<PAGE>
SMITH BARNEY
Precious
SEMI- Metals and
ANNUAL Minerals
REPORT Fund Inc.
.......................
APRIL 30, 1995
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.
<PAGE>
PRECIOUS METALS AND MINERALS FUND
DEAR SHAREHOLDER:
During the six month period ended April 30, 1995, Class A,
Class B and Class C shares of the Smith Barney Precious
Metals and Minerals Fund (the "Fund") had total returns of
(12.64)%, (12.96)% and (10.81)%, respectively (in U.S. dollars).
This compared with returns for the same period of: (12.24)% for the
James Capel Composite Index; (18.69)% for Australian gold shares
(as measured by the Australian Gold Index), (37)% for South African
gold shares (as measured by the South African Gold Index); (1.58)%
for Canadian gold shares (as measured by the Toronto Gold Index)
and .31% for U.S. gold shares (as measured by the Standard & Poor's
Gold Index). During the same period, gold bullion had a return of
1.37%; base metal shares fell by 8.91% (as measured by the James
Capel Base Metal Index); and diversified shares fell by 6.21% (as
measured by the James Capel Diversified Mining Index). The Standard
& Poor's Composite Index of 500 Common Stocks had a return for the
same period of 10.46%.
REVIEW
Throughout the fourth quarter of 1994, the global economic
environment favored metal consumption. Although the outlook for
Japanese growth was uncertain, the U.S. economy continued to grow
despite several interest rate increases. At the same time, the European
economies continued to demonstrate a strong recovery and the emerging markets
were still attracting significant investment flows, especially from U.S.
investors. However, the Mexican financial crisis which culminated in December
with a 55% fall in the Mexican peso, led to a wave of selling across emerging
markets in Latin America and the Far East, irrespective of individual country
fundamentals. The U.S. dollar, which had been weakening during most of 1994,
was subjected to further negative pressure as the U.S.-sponsored Mexican aid
package was received negatively.
COMMODITY PRICES
During the period, commodity markets experienced a high level of volatility
which we believe was the result of several factors, including dampened economic
growth, interest rate movements, currency instability, the emerging market
crises of December/January, increased speculative metals hedging, fundamental
shifts in the supply and demand for metals and minerals and the emergence of
China and the nations of the former Soviet Union as significant economic powers.
BASE METALS: Throughout the latter part of 1994, base metal commodity prices
remained strong, aided by improving supply and demand and optimistic global
growth expectations. Beginning in December, however, this market began to
1
<PAGE>
experience a correction which has continued to date, with base metal shares
underperforming gold shares (especially North American gold shares).
As we reported to you in October, we believed Japan would follow the recoveries
of the U.S. and Europe with a gradually strengthening economy by early 1995.
However, in January, Japan was hit by the devastating earthquake in Kobe -- a
major manufacturing center. The destruction there, coupled with a strong yen,
resulted in short-term economic growth forecasts being lowered.
Individual base metal markets have also been negatively impacted by certain
events. The 1994 memorandum of understanding among producers to limit aluminum
production in the face of decreasing prices appears to be breaking down as some
producers are considering bringing on currently unused capacity. The copper
market's long-term fundamentals have deteriorated due to concerns over long-term
production expansions as well as the potential for China to emerge as a major
player. At the same time, the nickel market appears to be feeling the negative
effects of the slow-down in the U.S. economy which has resulted in lower steel
prices.
GOLD: The gold bullion market held up well during the six-month period ended
April 30, 1995, due in part to favorable currency movements, the interest rate
outlook and fundamentally strong supply and demand. During the period, gold
traded in a range of $375 to $397. Fabrication demand continued to strengthen
with robust demand emerging at lower trading levels, particularly from the Far
East. Since January, the Japanese gold market has witnessed a marked increase as
consumers have been attracted by a low yen. Chinese gold demand also remains
strong, fueled by continued inflation and currency concerns. At the same time,
however, the Belgium Central Bank reduced its gold holdings during the period.
Lastly, the U.S. interest rate environment appears favorable for gold.
Generally, rising interest rates have a negative impact on the value of gold
which is a non-interest bearing investment. U.S. investors currently appear to
be more and more confident that, with the slowing down of the economy, there
will be few if any further increases in interest rates.
GOLD EQUITY MARKETS
As demonstrated by the returns above, the individual gold share markets have had
contrasting performances. Whereas North American (U.S. and Canadian) gold shares
performed comparatively well during the period, reversing last year's
underperformance, the South African market fell by 37%, negating, at least in
part, the spectacular performance of prior years. We believe that South Africa's
underperformance was attributable to decreasing operating margins for the mines
- -- with rising capital expenditure costs, reduced production due to an increase
in the number of holidays and the strengthened South African rand. Australian
gold shares also performed poorly during the period as the general market was
impacted by
2
<PAGE>
heavy overseas selling. In addition, freak weather conditions during the first
part of 1995 resulted in some significant fall-offs in mine production in that
country. Although we reduced our weighting on the South Africa market, the Fund
has been negatively impacted by Australia's poor performance.
OUTLOOK
We anticipate that the remainder of 1995 should provide a positive environment
for gold and gold shares. With regard to the Fund's geographic allocation going
forward, we intend to maintain a significant portion of the portfolio in North
American holdings. We anticipate a re-rating of the other markets, particularly
Australia, and as such, shall be looking to readjust our weightings by country.
In terms of the Fund's commodity allocation, we currently intend to maintain a
substantial portion of the Fund's assets in gold shares while remaining
underweighted in pure base metals, as we anticipate a slowdown in economic
growth. We also look forward to increasing our exposure to smaller companies,
although the Fund will still be concentrated in the larger, typically more
stable, companies.
As always, we appreciate the opportunity to help you reach your investment
goals.
<TABLE>
<S> <C>
Heath B. McLendon Aisling O'Duffy
Chairman of the Board Investment Officer
and Investment Officer
June 19, 1995
</TABLE>
3
<PAGE>
Smith Barney
Precious Metals and Minerals Fund Inc.
- --------------------------------------------------------------------------------
PORTFOLIO HIGHLIGHTS (UNAUDITED) APRIL 30, 1995
COUNTRY BREAKDOWN
<TABLE>
Pie chart depicting the allocation of the Precious Metals and Minerals Fund
Inc. investment securities held at April 30, 1995 by country classification.
