<PAGE>
[GRAPHIC]
Smith Barney
Natural
Resources
Fund Inc.
- ----------------------------------
S E M I - A N N U A L R E P O R T
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April 30, 1999
Smith Barney Mutual Funds
<PAGE>
Smith Barney [PHOTO] [PHOTO]
Natural Resources
Fund Inc. HEATH B. JOHN G.
MCLENDON GOODE
Chairman Vice President and
Investment Officer
Dear Shareholder:
We are pleased to provide the semi-annual report for the Smith Barney Natural
Resources Fund Inc. ("Fund") for the period ended April 30, 1999. We hope you
find this report to be useful and informative. In this report we have summarized
the period's prevailing economic and market conditions and outlined the Fund's
investment strategy. A detailed summary of performance and current holdings can
be found in the appropriate sections that follow.
Performance Update
For the six months ended April 30, 1999, the Fund's Class A, Class B and Class L
shares returned 19.26%, 18.87%, 18.90% (without sales charges), respectively. In
comparison, the Fund's Lipper, Inc. peer group returned 16.07% over the same
period. (Lipper, Inc. is a major fund-tracking organization.)
Economic and Market Update
Between October 1998 through February 1999, U.S. stock market breadth was very
narrow and the major indexes were strongly influenced by a limited number of
large-capitalization stocks. Although indexes such as the NASDAQ Composite Index
and the S&P 500 Index were showing substantial gains, most stocks were making
little progress and many smaller and mid-cap stocks were actually declining in
price. (The NASDAQ Composite Index is a market value-weighted index that
measures all domestic and non-U.S. based securities, more than 4,700 companies,
listed on the NASDAQ stock market. The S&P 500 Index is an index composed of
widely held common stocks listed on the New York Stock Exchange, American Stock
Exchange and over-the-counter market.) An unweighted index such as the Value
Line Index made its peak in April 1998 and declined 20% between then and year
end. Until the last two months, natural resource stock prices generally were
under pressure.
The continuing economic problems in Asia and the problems in Russia and Brazil
caused the monetary authorities in the United States and elsewhere to redouble
their efforts to provide sufficient liquidity during a period of economic
stress.
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Smith Barney Natural Resources Fund Inc. 1
<PAGE>
The government of Japan also began to consider much more proactive monetary and
fiscal measures to revive its economy. Alan Greenspan and former Secretary of
Treasury Robert Rubin, in the U.S., spearheaded coordinated efforts to "reflate"
the world economy, that is to use monetary and fiscal policy aggressively to lay
the basis for an increase in world Gross Domestic Product ("GDP") growth.
Global GDP growth, in 1999, is expected to be the slowest in 50 years and a
continuation of economic activity at these levels potentially could subject many
parts of the world to social, political, as well as economic risks.
The Greenspan/Rubin initiatives begun last year are extremely important but it
took until March 1999 for the stock market to react to their significance. In
our opinion, reflation brings with it much more than the prospects for higher
world GDP growth rates. The long-term trade-off is somewhat higher interest
rates and inflation risks.
In addition, faster economic growth probably could benefit economically
sensitive issues and broaden the market substantially. Most importantly,
reflation may cause investment flows to move away from longer duration equities,
that is, growth stocks. If inflation and interest rate risks are higher with
reflation, future earnings need to be discounted more heavily and P/E ratios for
many of the modern day "nifty-50" can be expected to decline. In other words,
reflation may lead to conditions that cause a major change in stock market
leadership.
We may have begun to see this pattern in March through April 1999 as
economically sensitive stocks, including natural resources, performed better in
absolute and relative terms than at any time in the last five years. We believe
this may be the beginning of a multi-year period in which natural resource
stocks do well relative to the U.S. stock market.
Principal Investment Strategies Employed
Within the S&P 500 Index, many natural resource companies are found in the basic
materials and energy sectors. Basic materials comprise only about 3% of the S&P
500 and energy's weight has fallen to about 5%. This compares with 8% and 14%
respectively at the beginning of the 1990s. Many mutual funds and other
investors probably have been underweighted in these sectors of the market. With
the exception of the integrated oil stocks, many leading natural resource
companies are relatively small when compared to mega-capitalization companies in
financial services, technology, and health care. It has been our belief that the
first money made when investor interest returned to natural resources would be
made in the largest companies within this area of the market. Therefore we
sought out what we think are the best opportunities and made them core positions
in the Fund.
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2 1999 Semi-Annual Report to Shareholders
<PAGE>
Second, we have also tried to identify the best supply and demand relationships
within natural resources. We believe that domestic natural gas and paper
represent compelling risk and reward opportunities over the next twelve months.
Natural gas production probably should decline in 1999 but there is continued
growth in demand and Canada, an alternative supply source, may have difficulty
providing the level of additional supplies that may be needed. Rig counts in the
United States and Canada remains low. Domestic natural gas, integrated oil, and
energy service stocks account for about 46% of the Fund's portfolio as of April
30, 1999.
Paper stocks have been in their own private bear market since 1995. With the
exception of Indonesia, there have been limited new expansions in most parts of
the world. Improved economic conditions, at some point, should return pricing
power to paper stocks and we are seeing evidence of this possible trend recently
in containerboard prices. Paper companies comprise about 12% of the portfolio.
