Smith Barney
Money Funds, Inc.
3100 Breckinridge Blvd., Bldg. 200
Duluth, Georgia 30199-0062
(800) 544-5445
Smith Barney Money
Funds,Inc.
MARCH 1, 1996
Prospectus begins on page one
PR O S P E C T U S
Smith Barney Money Funds, Inc.
Cash Portfolio Prospectus
March 1, 1996
3100 Breckinridge Blvd., Bldg. 200
Duluth, Georgia 30199-0062
(800) 544-5445
The Cash Portfolio (the "Portfolio") is one of the investment portfolios
that currently comprise Smith Barney Money Funds, Inc. The Portfolio is
a money market fund that invests in high quality money market
instruments.
The Portfolio seeks to provide:
~ Daily Income
~ Convenience
~ Daily Liquidity
~ Stability of Net Asset Value
The Portfolio offers one Class of shares (Class A shares) to investors
purchasing through Investments Representatives of PFS Investments Inc.
("PFS Investments"). In addition to Class A shares, the Portfolio
offers Class C and Class Y shares to investors purchasing through Smith
Barney Inc. ("Smith Barney"), a distributor of the Fund. Those shares
have different expenses than Class A shares, which may affect
performance.
Shares of the Fund are not insured or guaranteed by the U.S. Government.
There is no assurance that the Fund will be able to maintain a stable
net asset value of $1.00 per share.
This Prospectus sets forth concisely certain information about the Fund
and the Portfolio, including service fees and expenses, that prospective
investors will find helpful in making an investment decision. Investors
are encouraged to read this Prospectus carefully and retain it for
future reference.
Additional information about the Fund is contained in a Statement of
Additional Information dated February 16, 1996, as amended or
supplemented from time to time, that is available upon request and
without charge by calling or writing the Fund at the telephone number or
address set forth above, or by contacting a PFS Investments
Representative.
The Statement of Additional Information has been filed with the
Securities and Exchange Commission (the "SEC") and is incorporated by
reference into this Prospectus in its entirety.
PFS Distributors, Inc.
Distributor
Smith Barney Mutual Funds Management Inc.
Investment Manager
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Smith Barney Money Funds, Inc.
Table of Contents
Fee Table
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Financial Highlights
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Investment Objectives and Policies
- ------------------------------------------------------------
Valuation of Shares
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Dividends, Automatic Reinvestment and Taxes
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Purchase of Shares
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Redemption of Shares
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Exchange Privilege
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Minimum Account Size
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Yield Information
- ------------------------------------------------------------
Management of the Fund
- ------------------------------------------------------------
Distributor
- ------------------------------------------------------------
Additional Information
- ------------------------------------------------------------
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No person has been authorized to give any information or to make any
representations in connection with this offering other than those
contained in this Prospectus and, if given or made, such other
information and representations must not be relied upon as having been
authorized by the Fund or the Distributor. This Prospectus does not
constitute an offer by the Fund or the Distributor to sell or a
solicitation of an offer to buy any of the securities offered hereby in
any jurisdiction to any person to whom it is unlawful to make such offer
or solicitation in such jurisdiction.
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Smith Barney Money Funds, Inc.
Fee Table (continued)
The following expense table lists the costs and expenses that an
investor will incur either directly or indirectly as a shareholder of
the Portfolio based on its operating expenses for its most recent
fiscal year:
- ------------------------------------------------------------------------
- -----------------------------------------
Shareholder Transaction Expenses
Sales Charge Imposed on Purchases None
Sales Charge Imposed on Reinvested
Dividends None
Deferred Sales Charge None*
Redemption Fee None
Exchange Fee None
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Annual Portfolio Operating Expenses
(as a percentage of average net
assets)
Management Fees 0.42%
12b-1 Fees 0.10
Other Expenses 0.10
TOTAL PORTFOLIO OPERATING
EXPENSES 0.62%
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- ----------------------------------------
* Class A shares acquired as part of an exchange privilege transaction,
which were originally acquired in one of the other Smith Barney Mutual
Funds at net asset value subject to a contingent deferred sales charge
("CDSC"), remain subject to the original fund's CDSC while held in the
Portfolio. See "Redemption of Shares-Contingent Deferred Sales Charge."