The pie is broken in pieces representing Country in the following percentages:
<CAPTION>
COUNTRY PERCENTAGE
<S> <C>
CANADA 28.2%
AUSTRALIA 26.1%
UNITED STATES 25.1%
SOUTH AFRICA 9.7%
GREAT BRITAIN 6.9%
FINLAND 0.6%
WARRANTS, CONVERTIBLE PREFERRED STOCK,
CONVERTIBLE BOND, REPURCHASE AGREEMENT,
AND NET OTHER ASSETS 3.4%
</TABLE>
TOP TEN COMMON STOCK HOLDINGS
<TABLE>
<CAPTION>
Percentage of
Company Net Assets
<S> <C>
- ----------------------------------------------------------------------
TVX GOLD INC. 5.8%
NEWMONT MINING CORPORATION 5.3
HOMESTAKE MINING COMPANY 5.1
POSEIDON GOLD 4.9
PLACER DOME INC., ADR 4.8
LONRHO GROUP 4.3
BATTLE MOUNTAIN GOLD COMPANY 4.2
CAMBIOR INC. 3.7
NEWCREST MINING LIMITED 3.6
PLACER PACIFIC LIMITED 3.1
</TABLE>
4
<PAGE>
Smith Barney
Precious Metals and Minerals Fund Inc.
<TABLE>
- -----------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED) APRIL 30, 1995
<CAPTION>
MARKET VALUE
SHARES (NOTE 1)
<C> <S> <C>
- ------------------------------------------------------------------------------------------
COMMON STOCKS - 96.6%
CANADA - 28.2%
400,000 Antares Mining Exploration $ 197,124
245,000 Asia Pacific Resources 540,620
745,000 Black Hawk Mining 438,380
430,000 Bolivar Goldfields Limited 458,608
214,800 Cambior Inc. 2,448,899
108,400 Canadian Crew Energy+ 259,130
120,000 Ecuadorian Minerals Corporation 101,504
35,600 Eden Rock Minerals Corporation 64,939
483,100 El-Callao Mining Company 319,804
50,000 Euro Nevada Mining Limited, ADR 1,351,550
15,000 Franco Nevada Mining Limited, ADR 750,248
214,000 Golden Star Resources+ 1,672,428
42,800 Guyanor Resources, Class B 85,628
175,500 Hycroft Resources & Development+ 309,808
100,000 International Gold Resources Corporation 264,794
120,800 Kinross Gold 733,037
29,800 Marshall Minerals+ 47,126
112,000 Miramar Mining Corporation 576,661
150,000 Namibian Minerals Corporation 182,046
135,650 Placer Dome Inc., ADR 3,221,688
67,000 Prime Resources Group+ 462,010
763,500 Reclamation Management Limited+ 22,463
164,000 South African Minerals 241,256
535,000 TVX Gold Inc.+ 3,885,937
38,800 Viceroy Resources Corporation, ADR+ 206,907
- -----------------------------------------------------------------------------------------
18,842,595
- -----------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE>
Smith Barney
Precious Metals and Minerals Fund Inc.
<TABLE>
- ----------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED) (continued) APRIL 30, 1995
<CAPTION>
MARKET VALUE
SHARES (NOTE 1)
<C> <S> <C>
- -----------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
AUSTRALIA - 26.1%
145,000 Ampolex $ 418,699
1,579,574 Aurora Gold+ 1,953,135
986,300 Delta Gold NL 2,015,853
366,300 Emporer Mines Limited 503,549
500,000 Golden Shamrock Mines+ 345,491
1,444,900 Homestake Gold of Australia+ 1,681,517
1,000,000 Meekathara Minerals 210,931
556,000 Newcrest Mining Limited 2,377,911
674,850 Normandy Poseidon Limited 834,449
209,755 North Limited 509,568
834,000 Placer Pacific Limited 2,074,606
1,611,543 Poseidon Gold 3,282,036
215,000 Santos 591,117
1,018,333 Savage Resources 666,616
- -----------------------------------------------------------------------------------------
17,465,478
- -----------------------------------------------------------------------------------------
UNITED STATES - 25.1%
257,400 Battle Mountain Gold Company 2,831,400
73,700 Coeur D'Alene Mines Corporation 1,455,575
136,300 Hecla Mining Company+ 1,448,187
201,200 Homestake Mining Company 3,395,250
85,011 Newmont Mining Corporation 3,559,836
300,000 Reunion Mining 415,134
132,000 Santa Fe Pacific Gold Corporation 1,666,500
104,000 Stillwater Mining Company+ 2,002,000
- -----------------------------------------------------------------------------------------
16,773,882
- -----------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE>
Smith Barney
Precious Metals and Minerals Fund Inc.
<TABLE>
- -----------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED) (continued) APRIL 30, 1995
<CAPTION>
MARKET VALUE
SHARES (NOTE 1)
<C> <S> <C>
- -----------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
SOUTH AFRICA - 9.7%
24,000 A.E.C.I. Limited $ 207,254
75,000 Driefontein Consolidated Limited, ADR 1,078,125
70,700 Driefontein Consolidated Limited 1,035,468
133,000 Free State Consolidated Gold Mines Limited, ADR 1,579,375
360,000 Ocean Diamond Mining 338,238
32,550 Rustenburg Platinum Holdings 836,518
7,700 Rustenburg Platinum Holdings, ADR 194,425
203,000 Vaal Reefs Exploration & Mining Limited, ADR 1,243,375
- -----------------------------------------------------------------------------------------
6,512,778
- -----------------------------------------------------------------------------------------
GREAT BRITAIN - 6.9%
35,500 Ashanti Goldfields+** 887,500
411,562 Ivernia West+ 331,112
1,450,000 Kenmare Resources, Plc 303,306
1,083,000 Lonrho Group 2,857,864
100,000 Zambia Consolidated Copper Mines, Class B+ 245,000
- -----------------------------------------------------------------------------------------
4,624,782
- -----------------------------------------------------------------------------------------
FINLAND - 0.6%
21,355 Outokumpu Oy, Class A 381,581
- -----------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $56,204,558) 64,601,096
- -----------------------------------------------------------------------------------------
WARRANTS - 0.0%
120,000 Bolivar Goldfield Warrants, expire 9/28/95***+ 0
11,000 Cambior Inc. Warrants, expire 6/30/96+ 12,136
30,000 Canyon Resources Corporation Warrants, expire 6/30/95+ 7,500
25,000 Miramar Special Warrants, expire 10/12/95***+ 0
50,000 Namibian Minerals Corporation Purchase Warrants, expire
1/13/96***+ 0
24,755 Outokumpu Warrants, expire 6/28/96+ 14,512
100,000 Reunion Mining Warrants, expire 4/1/97***+ 0
- -----------------------------------------------------------------------------------------
TOTAL WARRANTS (Cost $92,700) 34,148
- -----------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE>
Smith Barney
Precious Metals and Minerals Fund Inc.
