[GRAPHIC OMITTED]
Smith Barney
Small Cap Blend
Fund, Inc.
- ------------------
SEMI-ANNUAL REPORT
- ------------------
June 30, 1998
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day(sm).
<PAGE>
Smith Barney Small Cap
Blend Fund, Inc.
================================================================================
Smith Barney Small Cap Blend Fund, Inc.
Average Annual Total Returns
June 30, 1998
Without Sales Charges(1)
-----------------------------------------
Class A(2) Class B Class L(3)
================================================================================
Six Months+ 5.27% 4.89% 4.89%
- --------------------------------------------------------------------------------
One-Year 23.93 22.17 22.17
- --------------------------------------------------------------------------------
Five-Year 16.33 N/A N/A
- --------------------------------------------------------------------------------
Since Inception++ 11.52 22.11 22.86
================================================================================
With Sales Charges(4)
-----------------------------------------
Class A(2) Class B Class L(3)
================================================================================
Six Months+ 0.01% (0.11)% 2.82%
- --------------------------------------------------------------------------------
One-Year 17.69 17.17 20.00
- --------------------------------------------------------------------------------
Five-Year 15.16 N/A N/A
- --------------------------------------------------------------------------------
Since Inception++ 10.84 18.17 21.69
================================================================================
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, 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. Prior to June
23, 1997, dividends were reinvested according to the Fund's reinvestment
plan, thereafter at net asset value.
(2) The Fund converted from a closed-end fund to an open-end fund on June 23,
1997. Prior to that date, its shares were traded on the American Stock
Exchange. As of June 23, 1997, all existing shares were converted to Class
A shares. The total returns noted for Class A shares may have been
different if the Fund had been an open-end fund from inception. Current
total return information for Class A shares through June 23, 1997 is based
on net asset value while it was a closed-end fund. Closed-end funds are
not subject to the same legal requirements as open-end funds, especially
with respect to liquidity requirements.
(3) On June 12, 1998, Class C shares were renamed Class L shares.
(4) Assumes reinvestment of all dividends and capital gain distributions, if
any. Prior to June 23, 1997 dividends were reinvested according to the
Fund's reinvestment plan, thereafter at net asset value. In addition,
Class A and L shares reflect the deduction of the current 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 and declines thereafter by 1.00% per year until no
CDSC is incurred. In addition, Class L shares reflect the deduction of a
1.00% CDSC, which applies if shares are redeemed within the first year of
purchase.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption value may be more or less than the original cost.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
++ Inception dates for Class A, B and L shares are January 23, 1990, June 25,
1997 and June 24, 1997, respectively. The Fund operated as a closed-end
fund until June 23, 1997.
================================================================================
The Smith Barney Small Cap Blend Fund, Inc. ("Fund") seeks long-term capital
appreciation by investing primarily in the common stock of companies with
relatively small market-capitalization.
- --------------------------------------------------------------------------------
FUND HIGHLIGHT
- --------------------------------------------------------------------------------
One of the key investment themes in the second quarter of 1998 was a flight to
quality and small-cap growth stocks with stable earnings growth. These stocks
performed the best during the last month of the period under review. In general,
both price and earnings momentum were key factors that were successful in
predicting relative performance among the different types of small-cap stocks
during this time.
- --------------------------------------------------------------------------------
WHAT'S INSIDE
- --------------------------------------------------------------------------------
Shareholder Letter............................................ 1
Historical Performance........................................ 4
Smith Barney Small Cap Blend Fund, Inc. at a Glance........... 6
Schedule of Investments....................................... 7
Statement of Assets and Liabilities.......................... 14
Statement of Operations...................................... 15
Statements of Changes in Net Assets.......................... 16
Notes to Financial Statements................................ 17
Financial Highlights......................................... 21
Additional Shareholder Information........................... 23
<PAGE>
- --------------------------------------------------------------------------------
Shareholder Letter
- --------------------------------------------------------------------------------
[PHOTO OMITTED] [PHOTO OMITTED]
HEATH B. SANDIP A.
MCLENDON BHAGAT, CFA
Chairman Vice President
Dear Shareholder:
We are pleased to provide you with the semi-annual report for the Smith Barney
Small Cap Blend Fund, Inc. ("Fund") for the period ended June 30, 1998. In this
letter, we comment on the market during the first and second quarters of 1998
and briefly outline how the Fund is managed. A detailed summary of performance
and current holdings can be found in the sections that follow.
A Style Pure Fund
The Smith Barney Small Cap Blend Fund is a Style Pure Fund. The mutual funds in
the Style Pure Series are Smith Barney Mutual Funds that are the basic building
blocks for asset allocation. Other than for the purposes of maintaining minimal
cash or responding to extraordinary market conditions, each Style Pure Series
Fund attempts to be fully invested 100% of the time in its designated asset
classes and its designated investment style.
Performance Update and Investment Strategy
For the six months ended June 30, 1998, the total return on Fund's Class A
shares was 5.27%. In comparison, the Russell 2500 Index had a total return of
5.66% during the same period. (The Russell 2500 Index is a broad-based index
representing smaller U.S. public companies.) As we discuss in greater detail in
the following sections, small capitalization stocks continued to lag their large
cap counterparts during the reporting period and the Fund's performance
reflected this trend.
To briefly review our investment style, the Fund is managed according to two
related investment approaches. First, the Fund seeks to provide investors with
reliable exposure to the small-cap universe. Second, the Fund seeks to achieve
consistent outperformance relative to this broad universe. The Fund attempts to
fulfill both of these missions at the same time - by combining the reliability
of relative performance tied to an index and the value-added benefits of active
management.
In the management of this Fund, we do not try to time the market by moving in
and out of stocks and into cash. Neither do we try to guess which industry
groups will set the world on fire based on economic expectations. Moreover, we
do not favor one stock-selection style at the expense of others. While any one
of these approaches may work from time to time, they may tend to run hot and
cold. Periods of good performance can be followed by dry spells. With the Small
Cap Blend Fund, our goal is to deliver more consistent performance relative to
the market for small-cap stock investing.
In the quantitative stock selection model employed in the Fund, we ask three
basic questions about the small-cap companies we follow: "Are earnings growing
at a steady and consistent pace?" "Is the stock valuation attractive relative to
potential earnings growth and when compared with other similar companies?" And
finally "Is the recent price trend likely to persist or reverse? If the answer
to all of these questions is "yes," we then apply fundamental research based on
our understanding of each company's business prospects and management. If a
stock passes all these tests, then it is likely to be overweighted in the Fund's
portfolio relative to the Russell 2500 Index.
- --------------------------------------------------------------------------------
Smith Barney Small Cap Blend Fund, Inc. 1
<PAGE>
Economic and Market Overview
In April 1998, stock market volatility increased significantly. A seesaw pattern
in stock prices persisted throughout the month, and stock prices remained
virtually unchanged at the end of April from a month earlier. Renewed concerns
over Asia and slower earnings growth rocked the stock market in May. Moreover,
several companies provided early guidance about lower second quarter earnings
during May and June. Investors, already concerned about the record valuations in
the stock market, showed no mercy in their response to such disappointments as
some stock prices fell from their highs by as much as 50%. The greater incidence
of negative earnings pre-announcements in the small cap universe in May made the
month challenging for many small cap stock managers.
Small capitalization stocks continued to have a rough time in June. In
particular, cyclical market sectors with exposure to Asia performed poorly. The
Russell 2500 Index did advance, but only by about 0.1%, compared to the nearly
4% return for the S&P 500 Index. Small-cap growth stocks (i.e., those with
higher price/earnings ratios) did better than small-cap value stocks during
June, reversing an earlier trend.