Example
The following example is intended to assist an investor in understanding
the various costs that an investor in the Portfolio will bear directly
or indirectly. The example assumes payment by the Portfolio of operating
expenses at the levels set forth in the table above. See "Purchase of
Shares," "Redemption of Shares," "Management of the Fund" and
"Distributor."
1 Year 3 Years 5 Years
10 years
An investor would pay the following expenses on a $1,000
investment, assuming (1) 5.00% annual return and (2)
redemption at the end of each time period:
$6 $20 $35 $77
The example is included to provide a means for the investor to compare
expense levels of funds with different fee structures over varying
investment periods. To facilitate such comparison, all funds are
required to utilize a 5.00% annual return assumption. This assumption is
unrelated to the Portfolio's prior performance and is not a projection
of future performance. This example should not be considered a
representation of past or future expenses. Actual expenses may be
greater or less than those shown.
Smith Barney Money Funds, Inc.
Financial Highlights
The following information for the periods ended December 31 has been
audited in conjunction with the annual audits of the financial
statements of Smith Barney Money Funds, Inc. by KPMG Peat Marwick LLP,
independent auditors. The 1995 financial statements and the independent
auditors' report thereon appear in the December 31, 1995 Annual Report
to Shareholders.
For a share of Class A stock outstanding throughout each period:
Year Ended Net Asset Dividends Net Asset
December 31, Value, Net from Net Value Net Assets
Beginning Investment Investment End of Total
End of Year Ratios to Average Net of Year Income Income Year Return
(in millions) Assets
Net Income
Expenses
1995 $1.00 $0.054 $(0.054) $1.00 5.53% $22,969 5.39% 0.62%
1994 1.00 0.037 (0.037) 1.00 3.73 17,590 4.10 0.64
1993 1.00 0.026 (0.026) 1.00 2.63 2,953 2.60 0.64
1992 1.00 0.033 (0.033) 1.00 3.31 2,841 3.17 0.60
1991 1.00 0.055 (0.055) 1.00 5.66 1,784 5.55 0.52
1990 1.00 0.076 (0.076) 1.00 7.92 1,998 7.60 0.52
1989 1.00 0.086 (0.086) 1.00 8.97 2,088 8.60 0.54
1988 1.00 0.069 (0.069) 1.00 7.15 1,379 6.93 0.58
1987 1.00 0.061 (0.061) 1.00 6.29 1,327 6.11 0.56
1986 1.00 0.062 (0.062) 1.00 6.37 1,230 6.21 0.60
Investment Objectives and Policies
The Portfolio's investment objectives are maximum current income and
preservation of capital. The Portfolio seeks to achieve its objectives
by investing in Bank Obligations and high quality Commercial Paper,
Corporate Obligations and Municipal Obligations, in addition to U.S.
Government Obligations and related repurchase agreements. The Portfolio
has adopted certain investment policies to assure that, to the extent
reasonably possible, its price per share will not change from $1.00,
although no assurance can be given that this goal will be achieved on a
continuous basis. In order to minimize fluctuations in market price the
Portfolio will not purchase a security with a remaining maturity of
greater than 13 months or maintain a dollar-weighted average portfolio
maturity in excess of 90 days (securities used as collateral for
repurchase agreements are not subject to these restrictions).
