<PAGE>
[GRAPHIC]
[GRAPHIC]
Smith Barney
Aggressive Growth
Fund Inc.
--------------------------------------------------
ANNUAL REPORT
--------------------------------------------------
August 31, 1998
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.(SM)
<PAGE>
Smith Barney Aggressive Growth Fund Inc.
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The Smith Barney Aggressive Growth Fund Inc. seeks capital appreciation
through investment primarily in common stocks of companies that 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 S&P 500 Index. They are often
small- or medium-sized companies that stand to benefit from new products or
services, technological developments or changes in management.
Smith Barney Aggressive Growth Fund Inc.
Average Annual Total Returns
August 31, 1998
<TABLE>
<CAPTION>
Without Sales Charges(1)
------------------------------------------
Class A Class B Class L(2)
================================================================================
<S> <C> <C> <C>
One-Year (15.16)% (15.90)% (15.80)%
- --------------------------------------------------------------------------------
Five-Year 11.88 11.00 11.04
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Ten-Year 14.33 N/A N/A
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Since Inception++ 12.65 11.93 12.57
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<CAPTION>
With Sales Charges(3)
------------------------------------------
Class A Class B Class L(2)
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<S> <C> <C> <C>
One-Year (19.40)% (19.90)% (17.44)%
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Five-Year 10.74 10.87 10.82
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Ten-Year 13.74 N/A N/A
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Since Inception++ 12.26 11.93 12.36
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</TABLE>
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to Class
B and L shares.
(2) On June 12, 1998, Class C shares were renamed Class L shares.
(3) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charges of 5.00% and 1.00%,
respectively; Class B shares reflect the deduction of a 5.00% CDSC, which
applies if shares are redeemed within one year from purchase. Thereafter,
the CDSC declines by 1.00% per year until no CDSC is incurred. Class L
shares also reflect the deduction of a 1.00% CDSC which applies if shares
are redeemed within the first year of purchase.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption value may be more or less than the original cost.
++ Inception dates for Class A, B and L shares are October 24, 1983, November
6, 1992 and May 13, 1993, respectively.
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FUND HIGHLIGHT
================================================================================
We believe that the stock market has reached an important low. Interest rates on
long-term government bonds are at their lowest levels in over a generation and,
based on the yield curve, we would not be surprised if the Federal Reserve Board
lowers short-term rates several more times within the next few months. (The
yield curve shows the difference between short- and long-term rates.) It is also
possible that the stock market is following its typical four-year pattern in
which a major low is recorded every four years (during the off presidential
election year), auguring for a much better 1999.
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NASDAQ SYMBOL
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Class A SHRAX
Class B SAGBX
Class L SAGLX
<TABLE>
<CAPTION>
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WHAT'S INSIDE
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<S> <C>
Shareholder Letter ........................................................ 1
Historical Performance .................................................... 4
Smith Barney Aggressive Growth Fund Inc.
at a Glance ............................................................... 7
Schedule of Investments ................................................... 8
Statement of Assets and Liabilities ....................................... 10
Statement of Operations ................................................... 11
Statements of Changes in Net Assets ....................................... 12
Notes to Financial Statements ............................................. 13
Financial Highlights ...................................................... 16
Independent Auditors' Report .............................................. 21
Tax Information ........................................................... 22
Additional Shareholder Information ........................................ 23
</TABLE>
<PAGE>
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SHAREHOLDER LETTER
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[PHOTO] [PHOTO]
HEATH B. RICHARD A.
MCLENDON FREEMAN
Chairman Vice President and
Investment Officer
Dear Shareholder:
We are pleased to provide the annual report for the Smith Barney Aggressive
Growth Fund ("Fund") for the year ended August 31, 1998. 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.
A Classic Series Fund
The Aggressive Growth Fund is part of the Classic Series of Smith Barney Mutual
Funds. The Classic Series funds are mutual funds whose investment decisions are
determined by experienced portfolio managers based on each fund's investment
objectives and guidelines. Funds in the Smith Barney Classic Series invest
across asset classes and sectors, utilizing a range of strategies in order to
achieve their objectives.
Fund Performance
For the year ended August 31, 1998, the Fund had negative total returns of
15.16%, 15.90% and 15.80% for its Class A, B and L shares, respectively. During
the same 12-month period, the Russell 2500 Growth Index* and the Value Line
Composite Index-Geometric,** that we consider good measures of performance for
the kinds of securities held in the Fund, declined 25.52% and 17.21%,
respectively.
For the six months ended August 31, 1998, the net asset value of Class A, B and
L shares declined by 22.22%, 22.55% and 22.53%, respectively. In the same
six-month period, the Russell 2500 Growth Index and Value Line Composite
Index-Geometric declined 29.45% and 23.55%, respectively.
Market Overview
In this section, we will attempt to put the most recent market decline into
perspective and offer some insights as to the possible future course of emerging
growth stocks. Based on data supplied by our internal research, the average
decline for the NASDAQ universe for stocks, from their 52-week highs, now
approaches 50%. Back in 1987, by comparison, this figure was about 45%. In 1990,
the last overall bear market, the average decline for the entire NASDAQ universe
was about 42%.
The last time that the average NASDAQ decline was as severe as the recent market
was back in 1974. Based on the declines within the emerging growth sector,
relative valuations for smaller stocks are at multi-decade lows.
August 1998 was the poorest month for the overall stock market since October
1997. The market decline was widespread, with the most intense pressure being
felt in the mid- and small-capitalization sectors. In
- ----------
* Russell 2500 Growth Index is a broad-based index representing smaller-sized
U.S. companies.
** The Value Line Composite Index-Geometric is composed of the 1,700 stocks
tracked by the Value Line Investment Survey.
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Smith Barney Aggressive Growth Fund Inc. 1
<PAGE>
August alone, the Russell 2500 Growth Index declined 22.7%. In our view, several
factors contributed to this unusually weak performance by the stock market
including:
. Continued deterioration in key Asian economies, most notably Japan, the
region's most important country from an economic standpoint.
. Russia defaulted on its debt payments, which led to sizable writeoffs for
commercial banks and other financial institutions, and substantial losses
by many leveraged investors whose portfolios were exposed to that country's
debt. This contributed to a "mini-snowball" effect whereby sound
investments were liquidated to fund margin calls left in the wake of
Russia's debt default.
