<PAGE>
SEMI-ANNUAL REPORT
[ART]
Smith Barney
Natural Resources
Fund Inc.
- -----------------
April 30, 1996
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.
<PAGE>
Smith Barney Natural Resources Fund Inc.
Dear Shareholder:
We are pleased to provide you with the semi-annual report for the Smith Barney
Natural Resources Fund Inc. for the period ended April 30, 1996. For your
convenience, we have summarized the Fund's investment strategy over this time
and discussed some of the Fund's holdings in greater detail. A more
comprehensive summary of performance and current holdings can be found in the
appropriate sections of this semi-annual report.
As you know, the Natural Resources Fund has changed significantly over the past
six months. On December 18, 1996, the Fund's shareholders voted to broaden the
Fund's investment focus from investing primarily in precious metals securities
to investing in a much wider variety of natural resource industries. For
example, in late November 1995, the Natural Resources Fund had over 75% of its
assets invested in gold and precious metals stocks. By December 31, 1995, that
percentage was approximately 50%. As of April 30, 1996, the Natural Resources
Fund had a weighting of roughly 38% of its assets in gold and precious metals
securities.
Worldwide Commodity Growth Rates
--------------------------------
1985 - 1995
Chart here
No Data Points
Source: Davis Skaggs Investment Management. Donaldson, Lufkin & Jenrette
provided the aluminum data. Solomon Brothers supplied the copper data. Morgan
Stanley provided the ethylene data and Bloomberg Information Services supplied
the information about oil and gas growth rates. Although we believe the
information in this chart to be correct, we cannot guarantee its accuracy.
1
<PAGE>
The Case for Natural Resources
Put simply, we believe the case for natural resources is compelling because of
strong and growing worldwide demand. The chart on the previous page demonstrates
how natural resource demand growth in developing nations over the past ten years
has exceeded that of industrialized countries. In many cases, demand growth
rates for natural resources in developing nations such as China and other Asian
countries have been more than twice as high as those in the industrialized
countries. In our view, growth in worldwide demand for natural resources will
continue and may even accelerate, over the next five to ten years.
Fund Performance
During the past six months, the Smith Barney Natural Resources Fund had a total
return of 37.39% (Class A shares). The Fund's performance compared favorably
with the 32.1% return of the Goldman Sachs Commodities Index, a basket of
weighted commodities, which trade in both the cash and futures markets, and a
13.8% return over the same period of the Standard & Poor's 500 Stock Index ("S&P
500"), a capitalization-weighted measure of 500 widely held common stocks listed
on the New York Stock Exchange, American Stock Exchange and the over-the-counter
market.
The Fund's holdings in gold stocks were a significant contributor to its strong
performance over the past six months. After more than two years of trading in a
narrow range between $360-$390 per ounce, the price of gold rose above $400 per
ounce in early 1996. Gold stocks, which had also languished for the past several
years, experienced even stronger performance over the same period.
The Natural Resources Fund also benefited from its holdings in the energy area,
as strong worldwide demand and adverse winter weather conditions in many areas
of the world caused prices for oil and natural gas to rise, especially in the
United States. In addition, strong cash flows at many international oil
companies and improved technology have led to increased spending on energy
exploration worldwide. After fifteen years of lean times, the energy service
business is strong once again. Within the energy sector, the Fund maintains
positions in stocks of exploration and production companies, refining companies,
energy service companies and natural gas processing companies. Other Fund
holdings that contributed to its strong performance over the past six months
included paper and aluminum stocks.
Fund's Investment Approach
Gold
As we mentioned earlier, as of April 30, 1996, the Fund's holdings within
the gold sector represented approximately 38% of total Fund assets, which breaks
down as follows: 10% of Fund assets are invested in large-sized North American
companies, 9.6% in Australian companies, 9.3% in smaller-sized, "junior" mining
exploration companies and 6.8% in African companies.
2
<PAGE>
In the large capitalization North American company sector, the Fund has major
positions in unhedged producers such as Newmont Mining and Homestake Mining,
which can be expected to perform very well in a rising gold price environment.
The Fund also has positions in Euro-Nevada Mining, Franco-Nevada Mining and
Hemlo Gold.
As mentioned previously, holdings in the Australian gold sector made up about
10% of the Fund. As of April 30, 1996, Australian gold companies trade at
valuations which are about 33% less than their North American counterparts. In
our opinion, there is no reason for this valuation disparity. Australia is a
stable country with very favorable mining laws, and in many cases these
companies have growth prospects which are superior to the North American
companies. The Australian industry is characterized by many small mining
operations and only a few large, world-scale companies. This situation is
changing rapidly, as companies from both inside and outside of Australia are
looking to increase their stakes in the country. In the Australian mining
sector, the Fund holds the following securities: Normandy Mining, Posgold,
Aurora Gold, Emperor Mines, Sons of Gwalia, Goldfields Resources, Ranger
Minerals, and Meekatharra Minerals.
Within the African sector of the portfolio, the Natural Resources Fund has about
4.8% of assets in the South African mining sector. The South African mining
companies trade at valuations of $30 to $50 per ounce of reserves in the ground,
which compares with about $125 per ounce for the Australian companies and over
$200 per ounce for the large North American companies. The South African single-
mine companies trade at such discounts because they generally are restricted
from exploring for gold in areas outside of their leases.
The large degree of economic concentration and restrictive holding company
structures in South Africa at present, make outside acquisitions of these single
mine companies very difficult. However, we believe we are seeing the early signs
of major reforms in the South African economy, including the mining sector.
Given the low valuations, the potential payoffs from these changes are quite
significant, both from internal restructuring and possible corporate merger
activity. We hold positions in a number of South African producers such as Vaal
Reefs, Western Areas, and Driefontein Consolidated Mines, which have the
potential to benefit from the changes occurring in South Africa as well as from
a rising gold price.