The Portfolio's investments will be limited to United States dollar-
denominated instruments that have received the highest rating from the
"Requisite NRSROs", securities of issuers that have received such rating
with respect to other short-term debt securities and comparable unrated
securities. "Requisite NRSROs" means (a) any two nationally recognized
statistical ratings organizations ("NRSROs") that have issued a rating
with respect to a security or class of debt obligations of an issuer, or
(b) one NRSRO, if only one NRSRO has issued such a rating at the time
that the Portfolio acquires the security. The NRSROs currently
designated as such by the SEC are Standard & Poor's Corporation ("S&P"),
Moody's Investors Service, Inc. ("Moody's"), Fitch Investors Services,
Inc., Duff and Phelps Inc., IBCA Limited and its affiliate, IBCA, Inc.
and Thomson BankWatch.
The following is a description of the types of money market instruments
in which the Portfolio may invest:
Smith Barney Money Funds, Inc.
Investment Objectives and Policies (continued)
U.S. Government Obligations - Obligations issued or guaranteed as to
payment of principal and interest by the U.S. Government (including
Treasury bills, notes and bonds) or by its agencies and
instrumentalities (such as the Government National Mortgage Association,
the Student Loan Marketing Association, the Tennessee Valley Authority,
the Bank for Cooperatives, the Farmers Home Administration, Federal Farm
Credit Banks, Federal Home Loan Banks, Federal Intermediate Credit
Banks, Federal Land Banks, the Export-Import Bank of the U.S., the
Federal Housing Administration, the Federal Home Loan Mortgage
Corporation, the U.S. Postal Service, the Federal Financing Bank and the
Federal National Mortgage Association). Some of these securities (such
as Treasury bills) are supported by the full faith and credit of the
U.S. Treasury; others (such as obligations of the Federal Home Loan
Bank) are supported by the right of the issuer to borrow from the
Treasury; while still others (such as obligations of the Student Loan
Marketing Association) are supported only by the credit of the
instrumentality.
Repurchase Agreements - The Portfolio may enter into repurchase
agreement transactions with any broker/dealer or other financial
institution, including the Fund's custodian, that is deemed creditworthy
by the Manager, under guidelines approved by the Board of Directors. A
repurchase agreement arises when the Portfolio acquires a security and
simultaneously agrees to resell it to the vendor at an agreed-upon
future date, normally the next business day. The resale price is greater
than the purchase price and reflects an agreed-upon return unrelated to
the coupon rate on the purchased security. Such transactions afford an
opportunity for the Portfolio to invest temporarily available cash at no
market risk. The Portfolio requires continual maintenance of the market
value of the collateral in amounts at least equal to the resale price.
The Portfolio's risk is limited to the ability of the seller to pay the
agreed-upon amount on the delivery date; however, if the seller
defaults, realization upon the collateral by the Portfolio may be
delayed or limited, or the Portfolio might incur a loss if the value of
the collateral securing the repurchase agreement declines and might
incur disposition costs in connection with liquidating the collateral.
The Portfolio as a matter of fundamental policy will not enter into a
repurchase agreement if, as a result thereof, more than 10% of its total
assets (taken at current value) at that time would be subject to
repurchase agreements maturing in more than seven days.
The following are permitted investments for the Portfolio:
High Quality Commercial Paper - Promissory notes that have received the
highest rating from the Requisite NRSRO for short-term debt securities
or comparable unrated securities. The Portfolio may invest without limit
in the commercial paper of foreign issuers.
High Quality Corporate Obligations - Obligations of corporations that
are: (1) rated AA or better by the Requisite NRSRO or (2) issued by an
issuer that has a class of short-term debt obligations that are
comparable in priority and security with the obligation and that have
been rated in one of the two highest rating categories for short-term
debt obligations. The Portfolio will invest only in corporate
obligations with remaining maturities of 13 months or less.
Bank Obligations - Obligations (including certificates of deposit,
bankers' acceptances and fixed time deposits) and securities backed by
letters of credit of U.S. Banks or other U.S. financial institutions
that are members of the Federal Reserve System or the Federal Deposit
Insurance Corporation ("FDIC") (including obligations of foreign
branches of such members) if either: (a) the principal amount of the
obligation is insured in full by the FDIC, or (b) the issuer of such
obligation has capital surplus and undivided profits in excess of $100
million or total assets of $1 billion (as reported in its most recently
published financial statements prior to the date of investment). Under
current FDIC regulations, the maximum insurance payable as to any one
certificate of deposit is $100,000; therefore, certificates of deposit
in denominations greater than
Smith Barney Money Funds, Inc.
