[PHOTO OMITTED]
[PHOTO OMITTED] Smith Barney
Small Cap Blend
Fund, Inc.
--------------------------------
ANNUAL REPORT
--------------------------------
December 31, 1997
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.(SM)
<PAGE>
Smith Barney Small Cap
Blend Fund, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Smith Barney Small Cap Blend Fund, Inc. ("Fund"), formerly the Smith Barney
Disciplined Small Cap Fund, Inc., seeks long-term capital appreciation by
investing primarily in the common stock of companies with relatively small
market capitalization. The Fund has a widely diversified portfolio structured to
mirror a broad measure of the small-cap market in terms of over all risk and
sector weightings. The Fund's management team combines a sophisticated
statistical model to screen a large universe and an active management approach
used to identify companies that are likely to outperform their industry peer
group.
- --------------------------------------------------------------------------------
WHAT'S INSIDE
- --------------------------------------------------------------------------------
Shareholder Letter............................................................ 1
An Interview with Portfolio Manager
Sandip A. Bhagat, CFA......................................................... 4
Historical Performance........................................................ 6
Smith Barney Small Cap Blend Fund, Inc.
at a Glance................................................................... 8
Schedule of Investments....................................................... 9
Statement of Assets and Liabilities.......................................... 17
Statement of Operations...................................................... 18
Statements of Changes in Net Assets.......................................... 19
Notes to Financial Statements................................................ 20
Financial Highlights......................................................... 24
Independent Auditors' Report................................................. 26
Tax Information.............................................................. 27
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Smith Barney Small Cap Blend Fund, Inc.'s
Average Annual Total Returns Ended
December 31, 1997
Without Sales Charges*
----------------------------------------
Class A+ Class B Class C
================================================================================
One-Year 28.25% N/A N/A
- --------------------------------------------------------------------------------
Five-Year 14.77 N/A N/A
- --------------------------------------------------------------------------------
Since Inception++ 11.56 16.73%## 17.53%##
================================================================================
With Sales Charges**
----------------------------------------
Class A+ Class B Class C
================================================================================
One-Year 21.81% N/A N/A
- --------------------------------------------------------------------------------
Five-Year 13.60 N/A N/A
- --------------------------------------------------------------------------------
Since Inception++ 10.83 11.73%## 16.53%##
================================================================================
* 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 shares or the applicable contingent deferred sales
charges ("CDSC") with respect to Class B and C shares. Prior to June 23,
1997, dividends were reinvested according to the Fund's reinvestment plan,
thereafter at net asset value.
** 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 shares
reflect the deduction of the current maximum initial sales charge of 5.00%;
and Class B shares reflect the deduction of a 5.00% CDSC, which applies if
shares are redeemed within one year from initial purchase and declines
thereafter by 1.00% per year until no CDSC is incurred. Class C shares
reflect the deduction of a 1.00% CDSC, which applies if shares are redeemed
within the first year of purchase.
+ 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.
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.
++ Inception dates for Class A, B and C 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.
## Total return is not annualized, as it may not be representative of the total
return for the year.
<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 annual report for the Smith Barney Small
Cap Blend Fund, Inc. ("Fund"), formerly known as the Smith Barney Disciplined
Small Cap Fund, Inc., for the year ended December 31, 1997. In this letter, we
comment on the market environment during 1997 with a focus on the second half
and briefly review the Fund's investment strategy. In addition, an interview
with Portfolio Manager Sandip A. Bhagat, CFA, appears on page four. A detailed
summary of performance and current holdings can be found in the report that
follows.
As you may know, your Fund's name has been changed from Smith Barney Disciplined
Small Cap Fund, Inc. to Smith Barney Small Cap Blend Fund, Inc. You were
recently sent a letter and a supplement to the Fund's prospectus which included
information about the name change.
Performance Update
During the second half of 1997, the Fund had a total return of 17.22% for Class
A shares on net asset value ("NAV") without sales charges, assuming reinvestment
of dividends and capital gain distributions. The Fund's performance for the six
months ended December 31, 1997 significantly outperformed the Russell 2500
Index, which recorded a total return of 11.78% over the same period. (The
Russell 2500 Index is a broad-based index representing smaller sized U.S.
companies.) For the year ended December 31, 1997, the Fund achieved a total
return of 28.25%, compared to the 24.40% return of the Russell 2500 Index over
the same period.
Economic and Market Overview
The big story in the second half of 1997 was the Asian economic and financial
crisis. What started out as a localized disturbance in Thailand in July 1997
soon spread through the other countries in Southeast Asia and wreaked havoc on
their currency and capital markets. The events in Asia raise the specter of a
global economic slowdown and prospects of global deflation.
For most of the year, the U.S. economy continued to grow with a near absence of
inflationary pressures. Consumer prices rose only modestly while wholesale
prices actually fell. Never before has the rate of inflation remained so low at
this late stage of an economic expansion.
While we believe that strong productivity gains have contributed to the recent
disinflationary trend, another positive factor has now come into play for the
outlook on U.S. inflation. With the significant devaluation of several Asian
currencies, import prices should fall and push domestic inflation even lower.
Prices of some of the most important industrial commodities, including oil and
copper, have tumbled in recent months and the price of gold, a traditional hedge
against inflation, was well below $300 per ounce and at an 18-year low in
December 1997.
We believe that inflation will continue to remain subdued. Despite a tight labor
market in the U.S., wage inflation has not surged. Global deflationary pressures
should offset wage inflation in 1998. While we acknowledge the arguments in
favor of global deflation, we have not seen enough evidence to foresee zero or
negative inflation in 1998. Moreover, while it is difficult to predict the
eventual impact on U.S.
- --------------------------------------------------------------------------------
Smith Barney Small Cap Blend Fund, Inc. 1
<PAGE>
exports, most reasonable estimates of growth shortfalls suggest that the impact
of the Asian turmoil on U.S. Gross Domestic Product ("GDP") growth will be no
more than roughly -0.5%.
1997 turned out to be another spectacular year for the U.S. stock market. For
the first time ever, the U.S. stock market posted three consecutive years of
gains in excess of 20%. The current bull market continues to be driven by stable
economic growth, robust earnings growth and low inflation.
The events in Southeast Asia came into sharp focus for U.S. investors when a
sell-off in Hong Kong, a beacon of stability in the region, dropped the Dow
Jones Industrial Average by 554 points on Monday, October 27 and created its
largest point loss in history. After a wild swing in trading the following day,
stock prices began to stabilize. Despite more bad news in terms of large-scale
bankruptcies in South Korea and Japan in the ensuing weeks, U.S. investors
assessed a relatively modest impact on the domestic economy and the stock market
was able to recover its losses from Gray Monday and even nudge higher by
year-end in select sectors.
Portfolio Review
During the second half of 1997, stock selection in the health care, consumer
discretionary and technology sectors made the strongest positive contribution to
the Fund's overall relative performance. In the health care sector, our biggest
relative performance gain came from our overweighted positions in a number of
drug manufacturers, including Watson Pharmaceuticals and Dura Pharmaceuticals,
both of which benefited from a strong new product introductions, attractive
valuations and earnings surprises. Medical device manufacturers Minimed, DePuy
and Theragenics all performed well as they obtained government approval for
introducing new devices into niche segments of the drug delivery or orthopedics
marketplaces.