One of the best performing sectors of the Fund has been its basket of "junior"
mining companies, which are companies that are exploring for gold and other
minerals in all parts of the world. Over the past few months we have seen a
tremendous bull market in exploration company shares, as the well-publicized
discoveries made by Bre-X Minerals and Diamond Fields Resources have created a
great deal of excitement and liquidity for the entire minerals exploration
industry.
3
<PAGE>
While the Natural Resources Fund has profited handsomely from its junior mining
sector holdings, we are concerned about the speculation occurring in this part
of the market. Companies which have no more than a few drill holes in the ground
are being accorded valuations of several hundred million dollars. Some of these
companies may ultimately prove successful in developing new ore bodies, but many
of them will not. Given our concerns, we have been taking profits in some of our
junior mining stock holdings.
Energy
As of April 30, 1996, the Fund's holdings in the energy sector made up roughly
12% of the portfolio. With energy prices rising in virtually every market over
the past several months, the energy sector has been one of the best-performing
sectors of the stock market so far in 1996.
Our long-term outlook for oil and gas prices remains positive. With respect to
oil, worldwide demand continues to grow, led by the developing countries of
Southeast Asia. Supply is also expected to grow as Iraqi oil enters the market
and as capital spending on exploration increases around the world. However, we
anticipate that Iraqi supplies will be absorbed in world markets without causing
major price decreases, as evidenced by crude oil inventories which are at
extremely low levels relative to historical norms.
The issue of increased capital spending is an important one because
technological improvements have enabled oil companies to find and develop
reserves which were previously uneconomic. The bright side of this improved
technology is that it is helping to create the best environment for the energy
service industry since the boom times of the late 1970s and early 1980s. The
Natural Resources Fund holds a position in Diamond Offshore Drilling, a company
we believe to be positioned to take advantage of the increased spending on
offshore development taking place throughout the industry. In fact, conditions
in the offshore drilling industry are so positive, we anticipate a significant
number of new rigs will be built over the next several years. The Fund also owns
Far East Levingston Shipbuilding, a Singapore-based company that currently has a
significant market share in the offshore rig construction industry.
In the exploration and production area, the Fund's largest holding is Enserch
Exploration, which is owned indirectly by the Fund through its holding in
Enserch Corporation. (Enserch Corp. owns 83% of Enserch Exploration, which it
plans to spin off to shareholders later this year.) Enserch Exploration is one
of the premier operators in the deep waters of the Gulf of Mexico beyond the
traditionally exploited waters of the Continental Shelf. We expect the spin-off
of the parent company's stake later this year to be a very positive event, as it
should increase Enserch Exploration's liquidity and visibility on Wall Street.
Other Fund holdings in the exploration and production sector include Oryx Energy
and Snyder Oil. In the past several weeks, the Fund sold its holdings in
4
<PAGE>
Enron Oil & Gas and Abacan Resources, both of which, we believe, had reached
levels closer to their full value.
Paper
Over the past ten months, the prices of many paper grades have declined by 20%
to 50%. We believe that the speed and magnitude of these price declines have
been so severe that they are not sustainable, and we expect paper prices to
recover later in 1996. In our view, paper company stocks, which have been one of
the worst performing groups in the S&P 500 over the last six months, will rise
substantially from current levels.
The Natural Resources Fund has invested in a number of paper companies
representing virtually all of the major paper grades. The Fund's biggest
position in this sector is Champion International, a large owner of timberlands
in the U.S. and a major producer of white paper. Other major paper holdings of
the Fund include Avenor Corporation, Stone Container, Union Camp Corporation,
Asia Pacific Resources, Longview Fibre and Harmac Pacific Corporation.
Metals
The Fund's largest holdings in the metals sector during the period under review
were in the aluminum industry. The aluminum industry experienced an outstanding
year in 1995, as a significant amount of industry capacity was curtailed
pursuant to a worldwide Memorandum of Understanding. Inventories held on the
London Metal Exchange (LME) and in producers' warehouses declined by about one
million tonnes in 1995. In response to last year's excellent results, several
large U.S. and European producers elected to restart capacity, perhaps
prematurely. Inventories held at the LME and at the producer level have
increased modestly, and the price of aluminum products has weakened.
We believe that the aluminum industry is undergoing a mid-cycle correction.
Demand growth should accelerate over the next several years led by increasing
automotive, aerospace, packaging and construction applications worldwide. On the
supply side, the aluminum industry will eventually have to absorb the restart
of all the capacity idled in the 1994 Memorandum of Understanding. Once this
capacity returns to the market, there are no major greenfield expansions planned
for the years 1997 through 1999. We therefore expect the price of aluminum, and
the profits of the aluminum companies, to be substantially higher during that
time. Our largest holdings in the aluminum industry are Reynolds Metals, Alcoa
and Commonwealth Aluminum.
In the zinc industry, the Fund holds shares of Savage Resources, an Australian
company which owns several zinc mines in the U.S. In the tin industry, we own
shares of PT Tambang Timah which is one of the largest, lowest cost tin miners
in the world from its operations in Indonesia.
5
<PAGE>
Other Fund Holdings
Before the Natural Resources Fund's investment objective was broadened, it could
invest up to 35% of assets in securities of companies not directly involved in
the natural resource industries. While the Fund may invest in companies not
directly related to natural resources, it plans to invest primarily in companies
that stand to benefit from developing trends in the natural resource industries.
Another key investment focus will be on companies that can perform well in
periods of higher inflation. For example, during the period covered by this
report, the Natural Resources Fund held a position in Del Webb Corporation, a
company that builds large, active-adult retirement communities in Sunbelt states
across the U.S. We view Del Webb Corp. as a company that can "create its own
inflation" by taking raw land and developing cities over a long period of time.
Because much of the land the company owns was purchased in years past, the value
of their real estate assets should, in our view, appreciate handsomely over time
and this should result in higher profit margins. Del Webb is illustrative of the
types of investments the Fund seeks outside the natural resources industry.