Investment Objectives and Policies (continued)
$100,000, that are purchased by the Fund, will not be fully insured. The
Portfolio will not purchase fixed time deposits maturing in more than
seven calendar days, and will limit its investment in fixed time
deposits maturing from two business to seven calendar days to 10% of its
total assets.
The Portfolio intends to maintain at least 25% of its total assets
invested in obligations of domestic and foreign banks, subject to the
above-mentioned size criteria. The Portfolio may invest in instruments
issued by domestic banks, including those issued by their branches
outside the United States and subsidiaries located in Canada, and in
instruments issued by foreign banks through their branches located in
the United States and the United Kingdom. In addition, the Portfolio may
invest in fixed time deposits of foreign banks issued through their
branches located in Grand Cayman Island, Nassau, Tokyo and Toronto.
High Quality Municipal Obligations - Debt obligations of states, cities,
counties, municipalities, municipal agencies and regional districts
rated SP-1+ or A-1 or AA or better by S&P or MIG 2, VMIG 2 or Prime-1 or
Aa or better by Moody's or, if not rated, are determined by the Manager
to be of comparable quality. At certain times, supply/demand imbalances
in the tax-exempt market cause municipal obligations to yield more than
taxable obligations of equivalent credit quality and maturity length.
The purchase of these securities could enhance each Portfolio's yield.
The Portfolio will not invest more than 10% of its total assets in
municipal obligations.
The Portfolio may, to a limited degree, engage in short-term trading to
attempt to take advantage of short-term market variations, or may
dispose of a portfolio security prior to its maturity if it believes
such disposition advisable or it needs to generate cash to satisfy
redemptions. In such cases, the Portfolio may realize a gain or loss.
Though it has never done so, as a matter of fundamental policy, the
Portfolio may borrow money from banks for temporary purposes but only in
an amount up to 10% of the value of its total assets and may pledge its
assets in an amount up to 10% of the value of its total assets only to
secure such borrowings. The Portfolio will borrow money only to
accommodate requests for the redemption of shares while effecting an
orderly liquidation of portfolio securities or to clear securities
transactions and not for leveraging purposes.
The Portfolio's investments will be affected by general changes in
interest rates, which will result in increases or decreases in the value
of the obligations held by the Portfolio. The market value of the
obligations held by the Portfolio can be expected to vary inversely to
changes in prevailing interest rates. Investors also should recognize
that, in periods of declining interest rates, the Portfolio's yield will
tend to be somewhat higher than prevailing market rates, and in periods
of rising interest rates, the Portfolio's yield will tend to be somewhat
lower. Also, when interest rates are falling, the inflow of net new
money to the Portfolio from the continuous sale of its shares will
likely be invested in instruments producing lower yields than the
balance of its investments, thereby reducing the Portfolio's current
yield. In periods of rising interest rates, the opposite can be expected
to occur. In addition, securities in which the Portfolio may invest may
not yield as high a level of current income as might be achieved by
investing in securities with less liquidity and safety and longer
maturities.
Investments in securities issued by foreign banks or foreign issuers
present certain risks, including those resulting from fluctuations in
currency exchange rates, revaluation of currencies, future political and
economic developments and the possible imposition of currency exchange
blockages or other foreign governmental laws or restrictions and reduced
availability of public information. Foreign issuers generally are not
subject to uniform accounting, auditing and financial reporting
Smith Barney Money Funds, Inc.
Investment Objectives and Policies (continued)
standards or to other regulatory practices and requirements applicable
to domestic issuers. In addition, there may be less publicly available
information about a foreign bank than about a domestic bank.