In the consumer discretionary sector, our biggest relative performance gain came
from our overweighted positions in a number of specialty retailers, including
Family Dollar Stores and Borders Group, which benefited from a strong domestic
economy and healthy trends in consumer spending. The portfolio also was helped
by solid advertising trends and merger activity in the media industry, which
boosted the stocks of Chancellor Media and HSN.
In the technology sector, in which investors became increasingly concerned about
the negative implications of the Asian crisis upon growth rates and earnings,
our underweighting of semiconductor and semiconductor equipment stocks helped
the Fund's returns. In the computer information consulting services group, which
benefited as investors again focused on the year 2000 computing problem and
possible solutions, our holdings in Ciber, Keane and Computer Horizons all added
to portfolio performance.
Market Outlook
We expect that the uncertainty on the earnings front as a result of the Asian
crisis will sustain the high level of volatility that we saw in 1997, a year
which saw the Dow Jones Industrial Average move up or down by more than 1% every
third trading day on average. We remain cautious about the stock market in the
short run. Over the long term, a friendly interest rate environment and
reasonable earnings strength preclude the prospect of a sustained bear market.
The key to stock market performance in 1998 will be the extent to which
corporate profits remain immune to the problems in Asia. The obvious
contributors to likely shortfalls in earnings will be currency translation
losses and lower export revenues stemming from lower demand in Asia. With
current valuations at fairly high levels, the stock market will be intolerant to
earnings disappointments.
- --------------------------------------------------------------------------------
2 1997 Annual Report to Shareholders
<PAGE>
A number of positive fundamental factors argue in favor of favorable small-cap
stock performance in 1998. Small-cap stocks have endured a sustained cycle of
underperformance relative to large-cap stocks over the last three years. In
large part, the divergence in performance (and valuation) was explained by the
superior earnings momentum of large-cap stocks. In the last several weeks,
however, changes in earnings expectations as measured by analyst revisions have
turned in favor of small-cap stocks relative to large-cap stocks. The recent
reduction in the capital gains tax rate should also favor small-cap stocks. With
a low dividend yield, small-cap stocks derive most of their total return from
capital appreciation and should, therefore, benefit from a lower capital gains
tax rate.
We suspect that the global stock markets are currently more vulnerable to the
woes of a weak economy than the risk of higher interest rates stimulated by
economic strength. It is difficult to gauge the precise impact of the Asian
crisis on corporate earnings and, as a result, 1998 promises to be a year of
great uncertainty.
In this environment, we believe that it is particularly important to identify
companies with sustainable earnings growth at attractive valuations across a
wide variety of industries. In our disciplined approach to stock selection, we
emphasize stocks that exhibit improving fundamentals as measured by changes in
analysts' earnings estimates and the trend of recent earnings surprises, and
which also trade at a reasonable price-to-earnings ratio relative to expected
earnings growth rates.
In the technology sector, we are maintaining an emphasis in Ciber, a leading
information technology consulting company which is generating strong earnings
gains, and VLSI Technology, a leading designer and manufacturer of
semiconductors used in wireless and digital telecommunications applications. In
the health care sector, we continue to hold positions in Cooper Companies, a
maker of contact lenses and related eye products.
In the consumer sector, our focus remains on diversified media companies like
A.H. Belo, as well as retailers that demonstrate above-average sales and
earnings momentum, including Family Dollar Stores, The Buckle and Borders Group.
In consumer staples, we emphasize Canandaigua Brands, a leading producer and
marketer of spirits, with rising earnings and an attractive valuation.
On a more somber note, we are saddened by the loss of an outstanding physician
and Director of the Fund, Dr. Francis P. Martin. His knowledge and wisdom will
be missed.
In closing, thank you for investing in the Smith Barney Small Cap Blend Fund,
Inc. We look forward to continuing to help you pursue your financial goals.
Sincerely,
/s/ Heath B. McLendon /s/ Sandip A. Bhagat
Heath B. McLendon Sandip A. Bhagat, CFA
Chairman Vice President
January 26, 1998
- --------------------------------------------------------------------------------
Top Ten Holdings* As of December 31, 1997
- --------------------------------------------------------------------------------
1. LCI International, Inc. 0.8%
- --------------------------------------------------------------------------------
2. A.G. Edwards, Inc. 0.6
- --------------------------------------------------------------------------------
3. Century Telephone Enterprises, Inc. 0.6
- --------------------------------------------------------------------------------
4. HSN, Inc. 0.6
- --------------------------------------------------------------------------------
5. Pinnacle West Capital Corp. 0.6
- --------------------------------------------------------------------------------
6. U.S. Office Products Co. 0.6
- --------------------------------------------------------------------------------
7. Vulcan Materials Co. 0.6
- --------------------------------------------------------------------------------
8. Borders Group, Inc. 0.5
- --------------------------------------------------------------------------------
9. Ecolab Inc. 0.5
- --------------------------------------------------------------------------------
10. MAPCO, Inc. 0.5
- --------------------------------------------------------------------------------
* As a percentage of total investments.
- --------------------------------------------------------------------------------
Smith Barney Small Cap Blend Fund, Inc. 3
<PAGE>
- --------------------------------------------------------------------------------
An Interview with Portfolio Manager
Sandip A. Bhagat, CFA
- --------------------------------------------------------------------------------
Sandip A. Bhagat, CFA, is the portfolio manager for the Smith Barney Small Cap
Blend Fund, Inc. (formerly known as the Smith Barney Disciplined Small Cap Fund,
Inc.). Sandip has extensive portfolio management experience in quantitative
investment management involving stocks, asset allocation, currencies and
derivatives. He received his B.S. degree in Chemical Engineering from the
University of Bombay in 1981 and an M.S. in Chemical Engineering from the
University of Connecticut in 1984. Sandip later received an M.B.A. from the
University of Connecticut in 1985.
Sandip, how is the Asian financial crisis affected the Fund or your investment
management approach?
Sandip: Technology stocks that have had significant exposure to Southeast Asia
have been hit hard in the stock market, as have commodity and basic material
stocks. In fact, the price of most commodities has plummeted. However, the Fund
has been relatively immune to these developments because our portfolio is sector
neutral. So we did not and will not have a bet on specific industry groups and
our exposure to these groups is similar to the broad universe. We are pleased to
report that the Fund's portfolio has performed in line with the market during
this period of market turbulence.
Small-cap stocks have continued to lag the larger ones over the past year. Why?
Sandip: That's an interesting question because there are so many fundamental
arguments in favor of small-cap stocks at the moment. Small-cap stocks have
underperformed significantly over the last several years, as a result valuations
for these stocks have become quite attractive. Looking ahead to 1998, we think
that small-cap stocks will see even more upward revisions to earnings estimates
than large-cap, multi-national companies going forward. In addition, as we noted
in our letter, small-cap stocks stand to benefit from recent tax law changes.
