Smith Barney
Natural Resources Fund Inc.
388 Greenwich Street
New York, New York 10013
(212) 723-9218

Statement of Additional Information	February 27, 1998
	As amended May 15, 1998

	This Statement of Additional Information (the SAI) expands upon and 
supplements the information contained in the current Prospectus of Smith 
Barney Natural Resources Fund Inc. (the Fund) dated February 27, 1998, as 
amended or supplemented from time to time, and should be read in conjunction 
with the Funds Prospectus. The Funds Prospectus may be obtained from any 
Smith Barney Financial Consultant, or by writing or calling the Fund at the 
address or telephone number set forth above. This SAI, although not in itself 
a prospectus, is incorporated by reference into the Prospectus in its 
entirety.

CONTENTS

For ease of reference, the same section headings are used in both the 
Prospectus and this SAI, except where shown below:

Management of the Fund	
1
Investment Objective and Management Policies	
4
Purchase of Shares	
12
Redemption of Shares	
13
Distributor.	
14
Valuation of Shares	
15
Exchange Privilege	
16
Performance Data (See in the Prospectus Performance)	
16
Taxes (See in the Prospectus Dividends, Distributions and 
Taxes)	
19
Additional Information	
21
Financial Statements	
22
Appendix	
23

MANAGEMENT OF THE FUND

The executive officers of the Fund are employees of certain of the 
organizations that provide services to the Fund. These organizations are the 
following:

Name
Service
Smith Barney Inc. 
(Smith Barney or the 
Distributor)..........................
 .......
Distributor


Mutual Management Corp.
(MMC or the 
Manager)................................
 ...............

Investment Manager 


The Chase Manhattan Bank N.A.
(Chase or the 
Custodian)...............................
 ..............

Custodian


First Data Investor Services Group, Inc. 
(First Data or the Transfer 
Agent)................................

Transfer Agent

These organizations and the functions they perform for the Fund are discussed 
in the Prospectus and in this SAI.
Directors and Executive Officers of the Fund

The Directors and executive officers of the Fund, together with information 
as to their principal business occupations during the past five years, are 
shown below. Each Director who is an interested person of the Fund, as 
defined in the Investment Company Act of 1940, as amended (the 1940 Act), 
is indicated by an asterisk.

	Herbert Barg (Age 74). Private Investor.  His address is 273 Montgomery 
Avenue, Bala Cynwyd, Pennsylvania 19004.

	*Alfred J. Bianchetti, Director (Age 75).  Retired; formerly Senior 
Consultant to Dean Witter Reynolds Inc.  His address is 19 Circle End Drive, 
Ramsey, New Jersey 07466.

	Martin Brody, Director (Age 76).  Consultant, HMK Associates; Retired 
Vice Chairman of the Board of Restaurant Associates Corp.  His address is c/o 
HMK Associates, 30 Columbia Turnpike, Florham Park, New Jersey 07932.

	Dwight B. Crane, Director (Age 60).  Professor, Harvard Business 
School.  His address is c/o Harvard Business School, Soldiers Field Road, 
Boston, Massachusetts 02163.

	Burt N. Dorsett, Director (Age 67).  Managing Partner of Dorsett McCabe 
Management. Inc., an investment counseling firm; Director of Research 
Corporation Technologies, Inc., a nonprofit patent clearing and licensing 
firm.  His address is 201 East 62nd Street, New York, New York 10021.

	Elliot S. Jaffe, Director (Age 71).  Chairman of the Board and 
President of The Dress Barn, Inc.  His address is 30 Dunnigan Drive, Suffern, 
New York 10901.

	Stephen E. Kaufman, Director (Age 66).  Attorney.  His address is 277 
Park Avenue, New York, New York 10172.

	Joseph J. McCann, Director (Age 67).  Financial Consultant; Retired 
Financial Executive, Ryan Homes, Inc.  His address is 200 Oak Park Place, 
Pittsburgh, Pennsylvania 15243.

	*Heath B. McLendon, Chairman of the Board and Investment Officer (Age 
64).  Managing Director of Smith Barney, Chairman of the Board of Smith 
Barney Strategy Advisers Inc. and President of MMC and Travelers Investment 
Adviser, Inc. (TIA); prior to July 1993, Senior Executive Vice President 
of Shearson Lehman Brothers Inc., Vice Chairman of Shearson Asset Management.  
Mr. McLendon is Chairman of the Board of 42 Smith Barney Mutual Funds. His 
address is 388 Greenwich Street, New York, New York 10013.

	Cornelius C. Rose, Jr., Director (Age 64).  President, Cornelius C. 
Rose Associates, Inc., financial consultants, and Chairman and Director of 
Performance Learning Systems, an educational consultant.  His address is Fair 
Oaks, Enfield, New Hampshire 03748.

	James J. Crisona, Director Emeritus.  Attorney; formerly Justice of the 
Supreme Court of the State of New York.  His address is 118 East 60th Street, 
New York, New York 10022

	Lewis E. Daidone, Senior Vice President and Treasurer (Age 40).  
Managing Director of Smith Barney, Chief Financial Officer of the Smith 
Barney Mutual Funds; Director and Senior Vice President of MMC and TIA. Mr. 
Daidone serves as Senior Vice President and Treasurer of 42 Smith Barney 
Mutual Funds.  His address is 388 Greenwich Street, New York, New York 10013.

	John G. Goode, Vice President and Investment Officer (age 52).  
Chairman and Chief Investment Officer of Davis Skaggs Investment Management 
(Davis Skaggs), a division of MMC;  Managing Director of Smith Barney.  
His address is 1 Sansome Street, 36th Floor, San Francisco, California 94104.

	David A. Stadlin, Vice President and Investment Officer (age 32).  
Portfolio Manager/Research Analyst of Davis Skaggs;  Vice President of Smith 
Barney.  His address is 1 Sansome Street, 36th Floor, San Francisco, 
California 94104.

	Christina T. Sydor, Secretary (Age 46). Managing Director of Smith 
Barney; General Counsel and Secretary of MMC and TIA. Ms. Sydor serves as 
Secretary of 42 Smith Barney Mutual Funds. Her address is 388 Greenwich 
Street, New York, New York 10013.

	No officer, director or employee of Smith Barney or any parent or 
subsidiary of Smith Barney receives any compensation from the Fund for 
serving as an officer or Director of the Fund. The Trust pays each Director 
who is not an officer, director or employee of Smith Barney or any of their 
affiliates a fee of $8,000 per annum plus $500 per meeting attended. All 
Directors are reimbursed for travel and out-of-pocket expenses incurred to 
attend such meetings.

	For the calendar year ended October 31, 1997, the Directors of the Fund 
were paid the following compensation. 

		Total
		Pension or	Compensation	Number of
		Retirement	from Fund	Funds for
	                Aggregate	Benefits Accrued	and Fund	                 Which  
Director
	Compensation 	as part of 	Complex	Serves Within
Name of Person	from Fund 	  Fund Expenses  	Paid to Directors	 Fund Complex 

Herbert Barg	$3,100	                     $0		           
$101,600		     18
Alfred Bianchetti**	3,100		       0			49,600		     
13
Martin Brody	3,000		       0		             119,814	
	     21
Dwight B. Crane	3,100		       0		             133,850	
	     24
Burt N. Dorsett*	3,100		       0			49,600		     
13
Elliot S. Jaffe	3,000		       0			48,500		     
13
Stephen E. Kaufman	3,100		       0			91,964		     
15
Joseph J. McCann	3,100		       0			49,600		     
13
Heath B. McLendon **	 -		       -			     -		     
42
Cornelius C. Rose, Jr.	3,100		       0			49,600		     
13
James J. Crisona***	1,550		       0			18,825		     
12

	

*	Pursuant to the Funds deferred compensation plan, Mr. Dorsett elected to 
defer the compensation due to him from the Fund.  As of January 1, 1997, 
Mr. Dorsett elected not to defer his future compensation.
**    Designates an interested Director.
***  Upon attainment of age 80,  Fund Directors are required to change to 
emeritus status.  Directors Emeritus are entitled to serve in emeritus 
status for a maximum of 10 years, during which time they are paid 50% of 
the annual retainer fee and meeting fees otherwise applicable to Fund 
Directors, together with reasonable out-of-pocket expenses for each meeting 
attended.  Mr. Crisona is a Director Emeritus and as such may attend 
meetings but has no voting rights.

Investment Adviser--MMC 

	MMC, formerly known as Smith Barney Mutual Funds Management Inc., 
serves as investment manager to the Fund pursuant to a written agreement (the 
Investment Management Agreement), which was approved by the Board of 
Directors, including a majority of the Directors who are not interested 
persons of the Fund or the Manager (the Independent Directors).  The 
Manager pays the salary of any officer and employee who is employed by both 
it and the Fund. The services provided by the Manager under the Investment 
Management Agreement are described in the Prospectus under Management of 
the Fund. The Manager bears all expenses in connection with the performance 
of its services. The Manager  is a wholly owned subsidiary of Salomon Smith 
Barney Holdings Inc. (Holdings), which in turn, is a wholly owned 
subsidiary of  Travelers Group Inc. (Travelers). 

	As compensation for investment advisory services provided pursuant the 
Investment Management Agreement, the Fund pays the Manager a fee computed 
daily and paid monthly at the annual rate of 0.75% of the value of the Funds 
average daily net assets.  For the fiscal years ended October 31, 1995, 
October 31, 1996 and October 31, 1997 the Fund paid the Manager $505,253, 
$763,626 and $1,012,447, respectively, in investment advisory fees.  

	The Fund bears expenses incurred in its operation, including: taxes, 
interest, brokerage fees and commissions, if any; fees of Directors who are 
not officers, directors, shareholders or employees of Smith Barney or the 
Manager; Securities and Exchange Commission (SEC) fees and state Blue Sky 
qualification fees; charges of custodians; transfer and dividend disbursing 
agents fees; certain insurance premiums; outside auditing and legal 
expenses; and costs of preparation and printing of prospectuses for 
regulatory purposes and for distribution to existing shareholders, cost of 
shareholders reports and shareholder meetings and meetings of the officers 
or Board of Directors of the Fund. 

Counsel and Auditors

	Willkie Farr & Gallagher serves as counsel to the Fund. The Independent 
Directors of the Fund have selected Stroock & Stroock & Lavan LLP, as their 
counsel.

	KPMG Peat Marwick LLP, independent auditors, 345 Park Avenue, New York, 
New York 10154, serve as auditors of the Fund and render an opinion on the 
Funds financial statements annually.

INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES

	The Prospectus discusses the Funds investment objective and the 
policies it employs to achieve its objective. The following discussion 
supplements the description of the Funds investment objective and management 
policies in the Prospectus.

	United States Government Securities. United States government 
securities include debt obligations of varying maturities issued or 
guaranteed by the United States government or its agencies or 
instrumentalities (U.S. government securities). Direct obligations of the 
United States Treasury include a variety of securities that differ in their 
interest rates, maturities and dates of issuance. 

	U.S. government securities include not only direct obligations of the 
United States Treasury, but also include securities issued or guaranteed by 
the Federal Housing Administration, Federal Financing Bank, Export-Import 
Bank of the United States, Small Business Administration, Government National 
Mortgage Association, General Services Administration, Federal Home Loan 
Banks, Federal Home Loan Mortgage Corporation, Federal National Mortgage 
Association, Maritime Administration, Tennessee Valley Authority, Resolution 
Trust Corporation, District of Columbia Armory Board, Student Loan Marketing 
Association and various institutions that previously were or currently are 
part of the Farm Credit System (which has been undergoing a reorganization 
since 1987). Because the United States government is not obligated by law to 
provide support to an instrumentality that it sponsors, the Fund will invest 
in obligations issued by such an instrumentality only if MMC determines that 
the credit risk with respect to the instrumentality does not make its 
securities unsuitable for investment by the Fund. 

	Lending of Portfolio Securities. As stated in the Prospectus, the Fund 
has the ability to lend securities from its portfolio to brokers, dealers and 
other financial organizations. Such loans, if and when made, will not exceed 
20% of the Funds total assets. The Fund may not lend its portfolio 
securities to Smith Barney or its affiliates unless it has applied for and 
received specific authority from the SEC. Loans of portfolio securities by 
the Fund will be collateralized by cash, letters of credit or U.S. government 
securities which will be maintained at all times in an amount equal to at 
least 100% of the current market value of the loaned securities. From time to 
time, the Fund may return a part of the interest earned from the investment 
of collateral received for securities loaned to the borrower and/or a third 
party, which is unaffiliated with the Fund or with Smith Barney, and which is 
acting as a finder. In lending its securities, the Fund can increase its 
income by continuing to receive interest on the loaned securities as well as 
by either investing the cash collateral in short-term instruments or 
obtaining yield in the form of interest paid by the borrower when U.S. 
government securities are used as collateral. Requirements of the SEC, which 
may be subject to future modifications, currently provide that the following 
conditions must be met whenever the Funds portfolio securities are loaned: 
(a) the Fund must receive at least 100% cash collateral or equivalent 
securities or letters of credit from the borrower; (b) the borrower must 
increase such collateral whenever the market value of the securities rises 
above the level of such collateral; (c) the Fund must be able to terminate 
the loan at any time; (d) the Fund must receive reasonable interest on the 
loan, as well as an amount equal to any dividends, interest or other 
distributions on the loaned securities, and any increase in market value; (e) 
the Fund may pay only reasonable custodian fees in connection with the loan; 
and (f) voting rights on the loaned securities may pass to the borrower; 
however, if a material event adversely affecting the investment occurs, the 
Funds Board of Directors must terminate the loan and regain the right to 
vote the securities. The risks in lending portfolio securities, as with other 
extensions of secured credit, consist of possible delay in receiving 
additional collateral or in the recovery of the securities or possible loss 
of rights in the collateral should the borrower fail financially. Loans will 
be made to firms deemed by the Manager to be of good standing and will not be 
made unless, in the judgment of the Manager, the consideration to be gained 
from such loans would justify the risk.

	Options on Securities.  The Fund may engage in the writing of covered 
put and call options and may enter into closing transactions.  The Fund also 
may purchase put and call options on securities.

	The principal reason for writing covered call options on securities is 
to attempt to realize, through the receipt of premiums, a greater return than 
would be realized on the securities alone.  In return for a premium, the 
writer of a covered call option forfeits the right to any appreciation in the 
value of the underlying security above the strike price for the life of the 
option (or until a closing purchase transaction can be effected). 
Nevertheless, the call writer retains the risk of a decline in the price of 
the underlying security.  Similarly, the principal reason for writing covered 
put options is to realize income in the form of premiums.  The writer of a 
covered put option accepts the risk of a decline in the price of the 
underlying security.  The size of the premiums that the Fund may receive may 
be adversely affected as new or existing institutions, including other 
investment companies, engage in or increase their option-writing activities. 

	Options written by the Fund normally will have expiration dates between 
one and nine months from the date written.  The exercise price of the options 
may be below, equal to or above the market values of the underlying 
securities at the times the options are written.  In the case of call 
options, these exercise prices are referred to as in-the-money, at-the-
money and out-of-the-money, respectively.  The Fund may write (a) in-
the-money call options when the Manager expects that the price of the 
underlying security will remain flat or decline moderately during the option 
period, (b) at-the-money call options when the Manager expects that the price 
of the underlying security will remain flat or advance moderately during the 
option period and (c) out-of-the-money call options when the Manager expects 
that the price of the underlying security may increase but not above a price 
equal to the sum of the exercise price plus the premiums received from 
writing the call option.  In any of the preceding situations, if the market 
price of the underlying security declines and the security is sold at this 
lower price, the amount of any realized loss will be offset wholly or in part 
by the premium received.  Out-of-the-money, at-the-money and in-the-money put 
options (the reverse of call options as to the relation of exercise price to 
market price) may be utilized in the same market environments that such call 
options are used in equivalent transactions. 

	So long as the obligation of the Fund as the writer of an option 
continues, the Fund may be assigned an exercise notice by the broker-dealer 
through which the option was sold, requiring the Fund to deliver, in the case 
of a call, or take delivery of, in the case of a put, the underlying security 
against payment of the exercise price.  This obligation terminates when the 
option expires or the Fund effects a closing purchase transaction.  The Fund 
can no longer effect a closing purchase transaction with respect to an option 
once it has been assigned an exercise notice.  To secure its obligation to 
deliver the underlying security when it writes a call option, or to pay for 
the underling security when it writes a put option, the Fund will be required 
to deposit in escrow the underlying security or other assets in accordance 
with the rules of the Options Clearing Corporation (Clearing Corporation) 
and of the securities exchange on which the option is written. 

	An option position may be closed out only where there exists a 
secondary market for an option of the same series on a recognized securities 
exchange or in the over-the-counter market.  In light of this fact and 
current trading conditions, the Fund expects to purchase not only call or put 
options issued by the Clearing Corporation, but also options in the domestic 
and foreign over-the-counter markets.  The Fund expects to write options only 
on U.S. securities exchanges, except that it may write options on U.S. 
government securities in the over-the-counter market.

	The Fund may realize a profit or loss upon entering into a closing 
transaction.  In cases in which the Fund has written an option, it will 
realize a profit if the cost of the closing purchase transaction is less than 
the premium received upon writing the original option and will incur a loss 
if the cost of the closing purchase transaction exceeds the premium received 
upon writing the original option.  Similarly, when the Fund has purchased an 
option and engages in a closing sale transaction, whether the Fund realizes a 
profit or loss will depend upon whether the amount received in the closing 
sale transaction is more or less than the premium that the Fund initially 
paid for the original option plus the related transaction costs.

	Although the Fund generally will purchase or write only those options 
for which the Manager believes there is an active secondary market so as to 
facilitate closing transactions, there is no assurance that sufficient 
trading interest to create a liquid secondary market on a securities exchange 
will exist for any particular option or at any particular time, and for some 
options no such secondary market may exist.  A liquid secondary market in an 
option may cease to exist for a variety of reasons.  In the past, for 
example, higher than anticipated trading activity or order flow or other 
unforeseen events have at times rendered inadequate certain of the facilities 
of the Clearing Corporation and securities exchanges and resulted in the 
institution of special procedures, such as trading rotations, restrictions on 
certain types of orders or trading halts or suspensions in one or more 
options.  There can be no assurance that similar events, or events that may 
otherwise interfere with the timely execution of customers orders, will not 
recur.  In such event, it might not be possible to effect closing 
transactions in particular options.  If, as a covered call option writer, the 
Fund is unable to effect a closing purchase transaction in a secondary 
market, it will not be able to sell the underlying security until the option 
expires or it delivers the underlying security upon exercise. 

	Securities exchanges generally have established limitations governing 
the maximum number of calls and puts of each class which may be held or 
written, or exercised within certain time periods, by an investor or group of 
investors acting in concert (regardless of whether the options are written on 
the same or different securities exchanges or are held, written or exercised 
in one or more accounts or through one or more brokers).  It is possible that 
the Fund and other clients of the Manager and certain of their affiliates may 
be considered to be such a group.  A securities exchange may order the 
liquidation of positions found to be in violation of these limits and it may 
impose certain other sanctions.
 
	In the case of options written by the Fund that are deemed covered by 
virtue of the Funds holding convertible or exchangeable preferred stock or 
debt securities, the time required to convert or exchange and obtain physical 
delivery of the underlying common stocks with respect to which the Fund has 
written options may exceed the time within which the Fund must make delivery 
in accordance with an exercise notice.  In these instances, the Fund may 
purchase or temporarily borrow the underlying securities for purposes of 
physical delivery.  By so doing, the Fund will not bear any market risk, 
because the Fund will have the absolute right to receive from the issuer of 
the underlying security an equal number of shares to replace the borrowed 
stock, but the Fund may incur additional transaction costs or interest 
expenses in connection with any such purchase or borrowing.

	Stock Index Options. The Fund may purchase and write put and call 
options on domestic stock indexes listed on domestic securities exchanges 
and, subject to applicable state securities regulations, on foreign stock 
indexes listed on foreign securities exchanges for the purpose of hedging its 
portfolio. A stock index fluctuates with changes in the market values of the 
stocks included in the index. Some stock index options are based on a broad 
market index such as the NYSE Composite Index or the Canadian Market 
Portfolio Index, or a narrower market index such as the Standard & Poors 
100. Indexes also are based on an industry or market segment such as the AMEX 
Oil and Gas Index or the Computer and Business Equipment Index. 