Conclusion
Once again, we would like to thank you for your investment in the Smith Barney
Natural Resources Fund. We look forward to communicating with you over the
coming years as we seek to capitalize on the opportunities being created around
the world in the natural resources industries.
Sincerely,
/s/ Heath B. McLendon /s/ David Stadlin
Heath B. McLendon David Stadlin
Chairman and Investment Officer
Chief Executive Officer
/s/ John G. Goode
John G. Goode
Vice President and
Investment Officer
June 6, 1996
6
<PAGE>
<TABLE>
<CAPTION>
Smith Barney Natural Resources Fund Inc.
Historical Performance -- Class A Shares
Net Asset Value
-----------------
Beginning End Income Capital Gain Return Total
Period Ended of Period of Period Dividends Distributions of Capital Returns(1)
<S> <C> <C> <C> <C> <C> <C>
4/30/96 $16.50 $22.67 $0.00 $0.00 $0.00 37.39%+
10/31/95 21.44 16.50 0.00 0.00 0.00 (23.04)
10/31/94 18.89 21.44 0.00 0.00 0.00 13.50
10/31/93 13.27 18.89 0.00 0.00 0.00 42.35
10/31/92 13.93 13.27 0.06 0.00 0.03 (4.09)
10/31/91 13.63 13.93 0.00 0.00 0.00 2.20
10/31/90 16.96 13.63 0.21 0.00 0.11 (18.18)
10/31/89 16.43 16.96 0.00 0.00 0.00 3.23
10/31/88 18.58 16.43 0.00 0.90 0.00 (7.56)
Inception*-10/31/87 15.20 18.58 0.00 0.00 0.00 22.24+
Total $0.27 $0.90 $0.14
<CAPTION>
Historical Performance -- Class B Shares
Net Asset Value
-----------------
Beginning End Income Capital Gain Return Total
Period Ended of Period of Period Dividends Distributions of Capital Returns(1)
<S> <C> <C> <C> <C> <C> <C>
4/30/96 $16.15 $22.11 $0.00 $0.00 $0.00 36.90%+
10/31/95 21.14 16.15 0.00 0.00 0.00 (23.60)
10/31/94 18.75 21.14 0.00 0.00 0.00 12.75
Inception*-10/31/93 13.35 18.75 0.00 0.00 0.00 40.45+
Total $0.00 $0.00 $0.00
<CAPTION>
Historical Performance -- Class C Shares
Net Asset Value
-----------------
Beginning End Income Capital Gain Return Total
Period Ended of Period of Period Dividends Distributions of Capital Returns(1)
<S> <C> <C> <C> <C> <C> <C>
4/30/96 $16.16 $22.11 $0.00 $0.00 $0.00 36.82%+
Inception*-10/31/95 20.63 16.16 0.00 0.00 0.00 (21.67)+
Total $0.00 $0.00 $0.00
</TABLE>
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
7
<PAGE>
Smith Barney Natural Resources Fund Inc.
Average Annual Total Return
Without Sales Charge(1)
-----------------------------
Class A Class B Class C
Six Months Ended 4/30/96+ 37.39% 36.90% 36.82%
Year Ended 4/30/96 21.04 20.16 20.16
Five Years Ended 4/30/96 12.39 N/A N/A
Inception* through 4/30/96 5.09 15.59 4.79
With Sales Charge(2)
-----------------------------
Class A Class B Class C
Six Months Ended 4/30/96+ 30.51% 31.90% 35.82%
Year Ended 4/30/96 14.96 15.16 19.16
Five Years Ended 4/30/96 11.24 N/A N/A
Inception* through 4/30/96 4.52 15.19 4.79
Cumulative Total Return
Without Sales Charge(1)
-----------------------------
Class A (Inception* through 4/30/96) 59.80%
Class B (Inception* through 4/30/96) 65.62
Class C (Inception* through 4/30/96) 7.17
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charge with respect to Class A shares or the applicable
contingent deferred sales charges ("CDSC") with respect to Class B and C
shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A shares reflect the deduction
of the maximum initial sales charge of 5.00%; Class B shares reflect the
deduction of a 5.00% CDSC, which applies if shares are redeemed less than
one year from initial purchase and declines thereafter by 1.00% per year
until no CDSC is incurred. Class C shares reflect the deduction of a 1.00%
CDSC, which applies if shares are redeemed within the first year of
purchase.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
* Inception dates for Class A, B and C shares are November 24, 1986,
November 6, 1992 and November 7, 1994, respectively.
8
<PAGE>
Smith Barney Natural Resources Fund Inc.
Historical Performance (unaudited)
Growth of $10,000 Invested in Class A Shares of
the Smith Barney Natural Resources Fund Inc.
vs. MSCI World Index and Standard & Poor's 500 Index+
November 1986 -- April 1996
<TABLE>
<CAPTION>
Smith Barney
Natural Resources Fund Inc. MSCI World Index Standard & Poor's 500 Index
<S> <C> <C> <C>
11/24/86 9,500 10,000 10,000
10/87 11,613 11,479 10,388
10/88 10,735 13,555 11,926
10/89 11,081 15,129 15,075
10/90 9,066 13,172 13,948
10/91 9,266 14,947 18,621
10/92 8,886 13,879 20,475
10/93 12,650 17,316 23,533
10/94 14,358 18,336 24,443
10/95 11,049 19,735 30,906
4/30/96 15,181 22,373 34,769
</TABLE>
+ Hypothetical illustration of $10,000 invested in Class A shares at inception
on November 24, 1986, assuming deduction of the maximum 5.00% sales charge at
the time of investment and the reinvestment of dividends and capital gains, if
any, at net asset value through April 30, 1996. The Morgan Stanley Capital
International World Index is an arithmetical average weighted by the market
value performance of 1,468 securities listed on the stock exchanges of the USA,
Europe, Canada, Australia, New Zealand and the Far East. The Standard & Poor's
500 Index 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.
Figures for the index include the reinvestment of dividends. The indexes are
unmanaged and not subject to the same management and trading expenses of a
mutual fund. The performance of the Fund's other classes may be greater or less
than the Class A shares' performance indicated on this chart, depending on
whether greater or lesser sales charges and fees were incurred by shareholders
investing in the other classes.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and redemption
values may be more or less than the original cost. No adjustment has been made
for shareholder tax liability on dividends or capital gains.
