
-----------------------------------------------------------------------------------------------------
REAL ESTATE -- 12.3%
40,000 Avalonbay Communities, Inc. 1,465,000
41,250 Boston Properties, Inc. 1,312,266
95,000 Catellus Development Corp.+ 1,318,125
40,000 Centex Corp. 952,500
25,000 Clayton Homes, Inc. 253,125
44,000 Cousins Properties, Inc. 1,619,750
85,000 Duke - Weeks Realty Corp. 1,625,625
40,000 General Growth Properties, Inc. 1,217,500
65,000 Highwoods Properties, Inc. 1,381,250
35,000 Kimco Realty Corp. 1,312,500
44,500 Spieker Properties, Inc. 1,980,250
85,100 Starwood Financial Inc. 1,499,887
-----------------------------------------------------------------------------------------------------
15,937,778
-----------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
Smith Barney Small Cap Value Fund 9
<PAGE>
<CAPTION>
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED) MARCH 31, 2000
SHARES SECURITY VALUE
=====================================================================================================
<S> <C> <C>
TECHNOLOGY -- 16.9%
25,000 Alliant Techsystems Inc.+ $ 1,471,875
23,500 Andrew Corp.+ 537,562
32,800 Artesyn Technologies, Inc.+ 621,150
61,000 Belden Inc. 1,677,500
101,250 Cypress Semiconductor Corp.+ 4,992,891
65,000 Diebold, Inc. 1,787,500
18,000 Geoworks Corp.+ 641,250
35,000 Glenayre Technologies, Inc.+ 614,688
178,000 JDA Software Group, Inc.+ 2,603,250
382,500 Maxtor Corp.+ 4,948,594
29,800 Varian Semiconductor Equipment Associates, Inc.+ 1,896,025
-----------------------------------------------------------------------------------------------------
21,792,285
-----------------------------------------------------------------------------------------------------
UTILITIES -- 8.0%
47,500 Avista Corp. 1,935,625
100,000 Citizens Utilities Co., Class B Shares+ 1,637,500
35,100 Eastern Enterprises 2,101,612
25,000 Energy East Corp. 495,312
42,500 IDACORP, Inc. 1,476,875
42,500 WPS Resources Corp. 1,102,344
57,500 Washington Gas Light Co. 1,563,281
-----------------------------------------------------------------------------------------------------
10,312,549
-----------------------------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost -- $115,363,054) 127,633,222
=====================================================================================================
FACE
AMOUNT SECURITY VALUE
=====================================================================================================
REPURCHASE AGREEMENT -- 1.1%
$ 1,436,000 Morgan Stanley Dean Witter & Co., 6.050% due 4/3/00;
Proceeds at maturity -- $1,436,724; (Fully collateralized by
U.S. Treasury Bonds, 6.250% to 7.125% due 2/15/23 to 8/15/23;
Market value -- $1,468,631) (Cost -- $1,436,000) 1,436,000
=====================================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $116,799,054*) $129,069,222
=====================================================================================================
</TABLE>
+ Non-income producing security.
* Aggregate cost for Federal income tax purposes is substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
10 2000 Semi-Annual Report to Shareholders
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) MARCH 31, 2000
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Investments, at value (Cost -- $116,799,054) $129,069,222
Cash 641
Receivable for Fund shares sold 203,203
Dividends and interest receivable 160,977
-----------------------------------------------------------------------------------------------------
TOTAL ASSETS 129,434,043
-----------------------------------------------------------------------------------------------------
LIABILITIES:
Management fees payable 78,125
Distribution fees payable 43,157
Payable for Fund shares purchased 10,958
Accrued expenses 89,219
-----------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 221,459
-----------------------------------------------------------------------------------------------------
TOTAL NET ASSET $129,212,584
=====================================================================================================
NET ASSETS:
Par value of capital shares $ 10,036
Capital paid in excess of par value 116,643,609
Undistributed net investment income 233,500
Accumulated net realized gain from security transactions and future contracts 55,271
Net unrealized appreciation of investments 12,270,168
-----------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $129,212,584
=====================================================================================================
SHARES OUTSTANDING:
Class A 2,631,845
------------------------------------------------------------------------------------------------
Class B 4,446,352
------------------------------------------------------------------------------------------------
Class L 2,957,908
------------------------------------------------------------------------------------------------
NET ASSET VALUE:
Class A (and redemption price) $12.89
------------------------------------------------------------------------------------------------
Class B* $12.87
------------------------------------------------------------------------------------------------
Class L** $12.87
------------------------------------------------------------------------------------------------
MAXIMUM PUBLIC OFFERING PRICE PER SHARE:
Class A (net asset value plus 5.26% of net asset value per share) $13.57
--------------------------------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset value per share) $13.00
=====================================================================================================
</TABLE>
* Redemption price is NAV of Class B shares reduced by a 5.00% CDSC if shares
are redeemed within one year from purchase (See Note 2).
