Registration No. 2-84199
811-3762
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
X
Pre-Effective Amendment No.
Post-Effective Amendment No. 17
X
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 X
Amendment No. 18
X
SMITH BARNEY AGGRESSIVE GROWTH FUND INC.
(formerly known as Smith Barney Shearson Aggressive Growth Fund
Inc.)
(Exact name of Registrant as Specified in Charter)
388 Greenwich Street, New York, New York 10013
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code
(212) 723 -9218
Christina T. Sydor
Secretary
Smith Barney Aggressive Growth Fund Inc.
388 Greenwich Street
New York, New York 10013
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering:
As soon as possible after this Post-Effective Amendment
becomes effective.
It is proposed that this filing will become effective:
_____ immediately upon filing pursuant to Rule 485(b)
X on November 7, 1994 pursuant to Rule 485(b)
_____ 60 days after filing pursuant to Rule 485(a)
on pursuant to Rule 485(a)
___________________________________________________________________________
_________
The Registrant has previously filed a declaration of indefinite
registration of its shares pursuant to Rule 24f-2 under the Investment
Company Act of 1940, as amended. Registrant's Rule 24f-2 Notice for the
fiscal year ended August 31, 1994 was filed on October 31, 1994.
SMITH BARNEY AGGRESSIVE GROWTH FUND INC.
FORM N-1A
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(a)
Part A
Item No.
Prospectus Caption
1. Cover Page
Cover Page
2. Synopsis
Prospectus Summary
3. Financial Highlights
Financial Highlights
4. General Description of
Registrant
Cover Page; Prospectus Summary;
Investment Objective and
Management Policies; ;
Additional Information
5. Management of the Fund
Prospectus Summary ;
Management of the Fund;
Distributor; Additional
Information; Annual Report
6. Capital Stock and Other
Securities
Investment Objective and
Management Policies; ;
Dividends, Distributions and
Taxes; Additional Information
7. Purchase of Securities Being
Offered
Purchase of Shares;
Valuation of Shares; Redemption of
Shares; Exchange Privilege;
Distributor; Additional
Information; Minimum Account
Size
8 Redemption or Repurchase
Purchase of Shares;
Redemption of Shares
9. Legal Proceedings
Not Applicable
Part B
Item No.
Statement of
Additional Information Caption
10. Cover Page
Cover page
11. Table of Contents
Contents
12. General Information and
History
Distributor; Additional
Information
13. Investment Objectives and
Policies
Investment Objective and
Management Policies
14. Management of the Fund
Management of the Fund;
Distributor
15. Control Persons and Principal
Holders of Securities
Management of the Fund
16. Investment Advisory and Other
Services
Management of the Fund;
Distributor
17. Brokerage Allocation
Investment Objective and
Management Policies;
Distributor
18. Capital Stock and Other
Securities
Purchase of Shares; Redemption
of Shares ; Taxes
19. Purchase, Redemption and
Pricing of Securities Being
Offered
Purchase of Shares; Redemption of
Shares; Valuation of Shares;
Distributor ; Exchange
Privilege
20. Tax Status
Taxes
21. Underwriters
Distributor
22. Calculation of Performance
Data
Performance Data
23. Financial Statements
Financial Statements
[LOGO OF RECYCLED RECYCLABLE APPEARS HERE]
[LOGO OF SMITH BARNEY A MEMBER OF TRAVELERS GROUP APPEARS HERE]
Smith Barney Aggressive Growth Fund Inc.
388 Greenwich Street
New York, New York 10013
Fund 9, 188, 189, 214
FD0204J4
SMITH BARNEY
Aggressive Growth Fund Inc.
PROSPECTUS November 7, 1994
388 Greenwich Street
New York, New York 10013
(212) 723-9218
Smith Barney Aggressive Growth Fund Inc. (the "Fund") is a diversified mutual
fund that seeks capital appreciation by investing primarily in common stock of
companies the Fund's investment adviser believes are experiencing, or have the
potential to experience, growth in earnings that exceed the average earnings
growth rate of companies whose securities are included in the Standard & Poor's
Daily Price Index of 500 Common Stocks (the "S&P 500"), a weighted index which
measures the aggregate change in market value of 400 industrials, 60 transpor-
tation stocks and utility companies and 40 financial issues. Companies whose
earnings grow at a rate more rapidly than those of S&P 500 companies are often
small- or medium-sized companies that stand to benefit from new products or
services, technological developments or changes in management. Consequently,
the Fund invests principally in the securities of small- or medium-sized compa-
nies. Because of its objective and policies, the Fund may be subject to greater
investment risks than those assumed by some other investment companies.
This Prospectus sets forth concisely certain information about the Fund,
including sales charges, distribution and service fees and expenses, that pro-
spective investors will find helpful in making an investment decision. Invest-
ors are encouraged to read this Prospectus carefully and retain it for future
reference.
Additional information about the Fund is contained in a Statement of Addi-
tional Information dated November 7, 1994, as amended or supplemented from time
to time, that is available upon request and without charge by calling or writ-
ing the Fund at the telephone number or address set forth above, or by contact-
ing a Smith Barney Financial Consultant. The Statement of Additional Informa-
tion has been filed with the Securities and Exchange Commission (the "SEC") and
is incorporated by reference into this Prospectus in its entirety.
SMITH BARNEY INC.
Distributor
SMITH BARNEY MUTUAL FUNDS MANAGEMENT INC.
Investment Adviser and Administrator
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
1
SMITH BARNEY
Aggressive Growth Fund Inc.
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUMMARY 3
--------------------------------------------------
FINANCIAL HIGHLIGHTS 11
--------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES 15
--------------------------------------------------
VALUATION OF SHARES 18
--------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES 19
--------------------------------------------------
PURCHASE OF SHARES 20
--------------------------------------------------
EXCHANGE PRIVILEGE 30
--------------------------------------------------
REDEMPTION OF SHARES 34
--------------------------------------------------
MINIMUM ACCOUNT SIZE 36
--------------------------------------------------
PERFORMANCE 37
--------------------------------------------------
MANAGEMENT OF THE FUND 37
--------------------------------------------------
DISTRIBUTOR 39
--------------------------------------------------
ADDITIONAL INFORMATION 40
--------------------------------------------------
</TABLE>
No person has been authorized to give any information or to
make any representations in connection with this offering other
than those contained in this Prospectus and, if given or made,
such other information or representations must not be relied
upon as having been authorized by the Fund or the distributor.
This Prospectus does not constitute an offer by the Fund or the
distributor to sell or a solicitation of an offer to buy any of
the securities offered hereby in any jurisdiction to any person
to whom it is unlawful to make such offer or solicitation in
such jurisdiction.
2
SMITH BARNEY
Aggressive Growth Fund Inc.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by detailed information
appearing elsewhere in this Prospectus and in the Statement of Additional
Information. Cross references in this summary are to headings in the
Prospectus. See "Table of Contents."
INVESTMENT OBJECTIVE The Fund is an open-end, diversified management investment
company that seeks capital appreciation by investing primarily in common stock
of companies believed to be experiencing, or having the potential to experi-
ence, growth in earnings that exceed the average earnings growth rate of compa-
nies whose securities are included in the S&P 500. Although the Fund invests
primarily in common stocks, it may invest in convertible securities, preferred
stocks and warrants. See "Investment Objective and Management Policies."
ALTERNATIVE PURCHASE ARRANGEMENTS The Fund offers several classes of shares
("Classes") to investors designed to provide them with the flexibility of
selecting an investment best suited to their needs. The general public is
offered three classes of shares: Class A shares, Class B shares and Class C
shares, which differ principally in terms of sales charges and rate of expenses
to which they are subject. A fourth Class of shares, Class Y shares, is offered
only to investors meeting an initial investment minimum of $5,000,000. In addi-
tion, a fifth Class, Class Z shares, which is offered pursuant to a separate
prospectus, is offered exclusively to (a) tax-exempt employee benefit and
retirement plans of Smith Barney Inc. ("Smith Barney") and its affiliates and
(b) unit investment trusts ("UITs") sponsored by Smith Barney and its affili-
ates. See "Purchase of Shares" and "Redemption of Shares."
Class A Shares. Class A shares are sold at net asset value plus an initial
sales charge of up to 5.00% and are subject to an annual service fee of 0.25%
of the average daily net assets of the Class. The initial sales charge may be
reduced or waived for certain purchases. Purchases of Class A shares, which
when combined with current holdings of Class A shares offered with a sales
charge equal or exceed $500,000 in the aggregate, will be made at net asset
value with no sales charge, but will be subject to a contingent deferred sales
charge ("CDSC") of 1.00% on redemptions made within 12 months of purchase. See
"Prospectus Summary--Reduced or No Initial Sales Charge."
3
SMITH BARNEY
Aggressive Growth Fund Inc.
PROSPECTUS SUMMARY (CONTINUED)
Class B Shares. Class B shares are offered at net asset value subject to a
maximum CDSC of 5.00% of redemption proceeds, declining by 1.00% each year
after the date of purchase to zero. This CDSC may be waived for certain redemp-
tions. Class B shares are subject to an annual service fee of 0.25% and an
annual distribution fee of 0.75% of the average daily net assets of the Class.
The Class B shares' distribution fee may cause that Class to have higher
expenses and pay lower dividends than Class A shares.
Class B Shares Conversion Feature. Class B shares will convert automatically
to Class A shares, based on relative net asset value, eight years after the
date of the original purchase. Upon conversion, these shares will no longer be
subject to an annual distribution fee. In addition, a certain portion of Class
B shares that have been acquired through the reinvestment of dividends and dis-
tributions ("Class B Dividend Shares") will be converted at that time. See
"Purchase of Shares--Deferred Sales Charge Alternatives."
Class C Shares. Class C shares are sold at net asset value with no initial
sales charge. They are subject to an annual service fee of 0.25% and an annual
distribution fee of 0.75% of the average daily net assets of the Class, and
investors pay a CDSC of 1.00% if they redeem Class C shares within 12 months of
purchase. The CDSC may be waived for certain redemptions. The Class C shares'
distribution fee may cause that Class to have higher expenses and pay lower
dividends than Class A shares. Purchases of Class C shares, which when combined
with current holdings of Class C shares of the Fund equal or exceed $500,000 in
the aggregate, should be made in Class A shares at net asset value with no
sales charge, and will be subject to a CDSC of 1.00% on redemptions made within
12 months of purchase.
Class Y Shares. Class Y shares are available only to investors meeting an
initial investment minimum of $5,000,000. Class Y shares are sold at net asset
value with no initial sales charge or CDSC. They are not subject to any service
or distribution fees.
In deciding which Class of Fund shares to purchase, investors should consider
the following factors, as well as any other relevant facts and circumstances:
Intended Holding Period. The decision as to which Class of shares is more
beneficial to an investor depends on the amount and intended length of his or
her investment. Shareholders who are planning to establish a program of regular
investment may wish to consider Class A shares; as the investment accumulates
shareholders may qualify for reduced sales charges and the shares are
4
SMITH BARNEY
Aggressive Growth Fund Inc.
PROSPECTUS SUMMARY (CONTINUED)
subject to lower ongoing expenses over the term of the investment. As an
investment alternative, Class B and Class C shares are sold without any initial
sales charge so the entire purchase price is immediately invested in the Fund.
Any investment return on these additional invested amounts may partially or
wholly offset the higher annual expenses of these Classes. Because the Fund's
future return cannot be predicted, however, there can be no assurance that this
would be the case.
Finally, investors should consider the effect of the CDSC period and any con-
version rights of the Classes in the context of their own investment time
frame. For example, while Class C shares have a shorter CDSC period than Class
B shares, they do not have a conversion feature, and therefore, are subject to
an ongoing distribution fee. Thus, Class B shares may be more attractive than
Class C shares to investors with longer term investment outlooks.
Investors investing a minimum of $5,000,000 must purchase Class Y shares,
which are not subject to an initial sales charge, CDSC or service or distribu-
tion fee. The maximum purchase amount for Class A shares is $4,999,999, Class B
shares is $249,999 and Class C shares is $499,999. There is no maximum purchase
amount for Class Y shares.
Reduced or No Initial Sales Charge. The initial sales charge on Class A
shares may be waived for certain eligible purchasers, and the entire purchase
price will be immediately invested in the Fund. In addition, Class A share pur-
chases, which when combined with current holdings of Class A shares offered
with a sales charge equal or exceed $500,000 in the aggregate, will be made at
net asset value with no initial sales charge, but will be subject to a CDSC of
1.00% on redemptions made within 12 months of purchase. The $500,000 aggregate
investment may be met by adding the purchase to the net asset value of all
Class A shares held in funds sponsored by Smith Barney listed under "Exchange
Privilege." Class A share purchases may also be eligible for a reduced initial
sales charge. See "Purchase of Shares." Because the ongoing expenses of Class A
shares may be lower than those for Class B and Class C shares, purchasers eli-
gible to purchase Class A shares at net asset value or at a reduced sales
charge should consider doing so.
Smith Barney Financial Consultants may receive different compensation for
selling each Class of shares. Investors should understand that the purpose of
the CDSC on the Class B and Class C shares is the same as that of the initial
sales charge on the Class A shares.
5
SMITH BARNEY
Aggressive Growth Fund Inc.
PROSPECTUS SUMMARY (CONTINUED)
See "Purchase of Shares" and "Management of the Fund" for a complete descrip-
tion of the sales charges and service and distribution fees for each Class of
shares and "Valuation of Shares," "Dividends, Distributions and Taxes" and "Ex-
change Privilege" for other differences between the Classes of shares.
SMITH BARNEY 401(K) PROGRAM Investors may be eligible to participate in the
Smith Barney 401(k) Program, which is generally designed to assist plan spon-
sors in the creation and operation of retirement plans under Section 401(a) of
the Internal Revenue Code of 1986, as amended (the "Code"), as well as other
types of participant directed, tax-qualified employee benefit plans (collec-
tively, "Participating Plans"). Class A, Class B, Class C and Class Y shares
are available as investment alternatives for Participating Plans. See "Purchase
of Shares--Smith Barney 401(k) Program."
PURCHASE OF SHARES Shares may be purchased through the Fund's distributor,
Smith Barney, a broker that clears securities transactions through Smith Barney
on a fully disclosed basis (an "Introducing Broker") or an investment dealer in
the selling group. Direct purchases by certain retirement plans may be made
through the Fund's transfer agent, The Shareholder Services Group, Inc.
("TSSG"), a subsidiary of First Data Corporation. See "Purchase of Shares."
INVESTMENT MINIMUMS Investors in Class A, Class B and Class C shares may
open an account by making an initial investment of at least $1,000 for each
account, or $250 for an individual retirement account ("IRA") or a Self-
Employed Retirement Plan. Investors in Class Y shares may open an account for
an initial investment of $5,000,000. Subsequent investments of at least $50 may
be made for all Classes. For participants in retirement plans qualified under
Section 403(b)(7) or Section 401(a) of the Code, the minimum initial investment
requirement for Class A, Class B and Class C shares and the subsequent invest-
ment requirement for all Classes is $25. The minimum initial investment
requirement for Class A, Class B and Class C shares and the subsequent invest-
ment requirement for all Classes through the Systematic Investment Plan
described below is $100. There is no minimum investment requirement in Class A
for unitholders who invest distributions from a UIT sponsored by Smith Barney.
See "Purchase of Shares."
6
SMITH BARNEY
Aggressive Growth Fund Inc.
PROSPECTUS SUMMARY (CONTINUED)
SYSTEMATIC INVESTMENT PLAN The Fund offers shareholders a Systematic Investment
Plan under which they may authorize the automatic placement of a purchase order
each month or quarter for Fund shares in an amount of at least $100. See "Pur-
chase of Shares."
REDEMPTION OF SHARES Shares may be redeemed on each day the New York Stock
Exchange, Inc. ("NYSE") is open for business. See "Purchase of Shares" and "Re-
demption of Shares."
MANAGEMENT OF THE FUND Smith Barney Mutual Funds Management Inc. ("SBMFM")
serves as the Fund's investment adviser. SBMFM provides investment advisory and
management services to investment companies affiliated with Smith Barney. SBMFM
(formerly known as "Smith, Barney Advisers, Inc.") is a wholly owned subsidiary
of Smith Barney Holdings Inc. ("Holdings"). Holdings is a wholly owned subsidi-
ary of The Travelers Inc. ("Travelers"), a diversified financial services hold-
ing company engaged, through its subsidiaries, principally in four business
segments: Investment Services, Consumer Finance Services, Life Insurance Serv-
ices and Property & Casualty Insurance Services.
SBMFM also serves as the Fund's administrator and The Boston Company Advi-
sors, Inc. ("Boston Advisors") serves as the Fund's sub-administrator. Boston
Advisors is a wholly owned subsidiary of The Boston Company, Inc. ("TBC"),
which is in turn a wholly owned subsidiary of Mellon Bank Corporation
("Mellon"). See "Management of the Fund."
EXCHANGE PRIVILEGE Shares of a Class may be exchanged for shares of the same
Class of certain other funds of the Smith Barney Mutual Funds at the respective
net asset values next determined, plus any applicable sales charge differen-
tial. See "Exchange Privilege."
VALUATION OF SHARES Net asset value of the Fund for the prior day generally is
quoted daily in the financial section of most newspapers and is also available
from Smith Barney Financial Consultants. See "Valuation of Shares."
DIVIDENDS AND DISTRIBUTIONSDividends from net investment income and distribu-
tions of net realized capital gains, if any, are declared and paid annually.
See "Dividends, Distributions and Taxes."
REINVESTMENT OF DIVIDENDSDividends and distributions paid on shares of a Class
will be reinvested automatically, unless otherwise specified by an investor, in
additional shares of the same Class at current net asset value. Shares
7
SMITH BARNEY
Aggressive Growth Fund Inc.
PROSPECTUS SUMMARY (CONTINUED)
acquired by dividend and distribution reinvestments will not be subject to any
sales charge or CDSC. Class B shares acquired through dividend and distribution
reinvestments will become eligible for conversion to Class A shares on a pro
rata basis. See "Dividends, Distributions and Taxes."
RISK FACTORS AND SPECIAL CONSIDERATIONS There can be no assurance that the
Fund's investment objective will be achieved. Securities of the kinds of compa-
nies in which the Fund invests may be subject to significant price fluctuation
and above-average risk. In addition, companies achieving an earnings growth
rate higher than that of S&P 500 companies tend to reinvest their earnings
rather than distribute them. As a result, the Fund is not likely to receive
significant dividend income on its portfolio securities. Accordingly, an
investment in the Fund should not be considered as a complete investment pro-
gram and may not be appropriate for all investors. See "Investment Objective
and Management Policies."
8
SMITH BARNEY
Aggressive Growth Fund Inc.
PROSPECTUS SUMMARY (CONTINUED)
THE FUND'S EXPENSESThe following expense table lists the costs and expenses
an investor will incur either directly or indirectly as a shareholder of the
Fund, based on the maximum sales charge or maximum CDSC that may be incurred at
the time of purchase or redemption and, unless otherwise noted, the Fund's
operating expenses for its most recent fiscal year:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales charge imposed on purchases
(as a percentage of offering price) 5.00% None None None
Maximum CDSC
(as a percentage of original cost or redemption
proceeds, whichever is lower) None* 5.00% 1.00% None
- ---------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fees .80% .80% .80% .80%
12b-1 fees** .25% 1.00% 1.00% None
Other expenses*** .37% .42% .28% .37%
- ---------------------------------------------------------------------------------
TOTAL FUND OPERATING EXPENSES 1.42% 2.22% 2.08% 1.17%
- ---------------------------------------------------------------------------------
</TABLE>
* Purchases of Class A shares, which when combined with current holdings of
Class A shares offered with a sales charge, equal or exceed $500,000 in the
aggregate, will be made at net asset value with no sales charge, but will
be subject to a CDSC of 1.00% on redemptions made within 12 months.
** Upon conversion of Class B shares to Class A shares, such shares will no
longer be subject to a distribution fee. Class C shares do not have a
conversion feature and, therefore, are subject to an ongoing distribution
fee. As a result, long-term shareholders of Class C shares may pay more
than the economic equivalent of the maximum front-end sales charge
permitted by the National Association of Securities Dealers, Inc.
*** For Class Y shares, "Other expenses" have been estimated based on expenses
incurred by the Class A shares because Class Y shares were not available
for purchase prior to November 7, 1994.
The sales charge and CDSC set forth in the above table are the maximum
charges imposed on purchases or redemptions of Fund shares and investors may
actually pay lower or no charges, depending on the amount purchased and, in the
case of Class B, Class C and certain Class A shares, the length of time the
shares are held and whether the shares are held through the Smith Barney 401(k)
Program. See "Purchase of Shares" and "Redemption of Shares." Smith Barney
receives an annual 12b-1 service fee of 0.25% of the value of
average daily net assets of Class A shares. Smith Barney also receives, with
9
SMITH BARNEY
Aggressive Growth Fund Inc.
PROSPECTUS SUMMARY (CONTINUED)
respect to Class B shares, an annual 12b-1 fee of 1.00% of the value of average
daily net assets of that Class, consisting of a 0.75% distribution fee and a
0.25% service fee. For Class C shares, Smith Barney receives an annual 12b-1
fee of 1.00% of the value of average daily net assets of this Class, consisting
of a 0.75% distribution fee and a 0.25% service fee. "Other expenses" in the
above table include fees for shareholder services, custodial fees, legal and
accounting fees, printing costs and registration fees.
EXAMPLE The following example is intended to assist an investor in understand-
ing the various costs that an investor in the Fund will bear directly or indi-
rectly. The example assumes payment by the Fund of operating expenses at the
levels set forth in the table above. See "Purchase of Shares," "Redemption of
Shares" and "Management of the Fund."
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS*
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
An investor would pay the following expenses
on a $1,000 investment, assuming (1) 5.00%
annual return and (2) redemption at the end
of each time period:
Class A $64 $93 $124 $212
Class B 73 99 129 235
Class C 31 65 112 241
Class Y 12 37 64 142
An investor would pay the following expenses
on the same investment, assuming the same
annual return and
no redemption:
Class A 64 93 124 212
Class B 23 69 119 235
Class C 21 65 112 241
Class Y 12 37 64 142
- ------------------------------------------------------------------------------
</TABLE>
* Ten-year figures assume conversion of Class B shares to Class A shares at the
end of the eighth year following the date of purchase.
The example also provides a means for the investor to compare expense levels
of funds with different fee structures over varying investment periods. To
facilitate such comparison, all funds are required to utilize a 5.00% annual
return assumption. However, the Fund's actual return will vary and may be
greater or less than 5.00%. THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTA-
TION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN.
10
SMITH BARNEY
Aggressive Growth Fund Inc.
FINANCIAL HIGHLIGHTS
The following information has been audited by Coopers & Lybrand L.L.P.,
independent accountants, whose report thereon appears in the Fund's Annual
Report dated August 31, 1994. The information set out below should be read in
conjunction with the financial statements and related notes that also appear in
the Fund's Annual Report, which is incorporated by reference into the Statement
of Additional Information.
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH YEAR:
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
8/31/94 8/31/93+ 8/31/92*+ 8/31/91+ 8/31/90+ 8/31/89+
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
beginning of year $ 23.59 $ 18.94 $ 20.12 $ 16.16 $ 19.25 $ 13.68
- ------------------------------------------------------------------------------------------------
Income/(loss) from
investment operations:
Net investment
income/(loss) (0.32) (0.21) (0.07) (0.05) (0.02) 0.02
Net realized and
unrealized gain/(loss)
on investments 3.49 4.86 (0.35) 4.95 (1.02) 5.98
- ------------------------------------------------------------------------------------------------
Total from investment
operations 3.17 4.65 (0.42) 4.90 (1.04) 6.00
Less distributions:
Distributions from net
investment income -- -- -- -- (0.02) --
Distributions from net
realized gains -- -- (0.76) (0.94) (2.03) (0.43)
- ------------------------------------------------------------------------------------------------
Total distributions -- -- (0.76) (0.94) (2.05) (0.43)
- ------------------------------------------------------------------------------------------------
Net Asset Value, end of
year $ 26.76 $ 23.59 $ 18.94 $ 20.12 $ 16.16 $ 19.25
- ------------------------------------------------------------------------------------------------
Total return++ 13.44% 24.55% (2.42)% 31.97% (6.38)% 44.97%
- ------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of year
(in 000's) $180,917 $150,471 $181,459 $144,587 $86,169 $94,228
Ratio of operating
expenses to average net
assets 1.42%+++ 1.34% 1.05% 1.17% 1.13% 1.25%
Ratio of net investment
income/(loss) to
average net assets (1.23)% (1.01)% (0.31)% (0.24)% (0.11)% 0.15%
Portfolio turnover rate 11% 13% 3% 23% 14% 8%
- ------------------------------------------------------------------------------------------------
</TABLE>
* On November 6,1992 the Fund commenced selling Class B. Those shares in
existence prior to November 6, 1992 were designated Class A shares.
+ Per share amounts have been calculated using the monthly average method,
which more appropriately presents the per share data for these periods,
since use of the undistributed method does not accord with results of
operations for all Classes of shares.
++ Total return represents aggregate total return for each year indicated and
does not reflect any applicable sales charge.
+++ The operating expense ratio excludes interest expense. The operating
expense ratio including interest expense was 1.43% for the year ended
August 31, 1994.
11
SMITH BARNEY
Aggressive Growth Fund Inc.