As of April 30, 1999, other important Fund investment commitments were in metals
and mining (16%), agriculture and related (7%), steel (7%), and chemicals (4%).
Given conditions in the world, we felt it was prudent to concentrate our assets
in the United States and other more stable countries. Currency and political
risks are just too high in many parts of the world. During the last six months,
our exposure outside the U.S. was reduced significantly.
Portfolio Activity*
The principal Fund purchases during the reporting period occurred in energy and
we emphasized industry leaders. Within energy, companies such as CONOCO,
Halliburton, Baker Hughes, Schlumberger, Burlington Resources, Barrett
Resources, Apache and Vastar, either were added or increased in size. In paper,
Weyerhaeuser, International Paper, and Mead were purchased and these positions
were consistent with our desire to emphasize what we thought were outstanding
opportunities within this sector of the market.
We also added Stone Smurfit within the paper group because of its extraordinary
leverage and sensitivity to containerboard prices. In agriculture, new positions
in IMC Global (fertilizer) and Archer Daniels Midland were added. In chemicals,
DuPont and Engelhard were new additions. Within the steel sector, the position
in Nucor was increased and USX (U.S. Steel) Corp. was added to the portfolio.
Most of the Fund's sales were in smaller companies and ones domiciled in South
Africa, Indonesia, and Australia. We allowed our gold position to fall well
below 5%. There are some aspects of the gold situation that intrigue us,
especially the very large short position due to forward sales by producers and
speculation by hedge funds. If these conditions ever were to reverse, the upside
could be
- ----------
* As of April 30, 1999, securities in the portfolio are subject to change.
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Smith Barney Natural Resources Fund Inc. 3
<PAGE>
substantial. However, gold is one of the principal "report cards" for Alan
Greenspan. With central banks holding vast supplies of gold and Greenspan
wishing to see gold prices in and around $300 per ounce, we think that other
natural resource investments may appreciate sooner than gold. However, should
gold share prices weaken, we may add to our positions at lower prices.
The Next Five Years as Seen through Our Crystal Ball
We expect the stock market to incorporate "reflation" into its pricing of
assets, which means natural resource investments should continue to do well in
the coming months and years. We anticipate that the S&P 500 Index will track its
underlying growth of 5% to 8% in the next few years and that P/E ratios, which
have doubled since 1994, should stabilize or even decline somewhat. In this
environment, we expect natural resource companies not only to provide materially
higher annual returns, but also to perform well relative to the market.
We believe natural resources and so-called hard assets should do well in 1999
and in the coming years. All portfolios should have some representation in
natural resources because these stocks serve two functions. First, they are
likely to perform well in the coming years if we are correct in our economic
assessments. In addition, many natural resource stocks can and do move counter
to the market. Therefore, natural resource stocks may help to reduce portfolio
volatility.
We are not sure the torrid pace of the last few months will continue. However,
we remain confident that the Smith Barney Natural Resources Fund should provide
competitive returns in the coming years when compared to the leading market
averages.
Thank you for investing in the Natural Resources Fund. We encourage you to visit
our Web site at www.smithbarney.com. We look forward to helping you pursue your
financial goals in the years ahead.
Sincerely,
/s/ Heath B. McLendon /s/ John G. Goode
Heath B. McLendon John G. Goode
Chairman Vice President and
Investment Officer
May 25, 1999
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4 1999 Semi-Annual Report to Shareholders
<PAGE>
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Historical Performance -- Class A Shares
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<TABLE>
<CAPTION>
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>
4/30/99 $16.56 $19.75 $0.00 $0.00 $0.00 19.26%+
- -----------------------------------------------------------------------------------------------
10/31/98 23.23 16.56 0.00 0.16 0.00 (28.13)
- -----------------------------------------------------------------------------------------------
10/31/97 22.95 23.23 0.33 0.00 0.00 2.67
- -----------------------------------------------------------------------------------------------
10/31/96 16.50 22.95 0.00 0.00 0.00 39.09
- -----------------------------------------------------------------------------------------------
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
===============================================================================================
Total $0.60 $0.16 $0.14
===============================================================================================
</TABLE>
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Historical Performance -- Class B Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
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>
4/30/99 $16.00 $19.02 $0.00 $0.00 $0.00 18.87%+
- ------------------------------------------------------------------------------------------------
10/31/98 22.60 16.00 0.00 0.16 0.00 (28.61)
- ------------------------------------------------------------------------------------------------
10/31/97 22.32 22.60 0.15 0.00 0.00 1.95
- ------------------------------------------------------------------------------------------------
10/31/96 16.15 22.32 0.00 0.00 0.00 38.20
- ------------------------------------------------------------------------------------------------
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 $0.15 $0.16 $0.00
================================================================================================
</TABLE>
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Historical Performance -- Class L Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
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>
4/30/99 $16.03 $19.06 $0.00 $0.00 $0.00 18.90%+
- ------------------------------------------------------------------------------------------------
10/31/98 22.62 16.03 0.00 0.16 0.00 (28.54)
- ------------------------------------------------------------------------------------------------