Within the small-cap universe, traditional growth sectors such as technology,
health care, and consumer-related industries performed the best in the second
quarter of 1998 against the backdrop of a strong domestic economy. A stable
interest rate environment also helped the performance of the utilities sector.
On the other hand, small-cap energy stocks performed the worst in response to
weak oil prices, continuing a trend that started at the beginning of 1998.
While it is impossible to time the pivot points in investment cycles, the
earnings recovery that will eventually follow the current slowdown in earnings
could well provide the catalyst for a small cap rally.
One of the key investment themes in the second quarter of 1998 was a flight to
quality and small-cap growth stocks with stable earnings growth. These stocks
performed the best during the last month of the period under review. In general,
both price and earnings momentum were key factors that were successful in
predicting relative performance among the different types of small-cap stocks
during this time.
Portfolio Review
The second quarter of 1998 was a tale of two cities for the Fund. The Fund did
not perform as well in April and May, but it did recover nicely in June due
primarily to stock picks in the technology sector. One of the Fund's biggest
winners in technology in June was Lycos, an independent Internet company with a
popular search engine. Lycos is now a possible acquisition target and the
company recently entered into an agreement with bookseller Barnes & Noble to
market their books on-line.
Within the technology sector, software and information technology companies such
as Computer Horizons, Ciber Inc. and Keane Inc. did well while the performance
of hardware, semiconductor and capital goods companies with exposure to Asia
lagged. As examples of such weakness, Cohu Inc., a large manufacturer of
semiconductor test equipment, lost ground and Dexter Corp., which pre-announced
weak second quarter earnings because of weakness in Asian markets, created a
drag on the Fund's performance.
The Fund's holdings in the health care, consumer discretionary and financial
services sectors for the most part held their own in the second quarter of 1998.
We maintain a well-diversified portfolio in the Fund and we continue to
emphasize stocks for which we see improved earnings trends and reasonable
valuations.
Market Outlook
The outlook for small cap stocks continues to present several interesting
contrasts. A number of positive factors currently argue in favor of small cap
stocks. After a sustained period of underperformance, small-cap stocks are
trading at lower valuations than large-cap stocks. They are also expected by
many investment professionals to grow earnings more rapidly than their large-cap
counterparts for calendar year 1998. On top of these fundamental factors, the
recent reduction in the capital gains tax rate creates another structural
positive for small cap stocks.
- --------------------------------------------------------------------------------
2 1998 Semi-Annual Report to Shareholders
<PAGE>
Despite these positives, we suspect that small cap stocks have struggled for a
couple of reasons. The recent turmoil in global markets and economies has
triggered a classic flight to quality where the safest, most liquid
dollar-denominated assets such as Treasury bonds and large cap U.S. stocks have
performed well. Also, in line with conventional wisdom on business cycle
investing, investors have favored large cap and growth stocks in these later
stages of the current economic expansion.
In closing, thank you for investing in the Smith Barney Small Cap Blend Fund,
Inc. We look forward to helping you pursue your financial goals.
Sincerely,
/s/ Heath B. McLendon /s/ Sandip A. Bhagat, CFA
Heath B. McLendon Sandip A. Bhagat, CFA
Chairman Vice President
July 27, 1998
Shareholder Notice
On a more somber note, we report with much sadness the passing of Emeritus
Director C. Richard Youngdahl on August 6, 1998. Dick made many valuable
contributions to the Board and the Fund during his tenure and he will be missed.
- --------------------------------------------------------------------------------
Top Ten Holdings* As of June 30, 1998
- --------------------------------------------------------------------------------
1. Legato Systems, Inc 0.8%
- --------------------------------------------------------------------------------
2. Lycos, Inc. 0.8
- --------------------------------------------------------------------------------
3. CIBER Inc. 0.7
- --------------------------------------------------------------------------------
4. Safeskin Corp. 0.7
- --------------------------------------------------------------------------------
5. Arterial Vascular Engineering, Inc. 0.7
- --------------------------------------------------------------------------------
6. Total Renal Care Holdings, Inc., Class A Shares 0.6
- --------------------------------------------------------------------------------
7. Allegiance Corp. 0.6
- --------------------------------------------------------------------------------
8. Keane, Inc. 0.6
- --------------------------------------------------------------------------------
9. Theragenics Corp. 0.6
- --------------------------------------------------------------------------------
10. Network Appliance, Inc. 0.6
- --------------------------------------------------------------------------------
* As a percentage of total common stock.
- --------------------------------------------------------------------------------
Smith Barney Small Cap Blend Fund, Inc. 3
<PAGE>
- --------------------------------------------------------------------------------
Historical Performance -- Class A Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
----------------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
6/30/98 $13.68 $14.24 $0.00 $0.16 5.27%+
- ------------------------------------------------------------------------------------------------------------------------------------
12/31/97 12.30 13.68 0.04 1.98 28.25
- ------------------------------------------------------------------------------------------------------------------------------------
12/31/96 12.15 12.30 0.04 2.00 20.56
- ------------------------------------------------------------------------------------------------------------------------------------
12/31/95 11.78 12.15 0.11 1.94 18.90
- ------------------------------------------------------------------------------------------------------------------------------------
12/31/94 12.50 11.78 0.05 0.09 (4.36)
- ------------------------------------------------------------------------------------------------------------------------------------
12/31/93 11.49 12.50 0.01 0.00 8.90
- ------------------------------------------------------------------------------------------------------------------------------------
12/31/92 10.34 11.49 0.05 0.00 11.71
- ------------------------------------------------------------------------------------------------------------------------------------
12/31/91 9.32 10.34 0.14 0.79 22.69
- ------------------------------------------------------------------------------------------------------------------------------------
Inception* -- 12/31/90 11.12 9.32 0.37 0.00 (12.66)
====================================================================================================================================
Total $0.81 $6.96
====================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Historical Performance -- Class B Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
----------------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
6/30/98 $13.52 $14.02 $0.00 $0.16 4.89%+
- ------------------------------------------------------------------------------------------------------------------------------------
Inception* -- 12/31/97 13.34 13.52 0.01 1.98 16.73+
====================================================================================================================================
Total $0.01 $2.14
====================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Historical Performance -- Class L Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
----------------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
6/30/98 $13.51 $14.01 $0.00 $0.16 4.89%+
- ------------------------------------------------------------------------------------------------------------------------------------
Inception* -- 12/31/97 13.24 13.51 0.01 1.98 17.53+
====================================================================================================================================
Total $0.01 $2.14
====================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Historical Performance -- Class Y Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
----------------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
6/30/98 $13.63 $14.22 $0.00 $0.16 5.51%+
- ------------------------------------------------------------------------------------------------------------------------------------
Inception* -- 12/31/97 13.87 13.63 0.04 0.00 (1.42)+
====================================================================================================================================
Total $0.04 $0.16
====================================================================================================================================
</TABLE>
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
- --------------------------------------------------------------------------------
4 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Average Annual Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
--------------------------------------------
Class A(2) Class B Class L Class Y
================================================================================
Six Months Ended 6/30/98+ 5.27% 4.89% 4.89% 5.51%
- --------------------------------------------------------------------------------
Year Ended 6/30/98 23.93 22.17 22.17 N/A
- --------------------------------------------------------------------------------
Five Years Ended 6/30/98 16.33 N/A N/A N/A
- --------------------------------------------------------------------------------
Inception* through 6/30/98 11.52 22.11 22.86 4.01+
================================================================================
With Sales Charge(3)
--------------------------------------------
Class A(2) Class B Class L Class Y
================================================================================
Six Months Ended 6/30/98+ 0.01% (0.11)% 2.82% 5.51%
- --------------------------------------------------------------------------------
Year Ended 6/30/98 17.69 17.17 20.00 N/A
- --------------------------------------------------------------------------------
Five Years Ended 6/30/98 15.16 N/A N/A N/A
- --------------------------------------------------------------------------------
Inception* through 6/30/98 10.84 18.17 21.69 4.01+
================================================================================
- --------------------------------------------------------------------------------
Cumulative Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
================================================================================
Class A (Inception* through 6/30/98) 150.93%
- --------------------------------------------------------------------------------
Class B (Inception* through 6/30/98) 22.44
- --------------------------------------------------------------------------------
Class L (Inception* through 6/30/98) 23.28
- --------------------------------------------------------------------------------
Class Y (Inception* through 6/30/98) 4.01+
================================================================================
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, 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. Prior to June
23, 1997, dividends were reinvested according to the Fund's dividend
reinvestment plan, thereafter, at net asset value.