<TABLE>
- -----------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED) (continued) APRIL 30, 1995
<CAPTION>
MARKET VALUE
SHARES (NOTE 1)
<C> <S> <C>
- -----------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCK - 0.6% Cost ($346,000)
10,500 Freeport McMoran Copper, Class B, Convertible Preferred at
3.500% due 8/1/03 $ 371,438
- -----------------------------------------------------------------------------------------
<CAPTION>
FACE
VALUE
<C> <S> <C>
- -----------------------------------------------------------------------------------------
CONVERTIBLE BOND - 2.0% Cost ($1,447,022)
$1,450,000 Samancor Overseas Finance, Convertible Preferred at 7.000% due
6/30/04 1,330,375
- -----------------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 5.3% Cost ($3,517,000)
3,517,000 Agreement with Salomon Brothers , 5.910% dated 4/28/95, to be
repurchased at $3,518,732 on 5/1/95, collateralized by
$3,613,000 U.S. Treasury Notes, 3.088% due 9/30/95 3,517,000
- -----------------------------------------------------------------------------------------
TOTAL INVESTMENTS (Cost $61,607,280*) 104.5% 69,854,057
- -----------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (NET) (4.5) (2,981,108)
- -----------------------------------------------------------------------------------------
NET ASSETS 100.0% $66,872,949
- -----------------------------------------------------------------------------------------
<FN>
+ Non-income producing security.
* Aggregate cost for Federal tax purposes.
** Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration to qualified institutional buyers.
*** Restricted security (Note 11).
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
Smith Barney
Precious Metals and Minerals Fund Inc.
<TABLE>
- -------------------------------------------------------------------------------------------
SCHEDULE OF FORWARD FOREIGN EXCHANGE CONTRACTS (UNAUDITED) APRIL 30, 1995
<CAPTION>
CONTRACT MARKET
VALUE VALUE
DATE (NOTE 1)
<C> <S> <C> <C>
- --------------------------------------------------------------------------------------------
FORWARD FOREIGN EXCHANGE CONTRACTS TO SELL
(Contract amount $7,933,268)
10,896,740 Canadian Dollars 7/24/95 ($7,982,843)
- --------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
Smith Barney
Precious Metals and Minerals Fund Inc.
<TABLE>
- ------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) APRIL 30, 1995
<S> <C> <C>
ASSETS:
Investments, at value (Cost $61,607,280) (Note 1)
See accompanying schedule $ 69,854,057
Cash and foreign currency (Cost $930,818) 930,217
Receivable for forward foreign exchange contracts to sell 7,933,268
Receivable for investment securities sold 869,931
Receivable for Fund shares sold 159,066
Dividends and interest receivable 71,190
Other assets 50,000
- ------------------------------------------------------------------------------------------
TOTAL ASSETS 79,867,729
- ------------------------------------------------------------------------------------------
LIABILITIES:
Forward foreign exchange contracts to sell, at value
(Contract cost $7,933,268) (Note 1)
See accompanying schedule $7,982,843
Payable for Fund shares redeemed 3,826,408
Payable for investment securities purchased 1,018,669
Investment advisory fee payable (Note 2) 44,092
Distribution fee payable (Note 3) 20,147
Service fee payable (Note 3) 14,698
Transfer agent fees payable (Note 2) 13,516
Custodian fees payable (Note 2) 12,000
Administration fee payable (Note 2) 11,758
Accrued expenses and other payables 50,649
- ------------------------------------------------------------------------------------------
TOTAL LIABILITIES 12,994,780
- ------------------------------------------------------------------------------------------
NET ASSETS $ 66,872,949
- ------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
Smith Barney
Precious Metals and Minerals Fund Inc.
<TABLE>
- ------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES (continued) APRIL 30, 1995
<S> <C> <C>
NET ASSETS CONSIST OF:
Accumulated net investment loss $ (189,665)
Accumulated net realized loss on securities transactions,
forward foreign exchange contracts and currency
transactions (26,446,017)
Net unrealized appreciation of securities, forward foreign
exchange contracts, foreign currencies and net other assets 8,200,142
Par value 3,601
Paid-in capital in excess of par value 85,304,888
- ------------------------------------------------------------------------------------------
TOTAL NET ASSETS $ 66,872,949
- ------------------------------------------------------------------------------------------
NET ASSET VALUE:
CLASS A SHARES:
NET ASSET VALUE and redemption price per share
($34,822,205 / 1,859,064 shares of common stock outstanding) $18.73
- ------------------------------------------------------------------------------------------
Maximum offering price per share ($18.73 / 0.95)
(based on a sales charge of 5% of the offering price on
April 30, 1995) $19.72
- ------------------------------------------------------------------------------------------
CLASS B SHARES:
NET ASSET VALUE and offering price per share+
($31,674,093 / 1,721,403 shares of common stock outstanding) $18.40
- ------------------------------------------------------------------------------------------
CLASS C SHARES:
NET ASSET VALUE and offering price per share+
($376,651 / 20,466 shares of common stock outstanding) $18.40
- ------------------------------------------------------------------------------------------
<FN>
+ Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
Smith Barney
Precious Metals and Minerals Fund Inc.
