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SMITH BARNEY
SMALL CAP BLEND
FUND, INC.
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STYLE PURE SERIES
ANNUAL REPORT
DECEMBER 31, 1999
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[LOGO] Smith Barney
Mutual Funds
NOT FDIC INSURED o NOT BANK GUARANTEED o MAY LOSE VALUE
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Smith Barney Small Cap
Blend Fund, Inc.
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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.
Smith Barney Small Cap Blend Fund, Inc.
Average Annual Total Returns
December 31, 1999
Without Sales Charges(1)
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Class A Class B Class L
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One-Year 21.09% 20.21% 20.12%
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Five-Year 18.04 N/A N/A
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Since Inception+ 11.10 13.46 13.75
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With Sales Charges(2)
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Class A Class B Class L
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One-Year 15.05% 15.21% 17.94%
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Five-Year 16.83 N/A N/A
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Since Inception+ 10.53 12.47 13.31
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(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) 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.
+ 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.
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FUND HIGHLIGHT
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The Fund has benefited from its strong stock picks in the technology and health
care sectors. Internet, semiconductor, networking and software stocks such as
Lam Research Corp., Mercury Interactive Corp. and Dendrite International Inc.,
to name just a few, have all performed well during different periods of time
over the past twelve months. IDEC Pharmaceuticals Corp. is an example of one of
our more successful positions in the health care sector.
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WHAT'S INSIDE
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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 ....................................... 12
Statement of Operations ................................................... 13
Statements of Changes in Net Assets ....................................... 14
Notes to Financial Statements ............................................. 15
Financial Highlights ...................................................... 20
Independent Auditors' Report .............................................. 24
Tax Information ........................................................... 25
Additional Shareholder Information ........................................ 25
<PAGE>
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Shareholder Letter
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[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") for the year ended December 31, 1999. In this
letter, we comment briefly on the stock market for the year ended December 31,
1999 and briefly outline how the Fund was managed during this time. For your
convenience, a detailed summary of the Fund as well as its current holdings can
be found in the appropriate sections that follow. Any discussion of the Fund's
holdings is as of December 31, 1999. Please refer to pages seven through eleven
for the Fund's holdings.
Performance Update
For the year ended December 31, 1999, the Fund's Class A shares returned 15.05%
and 21.09%, with and without the effects of sales charges, respectively. In
comparison, the Russell 2000 Index returned 21.26% during the same period. (The
Russell 2000 Index is a broad-based index comprised of 2,000 of the smallest
stocks in the Russell 3000 Index. Indexes are unmanaged and are not subject to
the same management and trading expenses of a mutual fund.) Please note past
performance is not indicative of future results. For performance on the Fund's
other share classes, please refer to page four.
Investment Strategy
The Smith Barney Small Cap Blend Fund's fundamental goal is to capture the
performance of the small cap stock market with a high degree of consistency. We
do not attempt to time the market nor do we focus on exploiting market sector
opportunities based on economic forecasts. Instead, we employ an active
investment strategy based on a sophisticated, proprietary model that seeks to
identify small cap stocks that are likely to perform better than their peers. As
a result of our investment approach, the Fund's holdings are widely diversified
among 250 to 300 companies that we think should perform in a manner comparable
to the Russell 2000 Index, a broad measure of the small cap market.
Market Overview
The U.S. stock market has continued its historically unprecedented rise for yet
another year. We observed in last year's report that low interest rates and
favorable money flows were, in our view, the dominant influences affecting stock
market performance. While interest rates went up in 1999, their adverse impact
on stock prices has been more than offset by strong earnings growth and robust
money flows.
In our opinion, the most persuasive argument for the strength of the U.S. stock
market has been the significant gains in productivity. According to statistics
compiled by the U.S. Bureau of Labor Statistics, the ratio of productivity
growth to output growth has been above the historical norm in four out of the
last six years -- and often by wide margins.
Nonetheless, the magnitude and duration of this long bull market in stocks is
now beginning to defy gravity. While today's price/earnings ("P/E") ratios for
the broad market might still be justified in the context of low interest rates,
they remain at unprecedented historical highs. (A P/E ratio is the price of the
stock divided by its earnings per share.)
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Smith Barney Small Cap Blend Fund, Inc. 1
<PAGE>
The breadth of the current stock market run is also worth noting. By the end of
1998, 50% of the top quintile momentum stocks were in the technology or
telecommunications sector. In 1999, that figure is up to 70%. In fact, the
strong U.S. stock market has segmented into the haves and have-nots. The Russell
2000 Index of smaller-sized companies and the Standard & Poor's 500 Index ("S&P
500")(1) both advanced by roughly 21% in 1999, while the NASDAQ 100 Index(2)
rose by over 100%. On the other hand the Russell 2000 Value Index(3), which is
more economically sensitive than other market indexes, smaller companies
actually declined by about 1%.
Technology is now a dominant factor in both the U.S. economy and within the
large and small cap segments of the U.S. stock market. For example, technology
stocks make up over 20% of the small company universe in the U.S. This sector
was particularly strong from September to November of 1999.
The NASDAQ 100 Index rose by over 23% in this period. Not surprisingly,
performance was strong for established technology players such as:
o Yahoo, (up 48%), a global Internet media company, which offers web
navigation, aggregated information content, communication services and
commerce.
o CMGI, (up 82%), owns and invests in business-to-business and
business-to-customer Internet companies.
But the veteran cast was upstaged by newcomers like:
o Red Hat, (up 164%), develops and provides open source software and
services, including the Red Hat Linux operating system.
o MicroStrategy, (up 200%), provides enterprise decision support system
(DSS) software applications and related services.
o Open Market, (up 213%), develops, markets, licenses, and supports software
products.
However, there has been considerable divergence in performance within the small
cap market with narrow leadership limited to a few high growth stocks. Internet
stocks and initial public offerings ("IPOs") have been generating extraordinary
investor interest and are now trading at market valuations that bear no
resemblance to their cash-flow generating abilities.
Portfolio Update
The Fund has benefited from its strong stock picks in the technology and health
care sectors. Internet, semiconductor, networking and software stocks such as
Lam Research Corp., Mercury Interactive Corp. and Dendrite International Inc.,
to name just a few, have all performed well during different periods of time
over the past twelve months. IDEC Pharmaceuticals Corp. is an example of one of
our more successful positions in the health care sector.