10/31/97 22.32 22.62 0.15 0.00 0.00 2.04
- ------------------------------------------------------------------------------------------------
10/31/96 16.16 22.32 0.00 0.00 0.00 38.12
- ------------------------------------------------------------------------------------------------
Inception*-10/31/95 20.63 16.16 0.00 0.00 0.00 (21.67)+
================================================================================================
Total $0.15 $0.16 $0.00
================================================================================================
</TABLE>
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
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Smith Barney Natural Resources Fund Inc. 5
<PAGE>
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Average Annual Total Returns
- --------------------------------------------------------------------------------
Without Sales Charges(1)
-------------------------------------------
Class A Class B Class L
================================================================================
Six Months Ended 4/30/99+ 19.26% 18.87% 18.90%
- --------------------------------------------------------------------------------
Year Ended 4/30/99 (11.63) (12.23) (12.17)
- --------------------------------------------------------------------------------
Five Years Ended 4/30/99 0.59 (0.08) N/A
- --------------------------------------------------------------------------------
Ten Years Ended 4/30/99 2.98 N/A N/A
- --------------------------------------------------------------------------------
Inception* through 4/30/99 2.88 5.86 (1.42)
================================================================================
With Sales Charges(2)
-------------------------------------------
Class A Class B Class L
================================================================================
Six Months Ended 4/30/99+ 13.31% 13.87% 16.73%
- --------------------------------------------------------------------------------
Year Ended 4/30/99 (16.06) (16.62) (13.92)
- --------------------------------------------------------------------------------
Five Years Ended 4/30/99 (0.43) (0.28) N/A
- --------------------------------------------------------------------------------
Ten Years Ended 4/30/99 2.46 N/A N/A
- --------------------------------------------------------------------------------
Inception* through 4/30/99 2.46 5.86 (1.64)
================================================================================
- --------------------------------------------------------------------------------
Cumulative Total Returns
- --------------------------------------------------------------------------------
Without Sales Charges(1)
================================================================================
Class A (4/30/89 through 4/30/99) 42.36%
- --------------------------------------------------------------------------------
Class B (Inception* through 4/30/99) 44.65
- --------------------------------------------------------------------------------
Class L (Inception* through 4/30/99) (6.20)
================================================================================
(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 charges with respect to Class A and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to
Class B and L shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charge of 5.00% and 1.00%,
respectively; Class B shares reflect the deduction of a 5.00% CDSC, which
applies if shares are redeemed within one year from initial purchase and
declines thereafter by 1.00% per year until no CDSC is incurred. Class L
shares also reflect the deduction of a 1.00% CDSC, which applies if shares
are redeemed within the first year of purchase.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
* Inception dates for Class A, B and L shares are November 24, 1986,
November 6, 1992 and November 7, 1994, respectively.
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6 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
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+
- --------------------------------------------------------------------------------
April 1989 -- April 1999
[LINE CHART]
Natural Resources MSCI World S&P 500
Fund Inc. Index Index
4/89 9,501 10,000 10,000
10/89 10,443 10,422 11,185
10/90 8,545 9,299 10,348
10/91 8,733 10,827 13,806
10/92 8,375 10,321 15,179
10/93 11,922 13,179 17,442
10/94 13,532 14,255 18,116
10/95 10,414 15,685 22,900
10/96 14,485 18,325 28,417
10/97 14,871 21,487 37,539
10/98 10,687 24,857 45,801
4/99 12,746 29,722 56,019
+ Hypothetical illustration of $10,000 invested in Class A shares on April
30, 1989, 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, 1999. The Morgan Stanley Capital
International World Index ("MSCI World Index") is an arithmetic 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 as a mutual fund. The
performance of the Fund's other classes may be greater or less than the
Class A shares' performance indicated on this chart, depending on whether
greater or lesser sales charges and fees were incurred by shareholders
investing in the other classes.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption values may be more or less than the original cost. No
adjustment has been made for shareholder tax liability on dividends or
capital gains.
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Smith Barney Natural Resources Fund Inc. 7
<PAGE>
- --------------------------------------------------------------------------------
Portfolio Highlights (unaudited) April 30, 1999
- --------------------------------------------------------------------------------
Portfolio Breakdown*
[PIE CHART]
Repurchase Agreement 12.6%
Basic Materials - Agricultural 3.7%
Steel 6.9%
Oil & Gas 2.5%
Paper Products 12.4%
Base Metals 2.6%
Aluminum 2.6%
Metals 7.5%
Chemicals 7.2%
Energy Service & Equipment 2.5%
Other 6.5%
Oil Exploration & Products 33.0%
Percentage of
Exposure by Country Total Investments
- --------------------------------------------------------------------------------
United States 90.2%
United Kingdom 3.5
France 3.1
Canada 2.1
Singapore 0.7
Russia 0.4
Percentage of
Top Ten Common Stock Holdings Total Investments
- --------------------------------------------------------------------------------
Barrett Resources Corp. 4.8%
Apache Corp. 4.6
Archer-Daniels-Midland Co. 3.9
Burlington Resources Inc. 3.8
K N Energy Inc. 3.8
Ocean Energy Inc. 3.8
RTZ Corp. 3.6
Oregon Steel Mills Industries, Inc. 3.4
Weyerhaeuser Co. 3.3
Schlumberger Ltd. 3.2
* Percentage of total investments.