The Portfolio cannot change its investment objectives without the "vote
of a majority of the outstanding voting securities," as defined in the
Investment Company Act of 1940, as amended (the "Act"). (See "Voting
Rights" in the Statement of Additional Information).
Valuation of Shares
The net asset value per share of the Portfolio is determined as of 12
noon New York City time on each day that the New York Stock Exchange
("NYSE") is open by dividing the Portfolio's net assets ( i.e., the
value of its assets less liabilities) by the total number of shares of
outstanding. The Portfolio may also determine net asset value per share
on days when the NYSE is not open, but when the settlement of securities
may otherwise occur. The Portfolio employs the amortized cost method of
valuing portfolio securities and intends to use its best efforts to
continue to maintain a constant net asset value of $1.00 per share.
Dividends, Automatic Reinvestment and Taxes
The Portfolio declares a dividend of substantially all of its net
investment income on each day the NYSE is open. Net investment income
includes interest accrued and discount earned and all short-term
realized gains and losses on portfolio securities and is less premium
amortized and expenses accrued. Income dividends are paid monthly and
will automatically be reinvested in shares of the Portfolio unless a
shareholder has elected to receive distributions in cash. If a
shareholder redeems in full an account between payment dates, all
dividends declared up to and including the date of liquidation will be
paid at the end of the month in which the redemption occurs. Long-term
capital gains, if any, will be distributed annually.
It is the Portfolio's policy to qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code with which it
believes it complied during its last fiscal year. If so qualified, the
Portfolio will not be subject to Federal income taxes to the extent that
it distributes its taxable net income. For Federal income tax purposes,
dividends (other than dividends derived from income on tax-exempt
municipal obligations, if any) and capital gains distributions, if any,
whether in shares or cash, are taxable to shareholders of the Portfolio.
Under the Internal Revenue Code no portion of the Portfolio
distributions will be eligible for the dividends received deduction for
corporations.
Purchase of Shares
The Portfolio offers one Class of shares to investors purchasing through
PFS Investments Representatives. Class A shares are sold to investors
without an initial sales charge.
Initial purchases of Portfolio shares must be made through a PFS
Investments Representative by completing the appropriate application
found in the prospectus. The completed application should be forwarded
to the PFS Shareholder Services (the Fund's "Sub-Transfer Agent"), 3100
Breckinridge Blvd., Bldg 200, Duluth, Georgia 30199-0062. Checks drawn
on foreign banks must be payable in U.S. dollars and have the routing
number of the U.S. bank encoded on the check. Subsequent investments may
be sent directly to the Sub-Transfer Agent.
Smith Barney Money Funds, Inc.
Purchase of Shares (continued)
The minimum initial investment is $1,000 and the minimum subsequent
investment is $50, except for purchases through (a) Individual
Retirement Accounts ("IRAs") and Self-Employed Retirement Plans, for
which the minimum initial and subsequent investments are $250 and $50,
respectively, and (b) retirement plans qualified under Section 403(b)(7)
or Section 401(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), for which the minimum initial and subsequent investments are
$25. For the Fund's Systematic Investment Plan, the minimum initial and
subsequent requirement is $25. There are no minimum investment
requirements for employees of Travelers Group Inc. ("Travelers") and its
subsidiaries, including Smith Barney, and Directors or Trustees of any
of the Smith Barney Mutual Fundss, and their spouses and children. The
Fund reserves the right to waive or change minimums, to decline any
order to purchase its shares and to suspend the offering of shares from
time to time. Share certificates are issued only upon a shareholder's
written request to the Sub-Transfer Agent.