9
<PAGE>
Smith Barney Natural Resources Fund Inc.
Portfolio Highlights (unaudited) April 30, 1996
Portfolio Breakdown
Canada 11.7%
Australia 13.3%
United States 48.1%
South Africa 5.5%
United Kingdom 3.0% [PIE CHART APPEARS HERE]
Indonesia 1.3%
Singapore 2.2%
Convertible Notes 2.3%
Exchangeable Debentures 0.4%
Commercial Paper 12.2%
Top Ten Common Stock Holdings
Percentage of
Total Investments
- ----------------------------------------------------
Golden Star Resources Ltd. 4.3%
Homestake Mining Co. 3.6
Reynolds Metals Co. 3.5
Agrium Inc. 2.7
Avenor Inc. 2.5
Champion International Corp. 2.5
Posgold Gold Ltd. 2.3
Far East Levingston Shipbuilding Ltd. 2.2
Del E. Webb Corp. 2.1
Enserch Exploration Inc. 2.0
10
<PAGE>
Smith Barney Natural Resources Fund Inc.
Schedule of Investments (unaudited) April 30, 1996
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- -----------------------------------------------------------------------------
STOCKS -- 85.1%
Australia -- 13.3%
<C> <S> <C>
800,000 Aurora Gold Ltd.+ $ 1,522,276
395,000 Burmine Ltd. 1,366,588
366,300 Emperor Mines Ltd.+ 950,471
411,200 Goldfields Ltd.+ 1,083,143
140,451 Homestake Mining Co. 2,809,020
1,000,000 Meekatharra Minerals Ltd.+ 652,629
530,530 Normandy Mining Ltd. 934,428
911,543 Posgold Ltd. 2,465,606
259,600 Ranger Minerals NL+ 949,174
1,111,333 Savage Resources Ltd. 978,701
111,133 Savage Resources Ltd. Warrants, Expire 3/11/98+ 28,400
44,202 Sons of Gwalia NL 314,542
1,000,000 West Gold Resources NL+ 98,287
- -----------------------------------------------------------------------------
14,153,265
- -----------------------------------------------------------------------------
Canada -- 11.7%
150,000 Avenor Inc. 2,616,599
300,000 Ecuadorian Minerals Corp.+ 473,742
483,100 El Callao Mining Corp.+ 503,858
50,000 Euro Nevada Mining Corp. 1,872,934
15,000 Franco-Nevada Mining Corp. Ltd. 891,847
214,000 Golden Star Resources Ltd.+ 3,159,310
150,000 Gran Colombia Resources Inc.+ 413,147
100,000 Guyanor Resources S.A.+ 885,053
71,500 Harmac Pacific Inc.+ 624,936
680,600 Pan African Resources Corp.+ 799,824
1,013,500 Reclamation Management Ltd.+ 156,324
- -----------------------------------------------------------------------------
12,397,574
- -----------------------------------------------------------------------------
Indonesia -- 1.3%
81,770 PT Tambang Timah GDR+ 1,411,350
- -----------------------------------------------------------------------------
Singapore -- 2.2%
400,000 Far East Levingston Shipbuilding Ltd. 2,332,859
- -----------------------------------------------------------------------------
South Africa -- 5.5%
70,700 Driefontein Consolidated Ltd. 1,128,583
199,300 Ocean Diamond Mining Holdings Ltd.+ 165,987
32,550 Rustenburg Platinum Holdings Ltd. 643,846
11,000 Vaal Reefs Exploration & Mining Co. Ltd. 1,079,005
100,000 Vaal Reefs Exploration & Mining Co. Ltd. ADR 975,000
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
Smith Barney Natural Resources Fund Inc.
Schedule of Investments (unaudited) (continued) April 30, 1996
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ----------------------------------------------------------------------------
<C> <S> <C>
South Africa -- 5.5% (continued)
125,000 Western Areas Gold Mining Co. Ltd. $ 1,850,781
- ----------------------------------------------------------------------------
5,843,202
- ----------------------------------------------------------------------------
United Kingdom -- 3.0%
1,450,000 Kenmare Resources PLC 690,839
16,250,000 London Fiduciary Trust PLC+ 1,097,314
500,000 Lonrho PLC 1,451,831
100,000 Reunion Mining PLC Warrants, Expire 4/1/97+@ 0
- ----------------------------------------------------------------------------
3,239,984
- ----------------------------------------------------------------------------
United States -- 48.1%
56,500 Abacan Resource Corp.+ 314,281
225,000 Agrium Inc. 2,896,875
30,000 Aluminum Co. of America 1,871,250
110,000 Asia Pacific Resources International Holdings Ltd.+ 783,750
50,000 Bowater Inc. 2,000,000
54,000 Champion International Corp. 2,605,500
50,000 Commonwealth Aluminum Corp. 781,250
84,000 Crompton & Knowles Corp. 1,291,500
200,000 Crown Resource Corp.+ 1,125,000
40,000 Cyprus Amax Minerals Co. 1,085,000
125,000 Del E. Webb Corp. 2,234,375
10,000 Diamond Offshore Drilling Inc.+ 497,500
80,000 Enserch Corp. 1,720,000
200,000 Enserch Exploration Inc.+ 2,175,000
100,000 Global Marine Inc.+ 1,137,500
94,000 Golden Star Resources Ltd.+ 1,386,500
100,000 Hemlo Gold Mines Inc. 1,300,000
50,000 Homestake Mining Co. 1,006,250
48,800 Longview Fibre Co. 860,100
40,000 MEMC Electronic Materials Inc.+ 1,995,000
28,300 Mitchell Energy & Development, Class A shares 463,413
96,700 Mitchell Energy & Development, Class B shares 1,583,463
30,000 Newmont Mining Corp. 1,736,250
70,000 Oryx Energy Co. 1,120,000
70,000 Reynolds Metals Co. 3,762,500
212,500 Snyder Oil Corp. 1,912,500
125,000 Sterling Chemicals Inc.+ 1,421,875
84,000 Stillwater Mining Co. 2,016,000
125,000 Stone Container Corp. 2,125,000
70,000 Ultramar Corp.+ 2,196,250
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
Smith Barney Natural Resources Fund Inc.