** Redemption price is NAV of Class L shares reduced by a 1.00% CDSC if shares
are redeemed within the first year of purchase.
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
Smith Barney Small Cap Value Fund 11
<PAGE>
STATEMENT OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED MARCH 31, 2000
INVESTMENT INCOME:
Dividends $ 1,494,999
Interest 216,718
--------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 1,711,717
--------------------------------------------------------------------------------
EXPENSES:
Distribution fees (Note 2) 532,287
Management fees (Note 2) 497,259
Shareholder and system servicing fees 85,774
Registration fees 38,947
Shareholder communications 32,192
Audit and legal 18,816
Directors' fees 8,965
Custody 4,722
Other 2,346
--------------------------------------------------------------------------------
TOTAL EXPENSES 1,221,308
--------------------------------------------------------------------------------
NET INVESTMENT INCOME 490,409
--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FUTURES CONTRACTS (NOTES 3 AND 7):
Realized Gain (Loss) From:
Security transactions (excluding short-term securities) (1,184,855)
Futures contracts 862,339
--------------------------------------------------------------------------------
NET REALIZED LOSS (322,516)
--------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of period 3,135,173
End of period 12,270,168
--------------------------------------------------------------------------------
INCREASE IN NET UNREALIZED APPRECIATION 9,134,995
--------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS AND FUTURES CONTRACTS 8,812,479
--------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS $ 9,302,888
================================================================================
SEE NOTES TO FINANCIAL STATEMENT
--------------------------------------------------------------------------------
12 2000 Semi-Annual Report to Shareholders
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED MARCH 31, 2000 (UNAUDITED)
AND THE PERIOD ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
2000 1999(a)
====================================================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 490,409 $ 1,169,264
Net realized gain (loss) (322,516) 377,787
Increase in net unrealized appreciation 9,134,995 3,135,173
--------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS 9,302,888 4,682,224
--------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (1,499,499) --
--------------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (1,499,499) --
--------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 8):
Net proceeds from sale of shares 14,531,978 169,714,510
Net asset value of shares issued for
reinvestment of dividends 1,430,802 --
Cost of shares reacquired (35,693,655) (33,256,664)
--------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSET FROM FUND SHARE TRANSACTIONS (19,730,875) 136,457,846
--------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS (11,927,486) 141,140,070
NET ASSETS:
Beginning of period 141,140,070 --
--------------------------------------------------------------------------------------------------------------------
End of period* $129,212,584 $141,140,070
====================================================================================================================
* Includes undistributed net investment income of: $233,500 $1,242,590
====================================================================================================================
</TABLE>
(a) For the period from February 26, 1999 (commencement of operations) to
September 30, 1999.
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
Smith Barney Small Cap Value Fund 13
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
The Smith Barney Small Cap Value Fund ("Portfolio"), a separate investment fund
of the Smith Barney Investment Funds Inc. ("Fund"), a Maryland Corporation, is
registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company. The Fund consists of this
Portfolio and eight other separate investment portfolios: Concert Peachtree
Growth Fund, Smith Barney Investment Grade Bond Fund, Smith Barney Contrarian
Fund, Smith Barney Government Securities Fund, Smith Barney Hansberger Global
Value Fund, Smith Barney Hansberger Global Small Cap Value Fund, Smith Barney
Premier Selections Fund and Smith Barney Small Cap Growth Fund. The financial
statements and financial highlights for the other portfolios are presented in
separate shareholder reports.