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8 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) April 30, 1999
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
COMMON STOCK -- 84.8%
Aluminum -- 2.6%
27,000 Alcoa Inc. $1,680,750
- --------------------------------------------------------------------------------
Basic Materials - Agricultural -- 3.7%
142,500 Archer-Daniels-Midland Co. 2,137,500
9,500 Corn Products International, Inc. 274,312
- --------------------------------------------------------------------------------
2,411,812
- --------------------------------------------------------------------------------
Basic Materials - Chemical -- 2.6%
67,750 IMC Global Inc. 1,693,750
- --------------------------------------------------------------------------------
Chemicals -- 2.5%
22,500 E.I. du Pont de Nemours and Co. 1,589,062
- --------------------------------------------------------------------------------
Chemicals - Specialty -- 2.1%
71,250 Engelhard Corp. 1,367,109
- --------------------------------------------------------------------------------
Computers - Peripheral -- 0.2%
25,000 Maxtor Corp.(a) 141,406
- --------------------------------------------------------------------------------
Electronics - Semiconductor -- 0.9%
95,000 MEMC Electronic Materials, Inc.(a)(b) 570,000
- --------------------------------------------------------------------------------
Energy Service & Equipment -- 2.5%
49,500 Baker Hughes Inc.(b) 1,478,812
9,000 Catalytica, Inc.(a) 123,188
- --------------------------------------------------------------------------------
1,602,000
- --------------------------------------------------------------------------------
Gold -- 1.8%
57,000 Barrick Gold Corp.(b) 1,147,125
250,000 Ourominas Minerals Inc. Warrants, Expire 1/27/04(a) 0
- --------------------------------------------------------------------------------
1,147,125
- --------------------------------------------------------------------------------
Metals -- 7.5%
25,000 Brush Wellman Inc. 376,562
76,000 RTI International Metals, Inc.(b) 1,011,750
113,000 Rio Tinto PLC 1,981,339
71,250 Titanium Metals Corp.(b) 525,469
38,000 Wolverine Tube, Inc.(a) 959,500
- --------------------------------------------------------------------------------
4,854,620
- --------------------------------------------------------------------------------
Oil & Gas -- 2.5%
59,000 Conoco Inc., Class A Shares(b) 1,600,375
- --------------------------------------------------------------------------------
Oil Exploration & Products -- 33.0%
1,375,000 Abacan Resource Corp.(a) 226,875
26,000 Abacan Resource Corp. Canada(a) 4,641
81,250 Apache Corp. 2,493,359
15,000 Atlantic Richfield Co. 1,259,063
85,750 Barrett Resources Corp.(a) 2,604,656
45,000 Burlington Resources Inc. 2,072,813
See Notes to Financial Statements.
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Smith Barney Natural Resources Fund Inc. 9
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) April 30, 1999
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Oil Exploration & Products -- 33.0% (continued)
13,000 Chevron Corp. $ 1,296,750
28,500 Cooper Cameron Corp.(a)(b) 1,100,813
36,000 Halliburton Co. 1,534,500
356 Imperial Oil Ltd. 7,395
100,000 K N Energy, Inc. 2,062,500
57,000 Mitchell Energy & Development Corp.(b) 876,375
221,000 Ocean Energy Inc.(a)(b) 2,058,063
50,000 Santa Fe Energy Resources, Inc. 450,000
27,000 Schlumberger Ltd. 1,724,625
27,000 Vastar Resources, Inc.(b) 1,481,625
- --------------------------------------------------------------------------------
21,254,053
- --------------------------------------------------------------------------------
Paper Products -- 12.4%
451,250 Asia Pacific Resources International Holdings Ltd.,
Class A Shares(a) 394,844
16,000 Champion International Corp.(b) 875,000
16,000 Georgia Pacific Group 1,480,000
20,000 International Paper Co.(b) 1,066,250
21,250 Mead Corp.(b) 888,516
135,200 PT Inti Indorayon Utama Tbk ADR 12,547
63,000 Smurfit-Stone Container Corp.(a) 1,472,625
27,000 Weyerhaeuser Co. 1,812,375
- --------------------------------------------------------------------------------
8,002,157
- --------------------------------------------------------------------------------
Property/Casualty Insurance -- 1.0%
35,000 First American Financial Corp. 625,625
- --------------------------------------------------------------------------------
Real Estate -- 0.6%
25,000 Catellus Development Corp.(a)(b) 384,375
- --------------------------------------------------------------------------------
Semiconductors -- 1.7%
110,000 Cypress Semiconductor Corp.(a) 1,127,500
- --------------------------------------------------------------------------------
Steel -- 6.9%
14,000 Nucor Corp.(b) 821,625
115,000 Oregon Steel Mills Industries, Inc., Class A Shares(b) 1,883,125
59,500 Schnitzer Steel Industries, Inc., Class A Shares 851,594
28,500 USX-U.S. Steel Group 862,125
- --------------------------------------------------------------------------------
4,418,469
- --------------------------------------------------------------------------------
Telephone - Long-distance -- 0.3%
50,000 Rostelecom ADR 215,625
- --------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost -- $50,079,881) 54,685,813
================================================================================
See Notes to Financial Statements.
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10 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) April 30, 1999
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
CONVERTIBLE PREFERRED STOCK -- 2.6%
Base Metals -- 2.6%
39,000 Cyprus Amax Minerals Co. (Cost--$1,442,125) $ 1,667,250
================================================================================
FACE
AMOUNT SECURITY VALUE
================================================================================
REPURCHASE AGREEMENT -- 12.6%
$ 8,100,000 CIBC Wood Gundy Securities Inc., 4.700% due 5/3/99;
Proceeds at maturity -- $8,103,172; (Fully
collateralized by U.S. Treasury Note, 5.625% due
12/31/99; Market value -- $8,262,898)
(Cost -- $8,100,000) 8,100,000
================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $59,622,006*) $64,453,063
================================================================================
(a) Non-income producing security.