Schedule of Investments (unaudited) (continued) April 30, 1996
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ------------------------------------------------------------------------------
<S> <C> <C>
United States -- 48.1% (continued)
25,000 Union Camp Corp. $ 1,359,375
106,000 USX-Delhi Group 1,470,750
55,300 Western Gas Resources Inc. 815,675
10,000 Zydeco Energy Inc.+ 60,000
- ------------------------------------------------------------------------------
51,109,682
- ------------------------------------------------------------------------------
TOTAL STOCKS
(Cost -- $72,215,337) 90,487,916
- ------------------------------------------------------------------------------
FACE
AMOUNT SECURITY VALUE
- ------------------------------------------------------------------------------
CONVERTIBLE NOTES -- 2.3%
$ 2,250,000 Ashanti Goldfields Co. Ltd., 5.50% due 3/15/03 2,238,750
200,000 Stillwater Mining Co., 7.00% due 5/1/03++ 209,000
- ------------------------------------------------------------------------------
TOTAL CONVERTIBLE NOTES
(Cost -- $2,453,750) 2,447,750
- ------------------------------------------------------------------------------
EXCHANGEABLE DEBENTURES -- 0.4%
379,800 Atlas Corp., 7.00% due 12/5/00 (Cost -- $332,858) 379,800
- ------------------------------------------------------------------------------
COMMERCIAL PAPER -- 12.2%
12,952,308 Barclays Bank, 5.00% due 5/1/96 (Cost --$12,952,308) 12,952,308
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $87,954,253*) $106,267,774
- ------------------------------------------------------------------------------
</TABLE>
+ Non-income producing security.
++ Security exempt from registration under Rule144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, generally to qualified institutional buyers.
@ Restricted security (See Note 9).
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
13
<PAGE>
<TABLE>
<CAPTION>
Smith Barney Natural Resources Fund Inc.
Statement of Assets and Liabilities (unaudited) April 30, 1996
<S> <C>
ASSETS:
Investments, at value (Cost -- $87,954,253) $106,267,774
Foreign currency (Cost -- $88,155) 91,400
Receivable for Fund shares sold 1,262,676
Receivable for securities sold 904,841
Dividends and interest receivable 48,257
Other assets 78,652
- --------------------------------------------------------------------------------------
Total Assets 108,653,600
- --------------------------------------------------------------------------------------
LIABILITIES:
Investment advisory fees payable 25,618
Distribution fees payable 72,281
- --------------------------------------------------------------------------------------
Total Liabilities 97,899
- --------------------------------------------------------------------------------------
Total Net Assets $108,555,701
- --------------------------------------------------------------------------------------
NET ASSETS:
Par value of capital shares $ 4,858
Capital paid in excess of par value 109,990,257
Accumulated net investment loss (1,321,686)
Accumulated net realized loss on investments (18,433,551)
Net unrealized appreciation of investments and foreign currencies 18,315,823
- --------------------------------------------------------------------------------------
Total Net Assets $108,555,701
- --------------------------------------------------------------------------------------
Shares Outstanding:
Class A 2,042,046
---------------------------------------------------------------------------------
Class B 2,591,360
---------------------------------------------------------------------------------
Class C 224,625
---------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $22.67
---------------------------------------------------------------------------------
Class B * $22.11
---------------------------------------------------------------------------------
Class C ** $22.11
---------------------------------------------------------------------------------
Class A Maximum Public Offering Price Per Share
(net asset value plus 5.26% of net asset value per share) $23.86
- --------------------------------------------------------------------------------------
</TABLE>
* Redemption price is NAV of Class B shares reduced by a 5.00%
CDSC if shares are redeemed less than one year from initial
purchase (See Note 2).
** Redemption price is NAV of Class C shares reduced by a 1.00% CDSC if
shares are redeemed within the first year of purchase.
See Notes to Financial Statements.
14
<PAGE>
Smith Barney Natural Resources Fund Inc.
Statement of Operations (unaudited)
For the Six Months Ended April 30, 1996
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Dividends $ 320,350
Interest 351,176
Less: Foreign tax withholding (5,777)
- ------------------------------------------------------------------------
Total Investment Income 665,749
- ------------------------------------------------------------------------
EXPENSES:
Investment advisory and administration fees (Note 2) 245,002
Distribution fees (Note 2) 233,029
Shareholder and system servicing fees 71,300
Custody 61,370
Audit and legal 28,000
Registration fees 25,000
Shareholder communications 22,050
Directors' fees 11,000
Other 3,850
- ------------------------------------------------------------------------
Total Expenses 700,601
- ------------------------------------------------------------------------
Net Investment Loss (34,852)
- ------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FOREIGN CURRENCIES (NOTE 3):
Realized Gain (Loss) From:
Security transactions (excluding short-term
securities) 6,472,767
Foreign currency transactions (466,035)
- ------------------------------------------------------------------------
Net Realized Gain 6,006,732
- ------------------------------------------------------------------------
Change in Net Unrealized Appreciation
of Investments and Foreign Currencies:
Beginning of period 482,865
End of period 18,315,823
- ------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 17,832,958
- ------------------------------------------------------------------------
Net Gain on Investments and Foreign Currencies 23,839,690
- ------------------------------------------------------------------------
Increase in Net Assets From Operations $23,804,838
- ------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
15
<PAGE>
Smith Barney Natural Resources Fund Inc.
