A N N U A L R E P O R T
1996
1996
1996 [PHOTO]
1996
1996
Smith Barney
Aggressive
Growth
Fund Inc.
---------------------------
August 31, 1996
[LOGO] SMITH BARNEY MUTUAL FUNDS
INVESTING FOR YOUR FUTURE.
EVERY DAY.
<PAGE>
SMITH BARNEY AGGRESSIVE GROWTH FUND INC.
DEAR SHAREHOLDER:
We are pleased to provide you with the annual report for the Smith Barney
Aggressive Growth Fund Inc. for the year ended August 31, 1996. In this report,
we summarize the period's prevailing economic and market conditions and outline
our portfolio strategy. A detailed summary of the Fund's performance and current
holdings can be found in the appropriate sections that follow in the annual
report.
FUND PERFORMANCE UPDATE
For the year ended August 31, 1996, the Fund had a negative total return on net
asset value of 7.44%. For the same period the Standard & Poor's 500 Index ("S&P
500") experienced a gain of 18.72%. The Value Line Composite Index (Geometric),
which we believe represents a better measure of performance for the kinds of
securities held in the Fund, experienced a gain of 5.91%.
We realize that the Fund's performance this year has been disappointing, but we
believe that it is important to remain focused on long-term investment
opportunities. As with any high-growth-oriented equity mutual fund, the Smith
Barney Aggressive Growth Fund may at times experience significant volatility
because of the nature of the companies in which the Fund invests. However, we
believe these companies have the potential to deliver above-average capital
appreciation over the long-term. Moreover, although past performance is not
indicative of future results, it is our opinion that the Smith Barney Aggressive
Growth Fund will continue to deliver competitive returns comparable to those
seen in past years. The following chart shows the Fund's historical rates of
return for Class A shares:
SMITH BARNEY AGGRESSIVE GROWTH FUND
HISTORICAL PERFORMANCE FOR CLASS A SHARES
(AS OF 8/31/96)
1-YEAR 5-YEAR 10-YEAR INCEPTION (10/24/83)
------ ------ ------- -------------------
-7.44% 10.99% 12.26% 12.67%
In our view, several factors have contributed to the Fund's performance during
the period covered by this report:
o The value of emerging growth stocks held in the Fund was adversely affected
by the 20% decline in the NASDAQ (an index of over-the-counter stocks), from
its high on June 6, 1996 to its nadir on July 16, 1996.
1
<PAGE>
o Weakness in many biotechnology stocks as investors increasingly shifted their
assets toward more cyclical companies that stood to benefit from a
strengthening U.S. economy. In fact, even though several biotech companies
the Fund owns, such as Chiron, Genzyme and Amgen reported strong earnings and
have made significant strides in developing new products, their share prices
declined over the past six months. Moreover, the decline in share prices of
Chiron and Genzyme took place despite stock splits declared by both
companies, which usually indicate management's confidence in the future.
o Rising long-term interest rates had a negative impact on the stocks of
companies in the cable, broadcasting and paging sector, that tend to be
valued by Wall Street analysts in terms of their cash flow multiples, all of
which have significant representation in the Fund.
MARKET OVERVIEW
Confounding most analyst's expectations, the U.S. economy remained quite strong
over the period covered by this report. While some of the economy's strength
probably reflected, in part, a catch up in demand following the harsh winter in
the eastern region of the U.S. and a resumption of U.S. government spending
following the budget agreement, economic growth was clearly higher than many
analysts and investors had earlier expected. Although the current annual rate of
inflation seems to be subdued based on U.S. economic statistics, strong growth
in non-farm payrolls as well as increases in hourly wages have caused
inflationary fears to rise. In addition, if economic growth remains strong, many
investors are concerned that the Federal Reserve Board ("the Fed") may have to
tighten monetary policy by raising short-term interest rates. We believe that
the rise in long term interest rates that has occurred this year already factors
in at least a 50 basis point (0.50%) increase in short term rates by the Fed. In
our view, the combination of higher long-term interest rates, historically high
consumer debt levels, and rising credit card delinquencies should lead to a
reduction in the growth rate of the U.S. economy and eventually cause long-term
interest rates to decline.
FUND'S INVESTMENT STRATEGY AND OUTLOOK
Assuming that long-term interest rates remain in the range of the past year,
emerging growth stocks should provide above-average returns over the next six
months based on their superior earnings growth rates, after their recent erratic
performance. We are confident that the Fund's holdings particularly in health
care company stocks, will ultimately prove to be rewarding. In addition, if
valuations remain low, increasing merger activity in the healthcare industry
becomes more likely. For example, U.S. Healthcare, a company which offers health
care services through HMO's, and one of the Aggressive Growth Fund's ten largest
holdings, was recently acquired by Aetna for $8.9 billion.
2
<PAGE>
We also remain positive about the Fund's broadcasting and cable stock holdings.
In June, Westinghouse announced its intention to acquire Infinity Broadcasting,
the largest independent U.S. owner and operator of radio properties (and one of
the Fund's largest holdings), through a tax free stock deal valued at $3.9
billion. The combined company will result in a formidable organization of major
market radio stations featuring 83 stations in 16 markets including Los Angeles,
New York and Chicago. We are quite optimistic about the merger of the two
companies broadcasting properties and the role that Infinity's CEO, and largest
individual shareholder, Mel Karmazin will play as the Chairman and CEO in the
combined radio entity.
In the most recent six month period we added to our existing holdings in Chiron,
Quantum Corporation, Image Industries, (which was subsequently acquired by Maxim
Corp.), United Healthcare, IDEC Pharmaceuticals, Cirrus Logic and Intel. In
addition, we initiated positions in Netscape, Energy Ventures and Micron
Technologies. We sold our long-standing position in Oracle Corporation when, in
our view, the shares had become fully priced.
In our last shareholder report, we stated our belief that if long-term interest
rates headed higher, the P/E multiples of many companies would probably
contract, making it more difficult for stocks to continue their strong
performance of the last twelve months. This did indeed happen, and speculative
excesses that had built up in the market during prior months lessened. In our
opinion, emerging growth stocks could stage a solid recovery and reach new highs
if the balance of political power in Washington D.C. remains unchanged in
November. However, if American voters elect a more liberal Senate and House of
Representatives, interest rates could conceivably increase and put pressure on
stocks.