The significant accounting policies consistently followed by the Portfolio are:
(a) security transactions are accounted for on trade date; (b) securities traded
on national securities markets are valued at the closing price on such markets;
securities traded in the over-the-counter market and listed securities for which
no sales prices were reported are valued at bid price, or in the absence of a
recent bid price, at the bid equivalent obtained from one or more of the major
market makers; (c) securities for which market quotations are not available will
be valued in good faith at fair value by or under the direction of the Board of
Directors; (d) securities that have a maturity of more than 60 days are valued
at prices based on market quotations for securities of similar type, yield and
maturity; (e) securities maturing within 60 days are valued at cost plus
accreted discount, or minus amortized premium, which approximates value; (f)
dividend income is recorded on ex-dividend date and interest income is recorded
on an accrual basis; (g) dividends and distributions to shareholders are
recorded on the ex-dividend date; (h) gains or losses on the sale of securities
are calculated using the specific identification method; (i) the accounting
records are maintained in U.S. dollars. All assets and liabilities denominated
in foreign currencies are translated into U.S. dollars on the date of valuation.
Purchases and sales of securities and income and expenses are translated at the
rate of exchange quoted on the respective date that such transactions are
recorded. Differences between income or expense amounts recorded and collected
or paid are adjusted when reported by the custodian bank (j) direct expenses are
charged to each class; management fees and general portfolio expenses are
allocated on the basis of relative net assets; (k) the Portfolio intends to
comply with the applicable provisions of the Internal Revenue Code of 1986, as
amended, pertaining to regulated investment companies and to make distributions
of taxable income sufficient to relieve it from substantially all Federal income
and excise taxes; (l) the character of income and gains distributed is
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. At September 30, 1999,
reclassifications were made to the Fund's capital accounts to reflect permanent
book/tax differences and income and gains available for distributions under
income tax regulations. Accordingly, a portion of accumulated net investment
loss amounting to $73,326 was reclassified to paid-in capital. Net investment
income, net realized gains and net assets were not affected by this change and
(m) estimates and assumptions are required to be made regarding assets,
liabilities and changes in net assets resulting from operations when financial
statements are prepared. Changes in the economic environment, financial markets
and any other parameters used in determining these estimates could cause actual
results to differ.
2. MANAGEMENT AGREEMENT AND OTHER TRANSACTIONS
SSB Citi Fund Management LLC ("SSBC"), a subsidiary of Salomon Smith Barney
Holdings Inc. ("SSBH"), which, in turn, is a subsidiary of Citigroup Inc.
--------------------------------------------------------------------------------
14 2000 Semi-Annual Report to Shareholders
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
("Citigroup"), acts as investment manager to the Fund. The Portfolio pays SSBC a
management fee calculated at an annual rate of 0.75% of the average daily net
assets. This fee is calculated daily and paid monthly.
Effective October 1999, Citi Fiduciary Trust Company ("CFTC"), another
subsidiary of Citigroup, became the Fund's transfer agent and PFPC Global Fund
Services ("PFPC") became the sub-transfer agent. CFTC receives account fees and
asset-based fees that vary according to the size and type of account. PFPC is
responsible for shareholder recordkeeping and financial processing for all
shareholder accounts and is paid by CFTC. During the period October 1, 1999
through March 31, 2000, the Portfolio paid transfer agent fees of $66,406 to
CFTC.
CFBDS, Inc. ("CFBDS") acts as the Fund's distributor. Salomon Smith Barney Inc.
("SSB"), another subsidiary of SSBH, as well as certain other broker-dealers,
continues to sell Fund shares to the public as a member of the selling group.
SSB acts as the primary broker for its portfolio agency transactions. For the
six months ended March 31, 2000 SSB received total brokerage commissions of
$14,460.
There are maximum initial sales charges of 5.00% and 1.00% for Class A and L
shares, respectively. There is a contingent deferred sales charge ("CDSC") of
5.00% on Class B shares, which applies if redemption occurs within one year from
purchase. This CDSC declines thereafter by 1.00% per year until no CDSC is
incurred. Class Lshares also have a 1.00% CDSC, which applies if redemption
occurs within the first year of purchase. In certain cases, Class A shares have
a 1.00% CDSC, which applies if redemption occurs within the first year of
purchase. This CDSC only applies to those purchases of Class A shares, which,
when combined with current holdings of Class A shares, equal or exceed $500,000
in the aggregate. These purchases do not incur an initial sales charge.