The reduction in the capital gains tax should favor small-cap stocks because
they derive a larger percentage of their total return from capital gains.
Yet, both large- and small-cap stocks were punished equally hard back on what we
refer to as "gray Monday," October 27, 1997. On that day events in Hong Kong
caused the Dow Jones Industrial Average to fall more than 550 points. Since
then, large-cap stocks have rebounded to recover most of those losses and even
finish higher; but small-cap stocks have languished.
Why? The stock market is nervous, investors are fairly jittery about the overall
market and valuations are historically expensive. All of this means that
investors have been very intolerant of earnings disappointments. Any negative
earnings surprises have been dealt with mercilessly and investors have been
particularly harsh in their treatment of small-cap stock earnings
disappointments.
What role should small-cap stocks play in a typical portfolio?
Sandip: Over time, small-cap stocks have performed differently than large-cap
stocks and they have outperformed relative to large-cap stocks over the long
term. However, even more importantly, small-caps do not move in perfect tandem
with large-cap stocks. There is a strong diversification argument for small-cap
stocks and many well-diversified portfolios could benefit from some exposure in
this area.
However, investors should keep in mind that small-cap stocks are often more
volatile over the short-term and I would suggest that they consult with their
Financial Consultant about why this asset class may be appropriate for them.
- --------------------------------------------------------------------------------
4 1997 Annual Report to Shareholders
<PAGE>
How do you manage the Small Cap Blend Fund?
Sandip: The Fund is managed to achieve two broad investment objectives. First,
provide investors with reliable exposure to the small-cap stock universe.
Second, achieve consistent outperformance relative to this broad universe. The
Fund attempts to fulfill both of these missions at the same time. In order to
provide exposure, the Fund remains invested all the time.
With respect to our second mission, we don't try to time the market by moving in
and out of stocks. We don't try to guess which industry groups will set the
world on fire based on economic expectations. And we don't emphasize any one
stock-picking style at the expense of others. There's nothing inherently wrong
with these approaches, it's just that they tend to run hot and cold. There may
be periods of good performance, but they're often followed by dry spells. With
the Fund, we're trying to eliminate the peaks and valleys and deliver more
consistent performance.
Through our quantitative stock selection model, we ask three questions about the
companies we follow: "Are earnings growing at a steady and consistent pace?" "Is
the stock price attractive relative to potential earnings growth?" And, lastly,
"Is the stock a good value compared with similar companies?" 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's likely to be overweighted in the Fund's
portfolio relative to the Russell 2500 Index.
We believe that careful stock selection is really the essence of what we do as
portfolio managers. We don't spend time agonizing about inflation or interest
rates or where we are in the business cycle. We pick stocks, period. And since
there are so many small-cap stocks from which to choose, we rely on a highly
sophisticated computer model to make our initial judgments.
In light of the recent market volatility, are you pleased with how your Fund's
quantitative investment approach has performed?
Sandip: Yes, it has been gratifying to see the Fund hold up and deliver
performance that has been in-line with its peer group and asset class. Again,
through our approach, we're trying to achieve consistent relative performance.
We don't want our share holders to pick up the paper and discover that the Fund
has underperformed the market by a substantial amount, although we cannot
guarantee any particular level of performance. There's enough short-term
volatility in small-cap stocks already. Why create the potential for more?
Sandip, thanks for spending some time with us today.
- --------------------------------------------------------------------------------
Smith Barney Small Cap Blend Fund, Inc. 5
<PAGE>
- --------------------------------------------------------------------------------
Historical Performance -- Class A Shares
- --------------------------------------------------------------------------------
Net Asset Value
-------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
================================================================================
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 $6.80
================================================================================
- --------------------------------------------------------------------------------
Historical Performance -- Class B Shares
- --------------------------------------------------------------------------------
Net Asset Value
------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
================================================================================
Inception* -- 12/31/97 $13.34 $13.52 $0.01 $1.98 16.73%+
================================================================================
- --------------------------------------------------------------------------------
Historical Performance -- Class C Shares
- --------------------------------------------------------------------------------
Net Asset Value
------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
================================================================================
Inception* -- 12/31/97 $13.24 $13.51 $0.01 $1.98 17.53%+
================================================================================
- --------------------------------------------------------------------------------
Historical Performance -- Class Y Shares
- --------------------------------------------------------------------------------
Net Asset Value
------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
================================================================================
Inception* -- 12/31/97 $13.87 $13.63 $0.04 $0.00 (1.42)%+
================================================================================
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
- --------------------------------------------------------------------------------
6 1997 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Average Annual Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
-----------------------------------------------
Class A+ Class B Class C Class Y
================================================================================
Year Ended 12/31/97 28.25% N/A N/A N/A
- --------------------------------------------------------------------------------
Five Years Ended 12/31/97 14.77 N/A N/A N/A
- --------------------------------------------------------------------------------
Inception* through 12/31/97 11.56 16.73%++ 17.53%++ (1.42)%++
================================================================================
With Sales Charge(2)
-----------------------------------------------
Class A+ Class B Class C Class Y
================================================================================
Year Ended 12/31/97 21.81% N/A N/A N/A
- --------------------------------------------------------------------------------
Five Years Ended 12/31/97 13.60 N/A N/A N/A
- --------------------------------------------------------------------------------
Inception* through 12/31/97 10.83 11.73%++ 16.53%++ (1.42)%++
================================================================================
- --------------------------------------------------------------------------------
Cumulative Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
================================================================================
Class A (Inception* through 12/31/97) 138.36%
- --------------------------------------------------------------------------------
Class B (Inception* through 12/31/97) 16.73++
- --------------------------------------------------------------------------------
Class C (Inception* through 12/31/97) 17.53++
- --------------------------------------------------------------------------------
Class Y (Inception* through 12/31/97) (1.42)++
================================================================================
(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 shares or the applicable contingent deferred sales
charges ("CDSC") with respect to Class B and C shares. Prior to June 23,
1997, dividends were reinvested according to the Fund's dividend
reinvestment plan, thereafter, at net asset value.
(2) 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 shares reflect the deduction of the current maximum sales
charge of 5.00% and Class B shares reflect the deduction of a 5.00% CDSC,
which applies if shares are redeemed within one year from initial purchase
and declines thereafter by 1.00% per year until no CDSC is incurred. Class C
shares reflect the deduction of a 1.00% CDSC, which applies if shares are
redeemed within the first year of purchase.
+ 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.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
* Inception dates for Class A, B, C 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. 7
<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+
- --------------------------------------------------------------------------------
January 1990 -- December 1997
[LINE GRAPH OMITTED]
+ 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 December 31, 1997. As of June 23, 1997, all existing shares
became Class A shares. The Fund operated as closed-end 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 Stocks*
----------------------------------------------
[THE FOLLOWING TABLE WAS DEPICTED AS A BAR CHART IN THE PRINTED MATERIAL]
4.8% Autos & Transportation
19.9% Consumer Discretionary
2.9% Consumer Staples
16.5% Finance
8.6% Health Care
13.4% Materials & Processing
1.0% Oil Integrated - Domestic
4.2% Other Energy
5.6% Producer Durables
13.3% Technology
9.9% Utilities
* As a percentage of total common stocks.