	Options on stock indexes are similar to options on securities except 
that the delivery requirements are different. Instead of giving the right to 
take or make delivery of a security at a specified price, an option on a 
stock index gives the holder the right to receive a cash exercise 
settlement amount equal to (a) the amount, if any, by which the fixed 
exercise price of the option exceeds (in the case of a put) or is less than 
(in the case of a call) the closing value of the underlying index on the date 
of exercise, multiplied by (b) a fixed index multiplier. Receipt of this 
cash amount will depend upon the closing level of the stock index upon which 
the option is based being greater than, in the case of a call, or less than, 
in the case of a put, the exercise price of the option. The amount of cash 
received will be equal to such difference between the closing price of the 
index and the exercise price of the option expressed in U.S. dollars or a 
foreign currency, as the case may be, times a specified multiple. The writer 
of the option is obligated, in return for the payment received, to make 
delivery of this amount. The writer may offset its position in stock index 
options prior to expiration by entering into a closing transaction on an 
exchange or it may let the option expire unexercised. 

	The effectiveness of purchasing or writing stock index options as a 
hedging technique will depend upon the extent to which price movements in the 
portion of the Funds securities portfolio being hedged correlate with price 
movements of the stock index selected. Because the value of an index option 
depends upon movements in the level of the index rather than the price of a 
particular stock, whether the Fund will realize a gain or loss from the 
purchase or writing of options on an index depends upon movements in the 
level of stock prices in the particular stock market generally or, in the 
case of certain indexes, in an industry or market segment, rather than 
movements in the price of a particular stock. Accordingly, successful use by 
the Fund of options on stock indexes will be subject to the ability of the 
Manager to predict correctly movements in the direction of the stock market 
generally or of a particular industry. This requires different skills and 
techniques than predicting changes in the prices of individual stocks. 

	The Fund will engage in stock index options transactions only when 
determined by the Manager to be consistent with the Funds effort to control 
risk. There can be no assurance that the use of these portfolio strategies 
will be successful. When the Fund writes an option on a stock index, the Fund 
will establish a segregated account with the Custodian, or with a sub-
custodian for the Fund, in an amount equal to the market value of the option 
and will maintain the account while the option is open. 

	Futures Contracts on Gold and Related Options. The Funds purpose in 
entering into a gold futures contract or a related option is to mitigate the 
effects of fluctuations in the price of gold without necessarily buying gold 
or other portfolio assets. For example, if the Fund expects gold prices to 
increase, the Fund might purchase gold futures contracts in anticipation of 
the future purchase of gold or gold-related securities. Such a purchase would 
have much the same effect as the Funds buying gold. If gold prices increase 
as anticipated, the value of the gold futures contracts would increase at 
approximately the same rate. 

	No consideration is paid or received by the Fund upon the purchase of a 
gold futures contract. Initially, the Fund will be required to deposit with a 
broker an amount of cash or cash equivalents, such as U.S. government 
securities or high grade debt obligations. This amount, known as initial 
margin, is subject to change by the exchange on which the contract is traded 
and brokers may charge a higher amount. Initial margin is in the nature of a 
performance bond or good faith deposit on the contract and is returned to the 
Fund upon termination of the gold futures contract, assuming that all 
contractual obligations have been satisfied. Subsequent payments, known as 
maintenance margin, to and from broker, will be made daily as the price of 
the gold bullion underlying the futures contract fluctuates, making the 
positions in the futures contract more or less valuable, a process known as 
marking-to-market. Because the value of an option on a futures contract is 
fixed at the point of sale, there are no daily cash payments by the purchaser 
to reflect changes in the value of the underlying contract; however, the 
value of the option does change daily and that change would be reflected in 
the net asset value of the Fund. 

	There are several risks in connection with the use of gold futures 
contracts and related options as hedging devices. Successful use of gold 
futures contracts and related options by the Fund is subject to the ability 
of MMC to predict correctly movements in the price of gold and other factors  
affecting markets for gold. These predictions involve skills and techniques 
that are different from those generally involved in the management of the 
Fund. In addition, there can be no assurance that there will be a correlation 
between movements in the price of gold futures contracts or an option on a 
gold futures contract and movements in the price of the hedged assets. A 
decision of whether, when and how to hedge involves the exercise of skill and 
judgment, and even a well conceived hedge may be unsuccessful to some degree 
because of market behavior or unexpected trends in the price of gold or the 
hedged securities.

	At any time prior to the expiration of a gold futures contract or an 
option on a gold futures contract, the Fund may elect to close the position 
by taking an opposite position, which will operate to terminate the Funds 
existing position in the contract. Positions in futures contracts and options 
on futures contracts may be closed out only on the exchange on which they 
were entered into (or through a linked exchange). Although the Fund intends 
to purchase gold futures contracts and related options only if there is an 
active market for the contracts, there is no assurance that an active market 
will exist for the contracts or options at any particular time. Most futures 
exchanges limit the amount of fluctuation permitted in futures contract 
prices during a single trading day. Once the daily limit has been reached in 
a particular contract, no trades may be made that day at a price beyond that 
limit. It is possible that gold futures contract prices could move to the 
daily limit for several consecutive trading days with little or no trading, 
thereby preventing prompt liquidation of gold futures positions and 
subjecting the Fund to substantial losses. In such event, and in the event of 
adverse price movements, the Fund would be required to make daily cash 
payments of maintenance margin, and an increase, if any, in the value of the 
portion of the portfolio being hedged may partially or completely offset 
losses on the futures contract. As described above, however, there is no 
guarantee that the price of the assets being hedged will, in fact, correlate 
with the price movements in a gold futures contract or an option thereon and 
thus provide an offset to losses on the futures contract or option. 

	If the Fund has hedged against the possibility of a change in the price 
of gold adversely affecting the value of its assets and prices move in a 
direction opposite to that which was anticipated, the Fund will probably lose 
part or all of the benefit of the increased value of the assets hedged 
because of offsetting losses in its futures positions. In addition, in such a 
situation, if the Fund has insufficient cash, it might have to sell assets to 
meet daily maintenance margin requirements at a time when it would be 
disadvantageous to do so. These sales of assets could, but will not 
necessarily, be at increased prices which reflect the change in the value of 
gold. 

	The ability of the Fund to trade in gold futures contracts and related 
options may be materially limited by the requirements of the Internal Revenue 
Code of 1986, as amended (the Code), applicable to a regulated investment 
company. See Taxes. 

	Currency Transactions. The Fund may engage in currency exchange 
transactions to protect against uncertainty in the level of future exchange 
rates. The Funds dealings in forward currency exchange contracts will be 
limited to hedging involving either specific transactions or portfolio 
positions. Transaction hedging is the purchase or sale of forward currency 
with respect to specific receivables or payables of the Fund generally 
arising in connection with the purchase or sale of its portfolio securities. 
Position hedging is the sale of forward currency with respect to portfolio 
securities positions denominated or quoted in the currency. The Fund may not 
position hedge with respect to a particular currency to an extent greater 
than the aggregate market value at any time of the securities held in its 
portfolio denominated or quoted in or currently convertible (such as through 
exercise of an option or consummation of a forward contract) into that 
particular currency. If the Fund enters into a transaction hedging or 
position hedging transaction, it will cover the transaction through one or 
more of the following methods: (a) ownership of the underlying currency or an 
option to purchase such currency; (b) ownership of an option to enter into an 
offsetting forward contract; (c) entering into a forward contract to purchase 
currency being sold or to sell currency being purchased, provided such 
covering contract is itself covered by one of these methods unless the 
covering contract closes out the first contract; or (d) depositing into a 
segregated account with the custodian or a sub-custodian of the Fund cash or 
readily marketable securities in an amount equal to the value of the Funds 
total assets committed to the consummation of the forward contract and not 
otherwise covered. In the case of transaction hedging, any securities placed 
in the account must be liquid debt securities. In any case, if the value of 
the securities placed in the segregated account declines, additional cash or 
securities will be placed in the account so that the value of the account 
will equal the above amount. Hedging transactions may be made from any 
foreign currency into U.S. dollars or into other appropriate currencies. 

	At or before the maturity of a forward contract, the Fund may either 
sell a portfolio security and make delivery of the currency, or retain the 
security and offset its contractual obligation to deliver the currency by 
purchasing a second contract pursuant to which the Fund will obtain, on the 
same maturity date, the amount of the currency it is obligated to deliver. If 
the Fund retains the portfolio security and engages in an offsetting 
transaction, the Fund, at the time of execution of the offsetting 
transaction, will incur a gain or a loss to the extent that movement has 
occurred in forward contract prices. Should forward prices decline during the 
period between the Funds entering into a forward currency contract for the 
sale of a currency and the date it enters into an offsetting contract for the 
purchase of the currency, the Fund will realize a gain to the extent the 
price of the currency it has agreed to sell exceeds the price of the currency 
it has agreed to purchase. Should forward prices increase, the Fund will 
suffer a loss to the extent the price of the currency it has agreed to 
purchase exceeds the price of the currency it has agreed to sell. 

	The cost to the Fund of engaging in currency transactions varies with 
factors such as the currency involved, the length of the contract period and 
the market conditions then prevailing. Because transactions in currency 
exchange usually are conducted on a principal basis, no fees or commissions 
are involved. The use of forward currency contracts does not eliminate 
fluctuations in the underlying prices of the securities, but it does 
establish a rate of exchange that can be achieved in the future. In addition, 
although forward currency contracts limit the risk of loss due to a decline 
in the value of the hedged currency, at the same time they limit any 
potential gain that might result should the value of the currency increase. 

	If a devaluation of a currency is generally anticipated, the Fund may 
not be able to contract to sell the currency at a price above the devaluation 
level that it anticipates. The Fund will not enter into a currency 
transaction if, as a result, it will fail to qualify as a regulated 
investment company under the Code for a given year.

Investment Restrictions
	
The Fund has adopted the following investment restrictions for the protection 
of shareholders. Restrictions 1 through 7 below are fundamental policies that 
cannot be changed without approval by the holders of a majority of the 
outstanding voting securities of the Fund, defined as the lesser of (a) 67% 
of the shares present at a meeting, if the holders of more than 50% of the 
outstanding shares are present in person or by proxy or (b) more than 50% of 
the Funds outstanding shares. The remaining restrictions may    be changed 
by a vote of the Board of Directors at any time.

The investment policies adopted by the Fund prohibit it from:
   
1. Investing in a manner that would cause it to fail to be a diversified 
company under the 1940 Act and the rules, regulations and orders 
thereunder.

2. Issuing senior securities as defined in the 1940 Act and the rules, 
regulations and orders thereunder,  except as permitted under the 1940 Act 
and the rules,  regulations and orders thereunder.