We would like to thank you for your investment in the Smith Barney Aggressive
Growth Fund. We realize the past twelve months have been disappointing for the
Fund and we appreciate your continued confidence in our investment management
approach. However, over the next year, we fully expect the Fund to perform more
in line with its historical track record.
Sincerely,
/s/ Heath B. McLendon /s/ Richard A. Freeman
Heath B. McLendon Richard A. Freeman
Chairman and Vice President and
Chief Executive Officer Investment Officer
OCTOBER 11, 1996
3
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER RICHARD FREEMAN DISCUSSES THE FUND'S TOP-FIVE HOLDINGS
INTEL CORPORATION is the world's largest manufacturer of current and next
generation semiconductor chips used primarily in personal computers. With more
than $20 billion in revenues, $5 billion in cash, a majority market share and
strong earnings growth, we see Intel as a premier way to participate in the
domestic and global technology explosion currently underway. In our opinion,
increasingly complex software, video conferencing and the rising use of the
Internet should be strong future drivers of personal computer demand.
TYCO INTERNATIONAL LTD. is a global leader in fire protection equipment, flow
control products and disposable medical supplies. In addition to having strong
management, the company augments its growth by making acquisitions that help
drive earnings. Another positive for Tyco is the fact that a large amount of
management compensation is tied to the performance of its business units and
future earnings growth.
AMGEN INC. is the world's largest and most profitable biotechnology company. The
company has annual sales of more than $2 billion and net income margins of more
than 30%. Neupogen and Epogen, white and red blood cell simulators respectively,
comprise 85% of the company's revenue. By the end of 1996, Amgen expects to have
up to twelve products in human clinical trials worldwide. In addition, Amgen has
formed strategic alliances with leading universities and other biotechnology
firms to complement as well as advance its current internal research efforts.
CHIRON CORPORATION is a diversified biotechnology company which is involved in
four major businesses: diagnostics, vaccines, therapeutics and vision care
products. Through a 1995 partial tender offer, Ciba Geigy, the Swiss-based drug
concern, now owns nearly 50% of Chiron. The company is targeting a 50% compound
annual earnings per share growth rate over the next few years and we believe
their deep product pipeline should ultimately bear fruit.
UNITED HEALTHCARE CORPORATION is the largest publicly traded health maintenance
organization in the U.S. With strong enrollment growth, $3 billion in cash and a
relatively untapped commercial market, United Healthcare remains the undisputed
leader in the industry. In our view, health maintenance organizations stand to
benefit from the proposed privatization of Medicare and Medicaid, which is a
priority of the two leading political parties. In addition, we favor United
Healthcare because management, which pioneered the HMO concept, is heavily
incentivized with stock pegged to earnings-per-share growth.
- --------------------------------------------------------------------------------
4
<PAGE>
d
================================================================================
HISTORICAL PERFORMANCE -- CLASS A SHARES
================================================================================
Net Asset Value
-----------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
================================================================================
8/31/96 $33.53 $28.76 $0.00 $ 2.37 (7.44)%
- --------------------------------------------------------------------------------
8/31/95 26.76 33.53 0.00 1.37 31.95
- --------------------------------------------------------------------------------
8/31/94 23.59 26.76 0.00 0.00 13.44
- --------------------------------------------------------------------------------
8/31/93 18.94 23.59 0.00 0.00 24.55
- --------------------------------------------------------------------------------
8/31/92 20.12 18.94 0.00 0.76 (2.42)
- --------------------------------------------------------------------------------
8/31/91 16.16 20.12 0.00 0.94 31.97
- --------------------------------------------------------------------------------
8/31/90 19.25 16.16 0.02 2.03 (6.38)
- --------------------------------------------------------------------------------
8/31/89 13.68 19.25 0.00 0.43 44.97
- --------------------------------------------------------------------------------
8/31/88 21.63 13.68 0.00 2.47 (24.40)
- --------------------------------------------------------------------------------
8/31/87 16.43 21.63 0.00 0.84 39.36
================================================================================
Total $0.02 $11.21
================================================================================
================================================================================
HISTORICAL PERFORMANCE -- CLASS B SHARES
================================================================================
Net Asset Value
-----------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
================================================================================
8/31/96 $32.82 $27.88 $0.00 $2.37 (8.16)%
- --------------------------------------------------------------------------------
8/31/95 26.42 32.82 0.00 1.37 30.93
- --------------------------------------------------------------------------------
8/31/94 23.46 26.42 0.00 0.00 12.62
- --------------------------------------------------------------------------------
Inception*-8/31/93 20.52 23.46 0.00 0.00 14.33+
================================================================================
Total $0.00 $3.74
================================================================================
================================================================================
HISTORICAL PERFORMANCE -- CLASS C SHARES
================================================================================
Net Asset Value
-----------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
================================================================================
8/31/96 $32.84 $27.91 $0.00 $2.37 (8.12)%
- --------------------------------------------------------------------------------
8/31/95 26.42 32.84 0.00 1.37 31.01
- --------------------------------------------------------------------------------
8/31/94 23.47 26.42 0.00 0.00 12.57
- --------------------------------------------------------------------------------
Inception*-8/31/93 21.14 23.47 0.00 0.00 11.02+
================================================================================
Total $0.00 $3.74
================================================================================
5
<PAGE>
================================================================================
HISTORICAL PERFORMANCE -- CLASS Y SHARES
================================================================================
Net Asset Value
-----------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
================================================================================
Inception*-8/31/96 $31.86 $28.84 $0.00 $2.37 (2.32)%+
================================================================================
================================================================================
HISTORICAL PERFORMANCE -- CLASS Z SHARES
================================================================================
Net Asset Value
-----------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
================================================================================
8/31/96 $33.88 $29.20 $0.00 $2.37 (7.07)%
- --------------------------------------------------------------------------------
8/31/95 26.94 33.88 0.00 1.37 32.38
- --------------------------------------------------------------------------------
8/31/94 23.67 26.94 0.00 0.00 13.81
- --------------------------------------------------------------------------------
Inception*-8/31/93 20.52 23.67 0.00 0.00 15.35+
================================================================================
Total $0.00 $3.74
================================================================================
IT IS THE FUND'S POLICY TO DISTRIBUTE DIVIDENDS AND CAPITAL GAINS, IF ANY,
ANNUALLY.