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH YEAR:*
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
8/31/88 8/31/87 8/31/86 8/31/85
<S> <C> <C> <C> <C>
Net Asset Value, beginning
of year $ 21.63 $ 16.43 $ 11.45 $ 10.62
- --------------------------------------------------------------------------------
Income/(loss) from
investment operations:
Net investment income/(loss) (0.12) (0.11) (0.09) (0.04)
Net realized and unrealized
gain/(loss) on investments (5.36) 6.15 5.07 1.00
- --------------------------------------------------------------------------------
Total from investment
operations (5.48) 6.04 4.98 0.96
Less distributions:
Dividends from net
investment income -- -- -- (0.08)
Distributions from net
realized capital gains (2.47) (0.84) -- (0.05)
- --------------------------------------------------------------------------------
Total distributions (2.47) (0.84) -- (0.13)
- --------------------------------------------------------------------------------
Net Asset Value, end of year $13.68 $21.63 $16.43 $11.45
- --------------------------------------------------------------------------------
Total return++ (24.40)% 39.36 % 43.49 % 9.22 %
- --------------------------------------------------------------------------------
Ratios to average net assets
supplemental data:
Net assets, end of year (in
000's) $81,287 $143,572 $115,212 $100,140
Ratio of operating expenses
to average net assets 1.10 % 1.10 % 1.20 % 1.20 %
Ratio of net investment
income/(loss) to average
net assets (0.60)% (0.60)% (0.60)% (0.30)%
Portfolio turnover rate 10 % 25 % 24 % 33 %
- --------------------------------------------------------------------------------
</TABLE>
* On November 6,1992 the Fund commenced selling Class B. Those shares in
existence prior to November 6, 1992 were designated Class A shares.
++ Total return represents aggregate total return for each year indicated and
does not reflect any applicable sales charge.
12
SMITH BARNEY
Aggressive Growth Fund Inc.
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A CLASS B SHARE OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
8/31/94 8/31/93*+
<S> <C> <C>
Net Asset Value, beginning of period $ 23.46 $ 20.52
- --------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (0.29) (0.30)
Net realized and unrealized gain on investments 3.25 3.24
- --------------------------------------------------------------------------------
Total from investment operations 2.96 2.94
- --------------------------------------------------------------------------------
Net Asset Value, end of period $ 26.42 $ 23.46
- --------------------------------------------------------------------------------
Total return++ 12.62% 14.33%
- --------------------------------------------------------------------------------
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $49,741 $18,139
Ratio of operating expenses to average net assets 2.22%+++ 2.18%**
Ratio of net investment loss to average net assets (2.04)% (1.86)%**
Portfolio turnover rate 11% 13%
- --------------------------------------------------------------------------------
</TABLE>
* The Fund commended selling Class B shares on November 6, 1992.
** Annualized.
+ Per share amounts have been calculated using the monthly average method,
which more appropriately presents the per share data for this period, since
use of the undistributed method does not accord with results of operations
for all Classes of shares.
++ Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charge.
+++ The operating expense ratio excludes interest expense. The operating
expense ratio including interest expense was 2.23% for the year ended
August 31, 1994.
13
SMITH BARNEY
Aggressive Growth Fund Inc.
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A CLASS C SHARE OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
8/31/94 8/31/93*+
<S> <C> <C>
Net Asset Value, beginning of period $23.47 $21.14
- --------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (0.17) (0.13)
Net realized and unrealized gain on investments 3.12 2.46
- --------------------------------------------------------------------------------
Total from investment operations 2.95 2.33
- --------------------------------------------------------------------------------
Net Asset Value, end of period $26.42 $23.47
- --------------------------------------------------------------------------------
Total return++ 12.57% 11.02%
- --------------------------------------------------------------------------------
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 367 $ 24
Ratio of operating expenses to average net assets 2.08%+++ 2.11%**
Ratio of net investment loss to average net assets (1.90)% (1.76)%**
Portfolio turnover rate 11% 13%
- --------------------------------------------------------------------------------
</TABLE>
* The Fund commenced selling Class C shares (previously designated as Class D
shares) on May 13, 1993.
** Annualized.
+ Per share amounts have been calculated using the monthly average method,
which more appropriately presents the per share data for this period, since
use of the undistributed method does not accord with results of operations
for all Classes of shares.
++ Total return represents aggregate total return for the period indicated.
+++ The operating expense ratio excludes interest expense. The operating
expense ratio including interest expense was 2.09% for the year ended
August 31, 1994.
Prior to November 7, 1994, the Fund did not offer Class Y shares and accord-
ingly, no comparable financial information is available at this time for that
Class.
14
SMITH BARNEY
Aggressive Growth Fund Inc.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The investment objective of the Fund is capital appreciation. Although the
Fund may receive current income from dividends, interest and other sources,
income is only an incidental consideration of the Fund. The Fund's investment
objective may not be changed without the approval of the holders of a majority
of the Fund's outstanding shares. There can be no assurance that the Fund will
achieve its investment objective.
The Fund attempts to achieve its investment objective by investing primarily
in common stocks of companies that SBMFM believes are experiencing, or have the
potential to experience, growth in earnings that exceed the average earnings
growth rate of companies having securities included in the S&P 500. An earnings
growth rate exceeding that of S&P 500 companies is often achieved by small- or
medium-sized companies, generally referred to as "emerging growth companies,"
that stand to benefit from new products or services, technological developments
or changes in management, but it also may be achieved by seasoned, established
companies. As a result, SBMFM anticipates that the Fund will invest principally
in the securities of small- or medium-sized companies and to a lesser degree in
the securities of large, well-known companies.
SBMFM focuses its stock selection for the Fund on a diversified group of
emerging growth companies that have passed their "start-up" phase and show pos-
itive earnings and the prospect of achieving significant profit gains in the
two to three years after the Fund acquires their stocks. These companies gener-
ally may be expected to benefit from new technologies, techniques, products or
services or cost-reducing measures, and may be affected by changes in manage-
ment, capitalization or asset deployment, government regulations or other
external circumstances.
Although SBMFM anticipates that the assets of the Fund ordinarily will be
invested primarily in common stocks of U.S. companies, the Fund may invest in
convertible securities, preferred stocks, securities of foreign issuers, war-
rants and restricted securities. In addition, when SBMFM believes that market
conditions warrant, the Fund may invest for temporary defensive purposes in
corporate and U.S. government bonds and notes and money market instruments. The
Fund also is authorized to borrow in an amount of up to 5% of its total assets
for extraordinary or emergency purposes, and may borrow up to 33 1/3% of its
total assets less liabilities, for leveraging purposes. See "Investment Poli-
cies and Strategies--Leveraging."
15
SMITH BARNEY
Aggressive Growth Fund Inc.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
Further information about the Fund's investment policies, including a list of
those restrictions on its investment activities that cannot be changed without
shareholder approval, appears in the Statement of Additional Information.
INVESTMENT POLICIES AND STRATEGIES
Restricted Securities. Restricted securities are those that may not be sold
publicly without first being registered under the Securities Act of 1933, as
amended. For that reason, the Fund may not be able to dispose of restricted
securities at a time when, or at a price at which, it desires to do so and may
have to bear expenses associated with registering the securities. At any one
time, the Fund's aggregate holdings of restricted securities, repurchase agree-
ments having a duration of more than five business days, and securities lacking
readily available market quotations will not exceed 15% of the Fund's total
assets.
Foreign Securities. The Fund may invest up to 10% of its net assets in the
securities of foreign issuers. There are certain risks involved in investing in
foreign securities, including those resulting from fluctuations in currency
exchange rates, revaluation of currencies, future political or economic devel-
opments and the possible imposition of currency exchange blockages or other
foreign governmental laws or restrictions, reduced availability of public
information concerning issuers, and the fact that foreign companies are not
generally subject to uniform accounting, auditing and financial reporting stan-
dards or to other regulatory practices and requirements comparable to those
applicable to domestic companies. Moreover, securities of many foreign compa-
nies may be less liquid and their prices more volatile than securities of com-
parable domestic companies. In addition, with respect to certain foreign coun-
tries, there is the possibility of expropriation, confiscatory taxation and
limitations on the use or removal of funds or other assets of the Fund, includ-
ing the withholding of dividends.
Lending of Portfolio Securities. From time to time, the Fund may lend its
portfolio securities to brokers, dealers and other financial organizations.
These loans may not exceed 33 1/3% of the Fund's total assets taken at value.
Loans of portfolio securities by the Fund will be collateralized by cash, let-
ters of credit or obligations of the United States government or its agencies
and instrumentalities ("U.S. government securities") which are maintained at
all times in an amount equal to at least 100% of the current market value of
the loaned securities. By lending its portfolio securities, the Fund will seek
to generate income by continuing to receive interest on loaned securities, by
investing the cash collateral in
16
SMITH BARNEY
Aggressive Growth Fund Inc.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
short-term instruments or by obtaining yield in the form of interest paid by
the borrower when U.S. government securities are used as collateral. The risks
in lending portfolio securities, as with other extensions of secured credit,
consist of possible delays in receiving additional collateral or in the recov-
ery of the securities or possible loss of rights in the collateral should the
borrower fail financially. Loans will be made to firms deemed by SBMFM to be of
good standing and will not be made unless, in the judgment of SBMFM, the con-
sideration to be earned from such loans would justify the risk.
Leveraging. The Fund may from time to time leverage its investments by pur-
chasing securities with borrowed money. The Fund may borrow money only from
banks and in an amount not to exceed 33 1/3% of the total value of its assets
less its liabilities. Borrowed money creates an opportunity for greater capital
gain but at the same time increases exposure to capital risk, as any gain in
the value of securities purchased with borrowed money that exceeds the interest
paid on the amount borrowed would cause the Fund's net asset value to increase
more rapidly than otherwise, while any decline in the value of securities pur-
chased would cause the Fund's net asset value to decrease more rapidly than
otherwise.
Money Market Instruments. As noted above, in certain circumstances the Fund
may invest in short-term money market instruments, such as U.S. government
securities, certificates of deposit, time deposits, and bankers' acceptances
issued by domestic banks (including their branches located outside the United
States and subsidiaries located in Canada), domestic branches of foreign banks,
savings and loan associations and similar institutions, high-grade commercial
paper, and repurchase agreements with respect to such instruments.
Repurchase Agreements. The Fund will enter into repurchase agreements with
banks which are the issuers of instruments acceptable for purchase by the Fund
and with certain dealers on the Federal Reserve Bank of New York's list of
reporting dealers. Under the terms of a typical repurchase agreement, the Fund
would acquire an underlying obligation for a relatively short period (usually
not more than one week) subject to an obligation of the seller to repurchase,
and the Fund to resell, the obligation at an agreed-upon price and time,
thereby determining the yield during the Fund's holding period. This arrange-
ment results in a fixed rate of return that is not subject to market fluctua-
tions during the Fund's holding period. Under each repurchase agreement, the
selling institution will be required to maintain the value of the securities
subject to the repurchase agreement at not less than their repurchase price.
Repurchase
17
SMITH BARNEY
Aggressive Growth Fund Inc.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
agreements could involve certain risks in the event of default or insolvency of
the other party, including possible delays or restrictions upon the Fund's
ability to dispose of the underlying securities, the risk of a possible decline
in the value of the underlying securities during the period in which the Fund
seeks to assert its rights to them, the risk of incurring expenses associated
with asserting those rights and the risk of losing all or part of the income
from the agreement. SBMFM or Boston Advisors, acting under the supervision of
the Board of Directors, reviews on an ongoing basis to evaluate potential risks
the value of the collateral and the creditworthiness of those banks and dealers
with which the Fund enters into repurchase agreements.
Certain Risk Considerations. Securities of the kinds of companies in which
the Fund invests may be subject to significant price fluctuation and above-
average risk. In addition, companies achieving an earnings growth rate higher
than that of S&P 500 companies tend to reinvest their earnings rather than dis-
tribute them. As a result, the Fund is not likely to receive significant divi-
dend income on its portfolio securities. Accordingly, an investment in the Fund
should not be considered as a complete investment program and may not be appro-
priate for all investors.
Portfolio Transactions. Portfolio securities transactions on behalf of the
Fund are placed by SBMFM with a number of brokers and dealers, including Smith
Barney. Smith Barney has advised the Fund that in transactions with the Fund,
Smith Barney charges a commission rate at least as favorable as the rate Smith
Barney charges its comparable unaffiliated customers in similar transactions.
VALUATION OF SHARES
The Fund's net asset value per share is determined as of the close of regular
trading on the NYSE on each day that the NYSE is open, by dividing the value of
the Fund's net assets attributable to each Class by the total number of shares
of the Class outstanding.
Generally, the Fund's investments are valued at market value or, in the
absence of a market value with respect to any securities, at fair value as
determined by or under the direction of the Fund's Board of Directors. Short-
term investments that mature in 60 days or less are valued at amortized cost
18
SMITH BARNEY
Aggressive Growth Fund Inc.
VALUATION OF SHARES (CONTINUED)
whenever the Directors determine that amortized cost reflects fair value of
those investments. Further information regarding the Fund's valuation policies
is contained in the Statement of Additional Information.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
The Fund's policy is to distribute its investment income (that is, its income
other than its net realized capital gains) and net realized capital gains, if
any, once a year, normally at the end of the year in which earned or at the
beginning of the next year.
If a shareholder does not otherwise instruct, dividends and capital gain dis-
tributions will be reinvested automatically in additional shares of the same
Class at net asset value, subject to no sales charge or CDSC. In order to avoid
the application of a 4% nondeductible excise tax on certain undistributed
amounts of ordinary income and capital gains, the Fund may make an additional
distribution shortly before December 31 in each year of any undistributed ordi-
nary income or capital gains and expects to pay any other dividends and distri-
butions necessary to avoid the application of this tax.
The per share dividends on Class B and Class C shares of the Fund may be
lower than the per share dividends on Class A and Class Y shares principally as
a result of the distribution fee applicable with respect to Class B and Class C
shares. The per share dividends on Class A shares of the Fund may be lower than
the per share dividends on Class Y shares principally as a result of the serv-
ice fee applicable to Class A shares. Distributions of capital gains, if any,
will be in the same amount for Class A, Class B, Class C and Class Y shares.
TAXES
The Fund has qualified and intends to continue to qualify each year as a
"regulated investment company" under the Code. Dividends from net investment
income and distributions of realized short-term capital gains are taxable to
shareholders as ordinary income, regardless of how long shareholders have held
their Fund shares and whether such dividends and distributions are received in
cash or reinvested in additional Fund shares. Distributions of net realized
long-term
19
SMITH BARNEY
Aggressive Growth Fund Inc.
DIVIDENDS, DISTRIBUTIONS AND TAXES (CONTINUED)
capital gains are taxable to shareholders as long-term capital gains, regard-
less of how long shareholders have held Fund shares and whether such distribu-
tions are received in cash or are reinvested in additional Fund shares. Fur-
thermore, as a general rule, a shareholder's gain or loss on a sale or redemp-
tion of Fund shares will be a long-term capital gain or loss if the shareholder
has held the shares for more than one year and will be a short-term capital
gain or loss if the shareholder has held the shares for one year or less. Some
of the Fund's dividends declared from net investment income may qualify for the
Federal dividends-received deduction for corporations.
Statements as to the tax status of each shareholder's dividends and distribu-
tions are mailed annually. Each shareholder will also receive, if appropriate,
various written notices after the close of the Fund's prior taxable year as to
the Federal income tax status of his or her dividends and distributions which
were received from the Fund during the Fund's prior taxable year. Shareholders
should consult their tax advisors about the status of the Fund's dividends and
distributions for state and local tax liabilities.
PURCHASE OF SHARES
GENERAL
The Fund offers five Classes of shares. Class A shares are sold to investors
with an initial sales charge and Class B and Class C shares are sold without an
initial sales charge but are subject to a CDSC payable upon certain redemp-
tions. Class Y shares are sold without an initial sales charge or a CDSC and
are available only to investors investing a minimum of $5,000,000. Class Z
shares are offered without a sales charge, CDSC or service or distribution fee,
exclusively to: (a) tax-exempt employee benefit and retirement plans of Smith
Barney and its affiliates and (b) certain UITs sponsored by Smith Barney and
its affiliates. Investors meeting either of these criteria who are interested
in acquiring Class Z shares should contact a Smith Barney Financial Consultant
for a Class Z Prospectus. See "Prospectus Summary--Alternative Purchase
Arrangements" for a discussion of factors to consider in selecting which Class
of shares to purchase.
Purchases of Fund shares must be made through a brokerage account maintained
with Smith Barney, an Introducing Broker or an investment dealer in the selling
group, except for investors purchasing shares of the Fund through a qual-
20
SMITH BARNEY
Aggressive Growth Fund Inc.
PURCHASE OF SHARES (CONTINUED)
ified retirement plan who may do so directly through TSSG. When purchasing
shares of the Fund, investors must specify whether the purchase is for Class A,
Class B, Class C or Class Y shares. No maintenance fee will be charged by the
Fund in connection with a brokerage account through which an investor purchases
or holds shares.
Investors in Class A, Class B and Class C shares may open an account by mak-
ing an initial investment of at least $1,000 for each account, or $250 for an
IRA or a Self-Employed Retirement Plan in the Fund. Investors in Class Y shares
may open an account by making an initial investment of $5,000,000. Subsequent
investments of at least $50 may be made for all Classes. For participants in
retirement plans qualified under Section 403(b)(7) or Section 401(a) of the
Code, the minimum initial investment requirement for Class A, Class B and Class
C shares and the subsequent investment requirement for all Classes in the Fund
is $25. For the Fund's Systematic Investment Plan, the minimum initial invest-
ment requirement for Class A, Class B and Class C shares and the subsequent
investment requirement for all Classes is $100. There are no minimum investment
requirements for Class A shares for employees of Travelers and its subsidiar-
ies, including Smith Barney, Directors of the Fund and their spouses and chil-
dren and unitholders who invest distributions from a UIT sponsored by Smith
Barney. The Fund reserves the right to waive or change minimums, to decline any
order to purchase its shares and to suspend the offering of shares from time to
time. Shares purchased will be held in the shareholder's account by the Fund's
transfer agent, TSSG. Share certificates are issued only upon a shareholder's
written request to TSSG.
Purchase orders received by Smith Barney prior to the close of regular trad-
ing on the NYSE, on any day the Fund calculates its net asset value, are priced
according to the net asset value determined on that day. Orders received by
dealers or Introducing Brokers prior to the close of regular trading on the
NYSE on any day the Fund calculates its net asset value, are priced according
to the net asset value determined on that day, provided the order is received
by Smith Barney prior to Smith Barney's close of business (the "trade date").
Currently, payment for Fund shares is due on the fifth business day after the
trade date (the "settlement date"). The Fund anticipates that, in accordance
with regulatory changes, beginning on or about June 1, 1995, the settlement
date will be the third business day after the trade date.
21
SMITH BARNEY
Aggressive Growth Fund Inc.
PURCHASE OF SHARES (CONTINUED)
SYSTEMATIC INVESTMENT PLAN
Shareholders may make additions to their accounts at any time by purchasing
shares through a service known as the Systematic Investment Plan. Under the
Systematic Investment Plan, Smith Barney or TSSG is authorized through preau-
thorized transfers of $100 or more to charge the regular bank account or other
financial institution indicated by the shareholder on a monthly or quarterly
basis to provide systematic additions to the shareholder's Fund account. A
shareholder who has insufficient funds to complete the transfer will be charged
a fee of up to $25 by Smith Barney or TSSG. The Systematic Investment Plan also
authorizes Smith Barney to apply cash held in the shareholder's Smith Barney
brokerage account or redeem the shareholder's shares of a Smith Barney money
market fund to make additions to the account. Additional information is avail-
able from the Fund or a Smith Barney Financial Consultant.
INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES
The sales charges applicable to purchases of Class A shares of the Fund are
as follows:
<TABLE>
<CAPTION>
DEALERS
SALES CHARGE AS SALES CHARGE AS REALLOWANCE
% OF % OF AMOUNT AS % OF
AMOUNT OF INVESTMENT OFFERING PRICE INVESTED OFFERING PRICE
--------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $25,000 5.00% 5.26% 4.50%
$25,000--$49,999 4.00% 4.17% 3.60%
$50,000--$99,999 3.50% 3.63% 3.15%
$100,000--$249,999 3.00% 3.09% 2.70%
$250,000--$499,999 2.00% 2.04% 1.80%
$500,000 and over * * *
--------------------------------------------------------------------------
</TABLE>
* Purchases of Class A shares, which when combined with current
holdings of Class A shares offered with a sales charge equal
or exceed $500,000 in the aggregate, will be made at net asset
value without any initial sales charge but will be subject to
a CDSC of 1.00% on redemptions made within 12 months of
purchase. The CDSC on Class A shares is payable to Smith
Barney which compensates Smith Barney Financial Consultants
and other dealers whose clients make purchases of $500,000 or
more. The CDSC is waived in the same circumstances in which
the CDSC applicable to Class B and Class C shares is waived.
See "Deferred Sales Charge Alternatives" and "Waivers of
CDSC."
Members of the selling group may receive up to 90% of the sales charge and
may be deemed to be underwriters of the Fund as defined in the Securities Act
of 1933, as amended.
The reduced sales charges shown above apply to the aggregate of purchases of
Class A shares of the Fund made at one time by "any person," which
22
SMITH BARNEY
Aggressive Growth Fund Inc.
PURCHASE OF SHARES (CONTINUED)
includes an individual, his or her spouse and children, or a trustee or other
fiduciary of a single trust estate or single fiduciary account. The reduced
sales charge minimums may also be met by aggregating the purchase with the net
asset value of all Class A shares held in funds sponsored by Smith Barney that
are offered with a sales charge listed under "Exchange Privilege."
INITIAL SALES CHARGE WAIVERS
Purchases of Class A shares may be made at net asset value without a sales
charge in the following circumstances: (a) sales of Class A shares to Directors
of the Fund and employees of Travelers and its subsidiaries, or the spouses and
children of such persons (including the surviving spouse of a deceased Director
or employee, and retired Directors or employees), or sales to any trust, pen-
sion, profit-sharing or other benefit plan for such persons provided such sales
are made upon the assurance of the purchaser that the purchase is made for
investment purposes and that the securities will not be re-sold except through
redemption or repurchase; (b) offers of Class A shares to any other investment
company in connection with the combination of such company with the Fund by
merger, acquisition of assets or otherwise; (c) purchases of Class A shares by
any client of a newly employed Smith Barney Financial Consultant (for a period
up to 90 days from the commencement of the Financial Consultant's employment
with Smith Barney), on the condition the purchase of Class A shares is made
with the proceeds of the redemption of shares of a mutual fund which (i) was
sponsored by the Financial Consultant's prior employer, (ii) was sold to the
client by the Financial Consultant and (iii) was subject to a sales charge; (d)
shareholders who have redeemed Class A shares in the Fund (or Class A shares of
another fund of the Smith Barney Mutual Funds that are offered with a sales
charge equal to or greater than the maximum sales charge of the Fund) and who
wish to reinvest their redemption proceeds in the Fund, provided the reinvest-
ment is made within 60 calendar days of the redemption; (e) accounts managed by
registered investment advisory subsidiaries of Travelers; and (f) investments
of distributions from a UIT sponsored by Smith Barney. In order to obtain such
discounts, the purchaser must provide sufficient information at the time of
purchase to permit verification that the purchase would qualify for the elimi-
nation of the sales charge.
RIGHT OF ACCUMULATION
Class A shares of the Fund may be purchased by "any person" (as defined
above) at a reduced sales charge or at net asset value determined by aggregat-
ing the dollar amount of the new purchase and the total net asset value of all
Class
23
SMITH BARNEY
Aggressive Growth Fund Inc.
PURCHASE OF SHARES (CONTINUED)
A shares of the Fund and of funds sponsored by Smith Barney, which are offered
with a sales charge listed under "Exchange Privilege" then held by such person
and applying the sales charge applicable to such aggregate. In order to obtain
such discount, the purchaser must provide sufficient information at the time of
purchase to permit verification that the purchase qualifies for the reduced
sales charge. The right of accumulation is subject to modification or discon-
tinuance at any time with respect to all shares purchased thereafter.
GROUP PURCHASES
Upon completion of certain automated systems, a reduced sales charge or pur-
chase at net asset value will also be available to employees (and partners) of
the same employer purchasing as a group, provided each participant makes the
minimum initial investment required. The sales charge applicable to purchases
by each member of such a group will be determined by the table set forth above
under "Initial Sales Charge Alternative--Class A Shares," and will be based
upon the aggregate sales of Class A shares of Smith Barney Mutual Funds offered
with a sales charge to, and share holdings of, all members of the group. To be
eligible for such reduced sales charges or to purchase at net asset value, all
purchases must be pursuant to an employer- or partnership-sanctioned plan meet-
ing certain requirements. One such requirement is that the plan must be open to
specified partners or employees of the employer and its subsidiaries, if any.
Such plan may, but is not required to, provide for payroll deductions, IRAs or
investments pursuant to retirement plans under Sections 401 or 408 of the Code.
Smith Barney may also offer a reduced sales charge or net asset value purchase
for aggregating related fiduciary accounts under such conditions that Smith
Barney will realize economies of sales efforts and sales related expenses. An
individual who is a member of a qualified group may also purchase Class A
shares at the reduced sales charge applicable to the group as a whole. The
sales charge is based upon the aggregate dollar value of Class A shares offered
with a sales charge that have been previously purchased and are still owned by
the group, plus the amount of the current purchase. A "qualified group" is one
which (a) has been in existence for more than six months, (b) has a purpose
other than acquiring Fund shares at a discount and (c) satisfies uniform crite-
ria which enable Smith Barney to realize economies of scale in its costs of
distributing shares. A qualified group must have more than 10 members, must be
available to arrange for group meetings between representatives of the Fund and
the members, and must agree to include sales and other materials related to the
Fund in its publications and mailings to members at no cost to Smith Barney. In
order to obtain such reduced sales charge or to purchase at net asset value,
24
SMITH BARNEY
Aggressive Growth Fund Inc.
PURCHASE OF SHARES (CONTINUED)
the purchaser must provide sufficient information at the time of purchase to
permit verification that the purchase qualifies for the reduced sales charge.