3. Investing more than 25% of its total assets in securities, the issuers 
of which are in the same industry (other than in Natural Resource 
Investments as defined in the Prospectus). For purposes of this 
limitation, U.S. government securities are not considered to be issued by 
members of any industry. 

4. Borrowing money,  except that (a)  the Fund may borrow from banks for 
temporary or emergency (not leveraging) purposes,  including the meeting of 
redemption requests which might otherwise require the untimely disposition 
of securities,  and (b) the Fund may,  to the extent consistent with its 
investment policies,  enter into reverse repurchase agreements,  forward 
roll transactions and similar investment strategies and techniques.  To the 
extent that it engages in transactions described in (a) and (b),  the 
Portfolio will be limited so that no more than 33 1/3% of the value of its 
total assets (including the amount borrowed),  valued at the lesser of cost 
or market,  less liabilities (not including the amount borrowed)  valued at 
the time the borrowing is made,  is derived from such transactions.

5. Making loans.  This restriction does not apply to: (a) the purchase of 
debt obligations in which the Fund may invest consistent with its 
investment objectives and policies; (b) repurchase agreements; and (c) 
loans of its portfolio securities,  to the fullest extent permitted under 
the 1940 Act.

6. Engaging in the business of underwriting securities issued by other 
persons, except to the extent that the Fund may technically be deemed to 
be an underwriter under the Securities Act of 1933, as amended, in 
disposing of portfolio securities. 

7. Purchasing or selling real estate, real estate mortgages, commodities 
or commodity contracts, but this restriction shall not prevent the Fund 
from: (a) investing in securities of issuers engaged in the real estate 
business or the business of investing in real estate (including interests 
in limited partnerships owning or otherwise engaging in the real estate 
business or the business of investing in real estate)  and securities 
which are secured by real estate or interests therein;  (b)  holding or 
selling real estate received in connection with securities it holds or 
held;  (c) trading in futures contracts and options on futures contracts 
(including options on currencies to the extent consistent with the Funds 
investment objective and policies);  (d) investing in real estate 
investment trust securities;  or (e) investing in gold bullion and coins 
or receipts for gold. 
     
8. Purchasing any securities on margin (except for such short-term credits 
as are necessary for the clearance of purchases and sales of portfolio 
securities) or sell any securities short (except against the box).  For 
purposes of this restriction, the deposit or payment by the Fund of 
underlying securities and other assets in escrow and collateral agreements 
with respect to initial or maintenance margin in connection with futures 
contracts and related options and options on securities, indexes or similar 
items is not considered to be the purchase of a security on margin.

9. Investing in securities of other investment companies, except as they 
may be acquired as part of a merger, consolidation, reorganization or 
acquisition of assets. 

10. Purchasing restricted securities, illiquid securities or other 
securities which are not readily marketable if more than 15% of the total 
assets of the Fund would be invested in such securities. For purposes of 
this limitation, (a) repurchase agreements providing for settlement in 
more than seven days after notice by the Fund and (b) time deposits 
maturing in more than seven calendar days shall be considered illiquid 
securities. 

11. Purchasing any security if as a result the Fund would then have more 
than 5% of its total assets (taken at current value) invested in 
securities of issuers which directly or through a parent or affiliated 
company have had ongoing operations for fewer than three years. For 
purposes of this restriction, issuers include predecessors, sponsors, 
controlling persons, general partners, guarantors and originators of 
underlying assets.

12. Making investments for the purpose of exercising control or 
management. 

13. Investing in warrants (other than warrants acquired by the Fund as 
part of a unit or attached to securities at the time of purchase) if, as a 
result, the investments (valued at the lower of cost or market) would 
exceed 5% of the value of the Funds net assets, of which not more than 2% 
of the Funds net assets may be invested in warrants not listed on a 
recognized domestic or foreign stock exchange to the extent permitted by 
applicable state securities laws. 

14. Engaging in the purchase or sale of put, call, straddle or spread 
options or in the writing of such options other than (a) purchasing and 
writing put and call options on securities and stock indexes, (b) entering 
into closing purchase transactions with respect to such options, (c) 
purchasing put and call options on gold, purchasing gold futures contracts 
and writing covered call options on gold, or (d) upon 60 days notice 
given to its shareholders, (i) writing put and other call options on gold 
or (ii) entering into other hedging transactions involving futures 
contracts and related options, including gold futures contracts. 

	Certain restrictions listed above permit the Fund without shareholder 
approval to engage in investment practices that the Fund does not currently 
pursue. The Fund has no present intention of altering its current investment 
practices as otherwise described in the Prospectus and this Statement of 
Additional Information and any future change in those practices would require 
Board approval and appropriate disclosure to investors. If any percentage 
limitation is complied with at the time of an investment, a later increase or 
decrease resulting from a change in values or assets will not constitute a 
violation of that limitation.  In order to permit the sale of the Funds 
shares in certain states, the Fund may make commitments more restrictive than 
the investment restrictions described above.  Should the Fund determine that 
any such commitment is no longer in the best interests of the Fund and its 
shareholders, it will revoke the commitment by terminating sales of its 
shares in the state involved. 

Portfolio Turnover

	While the Fund does not intend to trade in securities for short-term 
profits, securities may be sold without regard to the length of time they 
have been held by the Fund when warranted by the circumstances. The Fund 
cannot accurately predict its annual rate of portfolio turnover (that is, the 
lesser of purchases or sales of portfolio securities for the year divided by 
the monthly average value of portfolio securities for the year); however, it 
is anticipated that the annual turnover rate generally will not exceed 100%. 
Under certain market conditions, the Fund may experience increased portfolio 
turnover as a result of its options activities. For instance, the exercise of 
a substantial number of options on stock indexes written by the Fund (due to 
appreciation of the underlying index in the case of call options or 
depreciation of the underlying index in the case of put options) could result 
in a turnover rate in excess of 100%. A portfolio turnover rate of 100% would 
occur, for example, if all the securities in the Funds portfolio were 
replaced once during a period of one year. Securities with remaining 
maturities of one year or less on the date of acquisition are excluded from 
the calculation. The portfolio turnover rates for the 1995, 1996 and 1997 
fiscal years were 40%, 120% and 101%, respectively.

Portfolio Transactions

	Most of the purchases and sales of securities for the Fund, whether 
transacted on a securities exchange or over-the-counter, will be effected in 
the primary trading market for the securities. The primary trading market for 
a given security generally is located in the country in which the issuer has 
its principal office. Decisions to buy and sell securities for the Fund are 
made by the Manager, which also is responsible for placing these 
transactions, subject to the overall review of the Board of Directors. 
Although investment decisions for the Fund are made independently from those 
of the other accounts managed by the Manager, investments of the type the 
Fund may make also may be made by those other accounts. When the Fund and one 
or more other accounts managed by the Manager are prepared to invest in, or 
desire to dispose of, the same security, available investments or 
opportunities for sales will be allocated in a manner believed by the Manager 
to be equitable to each. In some cases, this procedure may adversely affect 
the price paid or received by the Fund or the size of the position obtained 
or disposed of by the Fund. 

	Transactions on domestic stock exchanges and some foreign stock 
exchanges involve the payment of negotiated brokerage commissions. On 
exchanges on which commissions are negotiated, the cost of transactions may 
vary among different brokers. On many foreign exchanges, commissions 
generally are fixed. There is generally no stated commission in the case of 
securities traded on domestic or foreign over-the-counter markets, but the 
prices of those securities include undisclosed commissions or mark-ups. The 
cost of securities purchased from underwriters includes an underwriting 
commission or concession, and the prices at which securities are purchased 
from and sold to dealers include a dealers mark-up or mark-down. For the 
1995, 1996 and 1997 fiscal years, the Fund paid $246,842, $705,392, and 
$702,508, respectively, in brokerage commissions. 

	In selecting brokers or dealers to execute portfolio transactions on 
behalf of the Fund, the Manager seeks the best overall terms available. In 
assessing the best overall terms available for any transaction, the Manager 
will consider the factors it deems relevant, including the breadth of the 
market in the security, the price of the security, the financial condition 
and execution capability of the broker or dealer and the reasonableness of 
the commission, if any, for the specific transaction and on a continuing 
basis. In addition, the Investment Management Agreement authorizes the 
Manager in selecting brokers or dealers to execute a particular transaction 
and in evaluating the best overall terms available, to consider the brokerage 
and research services (as those terms are defined in Section 28(e) of the 
Securities Exchange Act of 1934) provided to the Fund and/or other accounts 
over which the Manager or its affiliates exercise investment discretion.

	The Funds Board of Directors periodically will review the commissions 
paid by the Fund to determine if the commissions paid over representative 
periods of time were reasonable in relation to the benefits inuring to the 
Fund. It is possible that certain of the services received will primarily 
benefit one or more accounts for which the Manager or its affiliates exercise 
investment discretion. Conversely, the Fund may be the primary beneficiary of 
services received as a result of portfolio transactions effected for other 
accounts. The fee under the Investment Management Agreement is not reduced by 
reason of the receipt by the Manager of such brokerage and research services. 

	The Funds Board of Directors has determined that any portfolio 
transactions for the Fund may be executed through Smith Barney or an 
affiliate of Smith Barney if, in the judgment of the Manager, the use of 
Smith Barney is likely to result in price and execution at least as favorable 
as those of other qualified brokers, and if, in the transaction, Smith Barney 
charges the Fund a commission rate consistent with those charged by Smith 
Barney to comparable unaffiliated customers in similar transactions. 
Similarly, the Fund may execute portfolio transactions in gold futures 
through an affiliated broker if comparable conditions are satisfied, 
including that the Fund is charged commissions consistent with those charged 
for comparable transactions in comparable accounts of the brokers most 
favored unaffiliated clients. In addition, under rules adopted by the SEC, 
Smith Barney may directly execute such transactions for the Fund on the floor 
of any national securities exchange, provided (a) the Board of Directors has 
expressly authorized Smith Barney to effect such transactions and (b) Smith 
Barney annually advises the Fund of the aggregate compensation it earned on 
such transactions. Smith Barney will not participate in commissions from 
brokerage given by the Fund to other brokers or dealers and will not receive 
any reciprocal brokerage business resulting therefrom. Over-the-counter 
purchases and sales are transacted directly with principal market makers 
except in those cases in which better prices and executions may be obtained 
elsewhere.  For the 1995 and 1996 fiscal years, the Fund paid no brokerage 
commissions to Smith Barney.  For the 1997 fiscal year the Fund paid $9,000 
in brokerage commissions to Smith Barney.