For the six months ended March 31, 2000, CFBDS and SSB received sales charges of
approximately $59,000 and $27,000 on sales of the Portfolio's Class A and L
shares, respectively. In addition, CDSCs paid to SSB were approximately:
CLASS A CLASS B CLASS L
==============================================================
CDSCs $9,000 $148,000 $30,000
==============================================================
Pursuant to a Distribution Plan, the Portfolio pays a service fee with respect
to Class A, B and L shares calculated at the annual rate of 0.25% of the average
daily net assets for each respective class. The Portfolio also pays a
distribution fee with respect to Class B and L shares calculated at an annual
rate of 0.75% of the average daily net assets of each class.
For the six months ended March 31, 2000, total Distribution Plan Fees incurred
by the Portfolio were:
CLASS A CLASS B CLASS L
==============================================================
Distribution Plan Fees $43,575 $288,479 $200,233
==============================================================
All officers and one Director of the Fund are employees of SSB.
3. INVESTMENTS
During the six months ended March 31, 2000, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
==============================================================
Purchases $34,160,077
--------------------------------------------------------------
Sales $36,160,331
==============================================================
At March 31, 2000, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were substantially as follows:
===============================================================
Gross unrealized appreciation $22,332,971
Gross unrealized depreciation (10,062,803)
---------------------------------------------------------------
Net unrealized appreciation $12,270,168
===============================================================
--------------------------------------------------------------------------------
Smith Barney Small Cap Value Fund 15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
4. REPURCHASE AGREEMENTS
The Portfolio purchases (and its custodian takes possession of) U.S. government
securities from banks and securities dealers subject to agreements to resell the
securities to the sellers at a future date (generally, the next business day),
at an agreed-upon higher repurchase price. The Portfolio requires continual
maintenance of the market value of the collateral in amounts at least equal to
the repurchase price.
5. OPTION CONTRACTS
Premiums paid when put or call options are purchased by the Portfolio, represent
investments, which are marked-to-market daily. When a purchased option expires,
the Portfolio will realize a loss in the amount of the premium paid. When the
Portfolio enters into a closing sales transaction, the Portfolio will realize a
gain or loss depending on whether the sales proceeds from the closing sales
transaction are greater or less than the premium paid for the option. When the
Portfolio exercises a put option, it will realize a gain or loss from the sale
of the underlying security and the proceeds from such sale will be decreased by
the premium originally paid. When the Portfolio exercises a call option, the
cost of the security which the Portfolio purchases upon exercise will be
increased by the premium originally paid.
At March 31, 2000, the Portfolio had no purchased call or put options.
When a Portfolio writes a covered call or put option, an amount equal to the
premium received by the Portfolio is recorded as a liability, the value of which
is marked-to-market daily. When a written option expires, the Portfolio realizes
a gain equal to the amount of the premium received. When the Portfolio enters
into a closing purchase transaction, the Portfolio realizes a gain or loss
depending upon whether the cost of the closing transaction is greater or less
than the premium originally received, without regard to any unrealized gain or
loss on the underlying security, and the liability related to such option is
eliminated. When a written call option is exercised, the cost of the security
sold will be decreased by the premium originally received. When a written put
option is exercised, the amount of the premium originally received will reduce
the cost of the security which the Portfolio purchased upon exercise. When a
written index option is exercised, settlement is made in cash. The risk
associated with purchasing options is limited to the premium originally paid.
The Portfolio enters into options for hedging purposes. The risk in writing a
covered call option is that the Portfolio gives up the opportunity to
participate in any increase in the price of the underlying security beyond the
exercise price. The risk in writing a put option is that the Portfolio is
exposed to the risk of loss if the market price of the underlying security
declines.
During the six months ended March 31, 2000, the Portfolio did not write any call
or put options.