Approval of group purchase reduced sales charge plans is subject to the discre-
tion of Smith Barney.
LETTER OF INTENT
A Letter of Intent for amounts of $50,000 or more provides an opportunity for
an investor to obtain a reduced sales charge by aggregating investments over a
13 month period, provided that the investor refers to such Letter when placing
orders. For purposes of a Letter of Intent, the "Amount of Investment" as
referred to in the preceding sales charge table includes purchases of all Class
A shares of the Fund and other funds of the Smith Barney Mutual Funds offered
with a sales charge over the 13 month period based on the total amount of
intended purchases plus the value of all Class A shares previously purchased
and still owned. An alternative is to compute the 13 month period starting up
to 90 days before the date of execution of a Letter of Intent. Each investment
made during the period receives the reduced sales charge applicable to the
total amount of the investment goal. If the goal is not achieved within the
period, the investor must pay the difference between the sales charges applica-
ble to the purchases made and the charges previously paid, or an appropriate
number of escrowed shares will be redeemed. New Letters of Intent will be
accepted beginning January 1, 1995. Please contact a Smith Barney Financial
Consultant or TSSG to obtain a Letter of Intent application.
DEFERRED SALES CHARGE ALTERNATIVES
"CDSC Shares" are sold at net asset value next determined without an initial
sales charge so that the full amount of an investor's purchase payment may be
immediately invested in the Fund. A CDSC, however, may be imposed on certain
redemptions of these shares. "CDSC Shares" are: (a) Class B shares; (b) Class C
shares; and (c) Class A shares which when combined with Class A shares offered
with a sales charge currently held by an investor equal or exceed $500,000 in
the aggregate.
Any applicable CDSC will be assessed on an amount equal to the lesser of the
cost of the shares being redeemed or their net asset value at the time of
redemption. CDSC Shares that are redeemed will not be subject to a CDSC to the
extent that the value of such shares represents: (a) capital appreciation of
Fund assets; (b) reinvestment of dividends or capital gain distributions; (c)
with respect to Class B shares, shares redeemed more than five years after
their pur
25
SMITH BARNEY
Aggressive Growth Fund Inc.
PURCHASE OF SHARES (CONTINUED)
chase; or (d) with respect to Class C shares and Class A shares that are CDSC
Shares, shares redeemed more than 12 months after their purchase.
Class C shares and Class A shares that are CDSC Shares are subject to a 1.00%
CDSC if redeemed within 12 months of purchase. In circumstances in which the
CDSC is imposed on Class B shares, the amount of the charge will depend on the
number of years since the shareholder made the purchase payment from which the
amount is being redeemed. Solely for purposes of determining the number of
years since a purchase payment, all purchase payments made during a month will
be aggregated and deemed to have been made on the last day of the preceding
Smith Barney statement month.
The following table sets forth the rates of the charge for redemptions of
Class B shares by shareholders, except in the case of purchases by Participat-
ing Plans, as described below. See "Purchase of Shares--Smith Barney 401(k)
Program."
<TABLE>
<CAPTION>
YEAR SINCE PURCHASE
PAYMENT WAS MADE CDSC
- ---------------------------------
<S> <C>
First 5.00%
Second 4.00%
Third 3.00%
Fourth 2.00%
Fifth 1.00%
Sixth 0.00%
Seventh 0.00%
Eighth 0.00%
- ---------------------------------
</TABLE>
Class B shares will convert automatically to Class A shares eight years after
the date on which they were purchased and thereafter will no longer be subject
to any distribution fees. There also will be converted at that time such pro-
portion of Class B Dividend Shares owned by the shareholder as the total number
of his or her Class B shares converting at the time bears to the total number
of outstanding Class B shares (other than Class B Dividend Shares) owned by the
shareholder. In addition, a certain portion of Class B Dividend Shares will be
converted at that time. Shareholders who held Class B shares of Smith Barney
Shearson Short-Term World Income Fund (the "Short-Term World Income Fund") on
July 15, 1994 and who subsequently exchange those shares for Class B shares of
the Fund will be offered the opportunity to exchange all such Class B shares
for Class A shares of the Fund four years after the date on which those shares
were deemed to have been purchased. Holders of such Class B shares will be
notified of the pending exchange in writing approximately 30 days before the
fourth anniversary of the purchase date and, unless the
26
SMITH BARNEY
Aggressive Growth Fund Inc.
PURCHASE OF SHARES (CONTINUED)
exchange has been rejected in writing, the exchange will occur on or about the
fourth anniversary date. See "Prospectus Summary--Alternative Purchase Arrange-
ments--Class B Shares Conversion Feature."
The length of time that CDSC Shares acquired through an exchange have been
held will be calculated from the date that the shares exchanged were initially
acquired in one of the other applicable Smith Barney Mutual Funds, and Fund
shares being redeemed will be considered to represent, as applicable, capital
appreciation or dividend and capital gain distribution reinvestments in such
other funds. For Federal income tax purposes, the amount of the CDSC will
reduce the gain or increase the loss, as the case may be, on the amount real-
ized on redemption. The amount of any CDSC will be paid to Smith Barney.
To provide an example, assume an investor purchased 100 Class B shares at $10
per share for a cost of $1,000. Subsequently, the investor acquired 5 addi-
tional shares through dividend reinvestment. During the fifteenth month after
the purchase, the investor decided to redeem $500 of his or her investment.
Assuming at the time of the redemption the net asset value had appreciated to
$12 per share, the value of the investor's shares would be $1,260 (105 shares
at $12 per share). The CDSC would not be applied to the amount which represents
appreciation ($200) and the value of the reinvested dividend shares ($60).
Therefore, $240 of the $500 redemption proceeds ($500 minus $260) would be
charged at a rate of 4.00% (the applicable rate for Class B shares) for a total
deferred sales charge of $9.60.
WAIVERS OF CDSC
The CDSC will be waived on: (a) exchanges (see "Exchange Privilege"); (b)
automatic cash withdrawals in amounts equal to or less than 1.00% per month of
the value of the shareholder's shares at the time the withdrawal plan commences
(see below) (provided, however, that automatic cash withdrawals in amounts
equal to or less than 2.00% per month of the value of the shareholder's shares
will be permitted for withdrawal plans that were established prior to November
7, 1994); (c) redemptions of shares within 12 months following the death or
disability of the shareholder; (d) redemption of shares made in connection with
qualified distributions from retirement plans or IRAs upon the attainment of
age 59 1/2; (e) involuntary redemptions; and (f) redemptions of shares in con-
nection with a combination of the Fund with any investment company by merger,
acquisition of assets or otherwise. In addition, a shareholder who has redeemed
shares from other funds of the Smith Barney Mutual Funds may, under certain
circumstances, reinvest all or part of the redemption proceeds
27
SMITH BARNEY
Aggressive Growth Fund Inc.
PURCHASE OF SHARES (CONTINUED)
within 60 days and receive pro rata credit for any CDSC imposed on the prior
redemption.
CDSC waivers will be granted subject to confirmation (by Smith Barney in the
case of shareholders who are also Smith Barney clients or by TSSG in the case
of all other shareholders) of the shareholder's status or holdings, as the case
may be.
SMITH BARNEY 401(K) PROGRAM
Investors may be eligible to participate in the Smith Barney 401(k) Program,
which is generally designed to assist plan sponsors in the creation and opera-
tion of retirement plans under Section 401(a) of the Code. To the extent appli-
cable, the same terms and conditions are offered to all Participating Plans in
the Smith Barney 401(k) Program.
The Fund offers to Participating Plans Class A, Class B, Class C and Class Y
shares as investment alternatives under the Smith Barney 401(k) Program. Class
A, Class B and Class C shares acquired through the Smith Barney 401(k) Program
are subject to the same service and/or distribution fees as, but different
sales charge and CDSC schedules than, the Class A, Class B and Class C shares
acquired by other investors. Similar to those available to other investors,
Class Y shares acquired through the Smith Barney 401(k) Program are not subject
to any initial sales charge, CDSC or service or distribution fee. Once a Par-
ticipating Plan has made an initial investment in the Fund, all of its subse-
quent investments in the Fund must be in the same Class of shares, except as
otherwise described below.
Class A Shares. Class A shares of the Fund are offered without any initial
sales charge to any Participating Plan that purchases from $500,000 to
$4,999,999 of Class A shares of one or more funds of the Smith Barney Mutual
Funds. Class A shares acquired through the Smith Barney 401(k) Program after
November 7, 1994 are subject to a CDSC of 1.00% of redemption proceeds, if the
Participating Plan terminates within four years of the date the Participating
Plan first enrolled in the Smith Barney 401(k) Program.
Class B Shares. Class B shares of the Fund are offered to any Participating
Plan that purchases less than $250,000 of one or more funds of the Smith Barney
Mutual Funds. Class B shares acquired through the Smith Barney 401(k) Program
are subject to a CDSC of 3.00% of redemption proceeds, if
28
SMITH BARNEY
Aggressive Growth Fund Inc.
PURCHASE OF SHARES (CONTINUED)
the Participating Plan terminates within eight years of the date the Partici-
pating Plan first enrolled in the Smith Barney 401(k) Program.
Eight years after the date the Participating Plan enrolled in the Smith Bar-
ney 401(k) Program, it will be offered the opportunity to exchange all of its
Class B shares for Class A shares of the Fund. Such Plans will be notified of
the pending exchange in writing approximately 60 days before the eighth anni-
versary of the enrollment date and, unless the exchange has been rejected in
writing, the exchange will occur on or about the eighth anniversary date. Once
the exchange has occurred, a Participating Plan will not be eligible to acquire
additional Class B shares of the Fund but instead may acquire Class A shares of
the Fund. If the Participating Plan elects not to exchange all of its Class B
shares at that time, each Class B share held by the Participating Plan will
have the same conversion feature as Class B shares held by other investors. See
"Purchase of Shares--Deferred Sales Charge Alternatives."
Class C Shares. Class C shares of the Fund are offered to any Participating
Plan that purchases from $250,000 to $499,999 of one or more funds of the Smith
Barney Mutual Funds. Class C shares acquired through the Smith Barney 401(k)
Program after November 7, 1994 are subject to a CDSC of 1.00% of redemption
proceeds, if the Participating Plan terminates within four years of the date
the Participating Plan first enrolled in the Smith Barney 401(k) Program. In
any year after the date a Participating Plan enrolled in the Smith Barney
401(k) Program if its total Class C holdings equal at least $500,000 as of the
calendar year-end, the Participating Plan will be offered the opportunity to
exchange all of its Class C shares for Class A shares of the Fund. Such Plans
will be notified in writing within 30 days after the last business day of the
calendar year, and unless the exchange offer has been rejected in writing, the
exchange will occur on or about the last business day of the following March.
Once the exchange has occurred, a Participating Plan will not be eligible to
acquire Class C shares of the Fund but instead may acquire Class A shares of
the Fund. Class C shares not converted will continue to be subject to the dis-
tribution fee.
Class Y Shares. Class Y shares of the Fund are offered without any service or
distribution fees, sales charge or CDSC to any Participating Plan that pur-
chases $5,000,000 or more of Class Y shares of one or more funds of the Smith
Barney Mutual Funds.
No CDSC is imposed on redemptions of CDSC Shares to the extent that the net
asset value of the shares redeemed does not exceed the current net asset
29
SMITH BARNEY
Aggressive Growth Fund Inc.
PURCHASE OF SHARES (CONTINUED)
value of the shares purchased through reinvestment of dividends or capital gain
distributions, plus (a) with respect to Class A and Class C shares, the current
net asset value of such shares purchased more than one year prior to redemption
and, with respect to Class B shares, the current net asset value of Class B
shares purchased more than eight years prior to the redemption, plus (b) with
respect to Class A and Class C shares, increases in the net asset value of the
shareholder's Class A or Class C shares above the purchase payments made during
the preceding year and, with respect to Class B shares, increases in the net
asset value of the shareholder's Class B shares above the purchase payments
made during the preceding eight years. Whether or not the CDSC applies to a
Participating Plan depends on the number of years since the Participating Plan
first became enrolled in the Smith Barney 401(k) Program, unlike the applica-
bility of the CDSC to other shareholders, which depends on the number of years
since those shareholders made the purchase payment from which the amount is
being redeemed.
The CDSC will be waived on redemptions of CDSC Shares in connection with
lump-sum or other distributions made by a Participating Plan as a result of:
(a) the retirement of an employee in the Participating Plan; (b) the termina-
tion of employment of an employee in the Participating Plan; (c) the death or
disability of an employee in the Participating Plan; (d) the attainment of age
59 1/2 by an employee in the Participating Plan; (e) hardship of an employee in
the Participating Plan to the extent permitted under Section 401(k) of the
Code; or (f) redemptions of shares in connection with a loan made by the Par-
ticipating Plan to an employee.
Participating Plans wishing to acquire shares of the Fund through the Smith
Barney 401(k) Program must purchase such shares directly from TSSG. For further
information regarding the Smith Barney 401(k) Program, investors should contact
a Smith Barney Financial Consultant.
EXCHANGE PRIVILEGE
Except as otherwise noted below, shares of each Class may be exchanged at the
net asset value next determined for shares of the same Class in the following
funds of the Smith Barney Mutual Funds, to the extent shares are offered for
sale in the shareholder's state of residence. Exchanges of Class A, Class B and
Class C shares are subject to minimum investment requirements and all
30
SMITH BARNEY
Aggressive Growth Fund Inc.
EXCHANGE PRIVILEGE (CONTINUED)
shares are subject to the other requirements of the fund into which exchanges
are made and a sales charge differential may apply.
FUND NAME
Growth Funds
Smith Barney Appreciation Fund Inc.
Smith Barney European Fund
Smith Barney Fundamental Value Fund Inc.
Smith Barney Funds, Inc.--Capital Appreciation Portfolio
Smith Barney Global Opportunities Fund
Smith Barney Precious Metals and Minerals Fund Inc.
Smith Barney Special Equities Fund
Smith Barney Telecommunications Growth Fund
Smith Barney World Funds, Inc.--European Portfolio
Smith Barney World Funds, Inc.--International Equity Portfolio
Smith Barney World Funds, Inc.--Pacific Portfolio
Growth and Income Funds
Smith Barney Convertible Fund
Smith Barney Funds, Inc.--Income and Growth Portfolio
Smith Barney Growth and Income Fund
Smith Barney Premium Total Return Fund
Smith Barney Strategic Investors Fund
Smith Barney Utilities Fund
Smith Barney World Funds--International Balanced Portfolio
Income Funds
**Smith Barney Adjustable Rate Government Income Fund
Smith Barney Diversified Strategic Income Fund
*Smith Barney Funds, Inc.--Income Return Account Portfolio
Smith Barney Funds, Inc.--Monthly Payment Government Portfolio
+++Smith Barney Funds, Inc.--Short-Term U.S. Treasury Securities Portfolio
Smith Barney Funds, Inc.--U.S. Government Securities Portfolio
Smith Barney Funds, Inc.--Utility Portfolio
Smith Barney Global Bond Fund
Smith Barney Government Securities Fund
Smith Barney High Income Fund
31
SMITH BARNEY
Aggressive Growth Fund Inc.
EXCHANGE PRIVILEGE (CONTINUED)
Smith Barney Investment Grade Bond Fund
*Smith Barney Limited Maturity Treasury Fund
Smith Barney Managed Governments Fund Inc.
Smith Barney World Funds, Inc.--Global Government Bond Portfolio
Municipal Bond Funds
Smith Barney Arizona Municipals Fund Inc.
Smith Barney California Municipals Fund Inc.
Smith Barney Florida Municipals Fund
*Smith Barney Intermediate Maturity California Municipals Fund
*Smith Barney Intermediate Maturity New York Municipals Fund
*Smith Barney Limited Maturity Municipals Fund
Smith Barney Managed Municipals Fund Inc.
Smith Barney Massachusetts Municipals Fund
*Smith Barney Muni Funds--California Limited Term Portfolio
Smith Barney Muni Funds--California Portfolio
*Smith Barney Muni Funds--Florida Limited Term Portfolio
Smith Barney Muni Funds--Florida Portfolio
Smith Barney Muni Funds--Georgia Portfolio
*Smith Barney Muni Funds--Limited Term Portfolio
Smith Barney Muni Funds--National Portfolio
Smith Barney Muni Funds--New Jersey Portfolio
Smith Barney Muni Funds--New York Portfolio
Smith Barney Muni Funds--Ohio Portfolio
Smith Barney Muni Funds--Pennsylvania Portfolio
Smith Barney New Jersey Municipals Fund Inc.
Smith Barney New York Municipals Fund Inc.
Smith Barney Oregon Municipals Fund
Smith Barney Tax-Exempt Income Fund
Money Market Funds
+Smith Barney Exchange Reserve Fund
++Smith Barney Money Funds, Inc.--Cash Portfolio
++Smith Barney Money Funds, Inc.--Government Portfolio
***Smith Barney Money Funds, Inc.--Retirement Portfolio
32
SMITH BARNEY
Aggressive Growth Fund Inc.
EXCHANGE PRIVILEGE (CONTINUED)
+++ Smith Barney Muni Funds--California Money Market Portfolio
+++ Smith Barney Muni Funds--New York Money Market Portfolio
+++ Smith Barney Municipal Money Market Fund, Inc.
- --------------------------------------------------------------------------------
* Available for exchange with Class A, Class C and Class Y shares of the Fund.
** Available for exchange with Class A, Class B, and Class Y shares of the
Fund. In addition, shareholders who own Class C shares of the Fund through
the Smith Barney 401(k) Program may exchange those shares for Class C
shares of this fund.
*** Available for exchange with Class A shares of the Fund.
+ Available for exchange with Class B and Class C shares of the Fund.
++ Available for exchange with Class A and Class Y shares of the Fund. In
addition, shareholders who own Class C shares of the Fund through the Smith
Barney 401(k) Program may exchange those shares for Class C shares of this
fund.
+++ Available for exchange with Class A and Class Y shares of the Fund.
Class A Exchanges. Class A shares of Smith Barney Mutual Funds sold without a
sales charge or with a maximum sales charge of less than the maximum charged by
other Smith Barney Mutual Funds will be subject to the appropriate "sales
charge differential" upon the exchange of such shares for Class A shares of a
fund sold with a higher sales charge. The "sales charge differential" is lim-
ited to a percentage rate no greater than the excess of the sales charge rate
applicable to purchases of shares of the mutual fund being acquired in the
exchange over the sales charge rate(s) actually paid on the mutual fund shares
relinquished in the exchange and on any predecessor of those shares. For pur-
poses of the exchange privilege, shares obtained through automatic reinvestment
of dividends and capital gain distributions are treated as having paid the same
sales charges applicable to the shares on which the dividends or distributions
were paid; however, except in the case of the Smith Barney 401(k) Program, if
no sales charge was imposed upon the initial purchase of the shares, any shares
obtained through automatic reinvestment will be subject to a sales charge dif-
ferential upon exchange.
Class B Exchanges. In the event a Class B shareholder (unless such share-
holder was a Class B shareholder of the Short-Term World Income Fund on July
15, 1994) wishes to exchange all or a portion of his or her shares in any of
the funds imposing a higher CDSC than that imposed by the Fund, the exchanged
Class B shares will be subject to the higher applicable CDSC. Upon an exchange,
the new Class B shares will be deemed to have been purchased on the same date
as the Class B shares of the Fund that have been exchanged.
Class C Exchanges. Upon an exchange, the new Class C shares will be deemed to
have been purchased on the same date as the Class C shares of the Fund that
have been exchanged.
33
SMITH BARNEY
Aggressive Growth Fund Inc.
EXCHANGE PRIVILEGE (CONTINUED)
Class Y Exchanges. Class Y shareholders of the Fund who wish to exchange all
or a portion of their Class Y shares for Class Y shares in any of the funds
identified above may do so without imposition of any charge.
Additional Information Regarding the Exchange Privilege. Although the
exchange privilege is an important benefit, excessive exchange transactions can
be detrimental to the Fund's performance and its shareholders. SBMFM may deter-
mine that a pattern of frequent exchanges is excessive and contrary to the best
interests of the Fund's other shareholders. In this event, SBMFM will notify
Smith Barney and Smith Barney may, at its discretion, decide to limit addi-
tional purchases and/or exchanges by a shareholder. Upon such a determination,
Smith Barney will provide notice in writing or by telephone to the shareholder
at least 15 days prior to suspending the exchange privilege and during the 15
day period the shareholder will be required to (a) redeem his or her shares in
the Fund or (b) remain invested in the Fund or exchange into any of the funds
of the Smith Barney Mutual Funds listed above, which position the shareholder
would be expected to maintain for a significant period of time. All relevant
factors will be considered in determining what constitutes an abusive pattern
of exchanges.
Exchanges will be processed at the net asset value next determined, plus any
applicable sales charge differential. Redemption procedures discussed below are
also applicable for exchanging shares, and exchanges will be made upon receipt
of all supporting documents in proper form. If the account registration of the
shares of the fund being acquired is identical to the registration of the
shares of the fund exchanged, no signature guarantee is required. A capital
gain or loss for tax purposes will be realized upon the exchange, depending
upon the cost or other basis of shares redeemed. Before exchanging shares,
investors should read the current prospectus describing the shares to be
acquired. The Fund reserves the right to modify or discontinue exchange privi-
leges upon 60 days' prior notice to shareholders.
REDEMPTION OF SHARES
The Fund is required to redeem the shares of the Fund tendered to it, as
described below, at a redemption price equal to their net asset value per share
next determined after receipt of a written request in proper form at no charge
34
SMITH BARNEY
Aggressive Growth Fund Inc.
REDEMPTION OF SHARES (CONTINUED)
other than any applicable CDSC. Redemption requests received after the close of
regular trading on the NYSE are priced at the net asset value next determined.
If a shareholder holds shares in more than one Class, any request for redemp-
tion must specify the Class being redeemed. In the event of a failure to spec-
ify which Class, or if the investor owns fewer shares of the Class than speci-
fied, the redemption request will be delayed until the Fund's transfer agent
receives further instructions from Smith Barney, or if the shareholder's
account is not with Smith Barney, from the shareholder directly. The redemption
proceeds will be remitted on or before the seventh day following receipt of
proper tender, except on any days on which the NYSE is closed or as permitted
under the Investment Company Act of 1940, as amended ("1940 Act"), in extraor-
dinary circumstances. The Fund anticipates that, in accordance with regulatory
changes, beginning on or about June 1, 1995, payment will be made on the third
business day after receipt of proper tender. Generally, if the redemption pro-
ceeds are remitted to a Smith Barney brokerage account, these funds will not be
invested for the shareholder's benefit without specific instruction and Smith
Barney will benefit from the use of temporarily uninvested funds. Redemption
proceeds for shares purchased by check, other than a certified or official bank
check, will be remitted upon clearance of the check, which may take up to ten
days or more.
Shares held by Smith Barney as custodian must be redeemed by submitting a
written request to a Smith Barney Financial Consultant. Shares other than those
held by Smith Barney as custodian may be redeemed through an investor's Finan-
cial Consultant, Introducing Broker or dealer in the selling group or by sub-
mitting a written request for redemption to:
Smith Barney Aggressive Growth Fund, Inc.
Class A, B, C or Y (please specify)
c/o The Shareholder Services Group, Inc.
P.O. Box 9134
Boston, Massachusetts 02205-9134
A written redemption request must (a) state the Class and number or dollar
amount of shares to be redeemed, (b) identify the shareholder's account number
and (c) be signed by each registered owner exactly as the shares are regis-
tered. If the shares to be redeemed were issued in certificate form, the cer-
tificates must be endorsed for transfer (or be accompanied by an endorsed stock
power) and must be submitted to TSSG together with the redemption request. Any
signa
35
SMITH BARNEY
Aggressive Growth Fund Inc.
REDEMPTION OF SHARES (CONTINUED)
ture appearing on a redemption request, share certificate or stock power must
be guaranteed by an eligible guarantor institution such as a domestic bank,
savings and loan institution, domestic credit union, member bank of the Federal
Reserve System or member firm of a national securities exchange. TSSG may
require additional supporting documents for redemptions made by corporations,
executors, administrators, trustees or guardians. A redemption request will not
be deemed properly received until TSSG receives all required documents in
proper form.
AUTOMATIC CASH WITHDRAWAL PLAN
The Fund offers shareholders an automatic cash withdrawal plan, under which
shareholders who own shares with a value of at least $10,000 may elect to
receive cash payments of at least $100 monthly or quarterly. Retirement plan
accounts are eligible for automatic cash withdrawal plans only where the share-
holder is eligible to receive qualified distributions and has an account value
of at least $5,000. The withdrawal plan will be carried over on exchanges
between funds or Classes of the Fund. Any applicable CDSC will not be waived on
amounts withdrawn by a shareholder that exceed 1.00% per month of the value of
the shareholder's shares subject to the CDSC 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 shareholder's shares subject to the CDSC.) For
further information regarding the automatic cash withdrawal plan, shareholders
should contact a Smith Barney Financial Consultant.
MINIMUM ACCOUNT SIZE
The Fund reserves the right to involuntarily liquidate any shareholder's
account in the Fund if the aggregate net asset value of the shares held in the
Fund account is less than $500. (If a shareholder has more than one account in
this Fund, each account must satisfy the minimum account size.) The Fund, how-
ever, will not redeem shares based solely on market reductions in net asset
value. Before the Fund exercises such right, shareholders will receive written
notice and will be permitted 60 days to bring accounts up to the minimum to
avoid automatic redemption.
36
SMITH BARNEY
Aggressive Growth Fund Inc.
