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

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<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