. The Asian/Russian "contagion" began spreading to Latin America. Countries
raised their interest rates to defend their currencies even though that had
a negative impact on their economies.
. Investor expectations for corporate profits continued to moderate,
particularly for multinational companies, as analysts factored in the
effects of a slowing global economy.
Investment Strategy and Outlook
The Smith Barney Aggressive Growth Fund's strategy continues to invest in young,
innovative companies in dynamic industries that we believe have the potential to
generate above-average growth in earnings over a two- to three-year period.
Ideally, this growth should come smoothly, immediately and predictably. However,
investing in these kinds of young and innovative companies often means that
growth does not necessarily proceed in a linear fashion. Nevertheless, provided
these young and innovative companies are able to generate above-average earnings
growth and sell at a reasonable multiple of those earnings, they usually remain
a Fund holding.
Stock markets reflect the collective expectations of investors for the future.
Although the past 12-month earnings have generally been quite good for most
companies, concern about the pace of future earnings is the major reason for the
stock market's weak performance during the summer. While we have designed the
Fund's portfolio in order to minimize the impact of earnings disappointments, in
actuality, rapidly changing world conditions will at times cause some of our
companies to miss a forecast with a corresponding negative adjustment to their
share prices. When that happens, we expect management to take advantage of these
circumstances, provided balance sheets are healthy (a prerequisite for inclusion
in the Fund), by repurchasing their shares on the open market while they are out
of favor. When earnings growth resumes, the earnings will be spread over a
smaller share base, thereby allowing the earnings per share to grow more
quickly. Examples of some companies in the Fund's portfolio that have
successfully employed these buybacks to reduce their shares outstanding include
Amgen, Intel, United Healthcare and Forest Laboratories.
We try to concentrate our portfolio holdings on those companies with sales and
earnings that are not overly dependent on trends in the general economy. With
the outlook for overall corporate profit growth more uncertain, we believe that
it is important to own those companies that can best control their own
destinies. We think that health care securities, the Fund's largest area of
concentration, represent just such an opportunity. Health care stocks,
particularly biotechnology companies, are somewhat protected from many of the
forces dragging down the multinationals such as international economic crisis,
political risk, economic cycles and even year 2000 computer problems.
We think that our biotechnology stocks have excellent earnings outlooks, strong
finances and generally reliable franchises. Another area affording
- --------------------------------------------------------------------------------
2 1998 Annual Report to Shareholders
<PAGE>
investors predictable U.S. growth are cable television companies. One key Fund
highlight during the past six months was the merger agreement signed between
Tele-Communications Inc. and AT&T. This follows, by about a year, the $1 billion
investment in Comcast (one of our original holdings) by Microsoft. We are quite
pleased to see the sizable investments being made in the cable area by other
corporate buyers, since we believe it validates our confidence in the group.
During the reporting period, we added to our positions in Chiron, IDEC
Pharmaceuticals, United Healthcare, Netscape and Alkermes, and established an
initial position in Nanogen. We sold our positions in the following companies:
Applied Materials, Steiner Leisure, Kayner Technologies, IRI International,
Ascent Pediatrics, Corixa, Wellman and Aetna. We also cut back our position in
Tyco International by roughly 15%, the Fund's largest holding, which fortunately
over the years had grown to become a very large percentage of the Fund's assets.
We believe that the stock market has reached an important low. Interest rates on
long-term government bonds are at their lowest levels in over a generation and,
based on the yield curve, we would not be surprised if the Federal Reserve Board
("Fed") lowers short-term rates several more times within the next few months.*
(The yield curve shows the difference between short- and long-term rates.) It is
also possible that the stock market is following its typical four-year pattern
in which a major low is recorded every four years (during the off presidential
election year), auguring for a much better 1999.
The combination of heightened pessimism on the part of the financial media, low
interest rates and the historic undervalued levels of emerging growth stocks
makes us optimistic that the next six months may witness a significant rebound.
Thank you for your confidence in our investment management approach. We look
forward to helping you pursue your financial goals in the years ahead.
Sincerely,
/s/ Heath B. McLendon /s/ Richard A. Freeman
Heath B. McLendon Richard A. Freeman
Chairman Vice President and
Investment Officer
September 23, 1998
<TABLE>
<CAPTION>
================================================================================
Top Ten Holdings+ As of August 31, 1998
================================================================================
<S> <C>
1. Tyco International Ltd. 11.8%
- --------------------------------------------------------------------------------
2. Intel Corp. 10.7
- --------------------------------------------------------------------------------
3. Forest Laboratories Inc., Class A Shares 7.7
- --------------------------------------------------------------------------------
4. CBS Corp. 6.1
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5. Amgen Inc. 5.4
- --------------------------------------------------------------------------------
6. Genzyme Corp.-- General Division 4.6
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7. Lehman Brothers Holdings Inc. 4.4
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8. Chiron Corp. 4.1
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9. United Healthcare Corp. 4.1
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10. Genentech Inc. 3.6
- --------------------------------------------------------------------------------
</TABLE>
+ As a percentage of total common stock.
- ----------
* The Fed lowered the federal funds rate by 25 basis points on Tuesday,
September 29, 1998 and 25 basis points on Thursday, October 15, 1998, after
this letter was written.