	The Fund will not purchase any security, including U.S. government 
securities, during the existence of any underwriting or selling group 
relating thereto of which Smith Barney is a member, except to the extent 
permitted by regulations adopted by the SEC. 


PURCHASE OF SHARES

Volume Discounts

	The schedule of sales charges on Class A shares described in the 
Prospectus applies to purchases made by any purchaser, which is defined to 
include the following: (a) an individual; (b) an individuals spouse and his 
or her children purchasing shares for his or her own account; (c) a Director 
or other fiduciary purchasing shares for a single trust estate or single 
fiduciary account; (d) a pension, profit-sharing or other employee benefit 
plan qualified under Section 401(a) of the Code and qualified employee 
benefit plans of employers who are affiliated persons of each other within 
the meaning of the 1940 Act; (e) tax-exempt organizations enumerated in 
Sections 501(c)(3) or (13) of the Code; and (f) a Director or other 
professional fiduciary (including a bank, or an investment adviser registered 
with the SEC under the Investment Advisers Act of 1940, as amended), 
purchasing shares of the Fund for one or more trust, estates or fiduciary 
accounts. Purchasers who wish to combine purchase orders to take advantage of 
volume discounts should contact a Smith Barney Financial Consultant. 

Combined Right of Accumulation

	Reduced sales charges, in accordance with the schedule in the 
Prospectus, apply to any purchase of Class A shares if the aggregate 
investment in Class A shares of the Fund and in Class A shares of other Smith 
Barney Mutual Funds that are offered with a sales charge, including the 
purchase being made, of any purchaser, is $25,000 or more. The reduced sales 
charge is subject to confirmation of the shareholders holdings through a 
check of appropriate records. The Fund reserves the right to terminate or 
amend the combined right of accumulation at any time after written notice to 
shareholders. For further information regarding the combined right of 
accumulation, shareholders should contact a Smith Barney Financial 
Consultant. 

Determination of Public Offering Price

	The Fund offers its shares to the public on a continuous basis. The 
public offering price for a Class A and Class Y share of the Fund is equal to 
the net asset value per share at the time of purchase plus for Class A shares 
an initial sales charge based on the aggregate amount of the investment. The 
public offering price for a Class B or Class C share (or Class A share 
purchases, including applicable right of accumulation, equaling or exceeding 
$500,000), is equal to the net asset value per share at the time of purchase 
and no sales charge is imposed at the time of purchase. A contingent deferred 
sales charge (CDSC), however, is imposed on certain redemptions of Class B 
shares and Class C shares, and of Class A shares when purchased in amounts 
equaling or exceeding $500,000. The method of computation of the public 
offering price is shown in the Funds financial statements incorporated by 
reference in their entirety into this SAI. 

REDEMPTION OF SHARES

	The right of redemption may be suspended or the date of payment 
postponed: (a) for any period during which the New York Stock Exchange, Inc. 
(the NYSE) is closed (other than for customary weekend and holiday 
closings); (b) when trading in the markets the Fund normally utilizes is 
restricted, or an emergency exists, as determined by the SEC, so that 
disposal of the Funds investments or determination of net asset value is not 
reasonably practicable; or (c) for such other periods as the SEC by order may 
permit for protection of the Funds shareholders. 

Distributions in Kind

	If the Board of Directors of the Fund determines that it would be 
detrimental to the best interests of the remaining shareholders of the Fund 
to make a redemption payment wholly in cash, the Fund may pay, in accordance 
with SEC rules, any portion of a redemption in excess of the lesser of 
$250,000 or 1% of the Funds net assets by distribution in kind of portfolio 
securities in lieu of cash. Securities issued as a distribution in kind may 
incur brokerage commissions when shareholders subsequently sell those 
securities. 

Automatic Cash Withdrawal Plan

	An automatic cash withdrawal plan (the Withdrawal Plan) is available 
to shareholders who own shares with a value of at least $10,000 ($5,000 for 
retirement plan accounts) and who wish to receive specific amounts of cash 
monthly or quarterly. Withdrawals of at least $50 monthly may be made under 
the Withdrawal Plan by redeeming as many shares of the Fund as may be 
necessary to cover the stipulated withdrawal payment. Any applicable CDSC 
will not be waived on amounts withdrawn by shareholders that exceed 1.00% per 
month of the value of a shareholders shares at the time the Withdrawal Plan 
commences. (With respect to Withdrawal Plans in effect prior to November 7, 
1994, any applicable CDSC will be waived on amounts withdrawn that do not 
exceed 2.00% per month of the value of a shareholders shares at the time the 
Withdrawal Plan commences.) To the extent that withdrawals exceed dividends, 
distributions and appreciation of a shareholders investment in the Fund, 
there will be a reduction in the value of the shareholders investment and 
continued withdrawal payments will reduce the shareholders investment and 
may ultimately exhaust it. Withdrawal payments should not be considered 
income from an investment in the Fund. Furthermore, as it generally would not 
be advantageous to a shareholder to make additional investments in the Fund 
at the same time that he or she is participating in the Withdrawal Plan, 
purchases by such shareholders in amounts of less than $5,000 ordinarily will 
not be permitted. 

	Shareholders who wish to participate in the Withdrawal Plan and who 
hold their shares in certificate form must deposit their share certificates 
with First Data as agent for Withdrawal Plan members. All dividends and 
distributions on shares in the Withdrawal Plan are reinvested automatically 
at net asset value in additional shares of the Fund. Withdrawal Plans should 
be set up with a Smith Barney Financial Consultant. A shareholder who 
purchases shares directly through First Data may continue to do so. 
Applications for participation in the Withdrawal Plan must be received by 
First Data no later than the eighth day of the month to be eligible for 
participation beginning with that months withdrawal. For additional 
information, shareholders should contact a Smith Barney Financial Consultant. 

DISTRIBUTOR

	Smith Barney serves as the Funds distributor on a best efforts basis 
pursuant to a distribution agreement (the Distribution Agreement) which 
was approved by the Funds Board of Directors, including a majority of the 
Independent Directors. For the 1995, 1996 and 1997 fiscal years, Smith 
Barney, received $76,401, $500,000 and $115,000, respectively, in sales 
charges from the sale of Class A shares, and did not reallow any portion 
thereof to dealers. For the fiscal years ended October 31, 1995, 1996 and 
1997, Smith Barney or its predecessor received from shareholders $136,462, 
$119,000 and $201,000, respectively, in CDSC on the redemption of Class B and 
Class C shares.

	When payment is made by the investor before the settlement date, unless 
otherwise noted by the investor, the funds will be held as a free credit 
balance in the investors brokerage account and Smith Barney may benefit from 
the temporary use of the funds. The investor may designate another use for 
the funds prior to settlement date, such as an investment in a money market 
fund of the Smith Barney Mutual Funds (other than Smith Barney Exchange 
Reserve Fund). If the investor instructs Smith Barney to invest the funds in 
a Smith Barney money market fund, the amount of the investment will be 
included as part of the average daily net assets of both the Fund and the 
Smith Barney money market fund, and affiliates of Smith Barney that serve the 
funds in an investment advisory capacity or administrative capacity will 
benefit from the fact that they are receiving fees from both such investment 
companies for managing these assets computed on the basis of their average 
daily net assets. The Funds Board of Directors has been advised of the 
benefits to Smith Barney resulting from these settlement procedures and will 
take such benefits into consideration when reviewing the Investment 
Management and Distribution Agreements for continuance.

	For the fiscal year ended October 31, 1997, Smith Barney incurred 
distribution expenses totaling approximately $2,412,949 consisting of 
approximately $101,442 for advertising, $6,548 for printing and mailing of 
prospectuses, $167,102 for support services, $1,980,781 to Smith Barney 
Financial Consultants, and $157,076 in accruals for interest on the excess of 
Smith Barney expenses incurred in distributing the Funds shares over the sum 
of the distribution fees and CDSC received by Smith Barney from the Fund. 

Distribution Arrangements

	To compensate Smith Barney for the service it provides and for the 
expense it bears under the Distribution Agreement, the Fund has adopted a 
services and distribution plan (the Plan) pursuant to Rule 12b-1 under the 
1940 Act. Under the Plan, the Fund pays Smith Barney a service fee, accrued 
daily and paid monthly, calculated at the annual rate of 0.25% of the value 
of the Funds average daily net assets attributable to the Class A, Class B 
and Class C shares. In addition, the Fund pays Smith Barney a distribution 
fee with respect to Class B and Class C shares primarily intended to 
compensate Smith Barney for its initial expense of paying Financial 
Consultants a commission upon sales of those shares. The Class B and Class C 
distribution fee is calculated at the annual rate of 0.75% of the value of 
the Funds average net assets attributable to the shares of the respective 
Class.

	For the fiscal year ended October 31, 1996, the Fund incurred $111,199, 
$127,817 and $10,685 in service fees for Class A, Class B and Class C shares, 
respectively.  For the fiscal year ended October 31, 1997, the Fund incurred 
$131,379, $187,521 and $18,980 in service fees for Class A, Class B and Class 
C shares, respectively.  In addition, Class B and Class C shares pay a 
distribution fee primarily intended to compensate Smith Barney for its 
initial expense of paying its Financial Consultants a commission upon the 
sale of its Class B and Class C shares.  These distribution fees are 
calculated at the annual rate of 0.75% of the value of the average daily net 
assets attributable to the respective Class. For the fiscal years ended 
October 31, 1996 and 1997, the Fund incurred $383,451 and $562,561 for Class 
B shares, respectively, in distribution fees.  For the fiscal years ended 
October 31, 1996 and October 31, 1997, the Fund incurred $32,054 and $56,941, 
respectively, for Class C shares in distribution fees.

	Under its terms, the Plan continues from year to year, provided such 
continuance is approved annually by vote of the Board of Directors, including 
a majority of the Independent Directors. The Plan may not be amended to 
increase the amount of the service and distribution fees without shareholder 
approval, and all material amendments of the Plan also must be approved by 
the Directors and Independent Directors in the manner described above. The 
Plan may be terminated with respect to a Class of the Fund at any time, 
without penalty, by vote of a majority of the Independent Directors or by a 
vote of a majority of the outstanding voting securities of the Class (as 
defined in the 1940 Act). Pursuant to the Plan, Smith Barney will provide the 
Funds Board of Directors with periodic reports of amounts expended under the 
Plan and the purpose for which such expenditures were made.