6. LENDING OF PORTFOLIO SECURITIES
The Portfolio has an agreement with its custodian whereby the custodian may lend
securities owned by the Portfolio to brokers, dealers and other financial
organizations. Fees earned by the Portfolio on securities lending are recorded
as interest income. Loans of securities by the Portfolio are collateralized by
cash, U.S. government securities or high quality money market instruments that
are maintained at all times in an amount at least equal to the current market
value of the loaned securities, plus a margin which may vary depending on the
type of securities loaned. The custodian establishes and maintains the
collateral in a segregated account. The Portfolio maintains exposure for the
risk of any losses in the investment of amounts received as collateral.
At March 31, 2000, the Portfolio had no securities on loan.
--------------------------------------------------------------------------------
16 2000 Semi-Annual Report to Shareholders
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
7. FUTURES CONTRACTS
Initial margin deposits made upon entering into futures contracts are recognized
as assets. Securities equal to the initial margin amount are segregated by
custodian in the name of the broker. Additional securities are also segregated
up to the current market value of futures contracts. During the period the
futures contract is open, changes in the value of the contract are recognized as
unrealized gains or losses by "marking-to-market" on a daily basis to reflect
the market value of the contract at the end of each day's trading. Variation
margin payments are made or received and recognized as assets due from or
liabilities due to broker, depending upon whether unrealized gains or losses are
incurred. When the contract is closed, the Portfolio records a realized gain or
loss equal to the difference between the proceeds from (or cost of) the closing
transactions and the Fund's basis in the contract. The Portfolio enters into
such contracts to hedge a portion of its portfolio. The Portfolio bears the
market risk that arises from changes in the value of the financial instruments
and securities indices (futures contracts) and the credit risk should a
counterparty fail to perform under such contracts.
At March 31, 2000, the Portfolio had no open futures contracts.
8. CAPITAL SHARES
At March 31, 2000, the Fund had ten billion shares of capital stock authorized
with a par value of $0.001 per share. The Portfolio has the ability to issue
multiple classes of shares. Each share of a class represents an identical
interest and has the same rights, except that each class bears certain direct
expenses, including those specifically related to the distribution of its
shares.
At March 31, 2000, total paid-in capital amounted to the following for each
class:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS L
====================================================================================
<S> <C> <C> <C>
Total Paid-in Capital $29,945,430 $52,260,983 $34,447,232
====================================================================================
</TABLE>
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
MARCH 31, 2000 SEPTEMBER 30, 1999*
--------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
===================================================================================================================================
<S> <C> <C> <C> <C>
CLASS A
Shares sold 510,117 $ 6,137,204 5,201,406 $62,511,206
Shares issued on reinvestment 44,645 522,797 -- --
Shares reacquired (1,006,351) (11,972,453) (2,117,972) (27,239,936)
-----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (451,589) $ (5,312,452) 3,083,434 $35,271,270
===================================================================================================================================
CLASS B
Shares sold 429,210 $ 5,126,989 5,263,462 $62,189,378
Shares issued on reinvestment 45,142 528,615 -- --
Shares reacquired (1,060,160) (12,615,711) (231,302) (2,933,992)
-----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (585,808) $ (6,960,107) 5,032,160 $59,255,386
===================================================================================================================================
CLASS L
Shares sold 273,599 $ 3,267,785 3,831,202 $45,013,926
Shares issued on reinvestment 32,399 379,390 -- --
Shares reacquired (935,246) (11,105,491) (244,046) (3,082,736)
-----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (629,248) $ (7,458,316) 3,587,156 $41,931,190
===================================================================================================================================
</TABLE>
* For the period from February 26, 1999 (commencement of operations) to
September 30, 1999.
