As filed with the Securities and Exchange Commission
on January 6, 1995
Registration No.
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No. [ ] Post-Effective
Amendment No.
SMITH BARNEY AGGRESSIVE GROWTH FUND INC.
(Exact name of Registrant as specified
in Charter)
Area Code and Telephone Number: (212) 790-9218
388 Greenwich Street, New York, New York 10013
(Address of principal executive offices) (Zip Code)
Christina T. Sydor, Esq.
Smith Barney Inc.
388 Greenwich Street New York, New York 10013 (22nd floor)
(Name and address of agent for service)
copies to:
Burton M. Liebert, Esq. John E. Baumgardner, Jr., Esq.
Willkie Farr & Gallagher Sullivan & Cromwell
One Citicorp Center 125 Broad Street
153 East 53rd Street New York, NY 10004
New York, NY 10022
Approximate date of proposed public offering: As soon as possible after
the effective date of this Registration Statement.
Registrant has registered an indefinite amount of securities pursuant to
Rule 24f-2 under the Investment Company Act of 1940, as amended;
accordingly, no fee is payable herewith. Registrant's Rule 24f-2 Notice
for the fiscal period ended August 31, 1994 was filed with the Securities
and Exchange Commission on October 31, 1994.
Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until the Registration Statement shall
become effective on such date as the Commission, action pursuant to said
Section 8(a), may determine.
SMITH BARNEY AGGRESSIVE GROWTH FUND INC.
CONTENTS OF
REGISTRATION STATEMENT
This Registration Statement contains the following pages and documents:
Front Cover
Contents Page
Cross-Reference Sheet
Letter to Shareholders
Notice of Special Meeting
Part A - Prospectus/Proxy Statement
Part B - Statement of Additional Information
Part C - Other Information
Signature Page
Exhibits
SMITH BARNEY AGGRESSIVE GROWTH FUND INC.
FORM N-14 CROSS REFERENCE SHEET
Pursuant to Rule 481(a) Under the Securities Act of 1933
Prospectus/Proxy
Part A Item No. and Caption Statement Caption
Item 1. Beginning of Registration Cover Page; Cross
Reference
Statement and Outside Front Sheet
Cover Page of Prospectus
Item 2. Beginning and Outside Back Table of Contents
Cover Page of Prospectus
Item 3. Synopsis Information and Summary; Risk
Factors; Comparison of Risk Factors
Investment Objectives and Policies
Item 4. Information About the Transaction Summary: Reasons for
the Reorganization;
Information About the Reorganization;
Information on Shareholder's Rights;
Exhibit A (Agreement and Plan of
Reorganization)
Item 5. Information About the Registrant Cover Page; Summary;
Information About the
Reorganization; Comparison of
Investment Objectives and Policies;
Comparative Information on Shareholder's
Rights; Additional Information About the
Aggressive Growth Fund and the
Capital Appreciation
Portfolio; Prospectus of the
Aggressive Growth Fund dated November
7, 1994
Item 6. Information About the Summary; Information
About the
Company Being Acquired Reorganization; Comparison
of Investment Objectives and
Policies; Information on
Shareholder's Rights; Additional
Information About the Capital
Appreciation Portfolio
Item 7. Voting Information Summary; Information
About the Reorganization;
Comparative Information on
Shareholder's Rights; Voting
Information
Item 8. Interest of Certain Persons Financial Statements
and Experts; Legal
and Experts Matters
Item 9. Additional Information Not Applicable
Required for Reoffering By
Persons Deemed to be Underwriters
Statement of Additional
Part B Item No. and Caption Information Caption
Item 10. Cover Page Cover Page
Item 11. Table of Contents Cover Page
Item 12. Additional Information Cover Page; Statement
of Additional About the Registrant
Information of the Aggressive Growth Fund dated November 7, 1994
Item 13. Additional Information Not Applicable
About the Company Being
Acquired
Item 14. Financial Statements Annual Report of
Aggressive Growth Fund;
Annual Report of Smith Barney
Funds, Inc.; Interim Financial Statements
Part C Item No. and Caption Other Information
Caption
Item 15. Indemnification Incorporated by reference
to Part A caption "Comparative
Information on Shareholder's
Rights - Liability of
Directors"
Item 16. Exhibits Exhibits
Item 17. Undertakings Undertakings
A SPECIAL NOTICE TO SHAREHOLDERS OF
SMITH BARNEY CAPITAL APPRECIATION PORTFOLIO
388 Greenwich Street
New York, New York 10013
[ ], 1995
Dear Shareholder:
The Board of Directors of Smith Barney Fund, Inc.
(the "Company"), has recently reviewed and unanimously endorsed a proposal
for the reorganization of the Capital Appreciation Portfolio (the
"Portfolio"), a separate series fund of the Company, which it judges to be
in the best interests of the Portfolio shareholders.
Under the terms of the proposal, the Aggressive Growth
Fund (the "Aggressive Growth Fund"), would acquire substantially all of the
assets and liabilities of the Portfolio. After the transaction, the
Portfolio would be dissolved and you would become a shareholder of the
Aggressive Growth Fund, having received shares with an aggregate net asset
value equivalent to the aggregate net asset value of your Portfolio
investment at the time of the transaction. The transaction would, in the
opinion of counsel, be free from Federal income taxes to you, the Portfolio
and the Aggressive Growth Fund.
SPECIAL MEETING OF SHAREHOLDERS: YOUR VOTE IS IMPORTANT
The Board of Directors of the Company has determined that
the proposed reorganization should provide benefits to the Portfolio
shareholders due, in part, to savings in expenses borne by shareholders.
We have therefore called a Special Meeting of Shareholders to be held on
May 12, 1995 to consider this transaction. We strongly urge your
participation by asking you to review, complete and return your proxy
promptly.
Detailed information about the proposed transaction is
described in the enclosed proxy statement. On behalf of the Board, I thank
you for your participation as a shareholder and urge you to please exercise
your right to vote by completing, dating and signing the enclosed proxy
card. A self-addressed, postage-paid envelope has been enclosed for your
convenience. If you sign and date your proxy card, but do not provide
voting instructions, your shares will be voted FOR the proposal.
If you have any questions regarding the proposed
transaction, please feel free to call your Financial Consultant.
IT IS VERY IMPORTANT THAT YOUR VOTING INSTRUCTIONS BE
RECEIVED PROMPTLY.
Sincerely,
Stephen Treadway
Chairman of the Board
SMITH BARNEY CAPITAL APPRECIATION PORTFOLIO
388 Greenwich Street
New York, New York 10013
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held On May 12, 1995
___________________
Notice is hereby given that a Special Meeting of Shareholders
(the "Meeting") of Smith Barney Capital Appreciation Portfolio (the
"Portfolio"), will be held at 388 Greenwich Street, New York, New York on
May 12, 1995, at 4:30 p.m. for the following purposes:
1. To consider and act upon the Agreement and Plan of
Reorganization (the "Plan") dated as of [ ], providing for:
(i) the acquisition of substantially all of the assets of the Portfolio by
the Smith Barney Aggressive Growth Fund (the "Aggressive Growth Fund") in
exchange for shares of the Aggressive Growth Fund and the assumption by the
Aggressive Growth Fund of certain liabilities of the Portfolio; (ii) the
distribution of such shares of the Aggressive Growth Fund to shareholders
of the Portfolio in liquidation of the Portfolio; and (iii) the subsequent
dissolution of the Portfolio.
2. To transact any other business which may properly come
before the Meeting or any adjournment thereof.
The Directors of the Portfolio have fixed the close of business
on February 20,1995, as the record date for the determination of
shareholders of the Portfolio entitled to notice of and to vote at this
Meeting or any adjournment thereof (the "Record Date").
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY.
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND IN PERSON ARE URGED TO
SIGN AND RETURN WITHOUT DELAY THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE,
WHICH REQUIRES NO POSTAGE, SO THAT THEIR SHARES MAY BE REPRESENTED AT THE
MEETING. INSTRUCTIONS FOR THE PROPER EXECUTION OF PROXIES ARE SET FORTH ON
THE FOLLOWING PAGE. PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE
EXERCISED BY THE SUBSEQUENT EXECUTION AND SUBMISSION OF A REVISED PROXY BY
GIVING WRITTEN NOTICE OF REVOCATION TO THE PORTFOLIO AT ANY TIME BEFORE THE
PROXY IS EXERCISED OR BY VOTING IN PERSON AT THE MEETING.
By order
of the Directors
Christina
T. Sydor
Secretary
[ ], 1995
YOUR PROMPT ATTENTION TO THE ENCLOSED PROXY WILL HELP TO
AVOID THE EXPENSE OF FURTHER SOLICITATION.
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may
be of assistance to you and avoid the time and expense involved in
validating your vote if you fail to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears
in the registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of
the party signing should conform exactly to the
name shown on the registration on the proxy card.
3. All other Accounts: The capacity of the individual
signing the proxy card should be indicated unless it
is reflected in the form of registration. For example:
Registration Valid
Signatures
Corporate Accounts
(1) ABC Corp. ABC Corp
(2) ABC Corp. John Doe, Treasurer
(3) ABC Corp
c/o John Doe, Treasurer John Doe
(4) ABC Corp. Profit Sharing Plan John Doe, Trustee
Trust Accounts
(1) ABC Trust Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee
u/t/d 12/28/78 Jane B. Doe
Custodial or Estate Accounts
(1) John B. Smith, Cust.
f/b/o John B. Smith, Jr. UGMA John B. Smith
(2) John B. Smith John B. Smith, Jr., Executor
PROSPECTUS/PROXY STATEMENT DATED FEBRUARY , 1995
Acquisition of the Assets Of
SMITH BARNEY FUNDS, INC. -- CAPITAL APPRECIATION PORTFOLIO
388 Greenwich Street
New York, New York 10013
(212) 723-9218
By And In Exchange For Shares Of
SMITH BARNEY AGGRESSIVE GROWTH FUND INC.
388 Greenwich Street
New York, New York 10013
(212) 723-9218
This Prospectus/Proxy Statement is being furnished to
shareholders of the Capital Appreciation Portfolio, a separate series of
Smith Barney Income Trust (the "Capital Appreciation Portfolio"), in
connection with a proposed plan of reorganization, to be submitted to
shareholders for consideration at a Special Meeting of Shareholders to be
held on May 12, 1995 at 4:30 p.m. , New York City time, at the offices of
Smith Barney Inc., located at 388 Greenwich Street, 22nd Floor, New York,
New York, and any adjournments thereof (collectively, the "Meeting"). The
Plan provides for all of the assets of the Capital Appreciation Portfolio
to be acquired by the Smith Barney Aggressive Growth Fund Inc. (the
"Aggressive Growth Fund"), in exchange for shares of the Aggressive Growth
Fund and the assumption by the Aggressive Growth Fund of certain
liabilities of the Capital Appreciation Portfolio (hereinafter referred to
as the "Reorganization"). (The Capital Appreciation Portfolio and the
Limited Term Portfolio are herein referred to individually as a "Fund" and
collectively as the "Funds"). Following the Reorganization, shares of the
Aggressive Growth Fund will be distributed to shareholders of the Capital
Appreciation Portfolio in liquidation of the Capital Appreciation Portfolio
and the Capital Appreciation Portfolio will be dissolved. As a result of
the proposed Reorganization, each shareholder of the Aggressive Growth Fund
having an aggregate net asset value equal to the aggregate net asset value
of such shareholder's shares of the Capital Appreciation Portfolio.
Holders of Class A shares in the Capital Appreciation Portfolio will
receive Class A shares of the Aggressive Growth Fund, and no sales charge
will be imposed on the Class A shares of the Aggressive Growth Fund
received by the Capital Appreciation Portfolio Class A shareholders.
Holders of Class B and Class C shares in the Capital Appreciation Portfolio
will receive corresponding Class B and Class C shares, respectively, of the
Aggressive Growth Fund; any contingent deferred sales charge ("CDSC") which
is applicable to a shareholder's investment will continue to apply, and in
calculating the applicable CDSC payable upon the subsequent redemption of
Class B or Class C shares of the Aggressive Growth Fund, the period during
which a Capital Appreciation Portfolio shareholder held Class B or Class C
shares of the Capital Appreciation Portfolio will be counted. Holders of
Class Y shares in the Capital Appreciation Portfolio will receive Class Y
shares of the Capital Appreciation Portfolio will receive Class Y shares of
the Aggressive Growth Fund received by the Capital Appreciation Portfolio
Class Y shareholders. This transaction is being structured as a tax-free
reorganization.
The Aggressive Growth Fund is an open-end, diversified
management investment company whose principal investment objective is to
seek 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 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 Capital appreciation Portfolio is also an open-end diversified
management investment company whose investment objective is long-term
capital appreciation. Each Fund invests primarily, by not exclusively, in
common stocks. Smith Barney Mutual Funds Management Inc. (the "Manager")
serves as investment manager to the Aggressive Growth Fund and to the
Capital Appreciation Portfolio. The Manager is wholly-owned subsidiary of
Smith Barney Holdings Inc. ("SBH") which is, in turn, a wholly-owned
subsidiary of The Travelers Inc.
The investment policies of the Aggressive Growth Fund are
generally similar to those of the Capital Appreciation Portfolio. However,
certain differences in the Funds' investment policies are described under
"Comparison of Investment Objectives and Policies" in this Prospectus\Proxy
Statement.
This Prospectus\Proxy Statement, which should be retained for
future reference, sets forth concisely the information about the Aggressive
Growth Fund that a prospective investor should know before investing.
Certain relevant documents listed below, which have been filed with the
Securities and Exchange Commission ("SEC"), are incorporated by reference.
A Statement of Additional Information dated February , 1995 relating to
this Prospectus\Proxy Statement and the Reorganization, has been filed with
the SEC and is incorporated by reference into this Prospectus\Proxy
Statement. A copy of such Statement of Additional Information and the
Capital Appreciation Portfolio Prospectus referred to below are available
upon request and without charge by writing to the Capital Appreciation
Portfolio at the address listed on the cover page of this Prospectus/Proxy
Statement or by calling (212) 723-9218.
1. The Prospectus dated November 7, 1994 of Smith Aggressive
Growth Fund Inc is incorporated in its entirety by reference herein.
2. The Prospectus dated November 7, 1994 of Smith Barney
Funds, Inc.-- Capital Appreciation Portfolio is incorporated in its
entirety by reference and will be filed by amendment
Also accompanying this Prospectus/Proxy Statement as Exhibit A is a
copy of the Agreement and Plan of Reorganization (the "Plan") for the
proposed transaction.
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/PROXY
STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
Page
Additional Materials 1
Summary 1
Risk Factors 4
Reasons for the Reorganization 4
Information about the Reorganization 5
Information about the Aggressive Growth Fund 9
Information about the Capital Appreciation Portfolio 10
Comparison of Investment Objectives and Policies 11
Comparative Information on Shareholders' Rights 13
Additional Information About the Aggressive Growth Fund and
the Capital Appreciation Portfolio 15
Other Business 15
Voting Information 16
Financial Statements and Experts 17
Legal Matters 17
Exhibit A: Agreement and Plan of Reorganization. .
A-1
ADDITIONAL MATERIALS
The following additional materials, which have been incorporated
by reference into the Statement of Additional Information dated February ,
1995 relating to this Prospectus/Proxy Statement and the Reorganization, will
be sent to all shareholders requesting a copy of such Statement of Additional
Information.
1. Statement of Additional Information of Smith Barney Funds, Inc.
dated November 7, 1994.
2. Statement of Additional Information of Smith Barney Aggressive
Growth Fund, Inc. dated November 7, 1994.
3. Annual Report of Smith Barney Aggressive Growth Fund, Inc. dated
August 31, 1994.
4. Annual Report of Smith Barney Funds, Inc. -- Capital Appreciation
Portfolio dated December 31, 1993.
5. Interim financial statements of Smith Barney Funds, Inc. --
Capital
Apprecition Portfolio dated August 31, 1994.
SUMMARY
This summary is qualified in its entirety by reference to the
additional information contained elsewhere in this Prospectus/Proxy Statement,
the Prospectus and Statement of Additional Information of the Aggressive
Growth Fund each dated November 7, 1994, the Prospectus of the Capital
Appreciation Portfolio and Statement of Additional Information of the Smith
Barney Aggressive Growth Fund, Inc., each dated November 7, 1994, and the
Plan, a copy of which is attached to this Prospectus/Proxy Statement as
Exhibit A.
Proposed Reorganization. The Plan provides for the transfer of
all of the assets of the Capital Appreciation Portfolio in exchange for shares
of the Aggressive Growth Fund and the assumption by the Aggressive Growth Fund
of certain liabilities of the Capital Appreciation Portfolio. The Plan also
calls for the distribution of shares of the Aggressive Growth Fund to the
Capital Appreciation Portfolio shareholders in liquidation of the Capital
Appreciation Portfolio. (The foregoing proposed transaction is referred to in
this Prospectus/Proxy Statement as the "Reorganization.") As a result of the
Reorganization, each shareholder of the Capital Appreciation Portfolio will
become the owner of that number of full and fractional shares of the
Aggressive Growth Fund having an aggregate net asset value equal to the
aggregate net asset value of the shareholder's shares of the Capital
Appreciation Portfolio as of the close of business on the date that the
Capital Appreciation Portfolio's assets are exchanged for shares of the
Aggressive Growth Fund. (Shareholders of Class A, Class B, Class C and Class
Y shares of the Capital Appreciation Portfolio will receive Class A, Class B,
Class C and Class Y shares, respectively, of the Aggressive Growth Portfolio.)
See "Information About the Reorganization."
For the reasons set forth below under "Reasons for the
Reorganization," the Board of Directors of the Capital Appreciation Portfolio,
including all of the "non-interested" Directors, as that term is defined in
the Investment Company Act of 1940, as amended (the "1940 Act"), has
unanimously concluded that the Reorganization would be in the best interests
of the shareholders of the Capital Appreciation Portfolio and that the
interests of the Capital Appreciation Portfolio's existing shareholders would
not be diluted as a result of the transaction contemplated by the
Reorganization, and therefore has submitted the Plan for approval by the
Capital Appreciation Portfolio's shareholders. The Board of Directors of the
Capital Appreciation Portfolio recommends approval of the Plan effecting the
Reorganization.
The Board of Directors of the Aggressive Growth Fund has also
approved the Reorganization.
Approval of the Reorganization will require the affirmative vote
of a majority of the outstanding shares of the Capital Appreciation
Portfolio. See "Voting Information."
Tax Consequences. Prior to completion of the Reorganization, the
Capital Appreciation Portfolio will have received from counsel an opinion
that, upon the Reorganization and the transfer of the assets of the Capital
Appreciation Portfolio, no gain or loss will be recognized by the Capital
Appreciation Portfolio or its shareholders for Federal income tax purposes.
The holding period and tax basis of shares of the Aggressive Growth Fund that
are received by each Capital Appreciation Portfolio shareholder will be the
same as the holding period and tax basis of the shares of the Capital
Appreciation Portfolio previously held by such shareholder. In addition, the
holding period and tax basis of the assets of the Capital Appreciation
Portfolio in the hands of the Aggressive Growth Fund as a result of the
Reorganization will be the same as in the hands of the Capital Appreciation
Portfolio immediately prior to the Reorganization.
Investment Objectives, Policies and Restrictions. The Capital
Appreciation Portfolio and the Aggressive Growth Fund have generally similar
investment objectives, policies and restrictions. The Aggressive Growth Fund
seeks long-term capital appreciation. The Capital Appreciation Portfolio
seeks capital appreciation. Each attempts to achieve its objective by
investing primarily, by not exclusively, in common.
Although the respective investment objectives and policies of the
Aggressive Growth Fund and the Capital Appreciation Portfolio are generally
similar, shareholders of the Capital Appreciation Portfolio should consider
certain differences in such objectives and policies. See " Information About
the Aggressive Growth Fund", "Information About the Capital Appreciation
Portfolio" and "Comparison of Investment Objectives and Policies."
Fees and Expenses. The Aggressive Growth Fund pays the Manager,
for investment advisory services, a monthly fee calculated at an annual rate
of 0.80% of its average daily net assets. The Capital Appreciation Portfolio
pays the Manager a monthly fee of 0.90% of its average daily net assets.