PERFORMANCE
TOTAL RETURN
From time to time the Fund may include its total return, average annual total
return and current dividend return in advertisements and/or other types of
sales literature. These figures are computed separately for Class A, Class B,
Class C and Class Y shares of the Fund. These figures are based on historical
earnings and are not intended to indicate future performance. Total return is
computed for a specified period of time assuming deduction of the maximum sales
charge, if any, from the initial amount invested and reinvestment of all income
dividends and capital gain distributions on the reinvestment dates at prices
calculated as stated in this Prospectus, then dividing the value of the invest-
ment at the end of the period so calculated by the initial amount invested and
subtracting 100%. The standard average annual total return, as prescribed by
the SEC, is derived from this total return, which provides the ending redeem-
able value. Such standard total return information may also be accompanied with
nonstandard total return information for differing periods computed in the same
manner but without annualizing the total return or taking sales charges into
account. The Fund calculates current dividend return for each Class by
annualizing the most recent monthly distribution and dividing by the net asset
value or the maximum public offering price (including sales charge) on the last
day of the period for which current dividend return is presented. The current
dividend return for each Class may vary from time to time depending on market
conditions, the composition of its investment portfolio and operating expenses.
These factors and possible differences in the methods used in calculating cur-
rent dividend return should be considered when comparing a Class' current
return to yields published for other investment companies and other investment
vehicles. The Fund may also include comparative performance infor-mation in
advertising or marketing its shares. Such performance information may include
data from Lipper Analytical Services, Inc. and other financial publications.
The Fund will include performance data for Class A, Class B, Class C and Class
Y shares in any advertisement or information including performance data of the
Fund.
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
Overall responsibility for management and supervision of the Fund rests with
the Fund's Board of Directors. The Directors approve all significant agreements
37
SMITH BARNEY
Aggressive Growth Fund Inc.
MANAGEMENT OF THE FUND (CONTINUED)
between the Fund and the companies that furnish services to the Fund, including
agreements with the Fund's distributor, investment adviser, administrator, sub-
administrator, custodian and transfer agent. The day-to-day operations of the
Fund are delegated to the Fund's investment adviser, administrator and sub-
administrator. The Statement of Additional Information contains background
information regarding each Director and executive officer of the Fund.
INVESTMENT ADVISER--SBMFM
SBMFM, the Fund's investment adviser, is a registered investment adviser
whose principal executive offices are located at 388 Greenwich Street, New
York, New York 10013. SBMFM (through its predecessor entities) has been in the
investment counselling business since 1940. SBMFM renders investment advice to
a wide variety of individual, institutional and investment company clients
which had aggregate assets under management as of September 30, 1994, in excess
of $52.4 billion.
Subject to the supervision and direction of the Fund's Board of Directors,
SBMFM manages the Fund's portfolio in accordance with the Fund's stated invest-
ment objective and policies, makes investment decisions for the Fund, places
orders to purchase and sell securities and employs professional portfolio man-
agers. For investment advisory services rendered to the Fund, the Fund pays
SBMFM a fee at the annual rate of 0.60% of the value of the Fund's average
daily net assets.
PORTFOLIO MANAGEMENT
Richard Freeman, an Investment Officer of SBMFM, is primarily responsible for
management of the Fund's assets. Mr. Freeman has served in this capacity since
November of 1986, and manages the day-to-day operations of the Fund, including
making all investment decisions.
Management's discussion and analysis, and additional performance information
regarding the Fund during the fiscal year ended August 31, 1994 is included in
the Annual Report dated August 31, 1994. A copy of the Annual Report may be
obtained upon request and without charge from a Smith Barney Financial Consul-
tant or by writing or calling the Fund at the address or phone number listed on
page one of this Prospectus.
38
SMITH BARNEY
Aggressive Growth Fund Inc.
MANAGEMENT OF THE FUND (CONTINUED)
ADMINISTRATOR
SBMFM also serves as the Fund's administrator and generally oversees all
aspects of the Fund's administration. For administration services rendered to
the Fund, the Fund pays SBMFM a fee at the annual rate of .20% of the value of
the Fund's average daily net assets.
SUB-ADMINISTRATOR--BOSTON ADVISORS
Boston Advisors, located at One Boston Place, Boston, Massachusetts 02108,
serves as the Fund's sub-administrator. Boston Advisors provides investment
management, investment advisory and/or administrative services to investment
companies that had aggregate assets under management as of September 30, 1994
in excess of $48.6 billion.
Boston Advisors calculates the net asset value of the Fund's shares and gen-
erally assists SBMFM in all aspects of the Fund's administration and operation.
Under a Sub-Administration Agreement dated April 20, 1994, Boston Advisors is
paid a portion of the fee paid by the Fund to SBMFM at a rate agreed upon from
time to time between Boston Advisors and SBMFM. Prior to April 20, 1994, Boston
Advisors served as the Fund's administrator.
DISTRIBUTOR
Smith Barney is located at 388 Greenwich Street, New York, New York 10013.
Smith Barney distributes shares of the Fund as principal underwriter and as
such conducts a continuous offering pursuant to a "best efforts" arrangement
requiring Smith Barney to take and pay for only such securities as may be sold
to the public. Pursuant to a plan of distribution adopted by the Fund under
Rule 12b-1 under the 1940 Act (the "Plan"), Smith Barney is paid an annual
service fee with respect to Class A, Class B and Class C shares of the Fund at
the annual rate of 0.25% of the average daily net assets of the respective
Class. Smith Barney is also paid an annual distribution fee with respect to
Class B and Class C shares at the annual rate of 0.75% of the average daily net
assets attributable to those Classes. Class B shares that automatically convert
to Class A shares eight years after the date of original purchase will no
longer be subject to distribution fees. The fees are used by Smith Barney to
pay its Financial Consultants for servicing shareholder accounts and, in the
case of Class B and Class C shares, to cover expenses primarily intended to
result in the sale of
39
SMITH BARNEY
Aggressive Growth Fund Inc.
DISTRIBUTOR (CONTINUED)
those shares. These expenses include: advertising expenses; the cost of print-
ing and mailing prospectuses to potential investors; payments to and expenses
of Smith Barney Financial Consultants and other persons who provide support
services in connection with the distribution of shares; interest and/or carry-
ing charges; and indirect and overhead costs of Smith Barney associated with
the sale of Fund shares, including lease, utility, communications and sales
promotion expenses.
The payments to Smith Barney Financial Consultants for selling shares of a
Class include a commission or fee paid by the investor or Smith Barney at the
time of sale and, with respect to Class A, Class B and Class C shares, a con-
tinuing fee for servicing shareholder accounts for as long as a shareholder
remains a holder of that Class. Smith Barney Financial Consultants may receive
different levels of compensation for selling different Classes of shares.
Payments under the Plan are not tied exclusively to the distribution and
shareholder service expenses actually incurred by Smith Barney and the payments
may exceed distribution expenses actually incurred. The Fund's Board of Direc-
tors will evaluate the appropriateness of the Plan and its payment terms on a
continuing basis and in so doing will consider all relevant factors, including
expenses borne by Smith Barney, amounts received under the Plan and proceeds of
the CDSC.
ADDITIONAL INFORMATION
The Fund was incorporated under the laws of the State of Maryland on May 12,
1983, and is registered with the SEC as a diversified, open-end management
investment company. The Fund offers shares of common stock currently classified
into five Classes, A, B, C, Y and Z. Each Class represents an identical inter-
est in the Fund's investment portfolio. As a result, the Classes have the same
rights, privileges and preferences, except with respect to: (a) the designation
of each Class; (b) the effect of the respective sales charges for each Class;
(c) the distribution and/or service fees borne by each Class pursuant to the
Plan; (d) the expenses allocable exclusively to each Class; (e) voting rights
on matters exclusively affecting a single Class; (f) the exchange privilege of
each Class; and (g) the conversion feature of the Class B shares. The Fund's
Board of Directors does not anticipate that there will be any conflicts among
the interests of the
40
SMITH BARNEY
Aggressive Growth Fund Inc.
ADDITIONAL INFORMATION (CONTINUED)
holders of the different Classes. The Directors, on an ongoing basis, will con-
sider whether any such conflict exists and, if so, take appropriate action.
The Fund does not hold annual shareholder meetings. There normally will be no
meeting of shareholders for the purpose of electing Directors unless and until
such time as less than a majority of the Directors holding office have been
elected by shareholders. The Directors will call a meeting for any purpose upon
written request of shareholders holding at least 10% of the Fund's outstanding
shares and the Fund will assist stockholders in calling such a meeting as
required by the 1940 Act. When matters are submitted for shareholder vote,
shareholders of each Class will have one vote for each full share owned and a
proportionate, fractional vote for any fractional share held of that Class.
Generally, shares of the Fund will be voted on a Fund-wide basis on all matters
except matters affecting only the interests of one or more of the Classes.
Boston Safe Deposit and Trust Company, an indirect wholly owned subsidiary of
Mellon, is located at One Boston Place, Boston, Massachusetts 02108, and serves
as custodian of the Fund's investments.
TSSG is located at Exchange Place, Boston, Massachusetts 02109, and serves as
the Fund's transfer agent.
The Fund sends its shareholders a semi-annual report and an audited annual
report, which include listings of the investment securities held by the Fund at
the end of the reporting period. In an effort to reduce the Fund's printing and
mailing costs, the Fund plans to consolidate the mailing of its semi-annual and
annual reports by household. This consolidation means that a household having
multiple accounts with the identical address of record will receive a single
copy of each report. In addition, the Fund also plans to consolidate the mail-
ing of its Prospectus so that a shareholder having multiple accounts (that is,
individual, IRA and/or Self-Employed Retirement Plan accounts) will receive a
single Prospectus annually. Shareholders who do not want this consolidation to
apply to their accounts should contact their Smith Barney Financial Consultants
or the Fund's transfer agent.
41
PROSPECTUS
[LOGO OF SMITH BARNEY MUTUAL FUNDS APPEARS HERE]
SMITH BARNEY
Aggressive Growth Fund Inc.
November 7, 1994
Prospectus begins on page one
PROSPECTUS
[LOGO OF SMITH BARNEY MUTUAL FUNDS APPEARS HERE]
SMITH BARNEY
Aggressive Growth Fund Inc.
Class Z Shares
November 7, 1994
Prospectus begins on page one
SMITH BARNEY
Aggressive Growth Fund Inc.--Class Z Shares
PROSPECTUS NOVEMBER 7, 1994
388 Greenwich Street
New York, New York 10013
(212) 723-9218
Smith Barney Aggressive Growth Fund Inc. (the "Fund") is a diversified mutual
fund that seeks capital appreciation by investing primarily in common stocks of
companies the Fund's investment adviser believes are experiencing, or have the
potential to experience, growth in earnings that exceed the average earnings
growth rate of companies whose securities are included in the Standard & Poor's
Daily Price Index of 500 Common Stocks (the "S&P 500"), a weighted index which
measures the aggregate change in market value of 400 industrials, 60 transpor-
tation stocks and utility companies and 40 financial issues. Companies whose
earnings grow at a rate more rapid than those of S&P companies are often small-
or medium-sized companies that stand to benefit from new products or services,
technological developments or changes in management. Consequently, the Fund
invests principally in the securities of small- or medium-sized companies.
Because of its objective and policies, the Fund may be subject to greater
investment risks than those assumed by some other investment companies.
This Prospectus sets forth concisely certain information about the Fund,
including expenses, that prospective investors will find helpful in making an
investment decision. Investors are encouraged to read this Prospectus carefully
and retain it for future reference.
The Class Z shares described in this Prospectus (previously designated as
Class C shares) are currently offered exclusively for sale to tax-exempt
employee benefit and retirement plans of Smith Barney Inc. ("Smith Barney") or
any of its affiliates ("Qualified Plans") and to certain unit investment trusts
sponsored by Smith Barney or any of its affiliates ("Smith Barney UITs").
Additional information about the Fund is contained in a Statement of
Additional Information dated November 7, 1994, as amended or supplemented from
time to time, that is available upon request and without charge by calling or
writing the Fund at the telephone number or address set forth above or by con-
tacting a Smith Barney Financial Consultant. The Statement of Additional Infor-
mation has been filed with the Securities and Exchange Commission (the "SEC")
and is incorporated by reference into this Prospectus in its entirety.
SMITH BARNEY INC.
Distributor
SMITH BARNEY MUTUAL FUNDS MANAGEMENT INC.
Investment Adviser and Administrator
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
1
SMITH BARNEY
Aggressive Growth Fund Inc.--Class Z Shares
TABLE OF CONTENTS
<TABLE>
<S> <C>
THE FUND'S EXPENSES 3
- -------------------------------------------------
FINANCIAL HIGHLIGHTS 4
- -------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES 5
- -------------------------------------------------
VALUATION OF SHARES 8
- -------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES 9
- -------------------------------------------------
PURCHASE AND REDEMPTION OF SHARES 10
- -------------------------------------------------
EXCHANGE PRIVILEGE 11
- -------------------------------------------------
PERFORMANCE 12
- -------------------------------------------------
MANAGEMENT OF THE FUND 13
- -------------------------------------------------
ADDITIONAL INFORMATION 15
- -------------------------------------------------
</TABLE>
No person has been authorized to give any information or to
make any representations in connection with this offering other
than those contained in this Prospectus and, if given or made,
such other information or representations must not be relied
upon as having been authorized by the Fund or the distributor.
This Prospectus does not constitute an offer by the Fund or the
distributor to sell or a solicitation of an offer to buy any
securities offered hereby in any jurisdiction to any person to
whom of its unlawful to make such an offer or solicitation in
such jurisdiction.
2
SMITH BARNEY
Aggressive Growth Fund Inc.--Class Z Shares
THE FUND'S EXPENSES
The following expense table lists the costs and expenses an investor will incur
either directly or indirectly as a shareholder of Class Z shares of the Fund,
based on the Fund's operating expenses for its most recent fiscal year:
<TABLE>
<CAPTION>
AS A % OF AVERAGE
NET ASSETS
- -------------------------------------------------
<S> <C>
ANNUAL FUND OPERATING EXPENSES
Management fees .80%
Other expenses .21
- -------------------------------------------------
TOTAL FUND OPERATING EXPENSES 1.01%
- -------------------------------------------------
</TABLE>
The nature of the services for which the Fund pays management fees is
described under "Management of the Fund." "Other expenses" in the above table
include fees for shareholder services, custodial fees, legal and accounting
fees, printing costs and registration fees.
EXAMPLE The following example is intended to assist an investor in understand-
ing the various costs that an investor in the Fund will bear directly or indi-
rectly. The example assumes payment by the Fund of operating expenses at the
levels set forth in the table above. See "Purchase and Redemption of Shares"
and "Management of the Fund."
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
An investor would pay the
following expenses on a $1,000
investment in Class Z shares of
the Fund, assuming (1) 5% annual
return and
(2) redemption at the end of
each time period: $10 $32 $56 $124
- --------------------------------------------------------------------------------------
</TABLE>
The example also provides a means for the investor to compare expense levels
of funds with different fee structures over varying investment periods. To
facilitate such comparison, all funds are required to utilize a 5.00% annual
return assumption. However, the Fund's actual return will vary and may be
greater or less than 5.00%. THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTA-
TION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN.
3
SMITH BARNEY
Aggressive Growth Fund Inc.--Class Z Shares
FINANCIAL HIGHLIGHTS
Except where otherwise noted, the following information for the fiscal year
ended August 31, 1994 is for the Fund's Class Z shares and has been audited by
Coopers & Lybrand L.L.P., independent accountants, whose report thereon appears
in the Fund's Annual Report dated August 31, 1994. This information should be
read in conjunction with the financial statements and related notes that also
appear in the Fund's Annual Report, which is incorporated by reference into the
Statement of Additional Information.
FOR A CLASS Z SHARE OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
8/31/94 8/31/93*+
<S> <C> <C>
Net Asset Value, beginning of period $23.67 $20.52
- ----------------------------------------------------------------------------
Income from investment operations:
Net investment loss (0.31) (0.12)
Net realized and unrealized gain on investments 3.58 3.27
- ----------------------------------------------------------------------------
Total from investment operations 3.27 3.15
- ----------------------------------------------------------------------------
Net Asset Value, end of period $26.94 $23.67
- ----------------------------------------------------------------------------
Total return ++ 13.81 % 15.35 %
- ----------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (in 000's) $24,467 $53,599
Ratio of operating expenses to average net assets 1.01 %+++ 0.99 %**
Ratio of net investment loss to average net assets (0.83)% (0.67)%**
Portfolio turnover rate 11 % 13 %
- ----------------------------------------------------------------------------
</TABLE>
* The Fund commenced selling Class Z shares (previously designated as Class C
shares) on November 6, 1992.
** Annualized.
+ Per share amounts have been calculated using the monthly average method,
which more appropriately presents the per share data for this period, since
use of the undistributed method did not accord with results of operations.
++ Total return represents aggregate total return for the period indicated.
+++ The operating expense ratio excludes interest expense. The operating
expense ratio including interest expense was 1.02% for the year ended
August 31, 1994.
4
SMITH BARNEY
Aggressive Growth Fund Inc.--Class Z Shares
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The investment objective of the Fund is capital appreciation. Although the
Fund may receive current income from dividends, interest and other sources,
income is only an incidental consideration of the Fund. The Fund's investment
objective may not be changed without the approval of the holders of a majority
of the Fund's outstanding shares. There can be no assurance that the Fund will
achieve its investment objective.
The Fund attempts to achieve its investment objective by investing primarily
in common stocks of companies that Smith Barney Mutual Funds Management Inc.
("SBMFM") believes are experiencing, or have the potential to experience,
growth in earnings that exceed the average earnings growth rate of companies
having securities included in the S&P 500. An earnings growth rate exceeding
that of S&P 500 companies is often achieved by small- or medium-sized compa-
nies, generally referred to as "emerging growth companies," that stand to bene-
fit from new products or services, technological developments or changes in
management, but it also may be achieved by seasoned, established companies. As
a result, SBMFM anticipates that the Fund will invest principally in the secu-
rities of small- or medium-sized companies and to a lesser degree in the secu-
rities of large, well-known companies.
SBMFM focuses its stock selection for the Fund on a diversified group of
emerging growth companies that have passed their "start-up" phase and show pos-
itive earnings and the prospect of achieving significant profit gains in the
two to three years after the Fund acquires their stocks. These companies gener-
ally may be expected to benefit from new technologies, techniques, products or
services or cost-reducing measures, and may be affected by changes in manage-
ment, capitalization or asset deployment, government regulations or other
external circumstances.
Although SBMFM anticipates that the assets of the Fund ordinarily will be
invested primarily in common stocks of domestic companies, the Fund may invest
in convertible securities, preferred stocks, securities of foreign issuers,
warrants and restricted securities. In addition, when SBMFM believes that mar-
ket conditions warrant, the Fund may invest for temporary defensive purposes in
corporate and U.S. government bonds and notes and money market instruments. The
Fund also is authorized to borrow in an amount of up to 5% of its total assets
for extraordinary or emergency purposes, and may borrow up to 33 1/3% of its
total assets less liabilities, for leveraging purposes. See "Investment Poli-
cies and Strategies--Leveraging."
5
SMITH BARNEY
Aggressive Growth Fund Inc.--Class Z Shares
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
Further information about the Fund's investment policies, including a list of
those restrictions on its investment activities that cannot be changed without
shareholder approval, appears in the Statement of Additional Information.
INVESTMENT POLICIES AND STRATEGIES
Restricted Securities. Restricted securities are those that may not be sold
publicly without first being registered under the Securities Act of 1933, as
amended. For that reason, the Fund may not be able to dispose of restricted
securities at a time when, or at a price at which, it desires to do so and may
have to bear expenses associated with registering the securities. At any one
time, the Fund's aggregate holdings of restricted securities, repurchase agree-
ments having a duration of more than five business days, and securities lacking
readily available market quotations will not exceed 15% of the Fund's total
assets.
Foreign Securities. The Fund may invest up to 10% of its net assets in the
securities of foreign issuers. There are certain risks involved in investing in
foreign securities, including those resulting from fluctuations in currency
exchange rates, revaluation of currencies, future political or economic devel-
opments and the possible imposition of currency exchange blockages or other
foreign governmental laws or restrictions, reduced availability of public
information concerning issuers, and the fact that foreign companies are not
generally subject to uniform accounting, auditing and financial reporting stan-
dards or to other regulatory practices and requirements comparable to those
applicable to domestic companies. Moreover, securities of many foreign compa-
nies may be less liquid and their prices more volatile than securities of com-
parable domestic companies. In addition, with respect to certain foreign coun-
tries, there is the possibility of expropriation, confiscatory taxation and
limitations on the use or removal of funds or other assets of the Fund, includ-
ing the withholding of dividends.
Lending of Portfolio Securities. From time to time, the Fund may lend its
portfolio securities to brokers, dealers and other financial organizations.
These loans may not exceed 33 1/3% of the Fund's total assets taken at value.
Loans of portfolio securities by the Fund will be collateralized by cash, let-
ters of credit or obligations of the United States government or its agencies
and instrumentalities ("U.S. government securities") which are maintained at
all times in an amount equal to at least 100% of the current market value of
the loaned securities. By lending its portfolio securities, the Fund will seek
to generate income by
6
SMITH BARNEY
Aggressive Growth Fund Inc.--Class Z Shares
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
continuing to receive interest on loaned securities, by investing the cash col-
lateral in short-term instruments or by obtaining yield in the form of interest
paid by the borrower when U.S. government securities are used as collateral.
The risks in lending portfolio securities, as with other extensions of secured
credit, consist of possible delays 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 SBMFM to
be of good standing and will not be made unless, in the judgment of SBMFM, the
consideration to be earned from such loans would justify the risk.
Leveraging. The Fund may from time to time leverage its investments by pur-
chasing securities with borrowed money. The Fund may borrow money only from
banks and in an amount not to exceed 33 1/3% of the total value of its assets
less its liabilities. Borrowed money creates an opportunity for greater capital
gain but at the same time increases exposure to capital risk, as any gain in
the value of securities purchased with borrowed money that exceeds the interest
paid on the amount borrowed would cause the Fund's net asset value to increase
more rapidly than otherwise, while any decline in the value of securities pur-
chased would cause the Fund's net asset value to decrease more rapidly than
otherwise.
Money Market Instruments. As noted above, in certain circumstances the Fund
may invest in short-term money market instruments, such as U.S. government
securities, certificates of deposit, time deposits, and bankers' acceptances
issued by domestic banks (including their branches located outside the United
States and subsidiaries located in Canada), domestic branches of foreign banks,
savings and loan associations and similar institutions, high-grade commercial
paper, and repurchase agreements with respect to such instruments.
Repurchase Agreements. The Fund will enter into repurchase agreements with
banks which are the issuers of instruments acceptable for purchase by the Fund
and with certain dealers on the Federal Reserve Bank of New York's list of
reporting dealers. Under the terms of a typical repurchase agreement, the Fund
would acquire an underlying obligation for a relatively short period (usually
not more than one week) subject to an obligation of the seller to repurchase,
and the Fund to resell, the obligation at an agreed-upon price and time,
thereby determining the yield during the Fund's holding period. This arrange-
ment results in a fixed rate of return that is not subject to market fluctua-
tions during the Fund's holding period. Under each repurchase agreement, the
selling institution will be required to maintain the value of the securities
subject to the repurchase agreement at not less than their repurchase price.
Repurchase
7
SMITH BARNEY
Aggressive Growth Fund Inc.--Class Z Shares
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
agreements could involve certain risks in the event of default or insolvency of
the other party, including possible delays or restrictions upon the Fund's
ability to dispose of the underlying securities, the risk of a possible decline
in the value of the underlying securities during the period in which the Fund
seeks to assert its rights to them, the risk of incurring expenses associated
with asserting those rights and the risk of losing all or part of the income
from the agreement. SBMFM or the sub-administrator, The Boston Company Advi-
sors, Inc. ("Boston Advisors"), acting under the supervision of the Board of
Directors, reviews on an ongoing basis to evaluate potential risks the value of
the collateral and the creditworthiness of those banks and dealers with which
the Fund enters into repurchase agreements.
Certain Risk Considerations. Securities of the kinds of companies in which
the Fund invests may be subject to significant price fluctuation and above-
average risk. In addition, companies achieving an earnings growth rate higher
than that of S&P 500 companies tend to reinvest their earnings rather than dis-
tribute them. As a result, the Fund is not likely to receive significant divi-
dend income on its portfolio securities. Accordingly, an investment in the Fund
should not be considered as a complete investment program and may not be appro-
priate for all investors.
Portfolio Transactions. Portfolio securities transactions on behalf of the
Fund are placed by SBMFM with a number of brokers and dealers, including Smith
Barney. Smith Barney has advised the Fund that in transactions with the Fund,
Smith Barney charges a commission rate at least as favorable as the rate Smith
Barney charges its comparable unaffiliated customers in similar transactions.
VALUATION OF SHARES
The net asset value per share of Class Z shares is determined as of the close
of regular trading on the New York Stock Exchange, Inc. (the "NYSE"), on each
day that the NYSE is open, by dividing the value of the Fund's net assets
attributable to Class Z by the number of shares of the Class outstanding. The
per share net asset value of the Class Z shares may be higher than those of
other Classes because of the lower expenses attributable to Class Z shares.
Generally, the Fund's investments are valued at market value or, in the
absence of a market value with respect to any securities, at fair value as
8
SMITH BARNEY
Aggressive Growth Fund Inc.--Class Z Shares
VALUATION OF SHARES (CONTINUED)
determined by or under the direction of the Board of Directors. Short-term
investments that mature in 60 days or less are valued at amortized cost when-
ever the Directors determine that amortized cost reflects fair value of those
investments. Further information regarding the Fund's valuation policies is
contained in the Statement of Additional Information.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
The Fund's policy is to distribute its investment income (that is, its income
other than its net realized capital gains) and net realized capital gains, if
any, once a year, normally at the end of the year in which earned or at the
beginning of the next year.