(2) The Fund converted from a closed-end fund to an open-end fund on June 23,
1997. Prior to that date, its shares were traded on the American Stock
Exchange. As of June 23, 1997, all existing shares were converted to a
Class A shares. The total returns noted for Class A shares may have been
different if the Fund had been an open-end fund from inception. All
historical performance information for Class A shares through June 23,
1997 is based on net asset value while it was a closed-end fund.
Closed-end funds are not subject to the same legal requirements as
open-end funds, especially to liquidity requirements.
(3) Assumes reinvestment of all dividends and capital gain distributions, if
any. Prior to June 23, 1997, dividends were reinvested according to the
Fund's dividend reinvestment plan, thereafter at net asset value. In
addition, Class A and L shares reflect the deduction of the current
maximum 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 and declines thereafter 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.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
* Inception dates for Class A, B, L and Y shares are January 23, 1990, June
25, 1997, June 24, 1997 and October 17, 1997, respectively.
- --------------------------------------------------------------------------------
Smith Barney Small Cap Blend Fund, Inc. 5
<PAGE>
- --------------------------------------------------------------------------------
Smith Barney Small Cap Blend Fund, Inc. at a Glance (unaudited)
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Class A Shares of the
Smith Barney Small Cap Blend Fund, Inc. vs. Russell 2500 Index+
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
Smith Barney
Small Cap Russell
Blend Fund 2500 Index
---------- ----------
1/23/90 9,496 10,000
12/90 8,294 11,592
12/91 10,718 14,084
12/92 11,369 16,528
12/93 12,381 19,435
12/94 11,806 22,904
12/95 14,640 28,612
12/96 17,650 34,812
12/97 22,635 43,293
6/30/98 23,829 45,743
+ Hypothetical illustration of $10,000 invested in the Fund at inception on
January 23, 1990, assuming reinvestment of dividends and capital gains, if
any, through June 30, 1998. As of June 23, 1997, all existing shares
became Class A shares. The Fund operated as a closed-end mutual fund until
June 23, 1997. Prior to that date, its shares were traded on the American
Stock Exchange, and dividends were eligible for reinvestment through the
Fund's dividend reinvestment plan; since that time, dividends have been
reinvested at net asset value. Current total return information is based
on net asset value while it was a closed-end fund. For purposes of this
illustration, the current maximum front-end sales charge for Class A
shares of 5.00% has been used to compute the initial account value at
inception. Closed-end funds are not subject to the same legal requirements
as open-end funds, especially with respect to liquidity requirements;
therefore, the performance indicated above may have been different had the
Fund been an open-end fund since inception. The Russell 2500 Index is
composed of the 2,500 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. The performance of
the Fund's other classes may be greater or less than the Class A shares'
performance indicated on this chart, depending on whether greater or
lesser sales charges and fees were incurred by shareholders investing in
the other classes.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption values may be more or less than the original cost. No
adjustment has been made for shareholder tax liability on dividends or
capital gains.
Industry Diversification of Common Stock*
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Autos & Transportation 5.1%
Consumer Discretionary 20.7%
Consumer Staples 2.3%
Financial Services 14.3%
Health Care 9.5%
Integrated Oil 0.9%
Materials & Processing 7.1%
Other Energy 4.6%
Producer Durables 6.0%
Real Estate 7.2%
Technology 15.7%
Utilities 6.6%
* As a percentage of total common stock.
Investment Breakdown
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Repurchase Agreement, Warrants and U.S. Treasury Bills 2.5%
Common Stock 97.5%
- --------------------------------------------------------------------------------
6 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) June 30, 1998
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
COMMON STOCK -- 97.5%
Autos & Transportation -- 4.9%
31,200 Airborne Freight Corp. $ 1,090,050
19,300 Arvin Industries, Inc. 700,831
26,900 Avondale Industries, Inc.* 742,272
25,900 C.H. Robinson Worldwide, Inc. 644,262
20,200 CNF Transportation, Inc. 858,500
27,700 GATX Corp. 1,215,338
22,400 J.B. Hunt Transport Services, Inc. 798,000
37,600 Mesaba Holdings, Inc.* 864,800
22,300 Motivepower Industries, Inc.* 546,350
24,400 Navistar International Corp.*+ 704,550
32,200 Overseas Shipholding Group, Inc. 656,075
41,450 Swift Transportation Co., Inc.* 821,228
29,900 US Freightways Corp. 982,028
- --------------------------------------------------------------------------------
10,624,284
- --------------------------------------------------------------------------------
Consumer Discretionary -- 20.2%
13,500 Abercrombie & Fitch Co.*+ 594,000
32,400 ADVO Inc.* 913,275
23,000 Apollo Group, Inc., Class A Shares*+ 760,437
18,500 Bed Bath & Beyond, Inc.*+ 958,531
37,200 Brinker International, Inc.* 716,100
38,150 The Buckle, Inc.* 1,125,425
19,700 Coach USA, Inc.*+ 898,812
15,740 Consolidated Graphics, Inc.* 928,660
24,100 Cort Business Services Corp.* 759,150
23,100 Cox Radio, Inc.* 999,075
31,100 Daisytek International Corp.* 791,106
50,000 Darden Restaurants, Inc. 793,750
33,400 Data Processing Resources Corp.* 1,037,487
30,300 Delia's, Inc.*+ 473,437
16,000 Ethan Allen Interiors, Inc. 799,000
43,800 Fairfield Communities, Inc.* 840,412
51,000 Family Dollar Stores, Inc.+ 943,500
47,130 Foodmaker, Inc.* 795,319
21,900 Footstar, Inc.* 1,051,200
37,200 Fossil, Inc.* 925,350
31,000 Fruit of The Loom, Inc.*+ 1,028,812
31,800 Furniture Brands International, Inc.* 892,387
41,600 Garden Ridge Corp.* 806,000
34,000 Genesco Inc.*+ 554,625
29,100 Guitar Center, Inc.* 876,637
33,500 Herbalife International, Inc.+ 824,937
33,300 International Game Technology 807,525
19,900 Jacor Communications Inc.*+ 1,174,100
58,000 Mail-Well, Inc.*+ 1,257,875
28,980 The Men's Wearhouse, Inc.* 956,340