(b) All or a portion of this security is on loan (See Note 6).
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
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Smith Barney Natural Resources Fund Inc. 11
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) April 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost -- $59,622,006) $ 64,453,063
Cash 42,343
Collateral for securities loaned (Note 6) 10,610,950
Receivable for securities sold 1,446,410
Dividends and interest receivable 11,931
Receivable for Fund shares sold 9,782
- ------------------------------------------------------------------------------------------
Total Assets 76,574,479
- ------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities loaned (Note 6) 10,610,950
Payable for securities purchased 336,375
Management fees payable 34,000
Distribution fees payable 15,461
Payable for Fund shares purchased 5,496
Accrued expenses 53,084
- ------------------------------------------------------------------------------------------
Total Liabilities 11,055,366
- ------------------------------------------------------------------------------------------
Total Net Assets $ 65,519,113
==========================================================================================
NET ASSETS:
Par value of capital shares $ 3,382
Capital paid in excess of par value 80,495,907
Undistributed net investment income 85,984
Accumulated net realized loss from
security transactions and options (19,897,217)
Net unrealized appreciation of investments 4,831,057
- ------------------------------------------------------------------------------------------
Total Net Assets $ 65,519,113
==========================================================================================
Shares Outstanding:
Class A 1,627,113
----------------------------------------------------------------------------------------
Class B 1,555,425
----------------------------------------------------------------------------------------
Class L 199,513
----------------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $ 19.75
----------------------------------------------------------------------------------------
Class B* $ 19.02
----------------------------------------------------------------------------------------
Class L** $ 19.06
----------------------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 5.26% of net asset value per share) $ 20.79
----------------------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset value per share) $ 19.25
==========================================================================================
</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 L shares reduced by a 1.00% CDSC if
shares are redeemed within the first year of purchase.
See Notes to Financial Statements.
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12 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations (unaudited)
- --------------------------------------------------------------------------------
For the Six Months Ended April 30, 1999
INVESTMENT INCOME:
Dividends $ 576,631
Interest 70,147
Less: Foreign withholding tax (8,704)
- -------------------------------------------------------------------------------
Total Investment Income 638,074
- -------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 187,517
Distribution fees (Note 2) 168,588
Shareholder and system servicing fees 68,312
Registration fees 36,411
Shareholder communications 32,619
Audit and legal 28,313
Directors' fees 16,393
Custody 12,848
Other 2,063
- -------------------------------------------------------------------------------
Total Expenses 553,064
- -------------------------------------------------------------------------------
Net Investment Income 85,010
- -------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
OPTIONS AND FOREIGN CURRENCIES (NOTES 3 AND 5):
Realized Gain (Loss) From:
Security transactions (excluding short-term securities) (3,863,388)
Options purchased (27,751)
Foreign currency transactions 7,347
- -------------------------------------------------------------------------------
Net Realized Loss (3,883,792)
- -------------------------------------------------------------------------------
Change in Net Unrealized Appreciation (Depreciation)
of Investments:
Beginning of period (8,724,983)
End of period 4,831,057
- -------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 13,556,040
- -------------------------------------------------------------------------------
Net Gain on Investments, Options and Foreign Currencies 9,672,248
- -------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 9,757,258
===============================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Natural Resources Fund Inc. 13
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the Six Months Ended April 30, 1999 (unaudited)
and the Year Ended October 31, 1998
1999 1998
===============================================================================
OPERATIONS:
Net investment income (loss) $ 85,010 $ (353,064)
Net realized loss (3,883,792) (13,475,655)
Increase (decrease) in net unrealized
appreciation 13,556,040 (14,250,250)
- -------------------------------------------------------------------------------
Increase (Decrease) in Net
Assets From Operations 9,757,258 (28,078,969)
- -------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net realized gains -- (770,167)
- -------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders -- (770,167)
- -------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 10):
Net proceeds from sale of shares 75,927,484 279,084,458
Net asset value of shares issued
for reinvestment of dividends -- 732,813
Cost of shares reacquired (79,717,665) (310,116,382)
- -------------------------------------------------------------------------------
Decrease in Net Assets From
Fund Share Transactions (3,790,181) (30,299,111)
- -------------------------------------------------------------------------------
Increase (Decrease) in Net Assets 5,967,077 (59,148,247)
NET ASSETS:
Beginning of period 59,552,036 118,700,283
- -------------------------------------------------------------------------------
End of period* $ 65,519,113 $ 59,552,036
===============================================================================
* Includes undistributed (overdistributed)
net investment income of: $ 85,984 $ (6,373)
===============================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
14 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
Smith Barney Natural Resources Fund Inc. ("Fund"), a Maryland corporation, is
registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company.