================================================================================
AVERAGE ANNUAL TOTAL RETURN
================================================================================
Without Sales Charge(1)
------------------------------------------------
Class A Class B Class C Class Y Class Z
================================================================================
Year Ended 8/31/96 (7.44)% (8.16)% (8.12)% N/A (7.07)%
- --------------------------------------------------------------------------------
Five Years Ended 8/31/96 10.99 N/A N/A N/A N/A
- --------------------------------------------------------------------------------
Ten Years Ended 8/31/96 12.26 N/A N/A N/A N/A
- --------------------------------------------------------------------------------
Inception* through 8/31/96 12.67 12.13 13.16 (2.32)%+ 13.37
================================================================================
With Sales Charge(2)
------------------------------------------------
Class A Class B Class C Class Y Class Z
================================================================================
Year Ended 8/31/96 (12.05)% (12.75)% (9.04)% N/A (7.07)%
- --------------------------------------------------------------------------------
Five Years Ended 8/31/96 9.65 N/A N/A N/A N/A
- --------------------------------------------------------------------------------
Ten Years Ended 8/31/96 11.69 N/A N/A N/A N/A
- --------------------------------------------------------------------------------
Inception* through 8/31/96 12.22 11.75 13.16 (2.32)%+ 13.37
================================================================================
6
<PAGE>
================================================================================
CUMULATIVE TOTAL RETURN
================================================================================
Without Sales Charge(1)
================================================================================
Class A (8/31/86 through 8/31/96) 217.81%
================================================================================
Class B (Inception* through 8/31/96) 54.83
- --------------------------------------------------------------------------------
Class C (Inception* through 8/31/96) 50.44
- --------------------------------------------------------------------------------
Class Y (Inception* through 8/31/96) (2.32)+
- --------------------------------------------------------------------------------
Class Z (Inception* through 8/31/96) 61.51
================================================================================
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the applicable
sales charges with respect to Class A shares or the applicable contingent
deferred sales charges ("CDSC") with respect to Class B and Class C shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A shares reflect the deduction
of the maximum initial sales charge of 5.00% and Class B shares reflect the
deduction of a 5.00% CDSC, which applies if shares are redeemed within one
year from initial purchase. This CDSC declines by 1.00% per year thereafter
until no CDSC is incurred. Class C shares reflect the deduction of a 1.00%
CDSC which applies if shares are redeemed within the first year of purchase.
* Inception dates for Class A, B, C, Y and Z shares are October 24, 1983,
November 6, 1992, May 13, 1993, October 12, 1995 and November 6, 1992,
respectively.
+ Total return is not annualized, as it may not be representative of the total
return for the year.
7
<PAGE>
================================================================================
HISTORICAL PERFORMANCE (UNAUDITED)
================================================================================
GROWTH OF $10,000 INVESTED IN CLASS A SHARES OF
THE SMITH BARNEY AGGRESSIVE GROWTH FUND INC. VS.
VALUE LINE COMPOSITE INDEX+
- --------------------------------------------------------------------------------
AUGUST 1986 -- AUGUST 1996
[The following table represents a line chart in the printed piece]
Smith Barney Aggressive Growth Fund Inc. Value Line Composite Index
8/86 9,503 10,000
8/87 13,243 12,104
8/88 10,013 9,674
8/89 14,515 11,763
8/90 13,590 8,841
8/91 17,934 10,387
8/92 17,500 10,407
8/93 21,797 12,170
8/94 24,726 12,457
8/95 32,626 13,785
8/96 30,201 14,600
+ Hypothetical illustration of $10,000 invested in Class A shares on August
31, 1986, assuming deduction of the maximum 5.00% sales charge at the time
of investment and reinvestment of dividends and capital gains, if any, at
net asset value through August 31, 1996. The Value Line Composite Index,
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. The index is unmanaged and is not subject to the same
management and trading expenses of a mutual fund. The performance of the
Fund's other classes may be greater or less than the Class A shares'
performance indicated on this chart, depending on whether greater or lesser
sales charges and fees were incurred by shareholders investing in the other
classes.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption values may be more or less than the original cost. No adjustment
has been made for shareholder tax liability on dividends or capital gains.
8
<PAGE>
================================================================================
PORTFOLIO HIGHLIGHTS (UNAUDITED) AUGUST 31, 1996
================================================================================
PORTFOLIO BREAKDOWN
[The following table represents a pie chart in the printed piece.]
Biotechnology 21.9%
Semiconductor 12.7%
Diversified Technology 10.6%
Pharmaceuticals 10.1%
Broadcasting/Cable 10.0%
Managed Health Care Providers 9.0%
Wireless Communications 4.2%
Investment Banking Services 3.9%
Computer Hardware 3.2%
Repurchase Agreement 1.8%
Convertible Preferred Stock
and Foreign Preferred Stock 1.7%
Other Common Stocks 10.9%
TOP TEN HOLDINGS
PERCENTAGE OF
COMPANY TOTAL INVESTMENTS
================================================================================
Intel Corp. 7.5%
Tyco International Ltd. 6.6
Amgen Inc. 5.6
Chiron Corp. 5.3
United Healthcare Corp. 5.0
Genzyme Corp.-General Division 4.9
Infinity Broadcasting Corp., Class A Shares 4.7
Forest Laboratories Inc., Class A Shares 4.6
Genentech Inc. Special 3.6
Quantum Corp. 2.8
9
<PAGE>
================================================================================
SCHEDULE OF INVESTMENTS AUGUST 31, 1996
================================================================================
SHARES SECURITY VALUE
================================================================================
COMMON STOCKS -- 96.5%
BIOTECHNOLOGY -- 21.9%
40,000 Affymetrix, Inc. $ 565,000
90,000 Alkermes Inc.+ 1,192,500
525,000 Amgen Inc.+ 30,581,250
1,461,428 Chiron Corp.+ 28,680,525
250,000 Cor Therapeutics Inc.+ 2,453,125
370,000 Genentech Inc. Special+ 19,425,000
35,000 Genset - Sponsored ADR 647,500
1,110,000 Genzyme Corp.- General Division+ 26,501,250
27,000 Genzyme Corp.- Tissue Repair+ 219,375
675,000 Nabi Inc.+ 7,171,875