Statements of Changes in Net Assets
For the Six Months Ended April 30, 1996 (unaudited)
and the Year Ended October 31, 1995
<TABLE>
<CAPTION>
1996 1995
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment loss $ (34,852) $ (455,937)
Net realized gain 6,006,732 3,103,162
Increase (decrease) in net unrealized appreciation 17,832,958 (18,931,243)
- ------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets
From Operations 23,804,838 (16,284,018)
- ------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income -- --
- ------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders -- --
- ------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 10):
Net proceeds from sale of shares 328,854,853 490,041,739
Net asset value of shares issued
for reinvestment of dividends -- --
Cost of shares reacquired (298,307,427) (498,628,547)
- ------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From
Fund Share Transactions 30,547,426 (8,586,808)
- ------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets 54,352,264 (24,870,826)
NET ASSETS:
Beginning of period 54,203,437 79,074,263
- ------------------------------------------------------------------------------------------------
End of period* $ 108,555,701 $ 54,203,437
- ------------------------------------------------------------------------------------------------
* Includes accumulated net investment loss of: $ (1,321,686) $ (820,799)
- ------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
16
<PAGE>
Smith Barney Natural Resources Fund Inc.
Notes to Financial Statements (unaudited)
1. Significant Accounting Policies
Smith Barney Natural Resources Fund Inc. ("Fund"), formerly known as Smith
Barney Precious Metals and Minerals Fund Inc., 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 followed by the Fund are: (a) security
transactions are accounted for on trade date; (b) securities traded in national
securities markets are valued at the closing prices in the primary exchange on
which they are traded; securities listed or traded on certain foreign exchanges
or other markets whose operations are similar to the U.S. over-the-counter
market (including securities listed on exchanges where the primary market is
believed to be over-the-counter) and listed securities for which no sale was
reported on that date are valued at the mean between the bid and ask prices.
Securities which are listed or traded on more than one exchange or market are
valued at the quotations on the exchange or market determined to be the primary
market for such securities. Gold bullion is valued at the daily London afternoon
fixing; (c) fixed-income investments that have a maturity of 60 days or more are
valued at prices based on market quotations for securities of similar type,
yield and maturity; (d) securities maturing within 60 days are valued at cost
plus accreted discount, or minus amortized premium, which approximates market
value; (e) foreign currencies (and receivables and payables for unsettled
foreign securities transactions) are translated into U.S. Dollars based on the
rate of exchange of such currencies against U.S. Dollars on the date of
valuation; (f) interest income, adjusted for amortization of premiums and
accretion of discounts, is recorded on the accrual basis; (g) 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;
(h) dividends and distributions to shareholders are recorded on the ex-dividend
date; (i) gains or losses on the sale of securities are calculated by using the
specific identification method; (j) direct expenses are charged to each class;
management fees and general expenses are allocated on the basis of relative net
assets; (k) in accordance with Statement of Position 93-2 Determination,
--------------
Disclosure, and Financial Statement Presentation of Income, Capital Gain, and
- -----------------------------------------------------------------------------
Return of Capital
- -----------------
17
<PAGE>
Smith Barney Natural Resources Fund Inc.
Notes to Financial Statements (unaudited) (continued)
Distributions by Investment Companies, book and tax basis differences relating
- --------------------------------------
to shareholder distributions and other permanent book and tax differences are
reclassified from accumulated net investment loss. As of October 31, 1995, the
cumulative effect of such differences, totaling $358,987 was reclassified to
paid-in capital from accumulated net investment loss. Net investment income, net
realized gains, and net assets were not affected by this change; (l) the Fund
intends to comply with the requirements 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; and (m) estimates and assumptions are required to be made
regarding assets, liabilities and changes in net assets resulting from
operations when financial statements are prepared. Changes in the economic
environment, financial markets and any other parameters used in determining
these estimates could cause actual results to differ from these amounts.
In addition, the Fund may enter into forward exchange contracts in order to
hedge against foreign currency risk. These contracts are marked-to-market daily,
by recognizing the difference between the contract exchange rate and the current
market rate as an unrealized gain or loss. Realized gains or losses are
recognized when contracts are settled.
There were no open forward foreign currency contracts as of
April 30, 1996.
2. Investment Advisory Agreement and Other Transactions
Effective December 18, 1995, the shareholders of the Fund approved a new
investment advisory agreement ("Agreement") between Smith Barney Mutual Funds
Management Inc. ("SBMFM"), a subsidiary of Smith Barney Holdings Inc. ("SBH"),
and the Fund. Pursuant to this Agreement, SBMFM provides all investment advisory
and administrative services and receives a fee calculated at an annual rate of
0.75% of the average daily net assets. This fee is calculated daily and paid
monthly.
Smith Barney Inc. ("SB"), another subsidiary of SBH, acts as distributor of the
Fund's shares. For the six months ended April 30, 1996, SB received sales
charges of $289,000 on sales of the Fund's Class A shares.
18
<PAGE>
Smith Barney Natural Resources Fund Inc.
Notes to Financial Statements (unaudited) (continued)
There is a contingent deferred sales charge ("CDSC") of 5.00% on Class B shares,
which applies if redemption occurs less than one year from initial purchase and
declines thereafter by 1.00% per year until no CDSC is incurred. Class C shares
have a 1.00% CDSC, which applies if redemption occurs within the first year of
purchase. In addition, Class A shares also have a 1.00% CDSC, which applies if
redemption occurs within the first year of purchase. This CDSC only applies to
those purchases of Class A shares, which when combined with current holdings of
Class A shares, equal or exceed $500,000 in the aggregate. These purchases do
not incur an initial sales charge. For the six months ended April 30, 1996,
CDSCs paid to SB were approximately:
Class A Class B Class C
- ---------------------------------------------------
CDSCs $1,000 $49,000 $4,000
- ---------------------------------------------------
Pursuant to a Distribution Plan, the Fund pays a service fee with respect to
Class A, B and C shares calculated at the annual rate of 0.25% of the average
daily net assets of each respective class. The Fund also pays a distribution fee
with respect to Class B and C shares calculated at an annual rate of 0.75% of
the average daily net assets for each class, respectively. For the six months
ended April 30, 1996, total Distribution Plan fees incurred were:
Class A Class B Class C
- ---------------------------------------------------
Distribution Plan Fees $47,371 $176,854 $8,804
- ---------------------------------------------------
All officers and one Director of the Fund are employees of SB.