<TABLE>
- -----------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED APRIL 30, 1995
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $41,109) $ 378,561
Interest 145,107
Miscellaneous income 52,510
- -----------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 576,178
- -----------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fee (Note 2) $256,123
Distribution fee (Note 3) 117,386
Service fee (Note 3) 85,375
Transfer agent fees (Notes 2 and 4) 82,999
Administration fee (Note 2) 68,301
Custodian fees (Note 2) 47,472
Legal and audit fees 25,744
Directors' fees and expenses (Note 2) 12,709
Other 53,712
- -----------------------------------------------------------------------------------------
Total before interest expense 749,821
- -----------------------------------------------------------------------------------------
Interest expense (Note 8) 16,022
- -----------------------------------------------------------------------------------------
TOTAL EXPENSES 765,843
- -----------------------------------------------------------------------------------------
NET INVESTMENT LOSS (189,665)
- -----------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS (NOTES 1 AND 5):
Net realized gain/(loss) on:
Securities transactions 2,867,327
Forward foreign exchange contracts (542,027)
Currency transactions (33,050)
- -----------------------------------------------------------------------------------------
Net realized gain on investments during the period 2,292,250
- -----------------------------------------------------------------------------------------
Net change in unrealized depreciation of:
Securities (11,166,483)
Forward foreign exchange contracts (44,636)
Foreign currencies and net other assets (2,847)
- -----------------------------------------------------------------------------------------
Net unrealized depreciation of investments during the period (11,213,966)
- -----------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS (8,921,716)
- -----------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS (9,111,381)
- -----------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
Smith Barney
Precious Metals and Minerals Fund Inc.
<TABLE>
- ------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
SIX MONTHS YEAR
ENDED ENDED
4/30/95 10/31/94
<S> <C> <C>
(UNAUDITED)
Net investment loss $ (189,665) $ (658,340)
Net realized gain on investments, forward foreign exchange
contracts and currency transactions during the period 2,292,250 7,326,991
Net unrealized appreciation/(depreciation) on investments,
forward foreign exchange contracts, foreign currencies
and net other assets during the period (11,213,966) 4,217,555
- ------------------------------------------------------------------------------------------
Net increase/(decrease) in net assets resulting from
operations (9,111,381) 10,886,206
Net increase/(decrease) in net assets from Fund share
transactions (Note 6):
Class A (2,247,503) 13,792,144
Class B (1,202,305) (12,595,761)
Class C 359,875 --
- ------------------------------------------------------------------------------------------
Net increase/(decrease) in net assets (12,201,314) 12,082,589
NET ASSETS:
Beginning of period 79,074,263 66,991,674
- ------------------------------------------------------------------------------------------
End of period (including accumulated net investment loss
of $189,665 on April 30, 1995) $66,872,949 $79,074,263
- ------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
Smith Barney
Precious Metals and Minerals Fund Inc.
<TABLE>
- ---------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
SIX MONTHS YEAR YEAR
ENDED ENDED ENDED
4/30/95 10/31/94 10/31/93#
<S> <C> <C> <C>
(UNAUDITED)
Net asset value, beginning of period $21.44 $18.89 $13.27
- ----------------------------------------------------------------------------------------
Income from investment operations:
Net investment income/(loss) (0.03) (0.06) (0.02)++
Net realized and unrealized gain/(loss) on
investments (2.68) 2.61 5.64
- ----------------------------------------------------------------------------------------
Total from investment operations (2.71) 2.55 5.62
- ----------------------------------------------------------------------------------------
Less Distributions:
Distributions from net investment income -- -- --
Distributions from capital -- -- --
Distributions from net realized capital gains -- -- --
- ----------------------------------------------------------------------------------------
Total distributions 0.00 0.00 0.00
- ----------------------------------------------------------------------------------------
Net asset value, end of period $18.73 $21.44 $18.89
- ----------------------------------------------------------------------------------------
Total Return+++ (12.64)% 13.50% 42.35%
- ----------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (in 000's) $ 34,822 $41,370 $20,097
Ratio of operating expenses to average net assets*** 1.90%**+ 1.81% 2.17%+
Ratio of net investment income/(loss) to average net
assets (0.26)%** (0.34)% (0.14)%
Portfolio turnover rate 25% 50% 108%
- ----------------------------------------------------------------------------------------
<FN>
* The Fund commenced operations on November 24, 1986. On November 6, 1992 the
Fund commenced selling Class B shares. Those shares in existence prior to
November 6, 1992 were designated Class A shares.
** Annualized
*** Annualized expense ratio before waiver of fees by investment adviser and
administrator for the year ended October 31, 1993 and for the period ended
October 31, 1987 were 2.28% and 1.86%, respectively.
+ The operating expense ratio excludes interest expense. The operating expense
ratio including interest expense for the six months ended April 30, 1995 and
for the year ended October 31, 1993 were 1.95% and 2.18%, respectively.
++ Net investment loss before waiver of fees by investment adviser and
administrator for the year ended October 31, 1993 and for the period ended
October 31, 1987 were $(0.04) and $(0.10), respectively.
+++ Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charge.
# The per share amounts have been calculated using the monthly average shares
method, which more appropriately presents per share data for this year since
use of the undistributed net investment income method did not accord with
the results of operations.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
Smith Barney
Precious Metals and Minerals Fund Inc.
- --------------------------------------------------------------------------------
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
10/31/92 10/31/91 10/31/90 10/31/89 10/31/88 10/31/87*
<C> <C> <C> <C> <C> <C>
$13.93 $13.63 $16.96 $16.43 $18.58 $15.20
- ----------------------------------------------------------------------------------
(0.10) 0.16 0.11 0.15 0.03 (0.09)++
(0.47) 0.14 (3.12) 0.38 (1.28) 3.47
- ----------------------------------------------------------------------------------
(0.57) 0.30 (3.01) 0.53 (1.25) 3.38
- ----------------------------------------------------------------------------------
(0.06) -- (0.21) -- -- --
(0.03) -- (0.11) -- -- --
-- -- -- -- (0.90) --
- ----------------------------------------------------------------------------------
(0.09) 0.00 (0.32) 0.00 (0.90) 0.00
- ----------------------------------------------------------------------------------
$13.27 $13.93 $13.63 $16.96 $16.43 $18.58
- ----------------------------------------------------------------------------------
(4.09)% 2.20% (18.18)% 3.23% (7.56)% 22.24%
- ----------------------------------------------------------------------------------
$14,138 $17,167 $22,350 $34,590 $49,029 $69,195
2.85% 2.24% 2.44% 2.35% 1.78% 1.76%**
(0.76)% 0.97% 0.69% 0.88% 0.27% (0.60)%**
58% 63% 61% 25% 30% 22%
- ----------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
Smith Barney
Precious Metals and Minerals Fund Inc.