The expense ratio of the Aggressive Growth Fund subsequent to the
Reorganization is expected to be lower than that of the Capital Appreciation
Portfolio. See "Reasons for the Reorganization." Total Aggressive Growth
Fund operating expenses stated as a percentage of average net assets for the
fiscal year ended August 1, 1994 for Class A shares were 1.43%. Total
operating expenses for the Capital Appreciation Portfolio stated as a
percentage of average net assets for Class A as of August 21, 1994 were [
]%. Total expense ratios for Class B and Class C shareholders of the
Aggressive Growth Fund, stated as a percentage of average net assets for the
fiscal year ended August 31, 1994 were 2.23% and 2.09%, respectively. Total
expense ratios for Class C shareholders of the Capital Appreciation Portfolio
stated as a percentage average net assets as of August 31, 1994 were [ %].
Prior to November 7, 1994, the Capital Appreciation Portfolio did not offer
Class B or Class Y shares. Accordingly, annualized total operating expenses
based on estimated amounts and stated as a percentage of average net assets,
for the period ending August 31, 1995 for Capital Appreciation Portfolio Class
B and Class Y shares are [ ]% and [ ]%, respectively. Total Aggressive
Growth Fund annual operating expenses stated as a percentage of average net
assets subsequent to the Reorganization (based upon pro forma final statements
included in the Statement of Additional Information dated January , 1995
and incorporated herein) are expected to be %, %, %, and for Class A,
Class B, Class C and Class Y shares, respectively.
Shares of the Aggressive Growth Fund and the Capital Appreciation
Portfolio are both sold subject to distribution plans adopted pursuant to Rule
12b-1 under the 1940 Act. Under their respective plans, Smith Barney Inc.
("Smith Barney") is paid a service fee calculated at the annual rate of 0.25%
of the value of each Fund's average daily net asset attributable to the
respect Fund's Class A, Class B and Class C shares. In addition, each Fund's
Class B and Class C shares pay a distribution fee primarily intended to
compensate Smith Barney for its initial expense of paying financial
consultants a commission upon sales of the respective shares. The
distribution fees for both Funds' Class B and Class C shares are calculated at
the annual rate of 0.75% of the value of the respective Fund's average net
assets attribute to the shares or the respective class. Class Y shares are
not subject to any service or distribution fees.
Purchase and Redemption Procedures. Purchases of shares of the
Aggressive Growth Fund and the Capital Appreciation Portfolio may be made
through Smith Barney, a broker that clears securities transaction through
Smith Barney on a fully disclosed basis (an "Introducing Broker"), or
investment dealers in the selling group at their respective public offering
prices (net asset value next determined plus any applicable sales charge).
Class A shares of both the Aggressive Growth Fund and Capital Appreciation
Portfolio are sold subject to a maximum initial sales charge of 5.00% of the
public offering price. Class B and Class C shares of both Funds are sold
without an initial sales charge by are subject to certain higher ongoing
expenses and a CDSC payable upon certain redemptions. Class Y shares of both
Funds are sold without an initial sales charge or CDSC, and are available only
to investors investing a minimum of $5,000,000.
Class A and Class Y shares of both the Aggressive Growth Fund and
the Capital Appreciation Portfolio may be redeemed at their net asset value
next determined per share without charge, except for certain purchases of
Class A shares which exceed $500,000 in the aggregate and are made at net
asset value, which are subject to a CDSC of 1.00% on redemptions made within
12 months. Class B shares of both Funds may be redeemed at their net asset
value per share, subject to a maximum CDSC of 5.00% of the lower of original
cost of redemption proceeds declining by 1.00% each year after the date of
purchase to zero. Class C shares of both Funds may be redeemed at their net
asset value per share, subject to a CDSC of 1.00% if such shares are redeemed
during the first 12 months following purchase. Shares of both Funds held by
Smith Barney as custodian may be redeemed by submitting a written request to a
Smith Barney Financial Consultant. All other shares may be redeemed through a
Financial Consultant, Introducing Broker of by forwarding an appropriate
written request for redemption with signature guarantee to The Shareholder
Services Group, Inc. ("TSSG" or the "the shareholder servicing agent"), a
subsidiary of First Data Corporation. See "Redemption of Shares" in the
accompanying Prospectus of the Aggressive Growth Fund.
Exchange Privileges. The exchange privileges available to
shareholders of the Aggressive Growth Fund are identical to those available to
shareholders of the Capital Appreciation Portfolio. Shareholders of both the
Capital Appreciation Portfolio and the Aggressive Growth Fund may exchange at
net asset value all or a portion of their shares for shares of the same class
in certain funds of the Smith Barney Mutual Funds at the respective net asset
values next determined, plus any applicable sales charge differential. Any
exchange will be a taxable event for which a shareholder may have to recognize
a gain or a loss under Federal income tax provisions. No initial sales charge
is imposed on the shares being acquired, and no CDSC is imposed on the shares
being disposed of, through an exchange. However, a sales charge differential
may apply to exchanges of Class A shares. With respect to Class B and Class C
shares of the Funds, the Class B and Class C shares acquired in the exchange
will be deemed to have been purchased on the same date as the Class B and
Class C shares that were exchanged. In the event a Class B shareholder wishes
to exchange his or her shares for Class B shares of a fund with a higher CDSC,
the exchanged Class B shares will be subject to the higher CDSC.
Dividends. The policies of each Fund with regard to dividends and
distributions are generally the same. The Capital Appreciation Portfolio
declares and pays dividends of investment income semi-annually and the
Aggressive Growth Fund declares and pays dividends of investment income
annually. Each Fund's policy is to make distributions of any realized capital
gains annually. Shareholders of both the Aggressive Growth Fund and the
Capital Appreciation Portfolio, if he or she does not otherwise instruct, will
have their income dividends and capital gain distributions reinvested
automatically in additional shares of the same Class at net asset value,
subject to no sales charge or CDSC. Whichever distribution option is currently
in effect for a shareholder of the Capital Appreciation Portfolio will remain
in effect after the Reorganization. After the Reorganization, however, the
former Capital Appreciation Portfolio shareholders may change their
distribution option at anytime by contacting TSSG in writing. See "Dividends,
Distributions and Taxes" in the accompanying prospectus of the Aggressive
Growth Fund.
Shareholder Voting Rights. The Aggressive Growth Fund and the
Capital Appreciation Portfolio are both open-end, diversified investment
companies, incorporated in Maryland. As permitted by Maryland law, there will
normally be no meetings 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. At that time, the directors in each
Fund then in office will call a shareholders' meeting for the election of
directors. Shareholders may, at any meeting called for the purpose, remove a
director by the affirmative vote of the holders of record of a majority of the
votes entitled to be cast for the election of directors. For purposes of
voting with respect to the Reorganization, the Class A, Class B, Class C and
Class Y shares of the Capital Appreciation Portfolio shall vote together as a
single class. See "Comparative Information on Shareholder's Rights-Voting
Rights."
RISK FACTORS
Due to the similarities of investment objectives and policies of
the Aggressive Growth Fund and the Capital Appreciation Portfolio, the
investment risks are generally similar. Such risks are generally those
typically associated with investing in common stocks of U.S. companies. Such
risks, and certain differences in the risks associated with investing in the
Funds, are discussed under the caption "Comparison of Investment Objectives
and Policies".
REASONS FOR THE REORGANIZATION
The Board of Directors of the Capital Appreciation Portfolio has
determined that it is advantageous to combine the Capital Appreciation
Portfolio with the Aggressive Growth Fund. The Funds have generally similar
investment objectives and policies and the Funds have the same investment
adviser and shareholder servicing agent.
The Board of Directors of the Capital Appreciation Portfolio has
determined that the Reorganization should provide certain benefits to its
shareholders. In making such a determination, the Board of Directors
considered, among other things:(i) the terms and conditions of the
Reorganization; (ii) the savings in expenses borne by shareholders expected to
be realized by the Reorganization; (iii) the fact that the Reorganization will
be effected as a tax-free reorganization; (iv) the comparative investment
performance of the Funds; and (v) the advantages of eliminating duplication
inherent in marketing two funds with similar investment objectives.
In light of the foregoing, the Board of Directors of the Capital
Appreciation Portfolio, including the non-interested Directors, have decided
that it is in the best interests of the Capital Appreciation Portfolio and its
shareholders to combine with the Aggressive Growth Fund. The Board of
Directors has also determined that a combination of the Capital Appreciation
Portfolio and the Aggressive Growth Fund would not result in a dilution of the
Capital Appreciation Portfolio's shareholders' interests.
The Board of Directors of the Aggressive Growth Fund considered
the following factors, among others, in approving the Reorganization and
determining that it is advantageous to acquire the assets of the Capital
Appreciation Portfolio: (i) the terms and conditions of the Reorganization;
(ii) the fact that the Reorganization will be effected as a tax-free
reorganization; and (iii) the savings in expenses borne by shareholders
expected to be realized by the Reorganization. Accordingly, the Board of
Directors of the Aggressive Growth Fund, including a majority of the non-
interested Directors, has determined that the Reorganization is in the best
interests of the Aggressive Growth Fund's shareholders and that the interests
of the Aggressive Growth Fund's shareholders will not be diluted as a result
of the Reorganization.
INFORMATION ABOUT THE REORGANIZATION
Plan of Reorganization. The following summary of the Plan is
qualified in its entirety by reference to the Plan (Exhibit A hereto). The
Plan provides that the Aggressive Growth Fund will acquire substantially all
of the assets of the Capital Appreciation Portfolio in exchange for shares of
the Aggressive Growth Fund and the assumption by the Aggressive Growth Fund of
certain liabilities of the Capital Appreciation Portfolio on May 19, 1995, or
such later date as may be agreed upon by the parties (the "Closing Date").
Prior to the Closing Date, the Capital Appreciation Portfolio will endeavor to
discharge all of its known liabilities and obligations. The Aggressive Growth
Fund will not assume any liabilities or obligations of the Capital
Appreciation Portfolio other than those reflected in an unaudited statement of
assets and liabilities of the Capital Appreciation Portfolio prepared as of
the close of regular trading on the New York Stock Exchange, Inc. (the
"NYSE"), currently 4:00 p.m. New York time, on the Closing Date. The number
of full and fractional Class A, Class B, Class C and Class Y shares of the
Aggressive Growth Fund to be issued to the Capital Appreciation Portfolio
shareholders will be determined on the basis of the Aggressive Growth Fund's
and the Capital Appreciation Portfolio's relative net asset values per Class
A, Class B, Class C and Class Y shares, respectively, computed as of the close
of regular trading on the NYSE on the Closing Date. The net asset value per
share of each Class will be determined by dividing assets, less liabilities,
by the total number of outstanding shares.
Both the Capital Appreciation Portfolio and the Aggressive Growth
Fund will utilize the procedures set forth in the Prospectus of the Aggressive
Growth Fund to determine the value of their respective portfolio securities.
The method of valuation employed will be consistent with Rule 22c-1 under the
1940 Act, and with the interpretation of such rule by the SEC's Division of
Investment Management.
At or prior to the Closing Date, the Capital Appreciation
Portfolio shall have declared a dividend or dividends which, together with all
previous such dividends, shall have the effect of distributing to the Capital
Appreciation Portfolio's shareholders all taxable income for the taxable year
ending on or prior to the Closing Date (computed without regard to any
deduction for dividends paid) and all of its net capital gains realized in the
taxable year ending on or prior to the Closing Date (after reductions for any
capital loss carry forward).
As soon after the Closing Date as conveniently practicable, the
Capital Appreciation Portfolio will liquidate and distribute pro rata to
shareholders of record as of the close of business on the Closing Date the
full and fractional shares of the Aggressive Growth Fund received by the
Capital Appreciation Portfolio. Such liquidation and distribution will be
accomplished by the establishment of accounts in the names of the Capital
Appreciation Portfolio's shareholders on the share records of the Aggressive
Growth Fund's shareholder servicing agent. Each account will represent the
respective pro rata number of full and fractional shares of the Aggressive
Growth Fund due to each of the Capital Appreciation Portfolio's shareholders.
After such distribution and the winding up of its affairs, the Capital
Appreciation Portfolio will be dissolved.
The consummation of the Reorganization is subject to the
conditions set forth in the Plan. Notwithstanding approval of the Capital
Appreciation Portfolio's shareholders, the Plan may be amended as set forth in
Section 9 of the Plan and may be terminated at any time at or prior to the
Closing Date by either party if (i) a material condition to one party's
performance under the Plan or a material covenant of one party shall not be
fulfilled on or before the date specified for the fulfillment thereof, (ii) a
material default or material breach of the Plan shall be made by one party
that is not cured or (iii) the Closing Date does not occur on or prior
to May
, 1995.
Approval of the Plan will require the affirmative vote of a
majority of the outstanding shares of the Capital Appreciation Portfolio. If
the Reorganization is not approved by shareholders of the Capital Appreciation
Portfolio, the Board of Trustees will consider other possible courses of
action, including liquidation of the Capital Appreciation Portfolio.
Description of the Aggressive Growth Fund's Shares. Full and
fractional shares of the respective Class of shares of common stock of the
Aggressive Growth Fund will be issued to the Capital Appreciation Portfolio in
accordance with the procedures detailed in the Plan and as described in the
Aggressive Growth Fund's Prospectus. Generally, the Aggressive Growth Fund
does not issue share certificates to shareholders unless a specific request is
submitted to the Aggressive Growth Fund's shareholder servicing agent. The
shares of the Aggressive Growth Fund to be issued to the Capital Appreciation
Portfolio shareholders and registered on the shareholder records of the
shareholder servicing agent will have no pre-preemptive or conversion rights.
Federal Income Tax Consequences. The exchange of assets for
shares of the Aggressive Growth Fund is intended to qualify for Federal income
tax purposes as a tax-free reorganization under Section 368 (a) of the
Internal Revenue Code of 1986, as amended (the "Code"). As a condition to the
closing of the Reorganization, the Capital Appreciation Portfolio will receive
an opinion from Willkie Farr & Gallagher, counsel to the Aggressive Growth
Fund, to the effect that, on the basis of the existing provisions of the Code,
U.S. Treasury regulations issued thereunder, current administrative rules,
pronouncements and court decisions, for Federal income tax purposes, upon
consummation of the Reorganization:
(1) the Reorganization will constitute a
reorganization within the meaning of Section 368 (a)(1)(C) of the Code, and
the Aggressive Growth Fund and the Capital Appreciation Portfolio are each a
"party to a reorganization" within the meaning of Section 368(b) of the Code;
(2) no gain or loss will be recognized by either the
Aggressive Growth Fund or the Capital Appreciation Portfolio upon the transfer
of the Capital Appreciation Portfolio's assets to, and the assumption of the
Capital
Appreciation Portfolio's liabilities by, the Aggressive
Growth Fund in exchange for the Aggressive Growth Fund's shares, or upon the
distribution of the Aggressive Growth Fund's shares to the Capital
Appreciation Portfolio's shareholders in exchange for their shares in the
Capital Appreciation Portfolio;
(3) no gain or loss will be recognized by shareholders
of the Capital Appreciation Portfolio upon the exchange of their shares for
the Aggressive Growth Fund shares;
(4) the basis of the Aggressive Growth Fund shares
received by each Capital Appreciation Portfolio shareholder pursuant to the
Reorganization will be the same as the basis of the Capital Appreciation
Portfolio shares surrendered in exchange therefor;
(5) the holding period of the Aggressive Growth Fund
shares to be received by each Capital Appreciation Portfolio shareholder will
include the holding period of the shares of the common stock of the Capital
Appreciation Portfolio which are surrendered in exchange therefor (provided
the Capital Appreciation Portfolio shares were held as capital assets on the
date of the Reorganization);
(6) the basis of the Capital Appreciation Portfolio's
assets acquired by the Aggressive Growth Fund will be the same as the basis of
such assets to the Capital Appreciation Portfolio immediately prior to the
Reorganization; and
(7) the holding period of the assets of the Capital
Appreciation Portfolio acquired by the Aggressive Growth Fund will include the
period for which such assets were held by the Capital Appreciation Portfolio.
Shareholders of the Capital Appreciation Portfolio should consult
their tax advisors regarding the effect, if any, of the proposed
Reorganization in light of their individual circumstances. Since the
foregoing discussion only relates to the Federal income tax consequences of
the Reorganization, shareholders of the Capital Appreciation Portfolio should
also consult their tax advisors as to state and local tax consequences, if
any, of the Reorganization.
Capitalization. The following table, which is unaudited, shows
the capitalization of the Aggressive Growth Fund and the Capital Appreciation
Portfolio as of August 31, 1994 and on a pro forma basis as of that date,
giving effect to the proposed acquisition of assets at net asset value:
(In thousands, except
per share values)
(Unaudited)
Cap. App. Aggressive Pro Forma
for
Class A Shares Portfolio GrowthFund
Reorganization
Net Assets............... $ $
$
Net asset value
per share....... $ $ $
Shares outstanding.....
Cap. App. Aggressive Pro Forma
for
Class B Shares Portfolio Growth Fund
Reorganization
Net Assets............... $ $
$
Net asset value
per share....... $ $ $
Shares outstanding.....
Cap. App. Aggressive Pro Forma
for
Class C Shares Portfolio Growth Fund
Reorganization
Net Assets............... $ $
$
Net asset value
per share....... $ $ $
Shares outstanding.....
Cap. App. Aggressive Pro Forma
for
Class Y Shares Portfolio Growth Fund
Reorganization
Net Assets............... $ $
$
Net asset value
per share....... $ $ $
Shares outstanding.....
As of the Record Date, January , 1995, there were
outstanding Class A shares, outstanding Class B shares,
outstanding Class C shares and outstanding Class Y shares of the Capital
Appreciation Portfolio and outstanding Class A shares, outstanding
Class B shares, and outstanding Class C shares and outstanding Class
Y shares of the Aggressive Growth Fund. As of the Record Date, the officers
and directors of the Capital Appreciation Portfolio beneficially owned as a
group less than 1% of the outstanding shares of the Capital Appreciation
Portfolio. To the best knowledge of the Directors, as of the Record Date, no
shareholder or "group" (as that term is used in Section 13(d) of the
Securities Exchange Act of 1934 (the "Exchange Act") owned beneficially or of
record more than 5% of the Capital Appreciation Portfolio. As of the Record
Date, the officers and Directors of the Aggressive Growth Fund beneficially
owned as a group less than 1% of the outstanding shares of the Aggressive
Growth Fund. To the best knowledge of the Directors of the Aggressive Growth
Fund, as of the Record Date, no shareholder or "group" (as that term is used
in Section 13(d) of the Exchange Act) owned beneficially or of record more
than 5% of the Aggressive Growth Fund.
INFORMATION ABOUT THE AGGRESSIVE GROWTH FUND
Financial Highlights.
The following table summarizes the Aggressive Growth Fund's
financial history and investment performance in terms of a single share
outstanding during the periods indicated. Such information for each of the
years in the five-year period ended August 31, 1994 has been audited by
Coopers & Lybrand L.L.P. in conjunction with their annual audits of the
financial statements of the Aggressive Growth Fund whose report thereon is
incorporated by reference into the Statement of Additional Information
relating to this Prospectus/Proxy Statement.
Management. Richard Freeman, an Investment Officer of the Manager,
is the portfolio manager of the Aggressive Growth Fund. Mr. Freeman manages
the day to day operations of the Aggressive Growth Fund, including making all
investment decisions, and has served in this capacity since November 1986. He
currently manages over $ million assets.
INFORMATION ABOUT THE CAPITAL APPRECIATION PORTFOLIO
Financial Highlights
The following table summarizes the Capital Appreciation
Portfolio's financial history and investment performance in terms of a single
share outstanding during the periods indicated. Such information for each of
the years in the five-year period ended December 31, 1993 has been audited by
KPMG Peat Marwick L.L.P. in conjunction with their annual audits of the
financial statements of the Capital Appreciation Portfolio whose report
thereon is incorporated by reference into the Statement of Additional
Information relating to this Prospectus/Proxy Statement. Such information for
the six-month period ended June 30, 1993 is unaudited.