- --------------------------------------------------------------------------------
Smith Barney Aggressive Growth Fund Inc. 3
<PAGE>
================================================================================
Historical Performance -- Class A Shares
================================================================================
<TABLE>
<CAPTION>
Net Asset Value
-------------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
8/31/98 $41.80 $33.78 $0.00 $1.96 (15.16)%
- ------------------------------------------------------------------------------------------------------------------------------------
8/31/97 28.76 41.80 0.00 0.81 49.11
- ------------------------------------------------------------------------------------------------------------------------------------
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
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8/31/90 19.25 16.16 0.02 2.03 (6.38)
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8/31/89 13.68 19.25 0.00 0.43 44.97
====================================================================================================================================
Total $0.02 $10.67
====================================================================================================================================
<CAPTION>
================================================================================
Historical Performance -- Class B Shares
================================================================================
Net Asset Value
-------------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
8/31/98 $40.17 $32.12 $0.00 $1.96 (15.90)%
- ------------------------------------------------------------------------------------------------------------------------------------
8/31/97 27.88 40.17 0.00 0.81 47.94
- ------------------------------------------------------------------------------------------------------------------------------------
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
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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 $6.51
====================================================================================================================================
<CAPTION>
================================================================================
Historical Performance -- Class L Shares
================================================================================
Net Asset Value
-------------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
8/31/98 $40.22 $32.19 $0.00 $1.96 (15.80)%
- ------------------------------------------------------------------------------------------------------------------------------------
8/31/97 27.91 40.22 0.00 0.81 47.97
- ------------------------------------------------------------------------------------------------------------------------------------
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 $6.51
====================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
4 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Historical Performance -- Class Y Shares
================================================================================
<TABLE>
<CAPTION>
Net Asset Value
-------------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
8/31/98 $42.07 $34.13 $0.00 $1.96 (14.86)%
- ------------------------------------------------------------------------------------------------------------------------------------
8/31/97 28.84 42.07 0.00 0.81 49.64
- ------------------------------------------------------------------------------------------------------------------------------------
Inception*-- 8/31/96 31.86 28.84 0.00 2.37 (10.13)+++
====================================================================================================================================
Total $0.00 $5.14
====================================================================================================================================
<CAPTION>
================================================================================
Historical Performance -- Class Z Shares
================================================================================
Net Asset Value
-------------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
8/31/98 $42.60 $34.58 $0.00 $1.96 (14.86)%
- ------------------------------------------------------------------------------------------------------------------------------------
8/31/97 29.20 42.60 0.00 0.81 49.61
- ------------------------------------------------------------------------------------------------------------------------------------
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 $6.51
====================================================================================================================================
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
<CAPTION>
================================================================================
Average Annual Total Return
================================================================================
Without Sales Charge(1)
------------------------------------------------------------------------------------
Class A Class B Class L Class Y Class Z
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Year Ended 8/31/98 (15.16)% (15.90)% (15.80)% (14.86)% (14.86)%
- ------------------------------------------------------------------------------------------------------------------------------------
Five Years Ended 8/31/98 11.88 11.00 11.04 N/A 12.27
- ------------------------------------------------------------------------------------------------------------------------------------
Ten Years Ended 8/31/98 14.33 N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Inception* through 8/31/98 12.65 11.93 12.57 5.38 13.20
====================================================================================================================================
<CAPTION>
With Sales Charge(2)
------------------------------------------------------------------------------------
Class A Class B Class L Class Y Class Z
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Year Ended 8/31/98 (19.40)% (19.90)% (17.44)% (14.86)% (14.86)%
- ------------------------------------------------------------------------------------------------------------------------------------
Five Years Ended 8/31/98 10.74 10.87 10.82 N/A 12.27
- ------------------------------------------------------------------------------------------------------------------------------------
Ten Years Ended 8/31/98 13.74 N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Inception* through 8/31/98 12.26 11.93 12.36 5.38 13.20
====================================================================================================================================
</TABLE>
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Smith Barney Aggressive Growth Fund Inc. 5
<PAGE>
================================================================================
Cumulative Total Return
================================================================================
<TABLE>
<CAPTION>
Without Sales Charge(1)
================================================================================
<S> <C>
Class A (8/31/88 through 8/31/98) 281.59%
- --------------------------------------------------------------------------------
Class B (Inception* through 8/31/98) 92.64
- --------------------------------------------------------------------------------
Class L (Inception* through 8/31/98) 87.43
- --------------------------------------------------------------------------------
Class Y (Inception* through 8/31/98) 14.51@
- --------------------------------------------------------------------------------
Class Z (Inception* through 8/31/98) 105.72
================================================================================
</TABLE>
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect deduction of the applicable
sales charges with respect to Class A and L shares or the applicable
contingent deferred sales charges ("CDSC") with respect to Class B and
Class L shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charges of 5.00% and 1.00%;
respectively; Class B shares reflect the deduction of a 5.00% CDSC, which
applies if shares are redeemed within one year from purchase. Thereafter,
the CDSC declines by 1.00% per year until no CDSC is incurred. Class L
shares also reflect the deduction of a 1.00% CDSC which applies if shares
are redeemed within the first year of purchase.
* Inception dates for Class A, B, L, 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.
++ Performance for Class Y shares is for the period from January 31, 1996
through August 31, 1996 since all Class Y shares redeemed during November
1995 and new shares in Class Y were not purchased until January 31, 1996.
@ For the purpose of calculating Class Y shares cumulative total return, an
inception date of January 31, 1996 is used.
- --------------------------------------------------------------------------------
6 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Smith Barney Aggressive Growth Fund Inc. at a Glance (unaudited)
================================================================================
Growth of $10,000 Invested in Class A Shares of the Smith Barney Aggressive
Growth Fund Inc. vs. Value Line Composite Index and Russell 2500 Growth Index+
- --------------------------------------------------------------------------------
August 1988--August 1998
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
Smith Barney Value Line Value Line Russell 2500
Aggressive Composite Index Composite Index Growth
Growth Fund Inc. (Geometric)++ (Arithmetic)++ Index++
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Aug 1988 $ 9,500 $10,000 $10,000 $10,000
Aug 1989 $13,772 $12,160 $12,686 $13,073
Aug 1990 $12,894 $ 9,139 $10,188 $11,304
Aug 1991 $17,017 $10,738 $13,029 $14,027
Aug 1992 $16,605 $10,758 $14,162 $13,298
Aug 1993 $20,681 $12,581 $17,569 $16,686
Aug 1994 $23,461 $12,878 $19,019 $17,484
Aug 1995 $30,956 $14,250 $22,182 $22,271
Aug 1996 $28,655 $15,093 $24,779 $25,077
Aug 1997 $42,727 $19,110 $32,951 $31,063
Aug 1998 $36,251 $15,821 $29,204 $23,129
</TABLE>
+ Hypothetical illustration of $10,000 invested in Class A shares on August
31, 1988, 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, 1998. The Value Line Composite Index is
composed of approximately 1,700 stocks. The Geometric Index is a geometric
average of the daily price percentage change in each stock covering both
large and small capitalized companies. The Arithmetic Index is an
arithmetic average of the daily price percentage change in each stock
covering both large and small capitalized companies. Russell 2500 Growth
Index measures the performance of those Russell 2500 companies with higher
price-to-book ratios and higher forecasted growth values. The indexes are
unmanaged and are not subject to the same management and trading expenses
as a mutual fund. The performance of the Fund's other classes may be
greater or less than the Class A shares' performance indicated on this
chart, depending on whether greater or lesser sales charges and fees were
incurred by shareholders investing in the other classes.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption values may be more or less than the original cost. No adjustment
has been made for shareholder tax liability on dividends or capital gains.