150,000 Virus Research Institute Inc. 975,000
- -------------------------------------------------------------------------------
118,412,400
- -------------------------------------------------------------------------------
BROADCASTING/CABLE -- 10.0%
125,000 Cablevision Systems Development Corp., Class A Shares+ 5,265,625
100,000 Comcast Corp., Class A Shares 1,587,500
600,000 Comcast Corp., Class A Special Shares 9,675,000
930,993 Infinity Broadcasting Corp., Class A Shares+ 25,485,932
150,000 Liberty Media, Class A Shares+ 3,956,250
25,000 LIN Television Corp.+ 893,750
500,000 Tele-Communications Inc., Class A Shares 7,437,500
- -------------------------------------------------------------------------------
54,301,557
- -------------------------------------------------------------------------------
COMPUTER HARDWARE -- 3.2%
210,000 Crosscomm Corp.+ 2,047,500
1,000,000 Quantum Corp.+ 15,375,000
- -------------------------------------------------------------------------------
17,422,500
- -------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 2.6%
85,000 Cimatron Inc. 504,687
500,000 ComputerVision Corp.+ 3,500,000
42,550 Microsoft Corp.+ 5,212,375
100,000 Netscape Communications Corp. 3,537,500
100,000 Quality Systems Inc.+ 1,287,500
- -------------------------------------------------------------------------------
14,042,062
- -------------------------------------------------------------------------------
DIVERSIFIED TECHNOLOGY -- 10.7%
487,000 C - COR Electronics Inc.+ 7,548,500
325,000 Drexler Technology Corp.+ 3,940,625
80,000 EP Medsystems Inc. 440,000
425,001 Excel Technology Inc.+ 3,904,697
305,000 GenRad Inc.+ 4,498,750
150,000 Indigo N.V.+ 1,293,750
122,500 Photon Dynamics Inc.+ 1,025,937
840,000 Tyco International Ltd. 35,490,000
- -------------------------------------------------------------------------------
58,142,259
- -------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
================================================================================
SCHEDULE OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
================================================================================
SHARES SECURITY VALUE
================================================================================
DRUG DELIVERY/TESTING -- 1.6%
499,500 Advanced Polymer Systems Inc.+ $ 3,683,813
170,000 Cygnus Inc.+ 2,932,500
115,000 Cytotherapeutics Inc.+ 1,322,500
100,000 Metra Biosystems Inc.+ 512,500
- --------------------------------------------------------------------------------
8,451,313
- --------------------------------------------------------------------------------
ENERGY -- 2.6%
436,500 Energy Ventures Inc. 14,349,938
- --------------------------------------------------------------------------------
ENVIRONMENTAL -- 2.3%
130,000 Image Industries Inc.+ 1,966,250
500,000 Wellman Inc. 10,312,500
- --------------------------------------------------------------------------------
12,278,750
- --------------------------------------------------------------------------------
HEALTHCARE-MISCELLANEOUS -- 0.4%
32,500 Intelligent Medical Imaging 487,500
90,000 Norland Medical Systems Inc. 1,620,000
- --------------------------------------------------------------------------------
2,107,500
- --------------------------------------------------------------------------------
INVESTMENT BANKING SERVICES -- 3.9%
700,000 Lehman Brothers Holdings Inc. 14,787,500
100,000 Merrill Lynch & Company Inc. 6,125,000
- --------------------------------------------------------------------------------
20,912,500
- --------------------------------------------------------------------------------
MACHINERY -- 1.4%
500,000 Bridgeport Machines Inc.+ 7,500,000
- --------------------------------------------------------------------------------
MANAGED HEALTH CARE PROVIDERS -- 9.0%
134,760 Aetna, Inc. 8,911,005
700,000 United Healthcare Corp. 27,037,500
800,000 Value Health Inc.+ 12,700,000
- --------------------------------------------------------------------------------
48,648,505
- --------------------------------------------------------------------------------
PHARMACEUTICALS -- 10.0%
600,000 Forest Laboratories Inc., Class A Shares+ 24,675,000
1,100,000 Gensia Inc.+ 5,568,750
500,000 IDEC Pharmaceuticals Corp.+ 11,687,500
30,525 Merck & Company Inc. 2,003,203
30,000 Microcide Pharmaceutical Inc. 345,000
70,000 Neurocrine Biosciences Inc. 595,000
60,400 Pfizer Inc. 4,288,400
200,000 Shaman Pharmaceuticals Inc.+ 1,350,000
55,000 Synaptic Pharmaceutical Corp.+ 570,625
100,000 Vertex Pharmaceuticals Inc.+ 3,175,000
- --------------------------------------------------------------------------------
54,258,478
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
================================================================================
SCHEDULE OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
================================================================================
SHARES SECURITY VALUE
================================================================================
SEMICONDUCTOR -- 12.7%
60,000 Applied Materials Inc.+ $ 1,455,000
550,000 Cirrus Logic Inc.+ 8,525,000
510,000 Intel Corp. 40,704,375
475,000 Micron Technology Inc. 10,806,250
575,000 Standard Microsystems Corp.+ 7,331,250
- --------------------------------------------------------------------------------
68,821,875
- --------------------------------------------------------------------------------
WIRELESS COMMUNICATIONS -- 4.2%
650,000 Arch Communications Group Inc.+ 8,856,250
800,000 California Microwave Inc.+ 11,700,000
450,000 Telular Corp.+ 2,475,000
- --------------------------------------------------------------------------------
23,031,250
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost-- $385,464,524) 522,680,887
================================================================================
FOREIGN PREFERRED STOCK -- 0.3%
42,192 Nokia Corp. AB
(Cost-- $1,242,554) 1,782,612
================================================================================
CONVERTIBLE PREFERRED STOCK -- 1.4%
44,940 Aetna, Inc. Class C Shares Exchange 6.25% 3,123,330
Airtouch Communications:
69,046 Series B, Exchange 6.00% 1,985,074
44,343 Series C, Exchange 4.25% 2,111,833
- --------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost-- $2,208,701) 7,220,237
================================================================================
FACE
AMOUNT SECURITY VALUE
================================================================================
REPURCHASE AGREEMENT -- 1.8%
$9,709,000 Chase Manhattan Bank, 5.188% due 9/3/96;
Proceeds at maturity--$9,714,597; (Fully
collateralized by U.S. Treasury Bill due 10/17/96;
Market value-- $9,907,258) (Cost-- $9,709,000) 9,709,000
================================================================================
TOTAL INVESTMENTS -- 100%
(Cost-- $398,624,779*) $541,392,736
================================================================================
+ Non-income producing security.