Management. The Manager has entered into a subadvisory agreement
with Janus Capital Corporation ("Janus") whereby Janus provides investment
advisory services to the Capital Appreciation Portfolio. Thomas Marisco, Vice
President of Janus, has served as portfolio manager of the Capital
Appreciation Portfolio since November 1992 and manages its day to day
operations including making all investment decisions. Mr. Marsico has been
involved in equity investing for Janus Capital Corporation for over 8 years
and has over 15 years of investment management experience.
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
The following discussion comparing investment objectives, policies
and restrictions of the Aggressive Growth Fund and the Capital Appreciation
Portfolio is based upon and qualified in its entirety by the respective
investment objectives, policies and restrictions sections of the Prospectuses
of the Aggressive Growth Fund and the Capital Appreciation Portfolio. For a
full discussion of the investment objectives, policies and restrictions of the
Aggressive Growth Fund, refer to the Aggressive Growth Fund's Prospectus,
which accompanies this Prospectus/Proxy Statement, under the captions,
"Investment Objective and Management Policies," and for a discussion of these
issues as they apply to the Capital Appreciation Portfolio, refer to the
Capital Appreciation Portfolio's Prospectus under the caption, "Investment
Objective and Management Policies."
Investment Objective. The principal investment objective of both
the Aggressive Growth Fund and the Capital Appreciation Portfolio is capital
appreciation. Although the language used by each Fund to define its
respective investment objectives is slightly different, the investment
objectives of the Funds are essentially the same. Both the Aggressive Growth
Fund's and the Capital Appreciation Portfolio's investment objectives and
policies are non-fundamental and, as such, may be changed by the Board of
Directors, provided such change is not prohibited by the investment
restrictions (which are set forth in the applicable Statement of Additional
Information) or applicable law , and any such change will first be disclosed
in the then current prospectus.
Primary Investments. The Aggressive Growth Fund invests primarily
in common stocks of companies that the Manager 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 Standard &
Poor's Daily Price Index of 500 Common Stocks (the "S&P 500"). An earning
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 of services, technological
developments of changes in management, but it also may be achieved by
seasoned, established companies.
The Manager focuses its stock selection for the Aggressive Growth
Fund on a diversified group of emerging growth companies that have passed
their "start-up" phase and show positive earnings and the prospect achieving
significant profits gains in the two to three years after the Aggressive
Growth Fund acquires its stocks. These companies generally may be expected to
benefit from new technologies, techniques, products or services or cost-
reducing measures, and may be affected by changes in management,
capitalization or asset development, government regulations or other external
circumstances. The Capital Appreciation Portfolio invests primarily in common
stocks, or in convertible preferred stocks or convertible bonds. Under normal
market conditions, at least 65% of the Fund's net assets will be invested in
such securities. In selecting issues for investment, the Fund generally
favors companies with prospects of sustained earnings growth, but it may also
purchase securities of companies with a cyclical earnings record if it is felt
they offer attractive investment opportunities. The remainder of the Fund's
assets may be invested in U.S. government obligations, high quality
certificate of deposit and commercial paper, and repurchase agreements
collateralized by U.S. government securities with broker/dealers of other
financial institutions, including the Fund's custodian. During times when the
Fund's Manager believes a defensive posture in the market is warranted, the
Fund may invest temporarily up to 100% of its assets in such securities. To
the extent the Fund's assets are invested for temporary defensive purposes,
such assets will not be invested in a manner designed to achieve the Fund's
investment objectives.
Although the Aggressive Growth Fund and the Capital Appreciation
Portfolio invest primarily in common stocks, each may also invest in the
securities of foreign issuers, though management of Aggressive Growth Fund
currently intends to limit such investments to 10% of each Fund's assets, and
the Capital Appreciation Portfolio may invest more than 25% of its net assets
in foreign securities traded in foreign currency and not publicly traded in
the United States.
Investment Techniques. From time to time, each Fund may lend its
portfolio securities to unaffiliated brokers, dealers and other financial
organizations. These loans may not exceed one-third of each Fund's total net
assets. Loans of portfolio securities by each Fund must be callable at any
time and collateralized by cash or obligations of the U.S. government and 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.
While both the Aggressive Growth Fund and the Capital Appreciation
Portfolio may invest in warrants up to 5% of each Fund's total net assets (2%
in the case of warrants that are not listed on the New York Stock Exchange or
American Stock Exchange), neither has purchased any warrants during its last
fiscal year and neither has an intention of doing so in the foreseeable
future. Both Funds may borrow money. However, neither has done so during the
last fiscal year and neither intends to do so in the foreseeable future. The
Capital Appreciation Portfolio may purchase and write options on securities
and on foreign currency, and may invest in futures contracts and options on
futures contracts. The Aggressive Growth Fund does not engage in futures,
options or forward transactions.
Both the Capital Appreciation Portfolio and the Aggressive Growth
Fund may invest up to 15% of their respective assets in restricted securities.
Both the Aggressive Growth Fund and the Capital Appreciation
Portfolio may enter into repurchase agreements which involve the acquisition
by the Fund of an underlying obligation for a short period of time subject to
an obligation of the seller to repurchase the obligation at an agreed-upon
price. Repurchase agreements involve certain risks in the event of default of
insolvency of the other party to the agreement.
Both Funds may invest in foreign securities. The Aggressive
Growth Fund may invest up to 10% of its assets in securities of foreign
issuers while the Capital Appreciation Portfolio may invest up to 25% of its
assets in foreign securities. Investments in foreign securities involve risks
that are different in some respects from investments in securities of U.S.
issuers, such as the risk of adverse political and economic development or
possible expropriations. In addition there is generally less public
information available about foreign issuers and foreign issuers generally are
not subject to uniform accounting, auditing and financial reporting standards
Risk Factors. Both Funds seek long term capital appreciation by
investing primarily in securities of companies which have the potential to
achieve an earnings and growth rate higher than the S&P 500 companies. Such
companies may, however, be subject to significant price fluctuations and
above-average risk.
COMPARATIVE INFORMATION ON SHAREHOLDERS' RIGHTS
General. The Capital Appreciation Portfolio and the Aggressive
Growth Fund are open-end, management investment companies registered under the
1940 Act, which continuously offer to sell shares at their current net asset
value. Each is a Maryland Corporation and is governed by its respective
Articles of Incorporation, By-Laws and Board of Directors. Each Fund is also
governed by applicable state and Federal law. The Aggressive Growth Fund has
an authorized capital of 100 million shares with a par value of $.01 per
share. The Capital Appreciation Portfolio is a separate series of Smith Barney
Funds, Inc. The Board of Directors has authorized the issuance of eight
series of shares, each representing shares in one of eight separate
portfolios, and may authorize the issuance of additional series of shares in
the future. The assets of each portfolio are segregated and separately
managed and a shareholders' interest is in the assets of the portfolio in
which he or she holds shares. The Capital Appreciation Portfolio has an
authorized capital of 1,000,000,000 shares with a par value of $.01 per share.
In both the Capital Appreciation Portfolio and the Aggressive Growth Fund,
Class A shares, Class B shares, Class C shares and Class Y shares represent
interests in the assets of the Fund and have identical voting, dividend,
liquidation, and other rights on the same terms and conditions except that
expenses related to the distribution of each class of shares are borne solely
by each class and each class of shares has exclusive voting rights with
respect to provisions of each Fund's Rule 12b-1 distribution plan which
pertains to a particular class.
Directors. The By-Laws of each of Smith Barney Funds, Inc. and
the Aggressive Growth Fund provide that the term of office of each Director
shall be from the time of his election and qualification until the next annual
meeting of shareholders or until his successor shall have been elected and
shall have qualified. Any Director may be removed by the shareholders by a
majority of the votes entitled to be cast for election of Directors.
Vacancies on the Boards of either Smith Barney Funds, Inc. of the Aggressive
Growth Fund may be filled by the Directors remaining in office. A meeting of
shareholders will be required for the Purpose of electing additional Directors
whenever fewer than a majority of the Directors then in office were elected by
shareholders.
Voting Rights. As permitted by Maryland law, there will normally
be no meetings 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. At that time, the directors then in office
will call a shareholders' meeting for the election of directors. Shareholders
may, at any meeting called for the purpose, remove a director by the
affirmative vote of the holders of record of a majority of the votes entitled
to be cast for the election of directors.
Liquidation or Dissolution. In the event of the liquidation or
dissolution of the Aggressive Growth Fund or the Capital Appreciation
Portfolio, the shareholders of the Funds are entitled to receive, when, and as
declared by the Directors, the excess of the assets belonging to the Funds
over the liabilities belonging to the Funds. In either case, the assets so
distributed to shareholders of the Funds will be distributed among the
shareholders in proportion to the number of shares of the Funds held by them
and recorded on the books of the Funds.
Liability of Directors. The Articles of Incorporation of Smith
Barney Funds, Inc. and the By-Laws of the Capital Appreciation Portfolio
provide that each Fund will indemnify Directors and officers against
liabilities and expenses incurred in connection with litigation in which they
may be involved because of their positions with Fund. However, nothing in the
Articles of Incorporation of Smith Barney Funds, Inc. or in the By-Laws of the
Capital Appreciation Portfolio protects or indemnifies a director or officer
against any liability to which such person would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such person's office.
Rights of Inspection. Shareholders of the Aggressive Growth Fund
and the Capital Appreciation Portfolio have the same inspection rights.
Currently, each shareholder is permitted to inspect the records, accounts and
books of the corporation subject to reasonable regulations of the Board of
Directors, not contrary to Maryland law, as to whether and to what extent, and
at what times and places, and under what conditions and regulations, such
right shall be exercised.
Appraisal Rights. There are no appraisal rights under Maryland
law for shareholders of an open-end investment company registered under the
Investment Company Act of 1940 if the value placed on the shareholder's stock
that is the subject of the transaction is its net asset value. Because shares
of the Capital Appreciation Portfolio to be exchanged for shares of the
Aggressive Growth Fund in the Reorganization will be valued at their net asset
values, shareholders of the Capital Appreciation Portfolio will have no
appraisal rights under Maryland law and will be bound by the terms of the
Plan, if approved; any shareholder of the Capital Appreciation Portfolio may,
however, redeem his shares at net asset value prior to the date of the
Reorganization.
The foregoing is only a summary of certain characteristics of the
operations of the Aggressive Growth Fund and the Capital Appreciation
Portfolio. The foregoing is not a complete description of the documents
cited. Shareholders should refer to the provisions of the corporate documents
and state laws governing each Fund for a more thorough description.
ADDITIONAL INFORMATION ABOUT
THE AGGRESSIVE GROWTH FUND
AND THE CAPITAL APPRECIATION PORTFOLIO
The Capital Appreciation Portfolio. Information about the Capital
Appreciation Portfolio is incorporated herein by reference from its current
Prospectus dated November 7, and in the Statement of Additional Information
dated November 7, 1994, which has been filed with the SEC. A copy of the
Prospectus and Statement of Additional Information is available upon request
and without charge by writing Smith Barney Funds, Inc.- Capital Appreciation
Portfolio at 388 Greenwich Street, New York, New York 10013 or by calling
(800) .
The Aggressive Growth Fund. Information concerning the operation
and management of the Aggressive Growth Fund is incorporated herein by
reference from the Prospectus dated November 7, 1994, a copy of which is
included herein, and in the Statement of Additional Information dated November
7, 1994, which has been filed with the SEC. A copy of such Statement of
Additional Information is available upon request and without charge by writing
Smith Barney Aggressive Growth Fund, Inc. at 388 Greenwich Street, New York,
New York 10013 or by calling (800) .
Both the Aggressive Growth Fund and the Capital Appreciation
Portfolio are subject to the informational requirements of the Exchange Act
and in accordance therewith file reports and other information including proxy
material, reports and charter documents with the SEC. These reports can be
inspected and copies obtained at the Public Reference Facilities maintained by
the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the New York
Regional Office of the SEC, 75 Park Place, New York, New York 10007. Copies
of such material can also be obtained from the Public Reference Branch, Office
of Consumer Affairs and Information Services, SEC, Washington, D.C. 20549 at
prescribed rates.
OTHER BUSINESS
The Directors of the Capital Appreciation Portfolio do not intend
to present any other business at the Meeting. If, however, any other matters
are properly brought before the Meeting, the persons named in the accompanying
form of proxy will vote thereon in accordance with their judgement.
VOTING INFORMATION
This Prospectus/Proxy Statement is furnished in connection with a
solicitation of proxies by the Board of Directors of the Capital Appreciation
Portfolio to be used at the Special Meeting of Shareholders to be held at 4:30
p.m. on May 12, 1995, at 388 Greenwich Street, New York, New York 10013 and at
any adjournments thereof. This Prospectus/Proxy Statement, along with a
Notice of the Meeting and a proxy card, is first being mailed to shareholders
of the Capital Appreciation Portfolio on or about March 6, 1995. Only
shareholders of record as of the close of business on the Record Date will be
entitled to notice of, and to vote at, the Meeting or any adjournment thereof.
The holders of a majority of the shares of the Capital Appreciation Portfolio
outstanding at the close of business on the Record Date present in person or
represented by proxy will constitute a quorum for the Meeting. For purposes
of determining a quorum for transacting business at the Meeting, abstentions
and broker "non-votes"(that is proxies from brokers or nominees indicating
that such persons have not received instructions from the beneficial owner or
other persons entitled to vote shares on a particular matter with respect to
which the broker or nominee do not have discretionary power) will be treated
as shares that are present but which have not been voted. For this reason,
abstentions and broker non-votes will have the effect of a "No" vote for
purpose of obtaining the requisite approval of the Plan. If the enclosed form
of proxy is properly executed and returned in time to be voted at the Meeting,
the proxies named therein will vote the shares represented by the proxy in
accordance with the instructions marked thereon. Unmarked proxies will be
voted FOR the proposed Reorganization and FOR any other matters deemed
appropriate. A proxy may be revoked at any time on or before the Meeting by
written notice to Smith Barney Capital Appreciation Portfolio, 388 Greenwich
Street, New York, New York 10013, 22nd Floor, c/o the Corporate Secretary.
Unless revoked, all valid proxies will be voted in accordance with the
specifications thereon or, in the absence of such specifications, FOR approval
of the Plan and the Reorganization contemplated thereby.
Approval of the Plan will require the affirmative vote of a
majority of the outstanding shares of the Capital Appreciation Portfolio.
Shareholders of the Capital Appreciation Portfolio shall vote together as a
single class. Shareholders of the Capital Appreciation Portfolio are entitled
to one vote for each share.
Proxies are solicited by mail. Additional solicitations may be
made by telephone, telegraph or personal contact by officers or employees of
Smith Barney and its affiliates. The cost of solicitation is expected to be
[$ ]. Expenses of the Reorganization including the costs of proxy
solicitation, the preparation of this Prospectus/Proxy Statement and enclosure
attached hereto and reimbursement of expenses for forwarding solicitation
material to beneficial owners of shares of the Capital Appreciation Portfolio
will be borne by the Capital Appreciation Portfolio and the Aggressive Growth
Fund in proportion to their assets.
In the event that sufficient votes to approve the Reorganization
are not received by May , 1995, the persons named as proxies may propose one
or more adjournments of the Meeting to permit further solicitation of proxies.
In determining whether to adjourn the Meeting, the following factors may be
considered: the percentage of votes actually cast, the percentage of negative
votes actually cast, the nature of any further solicitation and the
information to be provided to shareholders with respect to the reasons for the
solicitation. Any such adjournment will require an affirmative vote by the
holders of a majority of the shares present in person or by proxy and entitled
to vote at the Meeting. The persons named as proxies will vote upon such
adjournment after consideration of the best interests of all shareholders.
The votes of the shareholders of the Aggressive Growth Fund are
not being solicited by this Prospectus/Proxy Statement.
FINANCIAL STATEMENTS AND EXPERTS
The audited statements of assets and liabilities of the Capital
Appreciation Portfolio and the Aggressive Growth Fund as of December 31, 1993
and August 31, 1994, respectively, and the related statements of operations
for the years then ended and changes in net assets for the two years then
ended and selected per share data and ratios, have been incorporated by
reference into the Statement of Additional Information relating to this
Prospectus/Proxy Statement in reliance on the reports of KPMG Peat Marwick LLP
and Coopers & Lybrand, independent auditors for the Capital Appreciation
Portfolio and the Aggressive Growth Fund, respectively, given on the authority
of such firms as experts in accounting and auditing. In addition, the
unaudited interim financial statements for the Capital Appreciation Portfolio
for the period ended August 31, 1994 are incorporated by reference into the
aforementioned Statement of Additional Information.
LEGAL MATTERS
Certain legal matters concerning the issuance of shares of the
Aggressive Growth Fund will be passed upon by Willkie Farr & Gallagher One
Citicorp Plaza, New York, NY 10022.
THE BOARD OF DIRECTORS OF THE CAPITAL APPRECIATION PORTFOLIO, INCLUDING
THE "NON-INTERESTED" DIRECTORS UNANIMOUSLY RECOMMEND APPROVAL OF THE 0PLAN,
AND ANY UNMARKED PROXIES WITHOUT INSTRUCTIONS TO THE CONTRARY WILL BE VOTED IN
FAVOR OF APPROVAL OF THE PLAN.
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is
made as of this day of , 1995, by and between Smith Barney
Aggressive Growth Fund Inc. (the "Acquiring Fund"), a Maryland corporation
with its principal place of business at 388 Greenwich Street, New York, New
York 10013, and Smith Barney Funds, Inc., on behalf of its Capital
Appreciation Portfolio (the "Acquired Fund"), a Maryland corporation with its
principal place of business at 388 Greenwich Street, New York, New York 10048.
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C) of
the United States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization (the "Reorganization") will consist of the transfer of all or
substantially all of the assets of the Acquired Fund in exchange for Class A,
Class B, Class C and Class Y shares of common stock of the Acquiring Fund,
(the "Acquiring Fund Shares") and the assumption by the Acquiring Fund of
certain scheduled liabilities of the Acquired Fund and the distribution, after
the Closing Date herein referred to, of Acquiring Fund Shares to the
shareholders of the Acquired Fund in liquidation of the Acquired Fund and the
dissolution and termination of the Acquired Fund, all upon the terms and
conditions hereinafter set forth in this Agreement.
WHEREAS, the Acquiring Fund and the Acquired Fund are registered
investment companies of the management type and the Acquired Fund owns
securities that generally are assets of the character in which the Acquiring
Fund is permitted to invest;
WHEREAS, both the Acquiring Fund and the Acquired Fund are
authorized to issue shares of common stock;
WHEREAS, the Board of Directors of the Acquired Fund has
determined that the exchange of all or substantially all of the assets and
certain of the liabilities of the Acquired Fund for Acquiring Fund Shares and
the assumption of such liabilities by the Acquiring Fund is in the best
interests of the Acquired Fund's shareholders and that the interests of the
existing shareholders of the Acquired Fund would not be diluted as a result of
this transaction;
WHEREAS, the Board of Directors of the Acquiring Fund has
determined that the exchange of all or substantially all of the assets of the
Acquired Fund for Acquiring Fund Shares is in the best interests of the
Acquiring Fund's shareholders and that the interests of the existing
shareholders of the Acquiring Fund would not be diluted as a result of this
transaction.
NOW, THEREFORE, in consideration of the premises and of the
covenants and agreements hereinafter set forth, the parties hereto covenant
and agree as follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE ACQUIRING
FUND SHARES AND ASSUMPTION OF THE ACQUIRED FUND'S SCHEDULED LIABILITIES AND
LIQUIDATION, DISSOLUTION AND TERMINATION OF THE ACQUIRED FUND
1.1. Subject to the terms and conditions herein set forth and on
the basis of the representations and warranties contained herein, the Acquired
Fund agrees to transfer the Acquired Fund's assets as set forth in paragraph
1.2 to the Acquiring Fund, and the Acquiring Fund agrees in exchange therefor:
(i) to deliver to the Acquired Fund the number of Acquiring Fund Shares,
including fractional Acquiring Fund Shares, determined by dividing the value
of the Acquired Fund's net assets attributable to shares of the Acquired Fund,
computed in the manner and as of the time and date set forth in paragraph 2.1,
by the net asset value of one Acquiring Fund Share, computed in the manner and
as of the time and date set forth in paragraph 2.2; and (ii) to assume certain
scheduled liabilities of the Acquired Fund, as set forth in paragraph 1.3.