++ It is the opinion of management that the Russell 2500 Growth Index more
accurately reflects the current composition of the Smith Barney Aggressive
Growth Fund Inc. than the Value Line Composite Index. In future reporting,
the Russell 2500 Growth Index will be used as a basis of comparison of
total return performance rather than the Value Line Composite Index.
Industry Diversification of Common Stock*
- -----------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
<TABLE>
<S> <C>
Biotechnology 18.8%
Broadcasting/Cable 16.6%
Computer Hardware 3.4%
Compuer Software 4.0%
Diversified Technology 2.7%
Investment Banking Services 6.3%
Managed Health Care Providers 4.1%
Multi-Industry 11.8%
Pharmaceuticals 13.0%
Semiconductors 13.5%
Other 5.8%
</TABLE>
* As a percentage of total common stock.
Investment Breakdown**
- ----------------------
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<S> <C>
Common Stock 99.2%
Foreign Preferred Stock 0.8%
</TABLE>
** As a percentage of total investments.
- --------------------------------------------------------------------------------
Smith Barney Aggressive Growth Fund Inc. 7
<PAGE>
================================================================================
Schedule of Investments August 31, 1998
================================================================================
<TABLE>
<CAPTION>
============================================================================================================
SHARES SECURITY VALUE
============================================================================================================
<S> <C> <C>
COMMON STOCK -- 99.2%
Biotechnology -- 18.7%
175,000 Alkermes Inc.(a)(b) $ 1,914,062
600,000 Amgen Inc.(a) 36,525,000
232,500 AVANT Immunotherapeutics, Inc.(a) 421,406
1,950,000 Chiron Corp.(a)(b) 28,031,250
250,000 Cor Therapeutics Inc.(a) 2,382,813
370,000 Genentech Inc.(a)(b) 24,420,000
1,150,000 Genzyme Corp.-- General Division(a)(b) 31,050,000
780,000 NABI Inc.(a) 2,266,875
- ------------------------------------------------------------------------------------------------------------
127,011,406
- ------------------------------------------------------------------------------------------------------------
Broadcasting/Cable -- 16.4%
500,000 Cablevision Systems Development Corp., Class A Shares(a)(b) 16,937,500
1,591,998 CBS Corp.(a) 41,391,948
100,000 Comcast Corp., Class A Shares 3,750,000
600,000 Comcast Corp., Class A Special Shares 22,425,000
337,500 Liberty Media, Class A Shares(a)(b) 11,032,031
318,101 Tele-Communications Inc., Class A Shares(a)(b) 10,497,333
363,798 Telecom-TCI Ventures, Class A Shares(a)(b) 6,048,142
- ------------------------------------------------------------------------------------------------------------
112,081,954
- ------------------------------------------------------------------------------------------------------------
Communications -- 2.0%
800,000 Arch Communications Group, Inc.(a) 2,000,000
1,000,000 California Microwave Inc.(a) 10,750,000
625,000 Telular Corp.(a)(b) 761,719
- ------------------------------------------------------------------------------------------------------------
13,511,719
- ------------------------------------------------------------------------------------------------------------
Computer Hardware -- 3.4%
2,000,000 Quantum Corp.(a) 22,875,000
- ------------------------------------------------------------------------------------------------------------
Computer Software -- 4.0%
170,200 Microsoft Corp.(a) 16,328,563
600,000 Netscape Communications Corp.(a) 10,837,500
- ------------------------------------------------------------------------------------------------------------
27,166,063
- ------------------------------------------------------------------------------------------------------------
Diversified Technology -- 2.7%
585,000 C-Cor Electronics, Inc.(a) 7,020,000
340,000 Drexler Technology Corp.(a)(b) 3,315,000
589,000 Excel Technology Inc.(a) 3,911,328
305,000 GenRad Inc.(a) 3,202,500
150,000 Indigo N.V.(a) 365,625
100,000 Vivid Technologies, Inc.(a) 762,500
- ------------------------------------------------------------------------------------------------------------
18,576,953
- ------------------------------------------------------------------------------------------------------------
Drug Delivery/Testing -- 0.4%
499,500 Advanced Polymer Systems Inc.(a) 2,185,313
175,000 Cygnus Inc.(a)(b) 568,750
- ------------------------------------------------------------------------------------------------------------
2,754,063
- ------------------------------------------------------------------------------------------------------------
Energy -- 2.2%
1,000,000 EVI, Inc.(a) 15,250,000
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
8 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Schedule of Investments (continued) August 31, 1998
================================================================================
<TABLE>
<CAPTION>
============================================================================================================
SHARES SECURITY VALUE
============================================================================================================
<S> <C> <C>
Healthcare - Miscellaneous -- 0.3%
100,000 Biosite Diagnostics, Inc.(a) $ 375,000
70,000 EDAP TMS S.A.(a) 192,500
275,000 Nanogen Inc.(a) 1,271,875
45,000 Symphonix Devices, Inc.(a) 140,625
- ------------------------------------------------------------------------------------------------------------
1,980,000
- ------------------------------------------------------------------------------------------------------------
Investment Banking Services -- 6.3%
750,000 Lehman Brothers Holdings Inc. 29,531,250
200,000 Merrill Lynch & Co., Inc. 13,200,000
- ------------------------------------------------------------------------------------------------------------
42,731,250
- ------------------------------------------------------------------------------------------------------------
Machinery -- 0.8%
500,000 Bridgeport Machines Inc.(a) 5,500,000
- ------------------------------------------------------------------------------------------------------------
Managed Healthcare Providers -- 4.1%
775,000 United Healthcare Corp.(b) 27,996,875
- ------------------------------------------------------------------------------------------------------------
Multi-Industry -- 11.7%
1,440,000 Tyco International Ltd.(b) 79,920,000
- ------------------------------------------------------------------------------------------------------------
Pharmaceuticals -- 12.8%
80,000 EP Medsystems Inc.(a) 260,000
1,600,000 Forest Laboratories Inc., Class A Shares(a) 52,400,000
2,000,000 Gensia Sicor, Inc.(a) 5,500,000
800,000 IDEC Pharmaceuticals Corp.(a) 14,400,000
120,800 Pfizer Inc. 11,234,400
200,000 Shaman Pharmaceuticals Inc.(a)(b) 356,250
225,000 Vertex Pharmaceuticals Inc.(a)(b) 3,431,250
- ------------------------------------------------------------------------------------------------------------
87,581,900
- ------------------------------------------------------------------------------------------------------------
Semiconductors -- 13.4%
550,000 Cirrus Logic Inc.(a) 3,334,375
1,020,000 Intel Corp. 72,611,250
500,000 Micron Technology Inc.(a)(b) 11,375,000
630,000 Standard Microsystems Corp.(a) 3,937,500
- ------------------------------------------------------------------------------------------------------------
91,258,125
- ------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost-- $432,447,255) 676,195,308
============================================================================================================
FOREIGN PREFERRED STOCK -- 0.8%
84,384 Nokia Corp. AB (Cost-- $1,242,555) 5,637,906
============================================================================================================
TOTAL INVESTMENTS -- 100%
(Cost-- $433,689,810*) $681,833,214
============================================================================================================
</TABLE>
(a) Non-income producing security.