<TABLE>
- --------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A CLASS B SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
SIX MONTHS
ENDED YEAR PERIOD
4/30/95 ENDED ENDED
(UNAUDITED) 10/31/94 10/31/93*#
<S> <C> <C> <C>
Net asset value, beginning of period $ 21.14 $ 18.75 $ 13.35
- ----------------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (0.08) (0.33) (0.15)++
Net realized and unrealized gain/(loss) on
investments (2.66) 2.72 5.55
- ----------------------------------------------------------------------------------------
Total from investment operations (2.74) 2.39 5.40
- ----------------------------------------------------------------------------------------
Net asset value, end of period $ 18.40 $ 21.14 $ 18.75
- ----------------------------------------------------------------------------------------
Total Return+++ (12.96)% 12.75% 40.45%
- ----------------------------------------------------------------------------------------
Ratios/ supplemental data:
Net assets, end of period (in 000's) $31,674 $37,704 $ 40,895
Ratio of operating expenses to average net
assets*** 2.54%**+ 2.54% 2.98%**+
Ratio of net investment loss to average net
assets (0.90)%** (1.06)% (0.96)%**
Portfolio turnover rate 25% 50% 108%
- ----------------------------------------------------------------------------------------
<FN>
* The Fund commenced selling Class B shares on November 6, 1992.
** Annualized
*** Annualized expense ratio before waiver of fees by investment adviser and
administrator for the period ended October 31, 1993 was 3.09%.
+ The operating expense ratios exclude interest expense. The operating expense
ratios including interest expense for the six months ended April 30, 1995
and for the year ended October 31, 1993 were 2.59% and 3.00%, respectively.
++ Net investment loss before waiver of fees by investment adviser and
administrator for the period ended October 31, 1993 was $(0.17).
+++ Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charge.
# The per share amounts have been calculated using the monthly average shares
method, which more appropriately presents per share data for this year since
use of the undistributed net investment income method did not accord with
the results of operations.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
Smith Barney
Precious Metals and Minerals Fund Inc.
<TABLE>
- -------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A CLASS C SHARE OUTSTANDING THROUGHOUT THE PERIOD.
<CAPTION>
PERIOD
ENDED
4/30/95*
(UNAUDITED)
<S> <C>
Net asset value, beginning of period $ 20.63
- -------------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (0.03)
Net realized and unrealized loss on investments (2.20)
- -------------------------------------------------------------------------------------
Total from investment operations (2.23)
- -------------------------------------------------------------------------------------
Net asset value, end of period $ 18.40
- -------------------------------------------------------------------------------------
Total Return+++ (10.81)%
- -------------------------------------------------------------------------------------
Ratios/ supplemental data:
Net assets, end of period (in 000's) $ 377
Ratio of operating expenses to average net assets 2.43%**+
Ratio of net investment income to average net assets (0.79)%**
Portfolio turnover rate 25%
- -------------------------------------------------------------------------------------
<FN>
* The Fund commenced selling Class C shares on November 7, 1994.
** Annualized
+ The operating expense ratio excludes interest expense. The operating expense
ratio including interest expense for the period ended April 30, 1995 was
2.48%.
+++ Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charge.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE>
Smith Barney
Precious Metals and Minerals Fund Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Smith Barney Precious Metals and Minerals Fund Inc. (the "Fund") is registered
with the Securities and Exchange Commission under the Investment Company Act of
1940, as amended (the "1940 Act"), as a diversified, open-end management
investment company. The Fund was incorporated under the laws of the State of
Maryland on July 16, 1986. Effective November 7, 1994, the Fund began offering
Class C and Class Y shares and continued to offer Class A and Class B shares. As
of April 30, 1995, no Class Y shares had been sold. Class A shares are sold with
a front-end sales charge. Class B and Class C shares may be subject to a
contingent deferred sales charge ("CDSC") upon redemption. Class B shares will
convert automatically to Class A shares eight years after the date of original
purchase. Class Y shares are available to investors making an initial investment
of at least $5 million and are not subject to any sales charges, service or
distribution fees. All classes of shares have identical rights and privileges
except with respect to the effect of the respective sales charges, the
distribution and/or service fees borne by each class, expenses allocable
exclusively to each class, voting rights on matters affecting a single class,
the exchange privilege of each class and the conversion feature of Class B
shares. The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements.
Portfolio valuation: Generally, the Fund's investments are valued at market
value or, in the absence of a market value with respect to any portfolio
securities, at fair value as determined by or under the direction of the Fund's
Board of Directors. Securities traded on a domestic or foreign exchange are
valued at the last sale price on that exchange or, if there is no recent sale,
at the current bid quotations. Portfolio securities, including warrants, which
are traded on foreign securities exchanges are generally valued at the preceding
closing values of such securities on their respective exchanges, except that
when an occurrence subsequent to the time that a value was so established is
likely to have changed such value, then the fair value of those securities will
be determined by consideration of other factors by or under the direction of the
Board of Directors or its delegates. Gold bullion is valued at the daily London
afternoon fixing. Over-the-counter securities and securities listed or traded on
certain foreign exchanges whose operations are similar to the U.S. over-
the-counter market are valued on the basis of the bid price at the close of
business on each day. Investments in U.S. government securities (other than
short-term securities) are valued at the average of the quoted bid and asked
prices in the over-the-counter market. Restricted securities and other illiquid
securities are valued by or under the direction of the Fund's Board of Directors
in good faith at fair value,
18
<PAGE>
Smith Barney
Precious Metals and Minerals Fund Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (continued)
taking into consideration all indications of value available. Short-term
investments that mature in 60 days or less are valued at amortized cost.
Repurchase agreements: The Fund engages in repurchase agreement transactions.