VALUATION OF SHARES

	Each Class net asset value per share is calculated on each day, Monday 
through Friday, except on days on which the NYSE is closed. The NYSE 
currently is scheduled to be closed on New Years Day, Martin Luther King, 
Jr. Day, Presidents Day, Good Friday, Memorial Day, Independence Day, Labor 
Day, Thanksgiving and Christmas, and on the preceding Friday or subsequent 
Monday when one of these holidays falls on a Saturday or Sunday, 
respectively. Because of the differences in distribution fees and Class-
specific expenses, the per share net asset value of each Class may differ. 
The following is a description of the procedures used by the Fund in valuing 
its assets.

	Securities listed on a national securities exchange will be valued on 
the basis of the last sale on the date on which the valuation is made or, in 
the absence of sales, at the mean between the closing bid and asked prices.  
U.S. government securities will be valued at the mean between the closing bid 
and asked prices on each day, or, if market quotations for those securities 
are not readily available, at fair value, as determined in good faith by the 
Funds Board of Directors.  Over-the-counter securities will be valued on the 
basis of the bid price at the close of business on each day, or, if market 
quotations for those securities are not readily available, at fair value, as 
determined in good faith by the Funds Board of Directors. Short-term 
obligations with maturities of 60 days or less are valued at amortized cost, 
which constitutes fair value as determined by the Funds Board of Directors. 
Amortized cost involves valuing an instrument at its original cost to the 
Fund and thereafter assuming a constant amortization to maturity of any 
discount or premium, regardless of the effect of fluctuating interest rates 
on the market value of the instrument. All other securities and other assets 
of the Fund will be valued at fair value as determined in good faith by the 
Funds Board of Directors. 

EXCHANGE PRIVILEGE

	Except as noted below, shareholders of any of the Smith Barney Mutual 
Funds may exchange all or part of their shares for shares of the same class 
of other Smith Barney Mutual Funds, to the extent such shares are offered for 
sale in the shareholders state of residence, on the basis of relative net 
asset value per share at the time of exchange as follows: 

A. Class A shares of any Smith Barney Mutual Fund may be exchanged 
without a sales charge for Class A shares of any of the other Smith 
Barney Mutual Funds.

B. Class B shares of any Smith Barney Mutual Fund may be exchanged 
without a sales charge for Class B shares of any of the other Smith 
Barney Mutual Funds.  Class B shares of the Fund exchanged for Class B 
shares of another Smith Barney Mutual Fund will be subject to the 
higher applicable CDSC of the two funds and, for purposes of 
calculating CDSC rates and conversion periods, will be deemed to have 
been held since the date the shares being exchanged were deemed to be 
purchased.

C. Class C shares of any Smith Barney Mutual Fund may be exchanged 
without a sales charge for Class C shares of any of the other Smith 
Barney Mutual Funds. Class C shares of the Fund exchanged for Class C 
shares of another Smith Barney Mutual Fund will be deemed to have been 
held since the date the shares being exchanged were deemed to be 
purchased. 

	Dealers other than Smith Barney must notify First Data of an investors 
prior ownership of Class A shares of Smith Barney High Income Fund and the 
account number in order to accomplish an exchange of shares of the Smith 
Barney High Income Fund under paragraph B above. 

	The exchange privilege enables shareholders to acquire shares of the 
same Class in a fund with different investment objectives when they believe 
that a shift between funds is an appropriate investment decision. This 
privilege is available to shareholders residing in any state in which the 
fund shares being acquired may legally be sold. Prior to any exchange, the 
shareholder should obtain and review a copy of the current prospectus of each 
fund into which an exchange is to be made. Prospectuses may be obtained from 
a Smith Barney Financial Consultant.

 	Upon receipt of proper instructions and all necessary supporting 
documents, shares submitted for exchange are redeemed at the then-current net 
asset value and, subject to any applicable CDSC, the proceeds immediately 
invested, at a price described above, in shares of the fund being acquired. 
Smith Barney reserves the right to reject any exchange request. The exchange 
privilege may be modified or terminated at any time after written notice to 
shareholders. 

PERFORMANCE DATA

	From time to time, the Fund may quote total return of a Class in 
advertisements or in reports and other communications to shareholders. The 
Fund may include comparative performance information in advertising or 
marketing the Funds shares. Such performance information may include data 
from the following industry and financial publications: Barrons, Business 
Week, CDA Investment Technologies, Inc., Changing Times, Forbes, Fortune, 
Institutional Investor, Investors Daily, Money, Morningstar Mutual Fund 
Values, The New York Times, USA Today and The Wall Street Journal.

Average Annual Total Return

	Average annual total return figures, as described below, are 
computed according to a formula prescribed by the SEC. The formula can be 
expressed as follows:

		P (1+T)n = ERV

		Where:	P	=	a hypothetical initial payment of $1,000.
			T	=	average annual total return.
			n 	=	number of years.
			ERV 	=	Ending Redeemable Value of a hypothetical $1,000 
investment made at the beginning of the 1-, 5- or 
10-year period at the end of the 1-, 5- or 10-year 
period (or fractional portion thereof), assuming 
reinvestment of all dividends and distributions.

	Class As average annual total return was as follows for the periods 
indicated: 

(2.47)% for the one-year period from November 1, 1996 through October 31, 
1997. 

11.02% per annum during the five-year period from November 1, 1992 through 
October 31, 1997.

4.26% per annum for the period from commencement of operations (November 
24, 1986) through October 31, 1997.

	Class Bs average annual total return was as follows for the periods 
indicated: 

(3.05)% for the one-year from November 1, 1996 through October 31, 1997; 
and

11.16% per annum for the period from commencement of operations (November 
6, 1992) through October 31, 1997.

	Class Cs average annual total return was as follows for the periods 
indicated: 

1.04% for the one year period from November 1, 1996 through October 31, 
1997.

3.37% per annum for the period from commencement of operations (November 
7, 1994) through October 31, 1997.

	Average annual total return figures calculated in accordance with the 
above formula assume that the maximum 5.00% sales charge or maximum 
applicable CDSC, as the case may be, has been deducted from the hypothetical 
investment. If the maximum 5.00% sales charge had not been deducted at the 
time of purchase, Class As average annual total return for the same periods 
would have been 2.67%, 12.17% and 4.75%, respectively.  If the maximum CDSC 
had not been deducted at the time of purchase, Class Bs average annual total 
return for the same periods would have been 1.95% and 11.29%, respectively.  
If the maximum CDSC had not been deducted at the time of purchase, Class Cs 
average annual total return for the same periods would have been 2.04% and 
3.37%, respectively.


Aggregate Total Return

	Aggregate total return figures represent the cumulative change in the 
value of an investment in the Fund for the specified period and are computed 
by the following formula: 

ERV-P
P

		Where:   P	=	a hypothetical initial payment of $10,000. 
			ERV 	=	Ending Redeemable Value of a hypothetical $10,000 
investment made at the beginning of the 1-, 5- or 
10-year period at the end of the 1-, 5- or 10- year 
period (or fractional portion thereof), assuming 
reinvestment of all dividends and distributions. 

	Class As aggregate total return was as follows for the periods 
indicated: 

2.67% for the one-year period from November 1, 1995 through October 31, 
1997. 

77.56% for the five-year period from November 1, 1991 through October 31, 
1997.

35.88% for the period from commencement of operations (November 24, 1986) 
through
October 31, 1997. 

	Class Bs aggregate total return was as follows for the periods 
indicated: 

1.95% for the one-year period from November 1, 1996 through October 31, 
1997.

70.46% per annum from commencement of operations (November 6, 1992) 
through 
October 31, 1997.

	Class Cs aggregate total return was as follows for the period 
indicated:

2.04% for the one-year period from November 1, 1996 through October 31, 
1997

10.40% for the period from commencement of operations (November 7, 1994) 
through 
October 31, 1997.

	Class A aggregate total return figures assume that the maximum 5.00% 
sales charge has not been deducted from the investment at the time of 
purchase. If the maximum 5.00% sales charge had been deducted at the time of 
purchase, Class As aggregate total return for the same periods would have 
been (2.47%), 68.67% and 29.07%, respectively.

	Class B aggregate total return figures assume that the maximum 
applicable CDSC has not been deducted from the investment at the time of 
purchase. If the maximum 5.00% CDSC had been deducted at the time of 
purchase, Class Bs aggregate total return for the same periods would have 
been (3.05%) and 69.46%, respectively.

	Class C aggregate total return figures assume that the maximum 
applicable CDSC has not been deducted from the investment at the time of 
purchase. If the maximum 1% CDSC had been deducted at the time of purchase, 
Class Cs aggregate total return for the same periods would have been 1.04% 
and 10.40%, respectively.

	Performance will vary from time to time depending upon market 
conditions, the composition of the Funds portfolio and operating expenses 
and the expenses exclusively attributable to the Class. Consequently, any 
given performance quotation should not be considered representative of the 
Class performance for any specified period in the future. Because 
performance will vary, it may not provide a basis for comparing an investment 
in the Class with certain bank deposits or other investments that pay a fixed 
yield for a stated period of time. Investors comparing the Class performance 
with that of other mutual funds should give consideration to the quality and 
maturity of the portfolio securities. 

	It is important to note that the total return figures set forth above 
are based on historical earnings and are not intended to indicate future 
performance. 

TAXES

Tax Status of the Fund

	The following is a summary of selected Federal income tax 
considerations that may affect the Fund and its shareholders. The summary is 
not intended as a substitute for individual tax advice and investors are 
urged to consult their own tax advisors as to the tax consequences of an 
investment in the Fund.

	The Fund has qualified and intends to continue to qualify each year as 
a regulated investment company under the Code. Provided that the Fund (a) is 
a regulated investment company and (b) distributes at least 90% of its net 
investment income (including for this purpose, net realized short-term 
capital gains), the Fund will not be liable for Federal income taxes to the 
extent its net investment income and its net realized long- and short-term 
capital gains, if any, are distributed to its shareholders. One of several 
requirements for qualification is that the Fund receives at least 90% of its 
gross income each year from dividends, interest, payments with respect to 
securities loans, gains from the sale or other disposition of securities or 
foreign currencies, or other income derived with respect to the Funds 
investments in stock, securities and foreign currencies. Income from 
investments in gold bullion and gold coins will not qualify as gross income 
from securities for purposes of the 90% test. Therefore, the Fund intends 
to restrict its investment in gold bullion and gold coins to the extent 
necessary to meet the 90% test. 