The Portfolio's shares are sold continuously at their net asset value
next determined after a purchase order is received and becomes
effective. A purchase order becomes effective when the Sub-Transfer
Agent receives, or converts the purchase amount into, Federal funds
(i.e., monies of member banks within the Federal Reserve System held on
deposit at a Federal Reserve Bank). When orders for the purchase of
Portfolio shares are paid for in Federal funds, the order becomes
effective on the day of receipt if received prior to 12 noon, New York
time, on any day the Portfolio calculates its net asset value. See
"Valuation of Shares." Purchase orders received after 12 noon on any
business day are effective as of the time the net asset value is next
determined. When orders for the purchase of Portfolio shares are paid
for other than in Federal funds, the Sub-Transfer Agent, acting on
behalf of the investor, will complete the conversion into, or itself
advance, Federal funds, and the order will become effective on the day
following its receipt by the Sub-Transfer Agent. All shares purchased
begin to accrue income dividends on the next business day following the
day that the purchase order becomes effective.
Systematic Investment Plan
Shareholders may make additions to their accounts at any time by
purchasing shares through a service known as the Systematic Investment
Plan. Under the Systematic Investment Plan, the Sub-Transfer Agent is
authorized through preauthorized transfers of $25 or more to charge the
regular bank account or other financial institution indicated by the
shareholder on a monthly or quarterly basis to provide systematic
additions to the shareholder's Portfolio account. A shareholder who has
insufficient funds to complete the transfer will be charged a fee of up
to $25 by PFS Distributors, Inc. ("PFS"), the Fund's distributor or the
Sub-Transfer Agent.
Redemption of Shares
Shareholders may redeem for cash some or all of their shares of the
Portfolio at any time by sending a written request in proper form
directly to the Sub-Transfer Agent, PFS Shareholder Services, at 3100
Breckinridge Blvd., Bldg. 200, Duluth, Georgia 30199-0062. If you
should have any questions concerning how to redeem your account after
reviewing the information below, please contact the Sub-Transfer Agent
at (800) 544-5445 or Spanish-speaking representatives at (800) 544-7278,
or TDD Line for the Hearing Impaired at (800) 824-1721.
The request for redemption must be signed by all persons in whose names
the shares are registered. Signatures must conform exactly to the
account registration. If the proceeds of the redemption exceed $50,000,
or if the proceeds are not paid to the record owner(s) at the record
address, if the shareholder(s) has had an address change in the past 45
days, or if the shareholder is a corporation,
Smith Barney Money Funds, Inc.
Redemption of Shares (continued)
sole proprietor, partnership, trust or fiduciary, signature(s) must be
guaranteed by one of the following: a bank or trust company; a broker-
dealer; a credit union; a national securities exchange,
registered securities association or clearing agency; a savings and loan
association; or a federal savings bank.
Generally, a properly completed Redemption Form with any required
signature guarantee is all that is required for a redemption. In some
cases, however, other documents may be necessary. For example, in the
case of shareholders holding certificates, the certificates for the
shares being redeemed must accompany the redemption request. Additional
documentary evidence of authority is also required by the Sub-Transfer
Agent in the event redemption is requested by a corporation,
partnership, trust, fiduciary, executor or administrator. Additionally,
if a shareholder requests a redemption from a Retirement Plan account
(IRA, SEP or 403(b)(7)), such request must state whether or not federal
income tax is to be withheld from the proceeds of the redemption check.
A shareholder may utilize the Sub-Transfer Agent's FAX to redeem their
account as long as a signature guarantee or other documentary evidence
is not required. Redemption requests should be properly signed by all
owners of the account and faxed to the Sub-Transfer Agent at (800) 554-
2374. Facsimile redemptions may not be available if the shareholder
cannot reach the Sub-Transfer Agent by FAX, whether because all
telephone lines are busy or for any other reason; in such case, a
shareholder would have to use the Portfolio's regular redemption
procedure described above. Facsimile redemptions received by the Sub-
Transfer Agent prior to 12:00 p.m. Eastern time on a regular business
day will be processed at the net asset value per share determined that
day.