(b) A portion of this security is on loan (See Note 5).
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Aggressive Growth Fund Inc. 9
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================
Statement of Assets and Liabilities August 31, 1998
=================================================================================================
<S> <C>
ASSETS:
Investments, at value (Cost-- $433,689,810) $681,833,214
Collateral for securities on loan (Note 5) 139,266,370
Receivable for securities sold 906,570
Receivable for Fund shares sold 735,262
Dividends and interest receivable 126,185
- -------------------------------------------------------------------------------------------------
Total Assets 822,867,601
- -------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities on loan (Note 5) 139,266,370
Payable for Fund shares purchased 1,897,971
Payable to bank 1,497,001
Investment advisory fees payable 422,092
Administration fees payable 140,536
Distribution fees payable 73,638
Accrued expenses 243,655
- -------------------------------------------------------------------------------------------------
Total Liabilities 143,541,263
- -------------------------------------------------------------------------------------------------
Total Net Assets $679,326,338
=================================================================================================
NET ASSETS:
Par value of capital shares $ 204,335
Capital paid in excess of par value 412,794,432
Accumulated net investment loss (1,923)
Accumulated net realized gain from security transactions 18,186,090
Net unrealized appreciation of investments 248,143,404
- -------------------------------------------------------------------------------------------------
Total Net Assets $679,326,338
=================================================================================================
Shares Outstanding:
Class A 8,773,771
--------------------------------------------------------------------------------------------
Class B 5,784,027
--------------------------------------------------------------------------------------------
Class L 2,029,104
--------------------------------------------------------------------------------------------
Class Y 2,627,609
--------------------------------------------------------------------------------------------
Class Z 1,218,971
--------------------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $33.78
--------------------------------------------------------------------------------------------
Class B * $32.12
--------------------------------------------------------------------------------------------
Class L ** $32.19
--------------------------------------------------------------------------------------------
Class Y (and redemption price) $34.13
--------------------------------------------------------------------------------------------
Class Z (and redemption price) $34.58
--------------------------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 5.26% of net asset value per share) $35.56
--------------------------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset value per share) $32.52
=================================================================================================
</TABLE>
* Redemption price is NAV of Class B shares reduced by a 5.00% CDSC if shares
are redeemed within one year from purchase (See Note 2).
** Redemption price is NAV of Class L shares reduced by a 1.00% CDSC if shares
are redeemed within one year from initial purchase.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10 1998 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================
Statement of Operations For the Year Ended August 31, 1998
====================================================================================================
<S> <C>
INVESTMENT INCOME:
Dividends $ 1,388,762
Interest 641,388
Less: Foreign withholding tax (8,431)
- ----------------------------------------------------------------------------------------------------
Total Investment Income 2,021,719
- ----------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 2) 5,176,481
Distribution fees (Note 2) 3,984,290
Administration fees (Note 2) 1,725,494
Shareholder and system servicing fees 794,070
Registration fees 151,363
Shareholder communications 149,429
Directors' fees 52,000
Audit and legal 36,924
Custody 34,799
Other 69,966
- ----------------------------------------------------------------------------------------------------
Total Expenses 12,174,816
- ----------------------------------------------------------------------------------------------------
Net Investment Loss (10,153,097)
- ----------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 3):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales 83,391,648
Cost of securities sold 62,459,227
- ----------------------------------------------------------------------------------------------------
Net Realized Gain 20,932,421
- ----------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of year 378,425,928
End of year 248,143,404
- ----------------------------------------------------------------------------------------------------
Decrease in Net Unrealized Appreciation (130,282,524)
- ----------------------------------------------------------------------------------------------------
Net Loss on Investments (109,350,103)
- ----------------------------------------------------------------------------------------------------
Decrease in Net Assets From Operations $(119,503,200)
====================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Aggressive Growth Fund Inc. 11
<PAGE>
================================================================================
Statement of Changes in Net Assets For the Years Ended August 31,
================================================================================
<TABLE>
<CAPTION>
1998 1997
===================================================================================================================================
<S> <C> <C>
OPERATIONS:
Net investment loss $ (10,153,097) $ (7,389,592)
Net realized gain 20,932,421 39,280,111
Increase (decrease) in net unrealized appreciation (130,282,524) 235,657,971
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Operations (119,503,200) 267,548,490
- -----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gains (38,847,159) (15,724,994)
- -----------------------------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From Distributions to Shareholders (38,847,159) (15,724,994)
- -----------------------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares 1,188,296,454 679,494,690
Net asset value of shares issued for reinvestment of dividends 30,686,349 13,250,651
Cost of shares reacquired (1,191,738,320) (676,253,200)
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets From Fund Share Transactions 27,244,483 16,492,141
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets (131,105,876) 268,315,637
NET ASSETS:
Beginning of year 810,432,214 542,116,577
- -----------------------------------------------------------------------------------------------------------------------------------
End of year* $ 679,326,338 $ 810,432,214
===================================================================================================================================
* Includes accumulated net investment loss of: $(1,923) $(10,811)
===================================================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12 1998 Annual Report to Shareholders
<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 value; (d) dividend income is recorded on the ex-dividend date and
interest income is recorded on an 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 each class; investment advisory fees and general
Fund expenses are allocated on the basis of relative net assets by class; (g)
dividends and distributions to shareholders are recorded on the ex-dividend
date; (h) 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; (i) 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, 1998, reclassifications were made to the Fund's capital accounts to
reflect permanent book/tax differences and income and gains available for
distributions under income tax regulations. Accordingly, an accumulated net
investment loss of $7,416,237 was reclassified to paid-in capital. Net
investment income, net realized gains and net assets were not affected by this
adjustment; 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.