Under the terms of a typical repurchase agreement, the Fund takes possession of
an underlying debt obligation subject to an obligation of the seller to
repurchase, and the Fund to resell, the obligation at an agreed-upon price and
time, thereby determining the yield during the Fund's holding period. This
arrangement results in a fixed rate of return that is not subject to market
fluctuations during the Fund's holding period. The value of the collateral is at
least equal at all times to the total amount of the repurchase obligations,
including interest. In the event of counterparty default, the Fund has the right
to use the collateral to offset losses incurred. There is potential loss to the
Fund in the event the Fund is delayed or prevented from exercising its rights to
dispose of the collateral securities, including the risk of a possible decline
in the value of the underlying securities during the period while the Fund seeks
to assert its rights. To evaluate potential risks, the Fund's investment
adviser, administrator or sub-administrator, acting under the supervision of the
Board of Directors, reviews the value of the collateral and the creditworthiness
of those banks and dealers with which the Fund enters into
repurchase agreements.
Foreign currency: The books and records of the Fund are maintained in United
States (U.S.) dollars. Foreign currencies, investments and other assets and
liabilities are translated into U.S. dollars at the exchange rates prevailing at
the end of the period, and purchases and sales of investment securities, income
and expenses are translated on the respective dates of such transactions.
Unrealized gains and losses which result from changes in foreign currency
exchange rates have been included in the unrealized appreciation/(depreciation)
of currencies and net other assets. Net realized foreign currency gains and
losses resulting from changes in exchange rates include foreign currency gains
and losses between trade date and settlement date on investment securities
transactions, foreign currency transactions and the difference between the
amounts of interest and dividends recorded on the books of the Fund and the
amount actually received. The portion of foreign currency gains and losses
related to fluctuation in exchange rates between the initial purchase trade date
and subsequent sale trade is included in realized gains and losses on investment
securities sold.
Forward foreign currency contracts: Forward foreign currency contracts are
valued at the forward rate and are marked-to-market daily. The change in market
19
<PAGE>
Smith Barney
Precious Metals and Minerals Fund Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (continued)
value is recorded by the Fund as an unrealized gain or loss. When the contract
is closed, the Fund records a realized gain or loss equal to the difference
between the value of the contract at the time it was opened and the value at the
time it was closed.
The use of forward foreign currency contracts does not eliminate fluctuations in
the underlying prices of the Fund's portfolio securities, but it does establish
a rate of exchange that can be achieved in the future. Although forward foreign
currency contracts limit the risk of loss due to a decline in the value of the
hedged currency, they also limit any potential gain that might result should the
value of the currency increase. In addition, the Fund could be exposed to risks
if the counterparties to the contracts are unable to meet the terms of their
contracts.
Option contracts: Upon the purchase of a put option or a call option by the
Fund, the premium paid is recorded as an investment, the value of which is
marked-to-market daily to reflect the current market value. When a purchased
option expires, the Fund will realize a loss in the amount of the cost of the
option. When the Fund enters into a closing sale transaction, the Fund will
realize a gain or loss depending on whether the sales proceeds from the closing
sale transaction are greater or less than the cost of 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.
When the Fund writes a call option or a put option, an amount equal to the
premium received by the Fund is recorded as a liability, the value of which is
marked-to-market daily to reflect the current market value of the written
option. When a written option expires, the Fund realizes a gain equal to the
amount of the premium received. When the Fund enters into a closing purchase
transaction, the Fund realizes a gain (or loss if the cost of the closing
purchase transaction exceeds the premium received when the option was sold)
without regard to any unrealized gain or loss on the underlying security, and
the liability related to such option is eliminated. When a call option is
exercised, the Fund realizes a gain or loss from the sale of the underlying
security and the proceeds from such sale are increased by the premium originally
received. When a put option is exercised, the amount of the premium originally
received will reduce the cost of the security which the Fund purchased upon
exercise.
20
<PAGE>
Smith Barney
Precious Metals and Minerals Fund Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (continued)
The risk associated with purchasing options is limited to the premium originally
paid. The risk in writing a call option is the Fund may forego the opportunity
of profit if the market price of the underlying security increases and the
option is exercised. The risk in writing a put option is that the Fund may incur
a loss if the market price of the underlying security decreases and the option
is exercised. In addition, there is the risk the Fund may not be able to enter
into a closing transaction because of an illiquid secondary market.
Securities transactions and investment income: Securities transactions are
recorded as of the trade date. Realized gains and losses from securities
transactions are recorded on the identified cost basis. Dividend income is
recorded on the ex-dividend date except that certain dividends from foreign
securities are recorded as soon as the Fund is informed of the ex-dividend date.
Interest income is recorded on the accrual basis. Investment income and realized
and unrealized gains and losses are allocated based upon relative net assets of
each class.
Dividends and distributions to shareholders: Dividends from net investment
income determined on a class level, if any, and distribution of any net realized
capital gain determined on a Fund level are distributed once a year, normally at
the end of the year, in which it was earned or at the beginning of the next
year. Additional distributions may be made at the discretion of the Board of
Directors. In addition, in order to avoid the application of a 4.00%
nondeductible excise tax on certain undistributed amounts of ordinary income and
capital gains, the Fund may make one or more additional distributions shortly
before December 31 in each year. Income distributions and capital gain
distributions on a Fund level are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund, timing differences and
differing characterization of distributions made by the Fund as a whole.
Federal income taxes: It is the Fund's policy to qualify as a regulated
investment company, if such qualification is in the best interests of its
shareholders, by complying with the requirements of the Internal Revenue Code of
1986, as amended, applicable to regulated investment companies, and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required.
21
<PAGE>
Smith Barney
Precious Metals and Minerals Fund Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (continued)
Foreign income taxes: Investment income received by the Fund from sources
within foreign countries may be subject to foreign income taxes withheld at the
source.
2. INVESTMENT ADVISORY FEE, ADMINISTRATION FEE
AND OTHER TRANSACTIONS
The Fund has entered into an investment advisory agreement (the "Advisory
Agreement") with Smith Barney Strategy Advisers Inc. ("SBSA"). SBSA is a wholly
owned subsidiary of Smith Barney Holdings Inc. which is in turn a wholly owned
subsidiary of Travelers Group Inc. Under the Advisory Agreement, the Fund pays a
monthly fee at the annual rate of 0.75% of the value of its average daily net
assets.
The Fund has also entered into a sub-investment advisory agreement (the "Sub-
Investment Advisory Agreement") with Lehman Brothers Global Asset Management
Limited ("LBGAM"). LBGAM is a wholly owned subsidiary of Lehman Brothers
Holdings Inc. ("Lehman Holdings"). Lehman Holdings is a publicly owned
corporation of which Nippon Life Insurance Company owns approximately 11.2% of
the outstanding voting stock. For sub-investment advisory services rendered,
LBGAM receives a fee from SBSA, paid monthly at the annual rate of 0.375% of the
value of the Fund's average daily net assets.