Unless a shareholder is eligible for qualified distributions and instructs
that dividends and capital gain distributions on shares be paid in cash and
credited to the shareholder's account, dividends and capital gains distribu-
tions will be reinvested automatically in additional shares of the Class at net
asset value, subject to no sales charge or CDSC. In addition, in order to avoid
the application of a 4% nondeductible excise tax on certain undistributed
amounts of ordinary income and capital gains, the Fund may make an additional
distribution shortly before December 31 in each year of any undistributed ordi-
nary income or capital gains and expects to make any other dividends and dis-
tributions necessary to avoid the application of this tax.
TAXES
The Fund has qualified and intends to continue to qualify each year as a reg-
ulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended.
Dividends from net investment income and distributions of realized short-term
capital gains are taxable to shareholders as ordinary income, regardless of how
long shareholders have held their Fund shares and whether such dividends and
distributions are received in cash or reinvested in additional Fund shares.
Distributions of net realized long-term capital gains are taxable to sharehold-
ers as long-term capital gains, regardless of how long shareholders have held
Fund shares and whether such distributions are received in cash or are rein-
vested in
9
SMITH BARNEY
Aggressive Growth Fund Inc.--Class Z Shares
DIVIDENDS, DISTRIBUTIONS AND TAXES (CONTINUED)
additional Fund shares. Furthermore, as a general rule, a shareholder's gain or
loss on a sale or redemption of Fund shares will be a long-term capital gain or
loss if the shareholder has held the shares for more than one year and will be
a short-term capital gain or loss if the shareholder has held the shares for
one year or less. Some of the Fund's dividends declared from net investment
income may qualify for the Federal dividends-received deduction for corpora-
tions.
Statements as to the tax status of each shareholder's dividends and distribu-
tions are mailed annually. Each shareholder will also receive, if appropriate,
various written notices after the close of the Fund's prior taxable year as to
the Federal income tax status of his or her dividends and distributions which
were received from the Fund during the Fund's prior taxable year. Shareholders
should consult their plan document or tax advisors about the tax consequences
associated with participating in a Qualified Plan or UIT.
PURCHASE AND REDEMPTION OF SHARES
Purchases of the Fund's Class Z shares must be made in accordance with the
terms of a Qualified Plan or Smith Barney UIT. Purchases are effected at the
net asset value next determined after a purchase order is received by Smith
Barney (the "trade date"). Currently payment is due to Smith Barney on the
fifth business day (the "settlement date") after the trade date. The Fund
anticipates that, in accordance with regulatory changes, beginning on or about
June 1, 1995, the settlement date will be the third business day after the
trade date. Investors who make payment prior to the settlement date may desig-
nate a temporary investment (such as a money market fund of the Smith Barney
Mutual Funds) for such payment until settlement date. The Fund reserves the
right to reject any purchase order and to suspend the offering of shares for a
period of time. There are no minimum investment requirements for Class Z
shares; however, the Fund reserves the right to vary this policy at any time.
Purchase orders received by Smith Barney prior to the close of regular trad-
ing on the NYSE, currently 4:00 p.m., New York time, on any day that the Fund
calculates its net asset value, are priced according to the net asset value
determined on that day. See "Valuation of Shares." Certificates for Fund shares
are issued upon request to the Fund's transfer agent.
Shareholders may redeem their shares on any day the Fund calculates its net
asset value. See "Valuation of Shares." Redemption requests received in proper
10
SMITH BARNEY
Aggressive Growth Fund Inc.--Class Z Shares
PURCHASE AND REDEMPTION OF SHARES (CONTINUED)
form prior to the close of regular trading on the NYSE are priced at the net
asset value per share determined on that day. Redemption requests received
after the close of regular trading on the NYSE are priced at the net asset
value as next determined. Shareholders acquiring Class Z shares through a
Smith Barney Qualified Plan or a Smith Barney UIT should consult the terms of
their respective plans for redemption provisions.
EXCHANGE PRIVILEGE
Holders of Class Z shares may exchange their shares at the net asset value
next determined for shares of the same Class in the following funds of the
Smith Barney Mutual Funds to the extent shares are offered for sale in the
shareholder's state of residence. Exchanges of shares may be made at any time
without payment of any exchange fee.
. SMITH BARNEY APPRECIATION FUND INC.
. SMITH BARNEY DIVERSIFIED STRATEGIC INCOME FUND
. SMITH BARNEY FUNDS, INC.--INCOME AND GROWTH PORTFOLIO
. SMITH BARNEY FUNDS, INC.--INCOME RETURN ACCOUNT PORTFOLIO
. SMITH BARNEY FUNDS, INC.--U.S. GOVERNMENT SECURITIES PORTFOLIO
. SMITH BARNEY GLOBAL OPPORTUNITIES FUND
. SMITH BARNEY HIGH INCOME FUND
. SMITH BARNEY MONEY FUNDS, INC.--CASH PORTFOLIO
. SMITH BARNEY MONEY FUNDS, INC.--GOVERNMENT PORTFOLIO
. SMITH BARNEY UTILITIES FUND
. SMITH BARNEY WORLD FUNDS, INC.--INTERNATIONAL EQUITY PORTFOLIO
The exchange of shares of one fund for shares of another fund is generally
treated for Federal income tax purposes as a sale of the shares given in
exchange by the shareholder. Therefore, an exchanging shareholder may realize a
taxable gain or loss in connection with an exchange. Shareholders should con-
sult their plan prospectus and/or other governing documents regarding
exchanges. Generally exchanges within such a plan are not treated as a taxable
event.
11
SMITH BARNEY
Aggressive Growth Fund Inc.--Class Z Shares
EXCHANGE PRIVILEGE (CONTINUED)
Shareholders exercising the exchange privilege with any of the other funds of
the Smith Barney Mutual Funds should review the prospectus of that fund care-
fully prior to making an exchange. Smith Barney reserves the right to reject
any exchange request.
Although the exchange privilege is an important benefit, excessive exchange
transactions can be detrimental to the Fund's performance and its shareholders.
SBMFM may determine that a pattern of frequent exchanges is excessive and con-
trary to the best interests of the Fund's other shareholders. In this event,
SBMFM will notify Smith Barney, and Smith Barney may, at its discretion, decide
to limit additional purchases and/or exchanges by the shareholder. Upon such a
determination, Smith Barney will provide notice in writing or by telephone to
the shareholder at least 15 days prior to suspending the exchange privilege and
during the 15 day period the shareholder will be required to (a) redeem his or
her shares in the Fund or (b) remain invested in the Fund or exchange into any
of the funds of the Smith Barney Mutual Funds listed above, which position the
shareholder would be expected to maintain for a significant period of time. All
relevant factors will be considered in determining what constitutes an abusive
pattern of exchanges. The Fund reserves the right to modify or discontinue
exchange privileges upon 60 days' prior notice to shareholders.
PERFORMANCE
TOTAL RETURN
From time to time the Fund may include its total return, average annual total
return and current dividend return in advertisements and/or other types of
sales literature. These figures are based on historical earnings and are not
intended to indicate future performance. Total return is computed for a speci-
fied period of time assuming deduction of the maximum sales charge, if any,
from the initial amount invested and reinvestment of all income dividends and
capital gains distributions on the reinvestment dates at prices calculated as
stated in this Prospectus, then dividing the value of the investment at the end
of the period so calculated by the initial amount invested and subtracting
100%. The standard average annual total return, as prescribed by the SEC, is
derived from this total return, which provides the ending redeemable value.
Such standard total return information may also be accompanied with nonstandard
total return information for differing periods computed in the same manner but
with
12
SMITH BARNEY
Aggressive Growth Fund Inc.--Class Z Shares
PERFORMANCE (CONTINUED)
out annualizing the total return or taking sales charges into account. The Fund
calculates current dividend return by annualizing the most recent monthly dis-
tribution and dividing by the net asset value on the last day of the period for
which current dividend return is presented. The Fund's current dividend return
may vary from time to time depending on market conditions, the composition of
its investment portfolio and operating expenses. These factors and possible
differences in the methods used in calculating current dividend return should
be considered when comparing the Fund's current return to yields published for
other investment companies and other investment vehicles. The Fund may also
include comparative performance information in advertising or marketing its
shares. Such performance information may include data from Lipper Analytical
Services, Inc. and other financial publications.
Class Z's average annual total return was as follows for the periods indicat-
ed:
13.81% for the one-year period beginning September 1, 1993 through
August 31, 1994.
16.17% per annum during the period from commencement of operations (November
6, 1992) through August 31, 1994.
Class Z's aggregate total return was as follows for the periods indicated:
13.81% for the one year period beginning on September 1, 1993 through August
31, 1994.
31.29% for the period from commencement of operations through August 31,
1994.
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
Overall responsibility for management and supervision of the Fund rests with
the Fund's Board of Directors. The Directors approve all significant agreements
between the Fund and companies that furnish services to the Fund, including
agreements with the Fund's distributor, investment adviser, administrator, sub-
administrator, custodian and transfer agent. The day-to-day operations of the
Fund are delegated to the Fund's investment adviser, administrator and sub-
administrator. The Statement of Additional Information contains background
information regarding each Director and executive officer of the Fund.
13
SMITH BARNEY
Aggressive Growth Fund Inc.--Class Z Shares
MANAGEMENT OF THE FUND (CONTINUED)
INVESTMENT ADVISER--SBMFM
SBMFM (formerly known as "Smith, Barney Advisers, Inc."), the Fund's invest-
ment adviser, is a registered investment adviser whose principal executive
offices are located at 388 Greenwich Street, New York, New York 10013. SBMFM is
a wholly owned subsidiary of Smith Barney Holdings Inc. ("Holdings"). Holdings
is a wholly owned subsidiary of The Travelers Inc. ("Travelers"), a diversified
financial services holding company engaged, through its subsidiaries, princi-
pally in four business segments: Investment Services, Consumer Finance Servic-
es, Life Insurance Services and Property & Casualty Insurance Services. SBMFM
(through its predecessor entities) has been in the investment counseling busi-
ness since 1940 and renders investment advice to a wide variety of individual,
institutional and investment company clients that had aggregate assets under
management as of September 30, 1994, in excess of $52.4 billion.
Subject to the supervision and direction of the Fund's Board of Directors,
SBMFM manages the Fund's portfolio in accordance with the Fund's stated invest-
ment objective and policies, makes investment decisions for the Fund, places
orders to purchase and sell securities and employs professional portfolio man-
agers. For investment advisory services rendered the Fund pays SBMFM a fee at
the annual rate of .60% of the value of the Fund's average daily net assets.
PORTFOLIO MANAGEMENT
Richard Freeman, an Investment Officer of SBMFM, is primarily responsible for
management of the Fund's assets. Mr. Freeman has served in this capacity since
November of 1986, and manages the day-to-day operations of the Fund, including
making all investment decisions.
Management's discussion and analysis, and additional performance information
regarding the Fund during the fiscal year ended August 31, 1994 is included in
the Annual Report dated August 31, 1994. A copy of the Annual Report may be
obtained upon request and without charge from a Smith Barney Financial Consul-
tant or by writing or calling the Fund at the address or phone number listed on
page one of this Prospectus.
ADMINISTRATOR
SBMFM also serves as the Fund's administrator and oversees all aspects of the
Fund's administration. For administration services rendered to the Fund, the
14
SMITH BARNEY
Aggressive Growth Fund Inc.--Class Z Shares
MANAGEMENT OF THE FUND (CONTINUED)
Fund pays SBMFM a fee at the annual rate of .20% of the value of the Fund's
average daily net assets.
SUB-ADMINISTRATOR--BOSTON ADVISORS
Boston Advisors, located at One Boston Place, Boston, Massachusetts 02108,
serves as the Fund's sub-administrator. Boston Advisors is a wholly owned sub-
sidiary of The Boston Company, Inc. ("TBC"), a financial services holding com-
pany, which is in turn a wholly owned subsidiary of Mellon Bank Corporation.
Boston Advisors provides investment management, investment advisory and/or
administrative services to investment companies which had aggregate assets
under management as of September 30, 1994, in excess of $48.6 billion.
Boston Advisors calculates the net asset value of the Fund's shares and gen-
erally assists SBMFM in all aspects of the Fund's administration and operation.
Under a sub-administration agreement dated April 20, 1994, Boston Advisors is
paid a portion of the fee paid by the Fund to SBMFM at a rate agreed upon from
time to time between Boston Advisors and SBMFM. Prior to April 20, 1994, Boston
Advisors served as the Fund's administrator.
DISTRIBUTOR--SMITH BARNEY
Smith Barney is located at 388 Greenwich Street, New York, New York 10013,
and serves as the Fund's distributor. Smith Barney is a wholly owned subsidiary
of Travelers.
ADDITIONAL INFORMATION
The Fund was incorporated in the State of Maryland on May 12, 1983 and is
registered with the SEC as a diversified, open-end management investment compa-
ny.
The Fund offers shares of common stock currently classified into five Clas-
ses, A, B, C, Y and Z. Each Class represents an identical pro rata interest in
the Fund's investment portfolio. As a result, the Classes have the same rights,
privileges and preferences, except with respect to: (a) the designation of each
Class; (b) the effect of the respective sales charges, if any, for each Class;
(c) the distribution and/or service fees borne by each Class pursuant to plan
adopted by the Fund pursuant to Rule 12b-1 under the Investment Company Act of
1940, as amended; (d) the expenses allocable to each Class; (e) voting rights
on matters
15
SMITH BARNEY
Aggressive Growth Fund Inc.--Class Z Shares
ADDITIONAL INFORMATION (CONTINUED)
exclusively affecting a single Class; (f) the exchange privileges of each
Fund's Class; and (g) the conversion feature of shares of Class B. The Board of
Directors does not anticipate that there will be any conflicts among the inter-
ests of the holders of the different Classes. The Directors, on an ongoing
basis, will consider whether any such conflict exists and, if so, take appro-
priate action.
The Fund does not hold annual shareholder meetings. There normally will be no
meeting of shareholders for the purpose of electing Directors unless and until
such time as less than a majority of the Directors holding office have been
elected by shareholders. The Directors will call a meeting for any purpose upon
written request of shareholders holding at least 10% of the Fund's outstanding
shares and the Fund will assist shareholders in calling such a meeting as
required by the 1940 Act. When matters are submitted for shareholder vote,
shareholders of each Class will have one vote for each full share owned and a
proportionate, fractional vote for any fractional share held of that Class.
Generally, shares of the Fund will be voted on a Fund-wide basis on all matters
except matters affecting only the interests of one or more of the Classes.
The Fund sends its shareholders a semi-annual report and an audited annual
report, which include listings of the investment securities held by the Fund at
the end of the reporting period.
Boston Safe Deposit and Trust Company, an indirect wholly owned subsidiary of
Mellon, is located at One Boston Place, Boston, Massachusetts 02108, and serves
as custodian of the Fund's investments.
The Shareholder Services Group, Inc. is located at Exchange Place, Boston,
Massachusetts 02109, and serves as the Fund's transfer agent.
Shareholders may seek information regarding the Fund from their Smith Barney
Financial Consultants.
-------------------
16
[LOGO OF RECYCLED RECYCLABLE APPEARS HERE]
[LOGO OF SMITH BARNEY A MEMBER OF TRAVELERS GROUP APPEARS HERE]
Smith Barney Aggressive Growth Fund Inc.
Class Z Shares
388 Greenwich Street
New York, New York 10013
SMITH BARNEY
- ------
AGGRESSIVE GROWTH FUND INC.
388 Greenwich Street . New York, New York 10013 . (212) 723-9218
STATEMENT OF ADDITIONAL INFORMATION NOVEMBER 7, 1994
This Statement of Additional Information expands upon and supplements the
information contained in the current Prospectus of Smith Barney Aggressive
Growth Fund Inc. (the "Fund"), dated November 7, 1994, as amended or supple-
mented from time to time, and should be read in conjunction with the Fund's
Prospectus. The Fund's Prospectus may be obtained from any Smith Barney Finan-
cial Consultant, or by writing or calling the Fund at the address or telephone
number set forth above. This Statement of Additional Information, 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 Statement of Additional Information, except where shown
below:
<TABLE>
<S> <C>
Management of the Fund................................................... 1
Investment Objective and Management Policies............................. 5
Purchase of Shares....................................................... 11
Redemption of Shares..................................................... 12
Distributor.............................................................. 13
Valuation of Shares...................................................... 14
Exchange Privilege....................................................... 15
Performance Data (See in the Prospectus "Performance")................... 16
Taxes (See in the Prospectus "Dividends, Distributions and Taxes")....... 18
Additional Information................................................... 19
Financial Statements..................................................... 20
</TABLE>
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:
<TABLE>
<CAPTION>
NAME SERVICE
---- -------
<S> <C>
Smith Barney Inc.
("Smith Barney")...................... Distributor
Smith Barney Mutual Funds Management
Inc.
("SBMFM")............................. Investment Adviser and Administrator
The Boston Company Advisors, Inc.
("Boston Advisors")................... Sub-Administrator
Boston Safe Deposit and Trust Company
("Boston Safe") ...................... Custodian
The Shareholder Services Group, Inc.
("TSSG"),
a subsidiary of First Data
Corporation........................... Transfer Agent
</TABLE>
These organizations and the functions they perform for the Fund are
discussed in the Prospectus and in this Statement of Additional Information.
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.
Paul R. Ades, Director. Partner in the law firm of Murov & Ades. His address
is 272 South Wellwood Avenue, P.O. Box 504, Lindenhurst, New York 11757.
Herbert Barg, Director. Private investor. His address is 273 Montgomery
Avenue, Bala Cynwyd, Pennsylvania 19004.
Alger B. Chapman, Director. Chairman and Chief Operating Officer of the
Chicago Board of Options Exchange. His address is Chicago Board of Options
Exchange, LaSalle at Van Buren, Chicago, Illinois 60605.
Dwight B. Crane, Director. Professor, Graduate School of Business
Administration, Harvard University. His address is Graduate School of Business
Administration, Harvard University, Boston, Massachusetts 02163.
Frank G. Hubbard, Corporate Vice President, Materials Management and
Marketing Services of Huls America, Inc. His address is 80 Centennial Avenue
P.O. Box 456, Piscataway, New Jersey 08855-0456.
Allan R. Johnson, Director. Retired; Former Chairman, Retail Division of
BATUS, Inc., and Chairman and Chief Executive Officer of Saks Fifth Avenue,
Inc. His address is 2 Sutton Place South, New York, New York 10022.
*Heath B. McLendon, Chairman of the Board. Executive Vice President of Smith
Barney and Chairman of the Board of Smith Barney Strategy Advisers Inc.; prior
to July 1993, Senior Executive Vice President of Shearson Lehman Brothers Inc.
("Shearson Lehman Brothers"); Vice Chairman of Shearson Asset Management; a
Director of PanAgora Asset Management, Inc. and PanAgora Asset Management
Limited. His address is 388 Greenwich Street, New York, New York 10013.
Ken Miller, Director. President of Young Stuff Apparel Group, Inc. His
address is 1411 Broadway, New York, New York 10018.
John F. White, Director. President Emeritus of The Cooper Union for the
Advancement of Science and Art; Special Assistant to the President of the
Aspen Institute. His address is Crows Nest Road, Tuxedo Park, New York 10987.
Stephen J. Treadway, President. Executive Vice President and Director of
Smith Barney; Director and President of SBMFM; and Trustee of Corporate Realty
Income Trust I. His address is 388 Greenwich Street, New York, New York 10013.
Richard P. Roelofs, Executive Vice President. Managing Director of Smith
Barney; President of Smith Barney Strategy Advisers Inc.; prior to July 1993,
Senior Vice President of Shearson Lehman Brothers;
2
President of Shearson Lehman Investment Strategy Advisors Inc. His address is
388 Greenwich Street, New York, New York 10013.
Richard A. Freeman, Vice President and Investment Officer; Managing Director
of Asset Management; prior to July 1993, Executive Vice President of Shearson
Asset Management. His address is 388 Greenwich Street, New York, New York
10013.
Lewis E. Daidone, Treasurer. Managing Director and Chief Financial Officer
of Smith Barney; Director and Senior Vice President of SBMFM. His address is
388 Greenwich Street, New York, New York 10013.
Christina T. Sydor, Secretary. Managing Director of Smith Barney; General
Counsel and Secretary of SBMFM. Her address is 388 Greenwich Street, New York,
New York 10013.
Each Director also serves as a director, trustee and/or general partner of
certain other mutual funds for which Smith Barney serves as distributor. As of
October 31, 1994, the Directors and officers of the Fund, as a group, owned
less than 1.00% of the outstanding common stock of the Fund.
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 Fund pays each Director who is not an
officer or employee of Smith Barney or any of its affiliates a fee of $3,000
per annum plus $500 per meeting attended and reimburses them for travel and
out-of-pocket expenses. For the Fund's fiscal year ended August 31, 1994, such
fees and expenses totalled $45,370.
INVESTMENT ADVISER AND ADMINISTRATOR--SBMFM
SUB-ADMINISTRATOR--BOSTON ADVISORS
SBMFM serves as investment adviser to the Fund pursuant to a written
agreement (the "Advisory Agreement"), which was most recently approved by the
Fund's Board of Directors, including a majority of the Directors who are not
"interested persons" of the Fund or SBMFM, on April 7, 1993, and by
shareholders on June 9, 1993. The services provided by SBMFM under the
Advisory Agreement are described in the Prospectus under "Management of the
Fund." SBMFM pays the salary of any officer and employee who is employed by
both it and the Fund. SBMFM bears all expenses in connection with the
performance of its services. SBMFM is a division of SBMFM. SBMFM is a wholly
owned subsidiary of Smith Barney Holdings Inc. ("Holdings"), which is in turn
a wholly owned subsidiary of The Travelers Inc. ("Travelers").
As compensation for SBMFM's investment advisory services rendered to the
Fund, the Fund pays a fee computed daily and paid monthly at the annual rate
of .60% of the value of the Fund's average daily net assets. For the 1994,
1993 and 1992 fiscal years, the Fund paid $1,494,432, $1,239,641 and
$1,093,428, respectively, in investment advisory fees.
SBMFM also serves as administrator to the Fund pursuant to a written
agreement dated April 20, 1994 (the "Administration Agreement"), which was
most recently approved by the Fund's Board of Directors, including a majority
of Directors who are not "interested persons" of the Fund or SBMFM, on July
21, 1994. The services provided by SBMFM under the Administration Agreement
are described in the Prospectus under "Management of the Fund." SBMFM pays the
salary of any officer and employee
3
who is employed by both it and the Fund and bears all expenses in connection
with the performance of its services. For administration services rendered to
the Fund, the Fund pays SBMFM a fee at the annual rate of 0.20% of the value
of the Fund's average daily net assets. For the 1994 fiscal period, the Fund
paid SBMFM $81,334 in administration fees.
Boston Advisors serves as sub-administrator to the Fund under a written
agreement (the "Sub-Administration Agreement") dated April 20, 1994, which was
most recently approved by the Fund's Board of Directors, including a majority
of Directors who are not "interested persons" of the Fund or Boston Advisors
on July 21, 1994. Boston Advisors is a wholly owned subsidiary of The Boston
Company, Inc. ("TBC"), a financial services holding company, which is in turn
a wholly owned subsidiary of Mellon Bank Corporation ("Mellon").
As compensation for Boston Advisors' services rendered to the Fund, Boston
Advisors is paid a portion of the administration fee paid by the Fund to SBMFM
at a rate agreed upon from time to time between Boston Advisors and SBMFM.
Prior to April 20, 1994, Boston Advisors served as the Fund's administrator
and received a fee computed daily and paid monthly at the annual rate of .20%
of the value of the Fund's average daily net assets. For the period September
1, 1993 to April 19, 1994 and the 1993 and 1992 fiscal years, Boston Advisors
received $416,810, $413,214 and $364,476 respectively, in sub-investment
advisory and/or administration fees.
Certain of the services provided to the Fund by SBMFM and Boston Advisors
are described in the Prospectus under "Management of the Fund." In addition to
those services, SBMFM and Boston Advisors, respectively, pays the salaries of
all officers and employees who are employed by both it and the Fund, maintains
office facilities for the Fund, furnishes the Fund with statistical and
research data, clerical help and accounting, data processing, bookkeeping,
internal auditing and legal services and certain other services required by
the Fund, prepares reports to the Fund's shareholders and prepares tax
returns, reports to and filings with the Securities and Exchange Commission
(the "SEC") and state Blue Sky authorities. Boston Advisors bears all expenses
in connection with the performance of their services.
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, SBMFM or
Boston Advisors; SEC fees and state Blue Sky qualification fees; charges of
custodians; transfer and dividend disbursing agent's fees; certain insurance
premiums; outside auditing and legal expenses; costs of maintenance of
corporate existence; investor services (including allocated telephone and
personnel expenses); and costs of preparation and printing of prospectuses for
regulatory purposes and for distribution to existing shareholders,
shareholders' reports and corporate meetings.
SBMFM and Boston Advisors have agreed that if in any fiscal year the
aggregate expenses of the Fund (including fees paid pursuant to the Advisory,
Administration and Sub-Administration Agreements, but excluding interest,
taxes, brokerage and, with the prior written consent of the necessary state
securities commissions, extraordinary expenses) exceed the expense limitation
of any state having jurisdiction over the Fund, SBMFM and Boston Advisors
will, to the extent required by law, reduce their management fees by such
excess expense. Such a fee reduction, if any, will be reconciled on a monthly
basis. The most restrictive state limitation applicable to the Fund would
require SBMFM and Boston Advisors to reduce their fees in any year that such
excess expenses exceed 2.5% of the first $30 million of average net assets,
4
2% of the next $70 million of average net assets and 1.5% of the remaining
average net assets. No fee reduction was required for the 1994, 1993 and 1992
fiscal years.