In all cases, the redemption price is the net asset value per share of
the Portfolio next determined after the request for redemption is
received in proper form, by the Sub-Transfer Agent. Payment
for shares redeemed will be made by check mailed within three days after
acceptance by the Sub-Transfer Agent of the request and any other
necessary documents in proper order. Such payment
may be postponed or the right of redemption suspended as provided by the
rules of the SEC. If the shares to be redeemed have been recently
purchased by check or draft, the Sub-Transfer Agent may hold the payment
of the proceeds until the purchase check or draft has cleared, usually a
period of up to 15 days. Any taxable gain or loss will be recognized by
the shareholder upon redemption of shares.
After following the above-stated redemption guidelines, a shareholder(s)
may elect to have the redemption proceeds wire-transferred directly to
the shareholder's bank account of record (defined as a currently
established pre-authorized draft on the shareholder's account with no
changes within the previous 45 days), as long as the bank account is
registered in the same name(s) as the account with the Portfolio. If
the proceeds are not to be wired to the bank account of record, or
mailed to the registered owner(s), a signature guarantee will be
required from all shareholder(s). A $25 service fee will be charged by
the Sub-Transfer Agent to help defray the administrative expense of
executing a wire redemption. Redemption proceeds will normally be wired
to the designated bank account on the next business day following the
redemption, and should ordinarily be credited to the shareholders' bank
account by his/her bank within 48 to 72 hours.
Contingent Deferred Sales Charge
Class A shares of the Cash Portfolio, which were originally acquired in
one of the other Smith Barney Mutual Funds at net asset value subject to
a CDSC, continue to be subject to any applicable CDSC of the original
fund. Therefore, such Class A shares that are redeemed within 12 months
of the date of purchase of the original fund may be subject to a CDSC of
1.00%. The amount of any CDSC will be paid to PFS. The CDSC will be
assessed based on an amount equal
Smith Barney Money Funds, Inc.
Redemption of Shares (continued)
to the net asset value at the time of redemption. Accordingly, no CDSC
will be imposed on increases in net asset value above the initial
purchase price in the original Fund. In addition, no
charge will be assessed on shares derived from reinvestment of dividends
or capital gains distributions.
In determining the applicability of any CDSC, it will be assumed that a
redemption is made first of shares representing capital appreciation,
next of shares representing the reinvestments of dividends and capital
gain distributions and finally of other shares held by the shareholder
for the longest period of time. The length of time that Class A shares
have been held will be calculated from the date that the shares were
initially acquired in one of the other Smith Barney Mutual Funds, and
such shares being redeemed will be considered to represent, as
applicable, capital appreciation or dividend and capital gain
distribution reinvestments in such other funds. For Federal income tax
purposes, the amount of the CDSC will reduce the gain or increase the
loss, as the case may be, on the amount realized on redemption.
The CDSC on Class A shares, if any, will be waived on (a) exchanges (see
"Exchange Privilege" below); (b) automatic cash withdrawals in amounts
equal to or less than 1.00% per month of the value of the shareholder's
shares at the time the withdrawal plan commences (see "Redemption of
Shares-Automatic Cash Withdrawal Plan"): (c) redemptions of shares
within twelve months following the death or disability of the
shareholder; (d) redemptions of shares made in connection with qualified
distributions from retirement plans or IRAs upon the attainment of age
591/2; (e) involuntary redemptions; and (f) redemptions of shares in
connection with a combination of the Portfolio with any investment
company by merger, acquisition of assets or otherwise. In addition, a
shareholder who has redeemed shares from other funds of the Smith Barney
Mutual Funds may, under certain circumstances, reinvest all or part of
the redemption proceeds within 60 days and receive pro rata credit for
any CDSC imposed on the prior redemption.
CDSC waivers will be granted subject to confirmation by PFS of the
shareholder's status or holdings, as the case may be.