The Fund has entered into an administration agreement (the "Administration
Agreement") with Smith Barney Mutual Funds Management Inc. ("SBMFM") (formerly
known as "Smith, Barney Advisers, Inc."), a wholly owned subsidiary of Smith
Barney Holdings Inc. Under this agreement, the Fund pays SBMFM a monthly fee at
the annual rate of 0.20% of the value of its average daily net assets.
The Fund and SBMFM have also entered into a sub-administration agreement (the
"Sub-Administration Agreement") with The Boston Company Advisors, Inc. ("Boston
Advisors"), an indirect wholly owned subsidiary of Mellon Bank Corporation
("Mellon"). Under the Sub-Administration Agreement, SBMFM pays Boston Advisors a
portion of its administration fee at a rate agreed upon from time to time
between SBMFM and Boston Advisors.
For the six months ended April 30, 1995, the Fund incurred total brokerage
commissions of $139,188, none of which was paid to Smith Barney Inc. ("Smith
Barney").
22
<PAGE>
Smith Barney
Precious Metals and Minerals Fund Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (continued)
For the six months ended April 30, 1995, Smith Barney received $42,401 from
investors representing commissions (sales charges) on sales of Class A shares.
A CDSC is generally payable by a shareholder in connection with the redemption
of certain Class A, Class B and Class C shares. In circumstances in which the
CDSC is imposed, the amount of the charge will vary depending on the number of
years since the date of purchase. For the six months ended April 30, 1995, Smith
Barney received from shareholders $78,432 and $30, in CDSC on the redemption of
Class B and Class C shares, respectively.
No officer, director or employee of Smith Barney or any of its affiliates
receives any compensation from the Fund for serving as a Director or officer of
the Fund. The Fund pays each Director who is not an officer, director or
employee of Smith Barney or any of its affiliates a fee of $2,000 per annum plus
$250 per meeting attended and each Director emeritus who is not an officer,
director or employee of Smith Barney, or any of its affiliates, $1,000 per annum
plus $125 per meeting attended. The Fund reimburses Directors for travel and
out-of-pocket expenses incurred to attend such meetings.
Boston Safe Deposit and Trust Company, an indirect wholly owned subsidiary of
Mellon, serves as the Fund's custodian. The Shareholder Services Group, Inc., a
subsidiary of First Data Corporation, serves as the Fund's transfer agent.
3. DISTRIBUTION AGREEMENT
Smith Barney acts as distributor of the Fund's shares pursuant to a distribution
agreement with the Fund and sells shares of the Fund through Smith Barney or its
affiliates. Pursuant to Rule 12b-1 under the 1940 Act, the Fund has adopted a
distribution plan (the "Plan"). Under this Plan, the Fund compensates Smith
Barney for servicing shareholder accounts for Class A, Class B and Class C
shareholders, and covers expenses incurred in distributing Class B and Class C
shares. Smith Barney is paid an annual services fee with respect to Class A,
Class B and Class C shares of the Fund at the rate of 0.25% of the value of the
average daily net assets of each respective class of shares. Smith Barney is
also paid an annual distribution fee with respect to Class B and Class C shares
at the rate of 0.75% of the value of the average daily net assets attributable
to those shares. For the six months ended April 30, 1995, the Fund incurred
$46,246, $38,927 and $202 in service fees for Class A, Class B and Class C
shares, respectively. For the six months ended April 30, 1995, the Fund incurred
$116,781 and $605 in distribution fees for Class B and Class C shares,
respectively.
23
<PAGE>
Smith Barney
Precious Metals and Minerals Fund Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (continued)
4. EXPENSE ALLOCATION
Expenses of the Fund not directly attributable to the operations of any class of
shares are prorated among the classes based upon the relative net assets of each
class. Operating expenses directly attributable to a class of shares are charged
to that class' operations. In addition to the above servicing and distribution
fees, class-specific operating expenses include transfer agent fees. For the six
months ended April 30, 1995, the Fund incurred $54,301, $28,640 and $58 in
transfer agent fees for Class A, Class B and Class C shares, respectively.
5. SECURITIES TRANSACTIONS
Purchases and proceeds from sales of securities, excluding U.S. government and
short-term obligations, during the six months ended April 30, 1995 were
$16,556,479 and $19,431,978, respectively.
At April 30, 1995, aggregate gross unrealized appreciation for all securities in
which there was an excess of value over tax cost was $12,986,845, and aggregate
gross unrealized depreciation for all securities in which there was an excess of
tax cost over value was $4,740,068.
6. COMMON STOCK
At April 30, 1995, three billion shares of $.001 par value common stock were
authorized. Changes in shares of common stock outstanding for the Fund which are
divided into four classes, Class A, Class B, Class C and Class Y, were as
follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
4/30/95 10/31/94
Class A shares: Shares Amount Shares Amount
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
Sold 9,420,096 $ 168,985,622 12,039,759 $245,612,815
Redeemed (9,490,649) (171,233,125) (11,173,818) (231,820,671)
- ----------------------------------------------------------------------------------------------
Net increase/(decrease) (70,553) (2,247,503) 865,941 13,792,144
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
4/30/95 10/31/94
Class B shares: Shares Amount Shares Amount
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
Sold 2,591,859 $ 46,014,818 9,244,788 $192,768,293
Redeemed (2,654,022) (47,217,123) (9,961,611) (205,364,054)
- ----------------------------------------------------------------------------------------------
Net decrease (62,163) $ (1,202,305) (716,823) $(12,595,761)
- ----------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
Smith Barney
Precious Metals and Minerals Fund Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (continued)
<TABLE>
<CAPTION>
PERIOD ENDED
4/30/95*
Class C shares: Shares Amount
<S> <C> <C>
- -------------------------------------------------------------------------------------
Sold 36,254 $ 650,064
Redeemed (15,788) (290,189)
- -------------------------------------------------------------------------------------
Net increase 20,466 $ 359,875
- -------------------------------------------------------------------------------------
<FN>
* The Fund commenced selling Class C shares on November 7, 1994.
</TABLE>
As of April 30, 1995, no Class Y shares had been sold.