COUNSEL AND AUDITORS
Willkie Farr & Gallagher serves as counsel to the Fund. The Directors who
are not "interested persons" of the Fund have selected Stroock & Stroock &
Lavan as their counsel.
KPMG Peat Marwick LLP, independent accountants, 345 Park Avenue, New York,
New York 10154, serve as auditors of the Fund and will render an opinion on
the Fund's financial statements annually. Prior to October 20, 1994, Coopers &
Lybrand L.L.P., independent accountants, served as auditors of the Fund and
rendered an opinion on the Fund's financial statements for the fiscal year
ended August 31, 1994.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
- ------
The Prospectus discusses the Fund's investment objective and the policies it
employs to achieve its objective. The following discussion supplements the
description of the Fund's investment objective and management policies in the
Prospectus.
LEVERAGING
The Fund may from time to time leverage its investments by purchasing
securities with borrowed money. The Fund may borrow money only from banks and
in an amount not to exceed 33 1/3% of the total value of its assets less its
liabilities. The amount of the Fund's borrowings also may be limited by the
availability and cost of credit and by restrictions imposed by the Federal
Reserve Board.
The Fund is required under the 1940 Act to maintain at all times an asset
coverage of 300% of the amount of its borrowings. If, as a result of market
fluctuations or for any other reason, the Fund's asset coverage drops below
300%, the Fund must reduce its outstanding bank debt within three business
days so as to restore its asset coverage to the 300% level.
Any gain in the value of securities purchased with borrowed money that
exceeds the interest paid on the amount borrowed would cause the net asset
value of the Fund's shares to increase more rapidly than otherwise would be
the case. Conversely, any decline in the value of securities purchased would
cause the net asset value of the Fund's shares to decrease more rapidly than
otherwise would be the case. Borrowed money thus creates an opportunity for
greater capital gain but at the same time increases exposure to capital risk.
The net cost of any borrowed money would be an expense that otherwise would
not be incurred, and this expense could restrict or eliminate the Fund's net
investment income in any given period.
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 33 1/3% of the Fund's 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 securities issued or guaranteed by the United States
government, its agencies or instrumentalities ("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
5
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 portfolio 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 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 portfolio securities are loaned: (a) the Fund must receive at least
100% cash collateral or equivalent securities 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 Fund's 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 SBMFM to be of good
standing and will not be made unless, in the judgment of SBMFM the
consideration to be earned from such loans would justify the risk.
MONEY MARKET INSTRUMENTS
As stated in the Prospectus, the Fund may invest for defensive purposes in
corporate and government bonds and notes and money market instruments. Money
market instruments in which the Fund may invest include: U.S. government
securities; certificates of deposit, time deposits and bankers' acceptances
issued by domestic banks (including their branches located outside the United
States and subsidiaries located in Canada), domestic branches of foreign
banks, savings and loan associations and similar institutions; high grade
commercial paper; and repurchase agreements with respect to the foregoing
types of instruments. The following is a more detailed description of such
money market instruments.
Bank Obligations. Certificates of deposits ("CDs") are short-term,
negotiable obligations of commercial banks. Time deposits ("TDs") are non-
negotiable deposits maintained in banking institutions for specified periods
of time at stated interest rates. Bankers' acceptances are time drafts drawn
on commercial banks by borrowers, usually in connection with international
transactions.
Domestic commercial banks organized under Federal law are supervised and
examined by the Comptroller of the Currency and are required to be members of
the Federal Reserve System and to be insured by the Federal Deposit Insurance
Corporation (the "FDIC"). Domestic banks organized under state law are
supervised and examined by state banking authorities but are members of the
Federal Reserve System only if they elect to join. Most state banks are
insured by the FDIC (although such insurance may not be of material benefit to
the Fund, depending upon the principal amount of CDs of each bank held by the
Fund) and are subject to Federal examination and to a substantial body of
Federal law and regulation. As a result of governmental regulations, domestic
branches of domestic banks are, among other things, generally required to
maintain specified levels of reserves, and are subject to other supervision
and regulation designed to promote financial soundness.
6
Obligations of foreign branches of domestic banks, such as CDs and TDs, may
be general obligations of the parent bank in addition to the issuing branch,
or may be limited by the terms of a specific obligation and governmental
regulation. Such obligations are subject to different risks than are those of
domestic banks or domestic branches of foreign banks. These risks include
foreign economic and political developments, foreign governmental restrictions
that may adversely affect payment of principal and interest on the
obligations, foreign exchange controls and foreign withholding and other taxes
on interest income. Foreign branches of domestic banks are not necessarily
subject to the same or similar regulatory requirements that apply to domestic
banks, such as mandatory reserve requirements, loan limitations, and
accounting, auditing and financial recordkeeping requirements. In addition,
less information may be publicly available about a foreign branch of a
domestic bank than about a domestic bank. CDs issued by wholly owned Canadian
subsidiaries of domestic banks are guaranteed as to repayment of principal and
interest (but not as to sovereign risk) by the domestic parent bank.
Obligations of domestic branches of foreign banks may be general obligations
of the parent bank in addition to the issuing branch, or may be limited by the
terms of a specific obligation and by governmental regulation as well as
governmental action in the country in which the foreign bank has its head
office. A domestic branch of a foreign bank with assets in excess of $1
billion may or may not be subject to reserve requirements imposed by the
Federal Reserve System or by the state in which the branch is located if the
branch is licensed in that state. In addition, branches licensed by the
Comptroller of the Currency and branches licensed by certain states ("State
Branches") may or may not be required to: (a) pledge to the regulator by
depositing assets with a designated bank within the state, an amount of its
assets equal to 5% of its total liabilities; and (b) maintain assets within
the state in an amount equal to a specified percentage of the aggregate amount
of liabilities of the foreign bank payable at or through all of its agencies
or branches within the state. The deposits of State Branches may not
necessarily be insured by the FDIC. In addition, there may be less publicly
available information about a domestic branch of a foreign bank than about a
domestic bank.
In view of the foregoing factors associated with the purchase of CDs and TDs
issued by foreign branches of domestic banks or by domestic branches of
foreign banks, SBMFM will carefully evaluate such investments on a case-by-
case basis.
Savings and loans associations whose CDs may be purchased by the Fund are
supervised by the Office of Thrift Supervision and are insured by the Savings
Association Insurance Fund which is administered by the FDIC and is backed by
the full faith and credit of the United States government. As a result, such
savings and loan associations are subject to regulation and examination.
CONVERTIBLE SECURITIES
Convertible securities are fixed-income securities that may be converted at
either a stated price or stated rate into underlying shares of common stock.
Convertible securities have general characteristics similar to both fixed-
income and equity securities. Although to a lesser extent than with fixed-
income securities generally, the market value of convertible securities tends
to decline as interest rates increase and, conversely, tends to increase as
interest rates decline. In addition, because of the conversion feature, the
market value of convertible securities tends to vary with fluctuations in the
market value of the underlying common stocks and therefore also will react to
variations in the general market for equity securities. A unique feature of
convertible securities is that as the market price of the underlying common
7
stock declines, convertible securities tend to trade increasingly on a yield
basis, and so may not experience market value declines to the same extent as
the underlying common stock. When the market price of the underlying common
stock increases, the prices of the convertible securities tend to rise as a
reflection of the value of the underlying common stock. While no securities
investments are without risk, investments in convertible securities generally
entail less risk than investments in common stock of the same issuer.
As fixed-income securities, convertible securities are investments that
provide for a stable stream of income with generally higher yields than common
stocks. Of course, like all fixed-income securities, there can be no assurance
of current income because the issuers of the convertible securities may
default on their obligations. Convertible securities, however, generally offer
lower interest or dividend yields than non-convertible securities of similar
quality because of the potential for capital appreciation. A convertible
security, in addition to providing fixed income, offers the potential for
capital appreciation through the conversion feature, which enables the holder
to benefit from increases in the market price of the underlying common stock.
There can be no assurance of capital appreciation, however, because securities
prices fluctuate.
Convertible securities generally are subordinated to other similar but non-
convertible securities of the same issuer, although convertible bonds, as
corporate debt obligations, enjoy seniority in right of payment to all equity
securities, and convertible preferred stock is senior to common stock, of the
same issuer. Because of the subordination feature, however, convertible
securities typically have lower ratings than similar non-convertible
securities.
WARRANTS
Because a warrant does not carry with it the right to dividends or voting
rights with respect to the securities that the warrant holder is entitled to
purchase, and because it does not represent any rights to the assets of the
issuer, warrants may be considered more speculative than certain other types
of investments. Also, the value of a warrant does not necessarily change with
the value of the underlying securities and a warrant ceases to have value if
it is not exercised prior to its expiration date.
INVESTMENT RESTRICTIONS
The Fund has adopted the following investment restrictions for the
protection of shareholders. Restrictions 1 through 8 cannot be changed without
approval by the holders of a majority of the outstanding shares of the Fund,
defined as the lesser of (a) 67% or more of the Fund's 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 Fund's outstanding shares.
The remaining restrictions may be changed by the Board of Directors at any
time. The Fund may not:
1. With respect to 75% of the value of its total assets, invest more
than 5% of its total assets in securities of any one issuer, except
securities issued or guaranteed by the United States government, or
purchase more than 10% of the outstanding voting securities of such
issuer.
2. Issue senior securities as defined in the 1940 Act and any rules and
orders thereunder, except insofar as the Fund may be deemed to have
issued senior securities by reason of: (a) borrowing money or
purchasing securities on a when-issued or delayed-delivery basis, (b)
purchasing or selling futures contracts and options on futures
contracts and other similar instruments and (c) issuing separate
classes of shares.
8
3. Invest more than 25% of its total assets in securities, the issuers
of which are in the same industry. For purposes of this limitation,
U.S. government securities and securities of state or municipal
governments and their political subdivisions are not considered to be
issued by members of any industry.
4. Make loans. This restriction does not apply to: (a) the purchase of
debt obligations in which the Fund may invest consistent with its
investment objective and policies, (b) repurchase agreements and (c)
loans of its portfolio securities.
5. Engage 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.
6. Purchase or sell real estate, real estate mortgages, real estate
investment trust securities, commodities or commodity contracts, but
this shall not prevent the Fund from: (a) investing in securities of
issuers engaged in the real estate business 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 (c)
trading in futures contracts and options on futures contracts.
7. Purchase any securities on margin (except for each 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 initial or maintenance margin in connection with futures
contracts and related options and options on securities is not
considered to be the purchase of a security on margin.
8. Borrow money in excess of 33 1/3% of the total value of its assets
(including the amount borrowed) less its liabilities (not including
its borrowings).
9. Purchase or otherwise acquire any security if, as a result, more than
15% of its net assets would be invested in securities that are
illiquid.
10. Invest more than 5% of the value of its net assets (valued at the
lower of cost or market) in warrants, of which no more than 2% of net
assets may be invested in warrants not listed on the New York Stock
Exchange, Inc. (the "NYSE") or the American Stock Exchange. The
acquisition of warrants attached to other securities is not subject
to this restriction.
11. Purchase, sell or write put, call, straddle or spread options.
12. Purchase participations or other direct interests in oil, gas or
other mineral exploration or development programs.
13. Invest in securities of other investment companies, except as they
may be acquired as part of a merger, consolidation or acquisition of
assets.
14. Invest in companies for the purpose of exercising management or
control.
15. Purchase or hold the securities of any issuer if those officers or
Directors of the Fund, or of SBMFM, who individually own beneficially
more than 1/2 of 1% of the outstanding securities of the issuer,
together own beneficially more than 5% of those securities.
16. Invest more than 5% of the value of its total assets in securities of
issuers having a record of fewer than three years of continual
operation except that the restriction will not apply to U.S.
government securities. (For purposes of this restriction, issuers
include predecessors, sponsors, controlling persons, general
partners, guarantors of underlying assets.)
9
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 these practices would require
Board approval. If any percentage restriction described above is complied with
at the time of an investment, a later increase or decrease in percentage
resulting from a change in values or assets will not constitute a violation of
such restriction. The Fund may make commitments more restrictive than the
restrictions listed above such as those regarding oil and mineral leases and
real estate limited partnerships so as to permit the sale of Fund shares in
certain states. 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
The Fund's investment policies may result in its experiencing a greater
portfolio turnover rate than those of investment companies that seek to
produce income or to maintain a balanced investment position. Although the
Fund's portfolio turnover rate cannot be predicted and will vary from year to
year, SBMFM expects that the Fund's annual portfolio turnover rate may exceed
100%, but will not exceed 200%. A 100% portfolio turnover rate would occur,
for instance, if all securities in the Fund's portfolio were replaced once
during a period of one year. A high rate of portfolio turnover in any year
will increase brokerage commissions paid and could result in high amounts of
realized investment gain subject to the payment of taxes by shareholders. Any
realized short-term investment gain will be taxed to shareholders as ordinary
income. For the 1994 and 1993 fiscal years, the Fund's portfolio turnover
rates were 11% and 13%, respectively.
PORTFOLIO TRANSACTIONS
Decisions to buy and sell securities for the Fund are made by SBMFM, subject
to the overall supervision and review of the Fund's Board of Directors.
Portfolio securities transactions for the Fund are effected by or under the
supervision of SBMFM.
Transactions on stock exchanges involve the payment of negotiated brokerage
commissions. There is generally no stated commission in the case of securities
traded in the over-the-counter markets, but the price of those securities
includes an undisclosed commission or mark-up. 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 dealer's mark-up or mark-down. For the 1994, 1993 and 1992 fiscal
years, the Fund paid $34,996, $64,201 and $45,385, respectively, in brokerage
commissions.
In executing portfolio transactions and selecting brokers or dealers, it is
the Fund's policy to seek the best overall terms available. The Advisory
Agreement between the Fund and SBMFM provides that, in assessing the best
overall terms available for any transaction, SBMFM shall 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 Advisory
Agreement authorizes SBMFM, in selecting brokers or dealers to execute a
particular transaction and in evaluating the best overall terms
10
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 SBMFM or an affiliate exercises
investment discretion.
The Fund's Board of Directors will periodically 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 other accounts for which investment discretion is exercised. Conversely,
the Fund may be the primary beneficiary of services received as a result of
portfolio transactions effected for other accounts. SBMFM's fee under the
Advisory Agreement is not reduced by reason of SBMFM's receiving such
brokerage and research services.
The Fund's Board of Directors has determined that any portfolio transaction
for the Fund may be executed through Smith Barney if, in SBMFM's judgment, 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.
In addition, under rules recently 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
1994, 1993 and 1992 fiscal years, the Fund paid $3,800, $3,800 and $4,800,
respectively, in brokerage commissions to Smith Barney and/or Shearson Lehman
Brothers. For the 1994 fiscal year, Smith Barney received 10.9% of the
brokerage commissions paid by the Fund and effected 10.1% of the total dollar
amount of transactions for the Fund involving the payment of brokerage
commissions.
Even though investment decisions for the Fund are made independently from
those of the other accounts managed by SBMFM, investments of the kind made by
the Fund also may be made by those other accounts. When the Fund and one or
more accounts managed by SBMFM 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 SBMFM to be equitable. In some cases,
this procedure may adversely affect the price paid or received by the Fund or
the size of the position obtained for or disposed of by the Fund.
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 individual's spouse and his or her
children purchasing shares for his or her own account; (c) a trustee or other
fiduciary
11
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 Internal Revenue Code of 1986, as amended (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 Section 501(c)(3) or (13) of the Code; and (f) a trustee 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 on Class A shares should contact their Smith Barney Financial
Consultants.
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 funds of the Smith Barney
Mutual Funds that are offered with an initial 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 shareholder's holdings through a
check of appropriate records. The Fund reserves the right to terminate or
amend the combined rights of accumulation at any time after notice to
shareholders. For further information regarding the 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 Class A, Class Y and Class Z shares 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 Class B shares and Class C shares (and Class A share
purchases, including applicable rights of accumulation, equalling 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
and Class C shares, and of Class A shares when purchased in amounts equalling
or exceeding $500,000. The method of computation of the public offering price
is shown in the Fund's financial statements incorporated by reference in their
entirety to this Statement of Additional Information.
REDEMPTION OF SHARES
- ------
The right of redemption may be suspended or the date of payment postponed
(a) for any period during which the NYSE is closed (other than for customary
weekend or holiday closings), (b) when trading in markets the Fund normally
utilizes is restricted, or an emergency exists, as determined by the SEC, so
that disposal of the Fund's 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 the protection of the Fund's shareholders.
DISTRIBUTIONS IN KIND
If the Fund's Board of Directors 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
12
accordance with SEC rules, any portion of a redemption in excess of the lesser
of $250,000 or 1% of the Fund's 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 $100 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 shareholder's shares at the time the Withdrawal Plan commences.
(With respect to Withdrawal Plans in effect prior to November 7, 1994 any
applicable CDSC waived on amounts withdrawn that do not exceed 2.00% per month
of the value of a shareholder's shares at the time the Withdrawal Plan
commences.) To the extent withdrawals exceed dividends, distributions and
appreciation of a shareholder's investment in the Fund, there will be a
reduction in the value of the shareholder's investment and continued
withdrawal payments will reduce the shareholder's investment and ultimately
may exhaust it. Withdrawal payments should not be considered as income from
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
TSSG 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. Effective November 7, 1994, Withdrawal Plans
should be set up with any Smith Barney Financial Consultant. A shareholder who
purchases shares directly through TSSG may continue to do so and applications
for participation in the Withdrawal Plan must be received by TSSG no later
than the eighth day of the month to be eligible for participation beginning
with that month's withdrawal. For additional information, shareholders should
contact a Smith Barney Financial Consultant.
DISTRIBUTOR
- ------
Smith Barney serves as the Fund's distributor on a best efforts basis
pursuant to a written agreement (the "Distribution Agreement"), which was
first approved by the Fund's Board of Directors on July 21, 1994. For the
1994, 1993 and 1992 fiscal years, Smith Barney and/or Shearson Lehman Brothers
received $242,673, $314,155 and $1,765,161, respectively, in sales charges for
the sale of Fund shares, and did not reallow any portion thereof to dealers.
For the year ended August 31, 1994, Smith Barney received from shareholders
$101,447 in CDSC on the redemption of Class B shares.
When payment is made by the investor before settlement date, unless
otherwise directed by the investor, the funds will be held as a free credit
balance in the investor's 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
(other than Smith Barney Exchange Reserve Fund) of the Smith Barney Mutual of
Funds. 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
13
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 Fund's 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 Advisory, Administration and Distribution
Agreements for continuance.
DISTRIBUTION ARRANGEMENTS
To compensate Smith Barney for the services 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
Fund's 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 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 Fund's average net assets
attributable to the shares of the respective Class.
For the fiscal year ended August 31, 1994, the Fund incurred $435,857 and
$80,526 in service fees for Class A and Class B shares, respectively. For the
year ended August 31, 1994, the Fund incurred $366 in service fees for its
Class C shares. 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 year ended August 31, 1994, the Fund incurred
$241,578 and $1,095 for Class B and Class C shares, respectively, 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 Directors who are not interested persons of the Fund and who
have no direct or indirect financial interest in the operation of the Plan or
in the Distribution Agreement (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 the 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 Fund's 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 days on which the NYSE is closed. The NYSE currently is
scheduled to be closed on New Year's Day,
14
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. 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
Fund's 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 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 Fund's Board of Directors.
EXCHANGE PRIVILEGE
- ------
Except as noted below, shareholders of any fund of the Smith Barney Mutual
Funds may exchange all or part of their shares for shares of the same Class of
other funds of the Smith Barney Mutual Funds, to the extent such shares are
offered for sale in the shareholder's 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 fund purchased with a sales charge may be
exchanged for Class A shares of any of the other funds, and the
sales charge differential, if any, will be applied. Class A shares
of any fund may be exchanged without a sales charge for shares of
the funds that are offered without a sales charge. Class A shares of
any fund purchased without a sales charge may be exchanged for
shares sold with a sales charge, and the appropriate sales charge
differential will be applied.
B. Class A shares of any fund acquired by a previous exchange of shares
purchased with a sales charge may be exchanged for Class A shares of
any of the other funds, and the sales charge differential, if any,
will be applied.
C. Class B shares of any fund may be exchanged without a sales charge.
Class B shares of the Fund exchanged for Class B shares of another
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.
Dealers other than Smith Barney must notify TSSG of the investor's 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 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
15
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 being considered. 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 are immediately invested, at
a price as 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 the Classes in
advertisements or in reports and other communications to shareholders. To the
extent any advertisement or sales literature of the Fund describes the
expenses or performance of Class A, Class B, Class C or Class Y, it will also
disclose such information for the other Classes.
AVERAGE ANNUAL TOTAL RETURN
"Average annual total return" figures 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 a 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 A's average annual total return was as follows for the periods
indicated:
<TABLE>
<C> <S>
7.77% for the one-year period beginning on September 1, 1993 through August
31, 1994;
10.11% per annum during the five-year period beginning on September 1, 1989
through August 31, 1994; and
14.50% per annum during the ten-year period beginning on September 1, 1984
through August 31, 1994.
</TABLE>
Class B's average annual total return was as follows for the periods
indicated:
<TABLE>
<C> <S>
7.62% for the one-year period beginning on September 1, 1993 through August
31, 1994; and
12.94% per annum from November 6, 1992 through August 31, 1994.
</TABLE>
Class Z's average annual total return was as follows for the periods
indicated:
<TABLE>
<C> <S>
13.81% for the one-year period beginning on September 1, 1993 through August
31, 1994; and
16.17% per annum from November 6, 1992 through August 31, 1994.
</TABLE>
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.
16
AGGREGATE TOTAL RETURN
"Aggregate total return" figures represent the cumulative change in the
value of an investment in the Class for the specified period and are computed
by the following formula:
ERV-P
AGGREGATE TOTAL RETURN = -----
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 A's aggregate total return was as follows for the periods indicated:
<TABLE>
<C> <S>
13.44% for the one-year period from September 1, 1993 through August 31,
1994.
70.34% for the five-year period from September 1, 1989 through August
31,1994; and
307.81% for the ten-year period from September 1, 1984 through August 31,
1994.
</TABLE>
These aggregate total return figures do not assume the maximum 5.00% sales
charge has been deducted from the investment at the time of purchase. If the
maximum sales charge had been deducted at the time of purchase, the Fund's
aggregate total return for those same periods would have been 7.77%, 61.83%
and 287.42%, respectively.
Class B's aggregate total return was as follows for the periods indicated:
<TABLE>
<C> <S>
12.62% for one-year period from September 1, 1993 through August 31, 1994; and
28.75% for the period from November 6, 1992 through August 31, 1994.
</TABLE>
Class B's total return assumes that the maximum applicable CDSC has not been
deducted from the investment at the time of purchase. If the maximum CDSC had
been reflected, Class B's aggregate total return for the same period would
have been 7.62% and 24.75%, respectively.
Class C's aggregate total return was as follows for the periods indicated:
<TABLE>
<C> <S>
12.57% for the one-year period from September 1, 1993 through August 31, 1994;
and
24.98% for the period from November 6, 1992 through August 31, 1994.
</TABLE>
Class Z's aggregate total return was as follows for the periods indicated:
<TABLE>
<C> <S>
13.81% for the one-year period from September 1, 1993 through August 31, 1994;
and
31.29% for the period from November 6, 1992 through August 31, 1994.
</TABLE>
Performance will vary from time to time depending upon market conditions,
the composition of the Fund's portfolio, operating expenses and the expenses
exclusively attributable to the Class. Consequently, any given
17
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
respective investment companies' 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
- ------
The following is a summary of certain 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. Although the Fund
expects to be relieved of all or substantially all Federal, state, and local
income or franchise taxes, depending upon the extent of its activities in
states and localities in which its offices are maintained, in which its agents
or independent contractors are located, or in which it is otherwise deemed to
be conducting business, that portion of the Fund's income which is treated as
earned in any such state or locality could be subject to state and local
taxes. Any such taxes paid by the Fund would reduce the amount of income and
gains available for distribution to shareholders. All net investment income
and net capital gains earned by the Fund will be reinvested automatically in
additional shares of the same Class of the Fund at net asset value, unless the
shareholder elects to receive dividends and distributions in cash.
Gains or losses on the sales of securities by the Fund generally will be
long-term capital gains or losses if the Fund has held the securities for more
than one year. Gains or losses on the sales of securities held for not more
than one year generally will be short-term capital gains or losses. 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 it reflects accrued market discount.
Dividends of net investment income and distributions of net realized short-
term capital gains will be taxable to shareholders as ordinary income for
Federal income tax purposes, whether received in cash or reinvested in
additional shares. Dividends received by corporate shareholders will qualify
for the dividends-received deduction only to the extent that the Fund
designates the amount distributed as a dividend and the amount so designated
does not exceed the aggregate amount of dividends received by the Fund from
domestic corporations for the taxable year. The Federal dividends-received
deduction for corporate shareholders may be further reduced or disallowed if
the shares with respect to which dividends are received are treated as debt-
financed or are deemed to have been held for less than 46 days.
18
Foreign countries may impose withholding and other taxes on dividends and
interest paid to the Fund with respect to investments in foreign securities.
However, certain foreign countries have entered into tax conventions with the
United States to reduce or eliminate such taxes.
Distributions of long-term capital gains will be taxable to shareholders as
such, whether paid in cash or reinvested in additional shares and regardless
of the length of time that the shareholder has held his or her interest in the
Fund. If a shareholder receives a distribution taxable as long-term capital
gain with respect to his or her investment in 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.
If a shareholder (a) incurs a sales charge in acquiring or redeeming 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., exchange privilege), the
original sales charge increases the shareholder's tax basis in the original
shares only to the extent the otherwise applicable sales charge for the second
acquisition is not reduced. The portion of the original sales charge that does
not increase the shareholder's 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 shareholder's tax basis in the newly acquired shares.
Furthermore, the same rule also applies 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.