--------------------------------------------------------------------------------
Smith Barney Small Cap Value Fund 17
<PAGE>
FINANCIAL HIGHLIGHTS
For a share of each class of capital stock outstanding throughout each year
ended September 30, except where noted:
<TABLE>
<CAPTION>
CLASS A SHARES 2000(1)(2) 1999(2)(3)
<S> <C> <C>
====================================================================================================================================
NET ASSET VALUE, BEGINNING OF PERIOD $12.10 $11.40
------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS:
Net investment income 0.08 0.15
Net realized and unrealized gain 0.90 0.55
------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.98 0.70
------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income (0.19) --
------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.19) --
------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $12.89 $12.10
------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN++ 8.25% 6.14%
-----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000S) $33,931 $37,308
------------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS+:
Expenses 1.30% 1.32%
Net investment income 1.28 1.94
------------------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 28% 7%
====================================================================================================================================
(1) For the six months ended March 31, 2000 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) For the period from February 26, 1999 (inception date) to September 30,
1999.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
</TABLE>
--------------------------------------------------------------------------------
18 2000 Semi-Annual Report to Shareholders
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of each class of capital stock outstanding throughout each year
ended September 30, except where noted:
<TABLE>
<CAPTION>
CLASS B SHARES 2000(1)(2) 1999(2)(3)
<S> <C> <C>
====================================================================================================================================
NET ASSET VALUE, BEGINNING OF PERIOD $12.05 $11.40
------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS:
Net investment income 0.03 0.09
Net realized and unrealized gain 0.91 0.56
------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.94 0.65
------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income (0.12) --
------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.12) --
------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $12.87 $12.05
------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN++ 7.86% 5.70%
------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000S) $57,219 $60,620
------------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS+:
Expenses 2.03% 2.08%
Net investment income 0.55 1.19
------------------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 28% 7%
====================================================================================================================================
(1) For the six months ended March 31, 2000 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) For the period from February 26, 1999 (inception date) to September 30,
1999.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
</TABLE>
--------------------------------------------------------------------------------
Smith Barney Small Cap Value Fund 19
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of each class of capital stock outstanding throughout each year
ended September 30, except where noted:
<TABLE>
<CAPTION>
CLASS L SHARES 2000(1)(2) 1999(2)(3)
<S> <C> <C>
====================================================================================================================================
NET ASSET VALUE, BEGINNING OF PERIOD $12.05 $11.40
------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS:
Net investment income 0.03 0.09
Net realized and unrealized gain 0.91 0.56
------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.94 0.65
------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income (0.12) --
------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.12) --
------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $12.87 $12.05
------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN++ 7.86% 5.70%
------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000S) $38,063 $43,212
------------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS+:
Expenses 2.04% 2.08%
Net investment income 0.54 1.20
------------------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 28% 7%
====================================================================================================================================
</TABLE>
(1) For the six months ended March 31, 2000 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) For the period from February 26, 1999 (inception date) to September 30,
1999.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
--------------------------------------------------------------------------------
20 2000 Semi-Annual Report to Shareholders
<PAGE>
SMITH BARNEY
SMALL CAP VALUE FUND
DIRECTORS
Paul R. Ades
Herbert Barg
Dwight B. Crane
Frank G. Hubbard
Heath B. McLendon, Chairman
Jerome Miller
Ken Miller
OFFICERS
Heath B. McLendon
President and Chief Executive Officer
Lewis E. Daidone
Senior Vice President and Treasurer
Peter J. Hable
Vice President and Investment Officer
John G. Goode
Vice President and Investment Officer
Paul A. Brook
Controller
Christina T. Sydor
Secretary
INVESTMENT MANAGER
SSB Citi Fund Management LLC
DISTRIBUTOR
CFBDS, Inc.
CUSTODIAN
PFPC Trust Company
TRANSFER AGENT
Citi Fiduciary Trust Company
388 Greenwich Street, 22nd Floor
New York, New York 10013
SUB-TRANSFER AGENT
PFPC Global Fund Services
P.O. Box 9699
Providence, Rhode Island 02940-9699
This report is submitted for the general information of shareholders of Smith
Barney Investment Funds -- Smith Barney Small Cap Value Fund, but it may also be
used as sales literature when preceded or accompanied by a current Prospectus,
which gives details about charges, expenses, investment objectives and operating
policies of the Portfolio. If used as sales material after June 30, 2000, this
report must be accompanied by performance information for the most recently
completed calendar quarter.
[Salomon Smith Barney LOGO]
--------------------------------------------------------------------------------
A member of citigroup [Umbrella logo]
Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
SMITH BARNEY
SMALL CAP VALUE FUND
388 Greenwich Street, MF-2
New York, New York 10013
WWW.SMITHBARNEY.COM/MUTUALFUNDS
FD01653 5/00