7. FOREIGN SECURITIES
The Fund's policy of investing in securities of foreign companies involves
special risks and considerations not typically associated with investing in U.S.
companies. These risks include revaluation of currencies and future adverse
political and economic developments. Moreover, securities of many foreign
companies and their markets may be less liquid and their prices more volatile
than those of securities of comparable U.S. companies and the United States
government.
8. LINE OF CREDIT
The Fund and several affiliated entities participate in a $50 million line of
credit provided by Bank of America (formerly known as "Continental Bank N.A.")
under an Amended and Restated Line of Credit Agreement (the "Agreement") dated
April 30, 1992, and renewed effective May 31, 1994, primarily for temporary or
emergency purposes, including the meeting of redemption requests that otherwise
might require the untimely disposition of securities. Under this Agreement, the
Fund may borrow up to the lesser of $25 million or 25% of its net assets.
However, pursuant to the Fund's prospectus, the Fund may only borrow up to 10%
of its total net assets. Under the terms of the Agreement, as amended, the Fund
and the other affiliated entities are charged an aggregate commitment fee of
$100,000 which is allocated equally among each of the participants. The
Agreement requires, among other provisions, each participating fund to maintain
a ratio of net assets (not including funds borrowed pursuant to the Agreement)
to aggregate amount of indebtedness pursuant to the Agreement of no less than 5
to 1. During the six months ended April 30, 1995, the Fund had an average
outstanding daily balance of $514,917 with interest rates ranging from 5.875% to
6.750%. Interest expense
25
<PAGE>
Smith Barney
Precious Metals and Minerals Fund Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (continued)
totaled $16,022 for the six months ended April 30, 1995. At April 30, 1995, the
Fund had no outstanding borrowings under this Agreement.
9. CAPITAL LOSS CARRYFORWARDS
At October 31, 1994, the Fund had available for Federal tax purposes unused
capital loss carryforwards of $28,738,265, expiring over a period of years from
1995 through 2000.
10. CONCENTRATION OF RISK
The Fund intends to invest at least 65% of its assets in precious metals-related
investments. As a result of this concentration policy, which is a fundamental
policy of the Fund, the Fund's investments may be subject to greater risk and
market fluctuation than a fund that invests in securities representing a broader
range of investment alternatives. Historically, stock prices of companies
involved in precious metals-related industries have been volatile.
11. RESTRICTED SECURITIES
The Fund's investments in the following securities are restricted as to resale
and are valued under the direction of the Fund's Board of Directors in good
faith, at fair value, taking into consideration all indications of value
available. The following table shows the security description, acquisition date,
and number of shares of each restricted security:
<TABLE>
<CAPTION>
ACQUISITION
SECURITY DATE SHARES
<S> <C> <C>
- -----------------------------------------------------------------------------------------
Bolivar Goldfield Warrants expire 9/28/95 10/7/94 120,000
Miramar Special Warrants expire 10/12/95 9/8/94 25,000
Namibian Minerals Corporation Purchase Warrants expire 1/13/96 11/26/93 50,000
Reunion Mining Warrants expire 4/1/97 10/26/94 100,000
- -----------------------------------------------------------------------------------------
</TABLE>
As of April 30, 1995, each of the above restricted securities had a cost and
fair market value of $0, which equalled 0% of total net assets.
The Fund's investment policies prohibit it from investing more than 15% of the
market or other fair value of its total assets in illiquid securities, including
securities that are not readily marketable, securities that are restricted as to
disposition under
26
<PAGE>
Smith Barney
Precious Metals and Minerals Fund Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (continued)
Federal securities laws or otherwise, repurchase agreements maturing in more
than seven days, certain options traded in the over-the-counter market and the
securities to which such options relate. In purchasing securities which could
not be sold by the Fund without registration under the Securities Act of 1933,
as amended, the Fund will endeavor to obtain the right to registration at the
expense of the issuer. There generally will be a lapse of time between the
decision by the Fund to sell any such security and the registration of the
security permitting the sale. During any such period, the security will be
subject to market fluctuations.
27
<PAGE>
Smith Barney
Precious Metals and Minerals Fund Inc.
- --------------------------------------------------------------------------------
PARTICIPANTS
DISTRIBUTOR
Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
INVESTMENT ADVISER
Smith Barney Strategy
Advisers Inc.
388 Greenwich Street
New York, New York 10013
SUB-INVESTMENT ADVISER
Lehman Brothers Global Asset
Management Limited
Two Broadgate
London EC2M 7HA
United Kingdom
ADMINISTRATOR
Smith Barney Mutual Funds
Management Inc.
388 Greenwich Street
New York, New York 10013
SUB-ADMINISTRATOR
The Boston Company Advisors, Inc.
One Boston Place
Boston, Massachusetts 02108
COUNSEL
Willkie Farr & Gallagher
153 East 53rd Street
New York, New York 10022
TRANSFER AGENT
The Shareholders Services
Group Inc.
Exchange Place
Boston, Massachusetts 02109
CUSTODIAN
Boston Safe Deposit and
Trust Company
One Boston Place
Boston, Massachusetts 02108
28
<PAGE>
PRECIOUS METALS AND SMITH BARNEY
MINERALS FUND INC. ------------
DIRECTORS A Member of TravelersGroup [LOGO]
Herbert Barg
Alfred J. Bianchetti
Martin Brody
Dwight B. Crane
Burt N. Dorsett
Elliott S. Jaffe
Stephen E. Kaufman
Joseph J. McCann
Heath B. McLendon
Cornelius C. Rose, Jr.
OFFICERS
Heath B. McLendon
Chairman of the Board
and Investment Officer
This report is submitted for the
Jessica Bibliowicz general information of the
President shareholders of Smith Barney
Precious Metals and Minerals
Aisling O'Duffy Fund Inc. It is not authorized
Investment Officer for distribution to prospective
investors unless accompanied or
Lewis E. Daidone preceded by an effective
Senior Vice President Prospectus for the Fund, which
and Treasurer contains information concerning
the Fund's investment policies,
Christina T. Sydor fees and expenses as well as
Secretary other pertinent information.
SMITH BARNEY
MUTUAL FUNDS
388 Greenwich Street
New York, New York 10013
[RECYCLED LOGO] Fund 31, 204, 256
FD2213 F5