Taxation of the Funds Investments

	Gain or loss on the sale of securities by the Fund generally will be 
long-term capital gain or loss if the Fund has held the securities for more 
than one year. Gain or loss on sales of securities held for not more than one 
year will be short-term. If the Fund acquires a debt security at a 
substantial discount, a portion of any gain upon the sale or redemption will 
be taxed as ordinary income, rather than capital gain, to the extent that it 
reflects accrued market discount. 

	Option Transactions. The tax consequences of options transactions 
entered into by the Fund will vary depending on the nature of the underlying 
security and whether the straddle rules, discussed separately below, apply 
to the transaction. 

	If the Fund purchases a put option on an equity security, convertible 
debt security or gold or purchases a call option on gold and such a put or 
call option expires unexercised, the Fund will realize a capital loss equal 
to the cost of the option. If the Fund enters into a closing sale transaction 
with respect to the option, it will realize a capital gain or loss (depending 
on whether the proceeds from the closing transaction are greater or less than 
the cost of the option). The gain or loss will be short-term or long-term 
depending on the Funds holding period for the option. If the Fund exercises 
such a put option, it will realize a short-term capital gain or loss (long-
term if the Fund holds the underlying security for more than one year before 
it purchases the put) from the sale of the underlying security measured by 
the sales proceeds decreased by the premium paid and the Funds tax basis in 
the underlying securities. No gain or loss will be recognized by the Fund if 
it exercises a call option. 

	The Fund may write a covered call option on gold. If the option expires 
unexercised, or if the Fund enters into a closing purchase transaction, the 
Fund will realize a gain or loss without regard to any unrealized gain or 
loss on the underlying gold. Generally, any such gain or loss will be short-
term capital gain or loss. If a call option written by the Fund is exercised, 
the Fund will treat the premium received for writing such call option as 
additional sales proceeds and will recognize a capital gain or loss from the 
sale of the underlying gold. Whether the gain or loss will be long-term or 
short-term will depend on the Funds holding period for the underlying gold. 

	The Code imposes a special mark-to-market system for taxing 
section 1256 contracts including certain options on nonconvertible debt 
securities (including U.S. government securities), options on certain stock 
indexes, gold futures contracts and certain foreign currency contracts. In 
general, gain or loss on section 1256 contracts will be taken into account 
for tax purposes when actually realized (by a closing transaction, by 
exercise, by taking delivery or by other termination). In addition, any 
section 1256 contracts held at the end of a taxable year will be treated as 
sold at their year-end fair market value (that is, marked to the market), and 
the resulting gain or loss will be recognized for tax purposes. Provided that 
section 1256 contracts are held as capital assets and are not part of a 
straddle, both the realized and unrealized year-end gain or loss from these 
investment positions (including premiums on options that expire unexercised) 
will be treated as 60% long-term and 40% short-term capital gain or loss, 
regardless of the period of time particular positions are actually held by 
the Fund.  The long-term portion of such gain or loss will be treated as a 
gain or loss from an asset held for more than eighteen months.

	Straddles. While the mark-to-market system is limited to section 1256 
contracts, the Code contains other rules applicable to transactions which 
create positions which offset positions in section 1256 or other investment 
contracts (straddles). Straddles are defined to include offsetting 
positions in actively traded personal property. In general, investment 
positions may be offsetting if there is a substantial diminution in the 
risk of loss from holding one position by reason of holding one or more other 
positions. Under current law, it is not clear under what circumstances one 
investment made by the Fund, such as an option contract, would be treated as 
offsetting another investment also held by the Fund, and, therefore, whether 
the Fund would be treated as having entered into a straddle. Also, the 
forward currency contracts entered into by the Fund may result in the 
creation of straddles for Federal income tax purposes. 

	If two (or more) positions constitute a straddle, a realized loss from 
one position (including a mark-to-market loss) must be deferred to the extent 
of unrecognized gain in an offsetting position. Also, the holding period 
rules described above may be modified to recharacterize long-term gain as 
short-term gain, or to recharacterize short-term loss as long-term loss, in 
connection with certain straddle transactions. Furthermore, interest and 
other carrying charges allocable to personal property that is part of a 
straddle must be capitalized. In addition, wash sale rules apply to 
straddle transactions to prevent the recognition of loss from the sale of a 
position at a loss where a new offsetting position is or has been acquired 
within a prescribed period. To the extent that the straddle rules apply to 
positions established by the Fund, losses realized by the Fund may be either 
deferred or recharacterized as long-term losses, and long-term gains realized 
by the Fund may be converted into short-term gains.

	If the Fund chooses to identify particular offsetting positions as 
being components of a straddle, a realized loss will be recognized, but only 
upon the liquidation of all of the components of the identified straddle. 
Special rules apply to the treatment of mixed straddles (that is, 
straddles consisting of a section 1256 contract and an offsetting position 
that is not a section 1256 contract). If the Fund makes certain elections, 
the section 1256 contract components of such straddles will not be subject to 
the 60/40% mark-to-market rules. If any such election is made, the amount, 
the nature (as long or short-term) and the timing of the recognition of the 
Funds gains or losses from the affected straddle positions will be 
determined under rules that will vary according to the type of election made. 

Taxation of Shareholders

	The portion of the dividends received from the Fund which qualifies for 
the dividends-received deduction for corporations will be reduced to the 
extent that the Fund holds dividend-paying stock for less than 46 days (91 
days for certain preferred stocks). The Funds holding period will not 
include any period during which the Fund has reduced its risk of loss from 
holding the stock by purchasing an option to sell or entering into a short 
sale of substantially identical stock or securities, such as securities 
convertible into the stock. The holding period for stock may also be reduced 
if the Fund diminishes its risk of loss by holding one or more positions in 
substantially similar or related properties. Dividends-received deductions 
will be allowed only with respect to shares a corporate shareholder has held 
for at least 46 days within the meaning of the same holding period rules 
applicable to the Fund. 

	If the Fund is the holder of record of any stock on the record date for 
any dividends payable with respect to such stock, such dividends must be 
included in the Funds gross income as of the later of (a) the date that such 
stock became ex-dividend with respect to such dividends (i.e., the date on 
which a buyer of the stock would not be entitled to receive the declared, but 
unpaid, dividends) or (b) the date that the Fund acquired such stock. 
Accordingly, in order to satisfy its income distribution requirements, the 
Fund may be required to pay dividends based on anticipated earnings, and 
shareholders may receive dividends in an earlier year than would otherwise be 
the case. 

	If a shareholder (a) incurs a sales charge in acquiring shares of the 
Fund, (b) disposes of those shares within 90 days and (c) acquires shares in 
a mutual fund for which the otherwise applicable sales charge is reduced by 
reason of a reinvestment right (i.e., an exchange privilege), the original 
sales charge increases the shareholders tax basis in the original shares 
only to the extent that the otherwise applicable sales charge for the second 
acquisition is not reduced. The portion of the original sales charge that 
does not increase the shareholders tax basis in the original shares would be 
treated as incurred with respect to the second acquisition and, as a general 
rule, would increase the shareholders tax basis in the newly acquired 
shares. Furthermore, the same rule would apply to a disposition of the newly 
acquired or redeemed shares made within 90 days of the second acquisition. 
This provision prevents a shareholder from immediately deducting the sales 
charge by shifting his or her investment in a family of mutual funds. 

	Investors considering buying shares of the Fund on or just prior to a 
record date for a taxable-dividend or capital gain distribution should be 
aware that, regardless of whether the price of the Fund shares to be 
purchased reflects the amount of the forthcoming dividend or distribution 
payment, any such payment will be a taxable dividend or distribution payment. 

	Capital Gains Distributions. As a general rule, a shareholder who 
redeems or exchanges his or her shares will recognize long-term capital gain 
or loss if the shares have been held for more than one year, and will 
recognize short-term capital gain or loss if the shares have been held for 
one year or less. However, if a shareholder receives a distribution taxable 
as long-term capital gain with respect to shares of the Fund, and redeems or 
exchanges the shares before he or she has held them for more than six months, 
any loss on the redemption or exchange that is less than or equal to the 
amount of the distribution will be treated as a long-term capital loss. 

	Backup Withholding. If a shareholder fails to furnish a correct 
taxpayer identification number, fails to fully report dividend or interest 
income or fails to certify that he or she has provided a correct taxpayer 
identification number and that he or she is not subject to such withholding, 
then the shareholder may be subject to a 31% backup withholding tax with 
respect to (a) taxable dividends and distributions and (b) any proceeds of 
any redemption of Fund shares. An individuals taxpayer identification number 
is his or her social security number. The backup withholding tax is not an 
additional tax and may be credited against a shareholders Federal income tax 
liability. 

	The foregoing is only a summary of certain tax considerations generally 
affecting the Fund and its shareholders, and is not intended as a substitute 
for careful tax planning.  Shareholders are urged to consult their tax 
advisors with specific reference to their own tax situations, including their 
state and local tax liabilities. 

ADDITIONAL INFORMATION

	The Fund was incorporated under the laws of the State of Maryland on 
July 16, 1986 under the name Shearson Lehman Precious Metals and Minerals 
Fund Inc. On November 17, 1989, March 31, 1992, July 30, 1993, October 14, 
1994 and December 19, 1995, the Fund changed its name to SLH Precious Metals 
and Minerals Fund Inc., Shearson Lehman Brothers Precious Metals and Minerals 
Fund Inc., Smith Barney Shearson Precious Metals and Minerals Fund Inc., 
Smith Barney Precious Metals and Minerals Fund Inc. and Smith Barney Natural 
Resources Fund Inc., respectively.

	Chase, located at 4 Chase MetroTech Center, Brooklyn, New York  11245, 
serves as the Funds custodian. Under its agreement with the Fund, Chase 
holds the Funds portfolio securities and keeps all necessary accounts and 
records. For its services, Chase receives a monthly fee based upon the month-
end market value of securities held in custody and also receives securities 
transaction charges. The assets of the Fund are held under bank custodianship 
in compliance with the 1940 Act. Chase is authorized to establish separate 
accounts in foreign securities owned by the Fund to be held with foreign 
branches of other domestic banks as well as with certain foreign banks and 
securities depositories.