Market Outlook
A reversal in fortunes for small cap stocks appeared to be under way during the
second quarter of 1999 when both small cap growth and value stocks began to
perform better than large cap growth and value stocks. The small cap rally of
the second quarter was derailed with the onset of a tightening Federal Reserve
Board ("Fed") short-term interest rate policy. Small cap stocks have
historically performed poorly during periods of rising rates and that appeared
to be the case in the second half of 1999.
- ----------
(1) The S&P 500 is an index composed of widely held common stocks listed on
the New York Stock Exchange, American Stock Exchange and the
over-the-counter market.
(2) The NASDAQ 100 Index reflects NASDAQ's largest companies across major
industry groups, including computer hardware and software,
telecommunications, retail/wholesale trade and biotechnology.
(3) The Russell 2000 Value Index measures the performance of those Russell
2000 companies with lower P/E ratios and forecasted growth values.
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2 1999 Annual Report to Shareholders
<PAGE>
Y2K concerns abated during December and the market's assessment of low Y2K risk
proved to be correct as New Year's Day arrived with virtually no disruptions.
The Fed remained on the sidelines in December, but many believe that further Fed
monetary tightenings may be necessary if the current pace of strong economic
growth continues.(4)
Robust earnings growth in the third quarter suggested to us that the earnings
recovery of 1999 was well under way. In our opinion, the constant presence of
the Fed and the current investor love affair with technology stocks may prevent
a broad-based small cap rally in the near term.
Thank you for your investment in the Smith Barney Small Cap Blend Fund, Inc. We
look forward to continuing to help you achieve your financial goals in the new
century.
Sincerely,
/s/ Heath B. McLendon /s/ Sandip A. Bhagat, CFA
Heath B. McLendon Sandip A. Bhagat, CFA
Chairman Vice President
January 15, 2000
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(4) On Wednesday, February 2, 2000, the Fed raised interest rates by 0.25% to
5.75% after this letter was written.
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Smith Barney Small Cap Blend Fund, Inc. 3
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Historical Performance -- Class A Shares(1)
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<TABLE>
<CAPTION>
Net Asset Value
-------------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(2)
=============================================================================================================
<S> <C> <C> <C> <C> <C>
12/31/99 $13.35 $14.26 $0.08 $1.68 21.09%
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12/31/98 13.68 13.35 0.00 0.16 (1.31)
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12/31/97 12.30 13.68 0.04 1.98 28.25
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12/31/96 12.15 12.30 0.04 2.00 20.56
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12/31/95 11.78 12.15 0.11 1.94 18.90
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12/31/94 12.50 11.78 0.05 0.09 (4.36)
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12/31/93 11.49 12.50 0.01 0.00 8.90
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12/31/92 10.34 11.49 0.05 0.00 11.71
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12/31/91 9.32 10.34 0.14 0.79 22.69
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Inception* -- 12/31/90 11.12 9.32 0.37 0.00 (12.66)+
=============================================================================================================
Total $0.89 $8.64
=============================================================================================================
</TABLE>
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Historical Performance -- Class B Shares
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<TABLE>
<CAPTION>
Net Asset Value
-------------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(2)
=============================================================================================================
<S> <C> <C> <C> <C> <C>
12/31/99 $13.09 $13.92 $0.00 $1.68 20.21%
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12/31/98 13.52 13.09 0.00 0.16 (2.07)
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Inception* -- 12/31/97 13.34 13.52 0.01 1.98 16.73+
=============================================================================================================
Total $0.01 $3.82
=============================================================================================================
</TABLE>
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Historical Performance -- Class L Shares
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<TABLE>
<CAPTION>
Net Asset Value
-------------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(2)
=============================================================================================================
<S> <C> <C> <C> <C> <C>
12/31/99 $13.09 $13.91 $0.00 $1.68 20.12%
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12/31/98 13.51 13.09 0.00 0.16 (1.99)
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Inception* -- 12/31/97 13.24 13.51 0.01 1.98 17.53+
=============================================================================================================
Total $0.01 $3.82
=============================================================================================================
</TABLE>
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4 1999 Annual Report to Shareholders
<PAGE>
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Historical Performance -- Class Y Shares
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<TABLE>
<CAPTION>
Net Asset Value
-------------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(2)
=============================================================================================================
<S> <C> <C> <C> <C> <C>
12/31/99 $13.34 $14.37 $0.03 $1.68 21.55%
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12/31/98 13.63 13.34 0.03 0.16 (0.80)
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Inception* -- 12/31/97 13.87 13.63 0.04 0.00 (1.42)+
=============================================================================================================
Total $0.10 $1.84
=============================================================================================================
</TABLE>
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
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Average Annual Total Returns
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Without Sales Charges(2)
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Class A(1) Class B Class L Class Y
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Year Ended 12/31/99 21.09% 20.21% 20.12% 21.55%
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Five Years Ended 12/31/99 18.04 N/A N/A N/A
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Inception* through 12/31/99 11.10 13.46 13.75 8.97
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With Sales Charges(3)
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Class A(1) Class B Class L Class Y
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Year Ended 12/31/99 15.05% 15.21% 17.94% 21.55%
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Five Years Ended 12/31/99 16.83 N/A N/A N/A
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Inception* through 12/31/99 10.53 12.47 13.31 8.97
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Cumulative Total Returns
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Without Sales Charges(2)
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Class A (Inception* through 12/31/99) 170.50%
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Class B (Inception* through 12/31/99) 34.42
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Class L (Inception* through 12/31/99) 37.01
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Class Y (Inception* through 12/31/99) 20.86
================================================================================
(1) 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.
(2) 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.
(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.
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Smith Barney Small Cap Blend Fund, Inc. 5
<PAGE>
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Smith Barney Small Cap Blend Fund, Inc. at a Glance (unaudited)
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Growth of $10,000 Invested in Class A Shares of the
Smith Barney Small Cap Blend Fund, Inc. vs. Russell 2000 Index+
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January 1990 -- December 1999
[The following table was depicted as a line chart in the printed material.]