Investment Breakdown
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS DEPICTED AS A PIE CHART IN THE PRINTED MATERIAL]
Repurchase Agreement, Warrant and U.S. Treasury Bills 0.5%
Common Stocks 99.5%
- --------------------------------------------------------------------------------
8 1997 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments December 31, 1997
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
COMMON STOCKS -- 99.5%
Autos & Transportation -- 4.8%
7,800 Airborne Freight Corp. $ 484,575
19,900 Avondale Industries, Inc.* 590,781
15,600 Continental Airlines, Inc., Class B Shares*+ 750,750
4,800 Cummins Engine Co., Inc.+ 283,500
9,300 GATX Corp. 674,831
5,700 Intermet Corp. 99,750
16,600 Lear Corp.* 788,500
27,610 MascoTech, Inc. 507,333
16,800 Mesaba Holdings, Inc.* 436,800
14,900 Motive Power Industries, Inc. 346,425
21,000 Navistar International Corp.* 521,062
21,600 Overseas Shipholding Group, Inc. 471,150
18,500 Swift Transportation Co., Inc.* 598,937
13,200 The Timken Co. 453,750
20,000 US Freightways Corp. 650,000
- --------------------------------------------------------------------------------
7,658,144
- --------------------------------------------------------------------------------
Consumer Discretionary -- 19.8%
25,260 AccuStaff, Inc.* 580,980
14,000 Advanced Lighting Technologies, Inc.* 266,000
13,300 A.H. Belo Corp. 746,462
12,700 Alberto Culver Co., Class A Shares 342,900
10,300 Apollo Group, Inc., Class A Shares* 486,675
24,850 Arbor Drugs, Inc. 459,725
26,640 Borders Group, Inc.* 834,165
12,200 The Buckle, Inc.* 417,850
13,300 Caribiner International, Inc.*+ 591,850
10,100 Chancellor Media Corp.* 753,712
13,200 CoachUSA, Inc.* 442,200
19,900 CompUSA, Inc.* 616,900
8,090 Computer Learning Centers, Inc.*+ 495,512
6,640 Consolidated Graphics, Inc.* 309,590
33,388 Consolidated Products, Inc.* 546,720
16,900 Consolidated Stores Corp.* 742,543
10,600 CORT Business Service Corp.* 422,012
14,500 Data Processing Resources Corp.* 369,750
10,700 Ethan Allen Interiors, Inc. 412,618
25,650 Family Dollar Stores, Inc. 751,865
31,630 Foodmaker, Inc.* 476,426
8,000 Fred Meyer, Inc.*+ 291,000
21,300 Furniture Brands International, Inc.* 436,650
23,200 General Nutrition Cos., Inc., Class A Shares* 788,800
4,700 Herman Miller, Inc. 256,443
14,000 Holophane Corp.* 346,500
3,900 HON Industries, Inc. 230,100
19,485 HSN, Inc.* 1,003,477
12,900 Jones Apparel Group, Inc.* 554,700
19,900 Kellwood Co. 597,000
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Small Cap Blend Fund, Inc. 9
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) December 31, 1997
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Consumer Discretionary -- 19.8% (continued)
10,900 Mail-Well, Inc.* $ 441,450
18,200 Maytag Corp. 679,087
5,900 McClatchy Newspapers, Inc., Class A Shares 160,406
10,720 The Men's Wearhouse, Inc.* 372,520
14,500 Meredith Corp. 517,468
26,110 Merrill Corp. 607,057
27,700 Mohawk Industries, Inc.* 607,668
12,100 National Service Industries, Inc. 599,706
17,600 Ogden Corp. 496,100
15,300 Papa John's International, Inc.*+ 533,587
11,000 Payless ShoeSource. Inc.* 738,375
19,800 Performance Food Group Co.* 470,250
15,200 Proffitt's, Inc.* 432,250
19,792 Promus Hotel Corp.* 831,264
7,800 Quality Food Centers, Inc.* 522,600
36,160 Rio Hotel & Casino Inc.* 759,360
9,250 Robert Hall International, Inc.* 370,000
18,100 Ross Stores, Inc. 658,387
10,400 St. John's Knits, Inc. 416,000
11,900 StaffMark, Inc.* 376,337
7,100 Starbucks Corp.* 272,462
13,200 Stewart Enterprises, Inc., Class A Shares 615,450
35,340 Stride Rite Corp. 424,080
18,530 U.S. Industries, Inc. 558,216
48,700 U.S. Office Products Co.* 955,757
18,500 Unifi, Inc. 752,718
21,600 Valassis Communications, Inc.* 799,200
16,500 VWR Scientific Products Corp.* 466,125
16,600 West TeleServices Corp.* 199,200
27,235 Wolverine World Wide, Inc. 616,191
- --------------------------------------------------------------------------------
31,820,396
- --------------------------------------------------------------------------------
Consumer Staples -- 2.9%
10,900 Canandaigua Brands, Inc., Class A Shares* 603,587
12,010 Dean Foods Co. 714,595
14,000 The Earthgrains Co. 658,000
14,500 International Multifoods Corp. 410,531
18,600 Interstate Bakeries Corp.+ 695,175
16,800 Lance, Inc. 442,050
15,500 Smithfield Foods, Inc.* 511,500
10,600 Suiza Foods Corp.* 631,362
- --------------------------------------------------------------------------------
4,666,800
- --------------------------------------------------------------------------------
Finance -- 16.4%
23,810 A.G. Edwards, Inc. 946,466
8,100 ALBANK Financial Corp. 416,663
10,100 American Bankers Insurance Group, Inc. 463,968
11,800 Associated Bank Corp. 650,475
8,700 Astoria Financial Corp. 485,025
13,200 Bay View Capital Corp.+ 478,500
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10 1997 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) December 31, 1997
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Finance -- 16.4% (continued)
10,400 Brenton Banks, Inc. $ 416,000
5,100 CCB Financial Corp. 548,250
4,975 Charter One Financial, Inc. 314,066
10,700 Chartwell Re Corp. 361,125
14,000 City National Corp. 517,125
2,100 CMAC Investment Corp. 126,787
11,900 Community First Bancshares, Inc. 633,675
5,600 Compass Bancshares, Inc. 245,000
23,140 Dime Bancorp, Inc. 699,985
12,200 Enhance Financial Services Group, Inc. 725,900
13,400 Everest Reinsurance Holdings, Inc. 552,750
6,200 Executive Risk, Inc. 432,837
10,600 Financial Security Assurance Holdings, Ltd.+ 511,450
12,900 The FINOVA Group, Inc. 640,968
13,200 First American Corp. 656,700
1,300 First Empire State Corp. 604,500
4,700 First Virginia Banks, Inc. 242,931
13,300 FIRSTPLUS Financial Group, Inc.*+ 510,387
7,600 GBC Bancorp 484,500
14,900 Golden State Bancorp, Inc.* 556,887
18,000 HCC Insurance Holdings, Inc. 382,500