Such transactions shall take place at the closing provided for in paragraph
3.1 (the "Closing"). The Acquiring Fund and the Acquired Fund agree to file,
effective at the Closing, Articles of Transfer with the State of Maryland
Department of Assessments and Taxation.
1.2. (a) The assets of the Acquired Fund to be acquired by the
Acquiring Fund shall consist of all or substantially all of its property,
including, without limitation, all cash, securities and dividends or interest
receivables which are owned by the Acquired Fund and any deferred or prepaid
expenses shown as an asset on the books of the Acquired Fund on the closing
date provided in paragraph 3.1 (the "Closing Date").
(b) The Acquired Fund has provided the Acquiring Fund with
a list of all of the Acquired Fund's assets as of the date of execution of
this Agreement. The Acquired Fund reserves the right to sell any of these
securities but will not, without the prior approval of the Acquiring Fund,
acquire any additional securities other than securities of the type in which
the Acquiring Fund is permitted to invest. The Acquiring Fund will, within a
reasonable time prior to the Closing Date, furnish the Acquired Fund with a
statement of the Acquiring Fund's investment objectives, policies and
restrictions and a list of the securities, if any, on the Acquired Fund's list
referred to in the first sentence of this paragraph which do not conform to
the Acquiring Fund's investment objectives, policies and restrictions. In the
event that the Acquired Fund holds any investments which the Acquiring Fund
may not hold, the Acquired Fund will dispose of such securities prior to the
Closing Date. In addition, if it is determined that the portfolios of the
Acquired Fund and the Acquiring Fund, when aggregated, would contain
investments exceeding certain percentage limitations imposed upon the
Acquiring Fund with respect to such investments, the Acquired Fund, if
requested by the Acquiring Fund, will dispose of and/or reinvest a sufficient
amount of such investments as may be necessary to avoid violating such
limitations as of the Closing Date.
1.3. The Acquired Fund will endeavor to discharge all the
Acquired Fund's known liabilities and obligations prior to the Closing Date.
The Acquiring Fund shall assume all liabilities, expenses, costs, charges and
reserves reflected on an unaudited Statement of Assets and Liabilities of the
Acquired Fund prepared by The Boston Company Advisors, Inc. ("Boston
Advisors"), as sub-administrator of the Acquired Fund, as of the Valuation
Date (as defined in paragraph 2.1), in accordance with generally accepted
accounting principles consistently applied from the prior audited period. The
Acquiring Fund shall assume only those liabilities of the Acquired Fund
reflected in that unaudited Statement of Assets and Liabilities and shall not
assume any other liabilities, whether absolute or contingent, not reflected
thereon.
1.4. As provided in paragraph 3.4, as soon after the Closing Date
as is conveniently practicable (the "Liquidation Date"), the Acquired Fund
will liquidate and distribute pro rata to the Acquired Fund's shareholders of
record determined as of the close of business on the Closing Date (the
"Acquired Fund Shareholders"), the Acquiring Fund Shares it receives pursuant
to paragraph 1.1. Such liquidation and distribution will be accomplished by
the transfer of the Acquiring Fund Shares then credited to the account of the
Acquired Fund on the books of the Acquiring Fund to open accounts on the share
records of the Acquiring Fund in the name of the Acquired Fund's shareholders
and representing the respective pro rata number of the Acquiring Fund Shares
due such shareholders. All issued and outstanding shares of the Acquired Fund
will simultaneously be cancelled on the books of the Acquired Fund, although
share certificates representing interests in the Acquired Fund will represent
a number of Acquiring Fund Shares after the Closing Date as determined in
accordance with paragraph 1.1. The Acquiring Fund shall not issue
certificates representing the Acquiring Fund Shares in connection with such
exchange.
1.5. Ownership of Acquiring Fund Shares will be shown on the
books of the Acquiring Fund's transfer agent. Acquiring Fund Shares will be
issued in the manner described in the Acquiring Fund's current prospectus and
statement of additional information.
1.6. Any transfer taxes payable upon issuance of the Acquiring
Fund Shares in a name other than the registered holder of the Acquired Fund
shares on the books of the Acquired Fund as of that time shall, as a condition
of such issuance and transfer, be paid by the person to whom such Acquiring
Fund Shares are to be issued and transferred.
1.7. Any reporting responsibility of the Acquired Fund is and
shall remain the responsibility of the Acquired Fund up to and including the
Closing Date and such later dates on which the Acquired Fund is dissolved and
deregistered.
1.8. The Acquired Fund shall, following the Closing Date and the
making of all distributions pursuant to paragraph 1.4, be dissolved and
terminated under the laws of the State of Maryland and in accordance with its
governing documents and shall apply for an order of the Commission under
Section 8(f) of the 1940 Act declaring that it has ceased to be an investment
company.
2. VALUATION
2.1. The value of the Acquired Fund's assets to be acquired by
the Acquiring Fund hereunder shall be the value of such assets computed as of
the close of regular trading on the New York Stock Exchange, Inc. (the "NYSE")
on the Closing Date (such time and date being hereinafter called the
"Valuation Date"), using the valuation procedures set forth in the Acquiring
Fund's then current prospectus or statement of additional information.
2.2. The net asset value of Acquiring Fund Shares shall be the
net asset value per share computed as of the close of regular trading on the
NYSE on the Valuation Date, using the valuation procedures set forth in the
Acquiring Fund's then current prospectus or statement of additional
information.
2.3. All computations of value shall be made by Boston Advisors
and Mutual Management Corp. in accordance with its regular practice as pricing
agent for the Acquired Fund and the Acquiring Fund, respectively.
3. CLOSING AND CLOSING DATE
3.1. The Closing Date shall be __________, 1994, or such later
date as the parties may agree to in writing. All acts taking place at the
Closing shall be deemed to take place simultaneously as of the close of
business on the Closing Date unless otherwise provided. The Closing shall be
held as of 5:00 p.m. at the offices of Smith Barney Inc., 1345 Avenue of the
Americas, New York, New York 10105, or at such other time and/or place as the
parties may agree.
3.2. The custodian for the Acquiring Fund (the "Custodian"),
shall deliver at the Closing a certificate of an authorized officer stating
that: (a) the Acquired Fund's portfolio securities, cash and any other assets
shall have been delivered in proper form to the Acquiring Fund within two
business days prior to or on the Closing Date and (b) all necessary transfer
taxes including all applicable federal and state stock transfer stamps, if
any, shall have been paid, or provision for payment shall have been made, in
conjunction with the delivery of portfolio securities.
3.3. In the event that on the Valuation Date (a) the NYSE or
another primary trading market for portfolio securities of the Acquiring Fund
or the Acquired Fund shall be closed to trading or trading thereon shall be
restricted or (b) trading or the reporting of trading on the NYSE or elsewhere
shall be disrupted so that accurate appraisal of the value of the net assets
of the Acquiring Fund or the Acquired Fund is impracticable, the Closing Date
shall be postponed until the first business day after the day when trading
shall have been fully resumed and reporting shall have been restored.
3.4. The Acquired Fund shall deliver at the Closing a list of the
names and addresses of the Acquired Fund's shareholders and the number and
percentage ownership of outstanding shares owned by each such shareholder
immediately prior to the Closing, certified on behalf of the Acquired Fund by
its President. The Acquiring Fund shall issue and deliver a confirmation
evidencing the Acquiring Fund Shares to be credited to the Acquired Fund's
account on the Closing Date to the Secretary of the Acquired Fund, or provide
evidence satisfactory to the Acquired Fund that such Acquiring Fund Shares
have been credited to the Acquired Fund's account on the books of the
Acquiring Fund. At the Closing, each party shall deliver to the other such
bills of sale, checks, assignments, share certificates, if any, receipts or
other documents as such other party or its counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES
4.1. The Acquired Fund represents and warrants to the Acquiring
Fund as follows:
(a) The Acquired Fund is a corporation, duly organized, validly
existing and in good standing under the laws of the State of Maryland;
(b) The Acquired Fund is a registered investment company
classified as a management company of the open-end type, and its registration
with the Securities and Exchange Commission (the "Commission") as an
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act") is in full force and effect;
(c) The Acquired Fund is not, and the execution, delivery and
performance of this Agreement will not result, in a material violation of its
Articles of Incorporation or By-laws or of any agreement, indenture,
instrument, contract, lease or other undertaking to which the Acquired Fund is
a party or by which it is bound;
(d) The Acquired Fund has no material contracts or other
commitments (other than this Agreement) which will be terminated with
liability to the Acquired Fund prior to the Closing Date;
(e) Except as otherwise disclosed in writing to and accepted by
the Acquiring Fund, no litigation or administrative proceeding or
investigation of or before any court or governmental body is presently pending
or to its knowledge threatened against the Acquired Fund or any of the
Acquired Fund's properties or assets (other than that previously disclosed to
the other party to the Agreement) which, if adversely determined, would
materially and adversely affect its financial condition or the conduct of its
business. The Acquired Fund knows of no facts which might form the basis for
the institution of such proceedings and is not party to or subject to the
provisions of any order, decree or judgment of any court or governmental body
which materially and adversely affects its business or its ability to
consummate the transactions herein contemplated;
(f) The Statements of Assets and Liabilities of the Acquired Fund
as of September 30, 1984 through September 30, 1993 have been audited by
Coopers & Lybrand, independent certified public accountants, and, together
with the unaudited Statement of Assets and Liabilities of the Acquired Fund as
of March 31, 1994, are in accordance with generally accepted accounting
principles consistently applied, and such statements (copies of which have
been furnished to the Acquiring Fund) fairly reflect the financial condition
of the Acquired Fund as of such dates, and there are no known contingent
liabilities of the Acquired Fund as of such dates not disclosed therein;
(g) At the Closing Date, all federal and other tax returns and
reports of the Acquired Fund required by law then to have been filed by such
dates shall have been filed, and all federal and other taxes shown as due on
such returns shall have been paid so far as due, or provision shall have been
made for the payment thereof and, to the best of the Acquired Fund's
knowledge, no such return is currently under audit and no assessment has been
asserted with respect to such returns;
(h) For the most recent fiscal year of its operation, the
Acquired Fund has met the requirements of Subchapter M of the Code for
qualification and treatment as a regulated investment company;
(i) All issued and outstanding shares of the Acquired Fund are,
and at the Closing Date will be, duly and validly issued and outstanding,
fully paid and non-assessable. All of the issued and outstanding shares of
the Acquired Fund will, at the time of Closing, be held by the persons and in
the amounts set forth in the records of the transfer agent as provided in
paragraph 3.4. The Acquired Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any shares of the
Acquired Fund, nor is there outstanding any security convertible into any
shares of the Acquired Fund;
(j) At the Closing Date, the Acquired Fund will have good and
marketable title to its assets to be transferred to the Acquiring Fund
pursuant to paragraph 1.2 and full right, power and authority to sell, assign,
transfer and deliver such assets hereunder and, upon delivery and payment for
such assets, the Acquiring Fund will acquire good and marketable title
thereto, subject to no restrictions on the full transfer thereof, including
such restrictions as might arise under the Securities Act of 1933, as amended
(the "1933 Act"), other than as disclosed to the Acquiring Fund;
(k) The execution, delivery and performance of this Agreement has
been duly authorized by all necessary action on the part of the Acquired
Fund's Board of Directors, and subject to the approval of the Acquired Fund's
shareholders, assuming due authorization, execution and delivery by the
Acquiring Fund, this Agreement will constitute a valid and binding obligation
of the Acquired Fund, enforceable in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium and other
laws relating to or affecting creditors' rights and to general equity
principles;
(l) The information to be furnished by the Acquired Fund for use
in no-action letters, applications for exemptive orders, registration
statements, proxy materials and other documents which may be necessary in
connection with the transactions contemplated hereby shall be accurate and
complete in all material respects and shall comply in all material respects
with federal securities and other laws and regulations thereunder applicable
thereto; and
(m) The proxy statement of the Acquired Fund (the "Proxy
Statement") to be included in the Registration Statement referred to in
paragraph 5.7 (other than information therein that relates to the Acquiring
Fund) will, on the effective date of the Registration Statement and on the
Closing Date, not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not materially misleading.
4.2. The Acquiring Fund represents and warrants to the Acquired
Fund as follows:
(a) The Acquiring Fund is a corporation, duly organized, validly
existing and in good standing under the laws of the State of Maryland;
(b) The Acquiring Fund is a registered investment company
classified as a management company of the open-end type and its registration
with the Commission as an investment company under the 1940 Act is in full
force and effect;
(c) The current prospectus of and statement of additional
information of the Acquiring Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not materially misleading;
(d) At the Closing Date, the Acquiring Fund will have good and
marketable title to the Acquiring Fund's assets;
(e) The Acquiring Fund is not, and the execution, delivery and
performance of this Agreement on behalf of the Acquiring Fund will not result,
in a material violation of its Articles of Incorporation or By-laws or of any
agreement, indenture, instrument, contract, lease or other undertaking with
respect to the Acquiring Fund to which the Acquiring Fund is a party or by
which it is bound;
(f) No material litigation or administrative proceeding or
investigation of or before any court or governmental body is presently pending
or threatened against the Acquiring Fund or any of the Acquiring Fund's
properties or assets, except as previously disclosed in writing to the
Acquired Fund. The Acquiring Fund knows of no facts which might form the
basis for the institution of such proceedings and the Acquiring Fund is not a
party to or subject to the provisions of any order, decree or judgment of any
court or governmental body which materially and adversely affects the
Acquiring Fund's business or the Acquiring Fund's ability to consummate the
transactions contemplated herein;
(g) The Statements of Assets and Liabilities of the Acquiring
Fund as of March 31, 1985 through March 31, 1994, have been audited by KPMG
Peat Marwick, independent certified public accountants, and are in accordance
with generally accepted accounting principles consistently applied, and such
statements (copies of which have been furnished to the Acquired Fund) fairly
reflect the financial condition of the Acquiring Fund as of such dates, and
there are no known contingent liabilities of the Acquiring Fund as of such
dates not disclosed therein;
(h) At the Closing Date, all federal and other tax returns and
reports of the Acquiring Fund required by law then to have been filed by such
dates shall have been filed, and all federal and other taxes shown as due on
said returns and reports shall have been paid so far as due, or provision
shall have been made for the payment thereof and, to the best of the Acquiring
Fund's knowledge, no such return is currently under audit and no assessment
has been asserted with respect to such returns;
(i) For the most recent fiscal year of its operation, the
Acquiring Fund has met the requirements of Subchapter M of the Code for
qualification and treatment as a regulated investment company and the
Acquiring Fund intends to do so in the future;
(j) At the date hereof, all issued and outstanding shares of the
Acquiring Fund are, and at the Closing Date will be, duly and validly issued
and outstanding, fully paid and non-assessable, with no personal liability
attaching to the ownership thereof. The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or purchase
any shares of the Acquiring Fund, nor is there outstanding any security
convertible into shares of the Acquiring Fund;
(k) The execution, delivery and performance of this Agreement has
been duly authorized by all necessary action, if any, on the part of the
Acquiring Fund's Board of Directors, and assuming due authorization, execution
and delivery by the Acquired Fund, this Agreement constitutes a valid and
binding obligation of the Acquiring Fund, enforceable in accordance with its
terms, subject as to enforcement, to bankruptcy, insolvency, reorganization,
moratorium and other laws relating to or affecting creditors' rights and to
general equity principles;
(l) The Acquiring Fund Shares to be issued and delivered to the
Acquired Fund, for the account of the Acquired Fund Shareholders, pursuant to
the terms of this Agreement, will at the Closing Date have been duly
authorized and, when so issued and delivered, will be duly and validly issued
Acquiring Fund Shares, and will be fully paid and non-assessable with no
personal liability attaching to the ownership thereof;
(m) The information to be furnished by the Acquiring Fund for use
in no-action letters, applications for exemptive orders, registration
statements, proxy materials and other documents which may be necessary in
connection with the transactions contemplated hereby shall be accurate and
complete in all material respects and shall comply in all material respects
with federal securities and other laws and regulations applicable thereto;
(n) The Proxy Statement to be included in the Registration
Statement (only insofar as it relates to the Acquiring Fund ) will, on the
effective date of the Registration Statement and on the Closing Date, not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which such statements were made,
not materially misleading; and
(o) The Acquiring Fund agrees to use all reasonable efforts to
obtain the approvals and authorizations required by the 1933 Act, the 1940 Act
and such of the state Blue Sky or securities laws as it may deem appropriate
in order to continue the Acquiring Fund's operations after the Closing Date.
5. COVENANTS OF THE ACQUIRED FUND AND THE ACQUIRING FUND
5.1. The Acquiring Fund and the Acquired Fund each will operate
its business in the ordinary course between the date hereof and the Closing
Date. It is understood that such ordinary course of business will include the
declaration and payment of customary dividends and distributions and any other
dividends and distributions deemed advisable, in each case payable either in
cash or in additional shares.
5.2. The Acquired Fund will call a meeting of its shareholders to
consider and act upon this Agreement and to take all other action necessary to
obtain approval of the transactions contemplated herein.
5.3. The Acquired Fund covenants that the Acquiring Fund Shares
to be issued hereunder are not being acquired for the purpose of making any
distribution thereof other than in accordance with the terms of this
Agreement.
5.4. The Acquired Fund will assist the Acquiring Fund in
obtaining such information as the Acquiring Fund reasonably requests
concerning the beneficial ownership of the Acquired Fund's shares.
5.5. Subject to the provisions of this Agreement, the Acquired
Fund and the Acquiring Fund, each will take, or cause to be taken, all action,
and do or cause to be done, all things reasonably necessary, proper or
advisable to consummate and make effective the transactions contemplated by
this Agreement.
5.6. As promptly as practicable, but in any case within sixty
days after the Closing Date, the Acquired Fund shall furnish the Acquiring
Fund, in such form as is reasonably satisfactory to the Acquiring Fund, a
statement of the earnings and profits of the Acquired Fund for federal income
tax purposes which will be carried over to the Acquiring Fund as a result of
Section 381 of the Code, and which will be certified by the President and
Treasurer of the Acquired Fund.
5.7. The Acquired Fund will provide the Acquiring Fund with
information reasonably necessary for the preparation of a prospectus (the
"Prospectus") which will include the Proxy Statement, referred to in paragraph
4.1(m), all to be included in a Registration Statement on Form N-14 of the
Acquiring Fund (the "Registration Statement"), in compliance with the 1933
Act, the Securities Exchange Act of 1934 (the "1934 Act") and the 1940 Act in
connection with the meeting of the Acquired Fund's shareholders to consider
approval of this Agreement and the transactions contemplated herein.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Acquired Fund to consummate the
transactions provided for herein shall be subject, at its election, to the
performance by the Acquiring Fund of all of the obligations to be performed by
them hereunder on or before the Closing Date and, in addition thereto, the
following further conditions:
6.1. All representations and warranties of the Acquiring Fund
contained in this Agreement shall be true and correct in all material respects
as of the date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date;
6.2. The Acquiring Fund shall have delivered to the Acquired Fund
a certificate executed in its name by its President or Vice President and its
Treasurer or Assistant Treasurer, in a form reasonably satisfactory to the
Acquired Fund and dated as of the Closing Date, to the effect that the
representations and warranties of the Acquiring Fund made in this Agreement
are true and correct at and as of the Closing Date, except as they may be
affected by the transactions contemplated by this Agreement; and
6.3. The Acquired Fund shall have received on the Closing Date a
favorable opinion from Sullivan & Cromwell, counsel to the Acquiring Fund,
dated as of the Closing Date, in a form reasonably satisfactory to Christina
T. Sydor, Esq., Secretary of the Acquired Fund, covering the following points:
That (a) the Acquiring Fund is duly organized and validly existing under
the laws of the State of Maryland; (b) the Acquiring Fund is an open-end
management investment company registered under the 1940 Act; (c) this
Agreement, the reorganization provided for thereunder and the execution of
this Agreement have been duly authorized and approved by all requisite action
of the Acquiring Fund, and this Agreement has been duly executed and delivered
by the Acquiring Fund and is a valid and binding obligation of the Acquiring
Fund enforceable in accordance with its terms against the assets of the
Acquiring Fund; and (d) the Acquiring Fund Shares to be issued to the Acquired
Fund for distribution to its shareholders pursuant to this Agreement have
been, to the extent of the number of Acquiring Fund Shares authorized to be
issued by the Acquiring Fund in the Charter of the Acquiring Fund and then
unissued, duly authorized and, subject to the receipt by the Acquiring Fund of
consideration equal to the net asset value thereof (but in no event less than
the par value thereof), such Acquiring Fund Shares, when issued in accordance
with this Agreement, will be validly issued and fully paid and non-assessable.