[PLOT POINTS TO COME]
+ 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, 1999. 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 2000 Index is
comprised of 2000 of the smallest stocks in the Russell 3000 Index. The
Russell 3000 Index is composed of 3,000 of the largest U.S. companies by
market capitalization. The index is unmanaged and is not subject to the
same management and trading expenses as a mutual fund. An investor may not
invest directly in an index. The performance of the Fund's other classes
may be greater or less than the Class A shares' performance indicated on
this chart, depending on whether greater or lesser sales charges and fees
were incurred by shareholders investing in 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*
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[The following table was depicted as a bar graph in the printed material]
Autos & Transportation 4.1%
Consumer Discretionary 15.5%
Consumer Staples 2.2%
Energy 3.0%
Financial Services 11.9%
Health Care 9.4%
Materials & Processing 11.1%
Producer Durables 6.1%
Technology 29.9%
Utilities 6.8%
Top Ten Holdings*
- ------------------------------------------------------
1. Advanced Fibre Communications, Inc. 1.2%
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2. Mercury Interactive Corp. 1.1
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3. ISS Group, Inc. 1.1
- ------------------------------------------------------
4. Intermedia Communications Inc. 1.0
- ------------------------------------------------------
5. BroadVision, Inc. 1.0
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6. Xircom, Inc. 1.0
- ------------------------------------------------------
7. Lam Research Corp. 0.9
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8. Primus Telecommunications Group, Inc. 0.9
- ------------------------------------------------------
9. Eaton Vance Corp. 0.9
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10. Mettler-Toledo International Inc. 0.9
- ------------------------------------------------------
* As a percentage of total common stock.
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6 1999 Annual Report to Shareholders
<PAGE>
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Schedule of Investments December 31, 1999
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SHARES SECURITY VALUE
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COMMON STOCK -- 95.7%
Autos & Transportation -- 3.9%
62,800 Airborne Freight Corp. $ 1,381,600
40,900 Alaska Air Group, Inc. (a) 1,436,612
71,300 Arvin Industries, Inc. 2,023,137
36,600 Borg-Warner Automotive, Inc. 1,482,300
62,900 Eagle USA Airfreight, Inc. (a) 2,712,562
56,400 SkyWest, Inc. 1,579,200
42,500 USFreightways Corp. 2,034,688
43,111 Westinghouse Air Brake Co. 765,220
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13,415,319
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Consumer Discretionary -- 14.8%
65,800 Action Performance Companies, Inc. (a)(b) 756,700
65,200 ADVO, Inc. (a) 1,548,500
53,600 Ames Department Stores, Inc. (a) 1,544,350
54,500 AnnTaylor Stores Corp. (a) 1,876,844
155,300 Aztar Corp. (a) 1,688,887
59,700 Bebe Stores, Inc. (a)(b) 1,611,900
67,800 Boca Resorts, Inc. (a) 661,050
92,600 Burlington Coat Factory Warehouse Corp. 1,284,825
95,300 The Cato Corp., Class A Shares 1,203,162
60,200 Chico's FAS, Inc. (a)(b) 2,265,025
60,400 Complete Business Solutions, Inc. (a) 1,517,550
37,440 Consolidated Graphics, Inc. (a) 559,260
30,900 CORT Business Services Corp. (a) 538,819
55,950 Cost Plus, Inc. (a) 1,993,219
61,900 Daisytek International Corp. (a) 1,443,044
68,900 Education Management Corp. (a) 964,600
54,200 Fossil, Inc. (a) 1,253,375
50,700 The Hain Food Group, Inc. (a) 1,134,413
113,300 Haverty Furniture Companies, Inc. 1,430,413
92,600 Interim Services Inc. (a) 2,291,850
70,087 Jack in the Box Inc. (a) 1,449,925
89,600 K-Swiss Inc. 1,664,600
19,600 Lason, Inc. (a) 215,600
43,900 Linens 'n Things, Inc. (a) 1,300,538
163,600 Lone Star Steakhouse & Saloon, Inc. (a) 1,459,619
87,800 Mail-Well, Inc. (a) 1,185,300
42,500 The McClatchy Co., Class A Shares 1,838,125
57,980 The Men's Wearhouse, Inc. (a) 1,703,163
49,700 Navigant Consulting, Inc. (a) 540,488
70,550 Pacific Sunwear of California, Inc. (a)(b) 2,270,828
59,600 Rent-A-Center, Inc. (a) 1,180,825
54,300 Sirius Satellite Radio Inc. (a)(b) 2,416,350
74,450 Sonic Corp. (a) 2,121,825
41,200 Speedway Motorsports, Inc. (a) 1,145,875
74,900 Trans World Entertainment Corp. (a) 786,450
51,200 United Stationers Inc. 1,462,400
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50,309,697
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See Notes to Financial Statements.
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Smith Barney Small Cap Blend Fund, Inc. 7
<PAGE>
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Schedule of Investments (continued) December 31, 1999
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Consumer Staples -- 2.1%
31,800 Canandaigua Brands, Inc. (a) $ 1,621,800
55,100 The Earthgrains Co. 888,488
52,700 IBP, Inc. 948,600
105,200 International Home Foods, Inc. (a) 1,827,850
36,700 The Robert Mondavi Corp., Class A Shares (a) 1,275,325
62,800 Pilgrim's Pride Corp. 522,025
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7,084,088
- --------------------------------------------------------------------------------
Energy -- 2.8%
60,800 Barrett Resources Corp. (a) 1,789,800
42,400 Cal Dive International, Inc.(a) 1,404,500
38,104 Devon Energy Corp. (b) 1,252,669
131,500 Friede Goldman Halter, Inc. (a) 912,281
117,200 Marine Drilling Companies, Inc. (a) 2,629,675
63,300 Newfield Exploration Co. (a) 1,693,275
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9,682,200
- --------------------------------------------------------------------------------
Financial Services -- 11.4%
65,300 Affiliated Managers Group, Inc. (a) 2,640,569
26,100 Astoria Financial Corp. 794,419
47,300 Bank United Corp. 1,288,925
83,921 Brenton Banks, Inc. 849,700
28,100 Centura Banks, Inc. 1,239,912
42,000 City National Corp. 1,383,375
46,000 Commerce Bancorp, Inc. 1,860,125
58,900 Dime Bancorp, Inc. 890,862
87,300 Doral Financial Corp. 1,074,881
79,800 Eaton Vance Corp. 3,032,400
73,000 Enhance Financial Services Group Inc. 1,186,250
40,400 Everest Reinsurance Holdings, Inc. 901,425
94,070 Fidelity National Financial, Inc. 1,352,256
31,300 Financial Security Assurance Holdings Ltd. 1,631,513
70,800 The First American Financial Corp. 880,575
65,300 FirstFed Financial Corp. (a) 918,281
62,200 Flagstar Bancorp, Inc. 1,072,950
68,200 Hamilton Bancorp Inc. (a) 1,210,550
88,700 HCC Insurance Holdings, Inc. 1,169,731
91,600 Medallion Financial Corp. 1,643,075
41,460 Medical Assurance, Inc. (a) 878,434
72,300 National Commerce Bancorporation 1,640,306
88,100 Peoples Heritage Financial Group, Inc. 1,327,006
28,300 Radian Group Inc. 1,351,325
132,472 Republic Bancorp Inc. 1,608,299
102,600 Southwest Bancorporation of Texas, Inc. (a) 2,032,763
63,500 United Bankshares, Inc. 1,516,063
44,800 WestAmerica Bancorporation 1,251,600
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38,627,570
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See Notes to Financial Statements.