3. Investments
During the six months ended April 30, 1996, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding short-
term securities) were as follows:
- -----------------------------------------------------------
Purchases $81,959,276
- -----------------------------------------------------------
Sales 67,816,782
- -----------------------------------------------------------
19
<PAGE>
Smith Barney Natural Resources Fund Inc.
Notes to Financial Statements (unaudited) (continued)
At April 30, 1996, aggregate gross unrealized appreciation and depreciation of
investments for Federal income tax purposes were approximately as follows:
- -----------------------------------------------
Gross unrealized appreciation $20,071,287
Gross unrealized depreciation (1,757,766)
- -----------------------------------------------
Net unrealized appreciation $18,313,521
- -----------------------------------------------
4. Futures Contracts
Initial margin deposits made upon entering into futures contracts are recognized
as assets. During the period the futures contract is open, changes in the value
of the contract are recognized as unrealized gains or losses by "marking to
market" on a daily basis to reflect the market value of the contract at the end
of each day's trading. Variation margin payments are made or received and
recognized as assets due from or liabilities due to broker, depending upon
whether unrealized gains or losses are incurred. When the contract is closed,
the 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.
At April 30, 1996, there were no open futures contracts.
5. Options 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.
When a Fund writes a call or 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. When a written option expires, the
20
<PAGE>
Smith Barney Natural Resources Fund Inc.
Notes to Financial Statements (unaudited) (continued)
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 cost of the security sold will be 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.
6. 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 continual maintenance
of the market value of the collateral in amounts at least equal to the
repurchase price.
7. Fund Concentration of Risk
The Fund's investments in foreign securities may involve risks not present in
domestic investments. Since securities may be denominated in a foreign currency
and may require settlement in foreign currencies and pay interest or dividends
in foreign currencies, changes in the relationship of these foreign currencies
to the U.S. Dollar can significantly affect the value of these investments and
earnings of the Fund. Foreign investments may also subject the Fund to foreign
government exchange restrictions, expropriation, taxation or other political,
social or economic developments, all of which could affect the market and/or
credit risk of the investments.
In addition to the risks described above, risks may arise from forward foreign
currency contracts with respect to the potential inability of counterparties to
meet the terms of their contracts.
The Fund also intends to invest at least 65% of its assets in natural resource-
related investments. As a result of this concentration policy, which is a
fundamental policy of the Fund, the Fund's investment may
21
<PAGE>
Smith Barney Natural Resources Fund Inc.
Notes to Financial Statements (unaudited) (continued)
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 natural resource-related
industries have been volatile.
8. Capital Loss Carryforward
At October 31, 1995, the Fund had, for Federal tax purposes, $25,026,387 of loss
carryforwards, available to offset future realized capital gains through 2003.
To the extent that these carryforward losses are used to offset capital gains,
it is probable that the gains so offset will not be distributed. The amount and
year of the expiration for each carryforward loss is indicated below.
10/31/97 10/31/98 10/31/99 10/31/00
- --------------------------------------------------------------------
Carryforward Amounts $4,905,753 $6,044,045 $8,661,333 $5,415,256
- --------------------------------------------------------------------
9. Restricted Security
The Fund's investment in the following security is restricted as to resale and
is valued under the direction of the Fund's Board of Directors in good faith, at
fair value, taking into consideration the appropriate economic, financial and
other pertinent available information pertaining to the restricted security. At
April 30, 1996, the Fund held the following restricted security:
Acquisition
Security Date Shares
- -----------------------------------------------------------------------
Reunion Mining PLC Warrants, Expire 4/1/97 10/26/94 100,000
- -----------------------------------------------------------------------
The above restricted security had a cost and fair market value determined to be
$0, which equaled 0% of total net assets.
10. Capital Shares
At April 30, 1996, the Fund had three billion 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.
22
<PAGE>
Smith Barney Natural Resources Fund Inc.
Notes to Financial Statements (unaudited) (continued)
At April 30, 1996, total paid-in capital amounted to the following for each
class:
Class A Class B Class C
- --------------------------------------------------------------------------------
Total Paid-in Capital $60,101,416 $45,386,891 $4,506,808
- --------------------------------------------------------------------------------
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
April 30, 1996 October 31, 1995*
--------------------- ------------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold 12,281,929 $238,452,723 20,611,514 $379,301,425
Shares redeemed (11,929,676) (232,450,700) (20,851,338) (384,748,072)
- --------------------------------------------------------------------------------------------
Net Increase (Decrease) 352,253 $ 6,002,023 (239,824) $ (5,446,647)
- --------------------------------------------------------------------------------------------
Class B
Shares sold 4,366,368 $ 84,336,280 5,952,309 $107,496,241
Shares redeemed (3,368,927) (63,701,666) (6,141,956) (111,234,263)
- --------------------------------------------------------------------------------------------
Net Increase (Decrease) 997,441 $ 20,634,614 (189,647) $ (3,738,022)
- --------------------------------------------------------------------------------------------
Class C
Shares sold 302,643 $ 6,065,850 179,087 $ 3,244,073
Shares redeemed (113,379) (2,155,061) (143,726) (2,646,212)
- --------------------------------------------------------------------------------------------
Net Increase 189,264 $ 3,910,789 35,361 $ 597,861
- --------------------------------------------------------------------------------------------
</TABLE>
* For Class C shares, transactions are for the period from November 7, 1994
(inception date) to October 31, 1995.
23
<PAGE>
Smith Barney Natural Resources Fund Inc.