18,400 Meredith Corp. 863,650
36,210 Merrill Corp. 798,883
29,500 Mohawk Industries, Inc.* 934,781
31,300 The North Face Inc.*+ 751,200
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Small Cap Blend Fund, Inc. 7
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) June 30, 1998
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Consumer Discretionary -- 20.2% (continued)
26,400 Ogden Corp. $ 730,950
42,350 Outdoor Systems Inc.*+ 1,185,800
22,900 Petersen Companies Inc.* 586,813
17,900 Pillowtex Corp. 718,238
27,800 Rayovac Corp.* 630,713
53,960 Rio Hotel & Casino Inc.* 1,018,495
33,231 Romac International Inc.* 1,009,392
17,100 Ross Stores, Inc. 735,300
37,100 Safeskin Corp.*+ 1,525,738
15,500 St. John Knits Inc.+ 598,688
41,800 Signature Resorts, Inc.*+ 689,700
36,850 Sonic Corp.* 824,519
17,700 Staffmark Inc.* 648,263
52,640 Stride Rite Corp. 792,890
15,971 USA Networks Inc.* 401,271
32,500 VWR Scientific Products Corp.* 800,313
40,535 Wolverine World Wide, Inc. 879,103
- --------------------------------------------------------------------------------
43,407,964
- --------------------------------------------------------------------------------
Consumer Staples -- 2.2%
16,300 Canandaigua Brands, Inc.* 801,756
13,700 Earthgrains Co. 765,487
21,300 International Multifoods Corp. 585,750
27,700 Interstate Bakeries Corp.+ 919,294
23,000 Smithfield Foods, Inc.* 701,500
17,520 Suiza Foods Corp.*+ 1,045,725
- --------------------------------------------------------------------------------
4,819,512
- --------------------------------------------------------------------------------
Financial Services -- 14.0%
26,200 Amerus Life Holdings, Inc. 848,225
21,875 Associated Banc-Corp 823,047
13,000 Astoria Financial Corp.+ 695,500
19,700 Bay View Capital Corp. 625,475
43,210 Brenton Banks, Inc. 883,104
7,600 CCB Financial Corp. 807,500
14,100 CMAC Investment Corp. 867,150
14,200 Centura Banks, Inc. 887,500
15,900 Chartwell Re Corp. 468,056
20,900 City National Corp. 771,994
19,900 Eaton Vance Corp. 921,619
36,400 Enhance Financial Services Group, Inc.+ 1,228,500
19,900 Everest Reinsurance Holdings, Inc. 764,906
9,300 Executive Risk, Inc. 685,875
23,100 Fidelity National Financial, Inc. 919,669
15,800 Financial Security Assurance Holdings, Ltd.+ 928,250
34,400 First Republic Bank* 1,242,700
16,300 Firstfed Financial Corp.* 847,600
19,800 FIRSTPLUS Financial Group, Inc.*+ 712,800
22,500 GBC Bancorp 596,250
26,800 HCC Insurance Holdings, Inc. 589,600
8,975 International Bancshares Corp. 593,472
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
8 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) June 30, 1998
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Financial Services -- 14.0% (continued)
19,200 Legg Mason, Inc. $ 1,105,200
15,750 Liberty Financial Companies, Inc. 543,375
9,900 Life Re Corp. 811,800
23,600 Mercantile Bankshares Corp. 821,575
17,366 Mutual Risk Management, Ltd.+ 632,774
24,700 National Commerce Bancorporation 1,034,313
43,800 Peoples Heritage Financial Group, Inc. 1,034,775
48,000 Republic Bancorp, Inc. 906,000
22,000 Selective Insurance Group, Inc. 492,938
10,800 Trans Financial, Inc. 619,650
31,600 20th Century Industries 906,525
32,500 United Bankshares, Inc. 1,109,063
19,700 Webster Financial Corp. 655,025
22,300 Westamerica Bancorporation 716,388
19,300 Zions Bancorporation 1,025,313
- --------------------------------------------------------------------------------
30,123,506
- --------------------------------------------------------------------------------
Health Care -- 9.2%
26,230 Allegiance Corp. 1,344,287
36,600 Alpharma, Inc.+ 805,200
42,000 Arterial Vascular Engineering, Inc.* 1,501,500
53,250 Beverly Enterprises, Inc.* 735,516
21,000 Bindley Western Industries, Inc. 693,000
26,800 Cooper Cos., Inc.* 976,525
32,400 Datascope Corp.* 860,625
36,100 Genesis Health Ventures, Inc.*+ 902,500
154,380 Gensia Sicor Inc.* 617,520
23,400 Health Care & Retirement Corp.* 922,837
29,400 Lincare Holdings, Inc.*+ 1,236,638
51,000 Mariner Health Group, Inc.* 847,875
15,900 MiniMed Inc.* 832,763
63,400 Novacare, Inc.* 744,950
16,000 Renal Care Group, Inc.* 705,000
31,600 Res-Care, Inc.*+ 582,625
23,000 Schein Pharmaceutical, Inc.* 612,375
50,500 Theragenics Corp.* 1,316,156
39,433 Total Renal Care Holdings, Inc., Class A Shares* 1,360,439
22,400 Trigon Healthcare, Inc.* 810,600
13,300 VISX, Inc.* 791,350
29,500 Wesley Jessen VisionCare, Inc.* 682,188
- --------------------------------------------------------------------------------
19,882,469
- --------------------------------------------------------------------------------
Integrated Oil -- 0.9%
19,000 Murphy Oil Corp. 963,063
30,000 Valero Energy Corp. 997,500
- --------------------------------------------------------------------------------
1,960,563
- --------------------------------------------------------------------------------
Materials & Processing -- 7.0%
31,700 AK Steel Holding Corp. 566,637
15,500 AptarGroup, Inc. 963,906
35,000 Crompton & Knowles Corp. 881,562
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Small Cap Blend Fund, Inc. 9
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) June 30, 1998
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Materials & Processing -- 7.0% (continued)
61,500 Gaylord Container Corp.* $ 472,781
10,900 H.B. Fuller Co. 604,269
29,559 Hexcel Corp.*+ 668,772
31,000 IMCO Recycling, Inc. 573,500
52,630 International Specialty Products, Inc.* 980,234
10,500 Lone Star Industries, Inc.+ 809,156
24,000 Martin Marietta Materials, Inc. 1,080,000
43,300 NL Industries, Inc.+ 866,000
15,500 OM Group, Inc. 639,375
23,000 Reliance Steel & Aluminum Co. 888,375
20,900 Simpson Manufacturing Co., Inc.* 807,263
10,400 Southdown, Inc.+ 742,300
34,600 Steel Dynamics, Inc.* 480,075
49,300 Terra Industries, Inc. 443,700
22,000 Tower Automotive, Inc.*+ 943,250
8,600 Tredegar Industries, Inc. 729,925
16,000 USG Corp.*+ 866,000
- --------------------------------------------------------------------------------
15,007,080
- --------------------------------------------------------------------------------
Other Energy -- 4.5%
20,200 Atwood Oceanics, Inc.* 804,212
27,200 BJ Services Co.*+ 790,500
11,600 Cliffs Drilling Co.* 380,625
48,250 Cross Timbers Oil Co. 919,766
13,700 Devon Energy Corp.+ 478,644