2. Investment Advisory Agreement, Administration Agreement and Other
Transactions
Mutual Management Corp. ("MMC"), a subsidiary of Salomon Smith Barney Holdings
Inc. ("SSBH"), acts as investment adviser to the Fund. The Fund pays MMC 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.
MMC 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 SSBH, acts as distributor of
Fund shares and primary broker for its portfolio agency transactions.
On June 12, 1998, the Fund's Class C shares were renamed Class L shares.
Effective June 15, 1998, Class L shares are being sold at net asset value plus a
maximum initial sales charge of 1.00%. Class L shares also have a 1.00%
contingent deferred sales charge ("CDSC"), which applies if redemption occurs
within the first year of purchase.
There is also a CDSC of 5.00% on Class B shares, which applies if redemption
occurs within one year from purchase. This CDSC declines by 1.00% per year until
no CDSC is incurred. In certain cases, Class A shares have a 1.00% CDSC, which
applies if redemption occurs
- --------------------------------------------------------------------------------
Smith Barney Aggressive Growth Fund Inc. 13
<PAGE>
================================================================================
Notes to Financial Statements (continued)
================================================================================
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, 1998, SB received sales charges of approximately
$759,000 and $25,000 on sales of the Fund's Class A and Class L shares,
respectively. In addition, CDSCs paid to SB were approximately:
<TABLE>
<CAPTION>
Class A Class B Class L
================================================================================
<S> <C> <C> <C>
CDSCs $1,000 $341,000 $9,000
================================================================================
</TABLE>
Pursuant to a Distribution Plan the Fund pays a service fee with respect to its
Class A, B and L 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 L 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, 1998, total Distribution Plan fees were as follows:
<TABLE>
<CAPTION>
Class A Class B Class L
================================================================================
<S> <C> <C> <C>
Distribution Plan Fees $927,437 $2,247,276 $809,577
================================================================================
</TABLE>
All officers and one Director of the Fund are employees of SB.
3. Investments
During the year ended August 31, 1998, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
<TABLE>
================================================================================
<S> <C>
Purchases $56,194,026
- --------------------------------------------------------------------------------
Sales 83,391,648
================================================================================
</TABLE>
At August 31, 1998, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were substantially as follows:
<TABLE>
================================================================================
<S> <C>
Gross unrealized appreciation $ 323,502,674
Gross unrealized depreciation (75,359,270)
- -------------------------------------------------------------------------------
Net unrealized appreciation $ 248,143,404
================================================================================
</TABLE>
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 Fund requires continual
maintenance of the market value of the collateral in amounts at least equal to
the repurchase price.
5. Lending of Portfolio Securities
The Fund has an agreement with its custodian whereby the custodian may lend
securities owned by the Fund to brokers, dealers and other financial
organizations. Fees earned by the Fund on securities lending are recorded as
interest income. Loans of securities by the Fund are collateralized by cash,
U.S. government securities or high quality money market instruments that are
maintained at all times in an amount at least equal to the current market value
of the loaned securities, plus a margin which may vary depending on the type of
securities loaned. The custodian establishes and maintains the collateral in a
segregated account. The Fund maintains exposure for the risk of any losses in
the investment of amounts received as collateral.
At August 31, 1998, the Fund loaned common stocks having a value of
approximately $125,818,968 and holds the following collateral for loaned
securities:
<TABLE>
<CAPTION>
Security Description Value
================================================================================
<S> <C>
Time Deposits:
Banco Bilboa Vizcaya, 5.812% due 9/1/98 $ 19,432,661
Bank Brussels Lambert, 5.812% due 9/1/98 39,790,798
Societe Generale, 5.812% due 9/1/98 19,432,661
Svenska Handelsbanken,
5.812% due 9/1/98 21,388,156
Westdeutsche Landesbank,
5.812% due 9/1/98 16,656,567
Repurchase Agreement:
Morgan Stanley, 5.810% due 9/1/98 22,565,527
- --------------------------------------------------------------------------------
Total $139,266,370
================================================================================
</TABLE>
Interest income earned by the Fund from securities lending for the year ended
August 31, 1998 was $380,853.
- --------------------------------------------------------------------------------
14 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Notes to Financial Statements (continued)
================================================================================
6. Capital Shares
At August 31, 1998, 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. Effective June 12,
1998, the Fund adopted the renaming of existing Class C shares as Class L
shares.