Such opinion may state that it is solely for the benefit of the Acquired Fund,
its directors and its officers. Such counsel may rely, as to matters governed
by the laws of the State of Maryland, on an opinion of Maryland counsel.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE
ACQUIRING FUND
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance by
the Acquired Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions:
7.1. All representations and warranties of the Acquired Fund
contained in this Agreement shall be true and correct in all material respects
as of the date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date;
7.2. The Acquired Fund shall have delivered to the Acquiring Fund
a statement of the Acquired Fund's assets and liabilities, together with a
list of the Acquired Fund's portfolio securities showing the tax costs of such
securities by lot and the holding periods of such securities, as of the
Closing Date, certified by the Treasurer or Assistant Treasurer of the
Acquired Fund;
7.3. The Acquired Fund shall have delivered to the Acquiring Fund
on the Closing Date a certificate executed in its name by its President or
Vice President and its Treasurer or Assistant Treasurer, in form and substance
satisfactory to the Acquiring Fund and dated as of the Closing Date, to the
effect that the representations and warranties of the Acquired Fund made in
this Agreement are true and correct at and as of the Closing Date, except as
they may be affected by the transactions contemplated by this Agreement; and
7.4. The Acquiring Fund shall have received on the Closing Date a
favorable opinion of Willkie Farr & Gallagher, counsel to the Acquired Fund,
in a form satisfactory to Christina T. Sydor, Esq., Secretary of the Acquiring
Fund, covering the following points:
That (a) the Acquired Fund is duly organized and validly existing under
the laws of the State of Maryland; (b) the Acquired Fund is an open-end
management investment company registered under the 1940 Act; and (c) this
Agreement, the reorganization provided for thereunder and the execution of
this Agreement have been duly authorized and approved by all requisite action
of the Acquired Fund, and this Agreement has been duly executed and delivered
by the Acquired Fund and is a valid and binding obligation of the Acquired
Fund enforceable in accordance with its terms against the assets of the
Acquired Fund. Such opinion may state that it is solely for the benefit of
the Acquiring Fund, its directors and its officers. Such counsel may rely, as
to matters governed by the laws of the State of Maryland, on an opinion of
Maryland counsel.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND AND THE
ACQUIRING FUND
If any of the conditions set forth below do not exist on or before
the Closing Date with respect to the Acquiring Fund or the Acquired Fund, the
other party to this Agreement shall, at its option, not be required to
consummate the transactions contemplated by this Agreement:
8.1. This Agreement and the transactions contemplated herein
shall have been approved by the requisite vote of the holders of the
outstanding shares of the Acquired Fund in accordance with the provisions of
the Acquired Fund's Articles of Incorporation and By-laws and certified copies
of the votes evidencing such approval shall have been delivered to the
Acquiring Fund. Notwithstanding anything herein to the contrary, neither the
Acquiring Fund nor the Acquired Fund may waive the conditions set forth in
this paragraph 8.1;
8.2. On the Closing Date, no action, suit or other proceeding
shall be pending before any court or governmental agency in which it is sought
to restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein;
8.3. All consents of other parties and all other consents, orders
and permits of federal, state and local regulatory authorities (including
those of the Commission and of state Blue Sky and securities authorities,
including "no-action" positions of and exemptive orders from such federal and
state authorities) deemed necessary by the Acquiring Fund or the Acquired Fund
to permit consummation, in all material respects, of the transactions
contemplated hereby shall have been obtained, except where failure to obtain
any such consent, order or permit would not involve a risk of a material
adverse effect on the assets or properties of the Acquiring Fund or the
Acquired Fund, provided that either party hereto may for itself waive any of
such conditions;
8.4. The Registration Statement shall have become effective under
the 1933 Act and no stop orders suspending the effectiveness thereof shall
have been issued and, to the best knowledge of the parties hereto, no
investigation or proceeding for that purpose shall have been instituted or be
pending, threatened or contemplated under the 1933 Act;
8.5. The Acquired Fund shall have declared and paid a dividend or
dividends on the outstanding shares of the Acquired Fund, which, together with
all previous such dividends, shall have the effect of distributing to the
shareholders of the Acquired Fund all of the investment company taxable income
and exempt-interest income of the Acquired Fund for all taxable years ending
on or prior to the Closing Date. The dividend declared and paid by the
Acquired Fund shall also include all of such fund's net capital gain realized
in all taxable years ending on or prior to the Closing Date (after reduction
for any capital loss carryforward);
8.6. The parties shall have received a favorable opinion of
Willkie Farr & Gallagher, addressed to the Acquiring Fund and the Acquired
Fund and satisfactory to Christina T. Sydor, Esq., as Secretary of each of the
Funds, substantially to the effect that for federal income tax purposes:
(a) the transfer of all or substantially all of the Acquired Fund's
assets in exchange for the Acquiring Fund Shares and the assumption by the
Acquiring Fund of certain scheduled liabilities of the Acquired Fund will
constitute a "reorganization" within the meaning of Section 368(a)(1)(C) of
the Code, and the Acquiring Fund and the Acquired Fund are each a "party to a
reorganization" within the meaning of Section 368(b) of the Code; (b) no gain
or loss will be recognized by the Acquiring Fund upon the receipt of the
assets of the Acquired Fund in exchange for the Acquiring Fund Shares and the
assumption by the Acquiring Fund of certain scheduled liabilities of the
Acquired Fund; (c) no gain or loss will be recognized by the Acquired Fund
upon the transfer of the Acquired Fund's assets to the Acquiring Fund in
exchange for the Acquiring Fund Shares and the assumption by the Acquiring
Fund of certain scheduled liabilities of the Acquired Fund or upon the
distribution (whether actual or constructive) of the Acquiring Fund Shares to
the Acquired Fund's shareholders; (d) no gain or loss will be recognized by
shareholders of the Acquired Fund upon the exchange of their Acquired Fund
shares for the Acquiring Fund Shares and the assumption by the Acquiring Fund
of certain scheduled liabilities of the Acquired Fund; (e) the aggregate tax
basis for the Acquiring Fund Shares received by each of the Acquired Fund's
shareholders pursuant to the Reorganization will be the same as the aggregate
tax basis of the Acquired Fund shares held by such shareholder immediately
prior to the Reorganization, and the holding period of the Acquiring Fund
Shares to be received by each Acquired Fund shareholder will include the
period during which the Acquired Fund shares exchanged therefor were held by
such shareholder (provided that the Acquired Fund shares were held as capital
assets on the date of the Reorganization); and (f) the tax basis of the
Acquired Fund's assets acquired by the Acquiring Fund will be the same as the
tax basis of such assets to the Acquired Fund immediately prior to the
Reorganization, and the holding period of the assets of the Acquired Fund in
the hands of the Acquiring Fund will include the period during which those
assets were held by the Acquired Fund.
Notwithstanding anything herein to the contrary, neither the
Acquiring Fund nor the Acquired Fund may waive the conditions set forth in
this paragraph 8.6.
9. BROKERAGE FEES AND EXPENSES
9.1. The Acquiring Fund represents and warrants to the Acquired
Fund, and the Acquired Fund hereby represents and warrants to the Acquiring
Fund, that there are no brokers or finders entitled to receive any payments in
connection with the transactions provided for herein.
9.2. (a) Except as may be otherwise provided herein, the
Acquiring Fund and the Acquired Fund shall each be liable, in proportion to
their assets, for the expenses incurred in connection with entering into and
carrying out the provisions of this Agreement, including the expenses of: (i)
counsel and independent accountants associated with the Reorganization; (ii)
printing and mailing the Prospectus/Proxy Statement and soliciting proxies in
connection with the meeting of shareholders of the Acquired Fund referred to
in paragraph 5.2 hereof; (iii) any special pricing fees associated with the
valuation of the Acquired Fund's of the Acquiring Fund's portfolio on the
Closing Date; (iv) expenses associated with preparing this Agreement and
preparing and filing the Registration Statement under the 1933 Act covering
the Acquiring Fund Shares to be issued in the Reorganization; (v) registration
or qualification fees and expenses of preparing and filing such forms, if any,
necessary under applicable state securities laws to qualify the Acquiring Fund
Shares to be issued in connection with the Reorganization. The Acquired Fund
shall be liable for: (i) all fees and expenses related to the liquidation,
dissolution and termination of the Acquired Fund; and (ii) fees and expenses
of the Acquired Fund's custodian and transfer agent incurred in connection
with the Reorganization. The Acquiring Fund shall be liable for any fees and
expenses of the Acquiring Fund's custodian and transfer agent incurred in
connection with the Reorganization.
(b) Consistent with the provisions of paragraph 1.3, the Acquired
Fund, prior to the Closing, shall pay for or include in the unaudited
Statement of Assets and Liabilities prepared pursuant to paragraph 1.3 all of
its known and reasonably estimated expenses associated with the transactions
contemplated by this Agreement.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1. The parties hereto agree that no party has made any
representation, warranty or covenant not set forth herein and that this
Agreement constitutes the entire agreement between the parties.
10.2. The representations, warranties and covenants contained in
this Agreement or in any document delivered pursuant hereto or in connection
herewith shall survive the consummation of the transactions contemplated
hereunder.
11. TERMINATION
11.1. This Agreement may be terminated at any time prior to the
Closing Date by: (1) the mutual agreement of the Acquired Fund and the
Acquiring Fund; (2) the Acquired Fund in the event that the Acquiring Fund
shall, or the Acquiring Fund in the event that the Acquired Fund shall,
materially breach any representation, warranty or agreement contained herein
to be performed at or prior to the Closing Date; or (3) a condition herein
expressed to be precedent to the obligations of the terminating party has not
been met and it reasonably appears that it will not or cannot be met.
11.2. In the event of any such termination, there shall be no
liability for damages on the part of either the Acquired Fund or the Acquiring
Fund or their respective directors or officers to the other party, but each
shall bear the expenses incurred by it incidental to the preparation and
carrying out of this Agreement as provided in paragraph 9.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such
manner as may be mutually agreed upon in writing by the authorized officers of
the Acquired Fund and the Acquiring Fund; provided, however, that following
the meeting of the Acquired Fund shareholders called by the Acquired Fund
pursuant to paragraph 5.2 of this Agreement, no such amendment may have the
effect of changing the provisions for determining the number of the Acquiring
Fund Shares to be issued to the Acquired Fund's shareholders under this
Agreement to the detriment of such shareholders without their further
approval.
13. NOTICES
Any notice, report, statement or demand required or permitted by
any provisions of this Agreement shall be in writing and shall be given by
prepaid telegraph, telecopy or certified mail addressed to the Acquired Fund,
Two World Trade Center, 100th Floor, New York, New York 10048, Attention:
Heath B. McLendon; or to the Acquiring Fund, 1345 Avenue of the Americas, New
York, New York 10105, Attention: Stephen J. Treadway.
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF
LIABILITY
14.1 The article and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
14.2 This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.
14.3 This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
14.4 This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns, but no assignment
or transfer hereof or of any rights or obligations hereunder shall be made by
any party without the written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or give
any person, firm, corporation or other entity, other than the parties hereto
and their respective successors and assigns, any rights or remedies under or
by reason of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its Chairman of the Board, President or Vice
President and attested by its Secretary or Assistant Secretary.
Attest: SMITH BARNEY AGGRESSIVE
GROWTH FUND INC.
By:
Name: Name:
Title: Title:
Attest: SMITH BARNEY FUNDS, INC.
By:
Name: Name:
Title: Title:
[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
STATEMENT OF ADDITIONAL INFORMATION DATED FEBRUARY , 1994
Acquisition of the Assets of
SMITH BARNEY FUNDS, INC. -- CAPITAL APPRECIATION PORTFOLIO
388 Greenwich St.
New York, New York 10013
(212) 723-9218
By and in Exchange For Shares of
SMITH BARNEY AGGRESSIVE GROWTH FUND, INC.
388 Greenwich Street
New York, New York 10013
(212) 723-9218
This Statement of Additional Information, relating specifically to
the proposed transfer of all or substantially all of the assets of Smith
Barney Equity Funds, Inc. -- Capital Appreciaton Portfolio (the "Capital
Appreciation Portfolio") to Smith Barney Aggressive Growth Fund, Inc. (the
"Aggressive Growth Fund") in exchange for shares of the Aggressive Growth Fund
and the assumption by the Aggressive Growth Fund of certain scheduled
liabilities of the Capital Appreciation Portfolio, consists of this cover page
and the following described documents, each of which is incorporated herein by
reference.
1. Statement of Additional Information of Smith Barney
Aggressive Growth Fund, Inc., dated November 7, 1994.
2. Annual Report of the Aggressive Growth Fund for the year
ended August 31, 1994.
3. Statement of Additional Information of the Smith Barney
Funds, Inc. dated November 7, 1994.
4. Annual Report of the Capital Appreciation Portfolio for the
year ended December 31, 1993.
5. Interim Financial Statements of the Capital Appreciation
Portfolio for the period ended August 31, 1994.
6. Pro-Forma Financial Statements. (Accompanies this Statement
of Additional Information).
This Statement of Additional Information is not a prospectus. It
should be read in conjunction with the Prospectus/Proxy Statement, dated
February , 1995, relating to the above referenced matter, which may be
obtained without charge by calling or writing either the Aggressive Growth
Fund or the Capital Appreciation Portfolio at the telephone numbers or
addresses set forth above, by contacting any Smith Barney Financial
Consultant, or by calling toll-free 1-800- .
The date of this Statement of Additional Information is February
, 1995.
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
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 , director 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
SBMFM (formerly known as Smith, Barney Advisers, Inc.) 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 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 investment advisory services, the Fund pays
SBMFM a fee computed daily and paid monthly at the annual rate
of 0.60% 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, SBMFM
receives 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.
SUB-ADMINISTRATOR--BOSTON ADVISORS
Boston Advisors serves as sub-administrator to the Fund pursuant to 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. 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.
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").
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
0.20%
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 Boston Advisors
are described in the Prospectus under "Management of the Fund." In addition
to
those services, Boston Advisors 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 its 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
and statements of additional information 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 , fees paid pursuant to the Fund's services and
distribution plan
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 state 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 2.50% of the first $30 million of average net
assets,
4
2.00% of the next $70 million of average net assets and 1.50% 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 legal counsel.
KPMG Peat Marwick L.L.P. , 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 should contact a Smith Barney Financial
Consultant.
COMBINED RIGHT OF ACCUMULATION
Reduced sales charges, in accordance with the schedule in the Prospectus,
apply to any purchase of Class A shares if the aggregate investment in
Class A
shares of the Fund and in Class A shares of other funds of the Smith Barney
Mutual Funds that are offered with a sales charge, including the
purchase being made, of any purchaser is $25,000 or more. The reduced sales
charge is subject to confirmation of the 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 written
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 a Class A, Class Y and Class Z share of the Fund is
equal to
the net asset value per share at the time of purchase, plus for Class A
shares
an initial sales charge based on the aggregate amount of the investment.
The
public offering price for a Class B and Class C share (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 Board of Directors of the Fund determines that it would be
detrimental to
the best interests of the remaining shareholders of the Fund to make a
redemption payment wholly in cash, the Fund may pay, in
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 will be 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 a 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
most recently approved by the Fund's Board of Directors on July 21, 1994.
For the
1994, 1993 and 1992 fiscal years, Smith Barney or its predecessor,
Shearson Lehman Brothers,
received $242,673, $314,155 and $1,765,161, respectively, in sales the sale
of Class A shares, and did not reallow any portion thereof to dealers.
For the period from November 6, 1992 through August 31, 1993 and the fiscal
year ended August 31, 1994, Smith Barney received from shareholders
$147,433 and $101,447, respectively, in CDSC on the redemption of Class B
shares. No comparable information is available for 1992 because that was
the year that the variable pricing system was implemented.
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.
For the fiscal year ended August 31, 1994, Smith Barney incurred
distribution expenses totaling approximately $711,000, consisting of
approximately $3,000 for advertising, $2,000 for printing and mailing of
Prospectuses, $234,000 for support services, $450,000 to Smith Barney
Financial Consultants, and $22,000 in accruals for interest on the excess
of Smith Barney expenses incurred in distributing the Fund's shares over
the sum of the distribution fees and CDSC received by Smith Barney from the
Fund.
DISTRIBUTION ARRANGEMENTS
To compensate Smith Barney for the 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 shares primarily intended to compensate
Smith Barney
for its initial expense of paying Financial Consultants a commission upon
sales of those shares. The Class B and Class C distribution fee is
calculated
at the annual rate of 0.75% of the value of the Fund's average net assets
attributable to the shares of the respective Class.
For the period from November 6, 1992 through August 31, 1993, the Fund
incurred $312,312 and $22,840 in service fees for Class A and Class B
shares, respectively. 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 period from May 13, 1993 through August 31,
1993, the Fund incurred $10 in service fees for its Class C shares. For
the fiscal 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 period from November 6, 1992 through August 31,
1993 and the period from May 13, 1993 through August 31, 1993, the Fund
incurred $68,520 and $31 for Class B and Class C shares, respectively, in
distribution fees. 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 vote of a majority of the Independent Directors
or by 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 Fund's 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. The
Fund may include comparative performance information in advertising or
marketing the Fund's shares. Such performance information may include data
from the following industry and financial publications: Barron's, Business
Week, CDA Investment Technologies, Inc., Changing Times, Forbes, Fortune,
Institutional Investor, Investors Daily, Money, Morningstar Mutual Fund
Values, The New York Times, USA Today and The Wall Street Journal. 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 C's average annual total return was as follows for the periods
indicated:
<TABLE>
<C> <S>
11.57% for the one-year period beginning on September 1, 1993 through
August
31, 1994; and
18.69% per annum from May 13, 1993 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 aggregate total return figures assume that the maximum
applicable CDSC has not been deducted from the investment at the time of
purchase. If the maximum applicable CDSC had been reflected, Class B's
aggregate total return for the same periods 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 May 13, 1993 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]
1994
ANNUAL
REPORT
DESCRIPTION OF ART WORK ON REPORT COVER
Small box above fund name showing a personal computer, a touchtone
receiver, a DNA module, and a glass container used for measuring
scientific fluids.
Smith Barney
AGGRESSIVE
GROWTH FUND
INC.
AUGUST 31, 1994
SMITH BARNEY
AGGRESSIVE GROWTH FUND INC.
DEAR SHAREHOLDER:
We are pleased to provide you with the Annual Report, which includes the
portfolio of investments for Smith Barney Aggressive Growth Fund Inc. for
the fiscal year ended August 31, 1994. The Fund enjoyed strong relative
performance in its most recent fiscal year. The aggregate total returns
without the deduction of the applicable sales charges for Class A, Class
B, Class C and Class D shares of the Fund were 13.44%, 12.62%, 13.81% and
12.57%, respectively. This compared with a gain of 5.5% for the Standard &
Poor's Daily Price Index of 500 Common Stocks ("S&P 500") and 2.4% for the
Value Line Index, which we believe represents a better measure of perfor-
mance for the kinds of securities held in the Fund. Both of these unman-
aged indices track the movement of common stock prices. The net asset
value of Class A, Class B, Class C and Class D shares of the Fund in-
creased 13.44%, 12.62%, 13.81% and 12.57%, respectively, in the twelve-
month period ended August 31, 1994.