22,800 Dexter Corp. 725,325
59,700 EEX Corp.* 559,687
30,600 Forcenergy, Inc.* 545,062
18,800 Hanover Compressor Co.* 508,775
40,300 Marine Drilling Co., Inc.* 644,800
25,700 Newfield Exploration Co.* 639,288
33,900 Pool Energy Services Co.* 500,025
29,600 Seagull Energy Corp.* 490,250
41,690 Swift Energy Co.*+ 664,434
21,200 Veritas DGC, Inc.* 1,058,675
- --------------------------------------------------------------------------------
9,710,068
- --------------------------------------------------------------------------------
Producer Durables -- 5.8%
13,720 Aeroquip-Vickers, Inc. 800,905
29,200 AGCO Corp. 600,425
47,200 Berg Electronics Corp.* 923,350
19,300 The B.F. Goodrich Co. 957,762
17,100 C&D Technologies, Inc. 991,800
25,900 Comfort Systems USA, Inc.* 605,412
22,600 Cordant Technologies, Inc. 1,042,425
22,300 Graco, Inc. 777,712
26,700 Jacobs Engineering Group, Inc.* 857,738
25,500 Kaufman & Broad Home Corp. 809,625
13,800 Kennametal, Inc. 576,150
13,597 Lennar Corp. 401,112
10,500 Precision Castparts Corp. 560,438
21,300 Robbins & Myers, Inc.+ 619,031
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) June 30, 1998
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Producer Durables -- 5.8% (continued)
20,900 U.S. Home Corp.* $ 862,125
27,800 Watts Industries, Inc., Class A Shares 580,325
19,200 ZERO Corp. 544,800
- --------------------------------------------------------------------------------
12,511,135
- --------------------------------------------------------------------------------
Real Estate -- 7.0%
21,900 Arden Realty, Inc. 566,662
26,324 Avalon Bay Communities, Inc. 1,000,312
17,300 Cousins Properties, Inc. 516,837
57,000 Equity Inns, Inc. 751,687
21,500 Felcor Suite Hotels, Inc. 674,562
23,100 First Industrial Realty Trust, Inc. 733,425
38,200 Glenborough Realty Trust, Inc. 1,007,525
16,000 Health Care Properties Investors, Inc. 577,000
2,290 Horizon Group Properties, Inc.* 15,100
14,900 LaSalle Partners, Inc.* 663,050
37,700 Liberty Property Trust 963,706
21,800 Mack-Cali Realty Corp. 749,375
18,800 Mid-America Apartment Communities, Inc. 494,675
25,500 NVR, Inc.*+ 1,047,094
38,400 Nationwide Health Properties, Inc.* 916,800
45,800 Prime Retail, Inc. 546,738
43,930 Reckson Associates Realty Corp. 1,037,846
274 Reckson Services Industries, Inc.* 909
22,300 Regency Realty Corp. 560,288
44,410 Security Capital Pacific Trust* 999,225
15,700 Spieker Properties, Inc. 608,375
21,200 Trammell Crow Co.* 708,875
- --------------------------------------------------------------------------------
15,140,066
- --------------------------------------------------------------------------------
Technology -- 15.3%
24,970 Advanced Fibre Communications, Inc.*+ 1,000,361
15,700 Advent Software, Inc.* 659,400
18,600 Apple Computer, Inc.*+ 533,587
17,330 Applied Graphics Technologies, Inc.* 792,847
9,200 Aspect Development, Inc.*+ 695,750
23,900 Avid Technology, Inc.* 800,650
48,800 Brightpoint Inc.* 707,600
34,800 Burr-Brown Corp.* 730,800
72,600 CHS Electronics Inc.*+ 1,297,725
41,700 CIBER Inc.*+ 1,584,600
11,050 Citrix Systems Inc.* 755,544
22,300 Cohu, Inc. 542,169
29,400 Computer Horizons Corp.*+ 1,089,637
26,700 Computer Task Group, Inc. 894,450
20,600 Comsat Corp. 583,237
15,900 Comverse Technology, Inc.*+ 824,812
19,300 Envoy Corp.*+ 914,337
24,050 Information Management Resources, Inc.* 813,191
23,590 Keane, Inc.*+ 1,321,040
42,460 Legato Systems, Inc.* 1,655,940
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Small Cap Blend Fund, Inc. 11
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) June 30, 1998
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Technology -- 15.3% (continued)
21,300 Lycos, Inc.* $ 1,605,488
12,000 Micrel, Inc.* 390,000
33,500 Network Appliance, Inc.* 1,304,406
18,600 PMC-Sierra, Inc.* 871,875
23,000 Park Electrochemical Corp. 485,875
22,500 Policy Management Systems Corp.* 883,125
27,900 Sanmina Corp.*+ 1,210,163
21,000 Sapient Corp.*+ 1,107,750
23,000 Software AG Systems, Inc.* 672,750
23,330 Sterling Commerce, Inc.* 1,131,505
23,000 Symbol Technologies, Inc. 868,250
45,800 Systems & Computer Technology Corp.* 1,236,600
19,900 Tech Data Corp.* 853,213
10,900 Tekelec* 487,775
15,100 Visio Corp.* 721,025
28,400 Vitesse Semiconductor Corp.* 876,850
- --------------------------------------------------------------------------------
32,904,327
- --------------------------------------------------------------------------------
Utilities -- 6.5%
16,300 BEC Energy 676,450
35,100 Calenergy Co., Inc.*+ 1,055,194
49,740 Calpine Corp.* 1,004,126
17,800 CILCORP, Inc. 854,400
23,000 Connecticut Energy Corp. 641,125
61,065 DPL, Inc. 1,106,803
25,200 DQE, Inc.+ 907,200
99,480 El Paso Electric Co.* 913,972
32,200 MDU Resources Group, Inc. 1,149,138
20,900 New England Electric System 903,925
71,500 Paging Network, Inc.* 1,001,000
31,100 Sierra Pacific Resources 1,129,319
28,600 SkyTel Communications, Inc.* 669,419
36,300 Washington Gas Light Co. 971,025
20,600 WinStar Communications, Inc.*+ 884,513
- --------------------------------------------------------------------------------
13,867,609
- --------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost -- $200,374,273) 209,958,583
================================================================================
WARRANTS -- 0.0%
Financial Sevices -- 0.0%
18,200 Golden State Bancorp, Expire 1/1/01*
(Cost -- $90,266) 96,687
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) June 30, 1998
- --------------------------------------------------------------------------------
FACE
AMOUNT SECURITY VALUE
================================================================================
U.S. TREASURY BILLS -- 0.3%
$ 635,000 U.S. Treasury Bills, due 9/17/98
(Cost -- $628,090) $ 628,282
================================================================================
REPURCHASE AGREEMENT -- 2.2%
4,710,000 Goldman, Sachs & Co., 5.650% due 7/1/98;
Proceeds at maturity -- $4,710,739;
(Fully collateralized by U.S. Treasury Notes,
5.375% due 6/30/00; Market value -- $4,806,440)
(Cost -- $4,710,000) 4,710,000
================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $205,802,629**) $215,393,552
================================================================================
* Non-income producing security.
+ A portion of the security is on loan (See Note 7).
** Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Small Cap Blend Fund, Inc. 13
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost -- $205,802,629) $215,393,552
Cash 443
Collateral for securities on loan (Note 7) 41,024,800
Receivable for Fund shares sold 1,425,910
Dividends and interest receivable 194,009
Other assets 214,505
- -----------------------------------------------------------------------------------
Total Assets 258,253,219
- -----------------------------------------------------------------------------------
LIABILITIES:
Payable for securities on loan (Note 7) 41,024,800
Payable for securities purchased 146,780
Investment advisory fees payable 118,837
Investment administrative fees payable 18,672
Distribution fees payable 6,583
Payable to broker - variation margin 6,000
- -----------------------------------------------------------------------------------
Total Liabilities 41,321,672
- -----------------------------------------------------------------------------------
Total Net Assets $216,931,547
===================================================================================
NET ASSETS:
Par value of capital shares $ 15,280
Capital paid in excess of par value 197,575,681
Undistributed net investment income 52,720
Accumulated net realized gain on security transactions
and futures contracts 9,544,179
Net unrealized appreciation of investments and futures contracts 9,743,687
- -----------------------------------------------------------------------------------
Total Net Assets $216,931,547
===================================================================================
Shares Outstanding:
Class A 3,378,857
-------------------------------------------------------------------------------
Class B 1,614,580
-------------------------------------------------------------------------------
Class L 369,380
-------------------------------------------------------------------------------
Class Y 9,917,498
-------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $ 14.24
-------------------------------------------------------------------------------
Class B * $ 14.02
-------------------------------------------------------------------------------
Class L ** $ 14.01
-------------------------------------------------------------------------------
Class Y (and redemption price) $ 14.22
-------------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 5.26% of net asset value per share) $ 14.99
-------------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset value per share) $ 14.15
===================================================================================
</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 purchase.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
14 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations (unaudited) For the Six Months Ended June 30, 1998
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 1,053,692
Interest 316,605
- --------------------------------------------------------------------------------
Total Investment Income 1,370,297
- --------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 2) 639,851
Distribution fees 169,460
Administration fees (Note 2) 98,439
Registration 36,548
Shareholder and system servicing fees 32,197
Shareholder communications 12,364
Audit and legal 10,969
Custody 6,923
Directors' fees 2,472
Other 5,389
- --------------------------------------------------------------------------------
Total Expenses 1,014,612
- --------------------------------------------------------------------------------
Net Investment Income 355,685
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FUTURES CONTRACTS (NOTES 3 AND 5):
Realized Gain (Loss) From:
Security transactions (excluding short-term securities) 9,437,986
Futures contracts (138,349)
- --------------------------------------------------------------------------------
Net Realized Gain 9,299,637
- --------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments
and Futures Contracts:
Beginning of period 9,586,611
End of period 9,743,687
- --------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 157,076
- --------------------------------------------------------------------------------
Net Gain on Investments and Futures Contracts 9,456,713
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 9,812,398
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Small Cap Blend Fund, Inc. 15
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the Six Months Ended June 30, 1998 (unaudited)
and the Year Ended December 31, 1997
<TABLE>
<CAPTION>
1998 1997
=====================================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 355,685 $ 172,932
Net realized gain 9,299,637 9,590,820
Increase in net unrealized appreciation 157,076 5,188,816
- -----------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 9,812,398 14,952,568
- -----------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- (474,795)
Net realized gains (2,400,236) (7,596,619)
- -----------------------------------------------------------------------------------------------------
Decrease in Net Assets From Distributions to Shareholders (2,400,236) (8,071,414)
- -----------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 8):
Net proceeds from sale of shares 58,978,337 127,943,629
Net asset value of shares issued for reinvestment of dividends 557,713 2,945,999
Cost of shares reacquired (16,214,589) (24,484,001)+
- -----------------------------------------------------------------------------------------------------
Increase in Net Assets From Fund Share Transactions 43,321,461 106,405,627
- -----------------------------------------------------------------------------------------------------
Increase in Net Assets 50,733,623 113,286,781
NET ASSETS:
Beginning of period 166,197,924 52,911,143
- -----------------------------------------------------------------------------------------------------
End of period* $ 216,931,547 $ 166,197,924
=====================================================================================================
* Includes undistributed (overdistributed) net investment income of: $ 52,720 $ (302,965)
=====================================================================================================
</TABLE>
+ Amount reported is net of $452,851 in redemption fees charged through
December 31, 1997.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
16 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
The Smith Barney Small Cap Blend Fund, Inc. ("Fund"), a Maryland corporation, is
registered under the Investment Company Act of 1940, as amended. On June 23,
1997, the Fund became a diversified, open-end management investment company.
Prior to that date the Fund was a non-diversified, closed-end management
investment company and its shares were traded on the American Stock Exchange.
The significant accounting policies consistently followed by the Fund are: (a)
security transactions are accounted for on trade date; (b) securities traded on
a national securities exchange or on the Nasdaq National Market System are
valued at closing prices on such exchange or market; securities for which no
sales prices are reported are valued at the mean between the most recently
quoted bid and ask prices; (c) securities maturing within 60 days or less are
valued at cost plus accreted discount, or minus amortized premium, which
approximates value; (d) dividend income is recorded on the ex-dividend date and
interest income is recorded on the accrual basis; (e) dividends and
distributions to shareholders are recorded on the ex-dividend date; (f) gains or
losses on the sale of securities are calculated by using the specific
identification method; (g) direct expenses are charged to each class; management
fees and general fund expenses are allocated on the basis of relative net
assets; (h) the Fund intends to comply with the applicable provisions of the
Internal Revenue Code of 1986, as amended, pertaining to regulated investment
companies and to make distributions of taxable income sufficient to relieve it
from substantially all Federal income and excise taxes; (i) the character of
income and gains distributed are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles. At
December 31, 1997, 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 net investment loss and accumulated net realized gains
amounting to $3,218 and $8,391, respectively, was reclassified to paid-in
capital. Net investment income, net realized gains and net assets were not
affected by this change; and (j) 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 Transactions with Affiliated Persons
Travelers Investment Management Company ("TIMCO"), a subsidiary of Salomon Smith
Barney Holdings Inc. ("SSBH"), acts as investment manager to the Fund. The Fund
pays TIMCO a fee calculated at the annual rate of 0.65% of the Fund's average
daily net assets. Prior to June 23, 1997, the investment management fee paid was
0.75%. This fee is calculated daily and paid monthly.
Mutual Management Corp. ("MMC"), another subsidiary of SSBH, acts as the Fund's
administrator. As compensation for its services, the Fund pays MMC a fee
calculated at the annual rate of 0.10% of the Fund's average daily net assets.
Prior to June 23, 1997, the Fund paid an administration fee of 0.25%. This fee
is calculated daily and paid monthly.
For the six months ended June 30, 1998, Smith Barney Inc. ("SB"), also a
subsidiary of SSBH, was paid brokerage commissions of $11,495.
On June 12, 1998, the Fund's Class C shares were renamed as Class L shares.
Effective June 15, 1998, Class L shares are being sold at net asset value plus a
maximum initial sales charge of 1.00%. Class L shares also have a 1.00%
contingent deferred sales charge ("CDSC"), which applies if redemption occurs
within the first year of purchase.
- --------------------------------------------------------------------------------
Smith Barney Small Cap Blend Fund, Inc. 17
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
There is also a CDSC of 5.00% on Class B shares, which applies if redemption
occurs within one year from purchase and declines thereafter by 1.00% per year
until no CDSC is incurred.
For the six months ended June 30, 1998, SB received sales charges of
approximately $112,000 and $2,000 on sales of the Fund's Class A and Class L
shares, respectively. In addition, CDSCs paid to SB were approximately:
Class B Class L
================================================================================
CDSCs $14,000 $1,000
================================================================================
In addition, shareholders who held shares at the time of conversion to open-end
status on June 23, 1997, were subject to a 2.00% redemption fee until the end of
1997. For the year ended December 31, 1997, redemption fees paid to the Fund
were $452,851 for Class A shares.
Pursuant to a Distribution Plan, which became effective on June 23, 1997, the
Fund pays a service fee with respect to its Class A, B and L shares calculated
at the annual rate of 0.25% of the average daily net assets of each respective
class. In addition, the Fund also pays a distribution fee with respect to Class
B and L shares calculated at the annual rate of 0.75% of the average daily net
assets of each class. For the six months ended June 30, 1998, total Distribution
Plan fees were as follows:
Class A Class B Class L
================================================================================
Distribution Plan Fees $57,917 $91,201 $20,342
================================================================================
All officers and two directors of the Fund are employees of SB.