The significant accounting policies 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 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) securities for which market quotations are not available will be valued in
good faith at fair market value by or under the direction of the Board of
Trustees; (d) securities maturing within 60 days are valued at cost plus
accreted discount, or minus amortized premium, which approximates value; (e) the
accounting records of the Fund are maintained in U.S. dollars. All assets and
liabilities denominated in foreign currencies are translated into U.S. dollars
based on the rate of exchange of such currencies against U.S. dollars on the
date of valuation. Purchases and sales of securities, and income and expenses
are translated at the rate of exchange quoted on the respective date that such
transactions are recorded. Differences between income or expense amounts
recorded and collected or paid are adjusted when reported by the custodian; (f)
interest income, adjusted for amortization of premium and accretion of discount,
is recorded on an accrual basis; (g) dividend income is recorded on the
ex-dividend date; foreign dividends are recorded on the ex-dividend date or as
soon as practical after the Fund determines the existence of a dividend
declaration after exercising reasonable due diligence; (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)
the character of income and gains to be distributed are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles. At October 31, 1998, reclassifications were made to the Fund's
capital accounts to reflect permanent book/tax differences and income and gains
available for distributions under income tax regulations. Accordingly, a portion
of overdistributed net investment income amounting to $459,457 and accumulated
net realized gain of $14 was reclassified to paid-in capital. Net investment
income, net realized gains and
- --------------------------------------------------------------------------------
Smith Barney Natural Resources Fund Inc. 15
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
net assets were not affected by this adjustment; (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.
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.
2. Management Agreement and Other Transactions
SSBC Fund Management Inc. ("SSBC"), formerly known as Mutual Management Corp., a
subsidiary of Salomon Smith Barney Holdings Inc. ("SSBH"), acts as investment
manager to the Fund. The Fund pays SSBC a management fee calculated at an annual
rate of 0.75% of the average daily net assets. This fee is calculated daily and
paid monthly.
CFBDS, Inc. ("CFBDS") acts as the Fund's distributor. Salomon Smith Barney Inc.
("SSB"), another subsidiary of SSBH, as well as certain other broker-dealers,
continues to sell Fund shares to the public as a member of the selling group.
SSB acts as the primary broker for its portfolio agency transactions. For the
six months ended April 30, 1999, SSB received brokerage commissions of $13,980.
There is a contingent deferred sales charge ("CDSC") of 5.00% on Class B shares,
which applies if redemption occurs within one year from initial purchase and
declines thereafter by 1.00% per year until no CDSC is incurred. Class L shares
are being sold at net asset value plus a maximum initial sales charge of 1.00%.
Class L shares also have a 1.00% CDSC, which applies if redemption occurs within
the first year of purchase.
For the six months ended April 30, 1999, CDSC's paid to CFBDS and sales charges
received by CFBDS were approximately:
Class A Class B Class L
================================================================================
CDSCs -- $49,000 --
- --------------------------------------------------------------------------------
Sales Charges $18,000 -- $2,000
================================================================================
- --------------------------------------------------------------------------------
16 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
Pursuant to a Distribution Plan, the Fund pays a service fee with respect to
Class A, B and L shares calculated at an 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 L 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, 1999, total Distribution Plan fees incurred
were:
Class A Class B Class L
================================================================================
Distribution Plan Fees $27,144 $127,350 $14,094
================================================================================
All officers and one Director of the Fund are employees of SSB.
3. Investments
During the six months ended April 30, 1999, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases $33,791,106
- --------------------------------------------------------------------------------
Sales 37,532,314
================================================================================
At April 30, 1999, aggregate gross unrealized appreciation and depreciation of
investments for Federal income tax purposes were substantially as follows:
================================================================================
Gross unrealized appreciation $12,299,544
Gross unrealized depreciation (7,468,487)
- --------------------------------------------------------------------------------
Net unrealized appreciation $ 4,831,057
================================================================================
4. Futures Contracts
Initial margin deposits made upon entering into futures contracts are recognized
as assets. Securities equal to the initial margin amount are segregated by the
custodian in the name of the broker. Additional securities are also segregated
up to the current market value of the futures contract. During the period the
futures contract is open, changes in the value of the contract are recognized as
unrealized gains or losses by "marking to market" on a daily basis to reflect
the market value of the contract at the end of each day's trading. Variation
margin payments are received or made and recognized as assets due from or
liabilities due to 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.
- --------------------------------------------------------------------------------
Smith Barney Natural Resources Fund Inc. 17
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
The Fund enters into such contracts to hedge a portion of its portfolio. The
Fund bears the market risk that arises from changes in the value of the
financial instruments and securities indices (futures contracts).
At April 30, 1999, 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 and are included in the schedule
of investments. When a purchased option expires, the Fund will realize a loss in
the amount of the premium paid. When the Fund enters into a closing sales
transaction, the Fund will realize a gain or loss depending on whether the
proceeds from the closing sales transaction are greater or less than the premium
paid for the option. When the Fund exercises a put option, it will realize a
gain or loss from the sale of the underlying security and the proceeds from such
sale will be decreased by the premium originally paid. When the Fund exercises a
call option, the cost of the security which the Fund purchases upon exercise
will be increased by the premium originally paid.
At April 30, 1999, the Fund had no open purchased call or put option contracts.
When the Fund writes a covered 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 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 depending upon whether
the cost of the closing transaction is greater or less than the premium
originally received, without regard to any unrealized gain or loss on the
underlying security, and the liability related to such option is eliminated.