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8 1999 Annual Report to Shareholders
<PAGE>
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Schedule of Investments (continued) December 31, 1999
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Health Care -- 9.0%
38,400 Alpharma Inc., Class A Shares (b) $ 1,180,800
79,800 Aviron (a) 1,261,837
56,400 Bindley Western Industries, Inc. 849,525
55,400 CONMED Corp. (a) 1,433,475
58,300 COR Therapeutics, Inc. (a) 1,566,812
60,400 Datascope Corp. 2,416,000
16,400 Gilead Sciences, Inc. (a)(b) 887,650
71,800 Gliatech Inc. (a)(b) 1,193,675
30,200 IDEC Pharmaceuticals Corp. (a)(b) 2,967,150
95,600 InfoCure Corp. (a)(b) 2,981,525
44,250 King Pharmaceuticals, Inc. (a)(b) 2,480,766
48,250 Medicis Pharmaceutical Corp. (a) 2,053,641
12,700 Millennium Pharmaceuticals, Inc. (a) 1,549,400
8,800 PE Corp. - Celera Genomics Group (a) 1,311,200
28,399 Priority Healthcare Corp., Class B Shares (a) 821,796
24,500 Protein Design Labs, Inc. (a) 1,715,000
48,600 Renal Care Group, Inc. (a) 1,136,025
63,500 Res-Care, Inc. (a)(b) 809,625
51,600 Sunrise Assisted Living, Inc. (a) 709,500
44,900 Trigon Healthcare, Inc. (a) 1,324,550
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30,649,952
- --------------------------------------------------------------------------------
Materials & Processing -- 10.7%
95,900 AK Steel Holding Corp. 1,810,113
62,300 AptarGroup, Inc. 1,565,287
44,200 Arden Realty, Inc. 886,762
47,600 Centex Construction Products, Inc. 1,856,400
70,100 CK Witco Corp. 937,587
34,700 Cousins Properties, Inc. 1,177,631
46,200 The Dexter Corp. 1,836,450
54,900 EastGroup Properties, Inc. 1,015,650
114,500 Equity Inns Inc. 772,875
46,600 First Industrial Realty Trust, Inc. 1,278,588
58,600 General Growth Properties, Inc. 1,640,800
74,700 Glenborough Realty Trust Inc. 999,113
32,300 Health Care Property Investors, Inc. 771,163
75,700 Liberty Property Trust 1,835,725
37,700 Mid-America Apartment Communities, Inc. 852,963
77,100 Nationwide Health Properties, Inc. 1,060,125
31,600 NVR, Inc. (a) 1,508,900
48,800 OM Group, Inc. 1,680,550
58,900 Parkway Properties, Inc. 1,697,056
50,900 Potlatch Corp. (b) 2,271,413
92,100 Prime Retail, Inc. 518,063
81,630 Reckson Associates Realty Corp. 1,673,415
44,800 Regency Realty Corp. 896,000
69,500 Reliance Steel & Aluminum Co. 1,628,906
38,200 Simpson Manufacturing Co., Inc. (a) 1,671,250
88,300 Tower Automotive, Inc. (a) 1,363,131
51,900 Tredegar Corp. 1,073,681
- --------------------------------------------------------------------------------
36,279,597
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Small Cap Blend Fund, Inc. 9
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) December 31, 1999
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Producer Durables -- 5.8%
55,300 Astec Industries, Inc. (a) $ 1,040,331
25,200 Briggs & Stratton Corp. 1,351,350
49,300 C&D Technologies, Inc. 2,095,250
42,600 Centex Corp. 1,051,687
45,400 Cordant Technologies Inc. 1,498,200
91,700 D.R. Horton, Inc. 1,266,606
89,300 Insituform Technologies, Inc. (a) 2,522,725
53,500 Jacobs Engineering Group Inc. (a) 1,738,750
75,600 Lennar Corp. 1,228,500
78,900 Mettler-Toledo International Inc. (a) 3,012,994
60,900 Primex Technologies, Inc. 1,263,675
60,800 Terex Corp. (a) 1,687,200
- --------------------------------------------------------------------------------
19,757,268
- --------------------------------------------------------------------------------
Technology -- 28.6%
85,400 Advanced Fibre Communications, Inc. (a) 3,816,312
27,500 Alpha Industries, Inc. (a) 1,576,094
71,500 American Management Systems, Inc (a) 2,243,312
92,800 Amkor Technology, Inc. (a) 2,621,600
31,400 ANTEC Corp. (a)(b) 1,146,100
33,600 Ardent Software, Inc. (a) 1,310,400
56,800 AVT Corp. (a) 2,669,600
19,300 BroadVision, Inc. (a) 3,282,206
64,500 Brooks Automation, Inc. (a) 2,100,281
40,400 C-Cube Microsystems Inc. (a) 2,514,900
27,300 Carrier Access Corp. (a) 1,837,631
49,900 Cognex Corp. (a) 1,946,100
110,000 Computer Network Technology Corp. (a) 2,523,125
30,500 CSG Systems International, Inc. (a) 1,216,187
111,200 Datastream Systems, Inc. (a) 2,731,350
76,550 Dendrite International, Inc. (a) 2,593,131
44,100 Dycom Industries, Inc. (a) 1,943,156
65,200 Esterline Technologies Corp. (a) 753,875
28,000 Genesys Telecommunications Laboratories, Inc. (a) 1,512,000
89,400 Global Imaging Systems, Inc. (a) 1,095,150
35,200 Hadco Corp. (a) 1,795,200
85,500 Integrated Device Technology, Inc. (a) 2,479,500
50,400 ISS Group, Inc. (a) 3,584,700
27,500 Lam Research Corp. (a) 3,067,969
44,800 Lattice Semiconductor Corp. (a)(b) 2,111,200
67,200 Mastech Corp. (a) 1,663,200
34,600 Mercury Interactive Corp. (a) 3,734,638
13,500 MicroStrategy Inc. (a) 2,835,000
55,900 National Computer Systems, Inc. 2,103,238
129,600 NeoMagic Corp. (a) 1,417,500
34,000 New Era of Networks, Inc. (a)(b) 1,619,250
53,600 Park Electrochemical Corp. 1,423,750
44,600 Polycom, Inc. (a) 2,840,463
33,800 PRI Automation, Inc. (a)(b) 2,268,825
46,900 Progress Software Corp. (a) 2,661,575
23,900 Proxim, Inc. (a) 2,629,000