At August 31, 1998, total paid-in capital amounted to the following for each
class:
<TABLE>
<CAPTION>
Class A Class B Class L Class Y Class Z
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Total Paid-in Capital $108,098,930 $167,727,650 $43,338,557 $69,242,623 $24,591,007
====================================================================================================================================
</TABLE>
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
August 31, 1998 August 31, 1997
------------------------------------- --------------------------------------
Shares Amount Shares Amount
====================================================================================================================================
<S> <C> <C> <C> <C>
Class A
Shares sold 21,333,538 $902,655,163 12,458,917 $ 430,880,504
Shares issued on reinvestment 385,804 15,173,658 219,052 6,860,680
Shares redeemed (20,932,711) (889,903,470) (13,470,744) (465,482,694)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 786,631 $ 27,925,351 (792,775) $ (27,741,510)
====================================================================================================================================
Class B
Shares sold 5,409,162 $218,854,365 4,486,678 $ 148,506,108
Shares issued on reinvestment 260,912 9,820,734 126,231 3,822,271
Shares redeemed (4,805,074) (194,506,323) (4,583,116) (150,883,158)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 865,000 $ 34,168,776 29,793 $ 1,445,221
====================================================================================================================================
Class L+
Shares sold 786,447 $ 32,005,002 1,248,662 $ 40,857,598
Shares issued on reinvestment 96,287 3,630,010 56,833 1,722,597
Shares redeemed (775,551) (31,661,828) (1,669,256) (54,155,480)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 107,183 $ 3,973,184 (363,761) $ (11,575,285)
====================================================================================================================================
Class Y
Shares sold 642,321 $ 26,209,826 1,725,792 $ 55,549,740
Shares issued on reinvestment 9 346 3 84
Shares redeemed (1,774,035) (73,189,015) (107) (3,752)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (1,131,705) $(46,978,843) 1,725,688 $ 55,546,072
====================================================================================================================================
Class Z
Shares sold 202,137 $ 8,572,098 107,263 $ 3,700,740
Shares issued on reinvestment 51,347 2,061,601 26,548 845,019
Shares redeemed (56,869) (2,477,684) (167,718) (5,728,116)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 196,615 $ 8,156,015 (33,907) $ (1,182,357)
====================================================================================================================================
</TABLE>
+ On June 12, 1998, Class C shares were renamed Class L shares.
- --------------------------------------------------------------------------------
Smith Barney Aggressive Growth Fund Inc. 15
<PAGE>
================================================================================
Financial Highlights
================================================================================
For a share of each class of capital stock outstanding throughout each year:
<TABLE>
<CAPTION>
Class A Shares 1998 1997 1996 1995 1994
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $41.80 $28.76 $33.53 $26.76 $23.59
- -----------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss (0.42) (0.33) (0.31) (0.34) (0.32)
Net realized and unrealized gain (loss) (5.64) 14.18 (2.09) 8.48 3.49
- -----------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (6.06) 13.85 (2.40) 8.14 3.17
- -----------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net realized gains (1.96) (0.81) (2.37) (1.37) --
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.96) (0.81) (2.37) (1.37) --
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $33.78 $41.80 $28.76 $33.53 $26.76
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return (15.16)% 49.11% (7.44)% 31.95% 13.44%
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $296,376 $333,877 $252,531 $292,402 $180,917
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.21% 1.21% 1.30% 1.37% 1.42%*
Net investment loss (0.97) (0.93) (0.97) (1.05) (1.23)
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 7% 6% 13% 44% 11%
===================================================================================================================================
</TABLE>
* The operating expense ratio excludes interest expense. The operating
expense ratio including interest expense would have been 1.43%.
- --------------------------------------------------------------------------------
16 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of capital stock outstanding throughout each year:
<TABLE>
<CAPTION>
Class B Shares 1998 1997 1996 1995 1994
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $40.17 $27.88 $32.82 $26.42 $23.46
- -----------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss (0.66) (0.56) (0.53) (0.33) (0.29)
Net realized and unrealized gain (loss) (5.43) 13.66 (2.04) 8.10 3.25
- -----------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (6.09) 13.10 (2.57) 7.77 2.96
- -----------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net realized gains (1.96) (0.81) (2.37) (1.37) --
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.96) (0.81) (2.37) (1.37) --
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $32.12 $40.17 $27.88 $32.82 $26.42
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return (15.90)% 47.94% (8.16)% 30.93% 12.62%
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $185,808 $197,559 $136,322 $97,438 $49,741
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 2.02% 2.01% 2.07% 2.12% 2.22%*
Net investment loss (1.78) (1.73) (1.75) (1.80) (2.04)
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 7% 6% 13% 44% 11%
===================================================================================================================================
</TABLE>
* The operating expense ratio excludes interest expense. The operating
expense ratio including interest expense would have been 2.23%.
- --------------------------------------------------------------------------------
Smith Barney Aggressive Growth Fund Inc. 17
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of capital stock outstanding throughout each year:
<TABLE>
<CAPTION>
Class L Shares(1) 1998 1997 1996 1995(2) 1994
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $40.22 $27.91 $32.84 $26.42 $23.47
- ----------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss (0.68) (0.59) (0.53) (0.40) (0.17)
Net realized and unrealized gain (loss) (5.39) 13.71 (2.03) 8.19 3.12
- ----------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (6.07) 13.12 (2.56) 7.79 2.95
- ----------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net realized gains (1.96) (0.81) (2.37) (1.37) --
- ----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.96) (0.81) (2.37) (1.37) --
- ----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $32.19 $40.22 $27.91 $32.84 $26.42
- ----------------------------------------------------------------------------------------------------------------------------------
Total Return (15.80)% 47.97% (8.12)% 31.01% 12.57%
- ----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $65,312 $77,297 $63,786 $72,324 $367
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.97% 1.97% 2.06% 2.12% 2.08%*
Net investment loss (1.73) (1.68) (1.75) (1.80) (1.90)
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 7% 6% 13% 44% 11%
==================================================================================================================================
</TABLE>
(1) On June 12, 1998, Class C shares were renamed Class L shares.
(2) On November 7, 1994, the former Class D shares were renamed Class C shares.
* The operating expense ratio excludes interest expense. The operating
expense ratio including interest expense would have been 2.09%.
- --------------------------------------------------------------------------------
18 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of capital stock outstanding throughout each year:
<TABLE>
<CAPTION>
Class Y Shares 1998 1997 1996(1)
===================================================================================================================================
<S> <C> <C> <C>
Net Asset Value, Beginning of Year $42.07 $28.84 $31.86
- -----------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss (0.25) (0.16) (0.12)
Net realized and unrealized gain (loss) (5.73) 14.20 (0.53)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (5.98) 14.04 (0.65)
- -----------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net realized gains (1.96) (0.81) (2.37)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.96) (0.81) (2.37)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $34.13 $42.07 $28.84
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return (14.86)% 49.64% (10.13)%*++
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $89,675 $158,146 $58,641
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.85% 0.84% 0.84%+
Net investment loss (0.62) (0.56) (0.49)+
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 7% 6% 13%
===================================================================================================================================
</TABLE>
(1) For the period from October 12, 1995 (inception date) to August 31, 1996.