3. Investments
For the six months ended June 30, 1998, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases $173,282,181
- --------------------------------------------------------------------------------
Sales 132,598,915
================================================================================
At June 30, 1998, aggregate gross unrealized appreciation and depreciation of
investments for Federal income tax purposes were substantially as follows:
================================================================================
Gross unrealized appreciation $17,208,387
Gross unrealized depreciation (7,617,464)
- --------------------------------------------------------------------------------
Net unrealized appreciation $ 9,590,923
================================================================================
4. Repurchase Agreements
The Fund purchases (and its custodian takes possession of) U.S. government
securities from banks and securities dealers subject to agreements to resell the
securities to the sellers at a future date (generally, the next business day) at
an agreed-upon higher repurchase price. The Fund requires daily maintenance of
the market value of the collateral in amounts at least equal to the repurchase
price.
5. 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 the
custodian in the name of the broker. Additional securities are also segregated
up to the current market value of the futures contract. 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 received or made and recognized as assets due from or
liabilities due to the broker, depending upon whether unrealized gains or losses
are incurred.
- --------------------------------------------------------------------------------
18 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
When the contract is closed, the Fund records a realized gain or loss equal to
the difference between the proceeds from (or cost of) the closing transaction
and the Fund's basis in the contract. The Fund enters into such contracts to
hedge a portion of its portfolio.
The Fund bears the market risk that arises from changes in the value of the
financial instruments and securities indices (futures contracts).
At June 30, 1998, the Fund had the following open futures contracts:
# of Basis Market Unrealized
Purchased Contracts Contracts Expiration Value Value Gain
================================================================================
Mid Cap 400 40 9/98 $7,139,236 $7,292,000 $152,764
================================================================================
6. Option Contracts
Premiums paid when put or call options are purchased by the Fund, represent
investments, which are marked-to-market daily. When a purchased option expires,
the Fund will realize a loss in the amount of the premium paid. When the Fund
enters into a closing sales transaction, the Fund will realize a gain or loss
depending on whether the proceeds from the closing sales transaction are greater
or less than the premium paid for the option. When the Fund exercises a put
option, it will realize a gain or loss from the sale of the underlying security
and the proceeds from such sale will be decreased by the premium originally
paid. When the Fund exercises a call option, the cost of the security which the
Fund purchases upon exercise will be increased by the premium originally paid.
At June 30, 1998, the Fund had no open purchased call or put option contracts.
7. Lending of Portfolio Securities
The Fund has an agreement with its custodian whereby the custodian may lend
securities owned by the Fund to brokers, dealers and other financial
organizations, and receives a lenders fee. Fees earned by the Fund on securities
lending are recorded in interest income. Loans of securities by the Fund are
collateralized by cash, U.S. government securities or high quality money market
instruments that are maintained at all times in an amount at least equal to the
current market value of the securities loaned, plus a margin which may vary
depending on the type of securities loaned. The custodian establishes and
maintains the collateral in a segregated account. The Fund maintains exposure
for the risk of any losses in the investment of amounts received as collateral.
At June 30, 1998, the Fund loaned common stocks having a value of $39,861,604
and holds the following collateral for loaned securities:
Security Description Value
================================================================================
Repurchase Agreements:
Goldman, Sachs & Co. 6.250% due 7/1/98 $4,673,182
Morgan Stanley, 6.250% due 7/1/98 4,841,916
Time Deposits:
Banque Paribas, 6.500% due 7/1/98 9,162,396
Deutsche, 7.000% due 7/1/98 7,449,102
Svenska Handelbank Euro, 6.500% due 7/1/98 7,449,102
Toronto Dominion Euro, 6.250 due 7/1/98 7,449,102
- --------------------------------------------------------------------------------
Total $41,024,800
================================================================================
- --------------------------------------------------------------------------------
Smith Barney Small Cap Blend Fund, Inc. 19
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
8. Capital Shares
At June 30, 1998, the Fund had 400 million shares of capital stock authorized
with a par value of $0.001 per share. The Fund has the ability to issue multiple
classes of shares. Each share of a class represents an identical interest in the
Fund and has the same rights, except that each class bears certain expenses
specifically related to the distribution of its shares. Effective June 12, 1998,
the Fund adopted the renaming of existing Class C shares as Class L shares.
At June 30, 1998, total paid-in capital amounted to the following for each
class:
Class A Class B Class L Class Y
================================================================================
Total Paid-in Capital $36,352,526 $22,828,038 $5,123,969 $133,286,428
================================================================================
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1998 December 31, 1997+
------------------------- ----------------------------
Shares Amount Shares Amount
=================================================================================================
<S> <C> <C> <C> <C>
Class A
Shares sold 902,958 $ 12,949,857 674,438 $ 9,600,636
Shares issued on reinvestment 18,612 260,569 158,633 2,101,518
Shares redeemed (909,150) (12,836,220) (1,767,584) (23,585,099)++
- -------------------------------------------------------------------------------------------------
Net Increase (Decrease) 12,420 $ 374,206 (934,513) $ (11,882,945)
=================================================================================================
Class B
Shares sold 874,032 $ 12,300,808 908,111 $ 12,937,997
Shares issued on reinvestment 17,912 246,832 57,663 755,966
Shares redeemed (215,975) (3,039,469) (27,163) (374,336)
- -------------------------------------------------------------------------------------------------
Net Increase 675,969 $ 9,508,171 938,611 $ 13,319,627
=================================================================================================
Class L*
Shares sold 169,205 $ 2,403,528 241,885 $ 3,361,719
Shares issued on reinvestment 3,651 50,312 6,752 88,515
Shares redeemed (23,658) (338,900) (28,455) (441,253)
- -------------------------------------------------------------------------------------------------
Net Increase 149,198 $ 2,114,940 220,182 $ 3,008,981
=================================================================================================
Class Y
Shares sold 2,251,631 $ 31,324,144 7,672,217 $ 102,043,277
Shares issued on reinvestment -- -- -- --
Shares redeemed -- -- (6,350) (83,313)
- -------------------------------------------------------------------------------------------------
Net Increase 2,251,631 $ 31,324,144 7,665,867 $ 101,959,964
=================================================================================================
</TABLE>
+ For Class A, transactions are for the period from June 23, 1997 (date of
conversion to an open-end fund) to December 31, 1997. For Class B, L and
Y, transactions are for the period from inception to December 31, 1997.
Inception dates for Class B, L and Y are June 25, 1997, June 24, 1997 and
October 17, 1997, respectively.
++ Amount reported is net of $452,851 in redemption fees charged through
December 31, 1997.
* On June 12, 1998, Class C shares were renamed Class L shares.