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) December 31, 1999
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Technology -- 28.6% (continued)
37,000 RadiSys Corp. (a) $ 1,887,000
18,200 SEI Investments Co. 2,166,084
40,000 Semtech Corp. (a) 2,085,000
174,900 Sybase, Inc. (a) 2,973,300
29,500 TranSwitch Corp. (a) 2,140,594
12,200 VerticalNet, Inc. (a)(b) 2,000,800
15,000 WebTrends Corp. (a) 1,215,000
42,900 Xircom, Inc. (a) 3,217,500
- --------------------------------------------------------------------------------
97,352,796
- --------------------------------------------------------------------------------
Utilities -- 6.6%
28,700 Commonwealth Telephone Enterprises, Inc. (a) 1,517,512
46,400 Connecticut Energy Corp. 1,803,800
199,980 El Paso Electric Co. (a) 1,962,304
53,200 IDACORP, Inc. 1,426,425
85,200 Intermedia Communications Inc. (a)(b) 3,306,825
81,500 ITC DeltaCom, Inc. (a)(b) 2,251,438
73,000 MDU Resources Group, Inc. 1,460,000
37,700 New Jersey Resources Corp. 1,472,656
73,500 NorthWestern Corp. 1,617,000
79,500 Primus Telecommunications Group, Inc. (a) 3,040,875
50,900 Southwest Gas Corp. 1,170,700
61,700 UGI Corp. 1,260,994
- --------------------------------------------------------------------------------
22,290,529
- --------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost -- $307,216,933) 325,449,016
================================================================================
FACE
AMOUNT SECURITY VALUE
================================================================================
U.S. TREASURY BILLS -- O.2%
$640,000 U.S. Treasury Bills, due 03/16/00 (c)
(Cost -- $633,048) 633,414
================================================================================
REPURCHASE AGREEMENT -- 4.1%
14,107,000 Morgan Stanley, Dean Witter & Co., 2.500%
due 1/3/00; Proceeds at maturity -- $14,109,939;
(Fully collateralized by U.S. Treasury Bonds,
6.00% to 7.25% due 08/15/22 to 02/15/26;
Market Value -- $14,524,437)
(Cost -- $14,107,000) 14,107,000
================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $321,956,981*) $340,189,430
================================================================================
(a) Non-income producing security.
(b) All or a portion of this security is on loan (See Note 7).
(c) Security is segregated by the custodian for futures contracts commitments.
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Small Cap Blend Fund, Inc. 11
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities December 31, 1999
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost -- $321,956,981) $340,189,430
Collateral for securities loaned (Note 7) 35,539,295
Receivable for securities sold 5,259,774
Receivable for Fund shares sold 801,188
Dividends and interest receivable 388,710
Receivable from broker - variation margin 240,000
- --------------------------------------------------------------------------------
Total Assets 382,418,397
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for securities loaned (Note 7) 35,539,295
Payable for securities purchased 2,332,458
Payable for Fund shares reacquired 555,864
Investment advisory fee payable 178,947
Administration fee payable 27,920
Distribution fee payable 10,969
Payable to bank 7,542
Accrued expenses 72,386
- --------------------------------------------------------------------------------
Total Liabilities 38,725,381
- --------------------------------------------------------------------------------
Total Net Assets $343,693,016
================================================================================
NET ASSETS:
Par value of capital shares $ 24,040
Capital paid in excess of par value 309,597,825
Undistributed net investment income 382,804
Accumulated net realized gain on security
transactions and futures contracts 14,518,898
Net unrealized appreciation of investments
and futures contracts 19,169,449
- --------------------------------------------------------------------------------
Total Net Assets $343,693,016
================================================================================
Shares Outstanding:
Class A 2,922,335
--------------------------------------------------------------------------
Class B 2,065,540
--------------------------------------------------------------------------
Class L 1,055,294
--------------------------------------------------------------------------
Class Y 17,996,454
--------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $ 14.26
--------------------------------------------------------------------------
Class B* $ 13.92
--------------------------------------------------------------------------
Class L** $ 13.91
--------------------------------------------------------------------------
Class Y (and redemption price) $ 14.37
--------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 5.26% of net
asset value per share) $ 15.01
--------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset
value per share) $ 14.05
================================================================================
* Redemption price is NAV of Class B shares reduced by a 5.00% CDSC if
shares are redeemed within one year from purchase (See Note 2).