	First Data, located at Exchange Place, Boston, Massachusetts 02109, 
serves as the Funds transfer agent. Under the transfer agency agreement, 
First Data maintains the shareholder account records for the Fund, handles 
certain communications between shareholders and the Fund, and distributes 
dividends and distributions payable by the Fund. For these services, First 
Data receives a monthly fee computed on the basis of the number of 
shareholder accounts it maintains for the Fund during the month and is 
reimbursed for out-of-pocket expenses. 

FINANCIAL STATEMENTS

	The Funds Annual Report for the fiscal year ended October 31, 1997 is 
incorporated herein by reference in its entirety.


APPENDIX

Description of Standard & Poors Corporation (S&P) and Moodys Investors 
Service, Inc. (Moodys) ratings:

S&P Ratings for Municipal Bonds

S&Ps Municipal Bond ratings cover obligations of states and political 
subdivisions. Ratings are assigned to general obligation and revenue bonds. 
General obligation bonds are usually secured by all resources available to 
the municipality and the factors outlined in the rating definitions below are 
weighed in determining the rating. Because revenue bonds in general are 
payable from specifically pledged revenues, the essential element in the 
security for a revenue bond is the quantity and quality of the pledged 
revenues available to pay debt service.

Although an appraisal of most of the same factors that bear on the quality of 
general obligation bond credit is usually appropriate in the rating analysis 
of a revenue bond, other factors are important, including particularly the 
competitive position of the municipal enterprise under review and the basic 
security covenants. Although a rating reflects S&Ps judgment as to the 
issuers capacity for the timely payment of debt service, in certain 
instances it may also reflect a mechanism or procedure for an assured and 
prompt cure of a default, should one occur, i.e., an insurance program, 
Federal or state guarantee or the automatic withholding and use of state aid 
to pay the defaulted debt service.

AAA

Prime -- These are obligations of the highest quality. They have the 
strongest capacity for timely payment of debt service.

General Obligation Bonds -- In a period of economic stress, the issuers will 
suffer the smallest declines in income and will be least susceptible to 
autonomous decline. Debt burden is moderate. A strong revenue structure 
appears more than adequate to meet future expenditure requirements. Quality 
of management appears superior.

Revenue Bonds -- Debt service coverage has been, and is expected to remain, 
substantial. Stability of the pledged revenues is also exceptionally strong, 
due to the competitive position of the municipal enterprise or to the nature 
of the revenues. Basic security provisions (including rate covenant, earnings 
test for issuance of additional bonds, and debt service reserve requirements) 
are rigorous. There is evidence of superior management.

AA

High Grade -- The investment characteristics of general obligation and 
revenue bonds in this group are only slightly less marked than those of the 
prime quality issues. Bonds rated AA have the second strongest capacity for 
payment of debt service.

A

Good Grade -- Principal and interest payments on bonds in this category are 
regarded as safe. This rating describes the third strongest capacity for 
payment of debt service. It differs from the two higher ratings because:

General Obligation Bonds -- There is some weakness, either in the local 
economic base, in debt burden, in the balance between revenues and 
expenditures, or in quality of management. Under certain adverse 
circumstances, any one such weakness might impair the ability of the issuer 
to meet debt obligations at some future date.

Revenue Bonds -- Debt service coverage is good, but not exceptional. 
Stability of the pledged revenues could show some variations because of 
increased competition or economic influences on revenues. Basic security 
provisions, while satisfactory, are less stringent. Management performance 
appears adequate.

BBB

Medium Grade -- Of the investment grade ratings, this is the lowest.

General Obligation Bonds -- Under certain adverse conditions, several of the 
above factors could contribute to a lesser capacity for payment of debt 
service. The difference between A and BBB ratings is that the latter 
shows more than one fundamental weakness, or one very substantial fundamental 
weakness, whereas the former shows only one deficiency among the factors 
considered.

Revenue Bonds -- Debt coverage is only fair. Stability of the pledged 
revenues could show substantial variations, with the revenue flow possibly 
being subject to erosion over time. Basic security provisions are no more 
than adequate. Management performance could be stronger.

BB, B, CCC and CC

Bonds rated BB, B, CCC and CC are regarded, on balance, as predominately 
speculative with respect to capacity to pay interest and repay principal in 
accordance with the terms of the obligation. BB indicates the lowest degree 
of speculation and CC the highest degree of speculation. While such bonds 
will likely have some quality and protective characteristics, these are 
outweighed by large uncertainties or major risk exposures to adverse 
conditions.

C

The rating C is reserved for income bonds on which no interest is being paid.

D

Bonds rated D are in default, and payment of interest and/or repayment of 
principal is in arrears.

S&Ps letter ratings may be modified by the addition of a plus or a minus 
sign, which is used to show relative standing within the major rating 
categories, except in the AAA-Prime Grade category.

S&P Ratings for Municipal Notes

Municipal notes with maturities of three years or less are usually given note 
ratings (designated SP-1, -2 or -3) by S&P to distinguish more clearly the 
credit quality of notes as compared to bonds. Notes rated SP-1 have a very 
strong or strong capacity to pay principal and interest. Those issues 
determined to possess overwhelming safety characteristics are given the 
designation of SP-1+. Notes rated SP-2 have a satisfactory capacity to pay 
principal and interest.

Moodys Ratings for Municipal Bonds

Aaa

Bonds that are Aaa are judged to be of the best quality. They carry the 
smallest degree of investment risk and are generally referred to as gilt 
edge. Interest payments are protected by a large or by an exceptionally 
stable margin and principal is secure. While the various protective 

elements are likely to change, such changes as can be visualized are most 
unlikely to impair the fundamentally strong position of such issues.

Aa

Bonds that are rated Aa are judged to be of high quality by all standards. 
Together with the Aaa group they comprise what are generally known as high-
grade bonds. They are rated lower than the best bonds because margins of 
protection may not be as large as in Aaa securities or fluctuation of 
protective elements may be of greater amplitude or there may be other 
elements present which make the long-term risks appear somewhat larger than 
in Aaa securities.


A

Bonds that are rated A possess many favorable investment attributes and are 
to be considered as upper medium-grade obligations. Factors giving security 
to principal and interest are considered adequate, but elements may be 
present which suggest a susceptibility to impairment sometime in the future.

Baa

Bonds that are rated Baa are considered as medium-grade obligations, i.e., 
they are neither highly protected nor poorly secured. Interest payments and 
principal security appear adequate for the present but certain protective 
elements may be lacking or may be characteristically unreliable over any 
great length of time. Such bonds lack outstanding investment characteristics 
and in fact have speculative characteristics as well.

Ba

Bonds that are rated Ba are judged to have speculative elements; their future 
cannot be considered as well assured. Often the protection of interest and 
principal payments may be very moderate and thereby not well safeguarded 
during both good and bad times over the future. Uncertainty of position 
characterizes bonds in this class.

B

Bonds that are rated B generally lack characteristics of the desirable 
investment. Assurance of interest and principal payments or of maintenance of 
other terms of the contract over any long period of time may be small.

Moodys applies the numerical modifiers 1, 2 and 3 in each generic rating 
classification from Aa through B. The modifier 1 indicates that the security 
ranks in the higher end of its generic rating category; the modifier 2 
indicates a mid-range ranking; and the modifier 3 indicates that the issue 
ranks in the lower end of its generic rating category.

Caa

Bonds that are rated Caa are of poor standing. These issues may be in default 
or present elements of danger may exist with respect to principal or 
interest.

Ca

Bonds that are rated Ca represent obligations that are speculative in a high 
degree. These issues are often in default or have other marked short comings.


C

Bonds that are rated C are the lowest rated class of bonds, and issues so 
rated can be regarded as having extremely poor prospects of ever attaining 
any real investment standing.

Moodys Ratings for Municipal Notes

Moodys ratings for state and municipal notes and other short-term loans are 
designated Moodys Investment Grade (MIG) and for variable rate demand 
obligations are designated Variable Moodys Investment Grade (VMIG). This 
distinction is in recognition of the differences between short-term credit 
risk and long-term credit risk. Loans bearing the designation MIG 1 or VMIG 1 
are of the best quality, enjoying strong protection by established cash flows 
of funds for their servicing or from established and broad-based access to 
the market for refinancing, or both. Loans bearing the designation MIG 2 or 
VMIG 2 are of high quality, with ample margins of protection although not as 
large as the preceding group. Loans bearing the designation MIG 3 or VMIG 3 
are of favorable quality, with all security elements accounted for, but 
lacking the undeniable strength of the preceding grades. Liquidity and cash 
flow may be tight and market access for refinancing, in particular, is likely 
to be less well established.

Description of S&P A-1+ and A-1 Commercial Paper Rating

The rating A-1+ is the highest, and A-1 the second highest, commercial paper 
rating assigned by S&P. Paper rated A-1+ must have either the direct credit 
support of an issuer or guarantor that possesses excellent long-term 
operating and financial strengths combined with strong liquidity 
characteristics (typically, such issuers or guarantors would display credit 
quality characteristics which would warrant a senior bond rating of AA- or 
higher), or the direct credit support of an issuer or guarantor that 
possesses above average long-term fundamental operating and financing 
capabilities combined with ongoing excellent liquidity characteristics. Paper 
rated A-1 by S&P has the following characteristics: liquidity ratios are 
adequate to meet cash requirements; long-term senior debt is rated A or 
better; the issuer has access to at least two additional channels of 
borrowing; basic earnings and cash flow have an upward trend with allowance 
made for unusual circumstances; typically, the issuers industry is well 
established and the issuer has a strong position within the industry; and the 
reliability and quality of management are unquestioned.

Description of Moodys Prime-1 Commercial Paper Rating

The rating Prime-1 is the highest commercial paper rating assigned by 
Moodys. Among the factors considered by Moodys in assigning ratings are the 
following: (a) evaluation of the management of the issuer; (b) economic 
evaluation of the issuers industry or industries and an appraisal of 
speculative-type risks which may be inherent in certain areas; (c) evaluation 
of the issuers products in relation to competition and customer acceptance; 
(d) liquidity; (e) amount and quality of long-term debt; (f) trend of 
earnings over a period of ten years; (g) financial strength of a parent 
company and the relationships which exist with the issuer; and (h) 
recognition by the management of obligations which may be present or may 
arise as a result of public interest questions and preparations to meet such 
obligations.










Smith Barney
						Natural
						Resources Fund Inc.


Statement of

Additional 
Information















February 27, 1998 









Smith Barney
Natural Resources Fund Inc.
388 Greenwich Street
New York, NY  10013..................................Fund 
 ........................		SMITH BARNEY



33
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