* Aggregate cost for Federal income tax purposes is substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
================================================================================
STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996
================================================================================
ASSETS:
Investments, at value (Cost-- $398,624,779) $541,392,736
Cash 502
Receivable for Fund shares sold 2,647,391
Dividends and interest receivable 86,419
- ------------------------------------------------------------------------------
TOTAL ASSETS 544,127,048
- ------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 722,125
Payable for Fund shares purchased 498,654
Investment advisory fees payable 274,103
Distribution fees payable 216,463
Administration fees payable 91,206
Accrued expenses 207,920
- ------------------------------------------------------------------------------
TOTAL LIABILITIES 2,010,471
- ------------------------------------------------------------------------------
TOTAL NET ASSETS $542,116,577
==============================================================================
NET ASSETS:
Par value of capital shares $ 190,447
Capital paid in excess of par value 383,413,708
Accumulated net investment loss (534)
Accumulated net realized gain on security transactions 15,744,999
Net unrealized appreciation of investments 142,767,957
- ------------------------------------------------------------------------------
TOTAL NET ASSETS $542,116,577
==============================================================================
SHARES OUTSTANDING:
Class A 8,779,915
---------------------------------------------------------------------------
Class B 4,889,234
---------------------------------------------------------------------------
Class C 2,285,682
---------------------------------------------------------------------------
Class Y 2,033,626
---------------------------------------------------------------------------
Class Z 1,056,263
---------------------------------------------------------------------------
NET ASSET VALUE:
Class A (and redemption price) $28.76
---------------------------------------------------------------------------
Class B* $27.88
---------------------------------------------------------------------------
Class C** $27.91
---------------------------------------------------------------------------
Class Y (and redemption price) $28.84
---------------------------------------------------------------------------
Class Z (and redemption price) $29.20
---------------------------------------------------------------------------
CLASS A MAXIMIUM PUBLIC OFFERING PRICE PER SHARE
(net asset value plus 5.26% of net asset value per share) $30.27
==============================================================================
* Redemption price is NAV of Class B shares reduced by a 5.00% CDSC if shares
are redeemed within one year from initial purchase (See Note 2).
** Redemption price is NAV of Class C shares reduced by a 1.00% CDSC if shares
are redeemed within the first year of purchase.
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
================================================================================
STATEMENT OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 1996
================================================================================
INVESTMENT INCOME:
Dividends $ 1,520,098
Interest 223,770
Less: Foreign withholding tax (4,098)
- --------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 1,739,770
- --------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 2) 3,229,363
Distribution fees (Note 2) 2,750,086
Administration fees (Note 2) 1,076,455
Shareholder and system servicing fees 553,000
Registration fees 235,000
Shareholder communications 186,000
Audit and legal 80,000
Directors' fees 38,000
Custody 28,000
Other 123,100
- --------------------------------------------------------------------------------
TOTAL EXPENSES 8,299,004
- --------------------------------------------------------------------------------
NET INVESTMENT LOSS (6,559,234)
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTE 3):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales 69,857,281
Cost of securities sold 44,848,256
- --------------------------------------------------------------------------------
NET REALIZED GAIN 25,009,025
- --------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of year 205,368,461
End of year 142,767,957
- --------------------------------------------------------------------------------
DECREASE IN NET UNREALIZED APPRECIATION (62,600,504)
- --------------------------------------------------------------------------------
NET LOSS ON INVESTMENTS (37,591,479)
- --------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM OPERATIONS $(44,150,713)
================================================================================
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
================================================================================
STATEMENT OF CHANGES IN NET ASSETS FOR THE YEARS ENDED AUGUST 31,
================================================================================
1996 1995
- --------------------------------------------------------------------------------
OPERATIONS:
Net investment loss $ (6,559,234) $ (3,748,434)
Net realized gain 25,009,025 36,749,621
Increase (decrease) in net unrealized
appreciation (62,600,504) 91,092,574
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS(44,150,713) 124,093,761
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gains (35,706,513) (13,522,898)
- --------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM
DISTRIBUTIONS TO SHAREHOLDERS (35,706,513) (13,522,898)
- --------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 5):
Net proceeds from sale of shares 543,582,290 289,503,687
Net asset value of shares issued in
connection with the transfer of net
assets of the Smith Barney Funds, Inc.-
Capital Appreciation Portfolio (Note 6) -- 103,455,275
Net asset value of shares issued for
reinvestment of dividends 34,717,118 13,207,895
Cost of shares reacquired (445,699,000) (282,856,918)
- --------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS 132,600,408 123,309,939
- --------------------------------------------------------------------------------
INCREASE IN NET ASSETS 52,743,182 233,880,802
NET ASSETS:
Beginning of year 489,373,395 255,492,593
- --------------------------------------------------------------------------------
END OF YEAR* $542,116,577 $489,373,395
================================================================================
* Includes accumulated net investment loss of: $(534) --
================================================================================
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES
The Smith Barney Aggressive Growth Fund Inc. ("Fund"), a Maryland
corporation, is registered under the Investment Company Act of 1940, as amended,
as a diversified, open-end management investment company.
The significant accounting policies consistently followed by the Fund are:
(a) security transactions are accounted for on trade date; (b) securities traded
on national securities markets are valued at the closing prices on such markets;
securities for which no sales price was reported and U.S. Government and Agency
obligations are valued at the bid price. Investments in securities for which
market quotations are not available are valued at fair value as determined in
good faith by the Board of Directors; (c) securities maturing within 60 days are
valued at cost plus accreted discount, or minus amortized premium, which
approximates market value; (d) dividend income is recorded on the ex-dividend
date and interest income is recorded on the accrual basis; (e) gains or losses
on the sale of securities are calculated by using the specific identification
method; (f) direct expenses are charged to the Fund and each class; investment
advisory fees and general Fund expenses are allocated on the basis of relative
net assets; (g) dividends and distributions to shareholders are recorded on the
ex-dividend date; (h) the character of income and gains to be distributed are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. At August 31, 1996, reclassifications
are made to the Fund's capital accounts to reflect permanent book/tax
differences and income and gains available for distributions under income tax
regulations. Accordingly, a portion of undistributed net investment income
amounting to $989 has been reclassified to paid-in capital. Net investment
income, net realized gains and net assets were not affected by this change; (i)
the Fund intends to comply with the applicable provisions of the Internal
Revenue Code of 1986, as amended, pertaining to regulated investment companies
and to make distributions of taxable income sufficient to relieve it from
substantially all Federal income and excise taxes; and (j) estimates and
assumptions are required to be made regarding assets, liabilities and changes in
net assets resulting from operations when financial statements are prepared.