** Redemption price is NAV of Class L shares reduced by a 1.00% CDSC if
shares are redeemed within the first year of purchase.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 3,277,303
Interest 839,790
Less: Foreign withholding tax (2,413)
- --------------------------------------------------------------------------------
Total Investment Income 4,114,680
- --------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 2) 1,941,540
Distribution fees (Note 2) 445,478
Administration fees (Note 2) 298,698
Registration fees 128,564
Shareholder and system servicing fees 89,630
Audit and legal 48,566
Shareholder communications 38,809
Custody 32,103
Directors' fees 2,413
Other 8,889
- --------------------------------------------------------------------------------
Total Expenses 3,034,690
- --------------------------------------------------------------------------------
Net Investment Income 1,079,990
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FUTURES CONTRACTS (NOTES 3 AND 5):
Realized Gain From:
Security transactions (excluding short-term securities): 61,877,904
Futures contracts 3,415,116
- --------------------------------------------------------------------------------
Net Realized Gain 65,293,020
- --------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments and
Futures Contracts:
Beginning of the year 23,494,039
End of year 19,169,449
- --------------------------------------------------------------------------------
Decrease in Net Unrealized Appreciation (4,324,590)
- --------------------------------------------------------------------------------
Net Gain on Investments and Futures Contracts 60,968,430
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 62,048,420
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Small Cap Blend Fund, Inc. 13
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets For the Years Ended December 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
=======================================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,079,990 $ 443,794
Net realized gain (loss) 65,293,020 (12,983,874)
Increase (decrease) in net unrealized appreciation (4,324,590) 13,907,428
- -------------------------------------------------------------------------------------------------------
Increase In Net Assets From Operations 62,048,420 1,367,348
- -------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (649,805) (441,036)
Net realized gains (37,772,099) (2,410,101)
- -------------------------------------------------------------------------------------------------------
Decrease in Net Assets From Distributions to Shareholders (38,421,904) (2,851,137)
- -------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 8):
Net proceeds from sale of shares 182,774,760 181,707,409
Net asset value of shares issued for reinvestment of dividends 7,478,235 557,713
Cost of shares reacquired (151,098,520) (66,067,232)
- -------------------------------------------------------------------------------------------------------
Increase in Net Assets from Fund Share Transactions 39,154,475 116,197,890
- -------------------------------------------------------------------------------------------------------
Increase in Net Assets 62,780,991 114,714,101
NET ASSETS:
Beginning of year 280,912,025 166,197,924
- -------------------------------------------------------------------------------------------------------
End of year* $ 343,693,016 $ 280,912,025
=======================================================================================================
*Includes undistributed (overdistributed) net investment income of: $ 382,804 $ (2,083)
=======================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
14 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
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, as a
diversified, open-end management investment company.
The significant accounting policies consistently followed by the Fund are: (a)
security transactions are accounted for on trade date; (b) securities traded on
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 for which market quotations are not
available will be valued in good faith at fair value by or under the direction
of the Board of Directors; (d) securities maturing within 60 days or less are
valued at cost plus accreted discount, or minus amortized premium, which
approximates value; (e) dividend income is recorded on the ex-dividend date and
interest income is recorded on the accrual basis; (f) dividends and
distributions to shareholders are recorded on the ex-dividend date; (g) gains or
losses on the sale of securities are calculated by using the specific
identification method; (h) direct expenses are charged to each class; management
fees and general fund expenses are allocated on the basis of relative net
assets; (i) 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; (j) 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, 1999, reclassifications were made to the Fund's capital accounts to
reflect permanent book/tax differences and income and gains available for
distributions under income tax regulations. Net investment income, net realized
gains and net assets were not affected by this change; and (k) estimates and
assumptions are required to be made regarding assets, liabilities and changes in
net assets resulting from operations when financial statements are prepared.
Changes in the economic environment, financial markets and any other parameters
used in determining these estimates could cause actual results to differ.
2. Management Agreement and Transactions with Affiliated Persons
Travelers Investment Management Company ("TIMCO"), a subsidiary of Salomon Smith
Barney Holdings Inc. ("SSBH"), which in turn, is a subsidiary of Citigroup Inc.
("Citigroup"), acts as investment manager to the Fund. The Fund pays TIMCO a fee
calculated at the annual rate of 0.65% of the Fund's average daily net assets.
This fee is calculated daily and paid monthly.
SSB Citi Fund Management LLC ("SSBC"), formerly known as SSBC Fund Management
Inc., another subsidiary of SSBH, acts as the Fund's administrator. As
compensation for its services, the Fund pays SSBC a fee calculated at the annual
rate of 0.10% of the Fund's average daily net assets. This fee is calculated
daily and paid monthly.
Effective October 1999, Smith Barney Private Trust Company ("Private Trust"),
another subsidiary of Citigroup, became the Fund's transfer agent and PFPC
Global Fund Services ("PFPC") became the sub-transfer agent. Private Trust
receives account fees and asset-based fees that vary according to the account
size and type of account. PFPC is responsible for shareholder recordkeeping and
financial processing for all shareholder accounts. During the period October 1,
1999 through December 31, 1999, the Fund paid transfer agent fees of $18,826 to
Private Trust.
- --------------------------------------------------------------------------------
Smith Barney Small Cap Blend Fund, Inc. 15
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the year ended December 31, 1999, Salomon Smith Barney Inc. ("SSB"), another
subsidiary of SSBH, was paid brokerage commissions of $47,650.
CFBDS, Inc., acts as the Fund's distributor. SSB, as well as certain other
broker-dealers, continues to sell Fund shares to the public as a member of the
selling group.
There is a contingent deferred sales charge, ("CDSC") of 5.00% on Class B
shares, which applies if redemption occurs within one year from purchase and
declines thereafter by 1.00% per year until no CDSC is incurred. Class L shares
are being sold at net asset value plus a maximum initial sales charge of 1.00%.
Class L shares also have a 1.00% CDSC, which applies if redemption occurs within
the first year of purchase. In certain cases, Class A shares 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, 1999, SSB received sales charges of
approximately $124,000 and $71,000 on sales of the Fund's Class A and Class L
shares, respectively. In addition, CDSCs paid to SSB were approximately:
Class A Class B Class L
================================================================================
CDSCs $3,000 $73,000 $6,000
================================================================================
Pursuant to a Distribution Plan, 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 year ended December 31, 1999, total Distribution Plan fees were as
follows:
Class A Class B Class L
================================================================================
Distribution Plan Fees $99,696 $243,047 $102,735
================================================================================
All officers and one director of the Fund are employees of SSB.
3. Investments
For the year ended December 31, 1999, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases $301,261,875
- --------------------------------------------------------------------------------
Sales 298,363,505
================================================================================
At December 31, 1999, aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were substantially as follows:
================================================================================
Gross unrealized appreciation $ 56,468,405
Gross unrealized depreciation (38,235,956)
- --------------------------------------------------------------------------------
Net unrealized appreciation $ 18,232,449
================================================================================
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.