Financial Highlights
For a share of each class of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Class A Shares 1996(1) 1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 16.50 $ 21.44 $18.89 $ 13.27 $ 13.93 $13.63
- ---------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss)(2) (0.10) (0.23) (0.06) (0.02) (0.10) 0.16
Net realized and unrealized
gain (loss) 6.27 (4.71) 2.61 5.64 (0.47) 0.14
- ---------------------------------------------------------------------------------------------------
Total Income (Loss) From
Operations 6.17 (4.94) 2.55 5.62 (0.57) 0.30
- ---------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- -- -- (0.06) --
Capital -- -- -- -- (0.03) --
- ---------------------------------------------------------------------------------------------------
Total Distributions -- -- -- -- (0.09) --
- ---------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 22.67 $ 16.50 $ 21.44 $ 18.89 $13.27 $13.93
- ---------------------------------------------------------------------------------------------------
Total Return 37.39%++ (23.04)% 13.50% 42.35% (4.09)% 2.20%
- ---------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $ 46,289 $ 27,884 $41,370 $20,097 $14,138 $17,167
- ---------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.52%+ 1.99% 1.81% 2.17% 2.85% 2.24%
Net investment income (loss) (0.99)+ (1.46) (0.34) (0.14) (0.76) 0.97
- ---------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 106% 40% 50% 108% 58% 63%
- ---------------------------------------------------------------------------------------------------
Average commissions per share
paid on equity transactions(3) $ 0.02 $ 0.02 -- -- -- --
- ---------------------------------------------------------------------------------------------------
</TABLE>
(1) For the six months ended April 30, 1996 (unaudited).
(2) Includes realized gains and losses from foreign currency transactions.
(3) As of October 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per share.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
24
<PAGE>
Smith Barney Natural Resources Fund Inc.
Financial Highlights (continued)
For a share of each class of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Class B Shares 1996(1) 1995 1994 1993(2)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 16.15 $ 21.14 $18.75 $13.35
- ------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment Loss(3) (0.10) (0.22) (0.33) (0.15)
Net realized and unrealized gain (loss) 6.06 (4.77) 2.72 5.55
- ------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 5.96 (4.99) 2.39 5.40
- ------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- -- --
- ------------------------------------------------------------------------------------------------
Total Distributions -- -- -- --
- ------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $22.11 $16.15 $21.14 $18.75
- ------------------------------------------------------------------------------------------------
Total Return 36.90%++ (23.60)% 12.75% 40.45%++
- ------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $57,300 $25,747 $37,704 $40,895
- ------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 2.20%+ 2.62% 2.54% 2.98%+
Net investment loss (1.67)+ (2.11) (1.06) (0.96)+
- ------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 106% 40% 50% 108%
- ------------------------------------------------------------------------------------------------
Average commissions per share
paid on equity transactions(4) $0.02 $0.02 -- --
- ------------------------------------------------------------------------------------------------
</TABLE>
(1) For the six months ended April 30, 1996 (unaudited).
(2) For the period from November 6, 1992 (inception date) to October 31,
1993.
(3) Includes realized gains and losses from foreign currency transactions.
(4) As of October 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per share.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
25
<PAGE>
Smith Barney Natural Resources Fund Inc.
Financial Highlights (continued)
For a share of each class of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Class C Shares 1996(1) 1995(2)
- --------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period $16.16 $ 20.63
- --------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss(3) (0.22) (0.29)
Net realized and unrealized gain (loss) 6.17 (4.18)
- --------------------------------------------------------------------
Total Income (Loss) From Operations 5.95 (4.47)
- --------------------------------------------------------------------
Less Distributions From:
Net investment income -- --
- --------------------------------------------------------------------
Total Distributions -- --
- --------------------------------------------------------------------
Net Asset Value, End of Period $22.11 $ 16.16
- --------------------------------------------------------------------
Total Return++ 36.82% (21.67)%
- --------------------------------------------------------------------
Net Assets, End of Period (000s) $4,967 $ 572
- --------------------------------------------------------------------
Ratios to Average Net Assets+:
Expenses 2.14% 2.69%
Net investment loss (1.61) (1.97)
- --------------------------------------------------------------------
Portfolio Turnover Rate 106% 40%
- --------------------------------------------------------------------
Average commissions per share
paid on equity transactions(4) $ 0.02 $ 0.02
- --------------------------------------------------------------------
</TABLE>
(1) For the six months ended April 30, 1996 (unaudited).
(2) For the period from November 7, 1994 (inception date) to October 31, 1995.
(3) Includes realized gains and losses from foreign currency transactions.
(4) As of October 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per share.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
26
<PAGE>
Smith Barney
Natural Resources
Fund Inc.
Directors
Herbert Barg
Alfred J. Bianchetti
Martin Brody
Dwight B. Crane
Burt N. Dorsett
Elliot S. Jaffe
Stephen E. Kaufman
Joseph J. McCann
Heath B. McLendon, Chairman
Cornelius C. Rose, Jr.
Officers
Heath B. McLendon
Chief Executive Officer
Jessica M. Bibliowicz
President
Lewis E. Daidone
Senior Vice President
and Treasurer
John Goode
Vice President and
Investment Officer
David Stadlin
Investment Officer
Irving P. David
Controller
Christina T. Sydor
Secretary
SMITH BARNEY
- ------------
A Member of TravelersGroup[ART]
Investment Adviser
and Administrator
Smith Barney Mutual Funds
Management Inc.
Distributor
Smith Barney Inc.
Custodian
The Bank of New York
Shareholder
Servicing Agent
First Data Investor Services Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is submitted for the general information of the shareholders of
Smith Barney Natural Resources Fund Inc. It is not authorized for distribution
to prospective investors unless accompanied or preceded by a current Prospectus
for the Fund, which contains information concerning the Fund's investment
policies and expenses as well as other pertinent information.
Smith Barney
Natural Resources
Fund Inc.
388 Greenwich Street
New York, New York 10013
FD0299 6/96