- --------------------------------------------------------------------------------
20 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Class A Shares(1) 1998(2) 1997 1996 1995 1994 1993
===========================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 13.68 $ 12.30 $ 12.15 $ 11.78 $ 12.50 $ 11.49
- -----------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.01 0.04 0.05 0.11 0.05 0.01
Net realized and unrealized gain (loss) 0.71 3.23 2.14 2.31 (0.63) 1.01
- -----------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.72 3.27 2.19 2.42 (0.58) 1.02
- -----------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- (0.04) (0.04) (0.11) (0.05) (0.01)
Net realized gains (0.16) (1.98) (2.00) (1.94) (0.09) --
- -----------------------------------------------------------------------------------------------------------
Total Distributions (0.16) (2.02) (2.04) (2.05) (0.14) (0.01)
- -----------------------------------------------------------------------------------------------------------
Redemption Fee(3) -- 0.13 -- -- -- --
- -----------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 14.24 $ 13.68 $ 12.30 $ 12.15 $ 11.78 $ 12.50
- -----------------------------------------------------------------------------------------------------------
Total Return 5.27%++ 28.25% 20.56% 18.90% (4.36)% 8.90%
- -----------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $48,119 $46,036 $52,911 $52,546 $51,641 $54,809
- -----------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.14%+ 1.21% 1.21% 1.22% 1.22% 1.24%
Net investment income 0.24+ 0.24 0.43 0.84 0.43 0.08
- -----------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 70% 140% 151% 177% 45% 87%
- -----------------------------------------------------------------------------------------------------------
Average commissions per share paid
on equity transactions(4) $ 0.05 $ 0.05 $ 0.05 $ 0.05 -- --
===========================================================================================================
</TABLE>
(1) The Fund operated as a closed-end investment company until June 23, 1997.
As of that date all existing shares were converted to Class A shares.
Closed-end funds are not subject to the same legal requirements as
open-end funds, especially with respect to liquidity requirements. The
total returns noted for each year may have been different if the Fund had
been an open-end fund from inception. The Fund's total returns while it
was a closed-end fund are based on net asset value.
(2) For the six months ended June 30, 1998 (unaudited).
(3) Amount relates to a redemption fee which was in effect through December
31, 1997.
(4) As of September 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per share.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Smith Barney Small Cap Blend Fund, Inc. 21
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Class B Shares Class L Shares(1) Class Y Shares
-------------- ----------------- --------------
1998(2) 1997(3) 1998(2) 1997(4) 1998(2) 1997(5)
===================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 13.52 $ 13.34 $ 13.51 $ 13.24 $ 13.63 $ 13.87
- -------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss) (0.03) (0.01) (0.03) (0.01) 0.05 0.01
Net realized and
unrealized gain (loss) 0.69 2.18 0.69 2.27 0.70 (0.21)
- -------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.66 2.17 0.66 2.26 0.75 (0.20)
- -------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- (0.01) -- (0.01) -- (0.04)
Net realized gains (0.16) (1.98) (0.16) (1.98) (0.16) --
- -------------------------------------------------------------------------------------------------------------------
Total Distributions (0.16) (1.99) (0.16) (1.99) (0.16) (0.04)
- -------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 14.02 $ 13.52 $ 14.01 $ 13.51 $ 14.22 $ 13.63
- -------------------------------------------------------------------------------------------------------------------
Total Return++ 4.89% 16.73% 4.89% 17.53% 5.51% (1.42)%
- -------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $ 22,635 $ 12,685 $ 5,175 $ 2,974 $141,003 $104,503
- -------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets+:
Expenses 1.90% 1.99% 1.90% 2.00% 0.84% 1.11%
Net investment income (loss) (0.49) (0.26) (0.49) (0.26) 0.55 0.58
- -------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 70% 140% 70% 140% 70% 140%
- -------------------------------------------------------------------------------------------------------------------
Average commissions per share
paid on equity transactions $ 0.05 $ 0.05 $ 0.05 $ 0.05 $ 0.05 $ 0.05
===================================================================================================================
</TABLE>
(1) On June 12, 1998, Class C shares were renamed Class L shares.
(2) For the six months ended June 30, 1998 (unaudited).
(3) For the period from June 25, 1997 (inception date) to December 31, 1997.
(4) For the period from June 24, 1997 (inception date) to December 31, 1997.
(5) For the period from October 17, 1997 (inception date) to December 31,
1997.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
22 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Additional Shareholder Information (unaudited)
- --------------------------------------------------------------------------------
On March 9, 1998, a special meeting of shareholders of the Fund was held for the
purpose of voting on the following matters:
1. To elect Directors of the Fund; and
2. To approve or disapprove the reclassification, modification and/or
elimination of certain fundamental investment policies.
The results of the vote on Proposal 1 were as follows:
<TABLE>
<CAPTION>
Shares Voted Percentage Shares Voted Percentage
Name of Directors For Shares Voted Against Shares Voted
=========================================================================================
<S> <C> <C> <C> <C>
Donald R. Foley 8,077,691.911 97.588% 199,657.158 2.412%
Paul Hardin 8,101,363.688 97.874 175,985.401 2.126
Heath B. McLendon 8,106,017.405 97.930 171,331.664 2.070
Roderick C. Rasmussen 8,082,931.671 97.651 194,417.398 2.349
Bruce D. Sargent 8,107,263.505 97.945 170,085.564 2.055
John P. Toolan 8,088,314.370 97.716 189,034.699 2.284
=========================================================================================
</TABLE>
Proposal 2 requested that shareholders approve certain changes to the
fundamental policies of the Fund in order to modernize them in view of certain
regulatory, business or industry developments that have occurred since original
adoption of these policies by the Fund. The following chart demonstrates that
all proposals were approved by shareholders.
Please note that "M" indicates a modification of the policy; "E" indicates the
elimination of the policy; and "R" indicates the reclassification of the policy
from fundamental (which would require shareholder approval to change) to
non-fundamental (which can be changed by a vote of the Board of Directors).
================================================================================
M Diversification Approved
- --------------------------------------------------------------------------------
M Senior Securities Approved
- --------------------------------------------------------------------------------
M Industry Concentration Approved
- --------------------------------------------------------------------------------
M Borrowing Approved
- --------------------------------------------------------------------------------
E Ability to Pledge Assets Approved
- --------------------------------------------------------------------------------
M Lending Approved
- --------------------------------------------------------------------------------
M Underwriting of Securities Approved
- --------------------------------------------------------------------------------
R Margin and Short-Sales Approved
- --------------------------------------------------------------------------------
M Real Estate Approved
- --------------------------------------------------------------------------------
R Exercising Control or Management Approved
================================================================================
The information below reports the lowest percentage of shares voting for the
proposals, the highest percentage of shares voting against and abstaining by
shareholders of the Fund on all proposals.
Shares Percentage Shares Percentage Percentage
Voted of Shares Voted of Shares Shares of Shares
For Voted Against Voted Abstaining Abstained
================================================================================
7,463,739.932 92.634% 130,011.569 1.613% 463,499.568 5.730%
================================================================================
- --------------------------------------------------------------------------------
Smith Barney Small Cap Blend Fund, Inc. 23
<PAGE>
[This page intentionally left blank]
<PAGE>
Smith Barney
Small Cap Blend
Fund, Inc.
Directors
Donald R. Foley
Paul Hardin
Heath B. McLendon, Chairman
Roderick C. Rasmussen
John P. Toolan
Joseph H. Fleiss, Emeritus
Officers
Heath B. McLendon
President and
Chief Executive Officer
Lewis E. Daidone
Senior Vice President
and Treasurer
Sandip A. Bhagat, CFA
Vice President
Thomas M. Reynolds
Controller
Christina T. Sydor
Secretary
Investment Manager
Travelers Investment Management Company
Distributor
Smith Barney Inc.
Custodian
PNC Bank, N.A.
Shareholder Servicing Agent
First Data Investor Services Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is submitted for the general information of shareholders of Smith
Barney Small Cap Blend Fund, Inc. It is not authorized for distribution to
prospective investors unless accompanied by a current Prospectus for the Fund,
which contains information concerning the Fund's investment policies and
expenses as well as other pertinent information.
SMITH BARNEY
A Member of TravelersGroup[LOGO]
Smith Barney
Small Cap Blend Fund, Inc.
Smith Barney Mutual Funds
388 Greenwich Street
New York, New York 10013
www.smithbarney.com
FD01319 8/98