* Performance for Class Y shares is for the period from January 31, 1996 to
August 31, 1996 since all Class Y shares were redeemed during November 1995
and new shares in Class Y were not purchased until January 31, 1996.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Smith Barney Aggressive Growth Fund Inc. 19
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of capital stock outstanding throughout each year:
<TABLE>
<CAPTION>
Class Z Shares 1998 1997 1996 1995(1) 1994
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $42.60 $29.20 $33.88 $26.94 $23.67
- -----------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss (0.28) (0.20) (0.20) (0.34) (0.31)
Net realized and unrealized gain (loss) (5.78) 14.41 (2.11) 8.65 3.58
- -----------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (6.06) 14.21 (2.31) 8.31 3.27
- -----------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net realized gains (1.96) (0.81) (2.37) (1.37) --
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.96) (0.81) (2.37) (1.37) --
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $34.58 $42.60 $29.20 $33.88 $26.94
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return (14.86)% 49.61% (7.07)% 32.38% 13.81%
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $42,155 $43,553 $30,837 $27,209 $24,467
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.85% 0.85% 0.93% 1.12% 1.01%*
Net investment loss (0.62) (0.57) (0.61) (0.80) (0.83)
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 7% 6% 13% 44% 11%
===================================================================================================================================
</TABLE>
(1) On November 7, 1994, the former Class C shares were renamed Class Z shares.
* The operating expense ratio excludes interest expense. The operating
expense ratio including interest expense would have been 1.02%.
- --------------------------------------------------------------------------------
20 1998 Annual Report to Shareholders
<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, 1998, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the years
in the four-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 the year 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, 1998, by correspondence with the custodian. As to securities sold but
not delivered, 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, 1998, and the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period then ended, and the financial highlights for
each of the years in the four-year period then ended, in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
New York, New York
October 15, 1998
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Smith Barney Aggressive Growth Fund Inc. 21
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Tax Information (unaudited)
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For Federal tax purposes the Fund hereby designates for the fiscal year ended
August 31, 1998:
. The Taxpayer Relief Act of 1997 enacted differing rates of tax on
various long-term capital gain transactions. As a result, the Fund
designates:
. Total long-term capital gain distributions paid of $38,847,159
which are considered "20 percent rate gains".
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22 1998 Annual Report to Shareholders
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Additional Shareholder Information (unaudited)
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On March 9, 1998, a Special Meeting of shareholders of the Fund was held for the
purpose of voting on the following matters:
1. To elect Directors of the Fund; and
2. To approve or disapprove the reclassification, modification and/or
elimination of certain fundamental investment policies.
The results of the vote on Proposal 1 were as follows:
<TABLE>
<CAPTION>
Percentage Percentage
Shares Voted of Shares Shares Voted of Shares
Name of Director For Voted Against Voted
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<S> <C> <C> <C> <C>
Paul R. Ades 10,633,754.068 97.210% 305,222.474 2.790%
Herbert Barg 10,608,111.937 96.975 330,864.605 3.025
Dwight B. Crane 10,632,377.156 97.197 306,599.386 2.803
Frank Hubbard 10,635,107.914 97.222 303,868.628 2.778
Jerome Miller 10,632,725.072 97.200 306,251.470 2.800
Ken Miller 10,635,814.947 97.229 303,161.595 2.771
Heath B. McLendon 10,624,679.065 97.127 314,297.477 2.873
====================================================================================================================================
</TABLE>
Proposal 2 requested that shareholders approve certain changes to the
fundamental policies of the Fund in order to modernize them in view of certain
regulatory, business or industry developments that have occurred since original
adoption of these policies by the Fund. The following chart demonstrates that
all proposals were approved by shareholders.
Please note that "M" indicates a modification of the policy; and "R" indicates
the reclassification of the policy from fundamental (which would require
shareholder approval to change) to non-fundamental (which can be changed by a
vote of the Board of Directors).
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M Diversification Approved
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M Senior Securities Approved
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M Industry Concentration Approved
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M Borrowing Approved
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M Lending Approved
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R Margin and Short-Sales Approved
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M Real Estate Approved
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The information below reports the lowest percentage of shares voting for the
proposals, the highest percentage of shares voting against and abstaining by
shareholders of the Fund on all proposals.*
<TABLE>
<CAPTION>
Percentage Percentage Percentage
Shares Voted of Shares Shares Voted of Shares Shares of Shares
For Voted Against Voted Abstaining Abstained
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<S> <C> <C> <C> <C> <C>
9,888,950.688 90.811% 206,860.957 1.900% 793,774.897 7.289%
====================================================================================================================================
</TABLE>
* Broker non-votes constituted less than one percent of voted shares.
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Smith Barney Aggressive Growth Fund Inc. 23
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Smith Barney
Aggressive Growth
Fund Inc.
Directors Investment Adviser and Administrator
Paul R. Ades Mutual Management Corp.
Herbert Barg
Dwight B. Crane Distributor
Frank Hubbard
Heath B. McLendon, Chairman Smith Barney Inc.
Jerome Miller
Ken Miller
Custodian
Allan R. Johnson, Emeritus
John F. White, Emeritus PNC Bank, N.A.
Officers Shareholder Servicing Agent
Heath B. McLendon First Data Investor Services Group, Inc.
President and Chief Executive Officer P.O. Box 9134
Boston, MA 02205-9134
Lewis E. Daidone
Senior Vice President and Treasurer This report is submitted for the general
information of shareholders of Smith
Richard A. Freeman Barney Aggressive Growth Fund Inc. It is
Vice President and Investment Officer not for distribution to prospective
investors unless accompanied by a
Thomas M. Reynolds current Prospectus for the Fund, which
Controller contains information concerning the
Fund's investment policies and expenses
Christina T. Sydor as well as other pertinent information.
Secretary
SMITH BARNEY
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A Member of TravelersGroup [LOGO]
Smith Barney Aggressive
Growth Fund Inc.
Smith Barney Mutual Funds
388 Greenwich Street
MF-2
New York, New York 10013
www.smithbarney.com
FD0433 10/98