If a shareholder fails to furnish a correct taxpayer identification number,
fails to report dividend and interest income in full, 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, the shareholder may be subject to a
31% "backup withholding" tax with respect to (a) any taxable dividends and
distributions and (b) any proceeds of any redemption of Fund shares. An
individual's 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 shareholder's regular 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 on May 12, 1983 under the name Shearson Aggressive
Growth Fund Inc. On May 20, 1988, November 6, 1992, July 30, 1993 and October
14, 1994, the Fund changed
19
its name to Shearson Lehman Aggressive Growth Fund Inc., Shearson Lehman
Brothers Aggressive Growth Fund Inc., Smith Barney Shearson Aggressive Growth
Fund Inc. and Smith Barney Aggressive Growth Fund Inc., respectively.
Boston Safe, an indirect wholly owned subsidiary of Mellon, is located at
One Boston Place, Boston, Massachusetts 02108, and serves as the custodian of
the Fund. Under its agreement with the Fund, Boston Safe holds the Fund's
portfolio securities and keeps all necessary accounts and records. For its
services, Boston Safe receives a monthly fee based upon the month-end market
value of securities held in custody and also receives securities transaction
charges. Boston Safe is authorized to establish separate accounts for 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. The assets of the Fund are held under bank custodianship in
compliance with the 1940 Act.
TSSG is located at Exchange Place, Boston, Massachusetts 02109, and serves
as the Fund's transfer agent. Under the transfer agency agreement, TSSG
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, TSSG 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 Fund's Annual Report for the fiscal year ended August 31, 1994,
accompanies this Statement of Additional Information and is incorporated
herein by reference in its entirety.
20
SMITH BARNEY
AGGRESSIVE GROWTH FUND INC.
388 Greenwich Street
New York, New York 10013 Fund 9,188,214
_______________________________________________________________________________
SMITH BARNEY
AGGRESSIVE
GROWTH FUND INC.
STATEMENT OF
ADDITIONAL INFORMATION
NOVEMBER 7, 1994
[LOGO OF SMITH BARNEY APPEARS HERE]
SMITH BARNEY AGGRESSIVE GROWTH FUND INC.
PART C
Item 24. Financial Statements and Exhibits
(a) Financial Statements
Included in Part A:
Financial Highlights
Included in Part B:
The Registrant's Annual Reports for the fiscal year ended August 31,
1994 and the Reports of Independent Accountants dated October 7, 1994 are
incorporated by reference to the Definitive 30b-2 filed on November 4, 1994
as Accession # 0000053798-94-000509.
Included in Part C:
Consent of Independent Accountants
(b) Exhibits
All references are to the Registrant's registration statement on Form
N-1A (the "Registration Statement") as filed with the Securities and
Exchange Commission on June 5, 1983. File Nos. 2-84199 and 811-3762.
(1)(a) Registrant's Articles of Incorporation dated May 12, 1983 and
Articles of Amendment dated May 27, 1983, October 3, 1983, May 20, 1988,
November 5, 1992, November 19, 1992 and July 30, 1993, respectively, are
incorporated by reference to Post-Effective Amendment No. 15 to the
Registration Statement filed on October 28, 1993 ("Post-Effective Amendment
No. 15").
(b) Articles of Amendment dated October 14, 1994, Form of Articles
Supplementary and Form of Articles of Amendment are filed herein.
(2)(a) Registrant's By-Laws are incorporated by reference to the
Registration Statement.
(2)(b) Amendments dated January 27, 1987, October 22, 1987 and October
20, 1988 to By-Laws are incorporated by reference to Post-Effective
Amendment No. 9.
(3) Not Applicable.
(4) Registrant's form of stock certificate for Class A, B, C and D shares
are incorporated by reference to Post-Effective Amendment No. 14 to the
Registration Statement filed on October 23, 1992 ("Post-Effective Amendment
No. 14").
(5) Investment Advisory Agreement between the Registrant and the Smith
Barney Shearson Asset Management Division of Smith, Barney Advisers, Inc.
is incorporated by reference to Post-Effective Amendment No. 15.
(6) Distribution Agreement between the Registrant and Smith Barney
Shearson Inc. ("Smith Barney Shearson") is incorporated by reference to
Post-Effective Amendment No. 15.
(7) Not Applicable.
(8) Custodian Agreement between the Registrant and Boston Safe Deposit
and Trust Company is incorporated by reference to Pre-Effective Amendment
No. 1.
(9)(a) Administration Agreement dated April 21, 1994, between the
Registrant and Smith, Barney Advisers, Inc. will be filed by Amendment.
(b) Sub-Administration Agreement dated April 21, 1994, between
the Registrant and The Boston Company Advisors, Inc. will be filed by
Amendment.
(c) Transfer Agency Agreement dated August 2, 1993, between the
Registrant and The Shareholder Services Group, Inc. is incorporated by
reference to Post-Effective Amendment No. 16, filed on January 1, 1994
("Post-Effective Amendment No. 16").
(10) Not Applicable.</R >
(11) Consent of Independent Accountants is filed herein.
(12)
Not Applicable.
(13) Purchase Agreement between the Registrant and Shearson Lehman
Brothers Inc. is incorporated by reference to Pre-Effective Amendment No.
1.
(14) Not Applicable.
(15) Amended Services and Distribution Plan pursuant to Rule 12b-1
between the Registrant and Smith Barney Inc. ("Smith Barney") is filed
herein.
(16) Performance Data is incorporated by reference to Post-Effective
Amendment No. 9.
Item 25. Persons Controlled by or Under Common Control with Registrant
None.
Item 26. Number of Holders of Securities
(1) (2)
Number of Record
Title of Class Holders by Class as of September 23, 1994
Common Stock Class A-20,817
par value $.001 per Class B- 6,885
share Class C- 5
Class D- 9
Item 27. Indemnification
Under the Registrant's corporate charter and Maryland law, directors
and officers of the Registrant are not liable to the Registrant or its
stockholders except for receipt of an improper personal benefit or active
and deliberate dishonesty. The Registrant's corporate charter requires
that it indemnify its directors and officers against liabilities unless it
is proved that a director or officer acted in bad faith or with active and
deliberate dishonesty or received an improper personal benefit. These
indemnification provisions are subject to the limitation under the
Investment Company Act of 1940, as amended, that no director or officer may
be protected against liability for willful misfeasance, bad faith, gross
negligence or reckless disregard for the duties of his office.
Item 28(a). Business and Other Connections of Investment Adviser
Investment Adviser - - Smith Barney Mutual Funds Management Inc.
Smith Barney Mutual Funds Management Inc., formerly known as Smith, Barney
Advisers, Inc., ("SBMFM") was incorporated in December 1968 under the laws
of the State of Delaware. SBMFM is a wholly owned subsidiary of Smith
Barney Holdings Inc. (formerly known as Smith Barney Shearson Holdings
Inc.), which in turn is a wholly owned subsidiary of The Travelers Inc.
(formerly known as Primerica Corporation) ("Travelers"). SBMFM is
registered as an investment adviser under the Investment Advisers Act of
1940 (the "Advisers Act").
The list required by this Item 28 of officers and directors of SBMFM
together with information as to any other business, profession, vocation or
employment of a substantial nature engaged in by such officers and
directors during the past two years, is incorporated by reference to
Schedules A and D of FORM ADV filed by SBMFM pursuant to the Advisers Act
(SEC File No. 801-8314).
Smith Barney Asset Management ("SBAM"), through its predecessors, has been
in the investment counseling business since 1940 and was a division of
SBMFM, formerly known as Smith, Barney Advisers, Inc.
The list required by this Item 28 of officers and directors of SBA and
SBAM, together with information as to any other business, profession,
vocation or employment of a substantial nature engaged in by such officers
and directors during the past two fiscal years, is incorporated by
reference to Schedules A and D of FORM ADV filed by SBMFM pursuant to the
Advisers Act (SEC File No. 801-8314).
Prior to the close of business on July 30, 1993 (the "Closing"), Shearson
Asset Management, a member of the Asset Management Group of Shearson Lehman
Brothers Inc. ("Shearson Lehman Brothers"), served as the Registrant's
investment adviser. On the Closing, Travelers and Smith Barney Inc.
(formerly known as Smith Barney Shearson Inc.) acquired the domestic retail
brokerage and asset management business of Shearson Lehman Brothers which
included the business of the Registrant's prior investment adviser.
Shearson Lehman Brothers was a wholly owned subsidiary of Shearson Lehman
Brothers Holdings Inc. ("Shearson Holdings"). All of the issued and
outstanding common stock of Shearson Holdings (representing 92% of the
voting stock) was held by American Express Company. Information as to any
past business vocation or employment of a substantial nature engaged in by
officers and directors of Shearson Asset Management can be located in
Schedules A and D of FORM ADV filed by Shearson Lehman Brothers on behalf
of Shearson Asset Management prior to July 30, 1993 (SEC FILE NO. 801-
3701).
Item 29. Principal Underwriters
Smith Barney currently acts as distributor for Smith Barney Managed
Municipals Fund Inc., Smith Barney New York Municipals Fund Inc., Smith
Barney California Municipals Fund Inc., Smith Barney Massachusetts
Municipals Fund, Smith Barney Global Opportunities Fund, Smith Barney
Aggressive Growth Fund Inc., Smith Barney Appreciation Fund Inc., Smith
Barney Principal Return Fund, Smith Barney Shearson Municipal Money Market
Fund Inc., Smith Barney Daily Dividend Fund Inc., Smith Barney Government
and Agencies Fund Inc., Smith Barney Managed Governments Fund Inc., Smith
Barney New York Municipal Money Market Fund, Smith Barney California
Municipal Money Market Fund, Smith Barney Income Funds, Smith Barney Equity
Funds, Smith Barney Investment Funds Inc., Smith Barney Precious Metals and
Minerals Fund Inc., Smith Barney Telecommunications Trust, Smith Barney
Arizona Municipals Fund Inc., Smith Barney New Jersey Municipals Fund Inc.,
The USA High Yield Fund N.V., Garzarelli Sector Analysis Portfolio N.V.,
The Advisors Fund L.P., Smith Barney Fundamental Value Fund Inc., Smith
Barney Series Fund, Consulting Group Capital Markets Funds, Smith Barney
Income Trust, Smith Barney Adjustable Rate Government Income Fund, Smith
Barney Florida Municipals Fund, Smith Barney Oregon Municipals Fund, Smith
Barney Funds, Inc., Smith Barney Muni Funds, Smith Barney World Funds,
Inc., Smith Barney Money Funds, Inc., Smith Barney Tax Free Money Fund,
Inc., Smith Barney Variable Account Funds, Smith Barney U.S. Dollar Reserve
Fund (Cayman), Worldwide Special Fund, N.V., Worldwide Securities Limited,
(Bermuda), Smith Barney International Fund (Luxembourg) and various series
of unit investment trusts.
Smith Barney is a wholly owned subsidiary of Smith Barney Holdings Inc.,
which in turn is a wholly owned subsidiary of Travelers. On June 1, 1994,
Smith Barney changed its name from Smith Barney Inc. to its current name.
The information required by this Item 29 with respect to each director,
officer and partner of Smith Barney is incorporated by reference to
Schedule A of FORM BD filed by Smith Barney pursuant to the Securities
Exchange Act of 1934 (SEC File No. 812-8510).
Item 30. Location of Accounts and Records
(1) Smith Barney Aggressive Growth Fund Inc.
388 Greenwich Street
New York, New York 10013
(2) Smith Barney Mutual Funds Management Inc.
388 Greenwich Street
New York, New York 10013
(3) The Boston Company Advisors, Inc.
One Boston Place
Boston, Massachusetts 02108
(4) Boston Safe Deposit and Trust Company
One Boston Place
Boston, Massachusetts 02108
(5) The Shareholder Services Group, Inc.
One Exchange Place
Boston, Massachusetts 02109
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
None.
485(b) Certification
The Registrant hereby certifies that it meets all requirements for
effectiveness pursuant to Rule 485(b) (1)(ix) under the Securities
Act of 1933, as amended.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, the
Registrant, SMITH BARNEY AGGRESSIVE GROWTH FUND INC., has caused this
Amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of New York and
State of New York on the 3rd day of November, 1994.
SMITH BARNEY AGGRESSIVE
GROWTH FUND INC.
By: /s/ Heath B. McLendon
Heath B. McLendon
Chief Executive Officer
We, the undersigned, hereby severally constitute and appoint Heath
B. McLendon, Christina T. Sydor and Lee D. Augsburger and each of them
singly, our true and lawful attorneys, with full power to them and each of
them to sign for us, and in our hands and in the capacities indicated
below, any and all Amendments to this Registration Statement and to file
the same, with all exhibits thereto, and other documents therewith, with
the Securities and Exchange Commission, granting unto said attorneys, and
each of them, acting alone, full authority and power to do and perform each
and every act and thing requisite or necessary to be done in the premises,
as fully to all intents and purposes as he might or could do in person,
hereby ratifying and confirming all that said attorneys or any of them may
lawfully do or cause to be done by virtue thereof.
WITNESS our hands on the date set forth below.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Amendment to the Registration Statement and the above Power
of Attorney has been signed by the following persons in the capacities and
on the dates indicated:
Signature
Title
Date
/s/Heath B. McLendon
Heath B. McLendon
Chairman of the Board (Chief
Executive Officer)
November 3, 1994
/s/ Lewis E. Daidone
Lewis E. Daidone
Treasurer (Chief Financial and
Accounting Officer)
November 3, 1994
Signature
Title
Date
/s/Paul R. Ades
Paul R. Ades
Director
November 3, 1994
/s/Herbert Barg
Herbert Barg
Director
November 3, 1994
/s/Allan R. Johnson
Allan R. Johnson
Director
November 3, 1994
/s/Ken Miller
Ken Miller
Director
November 3, 1994
/s/John F. White
John F. White
Director
November 3, 1994
shared\domestic\clients\shearson\funds\grow\N1A-18.doc
EXHIBIT 1(b)
SMITH BARNEY SHEARSON AGGRESSIVE GROWTH FUND INC. ARTICLES OF AMENDMENT
Smith Barney Shearson Aggressive Growth Fund Inc., a Maryland
corporation having its principal office in the State of Maryland in
Baltimore City (hereinafter called the "Corporation"), hereby certifies to
the State Department of Assessments and Taxation of Maryland that:
FIRST: The Articles of Incorporation of the Corporation, as
amended, are hereby further amended by deleting Article II and inserting in
lieu thereof the following:
ARTICLE II
NAME
The name of the corporation (hereinafter called
the "Corporation") is Smith Barney Aggressive
Growth Fund Inc.
SECOND: The foregoing amendment to the charter of the
Corporation was approved by a majority of the entire Board of Directors of
the Corporation; the charter amendment is limited to a change expressly
permitted by Section 2-605 of Title 2 of Subtitle 6 of the Maryland General
Corporation Law to be made without action by the stockholders, and the
Corporation is registered as an open-end company under the Investment
Company Act of 1940.
The undersigned Chairman acknowledges these Articles of
Amendment to be the corporate act of the Corporation and states to the best
of his knowledge, information and belief that the matters and facts set
forth in these Articles with respect to authorization and approval are true
in all material respects and that this statement is made under the
penalties of perjury.
IN WITNESS WHEREOF, Smith Barney Shearson Aggressive Growth
Fund Inc. has caused these Articles of Amendment to be signed in its name
and on its behalf by its Chairman and witnessed by its Assistant Secretary
on October 14, 1994.
SMITH BARNEY SHEARSON AGGRESSIVE GROWTH FUND INC.
By: /s/ Heath B. McLendon Heath B. McLendon,
Chairman
WITNESS:
/s/ Lee D. Augsburger
Lee D. Augsburger
Assistant Secretary
5240/BLUSEC
##
##
## -#-
5272/BLUSEC
##
<PAGE> 1
ARTICLES SUPPLEMENTARY
SMITH BARNEY AGGRESSIVE GROWTH FUND INC.
Smith Barney Aggressive Growth Fund
Inc., a Maryland corporation having its
principal office in the State of Maryland in
Baltimore City (hereinafter called the
"Corporation"), hereby certifies to the State
Department of Assessments and Taxation of
Maryland that:
FIRST: The Corporation is
authorized to issue
100,000,000 shares of capital stock, par value
$.01 per share, with an aggregate par value of
$1,000,000. These Articles Supplementary do
not increase the total authorized capital
stock of the Corporation or the aggregate par
value thereof. The Board of Directors hereby
classifies and reclassifies all of the
unissued shares of capital stock of all
classes of the Corporation in such manner that
the Corporation's capital stock will be
classified into five classes, each with a par
value of $.01 per share, designated Class A
Common Stock, Class B Common Stock, Class C
Common Stock, Class Y Common Stock and Class Z
Common Stock. The Corporation shall be
authorized to issue up to 100,000,000 shares
of each such class of capital stock less, at
any time, the total number of shares of all
other such classes of capital stock then
issued and outstanding. At no time may the
Corporation cause to be issued and outstanding
more than 100,000,000 shares of its capital
stock of all such classes in the aggregate
unless such number be hereafter increased in
accordance with the Maryland General
Corporation Law.
SECOND: The shares of Class A Common
Stock, Class B Common Stock, Class C Common
Stock and Class Z Common Stock classified
hereby shall have the preferences, conversion
and other rights, voting powers, restrictions,
limitations as to dividends, qualifications
and terms and conditions of redemption as
currently set forth in the charter of the
Corporation with respect to those respective
classes of capital stock. The Class Y Common
Stock classified hereby shall have the
preferences, conversion and other rights,
voting powers, restrictions, limitations as to
dividends, qualifications, and terms and
conditions of redemption as set forth in
Article V of the Corporation's Articles of
Incorporation and shall be subject to all
provisions of its Articles of Incorporation
relating to stock of the Corporation
generally, and those set forth as follows:
(1) The assets belonging to the Class Y
Common Stock shall be invested in the same
<PAGE> 2
investment portfolio of the Corporation as the
assets belonging to the Class A Common Stock,
the Class B Common Stock, the Class C Common
Stock and the Class Z Common Stock.
(2) The dividends and distributions of
investment income and capital gains with
respect to the Class Y Common Stock shall be
in such amounts as may be declared from time
to time by the Board of Directors, and such
dividends and distributions with respect to
the Class Y Common Stock may vary from
dividends and distributions with respect to
each other class of capital stock to reflect
differing allocation of the expenses of the
Corporation among the holders of each such
class and any resultant differences among the
net asset values per share of each such class,
to such extent and for such purposes as the
Board of Directors may deem appropriate.
(3) The allocation of investment income,
capital gains and losses, expenses and
liabilities of the Corporation among the Class
Y Common Stock and any other class of the
Corporation's stock shall be determined
conclusively by the Board of Directors in a
manner that is consistent with the order dated
July 7, 1992 (Investment Company Act of 1940
Release No. 18832), as amended January 19,
1993 (Investment Company Act Release No.
19216), and January 28, 1994 (Investment
Company Act of 1940, Release No. 20042) issued
by the Securities and Exchange Commission in
connection with the application for exemption
filed by Smith Barney Appreciation Fund, Inc.
(formerly Shearson Lehman Brothers
Appreciation Fund Inc. et al.), and any
existing or future amendment to such order or
any rule or interpretation under the
Investment Company Act of 1940 that modifies
or supersedes such order.
(4) Except as may otherwise be required by
law pursuant to any applicable order, rule, or
interpretation issued by the Securities and
Exchange Commission, or otherwise, the holders
of the Class Y Common Stock shall
<PAGE> 3
have (i) exclusive voting rights with respect
to any matter, including any distribution plan
adopted by the Corporation pursuant to Rule
12b-1 under the Investment Company Act of 1940
(a "Plan") which affects only holders of such
class, and (ii) no voting rights with respect
to any matter, including any Plan, which does
not affect holders of such class.
THIRD: The Board of Directors of
the Corporation
has classified the shares described above
pursuant to authority contained in the
Corporation's charter.
FOURTH: These Articles Supplementary
will become
effective at 9:01 A.M. on November 7, 1994.
The undersigned Chairman of the Board of
the Corporation acknowledges these Articles
Supplementary to be the corporate act of the
Corporation and states that to the best of his
knowledge, information and belief, the matters
and facts set forth in these Articles with
respect to authorization and approval are true
in all material respects and that this
statement is made under penalties of perjury.
IN WITNESS WHEREOF, Smith Barney
Aggressive Growth Fund Inc. has caused these
Articles Supplementary to be signed and filed
in its name and on its behalf by its Chairman
of the Board, and witnessed by its Assistant
Secretary on , 1994.
SMITH BARNEY AGGRESSIVE
GROWTH FUND INC.
By: /s/ Heath B. McLendon
Heath B. McLendon, Chairman of the Board
WITNESS:/s/ Lee D. Augsburger
Lee D. Augsburger,
Assistant Secretary
##
##
## -#-
5274/BLUSEC
##
<PAGE> 1
SMITH BARNEY AGGRESSIVE GROWTH FUND INC.
ARTICLES OF AMENDMENT
Smith Barney Aggressive Growth Fund Inc., a Maryland corporation
having its principal office in the State of Maryland in Baltimore City
(hereinafter called the "Corporation"), hereby certifies to the State
Department of Assessments and Taxation of Maryland that:
FIRST: The charter of the Corporation is hereby amended to provide
that the Corporation's "Class C Common Stock" is hereby redesignated as
"Class Z Common Stock."
SECOND: The charter of the Corporation is hereby amended further to
provide that the Corporation's "Class D Common Stock" is hereby
redesignated as newly designated "Class C Common Stock."
THIRD: The charter of the Corporation is hereby
amended further to provide that the class of shares of "Common Stock" of
the Corporation that has not been previously further designated is hereby
designated as "Class A Common Stock."
FOURTH: The foregoing amendments to the charter of the Corporation
were approved by a majority of the entire Board of Directors of the
Corporation; the charter amendments are limited to changes expressly
permitted by Section 2-605 of Title 2 of Subtitle 6 of the Maryland General
Corporation Law to be made without action by the stockholders, and the
Corporation is registered as an open-end company under the Investment
Company Act of 1940.
FIFTH: These Articles of Amendment will become effective at 9:00
A.M. on November 7, 1994.
The undersigned Chairman of the Board of the Corporation acknowledges
these Articles of Amendment to be the corporate act of the Corporation and
states to the best of his knowledge, information and belief that the
matters and facts set forth in these Articles with respect to authorization
and approval are true in all material respects and that this statement is
made under the penalties of perjury.
<PAGE> 2
IN WITNESS WHEREOF, Smith Barney Aggressive Growth Fund Inc. has
caused these Articles of Amendment to be signed in its name and on its
behalf by its Chairman of the Board, and witnessed by its Assistant
Secretary on , 1994.
SMITH BARNEY AGGRESSIVE
GROWTH FUND INC.
By: /s/ Heath B. McLendon Heath D. McLendon,
Chairman of theBoard
WITNESS:/s/ Lee D. Augsburger
Lee D. Augsburger,
Assistant Secretary
EXHIBIT 9(a)
SHEARSON LEHMAN BROTHERS AGGRESSIVE GROWTH FUND INC.
ADMINISTRATION AGREEMENT
May 21, 1993
The Boston Company Advisors, Inc.
One Boston Place
Boston, Massachusetts 02108
Dear Sirs:
Shearson Lehman Brothers Aggressive Growth Fund Inc. a Maryland
Corporation organized under the laws of the State of Maryland, confirms its
agreement with The Boston Company Advisors, Inc. ("Boston Advisors") as
follows:
1. Investment Description; Appointment
The Fund desires to employ its capital by investing and reinvesting
in investments of the kind and in accordance with the limitations specified
in its Articles of Incorporation, as amended from time to time, in its
Prospectus and Statement of Additional Information as from time to time in
effect, and in such manner and to the extent as may from time to time be
approved by the Board of Directors of the Fund. Copies of the Fund's
Prospectus, Statement of Additional Information and the Articles of
Incorporation have been submitted to Boston Advisors. The Fund employs
Shearson Lehman Brothers Inc. on behalf of Shearson Asset Management (the
"Adviser") as its investment adviser and desires to employ and hereby
appoints Boston Advisors as its administrator. Boston Advisors accepts
this appointment and agrees to furnish services for the compensation set
forth below.
2. Services as Administrator
Subject to the supervision and direction of the Board of Directors of
the Fund, Boston Advisors will (a) assist in supervising all aspects of the
Fund's operations except those performed by the Fund's Adviser under its
investment advisory agreement; (b) assist in the execution of cash
management decisions made by the Fund's Adviser(s) pursuant to instructions
from Fund's Adviser(s); (c) furnish such statistical or other factual
information, advice regarding economic factors and trends and advice as to
occasional transactions in specific securities (but without generally
furnishing advice or making recommendations regarding the purchase or sale
of securities) as may be requested by the Fund's Adviser(s) in connection
with the selection of cash equivalent investments as may be requested from
time to time by the Fund's Adviser(s); (d) supply the Fund with office
facilities (which may be Boston Advisors' own offices) statistical and
research data, data processing services, clerical, accounting and
bookkeeping services, including but not limited to, the calculation of net
asset value of shares of the Fund, internal auditing and legal services,
internal executive and administrative services, and stationary and office
supplies; and (e) prepare reports to the shareholders of the Fund, tax
returns and reports to and filings with the Securities and Exchange
Commission and state Blue Sky authorities.
3. Compensation
In consideration of services rendered pursuant to this Agreement, the
Fund will pay Boston Advisors on the first business day of each month a fee
for the previous month at an annual rate of: .20% of the value of the
Fund's average daily net assets. Upon any termination of this Agreement
before the end of any month, the fee for such part of the month shall be
prorated according to the proportion which such period bears to the full
monthly period and shall be payable upon the date of termination of this
Agreement. For the purpose of determining fees payable to Boston Advisors,
the value of the Fund's net assets shall be computed at the times and in
the manner specified in the Prospectus and Statement of Additional
Information as from time to time in effect.