- --------------------------------------------------------------------------------
16 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
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. 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, 1999, the Fund had the following open futures contracts:
<TABLE>
<CAPTION>
# of Basis Market Unrealized
Purchased Contracts Contracts Expiration Value Value Gain
==========================================================================================
<S> <C> <C> <C> <C> <C>
Russell 2000 50 3/00 $11,811,750 $12,748,750 $937,000
==========================================================================================
</TABLE>
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, 1999, 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.
- --------------------------------------------------------------------------------
Smith Barney Small Cap Blend Fund, Inc. 17
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
At December 31, 1999, the Fund loaned common stocks having a value of
$34,732,834 and holds the following collateral for loaned securities:
Security Description Value
================================================================================
Time Deposits:
CAISSE, 12.0000% due 1/3/00 $ 4,866,458
Chase Manhattan Bank, 4.5000% due 1/3/00 7,128,238
Marshal & Isley, 2.0000% due 1/3/00 845,498
Suntrust Bank, 13.0000% due 1/3/00 5,928,463
Suntrust Bank, 4.5000% due 1/3/00 8,921,839
Certificates of Deposit:
Deutsche Bank, 6.0400% due 1/3/00 380,737
Commercial Paper:
Atlantis One, 5.9921% due 1/25/00 1,025,327
Atlantis One, 5.9732% due 3/20/00 772,962
CC USA, 5.9337% due 2/22/00 2,168,630
Sigma Finance, 5.9591% due 2/10/00 803,195
Floating Rate Notes:
Goldman Sachs, 5.9100% due 8/23/00 2,180,864
Sigma Finance, 6.2538% due 4/4/00 517,084
- --------------------------------------------------------------------------------
Total $35,539,295
================================================================================
For the year ended December 31, 1999, income earned by the Portfolio from
securities lending was $140,231.
8. Capital Shares
At December 31, 1999, 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.
At December 31, 1999, total paid-in capital amounted to the following for each
class:
Class A Class B Class L Class Y
================================================================================
Total Paid-in Capital $30,139,325 $28,662,684 $14,023,679 $236,796,177
================================================================================
- --------------------------------------------------------------------------------
18 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1999 December 31, 1998
------------------------------ ------------------------------
Shares Amount Shares Amount
=========================================================================================================
<S> <C> <C> <C> <C>
Class A
Shares sold 9,105,221 $ 126,323,039 4,335,738 $ 55,812,933
Shares issued on reinvestment 223,589 2,946,905 18,612 260,568
Shares reacquired (9,608,982) (133,273,922) (4,518,280) (57,908,518)
- ---------------------------------------------------------------------------------------------------------
Net Decrease (280,172) $ (4,003,978) (163,930) $ (1,835,017)
=========================================================================================================
Class B
Shares sold 715,813 $ 9,567,489 1,356,775 $ 18,169,322
Shares issued on reinvestment 234,980 3,024,197 17,912 246,833
Shares reacquired (683,740) (9,004,356) (514,811) (6,660,668)
- ---------------------------------------------------------------------------------------------------------
Net Increase 267,053 $ 3,587,330 859,876 $ 11,755,487
=========================================================================================================
Class L*
Shares sold 1,056,665 $ 14,118,611 439,129 $ 5,656,882
Shares issued on reinvestment 117,104 1,507,133 3,651 50,312
Shares reacquired (661,100) (8,820,242) (120,337) (1,498,046)
- ---------------------------------------------------------------------------------------------------------
Net Increase 512,669 $ 6,805,502 322,443 $ 4,209,148
=========================================================================================================
Class Y
Shares sold 2,435,314 $ 32,765,621 7,895,273 $ 102,068,272
Shares issued on reinvestment -- -- -- --
Shares reacquired -- -- -- --
- ---------------------------------------------------------------------------------------------------------
Net Increase 2,435,314 $ 32,765,621 7,895,273 $ 102,068,272
=========================================================================================================
</TABLE>
* On June 12, 1998, Class C shares were renamed Class L shares.
- --------------------------------------------------------------------------------
Smith Barney Small Cap Blend Fund, Inc. 19
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended December 31:
<TABLE>
<CAPTION>
Class A Shares(1) 1999(2) 1998(2) 1997 1996 1995
===================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $13.35 $13.68 $12.30 $12.15 $11.78
- -------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.02 0.00* 0.04 0.05 0.11
Net realized and unrealized gain (loss) 2.65 (0.17)** 3.23 2.14 2.31
- -------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 2.67 (0.17) 3.27 2.19 2.42
- -------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.08) -- (0.04) (0.04) (0.11)
Net realized gains (1.68) (0.16) (1.98) (2.00) (1.94)
- -------------------------------------------------------------------------------------------------------------------
Total Distributions (1.76) (0.16) (2.02) (2.04) (2.05)
- -------------------------------------------------------------------------------------------------------------------
Redemption Fee(3) -- -- 0.13 -- --
- -------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $14.26 $13.35 $13.68 $12.30 $12.15
- -------------------------------------------------------------------------------------------------------------------
Total Return 21.09% (1.31)% 28.25% 20.56% 18.90%
- -------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $41,669 $42,747 $46,036 $52,911 $52,546
- -------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.23% 1.33% 1.21% 1.21% 1.22%
Net investment income 0.13 0.03 0.24 0.43 0.84
- -------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 104% 129% 140% 151% 177%
===================================================================================================================
</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) Per share amounts have been calculated using the monthly average shares
method.
(3) Amount relates to a redemption fee which was in effect through December
31, 1997.
* Amount represents less than $0.01 per share.
** The amount shown may not be consistent with the change in aggregate gains
and losses of portfolio securities due to the timing of sales and
redemptions of Fund shares throughout the year.