When a written call option is exercised, the cost of the security sold will be
decreased by the premium originally received. When a written put option is
exercised, the amount of the premium originally received will reduce the cost of
the security which the Fund purchased upon exercise. When written index options
are exercised, settlement is made in cash. The risk associated with purchasing
options is limited to the premium originally paid. The Fund enters into options
for hedging purposes. The risk in writing a covered call option is that the Fund
gives up the opportunity to participate in any increase in the price of the
underlying security beyond the exercise price. The risk in writing a put option
is that the Fund is exposed to the risk of loss if the market price of the
underlying security declines.
During the six months ended April 30, 1999, the Fund did not write any covered
call or put options.
- --------------------------------------------------------------------------------
18 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
6. Lending of Portfolio Securities
The Fund has an agreement with its custodian whereby the custodian may lend
securities owned by the Fund to brokers, dealers and other financial
organizations. Fees earned by the Fund on securities lending are recorded as
interest income. Loans of securities by the Fund are collateralized by cash,
U.S. government securities or high quality money market instruments that are
maintained at all times in an amount at least equal to the current market value
of the loaned securities, plus a margin depending on the type of securities
loaned. The custodian establishes and maintains the collateral in a segregated
account. The Fund maintains exposure for the risk of any losses in the
investment of amounts received as collateral.
At April 30, 1999, the Fund loaned common stock having a value of $10,318,813
and holds the following collateral for loaned securities.
Security Descriptions Value
================================================================================
Repurchase Agreements:
Merrill Lynch Securities/MLPFS, 4.9875 due 5/3/99 $ 1,941,535
NationsBanc Montgomery Securities, 4.9875 due 5/3/99 2,119,281
Time Deposits:
Argentaria Caja Postal Banco Hipote, 4.8750 due 5/3/99 519,566
Caisse de Depots ET Consign, Parris, 4.8750 due 5/3/99 519,566
Caisse National de Credit Agricole, 4.9375 due 5/3/99 519,566
Commerzbank AG, Frankfurt, 5.1250 due 5/3/99 519,566
Dresdner Bank, Grand Caymen, 4.9688 due 5/3/99 519,565
National Australia Bank, 4.8750 due 5/3/99 519,565
Southtrust Bank of Alabama, 5.0000 due 5/3/99 410,183
Commercial Paper:
Associates First Capital, 4.9420 due 5/3/99 519,352
Barton Capital Corp., 5.1022 due 5/3/99 341,674
BP Capital PLC, 5.1022 due 5/3/99 519,345
General Electric Credit, 4.9520 due 5/3/99 519,351
General Motors ACC Corp., 4.9420 due 5/3/99 507,698
Market Street Funding, 5.1022 due 5/3/99 341,674
Wood Street Funding Corp., 5.0521 due 5/3/99 273,463
- --------------------------------------------------------------------------------
Total $10,610,950
================================================================================
Interest income earned from securities lending for the six months ended April
30, 1999 was $4,658.
- --------------------------------------------------------------------------------
Smith Barney Natural Resources Fund Inc. 19
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
7. 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.
8. 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.
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 be subject to
greater risk and market fluctuation than a fund that invests in securities
representing a broader range of investment alternatives.
9. Capital Loss Carryforward
At October 31, 1998, the Fund had, for Federal income tax purposes,
approximately $15,192,000 of capital loss carryforwards available to offset any
future realized capital gains. 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:
10/31/99 10/31/00 10/31/06
================================================================================
Carryforward Amounts $1,000,000 $1,320,000 $12,872,000
================================================================================
10. Capital Shares
At April 30, 1999, 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
- --------------------------------------------------------------------------------
20 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
related to the distribution of its shares. Effective June 12, 1998, the Fund
adopted the renaming of existing Class C shares as Class L shares.
At April 30, 1999, total paid-in capital amounted to the following for each
class:
Class A Class B Class L
================================================================================
Total Paid-in Capital $49,114,003 $27,349,042 $4,036,244
================================================================================
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
April 30, 1999 October 31, 1998
--------------------------- ----------------------------
Shares Amount Shares Amount
==========================================================================================
<S> <C> <C> <C> <C>
Class A
Shares sold 4,011,407 $ 67,709,040 12,798,401 $ 253,356,342
Shares issued on
reinvestment -- -- 14,116 279,913
Shares reacquired (4,023,828) (67,637,747) (13,131,266) (261,226,158)
- ------------------------------------------------------------------------------------------
Net Increase (Decrease) (12,421) $ 71,293 (318,749) $ (7,589,903)
==========================================================================================
Class B
Shares sold 411,590 $ 6,850,256 1,175,562 $ 22,620,288
Shares issued on
reinvestment -- -- 21,547 415,220
Shares reacquired (687,536) (10,867,362) (2,322,354) (43,993,495)
- ------------------------------------------------------------------------------------------
Net Decrease (275,946) $ (4,017,106) (1,125,245) $ (20,957,987)
==========================================================================================
Class L
Shares sold 78,872 $ 1,368,186 157,951 $ 3,107,828
Shares issued on
reinvestment -- -- 1,953 37,680
Shares reacquired (72,521) (1,212,556) (249,370) (4,896,729)
- ------------------------------------------------------------------------------------------
Net Increase (Decrease) 6,351 $ 155,630 (89,466) $ (1,751,221)
==========================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Smith Barney Natural Resources Fund Inc. 21
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended October 31, except where noted:
<TABLE>
<CAPTION>
Class A Shares 1999(1)(2) 1998(2) 1997 1996(2) 1995 1994
=======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $16.56 $23.23 $22.95 $16.50 $21.44 $18.89
- -----------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss) 0.05 (0.01) (0.12) 0.08 (0.23)# (0.06)
Net realized and unrealized
gain (loss) 3.14 (6.50) 0.73 6.37 (4.71) 2.61
- -----------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 3.19 (6.51) 0.61 6.45 (4.94) 2.55
- -----------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- (0.33) -- -- --
Net realized gain -- (0.16) -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Total Distributions -- (0.16) (0.33) -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $19.75 $16.56 $23.23 $22.95 $16.50 $21.44
- -----------------------------------------------------------------------------------------------------------------------
Total Return 19.26%++ (28.13)% 2.67% 39.09% (23.04)% 13.50%
- -----------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $32,129 $27,147 $45,488 $50,521 $27,884 $41,370
- -----------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.88%+ 1.57% 1.51% 1.62% 1.99% 1.81%
Net investment income (loss) 0.66+ (0.05) (0.32) 0.15 (1.46) (0.34)
- -----------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 70% 151% 101% 120% 40% 50%
=======================================================================================================================
</TABLE>
(1) For the six months ended April 30, 1999 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method,
because it more accurately reflects the per share data for the period.