31,520 Hibernia Corp., Class A Shares 592,970
10,550 Liberty Financial Companies, Inc. 398,262
6,700 Life Re Corp. 436,756
15,800 Mercantile Bankshares Corp. 618,175
13,200 Mercury General Corp. 729,300
11,966 Mutual Risk Managment, Ltd. 358,232
18,500 North Fork Bancorp, Inc. 620,906
10,400 ONBANCorp, Inc. 733,200
16,600 Orion Capital Corp. 770,862
14,700 Peoples Heritage Financial Group, Inc. 676,200
7,000 Popular, Inc. 346,500
32,200 Republic Bancorp., Inc. 688,275
14,800 Selective Insurance Group, Inc. 399,600
12,600 Silicon Valley Bancshares* 708,750
26,260 Sovereign Bancorp., Inc. 544,895
9,700 T. Rowe Price Associates, Inc. 609,887
16,900 Trans Financial, Inc. 656,987
23,300 20th Century Industries 605,800
8,100 USBANCORP, Inc. 591,300
10,200 Vesta Insurance Group, Inc. 605,625
5,000 West America Bancorp 511,250
9,300 Wilmington Trust Corp. 580,087
- --------------------------------------------------------------------------------
26,389,239
- --------------------------------------------------------------------------------
Health Care -- 8.6%
4,700 AmeriSource Health Corp., Class A Shares* 273,775
4,950 Bergen Brunswig Corp., Class A Shares+ 208,518
35,750 Beverly Enterprises, Inc.*+ 464,750
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Small Cap Blend Fund, Inc. 11
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) December 31, 1997
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Health Care -- 8.6% (continued)
12,700 Bindley Western Industries, Inc. $ 392,112
17,900 Biogen, Inc.* 651,112
23,100 Biomet, Inc. 591,937
45,100 Columbia Laboratories, Inc.*+ 715,962
17,200 Cooper Cos., Inc.* 703,050
41,100 Creative BioMolecules, Inc.* 303,112
20,900 DePuy, Inc. 600,875
7,600 Dionex Corp.* 381,900
17,800 Dura Pharmaceuticals, Inc.* 816,575
15,500 FPA Medical Management, Inc.*+ 288,687
69,280 Gensia Sicor Inc.* 402,690
12,200 Health Care & Retirement Corp.* 491,050
3,100 Health Care COMPARE Corp.* 158,487
6,225 Health Managment Associates, Inc.* 157,181
9,900 Lincare Holdings, Inc.*+ 564,300
10,700 MiniMed, Inc.* 415,962
3,966 Paragon Health Network, Inc.* 77,584
23,700 PhyMatrix Corp.* 373,275
11,000 Quintiles Transnational Corp.*+ 420,750
19,944 Quorum Health Group, Inc.* 521,037
7,800 Sofamor Danek Group, Inc.* 507,487
9,200 St. Jude Medical, Inc.+ 280,600
12,500 Sybron International Corp.* 586,718
15,400 Theragenics Corp.* 554,400
21,933 Total Renal Care Holdings, Inc., Class A Shares* 603,157
9,900 Trigon Healthcare, Inc.* 258,637
25,100 Watson Pharmaceuticals, Inc.* 814,181
3,600 Wellpoint Health Networks, Inc., Class A Shares* 152,100
- --------------------------------------------------------------------------------
13,731,961
- --------------------------------------------------------------------------------
Materials & Processing -- 13.3%
21,200 AK Steel Holding Corp. 374,975
15,800 Alumax, Inc.* 537,200
10,400 AptarGroup, Inc. 577,200
14,700 Arden Realty Group, Inc. 452,025
20,600 Avalon Properties, Inc. 637,312
10,600 Bay Apartment Communities, Inc. 413,400
43,790 Bethlehem Steel Corp.* 377,688
13,700 BMC Industries, Inc. 220,912
13,300 Boise Cascade Corp. 402,325
12,900 Bowater, Inc. 573,243
23,810 Coeur D'Alene Mines Corp. 214,290
11,500 Cousins Properties, Inc. 337,093
15,300 Dexter Corp. 660,768
15,400 Ecolab, Inc. 853,737
12,700 Equity Residential Properties Trust 642,143
14,500 Felcor Suite Hotels, Inc. 514,750
15,500 First Industrial Realty Trust, Inc. 559,937
14,700 Glenborough Realty Trust, Inc. 435,487
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12 1997 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) December 31, 1997
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Materials & Processing -- 13.3% (continued)
7,300 H.B. Fuller Co. $ 361,350
10,700 Health Care Property Investors, Inc. 404,593
32,000 Hexel Corp.* 798,000
35,430 International Specialty Products, Inc. 529,235
25,300 Liberty Property Trust 722,631
7,100 Lone Star Industries, Inc. 377,187
41,560 LTV Corp. 405,210
17,800 Lyondell Petrochemical Co. 471,700
16,200 Mack-Cali Realty Corp. 664,200
5,269 Meditrust Cos. 192,977
12,700 Mid-America Apartment Communities, Inc. 362,743
25,800 Nationwide Health Properties, Inc. 657,900
4,700 Olin Corp. 220,312
10,400 OM Group, Inc. 380,900
16,000 Pope & Talbot, Inc. 241,000
30,700 Prime Retail, Inc. 435,556
15,830 Reckson Associates Realty Corp. 401,686
14,900 Regency Realty Corp. 412,543
10,400 Sealed Air Corp.*+ 642,200
29,810 Security Capital Pacific Trust+ 722,892
7,000 Southdown, Inc. 413,000
10,400 Spieker Properties, Inc. 445,900
23,200 Steel Dynamics, Inc.* 371,200
10,700 USG Corp.* 524,300
8,000 USX-U.S. Steel Group, Inc. 250,000
9,300 Vulcan Materials Co.* 949,762
5,000 Witco Corp. 204,062
- --------------------------------------------------------------------------------
21,347,524
- --------------------------------------------------------------------------------
Oil Integrated - Domestic -- 1.0%
12,700 Murphy Oil Corp. 688,181
6,700 Sun Company, Inc. 281,818
20,100 Valero Energy Corp. 631,893
- --------------------------------------------------------------------------------
1,601,892
- --------------------------------------------------------------------------------
Other Energy -- 4.2%
9,400 Atwood Oceanics, Inc.* 445,325
9,100 BJ Services Co.* 654,631
7,800 Cliffs Drilling Co.* 389,025
21,600 Cross Timbers Oil Co. 538,650
44,400 EEX Corporation 402,375
10,400 Forcenergy, Inc. 272,350
22,400 Nabors Industries, Inc.* 704,200
15,300 Noble Affiliates Inc. 539,325
22,600 Oryx Energy Co.* 576,300
12,100 Pool Energy Services Co.* 269,225
19,900 Seagull Energy Corp.* 410,437
20,590 Swift Energy Co.* 433,676
5,600 Tidewater, Inc.+ 308,700
20,600 Veritas DGC, Inc.* 813,700
- --------------------------------------------------------------------------------
6,757,919
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Small Cap Blend Fund, Inc. 13