- --------------------------------------------------------------------------------
20 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended December 31:
Class B Shares 1999(1) 1998(1) 1997(2)
================================================================================
Net Asset Value, Beginning of Year $13.09 $13.52 $13.34
- --------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss (0.09) (0.09) (0.01)
Net realized and unrealized gain (loss) 2.60 (0.18)* 2.18
- --------------------------------------------------------------------------------
Total Income (Loss) From Operations 2.51 (0.27) 2.17
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- (0.01)
Net realized gains (1.68) (0.16) (1.98)
- --------------------------------------------------------------------------------
Total Distributions (1.68) (0.16) (1.99)
- --------------------------------------------------------------------------------
Net Asset Value, End of Year $13.92 $13.09 $13.52
- --------------------------------------------------------------------------------
Total Return 20.21% (2.07)% 16.73%++
- --------------------------------------------------------------------------------
Net Assets, End of Year (000s) $28,746 $23,551 $12,685
- --------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 2.04% 2.10% 1.99%+
Net investment loss (0.66) (0.72) (0.26)+
- --------------------------------------------------------------------------------
Portfolio Turnover Rate 104% 129% 140%
================================================================================
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from June 25, 1997 (inception date) to December 31, 1997.
* The amount shown may not be consistent with the change in aggregate gains
and losses of portfolio securities due to the timing of sales and
redemptions of Fund shares throughout the year.
++ 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 year
ended December 31:
Class L Shares 1999(1) 1998(1)(2) 1997(3)
================================================================================
Net Asset Value, Beginning of Year $13.09 $13.51 $13.24
- --------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss (0.08) (0.10) (0.01)
Net realized and unrealized gain (loss) 2.58 (0.16)* 2.27
- --------------------------------------------------------------------------------
Total Income (Loss) From Operations 2.50 (0.26) 2.26
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- (0.01)
Net realized gains (1.68) (0.16) (1.98)
- --------------------------------------------------------------------------------
Total Distributions (1.68) (0.16) (1.99)
- --------------------------------------------------------------------------------
Net Asset Value, End of Year $13.91 $13.09 $13.51
- --------------------------------------------------------------------------------
Total Return 20.12% (1.99)% 17.53%++
- --------------------------------------------------------------------------------
Net Assets, End of Year (000s) $14,684 $7,101 $2,974
- --------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 2.01% 2.13% 2.00%+
Net investment loss (0.61) (0.74) (0.26)+
- --------------------------------------------------------------------------------
Portfolio Turnover Rate 104% 129% 140%
================================================================================
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) On June 12, 1998, Class C shares were renamed Class L shares.
(3) For the period from June 24, 1997 (inception date) to December 31, 1997.
* The amount shown may not be consistent with the change in aggregate gains
and losses of portfolio securities due to the timing of sales and
redemptions of Fund shares throughout the year.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
22 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended December 31:
Class Y Shares 1999(1) 1998(1) 1997(2)
================================================================================
Net Asset Value, Beginning of Year $13.34 $13.63 $13.87
- --------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.08 0.06 0.01
Net realized and unrealized gain (loss) 2.66 (0.16)* (2.21)
- --------------------------------------------------------------------------------
Total Income (Loss) From Operations 2.74 (0.10) (0.20)
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.03) (0.03) (0.04)
Net realized gains (1.68) (0.16) --
- --------------------------------------------------------------------------------
Total Distributions (1.71) (0.19) (0.04)
- --------------------------------------------------------------------------------
Net Asset Value, End of Year $14.37 $13.34 $13.63
- --------------------------------------------------------------------------------
Total Return 21.55% (0.80)% (1.42)%++
- --------------------------------------------------------------------------------
Net Assets, End of Year (000s) $258,594 $207,513 $104,503
- --------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.82% 0.94% 1.11%+
Net investment income 0.56 0.44 0.58+
- --------------------------------------------------------------------------------
Portfolio Turnover Rate 104% 129% 140%
================================================================================
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from October 17, 1997 (inception date) to December 31,
1997.
* The amount shown may not be consistent with the change in aggregate gains
and losses of portfolio securities due to the timing of sales and
redemptions of Fund shares throughout the year.
++ 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. 23
<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, 1999, the related statement of operations for the year then ended,
the statements 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, 1999, by correspondence with the custodian. As to securities
purchased or sold but not yet 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, 1999, 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 LLP
New York, New York
February 11, 2000
- --------------------------------------------------------------------------------
24 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Tax Information (unaudited)
- --------------------------------------------------------------------------------
For Federal tax purposes the Fund hereby designates for the fiscal year ended
December 31, 1999:
o A corporate dividends received deduction of 4.72%.
o Total long-term capital gain distributions paid of $7,469,997.
- --------------------------------------------------------------------------------
Additional Shareholder Information (unaudited)
- --------------------------------------------------------------------------------
On May 12, 1999, a special meeting of shareholders of the Fund was held for the
purpose of electing Directors to the Fund.
The results of the vote 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>
Lee Abraham 17,321,090.654 99.707% 50,948.817 0.293%
Allan J. Bloostein 17,322,107.821 99.713 49,931.650 0.287
Jane F. Dasher 17,321,560.400 99.709 50,479.071 0.291
Donald R. Foley 17,316,786.788 99.682 55,252.683 0.318
Richard E. Hanson, Jr. 17,318,414.792 99.691 53,624.679 0.309
Paul Hardin 17,319,908.687 99.700 52,130.784 0.300
Heath B. McLendon 17,322,492.607 99.715 49,546.864 0.285
Roderick C. Rasmussen 17,321,090.654 99.707 50,948.817 0.293
John P. Toolan 17,322,492.607 99.715 49,546.864 0.285
=============================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Smith Barney Small Cap Blend Fund, Inc. 25
<PAGE>
Smith Barney
Small Cap Blend
Fund, Inc.
Directors
Lee Abraham
Allan J. Bloostein
Jane F. Dasher
Donald R. Foley
Richard E. Hanson, Jr.
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
Paul A. Brook
Controller
Christina T. Sydor
Secretary
Investment Manager
Travelers Investment Management Company
Distributor
CFBDS, Inc.
Custodian
PNC Bank, N.A.
Transfer Agent
Smith Barney Private Trust Company
388 Greenwich Street, 22nd Floor
New York, New York 10013
Sub-Transfer Agent
PFPC Global Fund Services
P.O. Box 9699
Providence, Rhode Island 02940-9699
This report is submitted for the general information of shareholders of Smith
Barney 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.
SALOMON SMITH BARNEY
---------------------------
A member of citigroup[LOGO]
Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
Smith Barney
Small Cap Blend Fund, Inc.
Smith Barney Mutual Funds
388 Greenwich Street, MF-2
New York, New York 10013
www.smithbarney.com/mutualfunds
FD01319 2/00