Changes in the economic environment, financial markets and any other parameters
used in determining these estimates could cause actual results to differ.
16
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
2. INVESTMENT ADVISORY AGREEMENT, ADMINISTRATION
AGREEMENT AND OTHER TRANSACTIONS
Smith Barney Mutual Funds Management Inc. ("SBMFM"), a subsidiary of Smith
Barney Holdings Inc. ("SBH"), acts as investment adviser to the Fund. The Fund
pays SBMFM an advisory fee calculated at an annual rate of 0.60% of the average
daily net assets. This fee is calculated daily and paid monthly.
SBMFM also acts as the Fund's administrator for which the Fund pays a fee
calculated at an annual rate of 0.20% of the average daily net assets. This fee
is calculated daily and paid monthly.
Smith Barney Inc. ("SB"), another subsidiary of SBH, acts as distributor of
Fund shares and primary broker for its portfolio agency transactions. For the
year ended August 31, 1996, SB received brokerage commissions of $3,000 and
received sales charges of approximately $834,000 on sales of the Fund's Class A
shares.
There is a contingent deferred sales charge ("CDSC") of 5.00% on Class B
shares, which applies if redemption occurs less than one year from initial
purchase and declines thereafter by 1.00% per year until no CDSC is incurred.
Class C shares have a 1.00% CDSC, which applies if redemption occurs within the
first year of purchase. In addition, Class A shares have a 1.00% CDSC, which
applies if redemption occurs within the first year of purchase. This CDSC only
applies to those purchases of Class A shares, which, when combined with current
holdings of Class A shares equal or exceed $500,000 in the aggregate. These
purchases do not incur an initial sales charge. For the year ended August 31,
1996, CDSCs paid to SB were approximately:
CLASS A CLASS B CLASS C
================================================================================
CDSCs $10,000 $237,000 $4,000
================================================================================
Pursuant to a Distribution Plan the Fund pays a service fee with respect to
its Class A, B and C shares calculated at the annual rate of 0.25% of the
average daily net assets of each respective class. The Fund also pays a
distribution fee with respect to Class B and C shares calculated at the annual
rate of 0.75% of the average daily net assets of each class, respectively. For
the year ended August 31, 1996, total Distribution Plan fees were as follows:
CLASS A CLASS B CLASS C
================================================================================
Distribution Plan Fees $716,789 $1,307,058 $726,239
================================================================================
All officers and one Director of the Fund are employees of SB.
17
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
3. INVESTMENTS
During the year ended August 31, 1996, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases $157,815,714
- --------------------------------------------------------------------------------
Sales 69,857,281
================================================================================
At August 31, 1996, the aggregate gross unrealized appreciation and
depreciation of investments were as follows:
================================================================================
Gross unrealized appreciation $182,735,912*
Gross unrealized depreciation (39,967,955)*
- --------------------------------------------------------------------------------
Net unrealized appreciation $142,767,957*
================================================================================
* Substantially the same for Federal income tax purposes.
4. REPURCHASE AGREEMENTS
The Fund purchases (and its custodian takes possession of) U.S. Government
securities from banks and securities dealers subject to agreements to resell the
securities to the sellers at a future date (generally, the next business day),
at an agreed-upon higher repurchase price. The Portfolio requires continual
maintenance of the market value of the collateral in amounts at least equal to
the repurchase price.
5. CAPITAL SHARES
At August 31, 1996, the Fund had 100 million shares of capital stock
authorized with a par value of $0.01 per share. The Fund has the ability to
issue multiple classes of shares. Each share of a class represents an identical
interest and has the same rights, except that each class bears certain expenses,
including those specifically related to the distribution of its shares. At
August 31, 1996, total paid-in capital amounted to the following for each class:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CLASS A CLASS B CLASS C CLASS Y CLASS Z
=============================================================================================
Total Paid-in Capital $114,118,981 $135,723,669 $52,319,690 $63,000,559 $18,441,256
=============================================================================================
</TABLE>
18
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
AUGUST 31, 1996 AUGUST 31, 1995
------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
========================================================================================
<S> <C> <C> <C> <C>
CLASS A
Shares sold 7,523,319 $ 235,110,800 6,749,531 $ 177,610,487
Transfer of net assets of
Capital Appreciation
Portfolio (Note 6) -- -- 1,632,417 45,764,593
Shares issued on reinvestment 643,970 19,299,781 344,884 9,021,552
Shares redeemed (8,108,128) (254,682,656) (6,767,114) (187,492,639)
- ----------------------------------------------------------------------------------------
Net Increase (Decrease) 59,161 $ (272,075) 1,959,718 $ 44,903,993
========================================================================================
CLASS B
Shares sold 5,946,915 $ 183,391,938 3,850,953 $ 108,799,180
Transfer of net assets of
Capital Appreciation
Portfolio (Note 6) -- -- 13,667 375,927
Shares issued on reinvestment 273,308 7,988,794 112,757 2,902,494
Shares redeemed (4,299,869) (131,994,037) (2,891,099) (80,272,640)
- ----------------------------------------------------------------------------------------
Net Increase 1,920,354 $ 59,386,695 1,086,278 $ 31,804,961
========================================================================================
CLASS C*
Shares sold 1,351,275 $ 41,155,971 466,565 $ 2,850,429
Transfer of net assets of
Capital Appreciation
Portfolio (Note 6) -- -- 2,083,900 57,314,755
Shares issued on reinvestment 172,409 5,042,968 4,191 110,650
Shares redeemed (1,440,396) (43,846,451) (366,163) (10,665,119)
- ----------------------------------------------------------------------------------------
Net Increase 83,288 $ 2,352,488 2,188,493 $ 49,610,715
========================================================================================
CLASS Y+
Shares sold 2,410,122 $ 75,020,331 -- --
Shares issued on reinvestment 4,965 148,799 -- --
Shares redeemed (381,461) (12,168,678) -- --
- ----------------------------------------------------------------------------------------
Net Increase 2,033,626 $ 63,000,452 -- --
========================================================================================
CLASS Z++
Shares sold 274,419 $ 8,903,250 8,570 $ 243,591
Shares issued on reinvestment 73,748 2,236,776 44,496 1,173,199
Shares redeemed (94,949) (3,007,178) (158,380) (4,426,520)
- ----------------------------------------------------------------------------------------
Net Increase (Decrease) 253,218 $ 8,132,848 (105,314)$ (3,009,730)
========================================================================================
* On November 7, 1994, the former Class D shares were renamed Class C shares.