# Includes realized gains and losses from foreign currency transactions.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
22 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended October 31, except where noted:
<TABLE>
<CAPTION>
Class B Shares 1999(1)(2) 1998(2) 1997 1996(2) 1995 1994
============================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $16.00 $22.60 $22.32 $16.15 $21.14 $18.75
- ------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss) 0.01 (0.13) (0.27) (0.09) (0.22)# (0.33)
Net realized and unrealized
gain (loss) 3.01 (6.31) 0.70 6.26 (4.77) 2.72
- ------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 3.02 (6.44) 0.43 6.17 (4.99) 2.39
- ------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- (0.15) -- -- --
Net realized gain -- (0.16) -- -- -- --
- ------------------------------------------------------------------------------------------------------------
Total Distributions -- (0.16) (0.15) -- -- --
- ------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $19.02 $16.00 $22.60 $22.32 $16.15 $21.14
- ------------------------------------------------------------------------------------------------------------
Total Return 18.87%++ (28.61)% 1.95% 38.20% (23.60)% 12.75%
- ------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $29,587 $29,309 $66,819 $73,969 $25,747 $37,704
- ------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 2.52%+ 2.23% 2.18% 2.29% 2.62% 2.54%
Net investment income (loss) 0.07+ (0.71) (0.99) (0.83) (2.11) (1.06)
- ------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 70% 151% 101% 120% 40% 50%
============================================================================================================
</TABLE>
(1) For the six months ended April 30, 1999 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method,
because it more accurately reflects the per share data for the period.
# Includes realized gains and losses from foreign currency transactions.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Smith Barney Natural Resources Fund Inc. 23
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended October 31, except where noted:
<TABLE>
<CAPTION>
Class L Shares 1999(1)(2) 1998(2)(3) 1997 1996(2) 1995(4)
======================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $16.03 $22.62 $22.32 $16.16 $20.63
- ------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss) 0.01 (0.12) (0.23) 0.05 (0.29)#
Net realized and unrealized gain (loss) 3.02 (6.31) 0.68 6.11 (4.18)
- ------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 3.03 (6.43) 0.45 6.16 (4.47)
- ------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- (0.15) -- --
Net realized gain -- (0.16) -- -- --
- ------------------------------------------------------------------------------------------------------
Total Distributions -- (0.16) (0.15) -- --
- ------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $19.06 $16.03 $22.62 $22.32 $16.16
- ------------------------------------------------------------------------------------------------------
Total Return 18.90%++ (28.54)% 2.04% 38.12% (21.67)%++
- ------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $3,803 $3,096 $6,393 $7,602 $572
- ------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 2.43%+ 2.17% 2.12% 2.25% 2.69%+
Net investment income (loss) 0.15+ (0.63) (0.92) (0.21) (1.97)+
- ------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 70% 151% 101% 120% 40%
======================================================================================================
</TABLE>
(1) For the six months ended April 30, 1999 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method,
because it more accurately reflects the per share data for the period.
(3) On June 12, 1998, Class C shares were renamed Class L shares.
(4) For the period from November 7, 1994 (inception date) to October 31, 1995.
# Includes realized gains and losses from foreign currency transactions.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
24 1999 Semi-Annual Report to Shareholders
<PAGE>
SALOMON SMITH BARNEY
---------------------------
A member of citigroup[LOGO]
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.
James J. Crisona, Emeritus
Officers
Heath B. McLendon
President and
Chief Executive Officer
Lewis E. Daidone
Senior Vice President
and Treasurer
John G. Goode
Vice President and
Investment Officer
Paul A. Brook
Controller
Christina T. Sydor
Secretary
Investment Manager
SSBC Fund Management Inc.
Distributor
CFBDS, Inc.
Custodian
The Chase Manhattan Bank, N.A.
Shareholder
Servicing Agent
First Data Investor Services Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is submitted for the general information of 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.
Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
Smith Barney
Natural Resources
Fund Inc.
388 Greenwich Street, MF-2
New York, New York 10013
www.smithbarney.com
FD0299 6/99