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) December 31, 1997
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Producer Durables -- 5.5%
9,220 Aeroquip-Vickers, Inc. $ 452,356
19,600 AGCO Corp. 573,300
300 American Power Conversion Corp.* 7,087
15,300 The B.F. Goodrich Co. 633,993
10,400 Crane Co. 451,100
11,700 Danaher Corp. 738,562
5,900 Flowserve Corp. 164,831
13,300 Gencorp., Inc. 332,500
11,900 Jacobs Engineering Group, Inc.* 301,962
9,300 Kennametal, Inc. 481,856
18,897 Lennar Corp. 407,466
19,900 Mark IV Industries, Inc. 435,312
7,000 Precision Castparts Corp. 422,187
14,300 Robbins & Meyers, Inc. 566,637
7,600 Thiokol Corp. 617,500
14,700 Thomas & Betts Corp. 694,575
17,400 U.S. Home Corp.* 682,950
18,600 Watts Industries, Inc., Class A Shares 526,612
12,900 ZERO Corp. 382,162
- --------------------------------------------------------------------------------
8,872,948
- --------------------------------------------------------------------------------
Technology -- 13.2%
7,600 Advanced Energy Industries, Inc.* 113,525
12,900 Advent Software, Inc.* 369,262
6,100 Aspect Development, Inc.*+ 317,200
6,700 Asyst Technologies, Inc.* 145,725
12,700 Avid Technology, Inc.* 339,725
13,400 AVX Corp. 247,062
16,200 Brightpoint, Inc.*+ 224,775
15,500 Burr-Brown Corp.* 497,937
31,900 C-Cube Microsystems, Inc.* 520,368
11,900 CellStar Corp.*+ 236,512
300 CFM Technologies, Inc.* 4,612
14,000 Ciber, Inc.* 812,000
5,000 Citrix Systems, Inc.* 380,000
14,900 Cognex Corp.* 406,025
9,900 Cohu, Inc. 303,187
19,020 Comdisco, Inc. 635,981
12,900 Computer Horizons Corp.* 580,500
10,600 Comverse Technology, Inc.* 413,400
7,100 Credence Systems Corp.* 210,337
9,900 Davox Corp.* 322,987
19,100 Digital Microwave Corp.* 276,950
28,900 Edify Corp.* 541,875
16,000 Electronics for Imaging, Inc.* 266,000
16,600 Eltron International, Inc.* 502,150
16,200 FORE Systems, Inc.* 247,050
26,400 Gerber Scientific, Inc. 524,700
14,700 Harbinger Corp.* 413,437
23,100 Helix Technology Corp. 450,450
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
14 1997 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) December 31, 1997
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Technology -- 13.2% (continued)
16,900 Industri-Matematik International Corp.* $ 498,550
21,200 Iomega Corp.*+ 263,675
18,700 Keane, Inc.* 759,687
14,500 Kemet Corp.* 280,937
7,500 KLA-Tencor Corp.*+ 289,687
11,880 Legato Systems, Inc.* 522,720
9,900 Micrel, Inc.* 277,200
12,100 Park Electrochemical Corp. 343,337
10,700 Policy Management Systems Corp.* 744,318
9,100 Project Software & Development, Inc.* 213,850
22,300 Quantum Corp.*+ 447,393
10,200 REMEC, Inc.* 229,500
5,100 Sanmina Corp.* 345,525
7,100 Sapient Corp.* 434,875
12,900 SCI Systems, Inc.*+ 561,956
14,000 SMART Modular Technologies, Inc.* 322,000
9,700 SpeedFam International, Inc.* 257,050
7,000 Sterling Commerce, Inc.* 269,062
12,200 Storage Technology Corp., Class A Shares*+ 755,637
25,700 SunGard Data Systems, Inc.* 796,700
15,400 Systems & Computer Tech Corp.* 764,225
13,300 Tech Data Corp.*+ 517,037
7,300 Tekelec* 222,650
10,600 Unitrode Corp.* 227,900
25,750 VLSI Technology, Inc.* 608,343
- --------------------------------------------------------------------------------
21,257,546
- --------------------------------------------------------------------------------
Utilities -- 9.8%
20,600 Boston Edison Co. 780,225
20,600 Calenergy Co., Inc.* 592,250
43,000 Calpine Corp. 639,625
18,000 Century Telephone Enterprises, Inc. 896,625
9,000 CILCORP, Inc. 439,875
15,800 CoreComm, Inc.* 159,975
27,310 DPL, Inc. 785,162
16,900 DQE, Inc. 593,612
54,000 El Paso Electric Co.* 394,875
5,000 EXCEL Communications, Inc.*+ 72,500
15,300 IGC Communications, Inc.*+ 416,925
22,500 Illinova Corp. 606,093
8,300 Intermedia Communications, Inc.*+ 504,225
5,600 IPALCO Enterprises, Inc. 234,850
41,981 LCI International, Inc.*+ 1,290,915
18,100 MAPCO, Inc. 837,125
19,900 MCN Energy Group, Inc. 803,462
13,400 MDU Resources Group, Inc. 423,775
16,900 National Fuel Gas Co. 822,818
2,100 New Century Energies, Inc. 100,668
15,200 NIPSCO Industries, Inc. 751,450
400 Northeast Utilities* 4,725
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Small Cap Blend Fund, Inc. 15
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) December 31, 1997
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Utilities -- 9.8% (continued)
22,600 Pinnacle West Capital Corp. $ 957,675
10,300 SCANA Corp. 308,356
13,400 Sierra Pacific Resources 502,500
5,600 Southern New England Telecommunications Corp.+ 281,750
28,410 TECO Energy, Inc. 799,031
4,700 Telephone & Data Systems, Inc. 218,843
19,500 Washington Gas Light Co. 603,281
- --------------------------------------------------------------------------------
15,823,191
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost -- $150,340,370) 159,927,560
================================================================================
WARRANT -- 0.0%
Finance -- 0.0%
446 Security Capital Group, Inc., Expires 9/18/98*
(Cost -- $2,920) 2,341
================================================================================
FACE
AMOUNT SECURITY VALUE
================================================================================
U.S. TREASURY BILLS -- 0.5%
$805,000 U.S. Treasury Bills due 1/22/98
(Cost -- $802,572) 802,572
================================================================================
REPURCHASE AGREEMENT -- 0.0%
17,000 Goldman, Sachs &Co., 6.348% due 1/2/98;
Proceeds at maturity -- $17,006; (Fully collateralized
by U.S. Treasury Notes, 5.625% due 12/31/99;
Market value -- $17,347) (Cost -- $17,000) 17,000
================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $151,162,862**) $160,749,473
================================================================================
* Non-income producing security.
+ A portion of the security is on loan.
** Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
16 1997 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities December 31, 1997
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost -- $151,162,862) $160,749,473
Cash 124
Collateral for securities loaned (Note 7) 13,339,253
Receivable for securities sold 7,771,300
Receivable for Fund shares sold 3,201,311
Dividends and interest receivable 133,815
Other assets 243,384
- --------------------------------------------------------------------------------
Total Assets 185,438,660
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for securities loaned (Note 7) 13,339,253
Payable for securities purchased 5,365,260
Income dividend payable 392,566
Investment advisory fees payable 79,872
Payable for Fund shares purchased 26,323
Investment administrative fees payable 12,678
Distribution fees payable 5,996
Accrued expenses 18,788
- --------------------------------------------------------------------------------
Total Liabilities 19,240,736
- --------------------------------------------------------------------------------
Total Net Assets $166,197,924
================================================================================
NET ASSETS:
Par value of capital shares $ 12,191
Capital paid in excess of par value 154,257,309
Overdistributed net investment income (302,965)
Accumulated net realized gain on security transactions
and futures contracts 2,644,778
Net unrealized appreciation of investments 9,586,611
- --------------------------------------------------------------------------------
Total Net Assets $166,197,924
================================================================================
Shares Outstanding:
Class A 3,366,437
------------------------------------------------------------------------------
Class B 938,611
------------------------------------------------------------------------------
Class C 220,182
------------------------------------------------------------------------------
Class Y 7,665,867
------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $13.68
------------------------------------------------------------------------------
Class B * $13.52
------------------------------------------------------------------------------
Class C ** $13.51
------------------------------------------------------------------------------
Class Y (and redemption price) $13.63
------------------------------------------------------------------------------
Class A Maximum Public Offering Price Per Share
(net asset value plus 5.26% of net asset value per share) $14.40
================================================================================
* Redemption price is NAV of Class B shares reduced by a 5.00% CDSC if shares
are redeemed within one year from initial purchase (See Note 2).
** Redemption price is NAV of Class C shares reduced by a 1.00% CDSC if shares
are redeemed within the first year purchase.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Small Cap Blend Fund, Inc. 17
<PAGE>
- --------------------------------------------------------------------------------
Statements of Operations For the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 766,809
Interest 197,117
- --------------------------------------------------------------------------------
Total Investment Income 963,926
- --------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 2) 439,687
Administration fees (Note 2) 102,195
Distribution fees 93,843
Shareholder and system servicing fees 45,194
Custody 39,961
Audit and legal 26,983
Shareholder communications 24,933
Directors' fees 4,986
Registration 3,489
Other 9,723
- --------------------------------------------------------------------------------
Total Expenses 790,994
- --------------------------------------------------------------------------------
Net Investment Income 172,932
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FUTURES CONTRACTS (NOTES3 AND 5):
Realized Gain From:
Security transactions (excluding short-term securities) 9,366,122
Futures contracts 224,698
- --------------------------------------------------------------------------------
Net Realized Gain 9,590,820
- --------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of the year 4,397,795
End of year 9,586,611
- --------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 5,188,816
- --------------------------------------------------------------------------------
Net Gain on Investments and Futures Contracts 14,779,636
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $14,952,568
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
18 1997 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets For the Year Ended December 31,
- --------------------------------------------------------------------------------
1997 1996
================================================================================
OPERATIONS:
Net investment income $ 172,932 $ 235,743
Net realized gain 9,590,820 8,411,575
Increase in net unrealized appreciation 5,188,816 789,945
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations 14,952,568 9,437,263
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (474,795) (193,543)
Net realized gains (7,596,619) (8,604,302)
- --------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (8,071,414) (8,797,845)
- --------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 8):
Net proceeds from sale of shares 127,943,629 --
Net asset value of shares issued for reinvestment
of dividends 2,945,999 --
Cost of shares reacquired (24,484,001)+ (274,104)++
- --------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From
Fund Share Transactions 106,405,627 (274,104)
- --------------------------------------------------------------------------------
Increase in Net Assets 113,286,781 365,314
NET ASSETS:
Beginning of year 52,911,143 52,545,829
- --------------------------------------------------------------------------------
End of year* $166,197,924 $52,911,143
================================================================================
* Includes undistributed (overdistributed) net
investment income of: $(302,965) $20,277
================================================================================
+ Amount reported is net of $452,851 in redemption fees charged through
December 31, 1997.
++ Represents repurchase of 24,000 shares during the Fund's buyback period
which ended December 31, 1996.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Small Cap Blend Fund, Inc. 19
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
The Smith Barney Small Cap Blend Fund, Inc. ("Fund"), formerly known as the
Smith Barney Disciplined Small Cap Fund, Inc., 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 in come is recorded on the ex-dividend date and
interest in come 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"), formerly known as Smith Barney Mutual Funds
Management Inc., another subsidiary of SSBH, acts as the Fund's administrator.
As compensation for its services, the Fund also 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 year ended December 31, 1997, Smith Barney Inc. ("SB"), also a
subsidiary of SSBH, was paid brokerage commissions of $9,374 and sales charges
of approximately $173,000 on sales of the Fund's Class A shares.
- --------------------------------------------------------------------------------
20 1997 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
There is a contingent deferred sales charge ("CDSC") of 5.00% on Class B shares,
which applies if redemption occurs within one year from initial purchase and
declines thereafter by 1.00% per year until no CDSC is incurred. Class C shares
have a 1.00% CDSC, which applies if redemption occurs within the first year of
purchase. In addition, Class A shares also 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 year ended December 31, 1997, CDSCs
paid to SB were:
Class A Class B
================================================================================
CDSCs $328,000 $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 C 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 C shares calculated at the annual rate of 0.75% of the average daily net
assets of each class. For the year ended December 31, 1997, total Distribution
Plan fees were as follows:
Class A Class B Class C
================================================================================
Distribution Plan Fees $64,196 $24,677 $4,970
================================================================================
All officers and two directors of the Fund are employees of SB.
3. Investments
For the year ended December 31, 1997, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases $182,593,599
- --------------------------------------------------------------------------------
Sales 90,018,028
================================================================================
At December 31, 1997, aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were substantially as follows:
================================================================================
Gross unrealized appreciation $13,135,253
Gross unrealized depreciation (3,548,642)
- --------------------------------------------------------------------------------
Net unrealized appreciation $ 9,586,611
================================================================================
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
- --------------------------------------------------------------------------------
Smith Barney Small Cap Blend Fund, Inc. 21
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
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. 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 December 31, 1997, the Fund had no open futures contracts.
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 December 31, 1997, 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 December 31, 1997, the Fund loaned common stocks having a value of
$12,965,539 and holds the following collateral for loaned securities:
Security Description Value
================================================================================
Time Deposits:
Bank of Tokyo, 10.000% due 1/2/98 $ 818,962
Instituto Bancario San Paolo,
7.000% due 1/2/98 2,293,093
Keycorp Bank, N.A., 4.000% due 1/2/98 523,425
Repurchase Agreements:
Goldman, Sachs & Co., 6.800% due 1/2/98 8,147,746
Merrill Lynch, 7.000% due 1/2/98 1,556,027
- --------------------------------------------------------------------------------
Total $13,339,253
================================================================================
- --------------------------------------------------------------------------------
22 1997 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
8. Capital Shares
At December 31, 1997, 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.