+ For Class Y shares, transactions are for the period from October 12, 1995
(inception date) to August 31, 1996.
++ On November 7, 1994, the former Class C shares were renamed Class Z shares.
</TABLE>
19
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
6. TRANSFER OF NET ASSETS
On June 2, 1995, the Fund acquired the assets and certain liabilities of
the Smith Barney Funds, Inc.--Capital Appreciation Portfolio ("Capital
Appreciation Portfolio"), pursuant to a plan of reorganization approved by the
Capital Appreciation Portfolio shareholders on May 11, 1995. Total shares issued
by the Fund and the total net assets of the Capital Appreciation Portfolio and
the Fund on the date of the transfer were:
TOTAL NET
SHARES ASSETS OF TOTAL NET
ISSUED BY ACQUIRED ASSETS OF
ACQUIRED PORTFOLIO THE FUND PORTFOLIO THE FUND
================================================================================
Capital Appreciation Portfolio 3,729,984 $103,455,275 $292,300,788
================================================================================
The total net assets of Capital Appreciation Portfolio before acquisition
included unrealized appreciation of $19,791,875. Total net assets of the Fund
immediately after the transfer were $395,756,063.
20
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS
================================================================================
FOR A SHARE OF EACH CLASS OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR:
CLASS A SHARES 1996 1995 1994 1993(1) 1992(1)
================================================================================
NET ASSET VALUE, BEGINNING OF YEAR $33.53 $26.76 $23.59 $18.94 $20.12
- --------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment loss (0.31) (0.34) (0.32) (0.21) (0.07)
Net realized and unrealized
gain (loss) (2.09) 8.48 3.49 4.86 (0.35)
- --------------------------------------------------------------------------------
Total Income (Loss) From Operations (2.40) 8.14 3.17 4.65 (0.42)
- --------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net realized gains (2.37) (1.37) -- -- (0.76)
- --------------------------------------------------------------------------------
Total Distributions (2.37) (1.37) -- -- (0.76)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $28.76 $33.53 $26.76 $23.59 $18.94
- --------------------------------------------------------------------------------
TOTAL RETURN (7.44)% 31.95% 13.44% 24.55% (2.42)%
- --------------------------------------------------------------------------------
NET ASSETS, END OF YEAR (000s) $252,531 $292,402 $180,917 $150,471 $181,459
- --------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses 1.30% 1.37% 1.42%* 1.34% 1.05%
Net investment loss (0.97) (1.05) (1.23) (1.01) (0.31)
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 13% 44% 11% 13% 3%
- --------------------------------------------------------------------------------
AVERAGE COMMISSIONS PER SHARE
PAID ON EQUITY TRANSACTIONS(2) $0.06 -- -- -- --
================================================================================
(1) Per share amounts have been calculated using the monthly average shares
method, which more appropriately presents the per share data for this
period, since use of the undistributed net investment income method does not
accord with results of operations for all classes of shares.
(2) As of September 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per share.
* The operating expense ratio excludes interest expense. The operating expense
ratio including interest expense would have been 1.43%.
21
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS (CONTINUED)
================================================================================
FOR A SHARE OF EACH CLASS OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR:
================================================================================
CLASS B SHARES 1996 1995 1994 1993(1)(2)
================================================================================
NET ASSET VALUE, BEGINNING OF YEAR $32.82 $26.42 $23.46 $20.52
- --------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment loss (0.53) (0.33) (0.29) (0.30)
Net realized and unrealized
gain (loss) (2.04) 8.10 3.25 3.24
- --------------------------------------------------------------------------------
Total Income (Loss) From Operations (2.57) 7.77 2.96 2.94
- --------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net realized gains (2.37) (1.37) -- --
- --------------------------------------------------------------------------------
Total Distributions (2.37) (1.37) -- --
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $27.88 $32.82 $26.42 $23.46
- --------------------------------------------------------------------------------
TOTAL RETURN (8.16)% 30.93% 12.62% 14.33%++
- --------------------------------------------------------------------------------
NET ASSETS, END OF YEAR (000S) $136,322 $97,438 $49,741 $18,139
- --------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses 2.07% 2.12% 2.22%* 2.18%+
Net investment loss (1.75) (1.80) (2.04) (1.86)+
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 13% 44% 11% 13%
- --------------------------------------------------------------------------------
AVERAGE COMMISSIONS PER SHARE
PAID ON EQUITY TRANSACTIONS(3) $0.06 -- -- --
================================================================================
(1) For the period from November 6, 1992 (inception date) to August 31, 1995.
(2) Per share amounts have been calculated using the monthly average shares
method, which more appropriately presents the per share data for this
period, since use of the undistributed net investment income method does not
accord with results of operations for all classes of shares.
(3) As of September 1995, the SEC instituted new guidelines requiring the
disclosures of average commissions per share. * The operating expense ratio
excludes interest expense. The operating expense ratio including interest
expense would have been 2.23%
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
22
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS (CONTINUED)
================================================================================
FOR A SHARE OF EACH CLASS OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR:
CLASS C SHARES 1996 1995(1) 1994 1993(2)(3)
================================================================================
NET ASSET VALUE, BEGINNING OF YEAR $32.84 $26.42 $23.47 $21.14
- --------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment loss (0.53) (0.40) (0.17) (0.13)
Net realized and unrealized gain (loss) (2.03) 8.19 3.12 2.46
- --------------------------------------------------------------------------------
Total Income (Loss) From Operations (2.56) 7.79 2.95 2.33
- --------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net realized gains (2.37) (1.37) -- --
- --------------------------------------------------------------------------------
Total Distributions (2.37) (1.37) -- --
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $27.91 $32.84 $26.42 $23.47
- --------------------------------------------------------------------------------
TOTAL RETURN (8.12)% 31.01% 12.57% 11.02%++
- --------------------------------------------------------------------------------
NET ASSETS, END OF YEAR (000S) $63,786 $72,324 $367 $24
- --------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses 2.06% 2.12% 2.08%* 2.11%+
Net investment loss (1.75) (1.80) (1.90) (1.76)+
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 13% 44% 11% 13%
- --------------------------------------------------------------------------------
AVERAGE COMMISSIONS PER SHARE
PAID ON EQUITY TRANSACTIONS(4) $0.06 -- -- --
================================================================================
(1) On November 7, 1994, the former Class D shares were renamed Class C shares.