AN OVERVIEW OF THE MARKET AND ECONOMIC ENVIRONMENT
During the last six-months, the equity market as defined by the S&P 500,
suffered its first 10% correction in three years. The catalyst for the de-
cline, which had an even greater impact on growth stocks, was the dramatic
increase in long-term interest rates. From the low point reached in 1993,
the yield on the 30-year Treasury Bond increased to a recent level of
7.78%. Several factors contributed to this rise in interest rates: (a)
several rounds of monetary tightening by the Federal Reserve Board, (b)
fears that the strengthening economy would lead to a pickup in the rate of
inflation, (c) the liquidation of leveraged bond positions which were put
on with the expectation that interest rates would continue falling, (d)
concern over a weak U.S. dollar and its potential inflationary impact, and
(e) reaction to increases in certain commodity prices.
INVESTMENT STRATEGY
During the last six months, the Fund sold its position in McCaw Cellular
Communications which recently merged into ATT, in addition to taking par-
tial profits in Infinity Broadcasting Corporation and Cirrus Logic, Inc.
Among purchases in the same six-month period, we added to positions in
C-COR Electronics, Inc., Cablevision Systems Development Corporation, Arch
Communications Group, Inc., Telular Corporation and Univax Biologics,
Inc., while establishing an initial position in Indigo N.V.
In prior reports to you, we outlined our reasons for maintaining sizable
weightings in emerging health care stocks, including top tier biotechnol-
ogy companies and leading managed care providers. A year ago many ques-
tioned the logic of owning stocks in an industry which was being criti-
cized in Washington, D.C. as well as in the financial press. We were of
the opinion that companies able to offer innovative, cost-effective treat-
ments would succeed in any health care environment. Fortunately, this has
not gone unnoticed by health care companies, as evidenced by the consoli-
dation underway in the pharmaceutical industry as well as among managed
care providers. In May 1994, United Health Care, one of our largest hold-
ings, sold its prescription benefits management ("PBM") subsidiary to
SmithKline Beecham for $2.4 billion which after taxes generated over $10
per share of cash for the company. The shares of Value Health, one of the
few remaining independent PBMs, have risen following other takeovers in
the industry. As top line growth has become harder to achieve for many
drug companies, they have sought to augment their product lines through
strategic acquisitions. Consolidation is likely to remain an important
theme in the health care industry where companies look to leverage their
existing sales forces with new products. Several top tier biotechnology
companies possess exciting products generating significant earnings while
offering large product pipelines besides. We think they represent logical
consolidation candidates. Outright acquisitions of such young dynamic com-
panies would surprise us. We expect any possible activity to be modeled
after the highly successful Roche/Genentech deal five years ago, which al-
lowed the biotechnology company to remain autonomous, yet provided signif-
icant upside potential for shareholders.
In the face of a recovery in the market in which a portion of the early
spring decline has been retraced, there remains a healthy degree of skep-
ticism regarding a further rally in stocks. The opinion expressed in Octo-
ber of this year by investment advisors as compiled weekly by Investors
Intelligence, a New York based service, is decidedly negative with over
70% of market letter writers defined as either outright bearish or looking
for a correction. Option speculators are also pessimistic, as evidenced by
the high ratio of put options being bought to call options. Traditionally,
when these two sentiment indicators display such pessimism, it has been
indicative of a stock market with only limited downside risk. While the
aforementioned sentiment indicators are constructive, the monetary back-
drop is far from friendly following the considerable back-up in long term
interest rates. A further decline in bond prices (prompted by a rise in
interest rates) would likely keep the stock market confined to its 1994
trading range rather than move out to new highs. In addition to cash in-
flows into equity mutual funds (down in recent months, but still high by
historic standards), an increase in stock buy-back activity and large
strategic acquisitions have acted as important incremental sources of de-
mand for stock with the latter two activities showing little sign of a
slowdown.
We believe that the year-long increase in interest rates combined with the
effects of the Clinton tax hike, may act to slow the pace of the economic
expansion before reaching overheated proportions. We think that the econo-
my's momentum is strong enough though to prevent a relapse into recession
with negative ramifications for corporate profits. In the Fund, we own
companies whose sales and earnings depend more on innovation and leader-
ship positions in emerging industries rather than on movements of the
economy. A moderation in the growth rate of the economy, therefore should
not have a deleterious effect on the earnings of most companies in the
Fund. In fact, the relative earnings momentum of companies in the Fund
compared to companies in the S&P 500 would accelerate in a slowing econ-
omy. Under such a scenario, growth stocks may receive an increased weight-
ing in an institutional equity portfolio, which would have positive impli-
cations for the Fund.
In mid-November of this year, the way Smith Barney mutual funds are listed
in the newspaper will change to reflect our consolidated mutual fund fam-
ily. Before the consolidation, the various Classes of Smith Barney and
Smith Barney Shearson mutual funds were listed in the press under separate
headings. Now, all funds will appear under the heading "Smith Barney."
Your Smith Barney Financial Consultant will be able to help you locate
funds in your newspaper.
The past twelve months were a difficult investment environment, but we be-
lieve we have been successful in meeting our stated investment goals. Dur-
ing the next six months we will endeavor to do the same and look forward
to reporting to you in the Fund's Semi-Annual Report.
Sincerely,
Heath B. McLendon Richard A. Freeman
Heath B. McLendon Richard A. Freeman
Chairman of the Board Vice President and
and Investment Officer Investment Officer
October 17, 1994
HISTORICAL PERFORMANCE -- CLASS A SHARES (UNAUDITED)
<TABLE>
<CAPTION>
Net Asset Value
Year Ended Capital Gains Dividends
Total
August 31 Beginning Ending Paid Paid
Return*
<S> <C> <C> <C> <C>
<C>
1985 $10.62 $11.45 $0.05 $0.08
9.22%
1986 $11.45 $16.43 -- --
43.49%
1987 $16.43 $21.63 $0.84 --
39.36%
1988 $21.63 $13.68 $2.47 --
(24.40)%
1989 $13.68 $19.25 $0.43 --
44.97%
1990 $19.25 $16.16 $2.03 $0.02
(6.38)%
1991 $16.16 $20.12 $0.94 --
31.97%
1992 $20.12 $18.94 $0.76 --
(2.42)%
1993 $18.94 $23.59 -- --
24.55%
1994 $23.59 $26.76 -- --
13.44%
Total $7.52 $0.10
Cumulative Total Return -- (10/24/83 through 8/31/94)
279.91%
<FN>
* Figures assume reinvestment of all dividends and capital gains distri-
butions at net asset value and do not assume deduction of the front-end
sales charge (maximum 5%).
</TABLE>
THE FUND'S POLICY IS TO DISTRIBUTE DIVIDENDS
AND CAPITAL GAINS, IF ANY, ANNUALLY.
AVERAGE ANNUAL TOTAL RETURN** -- CLASS A SHARES (UNAUDITED)
<TABLE>
<CAPTION>
Without Sales Charge With Sales
Charge***
<S> <C> <C>
Year Ended 8/31/94 13.44% 7.77%
Five Years Ended 8/31/94 11.24% 10.11%
Inception 10/24/83 through 8/31/94 13.09% 12.55%
<FN>
** All average annual total return figures shown reflect reinvestment
of dividends and capital gains at net asset value.
*** Average annual total return figures assume the deduction of the max-
imum 5% sales charge.
</TABLE>
NOTE: On November 6, 1992, existing shares of the Fund were desig-
nated Class A shares. Class A shares are subject to a maximum 5%
front-end sales charge and a service fee of 0.25% of the value of
the average daily net assets attributable to that Class. The Fund's
annual rates of return would have been lower had service fees been
in effect prior to November 6, 1992.
GROWTH OF $10,000 INVESTED IN CLASS A SHARES OF
SMITH BARNEY AGGRESSIVE GROWTH FUND INC.+
VS. VALUE LINE COMPOSITE INDEX
October 24, 1983 -- August 31, 1994
DESCRIPTION OF MOUNTAIN CHART IN
SHEARSON COVERS (CLASS A)
A line graph depicting the total growth (including reinvestment of divi-
dends and capital gains) of a hypothetical investment of $10,000 in Ag-
gressive Growth Fund's Class A shares on October 24, 1983 through August
31, 1994 as compared with the growth of a $10,000 investment in the Value
Line Composite Index. The plot points used to draw the line graph were as
follows:
<TABLE>
<CAPTION>
GROWTH OF
$10,000
GROWTH OF $10,000 INVESTMENT
IN THE
MONTH INVESTED IN CLASS A VALUE
LINE
ENDED SHARES OF THE FUND COMPOSITE
INDEX
<S> <C> <C>
10/24/83 $10,000 --
10/83 $ 9,947 $10,000
11/83 $10,430 $10,451
12/83 $10,035 $10,225
03/84 $ 8,623 $ 9,573
06/84 $ 8,684 $ 9,018
09/84 $ 8,851 $ 9,522
12/84 $ 8,806 $ 9,108
03/85 $10,068 $ 9,927
06/85 $10,415 $10,160
09/85 $ 9,464 $ 9,632
12/85 $11,224 $10,913
03/86 $13,516 $12,308
06/86 $15,329 $12,331
09/86 $13,112 $11,067
12/86 $14,111 $11,265
03/87 $19,040 $13,348
06/87 $18,551 $13,544
09/87 $19,934 $13,995
12/87 $14,878 $ 9,995
03/88 $16,227 $11,265
06/88 $17,296 $11,728
09/88 $15,991 $11,483
12/88 $16,278 $11,343
03/89 $18,317 $11,989
06/89 $10,402 $12,680
09/89 $23,032 $13,325
12/89 $23,013 $12,281
03/90 $22,754 $11,717
06/90 $25,468 $11,658
09/90 $18,981 $ 8,777
12/90 $21,639 $ 8,991
03/91 $26,748 $11,138
06/91 $24,940 $11,048
09/91 $28,528 $11,203
12/91 $30,793 $11,539
03/92 $29,813 $11,974
06/92 $27,130 $11,337
09/92 $26,988 $11,285
12/92 $31,418 $12,216
03/93 $29,231 $12,768
06/93 $31,304 $12,653
09/93 $35,819 $13,080
12/93 $38,048 $13,486
03/94 $36,159 $13,008
06/94 $33,760 $12,612
08/94 $37,991 $13,494
</TABLE>
+ Illustration of $10,000 invested in Class A shares on October 24, 1983
assuming reinvestment of dividends and capital gains at net asset value
through August 31, 1994.
VALUE LINE COMPOSITE INDEX -- The Value Line Composite Index (Geomet-
ric), composed of approximately 1,700 stocks, is a geometric average of
the daily price percentage change in each stock covering both large and
small capitalized companies.
Index information is available at month-end only; therefore, the closest
month-end to inception date of the Class has been used.
NOTE: All figures cited here and on the following pages represent past
performance of Class A shares and do not guarantee future results.
HISTORICAL PERFORMANCE -- CLASS B SHARES (UNAUDITED)
<TABLE>
<CAPTION>
Net Asset Value
Year Ended Capital Gains Dividends
Total
August 31 Beginning Ending Paid Paid
Return*
<S> <C> <C> <C> <C>
<C>
11/6/92-8/31/93 $20.52 $23.46 -- --
14.33%
1994 $23.46 $26.42 -- --
12.62%
Total $0.00 $0.00
Cumulative Total Return -- (11/6/92 through 8/31/94)
28.75%
<FN>
* Figures assume reinvestment of all dividends and capital gains distri-
butions at net asset value and do not assume deduction of the contin-
gent deferred sales charge ("CDSC").
</TABLE>
AVERAGE ANNUAL TOTAL RETURN** -- CLASS B SHARES (UNAUDITED)
<TABLE>
<CAPTION>
Without CDSC With
CDSC***
<S> <C> <C>
Year Ended 8/31/94 12.62%
7.62%
Inception 11/6/92 through 8/31/94 14.92%
12.94%
<FN>
** All average annual total return figures shown reflect reinvestment
of dividends and capital gains at net asset value.
*** Average annual total return figures assume the deduction of the max-
imum applicable CDSC which is described in the prospectus.
</TABLE>
NOTE: On November 6, 1992, the Fund began offering Class B shares.
Class B shares are subject to a 5% CDSC and service and distribution
fees of 0.25% and 0.75%, respectively, of the value of the average
daily net assets attributable to that Class.
GROWTH OF $10,000 INVESTED IN CLASS B SHARES OF
SMITH BARNEY AGGRESSIVE GROWTH FUND INC.+
VS. VALUE LINE COMPOSITE INDEX
November 6, 1992 -- August 31, 1994
DESCRIPTION OF MOUNTAIN CHART IN
SHEARSON COVERS (CLASS B)
A line graph depicting the total growth (including reinvestment of divi-
dends and capital gains) of a hypothetical investment of $10,000 in Ag-
gressive Growth Fund's Class B shares on November 6, 1992 through August
31, 1994 as compared with the growth of a $10,000 investment in the Value
Line Composite Index. The plot points used to draw the line graph were as
follows:
<TABLE>
<CAPTION>
GROWTH OF
$10,000
GROWTH OF $10,000 INVESTMENT
IN THE
MONTH INVESTED IN CLASS B VALUE
LINE
ENDED SHARES OF THE FUND COMPOSITE
INDEX
<S> <C> <C>
11/6/92 $10,000 --
11/92 $10,712 $10,410
12/92 $10,780 $10,664
3/93 $10,010 $11,146
6/93 $10,697 $11,045
9/93 $12,222 $11,418
12/93 $12,958 $11,773
3/94 $12,290 $11,355
6/94 $11,452 $11,009
8/94 $12,875 $11,779
</TABLE>
+ Illustration of $10,000 invested in Class B shares on November 6, 1992
assuming deduction of the maximum CDSC at the time of redemption and
reinvestment of dividends and capital gains at net asset value through
August 31, 1994.
++ Value does not assume deduction of applicable CDSC.
+++ Value assumes deduction of applicable CDSC (assuming redemption on Au-
gust 31, 1994).
VALUE LINE COMPOSITE INDEX -- The Value Line Composite Index (Geomet-
ric), composed of approximately 1,700 stocks, is a geometric average
of the daily price percentage change in each stock covering both large
and small capitalized companies.
Index information is available at month-end only; therefore, the clos-
est month-end to inception date of the Class has been used.
NOTE: All figures cited here and on the following pages represent
past performance of Class B shares and do not guarantee future re-
sults.
HISTORICAL PERFORMANCE -- CLASS C SHARES (UNAUDITED)
<TABLE>
<CAPTION>
Net Asset Value
Year Ended Capital Gains Dividends
Total
August 31 Beginning Ending Paid Paid
Return*
<S> <C> <C> <C> <C>
<C>
11/6/92-8/31/93 $20.52 $23.67 -- --
15.35%
1994 $23.67 $26.94 -- --
13.81%
Total $0.00 $0.00
Cumulative Total Return -- (11/6/92 through 8/31/94)
31.29%
<FN>
* Figures assume reinvestment of all dividends and capital gains distri-
butions at net asset value.
</TABLE>
AVERAGE ANNUAL TOTAL RETURN** -- CLASS C SHARES (UNAUDITED)
<TABLE>
<CAPTION>
Actual
<S> <C>
Year Ended 8/31/94
13.81%
Inception 11/6/92 through 8/31/94
16.17%
</TABLE>
** All average annual total return figures shown reflect reinvestment
of dividends and capital gains at net asset value.
NOTE: On November 6, 1992, the Fund began offering Class C shares.
Class C shares are not subject to a sales charge or a service fee
and are available only to tax-exempt employees and retirement plans
and certain UITs of Smith Barney and its affiliates.
GROWTH OF $10,000 INVESTED IN CLASS C SHARES OF
SMITH BARNEY AGGRESSIVE GROWTH FUND INC.+
VS. VALUE LINE COMPOSITE INDEX
November 6, 1992 -- August 31, 1994
DESCRIPTION OF MOUNTAIN CHART IN
SHEARSON COVERS (CLASS C)
A line graph depicting the total growth (including reinvestment of divi-
dends and capital gains) of a hypothetical investment of $10,000 in Ag-
gressive Growth Fund's Class C shares on November 6, 1992 through August
31, 1994 as compared with the growth of a $10,000 investment in the Value
Line Composite Index. The plot points used to draw the line graph were as
follows:
<TABLE>
<CAPTION>
GROWTH OF
$10,000
GROWTH OF $10,000 INVESTMENT
IN THE
MONTH INVESTED IN CLASS C VALUE
LINE
ENDED SHARES OF THE FUND COMPOSITE
INDEX
<S> <C> <C>
11/6/92 $10,000 --
11/92 $10,712 $10,410
12/92 $10,789 $10,664
3/93 $10,044 $11,146
6/93 $10,760 $11,045
9/93 $12,329 $11,418
12/93 $13,109 $11,773
3/94 $12,471 $11,355
6/94 $11,657 $11,009
8/94 $13,129 $11,779
</TABLE>
+ Illustration of $10,000 invested in Class C shares on November 6, 1992
assuming reinvestment of dividends and capital gains at net asset value
through August 31, 1994.
VALUE LINE COMPOSITE INDEX -- The Value Line Composite Index (Geomet-
ric), composed of approximately 1,700 stocks, is a geometric average of
the daily price percentage change in each stock covering both large and
small capitalized companies.
Index information is available at month-end only; therefore, the clos-
est month-end to inception date of the Class has been used.
NOTE: All figures cited here and on the following pages represent past
performance of Class C shares and do not guarantee future results.
HISTORICAL PERFORMANCE -- CLASS D SHARES (UNAUDITED)
<TABLE>
<CAPTION>
Net Asset Value
Year Ended Capital Gains Dividends
Total
August 31 Beginning Ending Paid Paid
Return*
<S> <C> <C> <C> <C>
<C>
5/13/93-8/31/93 $21.14 $23.47 -- --
11.02%
1994 $23.47 $26.42 -- --
12.57%
Total $0.00 $0.00
Cumulative Total Return -- (5/13/93 through 8/31/94)
24.98%
<FN>
* Figures assume reinvestment of all dividends and capital gains distri-
butions at net asset value.
</TABLE>
AVERAGE ANNUAL TOTAL RETURN** -- CLASS D SHARES (UNAUDITED)
<TABLE>
<CAPTION>
Actual
<S> <C>
Year Ended 8/31/94
12.57%
Inception 5/13/93 through 8/31/94
18.69%
</TABLE>
** All average annual total return figures shown reflect reinvestment
of dividends and capital gains at net asset value.
NOTE: The Fund began offering Class D shares on May 13, 1993. Class
D shares are subject to service and distribution fees of 0.25% and
0.75%, respectively, of the value of the average daily net assets
attributable to that Class.
GROWTH OF $10,000 INVESTED IN CLASS D SHARES OF
SMITH BARNEY AGGRESSIVE GROWTH FUND INC.+
VS. VALUE LINE COMPOSITE INDEX
May 13, 1993 -- August 31, 1994
DESCRIPTION OF MOUNTAIN CHART IN
SHEARSON COVERS (CLASS D)
A line graph depicting the total growth (including reinvestment of divi-
dends and capital gains) of a hypothetical investment of $10,000 in Ag-
gressive Growth Fund's Class D shares on May 13, 1993, through August 31,
1994 as compared with the growth of a $10,000 investment in the Value Line
Composite Index. The plot points used to draw the line graph were as fol-
lows:
<TABLE>
<CAPTION>
GROWTH OF
$10,000
GROWTH OF $10,000 INVESTMENT
IN THE
MONTH INVESTED IN CLASS C VALUE
LINE
ENDED SHARES OF THE FUND COMPOSITE
INDEX
<S> <C> <C>
5/12/93 $10,000 $10,000
5/93 $10,350 $10,390
6/93 $10,383 $10,237
9/93 $11,864 $10,583
12/93 $12,578 $10,912
3/94 $11,930 $10,525
6/94 $11,116 $10,204
8/94 $12,498 $10,918
</TABLE>
+ Illustration of $10,000 invested in Class D shares on May 13, 1993 as-
suming reinvestment of dividends and capital gains at net asset value
through August 31, 1994.
VALUE LINE COMPOSITE INDEX -- The Value Line Composite Index (Geomet-
ric), composed of approximately 1,700 stocks, is a geometric average of
the daily price percentage change in each stock covering both large and
small capitalized companies.