As of December 31, 1997, total paid-in capital amounted to the following for
each class:
Class A Class B Class C Class Y
================================================================================
Total Paid-in Capital $35,978,320 $13,319,867 $3,009,029 $101,962,284
================================================================================
Transactions in shares of each class were as follows:
Year Ended
December 31, 1997
-------------------------------
Shares Amount
================================================================================
Class A*
Shares sold 674,438 $ 9,600,636
Shares issued on reinvestment 158,633 2,101,518
Shares redeemed (1,767,584) (23,585,099)+
- --------------------------------------------------------------------------------
Net Decrease (934,513) $(11,882,945)
================================================================================
Class B**
Shares sold 908,111 $ 12,937,997
Shares issued on reinvestment 57,663 755,966
Shares redeemed (27,163) (374,336)
- --------------------------------------------------------------------------------
Net Increase 938,611 $ 13,319,627
================================================================================
Class C++
Shares sold 241,885 $ 3,361,719
Shares issued on reinvestment 6,752 88,515
Shares redeemed (28,455) (441,253)
- --------------------------------------------------------------------------------
Net Increase 220,182 $ 3,008,981
================================================================================
Class Y##
Shares sold 7,672,217 $102,043,277
Shares issued on reinvestment -- --
Shares redeemed (6,350) (83,313)
- --------------------------------------------------------------------------------
Net Increase 7,665,867 $101,959,964
================================================================================
* For the period from June 23, 1997 (date of conversion to an open-end fund)
to December 31, 1997.
** For the period from June 25, 1997 (inception date) to December 31, 1997.
+ Amount reported is net of $452,851 in redemption fees charged through
December 31, 1997.
++ For the period from June 24, 1997 (inception date) to December 31, 1997.
## For the period from October 17, 1997 (inception date) to December 31, 1997.
- --------------------------------------------------------------------------------
Smith Barney Small Cap Blend Fund, Inc. 23
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year:
<TABLE>
<CAPTION>
Class A Shares(1) 1997 1996 1995 1994 1993
======================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 12.30 $12.15 $11.78 $12.50 $11.49
- --------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.04 0.05 0.11 0.05 0.01
Net realized and unrealized gain (loss) 3.23 2.14 2.31 (0.63) 1.01
- --------------------------------------------------------------------------------------
Total Income (Loss) From Operations 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 (1.98) (2.00) (1.94) (0.09) --
- --------------------------------------------------------------------------------------
Total Distributions (2.02) (2.04) (2.05) (0.14) (0.01)
- --------------------------------------------------------------------------------------
Redemption Fee(2) 0.13 -- -- -- --
- --------------------------------------------------------------------------------------
Net Asset Value, End of Year $13.68 $12.30 $12.15 $11.78 $12.50
- --------------------------------------------------------------------------------------
Total Return 28.25% 20.56% 18.90% (4.36)% 8.90%
- --------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $46,036 $52,911 $52,546 $51,641 $54,809
- --------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.21% 1.21% 1.22% 1.22% 1.24%
Net investment income 0.24 0.43 0.84 0.43 0.08
- --------------------------------------------------------------------------------------
Portfolio Turnover Rate 140% 151% 177% 45% 87%
- --------------------------------------------------------------------------------------
Average commissions per share paid
on equity transactions(3) $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) Amount relates to a redemption fee which was in effect through December 31,
1997.
(3) As of September 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per share.
- --------------------------------------------------------------------------------
24 1997 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year:
<TABLE>
<CAPTION>
Class B Shares Class C Shares Class Y Shares
-------------- -------------- --------------
1997(1) 1997(2) 1997(3)
==========================================================================================
<S> <C> <C> <C>
Net Asset Value, Beginning of Year $13.34 $13.24 $13.87
- ------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss) (0.01) (0.01) 0.01
Net realized and unrealized gain (loss) 2.18 2.27 (0.21)
- ------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 2.17 2.26 (0.20)
- ------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.01) (0.01) (0.04)
Net realized gains (1.98) (1.98) --
- ------------------------------------------------------------------------------------------
Total Distributions (1.99) (1.99) (0.04)
- ------------------------------------------------------------------------------------------
Net Asset Value, End of Year $13.52 $13.51 $13.63
- ------------------------------------------------------------------------------------------
Total Return++ 16.73% 17.53% (1.42)%
- ------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $12,685 $2,974 $104,503
- ------------------------------------------------------------------------------------------
Ratios to Average Net Assets+:
Expenses 1.99% 2.00% 1.11%
Net investment income (loss) (0.26) (0.26) 0.58
- ------------------------------------------------------------------------------------------
Portfolio Turnover Rate 140% 140% 140%
- ------------------------------------------------------------------------------------------
Average commissions per share paid
on equity transactions $0.05 $0.05 $0.05
==========================================================================================
</TABLE>
(1) For the period from June 25, 1997 (inception date) to December 31, 1997.
(2) For the period from June 24, 1997 (inception date) to December 31, 1997.
(3) 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.
- --------------------------------------------------------------------------------
Smith Barney Small Cap Blend Fund, Inc. 25
<PAGE>
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors
of Smith Barney Small Cap Blend Fund, Inc.
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Smith Barney Small Cap Blend Fund, Inc. as of
December 31, 1997, the related statement of operations for the year then ended,
the statement of changes in net assets for each of the years in the two-year
period then ended and the financial highlights for each of the years in the
five-year period then ended. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997, by correspondence with the custodian. As to securities
purchased or sold but not received or delivered, we performed other appropriate
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Smith
Barney Small Cap Blend Fund, Inc. as of December 31, 1997, the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period then ended and the financial highlights for
each of the years in the five-year period then ended, in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
New York, New York
February 10, 1998
- --------------------------------------------------------------------------------
26 1997 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Tax Information (unaudited)
- --------------------------------------------------------------------------------
For Federal tax purposes the Fund hereby designates for the fiscal year ended
December 31, 1997:
o 9.56% of the ordinary dividends paid as qualifying for the corporate
dividends received deduction.
o The Taxpayer Relief Act of 1997 enacted differing rates of tax on
various long-term capital gain transactions. As a result, the Fund
designates:
o Total long-term capital gain distributions paid of $3,941,469:
$1,282,335 are considered "28 percent rate gains".
$2,659,134 are considered "20 percent rate gains".
- --------------------------------------------------------------------------------
Smith Barney Small Cap Blend Fund, Inc. 27
<PAGE>
Smith Barney
Small Cap Blend
Fund, Inc.
Directors
Donald R. Foley
Paul Hardin
Heath B. McLendon, Chairman
Roderick C. Rasmussen
Bruce D. Sargent
John P. Toolan
Joseph H. Fleiss, Emeritus
C. Richard Youngdahl, 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
FD01393 2/98