(2) For the period from May 13, 1993 (inception date) to August 31, 1993.
(3) Per share amounts have been calculated using the monthly average shares
method, which more appropriately presents the per share data for this
period, since use of the undistributed net investment income method does not
accord with results of operations for all classes of shares.
(4) As of September 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per share.
* The operating expense ratio excludes interest expense. The operating expense
ratio including interest expense would have been 2.09%.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
================================================================================
TAX INFORMATION (UNAUDITED)
================================================================================
The amount of long-term capital gains paid by the Portfolio to its
shareholders for the fiscal year ended August 31, 1996, was $25,091,470.
23
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS (CONTINUED)
================================================================================
FOR A SHARE OF EACH CLASS OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR:
CLASS Y SHARES 1996(1)
================================================================================
NET ASSET VALUE, BEGINNING OF YEAR $31.86
- --------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment loss (0.12)
Net realized and unrealized loss (0.53)
- --------------------------------------------------------------------------------
Total Loss From Operations (0.65)
- --------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net realized gains (2.37)
- --------------------------------------------------------------------------------
Total Distributions (2.37)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $28.84
- --------------------------------------------------------------------------------
TOTAL RETURN++ (2.32)%
- --------------------------------------------------------------------------------
NET ASSETS, END OF YEAR (000S) $58,641
- --------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS+:
Expenses 0.84%
Net investment loss (0.49)
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 13%
- --------------------------------------------------------------------------------
AVERAGE COMMISSIONS PER SHARE
PAID ON EQUITY TRANSACTIONS $0.06
================================================================================
(1) For the period from October 12, 1995 (inception date) to August 31, 1996.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
24
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS (CONTINUED)
================================================================================
FOR A SHARE OF EACH CLASS OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR:
CLASS Z SHARES 1996 1995(1) 1994 1993(2)(3)
================================================================================
NET ASSET VALUE, BEGINNING OF YEAR $33.88 $26.94 $23.67 $20.52
- --------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment loss (0.20) (0.34) (0.31) (0.12)
Net realized and unrealized gain (loss) (2.11) 8.65 3.58 3.27
- --------------------------------------------------------------------------------
Total Income (Loss) From Operations (2.31) 8.31 3.27 3.15
- --------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net realized gains (2.37) (1.37) -- --
- --------------------------------------------------------------------------------
Total Distributions (2.37) (1.37) -- --
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $29.20 $33.88 $26.94 $23.67
- --------------------------------------------------------------------------------
TOTAL RETURN (7.07)% 32.38% 13.81% 15.35%++
- --------------------------------------------------------------------------------
NET ASSETS, END OF YEAR (000S) $30,837 $27,209 $24,467 $53,599
- --------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.93% 1.12% 1.01%* 0.99%+
Net investment loss (0.61) (0.80) (0.83) (0.67)+
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 13% 44% 11% 13%
- --------------------------------------------------------------------------------
AVERAGE COMMISSIONS PER SHARE
PAID ON EQUITY TRANSACTIONS(4) $0.06 -- -- --
================================================================================
(1) On November 7, 1994, the former Class C shares were renamed Class Z shares.
(2) For the period from November 6, 1992 (inception date) to August 31, 1993.
(3) Per share amounts have been calculated using the monthly average shares
method, which more appropriately presents the per share data for this
period, since use of the undistributed net investment income method does not
accord with results of operations for all classes of shares.
(4) As of September 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per share.
* The operating expense ratio excludes interest expense. The operating expense
ratio including interest expense would have been 1.02%.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
25
<PAGE>
================================================================================
INDEPENDENT AUDITORS' REPORT
================================================================================
THE SHAREHOLDERS AND BOARD OF DIRECTORS OF
SMITH BARNEY AGGRESSIVE GROWTH FUND INC.:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Smith Barney Aggressive Growth Fund Inc. as of
August 31, 1996, the related statement of operations for the year then ended and
the statement of changes in net assets and financial highlights for each of the
years in the two-year 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. The financial highlights for each of
the years in the three-year period then ended August 31, 1994, were audited by
other auditors whose report thereon, dated October 7, 1994, expressed an
unqualified opinion on those financial highlights.
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 financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1996, by correspondence with the custodian. As to securities
purchased but not received, we performed other appropriate procedures. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating 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. as of August 31, 1996, the results of its
operations for the year then ended and the changes in its net assets and
financial highlights for each of the years in the two-year period then ended, in
conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
New York, New York
October 15, 1996
26
<PAGE>
[The page intentionally left blank.]
<PAGE>
[The page intentionally left blank.]
<PAGE>
SMITH BARNEY
AGGRESSIVE GROWTH [LOGO]
FUND INC.
DIRECTORS INVESTMENT ADVISER
Paul R. Ades AND ADMINISTRATOR
Herbert Barg Smith Barney Mutual Funds
Alger B. Chapman Management Inc.
Dwight B. Crane
Frank Hubbard DISTRIBUTOR
Allan R. Johnson Smith Barney Inc.
Heath B. McLendon
Jerry Miller CUSTODIAN
Ken Miller PNC Bank, N.A.
John F. White
SHAREHOLDER
OFFICERS SERVICING AGENT
Heath B. McLendon First Data Investor Services Group, Inc.
CHAIRMAN AND P.O. Box 9134
INVESTMENT OFFICER Boston, MA 02205-9134
Jessica M. Bibliowicz
PRESIDENT
This report is submitted for the general
Lewis E. Daidone information of the shareholders of the
SENIOR VICE PRESIDENT Smith Barney Aggressive Growth Fund Inc.
AND TREASURER It is not authorized for distribution to
prospective investors unless accompanied
Richard A. Freeman or preceded by a current Prospectus for
VICE PRESIDENT AND the Fund, which contains information
INVESTMENT OFFICER concerning the Fund's investment policies
and expenses as well as other pertinent
Thomas M. Reynolds information.
CONTROLLER
Christina T. Sydor
SECRETARY SMITH BARNEY AGGRESSIVE
GROWTH FUND INC.
388 Greenwich Street
New York, New York 10013
FD0433 10/96