Index information is available at month-end only; therefore, the clos-
est month-end to inception date of the Class has been used.
NOTE: All figures cited here and on the following pages represent past
performance of Class D shares and do not guarantee future results.
PORTFOLIO HIGHLIGHTS (UNAUDITED) AUGUST 31, 1994
NDUSTRY BREAKDOWN
DESCRIPTION OF PIE CHARTS IN SHAREHOLDER REPORT
Pie chart depicting the allocation of the Aggressive Growth Fund's invest-
ment securities held at August 31, 1994 by industry classification. The
pie is broken in pieces representing industries in the following percent-
ages:
<TABLE>
<CAPTION>
INDUSTRY
PERCENTAGE
<S>
<C>
WIRELESS COMMUNICATIONS
8.6%
BROADCASTING CABLE
11.5%
BIOTECHNOLOGY
17.5%
CONVERTIBLE PREFERRED STOCK
4.2%
COMMERCIAL PAPER, AND NET OTHER ASSETS AND LIABILITIES
3.2%
OTHER COMMON STOCKS AND UNITS
6.0%
COMPUTER SOFTWARE
6.8%
COMPUTER HARDWARE
4.4%
PHARMACEUTICALS
7.4%
DIVERSIFIED TECHNOLOGY
8.2%
MANAGED HEALTH CARE PROVIDERS
13.8%
SEMICONDUCTOR
8.4%
</TABLE>
TOP TEN HOLDINGS
<TABLE>
<CAPTION>
Percentage of
Company Net
Assets
<S> <C>
GENENTECH, INC. 6.4%
CHIRON CORPORATION 6.4
INTEL CORPORATION 5.9
UNITED HEALTHCARE INC. 5.5
FOREST LABS, INC. CLASS A 5.5
INFINITY BROADCASTING CORPORATION CLASS A 5.1
VALUE HEALTH, INC. 4.8
LOTUS DEVELOPMENT CORPORATION 4.0
WELLMAN INC. 4.0
TYCO LABORATORIES INC. 3.6
</TABLE>
PORTFOLIO OF INVESTMENTS AUGUST 31, 1994
<TABLE>
<CAPTION>
MARKET
VALUE
SHARES (NOTE
1)
<S> <C> <C>
COMMON STOCKS -- 92.6%
BIOTECHNOLOGY -- 17.5%
115,000 Alkermes, Inc.+ $
431,250
235,000 Chiron Corporation+
16,391,250
180,000 Cor Therapeutics, Inc.+
2,655,000
320,000 Genentech, Inc.+
16,440,000
200,000 Genzyme Corporation+
6,800,000
185,500 Glycomed, Inc.+
579,688
260,000 Univax Biologics, Inc. +
1,495,000
44,792,188
MANAGED HEALTHCARE PROVIDERS -- 13.8%
270,000 United Healthcare Corporation
14,107,500
205,000 U.S. Healthcare, Inc.
8,866,250
250,000 Value Health, Inc.+
12,312,500
35,286,250
BROADCASTING/CABLE -- 11.5%
100,000 Cablevision Systems Development Corpo-
ration, Class A+
5,750,000
100,000 Comcast Corporation, Class A
1,600,000
293,750 Comcast Corporation, Class A, Special
4,700,000
410,000 Infinity Broadcasting Corporation,
Class A+
12,915,000
200,000 Tele-Communications, Inc., Class A+
4,512,500
29,477,500
WIRELESS COMMUNICATIONS -- 8.6%
270,000 Arch Communications Group, Inc.+
5,062,500
335,000 California Microwave, Inc.+
7,956,250
250,000 Telular Corporation+
2,265,625
50,000 LIN Broadcasting Corporation+
6,700,000
21,984,375
SEMICONDUCTOR -- 8.4%
150,000 Cirrus Logic, Inc.+
4,143,750
400,000 GenRad, Inc.+
2,100,000
230,000 Intel Corporation
15,122,500
21,366,250
DIVERSIFIED TECHNOLOGY -- 8.2%
215,000 C-COR Electronics, Inc.+ $
7,310,000
151,000 Drexler Technology Corporation +
698,375
376,000 Excel Technology, Inc.+
2,256,000
80,000 Indigo N.V.
1,410,000
210,000 Tyco Laboratories, Inc.
9,240,000
20,914,375
PHARMACEUTICALS -- 7.4%
300,000 Forest Laboratories, Inc., Class A+
14,100,000
250,000 Gensia Pharmaceuticals, Inc.+
2,812,500
240,000 IDEC Pharmaceuticals Corporation+
660,000
100,000 Vertex Pharmaceuticals, Inc.+
1,437,500
19,010,000
COMPUTER SOFTWARE -- 6.8%
250,000 Lotus Development Corporation+
10,218,750
170,000 Oracle Systems Corporation+
7,256,875
17,475,625
COMPUTER HARDWARE -- 4.4%
246,000 NetFRAME Systems, Inc.+
2,337,000
556,143 Quantum Corporation+
8,689,734
11,026,734
ENVIRONMENTAL -- 4.0%
320,000 Wellman, Inc.
10,160,000
DRUG DELIVERY/TESTING -- 2.0%
499,500 Advanced Polymer Systems, Inc.+
2,997,000
170,000 Cygnus Therapeutic Systems+
1,338,750
70,000 Cytotherapeutics, Inc.+
568,750
400,000 TSI Corporation +
237,520
5,142,020
TOTAL COMMON STOCKS (Cost $130,287,805)
236,635,317
CONVERTIBLE PREFERRED STOCK -- 4.2% (Cost $2,721,625)
200,000 Cellular Communications, Inc.+
10,650,000
<CAPTION>
FACE
VALUE
<S> <C> <C> <C>
COMMERCIAL PAPER -- 1.3% (Cost $3,424,000)
$3,424,000 General Electric, 4.750% due 9/1/94 $
3,424,000
TOTAL INVESTMENTS (Cost $136,433,430*) 98.1%
250,709,317
OTHER ASSETS AND LIABILITIES (NET) 1.9
4,783,276
NET ASSETS 100.0%
$255,492,593
<FN>
* Aggregate cost for Federal tax purposes.
+ Non-income producing security.
</TABLE>
See Notes to Financial Statements.
STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1994
<TABLE>
<S> <C> <C>
ASSETS:
Investments, at value (Cost $136,433,430) (Note 1)
See accompanying schedule
$250,709,317
Cash
145
Receivable for investment securities sold
2,772,411
Receivable for Fund shares sold
2,692,247
Dividends and interest receivable
35,782
Due from Advisor
56,890
TOTAL ASSETS
256,266,792
LIABILITIES:
Payable for Fund shares redeemed $411,473
Investment advisory fee payable (Note 2) 122,811
Service fee payable (Note 3) 46,488
Payable for investment securities purchased 43,750
Administration fee payable (Note 2) 40,937
Distribution fee payable (Note 3) 30,372
Transfer agent fees payable (Note 2) 27,521
Custodian fees payable (Note 2) 10,400
Accrued expenses and other payables 40,447
TOTAL LIABILITIES
774,199
NET ASSETS
$255,492,593
NET ASSETS CONSIST OF:
Accumulated net investment loss $
(3,162,240)
Accumulated net realized gain on investments sold
13,523,887
Unrealized appreciation of investments
114,275,887
Par value
95,659
Paid-in capital in excess of par value
130,759,400
TOTAL NET ASSETS
$255,492,593
</TABLE>
See Notes to Financial Statements.
STATEMENT OF ASSETS AND LIABILITIES (continued) AUGUST 31, 1994
<TABLE>
<S>
<C>
NET ASSET VALUE:
CLASS A SHARES:
Net Asset Value and redemption price per share
($180,917,275 / 6,761,035 shares of common stock outstanding)
$26.76
Maximum offering price per share ($26.76 / 0.95) (based on
sales charge of 5% of the offering price on August 31, 1994)
$28.17
CLASS B SHARES:
Net Asset Value and offering price per share+
($49,740,559 / 1,882,602 shares of common stock outstanding)
$26.42
CLASS C SHARES:
Net Asset Value, offering and redemption price per share
($24,467,433 / 908,359 shares of common stock outstanding)
$26.94
CLASS D SHARES:
Net Asset Value offering and redemption price per share
($367,326 / 13,901 shares of common stock outstanding)
$26.42
<FN>
+ Redemption price per share is equal to Net Asset Value less any applica-
ble contingent deferred sales charge.
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 1994
<TABLE>
<S> <C>
<C>
INVESTMENT INCOME:
Dividends
$ 351,630
Interest
125,957
TOTAL INVESTMENT INCOME
477,587
EXPENSES:
Investment advisory fee (Note 2) $1,494,432
Service fee (Note 3) 516,749
Administration fee (Note 2) 498,144
Transfer agent fees (Notes 2 and 4) 339,893
Distribution fee (Note 3) 242,673
Legal and audit fees 110,849
Custodian fees (Note 2) 49,747
Directors' fees and expenses (Note 2) 45,370
Interest expense (Note 7) 25,591
Other 316,379
TOTAL EXPENSES
3,639,827
NET INVESTMENT LOSS
(3,162,240)
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
(NOTES 1 AND 4):
Net realized gain on investments sold during the year
14,492,212
Net unrealized appreciation of investments during the year
26,593,555
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
41,085,767
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
$37,923,527
</TABLE>
See Notes to Financial Statements.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR
YEAR
ENDED
ENDED
8/31/94
8/31/93
<S> <C>
<C>
Net investment loss $ (3,162,240)
$ (2,038,685)
Net realized gain on investments sold during the year 14,492,212
1,895,930
Net unrealized appreciation on investments during the year 26,593,555
44,190,147
Net increase in net assets resulting from operations 37,923,527
44,047,392
Net increase/(decrease) in net assets from Fund share
transactions (Note 6):
Class A 1,315,120
(68,499,166)
Class B 28,399,638
16,824,989
Class C (34,713,767)
48,377,699
Class D 335,105
22,852
Net increase in net assets 33,259,623
40,773,766
NET ASSETS:
Beginning of year 222,232,970
181,459,204
End of year (including accumulated net investment loss of
$3,162,240 at August 31, 1994) $255,492,593
$222,232,970
</TABLE>
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
YEAR
YEAR YEAR
ENDED
ENDED ENDED
8/31/94
8/31/93+ 8/31/92*+
<S> <C> <C>
<C>
Net Asset Value, beginning of year $ 23.59 $
18.94 $ 20.12
Income from investment operations:
Net investment income/(loss) (0.32)
(0.21) (0.07)
Net realized and unrealized gain/(loss) on
investments 3.49
4.86 (0.35)
Total from investment operations 3.17
4.65 (0.42)
Less distributions:
Distributions from net investment income --
- -- --
Distributions from net realized gains --
- -- (0.76)
Total distributions --
- -- (0.76)
Net Asset Value, end of year $ 26.76 $
23.59 $ 18.94
Total return++ 13.44%
24.55% (2.42)%
Ratios/supplemental data:
Net assets, end of year (in 000's) $180,917
$150,471 $181,459
Ratio of operating expenses to average net
assets 1.42%+++
1.34% 1.05%
Ratio of net investment income/(loss) to av-
erage net assets (1.23)%
(1.01)% (0.31)%
Portfolio turnover rate 11%
13% 3%
<FN>
* On November 6, 1992 the Fund commenced selling Class B and C shares.
Shares issued prior to November 6,1992 were designated as Class A
shares. On May 13, 1993 the Fund commenced selling Class D 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 period indi-
cated 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.
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR YEAR
YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
ENDED
8/31/91+ 8/31/90+ 8/31/89+ 8/31/88 8/31/87 8/31/86
8/31/85
<S> <C> <C> <C> <C> <C> <C>
$ 16.16 $ 19.25 $ 13.68 $ 21.63 $ 16.43 $ 11.45 $
10.62
(0.05) (0.02) 0.02 (0.12) (0.11) (0.09)
(0.04)
4.95 (1.02) 5.98 (5.36) 6.15 5.07
1.00
4.90 (1.04) 6.00 (5.48) 6.04 4.98
0.96
-- (0.02) -- -- -- --
(0.08)
(0.94) (2.03) (0.43) (2.47) (0.84) --
(0.05)
(0.94) (2.05) (0.43) (2.47) (0.84) --
(0.13)
$ 20.12 $ 16.16 $ 19.25 $ 13.68 $ 21.63 $ 16.43 $
11.45
31.97% (6.38)% 44.97% (24.40)% 39.36% 43.49%
9.22%
$144,587 $86,169 $94,228 $81,287 $143,572 $115,212
$100,140
1.17% 1.13% 1.25% 1.10% 1.10% 1.20%
1.20%
(0.24)% (0.11)% 0.15% (0.60)% (0.60%) (0.60%)
(0.30%)
23% 14% 8% 10% 25% 24%
33%
</TABLE>
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
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/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%
<FN>
* The Fund commenced 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 re-
sults of operations for all Classes of shares.
++ Total return represents aggregate total return for each period indi-
cated 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.
</TABLE>
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
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 $ 23.67 $
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%
<FN>
* The Fund commenced selling 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 does not accord with re-
sults of operations for all Classes of shares.
++ Total return represents aggregate total return for each period indi-
cated.
+++ The operating expense ratio excludes interest expense. The operating
expense ratio including interest expense was 1.02% for the year ended
August 31, 1994.
</TABLE>
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
FOR A CLASS D 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/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%
<FN>
* The Fund commenced selling 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 re-
sults of operations for all Classes of shares.
++ Total return represents aggregate total return for each period indi-
cated.
+++ The operating expense ratio excludes interest expense. The operating
expense ratio including interest expense was 2.09% for the year ended
August 31, 1994.
</TABLE>
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Smith Barney Aggressive Growth Fund Inc. (the "Fund"), formerly known as
Smith Barney Shearson Aggressive Growth Fund Inc., was incorporated under
the laws of the State of Maryland on May 12, 1983. The Fund is registered
as a diversified, open-end management investment company with the Securi-
ties and Exchange Commission under the Investment Company Act of 1940, as
amended (the "1940 Act"). As of November 6, 1992, the Fund offered three
classes of shares: Class A, Class B and Class C. On January 29, 1993 the
Fund offered a fourth class of shares, Class D shares, to investors eligi-
ble to participate in the Smith Barney 401(k) Program. The Fund began
selling Class D shares on May 13, 1993. Class A and Class B shares are of-
fered to the general public. Class A shares are sold with a front-end
sales charge. Class B shares may be subject to a contingent deferred sales
charge ("CDSC") upon redemption. Class B shares will convert automatically
to Class A shares approximately eight years after the date of purchase.
Class C shares are offered exclusively to tax-exempt employee benefit and
retirement plans of Smith Barney Inc. ("Smith Barney") and its affiliates
and unit investment trusts sponsored by Smith Barney. Class C and Class D
shares are offered without a front-end sales load or CDSC. All Classes of
shares have identical rights and privileges except with respect to the ef-
fect of the respective sales charges of each Class, if any, the distribu-
tion and/or service fees borne by each Class, expenses allocable exclu-
sively to each Class, voting rights on matters affecting a single Class,
the exchange privilege of each Class and the conversion feature of Class B
shares. The following is a summary of significant accounting policies con-
sistently followed by the Fund in the preparation of its financial state-
ments.
Portfolio valuation: Listed securities traded on a national securities
exchange are valued at the last reported sales price; securities traded in
the over-the-counter market and listed securities for which no sale was
reported are valued at the bid price or, in the absence of a recent bid
price, at the bid equivalent as obtained from one or more of the major
market makers in the securities. Investments in securities for which mar-
ket quotations are not available are valued at fair value as determined in
good faith by the Board of Directors. Short-term investments that mature
in 60 days or less are valued at amortized cost.
Repurchase agreements: The Fund engages in repurchase agreement transac-
tions. Under the terms of a typical repurchase agreement, the Fund takes
possession of an underlying debt obligation subject to an obligation of
the seller to repurchase, and the Fund to resell, the obligation at an
agreed- upon price and time, thereby determining the yield during the
Fund's holding period. This arrangement results in a fixed rate of return
that is not subject to market fluctuations during the Fund's holding pe-
riod. The value of the collateral is at least equal at all times to the
total amount of the repurchase obligations including interest. In the
event of counterparty default, the Fund has the right to use the collat-
eral to offset losses incurred. There is potential loss to the Fund in the
event the Fund is delayed or prevented from exercising its rights to dis-
pose of the collateral securities, including the risk of a possible de-
cline in the value of the underlying securities during the period while
the Fund seeks to assert its rights. The Fund's investment adviser, admin-
istrator or sub-administrator acting under the supervision of the Board of
Directors, reviews the value of the collateral and the creditworthiness of
those banks and dealers with which the Fund enters into repurchase agree-
ments to evaluate potential risks.
Securities transactions and investment income: Securities transactions
are recorded as of the trade date. Dividend income is recorded on the ex-
dividend date. Interest income is recorded on an accrual basis. Realized
gains and losses from securities transactions are recorded on the identi-
fied cost basis. Investment income and realized and unrealized gains and
losses are allocated based upon the relative net assets of each Class of
shares.
Dividends and distributions to shareholders: Distributions from net in-
vestment income, if any, are determined on a Class level and will be de-
clared and paid at least annually. Distributions from net realized capital
gains, if any, after utilization of capital loss carryforwards, are deter-
mined on a Fund level and will be distributed at least annually. Addi-
tional distributions may be made at the discretion of the Board of Direc-
tors in order to avoid the application of a 4% nondeductible excise tax on
certain amounts of undistributed ordinary income and capital gains. Income
distributions and capital gain distributions on a Fund level are deter-
mined in accordance with income tax regulations which may differ from gen-
erally accepted accounting principles. These differences are primarily due
to differing treatments of income and gains on various investment securi-
ties held by the Fund, timing differences and differing characterization
of distributions made by the Fund as a whole.
Federal income taxes: It is the Fund's policy to comply with the require-
ments of the Internal Revenue Code of 1986, as amended, applicable to reg-
ulated investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax pro-
vision is required.
2. INVESTMENT ADVISORY FEE, ADMINISTRATION FEE
AND OTHER TRANSACTIONS
The Fund has entered into an investment advisory agreement (the "Advisory
Agreement") with Smith Barney Asset Management, a division of Smith, Bar-
ney Advisers, Inc. ("SBA"), which is a wholly owned subsidiary of Smith
Barney Holdings Inc. ("Holdings"). Holdings is a wholly owned subsidiary
of The Travelers Inc. Under the Advisory Agreement, the Fund pays a
monthly fee at the annual rate of 0.60% of the value of its average daily
net assets.
Prior to April 21, 1994, the Fund was party to an administration agreement
(the "Administration Agreement") with The Boston Company Advisors, Inc.
("Boston Advisors"), an indirect wholly-owned subsidiary of Mellon Bank
Corporation ("Mellon"). Under the Administration Agreement, the Fund paid
a monthly fee at the annual rate of .20% of the value of its average daily
net assets.
As of the close of business on April 21, 1994, SBA succeeded Boston
Advisors as the Fund's administrator. The new administration agreement
contains substantially the same terms and conditions, including the level
of fees, as the predecessor agreement.
As of the close of business on April 21, 1994, the Fund and SBA entered
into a sub-administration agreement (the "Sub-Administration Agreement")
with Boston Advisors. Under the Sub-Administration Agreement, SBA pays
Boston Advisors a portion of its fee at a rate agreed upon from time to
time between SBA and Boston Advisors.
For the year ended August 31, 1994, the Fund incurred total brokerage com-
missions of $34,996, of which $3,800 was paid to Smith Barney.
For the year ended August 31, 1994, Smith Barney received from investors
$255,719 representing commissions (sales charges) on sales of Class A
shares.
A CDSC is generally payable by a shareholder in connection with the re-
demption of Class B shares within five years (eight years in the case of
purchases by certain 401(k) plans) after the date of purchase. In circum-
stances in which the CDSC is imposed, the amount of the charge ranges be-
tween 5% and 1% of net asset value depending on the number of years since
the date of purchase (except in the case of purchases by certain 401(k)
plans in which case a 3% CDSC is imposed for the eight year period after
the date of the purchase). For the year ended August 31, 1994, Smith Bar-
ney received $101,447 from shareholders in CDSCs on the redemption of
Class B shares.