4. Expenses
Boston Advisors will bear all expenses in connection with the
performance of its services under this Agreement. The Fund will bear
certain other expenses to be incurred in its operation, including: taxes,
interest, brokerage fees and commissions, if any; fees of Directors of the
Fund who are not officers, directors, or employees of the Adviser or Boston
Advisors; Securities and Exchange Commission fees and state Blue Sky
qualification fees; charges of custodians and transfer and dividend
disbursing agents; certain insurance premiums; outside auditing and legal
expenses, costs of maintenance of corporate existence; costs attributable
to investor services, including without limitation, telephone and personnel
expenses; costs of preparing and printing prospectuses and statement of
additional information for regulatory purposes and for distribution to
existing shareholders; costs of shareholders' reports and meetings, and
meetings of the officers or Board of Directors of the Fund; and any
extraordinary expenses.
5. Reimbursement to the Fund
If in any fiscal year, the aggregate expenses of the Fund (including
fees pursuant to this Agreement and the Fund's investment advisory
agreement, but excluding interest, taxes, brokerage and, if permitted by
state securities commissions, extraordinary expenses) exceed the expense
limitations of any state having jurisdiction over the Fund, Boston Advisors
will reimburse the Fund for that excess expense to the extent required by
state law in the same proportion as its respective fees bear to the
combined fees for investment advice and administration. The expense
reimbursement obligation of Boston Advisors will be limited to the amount
of fees hereunder. Such expense reimbursement, if any, will be estimated,
reconciled and paid on a monthly basis.
6. Standard of Care
Boston Advisors shall exercise its best judgment in rendering the
services listed in paragraph 2 above. Boston Advisors shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Fund in connection with the matters to which this Agreement relates
provided that nothing in this Agreement shall be deemed to protect or
purport to protect Boston Advisors against liability to the Fund or to its
shareholders to which Boston Advisors would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or by reason of Boston Advisors' reckless
disregard of its obligations and duties under this Agreement.
7. Term of Agreement
This Agreement shall continue automatically (unless terminated as
provided herein) for successive annual periods provided that such
continuance is specifically approved at least annually by the Board of
Directors of the Fund including a majority of the Board of Directors who
are not "interested persons" (as defined in the Investment Company Act of
1940, as amended) of any party to this Agreement, by vote cast in person at
a meeting called for the purpose of voting such approval. This Agreement
is terminable, without penalty, on 60 days' written notice, by the Board of
Directors of the Fund or by vote of holders of a majority of the Fund's
shares, or upon 90 days' written notice, by Boston Advisors.
8. Service to Other Companies or Accounts
The Fund understands that Boston Advisors now acts, will continue to
act and may act in the future as administrator to one or more other
investment companies, and the Fund has no objection to Boston Advisors' so
acting. The Fund understands that the persons employed by Boston Advisors
to assist in the performance of Boston Advisors' duties hereunder will not
devote their full time to such service and nothing contained herein shall
be deemed to limit or restrict the right of Boston Advisors or any
affiliate of Boston Advisors to engage in and devote time and attention to
other businesses or to render services of whatever kind or nature.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance hereof by signing and returning to us the enclosed
copy hereof.
Very truly yours,
Shearson Lehman Brothers Aggressive
Growth
Fund Inc.
By: /s/ Heath B. McLendon
Title: Chairman of the Board
Accepted:
The Boston Company Advisors, Inc.
By:
Title:
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EXHIBIT 9(b)
SMITH BARNEY SHEARSON AGGRESSIVE GROWTH FUND INC.
SUB-ADMINISTRATION AGREEMENT
May 5, 1994
The Boston Company Advisors, Inc.
One Exchange Place
Boston, MA 02109
Dear Sirs:
Smith Barney Shearson Aggressive Growth Fund Inc. (the "Fund"),
a corporation organized under the laws of the State of Maryland and Smith,
Barney Advisers, Inc. ("SBA") confirm their agreement with The Boston
Company Advisors, Inc. ("Boston Advisors") as follows:
1. Investment Description; Appointment
The Fund desires to employ its capital by investing and
reinvesting in investments of the kind and in accordance with the
limitations specified in its Articles of Incorporation dated May 12, 1983
as amended from time to time (the "Articles of Incorporation"), in its
Prospectus and Statement of Additional Information as from time to time in
effect, and in such manner and to such extent as may from time to time be
approved by the Board of Directors of the Fund (the "Board"). Copies of
the Fund's Prospectus, Statement of Additional Information and Articles of
Incorporation have been or will be submitted to you. The Fund employs SBA
as its administrator, and the Fund and SBA desire to employ and hereby
appoint Boston Advisors as the Fund's sub-administrator. Boston Advisors
accepts this appointment and agrees to furnish the services to the Fund,
for the compensation set forth below, under the general supervision of SBA.
2. Services as Sub-Administrator
Subject to the supervision and direction of the Board and SBA,
Boston Advisors will: (a) assist in supervising all aspects of the Fund's
operations except those performed by the Fund's investment adviser under
the Fund's investment advisory agreement; (b) supply the Fund with office
facilities (which may be in Boston Advisor's own offices), statistical and
research data, data processing services, clerical, accounting and
bookkeeping services, including, but not limited to, the calculation of (i)
the net asset value of shares of the Fund, (ii) applicable contingent
deferred sales charges and similar fees and changes and (iii) distribution
fees, internal auditing and legal services, internal executive and
administrative services, and stationery and office supplies; and (c)
prepare reports to shareholders of the Fund, tax returns and reports to and
filings with the Securities and Exchange Commission (the "SEC") and state
blue sky authorities.
3. Compensation
In consideration of services rendered pursuant to this
Agreement, SBA will pay Boston Advisors on the first business day of each
month a fee for the previous month calculated in accordance with the terms
set forth in Appendix B, and as agreed to from time to time by the Fund,
SBA and Boston Advisors. Upon any termination of this Agreement before the
end of any month, the fee for such part of a month shall be prorated
according to the proportion which such period bears to the full monthly
period and shall be payable upon the date of termination of this Agreement.
For the purpose of determining fees payable to Boston Advisors, the value
of the Fund's net assets shall be computed at the times and in the manner
specified in the Fund's Prospectus and Statement of Additional Information
as from time to time in effect.
4. Expenses
Boston Advisors will bear all expenses in connection with the
performance of its services under this Agreement. The Fund will bear
certain other expenses to be incurred in its operation, including: taxes,
interest, brokerage fees and commissions, if any; fees of the Board members
of the Fund who are not officers, directors or employees of Smith Barney
Shearson Inc., Boston Advisors of their affiliates; SEC fees and state blue
sky qualification fees; charges of custodians and transfer and dividend
disbursing agents; the Fund's and its Board members' proportionate share of
insurance premiums, professional association dues and/or assessments;
outside auditing and legal expenses; costs of maintaining the Fund's
existence; costs attributable to investor services, including, without
limitation, telephone and personnel expenses; costs of preparing and
printing prospectuses and statements of additional information for
regulatory purposes and for distribution to existing shareholders; costs of
shareholders' reports and meetings of the officers or Board and any
extraordinary expenses. In addition, the Fund will pay all distribution
fees pursuant to a Distribution Plan adopted under Rule 12b-1 of the
Investment Company Act of 1940, as amended (the "1940 Act").
5. Reimbursement of the Fund
If in any fiscal year the aggregate expenses of the Fund
(including fees pursuant to this Agreement and the Fund's investment
advisory agreement(s) and administration agreement, but excluding
distribution fees, interest, taxes, brokerage and, if permitted by state
securities commissions, extraordinary expenses) exceed the expense
limitations of any state having jurisdiction over the Fund, Boston Advisory
will reimburse the Fund for that excess expense to the extent required by
state law in the same proportion as its respective fees bear to the
combined fees for investment advice and administration. The expense
reimbursement obligation of Boston Advisors will be limited to the amount
of its fees hereunder. Such expense reimbursement, if any, will be
estimated, reconciled and paid on a monthly basis.
6. Standard of Care
Boston Advisors shall exercise its best judgment in rendering
the services listed in paragraph 2 above. Boston Advisors shall not be
liable for any error of judgment or mistake of law or for any loss suffered
by the Fund in connection with the matters to which this Agreement
relates, provided that nothing herein shall be deemed to protect or purport
to protect Boston Advisors against liability to the Fund or to its
shareholders to which Boston Advisors would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or by reason of Boston Advisor's reckless
disregard of its obligations and duties under this Agreement.
7. Term of Agreement
This agreement shall continue automatically for successive
annual periods, provided that it may be terminated by 90 days' written
notice to the other parties by any of the Fund, SBA or Boston Advisors.
This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns, provided, however,
that this agreement may not be assigned, transferred or amended without the
written consent of all the parties hereto.
8. Service to Other Companies or Accounts
The Fund understands that Boston Advisors now acts, will
continue to act and may act in the future as administrator to one or more
other investment companies, and the Fund has no objection to Boston
Advisors so acting. In addition, the Fund understands that the persons
employed by Boston Advisors to assist in the performance of its duties
hereunder may or may not devote their full time to such service and nothing
contained herein shall be deemed to limit or restrict the right of Boston
Advisors or its affiliates to engage in and devote time and attention to
other businesses or to render services of whatever kind of nature.
9. Indemnification
SBA agrees to indemnify Boston Advisors and its officers,
directors, employees, affiliates, controlling persons and agents
("indemnitees") to the extent that indemnification is available from the
Fund, and Boston Advisors agrees to indemnify SBA and its indemnitees,
against any loss, claim, expenses or cost of any kind (including reasonable
attorney's fees) resulting or arising in connection with this Agreement or
from the performance or failure to perform any act hereunder, provided that
not such indemnification shall be available if the indemnitee violated the
standard of care in paragraph 6 above. This indemnification shall be
limited by the 1940 Act, and relevant state law. Each indemnitee shall be
entitled to advancement of its expenses in accordance with the requirements
of the 1940 Act and the rules, regulations and interpretations thereof as
in effect from time to time.
10. Limitations of Liability
The Fund, SBA and Boston Advisors agree that the obligations of
the Fund under this Agreement shall not be binding upon any of the Board
members, shareholders, nominees, officers, employees or agents, whether
past, present or future, of the Fund individually, but are binding only
upon the assets and property of the Fund, as provided in the Articles of
Incorporation and Bylaws. The execution and delivery of this Agreement has
been duly authorized by the Fund, SBA and Boston Advisors, and signed by an
authorized officer of each, acting as such. Neither the authorization by
the Board Members of the Fund, nor the execution and delivery by the
officer of the Fund shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but
shall bind only the assets and property of the Fund as provided in the
Articles of Incorporation.
If the foregoing is in accordance with your understanding,
kindly indicate your acceptance hereof by signing and returning to us the
enclosed copy hereof.
Very truly yours,
Smith Barney Shearson
Aggressive Growth Fund Inc.
By: /s/ Heath B. McLendon
Name: Heath B. McLendon
Title: Chairman of the Board
Smith, Barney Advisers, Inc.
By: /s/ Christina Sydor_
Name: Christina Sydor
Title: Secretary
Accepted:
The Boston Company Advisors, Inc.
By: _______________________
Name:
Title:
APPENDIX A
ADMINISTRATIVE SERVICES
Fund Accounting. Fund accounting services involve comprehensive
accrual-based recordkeeping and management information. They include
maintaining a fund's books and records in accordance with the Investment
Company Act of 1940, as amended (the "1940 Act" ), net asset value
calculation, daily dividend calculation, tax accounting and portfolio
accounting.
The designated fund accountants interact with the Fund's
custodian, transfer agent and investment adviser daily. As required,
the responsibilities of each fund accountant may include:
Cash Reconciliation - Reconcile prior day's ending cash
balance per custodian's records and the accounting system to the prior
day's ending cash balance per fund accounting's cash availability
report;
Cash Availability - Combine all activity affecting the
Fund's cash account and produce a net cash amount available for
investment;
Formal Reconciliation - Reconcile system generated reports
to prior day's calculations of interest, dividends, amortization,
accretion, distributions, capital stock and net assets;
Trade Processing - Upon receipt of instructions from the
investment adviser review, record and transmit buys and sells to the
custodian;
Journal Entries - Input entries to the accounting system
reflecting shareholder activity and Fund expense accruals;
Reconcile and Calculate N.O.A. (net other assets) - Compile
all activity affecting asset and liability accounts other than
investment account;
Calculate Net Income, Mil Rate and Yield for Daily
Distribution
Funds - Calculate income on purchases and sales, calculate
change in income due to variable rate change; combine all daily income
less expenses to arrive at net income; calculate mil rate and yields (1
day, 7 day and 30 day);
Mini-Cycle (except for Money Market Funds) - Review intra
day trial balance and reports, review trial balance N.O.A.;
Holdings Reconciliation - Reconcile the portfolio holdings
per the system to custodian reports;
Pricing - Determine N.A.V. for the Fund using market value
of all securities and currencies (plus N.O.A.), divided by the shares
outstanding, and investigate securities with significant price changes
(over 5%);
Money Market Fund Pricing - Monitor valuation for compliance
with Rule 2a-7;
System Check-Back - Verify the change in market value of
securities which saw trading activity per the system;
Net Asset Value Reconciliation - Identify the impact of
current day's Fund activity on a per share basis;
Reporting of Price to NASDAQ - 5:30 P.M. is the final
deadline for Fund prices being reported to the newspaper;
Reporting of Price to Transfer Agent - N.A.V.s are reported
to transfer agent upon total completion of above activities.
In addition, fund accounting personnel: communicate corporate
actions of portfolio holdings to portfolio mangers; initiate
notification to custodian procedures on outstanding income receivables;
provide information to the Fund's treasurer for reports to shareholders,
SEC, Board, tax authorities, statistical and performance reporting
companies and the Fund's auditors; interface with Fund's auditors;
prepare monthly reconciliation packages, including expense pro forma;
prepare amortization schedules for premium and discount bonds based on
the effective yield method; prepare vault reconciliation reports to
indicate securities currently "out-for-transfer;" and calculate daily
expenses based on expense ratios supplied by Fund's treasurer.
Financial Administration. The financial administration services made
available to the Fund fall within three main categories: Financial
Reporting; Statistical Reporting; and Publications. The following is a
summary of the services made available to the Fund by the Financial
Administration Division:
Financial Reporting
Coordinate the preparation and review of the annual, semi-
annual and quarterly portfolio of investments and financial statements
included in the Fund's shareholder reports.
Statistical Reporting
Total return reporting;
SEC 30-day yield reporting and 7-day yield reporting (for
money market funds);
Prepare dividend summary;
Prepare quarter-end reports;
Communicate statistical data to the financial media
(Donoghue, Lipper, Morningstar, et al.).
Publications
Coordinate the printing and mailing process with outside
printers for annual and semi-annual reports, prospectuses, statements of
additional information, proxy statements and special letters or
supplements;
Treasury. The following is a summary of the treasury services available
to the Fund:
Provide an Assistant Treasurer for the Fund;
Authorize payment of bills for expenses of the Fund;
Establish and monitor the rate of expense accruals;
Prepare financial materials for review by the Fund's Board
(e.g., Rule 2a-7, 10f-3 17a-7 and 17e-1 reports, repurchase agreement
dealer lists, securities transactions);
Monitor mark-to-market comparisons for money market funds;
Recommend valuations to be used for securities which are not
readily saleable;
Function as a liaison with the Fund's outside auditors and
arrange for audits;
Provide accounting, financial and tax support relating to
portfolio management and any contemplated changes in the fund's
structure or operations;
Prepare and file forms with the Internal Revenue Service
Form 8613
Form 1120-RIC
Board Members' and Shareholders' 1099s
Mailings in connection with Section 852 and related
regulations.
Legal and Regulatory Services. The legal and regulatory services made
available to the Fund fall within four main areas: SEC and Public
Disclosure Assistance; Corporate and Secretarial Services; Compliance
Services; and Blue Sky Registration. The following is a summary of the
legal and regulatory services available to the Fund:
SEC and Public Disclosure Assistance
File annual amendments to the Fund's registration
statements, including updating the prospectus and statement of
additional information where applicable;
File annual and semi-annual shareholder reports with the
appropriate regulatory agencies;
Prepare and file proxy statements;
Provide legal assistance for shareholder communications.
Corporate and Secretarial Services
Provide an Assistant Secretary for the Fund;
Maintain general corporate calendar;
Prepare agenda and background materials for Fund board
meetings, make presentations where appropriate, prepare minutes and
follow-up matters raised at Board meetings;
Organize, attend and keep minutes of shareholder meetings;
Maintain Articles of Incorporation and By-Laws of the Fund.
Legal Consultation and Business Planning
Provide general legal advice on matters relating to
portfolio management, Fund operations and any potential changes in the
Fund's investment policies, operations or structure;
Maintain continuing awareness of significant emerging
regulatory and legislative developments which may affect the Fund,
update the Fund's Board and the investment adviser on those developments
and provide related planning assistance where requested or appropriate;
Develop or assist in developing guidelines and procedures to
improve overall compliance by the Fund and its various agents;
Manage Fund litigation matters and assume full
responsibility for the handling of routine fund examinations and
investigations by regulatory agencies.
Compliance Services
The Compliance Department is responsible for preparing compliance
manuals, conducting seminars for fund accounting and advisory personnel
and performing on-going testing of the Fund's portfolio to assist the
Fund's investment adviser in complying with prospectus guidelines and
limitations, 1940 Act requirements and Internal Revenue Code
requirements. The Department may also act as liaison to the SEC during
its routine examinations of the Fund.
State Regulation
The State Regulation Department operates in a fully automated
environment using blue sky registration software development by Price
Waterhouse. In addition to being responsible for the initial and on-
going registration of shares in each state, the Department acts as
liaison between the Fund and state regulators, and monitors and reports
on shares sold and remaining registered shares available for sale.
Schedule B
Fee
shared\domestic\clients\shearson\grow\subadm.doc
A-2
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EXHIBIT 11
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Smith Barney Aggressive Growth Fund Inc.:
We hereby consent to the following with respect to
Post-Effective Amendment No. 18 to the Registration Statement
on Form N-1A (File No. 2-84199) under the Securities Act of
1933, as amended, of Smith Barney Aggressive Growth Fund Inc.
(formerly Smith Barney Shearson Aggressive Growth Fund Inc.):
1. The incorporation by reference of our report dated October
7, 1994 accompanying the Annual Report dated August 31, 1994 of
Smith Barney Aggressive Growth Fund Inc., in the Statement of
Additional Information.
2. The reference to our firm under the heading "Financial
Highlights" in the Prospectus.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
November 2, 1994
EXHIBIT 15
AMENDED SERVICES AND DISTRIBUTION PLAN
SMITH BARNEY AGGRESSIVE GROWTH FUND INC.
This Services and Distribution Plan (the "Plan") is adopted in
accordance with rule 12b-1 (the "Rule") under the Investment
Company Act of 1940, as amended (the "1940 Act"), by Smith Barney
Aggressive Growth Fund Inc., a corporation organized under the laws
of the State of Maryland (the "Fund"), subject to the following
terms and conditions:
Section 1. Annual Fee
(a) Class A Service Fee. The Fund will pay to the distributor
of its shares, Smith Barney Inc., a corporation organized under the
laws of the State of Delaware ("Distributor"), a service fee under
the Plan at the annual rate of .25% of the average daily net assets
of the Fund attributable to the Class A shares (the "Class A
Service Fee").
(b) Service Fee for Class B shares. The Fund will pay to the
Distributor a service fee under the Plan at the annual rate of .25%
of the average daily net assets of the Fund attributable to the
Class B shares (the "Class B Service Fee").
(c) Service Fee for Class C shares. The Fund will pay to the
Distributor a service fee under the Plan at the annual rate of .25%
of the average daily net assets of the Fund attributable to the
Class C shares (the "Class C Service Fee," and collectively with
the Class A Service Fee and the Class B Service Fee, the "Service
Fees").
(d) Distribution Fee for Class B shares. In addition to the
Class B Service Fee, the Fund will pay the Distributor a
distribution fee under the Plan at the annual rate of .75% of the
average daily net assets of the fund attributable to the Class B
Distribution Fee, the "Distribution Fees").
(e) Distribution Fee for Class C shares. In addition to the
Class C Service Fee, the Fund will pay the Distributor a
distribution fee under the Plan at the annual rate of .75% of the
average daily net assets of the Fund attributable to the Class C
shares (the "Class C Distribution Fee," and collectively with the
Class B Distribution Fee, the "Distribution Fees").
(f) Payment of Fees. The Service Fees and Distribution Fees
will be calculated daily and paid monthly by the Fund with respect
to the foregoing classes of the fund's shares (each a "Class" and
together the "Classes") at the annual rates indicated above.
Section 2. Expenses Covered by the Plan
With respect to expenses incurred by each Class its respective
Service Fees and/or Distribution Fees may be used for; (a) costs of
printing and distributing the Fund's prospectus, statement of
additional information and reports to prospective investors in the
Fund; (b) costs involved in preparing, printing and distributing
sales literature pertaining o the Fund; (c) an allocation of
overhead and other branch office distribution-related expenses of
the Distributor; (d) payments made to, and expenses of Smith Barney
Financial Consultants and other persons who provide support
services in connection with the distribution of the Fund's shares,
including but not limited to, office space and equipment, telephone
facilities, answering routine inquires regarding the Fund,
processing shareholder transactions and providing any other
shareholder services not otherwise provided by the Fund's Transfer
agent; and (e) accruals for interest on the amount of the foregoing
expenses that exceed the Distribution Fee and, in the case of Class
B shares, the contingent deferred sales charge received by the
Distributor; provided, however, that the Distribution Fees may be
used by the Distributor only to cover expenses primarily intended
to result in the sale of the Fund's Class B and C shares, including
without limitation, payments to Distributor's financial consultants
ant the time of the sale of Class B and C shares. In addition,
Service Fees are intended to be used by the Distributor primarily
to pay its financial consultants for servicing shareholder
accounts, including a continuing fee to each such financial
consultant, which fee shall begin to accrue immediately after the
sale of such shares.
Section 3. Approval of Shareholders
The Plan will not take effect, and no fees will be payable in
accordance with Section 1 of the Plan, with respect to a Class
until the Plan has been approved by a vote of a least a majority of
the outstanding voting securities of the Class. The Plan will be
deemed to have been approved with respect to a class so longer as a
majority of the outstanding voting securities of the Class votes
for the approval of the Plan, notwithstanding that: (a) the Plan
has not been approved by a major of the outstanding voting
securities of any other Class, or (b) the Plan has not been
approved by a majority of the outstanding voting securities of the
Fund.
Section 4. Approval of Directors
Neither the Plan nor any related agreements will take effect
until approved by a majority of both (a) the full Board of
Directors of the Fund and (b) those Directors who are not
interested persons of the Fund and who have not direct or indirect
financial interest in the operation of the Plan or in any
agreements related to it (the "Qualified Directors"), cast in
person at a meeting called for the purpose of voting on the Plan
and the related agreements.
Section 5. Continuance of the Plan
The Plan will continue in effect with respect to each Class
until November 7, 1995, and thereafter for successive twelve-month
periods with respect to each Class; provided, however, that such
continuance is specifically approved at least annually by the
Directors of the Fund and by a majority of the Qualified Directors.
Section 6. Termination
The Plan may be terminated at any time with respect to a Class
(i) by the Fund without the payment of any penalty, by the vote of
a majority of the outstanding voting securities of such Class or
(ii) by a vote of the Qualified Directors. The Plan may remain in
effect with respect to a particular Class even if the Plan has been
terminated in accordance with this Section 6 with respect to any
other Class.
Section 7. Amendments
The Plan may to be amended with respect to any Class so as to
increase materially the amounts of the Fees described in Section 1
above, unless the amendment is approved by a vote of the holders of
at least a majority of the outstanding voting securities of that
class. No material amendment to the Plan may be made unless
approved by the Fund's Board of Directors in the manner described
in Section 4 above.
Section 8. Selection of Certain Directors
While the Plan is in effect, the selection and nomination of
the Fund's Directors who are not interested persons of the Fund
will be committed to the discretion of the Directors then in office
who are not interested persons of the Fund.
Section 9. Written Reports
In each year during which the Plan remains in effect, a person
authorized to direct the disposition of monies paid or payable by
the Fund pursuant to the Plan or any related agreement will prepare
and furnish to the Fund's Board of Directors and the Board will
review, at least quarterly, written reports complying with the
requirements of the Rule, which sets out the amounts expended under
the Plan and the purposes for which those expenditures were made.
Section 10. Preservation of Materials
The Fund will preserve copies of the Plan, any agreement
relating to the Plan and any report made pursuant to Section 9
above, for a period of not less than six years (the first two years
in an easily accessible place) from the date of the Plan, agreement
or report.
Section 11. Meanings of Certain Terms
As used in the Plan, the terms "interested person" and
"majority of the outstanding voting securities" will be deemed to
have the same meaning that those terms have under the 1940 Act by
the Securities and Exchange Commission.
IN WITNESS WHEREOF, the Fund execute the Plan as of November
7, 1994.
SMITH BARNEY
AGGRESSIVE GROWTH FUND INC.
By: /s/ Heath B. McLendon
Heath B. McLendon
Chairman of the Board
g\shared\domestic\clients\shearson\funds\grow\12b1pln2.doc5:37 PM
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NAME> AGGRESSIVE GROWTH- CLASS A
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
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<NAME> AGGRESSIVE GROWTH- CLASS B
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 0
<NAME> AGGRESSIVE GROWTH- CLASS C
<S> <C>
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</TABLE>
<TABLE> <S> <C>
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<NAME> AGGRESSIVE GROWTH- CLASS D
<S> <C>
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