No officer, director or employee of Smith Barney or any of its affiliates
receives any compensation from the Fund for serving as a Director or of-
ficer of the Fund. The Fund pays each Director who is not an officer, di-
rector or employee of Smith Barney or any of its affiliates $3,000 per
annum plus $500 per meeting attended and reimburses each such Director for
travel and out-of-pocket expenses.
Boston Safe Deposit and Trust Company, an indirect wholly owned subsidiary
of Mellon, serves as the Fund's custodian. The Shareholder Services Group,
Inc., a subsidiary of First Data Corporation, serves as the Fund's trans-
fer agent.
3. DISTRIBUTION PLAN
Smith Barney acts as distributor of the Fund's shares pursuant to a dis-
tribution agreement with the Fund and sells shares of the Fund through
Smith Barney or its affiliates.
Pursuant to Rule 12b-1 under the 1940 Act, the Fund has adopted a services
and distribution plan (the "Plan"). Under this Plan, the Fund compensates
Smith Barney for servicing shareholder accounts for Class A, Class B and
Class D shareholders, and covers expenses incurred in distributing Class B
and Class D shares. Smith Barney is paid an annual service fee with re-
spect to Class A, Class B and Class D shares of the Fund at the rate of
0.25% of the value of the average daily net assets of each respective
Class of shares. Smith Barney is also paid an annual distribution fee with
respect to Class B and Class D shares at the rate of 0.75% of the value of
the average daily net assets of each respective Class of shares. For the
year ended August 31, 1994, the Fund incurred a service fee of $435,857,
$80,526 and $366 for Class A, Class B and Class D shares, respectively.
For the year ended August 31, 1994, the Fund incurred distribution fees of
$241,578 and $1,095 for Class B and Class D shares.
4. EXPENSE ALLOCATION
Expenses of the Fund not directly attributable to the operation of any
Class of shares are prorated among the Classes based upon the relative net
assets of each Class. Operating expenses directly attributable to a Class
of shares are charged to that Class' operations. In addition to the above
service and distribution fees, Class specific operating expense include
transfer agent fees. For the year ended August 31, 1994, transfer agent
fees for Class A, Class B, Class C and Class D shares were $270,751,
$68,908, $131 and $103, respectively.
5. SECURITIES TRANSACTIONS
Costs of purchases and proceeds from sales of securities, excluding short-
term investments and long-term U.S. government securities, for the year
ended August 31, 1994, were $27,820,759 and $52,103,016, respectively.
At August 31, 1994, aggregate gross unrealized appreciation for all secu-
rities in which there was an excess of value over tax cost was
$130,825,100, and aggregate gross unrealized depreciation for all securi-
ties in which there was an excess of tax cost over value was $16,549,213.
6. COMMON STOCK
At August 31, 1994, the Fund had authorized 100 million shares of $.01 par
value common stock divided into four Classes: Class A, Class B, Class C,
and Class D.
Changes in common stock outstanding were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR
ENDED
8/31/94
8/31/93
CLASS A SHARES: Shares Amount Shares
Amount
<S> <C> <C> <C>
<C>
Sold 3,336,796 $ 75,925,637 3,043,908 $
63,507,753
Issued in exchange for
shares of Smith Barney
Shearson 1990's Fund (Note
8) 997,919 26,604,524 --
- --
Redeemed (3,951,101) (101,215,041) (6,245,040)
(132,006,919)
Net increase/(decrease) 383,614 $ 1,315,120 (3,201,132) $
(68,499,166)
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED PERIOD
ENDED
8/31/94 8/31/93*
CLASS B SHARES: Shares Amount Shares
Amount
<S> <C> <C> <C> <C>
Sold 3,421,611 $ 87,244,483 1,450,574 $
31,569,205
Issued in exchange for
shares of Smith Barney
Shearson 1990's Fund (Note
8) 18,212 482,442 --
- --
Redeemed (2,330,261) (59,327,287) (677,534)
(14,744,216)
Net increase 1,109,562 $ 28,399,638 773,040 $
16,824,989
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED PERIOD
ENDED
8/31/94 8/31/93*
CLASS C SHARES: Shares Amount Shares
Amount
<S> <C> <C> <C> <C>
Sold 281,446 $ 7,536,528 2,588,331
$55,409,780
Redeemed (1,637,144) (42,250,295) (324,274)
(7,032,081)
Net increase/(decrease) (1,355,698) $(34,713,767) 2,264,057
$48,377,699
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED PERIOD
ENDED
8/31/94 8/31/93*
CLASS D SHARES: Shares Amount Shares
Amount
<S> <C> <C> <C>
<C>
Sold 13,833 $358,452 1,042 $
22,852
Redeemed (974) (23,347) --
- --
Net increase 12,859 $335,105 1,042 $
22,852
<FN>
* The Fund commenced selling Class B and Class C shares on November 6,
1992. Any shares outstanding prior to November 6, 1992 were designated
Class A shares. The Fund commenced selling Class D shares on May 13,
1993.
</TABLE>
7. LINE OF CREDIT
The Fund and several affiliated entities participate in a $50 million line
of credit provided by Continental Bank N.A. under an Amended and Restated
Line of Credit Agreement (the "Agreement") dated April 30, 1992 and re-
newed effective May 31, 1994, primarily for temporary or emergency pur-
poses, including the meeting of redemption requests that otherwise might
require the untimely disposition of securities. Under this Agreement, the
Fund may borrow up to the lesser of $25 million or 20% of its net assets.
Interest is payable either at the bank's Money Market Rate or the London
Interbank Offered Rate (LIBOR) plus .375% on an annualized basis. Under
the terms of the Agreement, as amended, the Fund and the other affiliated
entities are charged an aggregate commitment fee of $100,000 which is al-
located equally among each of the participants. The Agreement requires,
among other provisions, each participating fund to maintain a ratio of net
assets (not including funds borrowed pursuant to the Agreement) to aggre-
gate amount of indebtedness pursuant to the Agreement of no less than 5 to
1. During the year ended August 31, 1994, the Fund had an average out-
standing daily balance of $456,712 with interest rates ranging from
3.3125% to 4.8750%. Interest expense for the year ended August 31, 1994,
totalled $25,591. At August 31, 1994, the Fund had no outstanding borrow-
ings under this Agreement.
8. REORGANIZATION
On October 15, 1993, the Fund (the "Acquiring Fund") acquired the
assets and certain liabilities of Smith Barney Shearson 1990's Fund (the
"Acquired Fund"), in a tax-free exchange for shares of the Acquiring Fund,
pursuant to a plan of reorganization approved by the Acquired Fund's
shareholders on October 12, 1993. Total shares issued by the Acquiring
Fund, the total net assets of the Acquired Fund and the Acquiring Fund are
as follows:
<TABLE>
<CAPTION>
SHARES TOTAL NET
TOTAL NET
ISSUED BY ASSETS OF
ASSETS OF
ACQUIRING ACQUIRED ACQUIRING ACQUIRED
ACQUIRING
FUND FUND FUND FUND*
FUND
<S> <C> <C> <C>
<C>
The Fund Smith Barney Shearson 1990s Fund 1,016,131 $27,086,966
$247,422,920
</TABLE>
The total net assets of the Acquired Fund before acquisition included un-
realized appreciation of $9,088,361. The total net assets of the Acquiring
Fund immediately after the acquisition were $274,509,886.
9. LENDING OF PORTFOLIO SECURITIES
The Fund has the ability to lend its securities to brokers, dealers and
other financial organizations. Loans of securities by the Fund are collat-
eralized by cash, letters of credit or U.S. government securities that are
maintained at all times in an amount at least equal to the current market
value of the loaned securities. At August 31, 1994, the Fund had no secu-
rities on loan.
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF
SMITH BARNEY AGGRESSIVE GROWTH FUND INC.:
We have audited the accompanying statement of assets and liabilities of
Smith Barney Aggressive Growth Fund Inc., formerly known as Smith Barney
Shearson Aggressive Growth Fund Inc., including the schedule of portfolio
investments, as of August 31, 1994, and the related statement of opera-
tions for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended, and the financial high-
lights for each of the ten years in the period then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and fi-
nancial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclo-
sures in the financial statements. Our procedures included confirmation of
securities owned as of August 31, 1994 by correspondance with the custo-
dian and brokers. An audit also includes assessing the accounting princi-
ples used and significant estimates made by management, as well as evalu-
ating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Smith Barney Aggressive Growth Fund Inc., formerly known as Smith Bar-
ney Shearson Aggressive Growth Fund Inc., as of August 31, 1994, the re-
sults of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the finan-
cial highlights for each of the ten years in the period then ended in con-
formity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
October 7, 1994
TAX INFORMATION (unaudited)
FISCAL YEAR ENDED AUGUST 31, 1994
The following information represents fiscal year end disclosures of vari-
ous tax benefits passed through to shareholders at calendar year end.
Of the distributions made by the Fund, 100% represents the amount of each
distribution which will qualify for the dividends received deduction
available to corporate shareholders.
The above figures may differ from those cited elsewhere in this report due
to differences in the calculations of income and capital gains for Securi-
ties and Exchange Commission (book) purposes and Internal Revenue Service
(tax) purposes.
PARTICIPANTS
DISTRIBUTOR
Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
INVESTMENT ADVISER
Smith Barney Asset Management
388 Greenwich Street
New York, New York 10013
ADMINISTRATOR
Smith, Barney Advisers, Inc.
388 Greenwich Street
New York, New York 10013
SUB-ADMINISTRATOR
The Boston Company Advisors, Inc.
One Boston Place
Boston, Massachusetts 02108
AUDITORS AND COUNSEL
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
Willkie Farr & Gallagher
153 East 53rd Street
New York, New York 10022
TRANSFER AGENT
The Shareholder Services
Group, Inc.
Exchange Place
Boston, Massachusetts 02109
CUSTODIAN
Boston Safe Deposit
and Trust Company
One Boston Place
Boston, Massachusetts 02108
GLOSSARY OF COMMONLY USED MUTUAL FUND TERMS
CAPITAL GAIN (OR LOSS) This is the increase (or decrease) in the market
value (price) of a security in your portfolio. If a stock or bond appreci-
ates in price, there is a capital gain; if it depreciates, there is a cap-
ital loss. A capital gain or loss is "realized" upon the sale of a
security; if net capital gains exceed net capital losses, there may be a
capital gain distribution to shareholders.
CONTINGENT DEFERRED SALES CHARGE (CDSC) One kind of back-end load, a CDSC
may be imposed if shares are redeemed during the first few years of owner-
ship. The CDSC may be expressed as a percentage of either the original
purchase price or the redemption proceeds. Most CDSCs decline over time,
and some will not be charged if shares are redeemed after a certain period
of time.
DIVIDEND This is income generated by securities in a portfolio and dis-
tributed after expenses to shareholders.
FRONT-END SALES CHARGE This is the sales charge applied to an investment
at the time of initial purchase.
NET ASSET VALUE (NAV) Net asset value is the total market of all securi-
ties held by a fund, minus any liabilities, divided by the number of
shares outstanding. It is the value of a single share of a mutual fund on
a given day. The total value of your investment would be the NAV multi-
plied by the number of shares you own.
TOTAL RETURN Total return measures a fund's performance, taking into ac-
count the combination of dividends paid and the gain or loss in the value
of the securities held in the portfolio. It may be expressed on an average
annual basis or cumulative basis (total change over a given period). In
addition, total return may be expressed with or without the effects of
sales charges or the reinvestment of dividends and capital gains.
Whenever a fund reports any type of performance, it must also report the
average annual total return according to the standardized calculation de-
veloped by the SEC. The SEC average annual total return calculation in-
cludes the effects of all fees and sales charges and assumes the reinvest-
ment of all dividends and capital gains.
AGGRESSIVE
GROWTH
FUND INC.
DIRECTORS
Paul R. Ades
Herbert Barg
Alger B. Chapman
Dwight B. Crane
Frank Hubbard
Allan R. Johnson
Heath B. McLendon
Ken Miller
John F. White
OFFICERS
Heath B. McLendon
Chairman of the Board
and Investment Officer
Stephen J. Treadway
President
Richard P. Roelofs
Executive Vice President
Richard A. Freeman
Vice President and
Investment Officer
Lewis E. Daidone
Treasurer
Christina T. Sydor
Secretary
Recycled
Recyclable
This report is submitted for
the general information of the
shareholders of Smith Barney
Aggressive Growth Fund Inc. It is
not authorized for distribution to
prospective investors unless
accompanied or preceded by an
effective Prospectus for the Fund,
which contains information
concerning the Fund's investment
policies, fees and expenses as well
as other pertinent information.
SMITH BARNEY
SMITH BARNEY
MUTUAL FUNDS
388 Greenwich Street
New York, New York 10013
Fund 9, 188, 189, 214
FD0433 J4
PART C
OTHER INFORMATION
Item
15.
Indemnification
The response to this item is incorporated by reference to
"Liability of Directors" under the caption "Comparative
Information on Shareholders' Rights" in Part A of this
Registration Statement.
Item
16.
Exhibits
All References are to 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 Post-Effective
Amendment No. 15 filed on October 28, 1993 ("Post-Effective
Amendment No. 15").
(b)
Articles of Amendment dated October 14, 1994 and November 7,
1994, respectively, and Articles Supplementary dated November 7,
1994 are incorporated by reference to Post-Effective Amendment
No. 17 filed on November 7, 1994 ("Post-Effective Amendment No.
17").
(2) (a)
Registrant's By-laws are incorporated by reference to the
Registration Statement.
(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)
Agreement and Plan of Reorganization is filed herein as Exhibit
A to Registrant's Prospectus/Proxy Statement contained in Part A
of this Registration Statement.
(5)
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").
(6)
Investment Advisory Agreement between the Registrant and Smith
Barney Shearson Asset Management Division is incorporated by
reference to Post-Effective Amendment No. 15.
(7)
Distribution Agreement between the Registrant and Smith Barney
Shearson Inc. is incorporated by reference to Post-Effective
Amendment No. 15.
(8)
Not Applicable.
(9) (a)
Administration Agreement dated April 21, 1994 between the
Registrant and Smith, Barney Advisers, Inc. ("SBA") is
incorporated by reference to Post-Effective Amendment No. 17.
(b)
Sub-Administration Agreement dated April 21, 1994 between the
Registrant, SBA and The Boston Company Advisors, Inc. is
incorporated by reference to Post-Effective Amendment No. 17.
(c)
Custodian Agreement between the Registrant and Boston Safe
Deposit and Trust Company is incorporated by reference to Pre-
Effective Amendment No. 1 ("Pre-Effective Amendment No. 1").
(d)
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.
(10)
Amended Services and Distribution Plan pursuant to Rule 12b-1
between the Registrant and Smith Barney Inc. is incorporated by
reference to Post-Effective Amendment No. 17.
(11)
Opinion and Consent of Willkie Farr & Gallagher with respect to
legality (with Opinion of Venable, Baetjer & Howard attached
thereto) will be filed by amendment.
(12)
Opinion and Consent of Willkie Farr & Gallagher with respect to
tax matters will be filed by amendment.
(13)
Not Applicable.
(14)
Consent of Independent Accountants will be filed by amendment.
(15)
Not Applicable.
(16)
Not Applicable.
(17)
Form of Proxy Card and Instruction is filed herein.
Item
17.
Undertakings
(1)
The undersigned Registrant agrees that prior to any
public reoffering of the securities registered through the
use of a prospectus which is a part of this registration
statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the
Securities Act of 1933, the reoffering prospectus will
contain the information called for by the applicable
registration form for reofferings by persons who may be
deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2)
The undersigned Registrant agrees that every prospectus
that is filed under paragraph (1) above will be filed as a
part of an amendment to the Registration Statement and
will not be used until the amendment is effective, and
that, in determining any liability under the Securities
Act of 1933, each post-effective amendment shall be deemed
to be a new registration statement for the securities
offered therein, and the offering of the securities at
that time shall be deemed to be the initial bona fide
offering of them.
EXHIBIT INDEX
Exhibit Number
Description
(4)
Agreement and Plan of Reorganization*
(17)
Proxy Card and Instructions
______________________________
* Filed herein as Exhibit A to Registrant's Prospectus/Proxy
Statement
contained in Part A of this Registration Statement.
SIGNATURES
As required by the Securities Act of 1933, as amended, this
Registration Statement on Form N-14 has been signed on behalf of the
registrant, in the City of New York and State of New York on the 10th
day of January, 1995.
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.
As required by the Securities Act of 1933, as amended, this
Registration Statement on Form
N-14 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
Chairman of the Board and
1/10/95
Heath B. McLendon
Chief Executive Officer
/s/ Lewis E. Daidone
Lewis E. Daidone
Senior Vice President and
Treasurer (Chief Financial
and Accounting Officer
1/10/95
/s/ Paul R. Ades
Paul R. Ades
Director
1/10/95
/s/ Herbert Barg
Herbert Barg
Director
1/10/95
/s/ Allan R. Johnson
Allan R. Johnson
Director
1/10/95
/s/ Ken Miller
Ken Miller
Director
1/10/95
/s/ John F. White
John F. White
Director
1/10/95
VOTE THIS VOTING INSTRUCTION CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
(Please Detach at Perforation Before Mailing)
........................................................................
........................................................................
........................................................................
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SMITH BARNEY FUNDS, INC. - CAPITAL APPRECIATION PORTFOLIO
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned holder of shares of Smith Barney Funds, Inc.- Capital
Appreciation Portfolio (the "Capital Appreciation Portfolio")
, hereby appoints Stephen J. Treadway, Lewis E. Daidone and Christina T.
Sydor, attorneys and proxies for the undersigned with full powers of
substitution and revocation, to represent the undersigned and to vote on
behalf of the undersigned all shares of the Capital Appreciation
Portfolio that the undersigned is entitled to vote at the Special
Meeting of Shareholders of the Capital Appreciation Portfolio to be held
at the offices of the Capital Appreciation Portfolio 388 Greenwich
Street, New York, New York on May 12, 1995 at 4:30pm and any adjournment
or adjournments thereof. The undersigned hereby acknowledges receipt
of the Notice of Special Meeting and Prospectus /Proxy Statement dated
February , 1995 and hereby instructs said attorneys and proxies to vote
said shares as indicated herein. In their discretion, the proxies are
authorized to vote upon such other business as may properly come before
the Special Meeting. A majority of the proxies present and acting at
the Special Meeting in person or by substitute (or, if only one shall be
so present, then that one) shall have and may exercise all of the power
and authority of said proxies hereunder. The undersigned hereby revokes
any proxy previously given.
PLEASE SIGN, DATE AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE
Note: Please sign exactly as your name appears on this
Proxy. If joint owners, EITHER may sign this Proxy. When signing as
attorney, executor, administrator, trustee, guardian or corporate
officer, please give your full title.
Date:
Signature(s) (Title(s), if applicable)
VOTE THIS VOTING INSTRUCTION CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
(Please Detach at Perforation Before Mailing)
........................................................................
........................................................................
........................................................................
......................................
Please indicate your vote by an "X" in the appropriate box below. This
proxy, if properly executed, will be voted in the manner directed by the
undersigned shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE PROPOSAL.
1. To approve the Agreement and Plan of Reorganization FOR
AGAINST ABSTAIN
dated as of [ ], 1995 providing for:(i) the acquisition of all
or substantially all of the assets of the Capital Appreciation Portfolio
by Smith Barney Aggressive Growth Fund Inc. (the "Aggressive Growth
Fund") in exchange for Class A, Class B, Class C and Class Y shares of
the Aggressive Growth Fund and the assumption by the Aggressive Growth
Fund of certain scheduled liabilities of the Capital Appreciation
Portfolio; (ii) the distribution of such shares of the Aggressive Growth
Fund to shareholders of the Capital Appreciation Portfolio in
liquidation of the Capital Appreciation Portfolio; and (iii) the
subsequent dissolution of the Capital Appreciation Portfolio.
U:\SORRENTI\SBF\PROXY95