Automatic Cash Withdrawal Plan
The Portfolio offers shareholders an automatic cash withdrawal plan,
under which shareholders who own shares with a value of at least $10,000
may elect to receive periodic cash payments of at least $50 monthly or
quarterly. Retirement plan accounts are eligible for automatic cash
withdrawal plans only where the shareholder is eligible to receive
qualified distributions and has an account value of at least $5,000.
The withdrawal plan will be carried over on the exchanges between funds.
Any applicable CDSC will not be waived on amounts withdrawn by a
shareholder that exceed 1.00% per month of the value of the
shareholder's shares subject to the CDSC at the time the withdrawal plan
commences. For further information regarding the automatic cash
withdrawal plan, shareholders should contact the Sub-Transfer Agent.
Exchange Privilege
Except as otherwise noted below, Class A shares may be exchanged for
Class A shares of the following funds of the Smith Barney Mutual Funds,
to the extent shares are offered for sale in the shareholder's state of
residence. Exchanges of Class A shares are subject to minimum investment
requirements and all shares are subject to other requirements of the
fund into which exchanges are made and a sales charge differential may
apply.
Smith Barney Money Funds, Inc.
Exchange Privilege (continued)
Fund Name
Smith Barney Appreciation Fund Inc.
Smith Barney Growth Opportunity Fund
Smith Barney Concert Series Inc.
The Balanced Portfolio
The Conservative Portfolio
The Growth Portfolio
The High Growth Portfolio
The Income Portfolio
Smith Barney Investment Grade Bond Fund
Class A shares of the Portfolio will be subject to the appropriate
"sales charge differential" upon the exchange of such shares for Class A
shares of another fund of the Smith Barney Mutual Funds sold with a
sales charge. The "sales charge differential" is limited to a percentage
rate no greater than the excess of the sales charge rate applicable to
purchases of shares of the mutual fund being acquired in the exchange
over the sales charge rate(s) actually paid on the mutual fund shares
relinquished in the exchange and on any predecessor of those shares. For
purposes of the exchange privilege, shares obtained through automatic
reinvestment of dividends and capital gains distributions are treated as
having paid the same sales charges applicable to the shares on which the
dividends or distributions were paid; however, if no sales charge was
imposed upon the initial purchase of the shares, any shares obtained
through automatic reinvestment will be subject to a sales charge
differential upon exchange.
Although the exchange privilege is an important benefit, excessive
exchange transactions can be detrimental to the Portfolio's performance
and its shareholders. The investment manager may determine that a
pattern of frequent exchanges is excessive and contrary to the best
interests of the Portfolio's other shareholders. In this event the
Portfolio may, at its discretion, decide to limit additional purchases
and/or exchanges by the shareholder. Upon such a determination by the
Portfolio, PFS will provide notice in writing or by telephone to the
shareholder at least 15 days prior to suspending the exchange privilege
and during the 15 day period the shareholder will be required to (a)
redeem his or her shares in the Portfolio or (b) remain invested in the
Portfolio or exchange into any of the funds of the Smith Barney Mutual
Funds listed under "Exchange Privilege," which position the shareholder
would be expected to maintain for a significant period of time. All
relevant factors will be considered in determining what constitutes an
abusive pattern of exchanges.
Exchanges will be processed at the net asset value next determined, plus
any applicable sales charge differential. Redemption procedures
discussed above are also applicable for exchanging shares, and exchanges
will be made upon receipt of all supporting documents in proper form. If
the account registration of the shares of the fund being acquired is
identical to the registration of the shares of the fund exchanged, no
signature guarantee is required. A capital gain or loss for tax purposes
will be realized upon the exchange, depending upon the cost or other
basis of shares redeemed. Before exchanging shares, investors should
read the current prospectus describing the shares to be acquired. These
exchange privileges are available to shareholders resident in any state
in which the fund shares being acquired may legally be sold. The Fund
reserves the right to modify or discontinue exchange privileges upon 60
days' prior notice to shareholders.
Smith Barney Money Funds, Inc.
Exchange Privilege (continued)
Check Writing Privilege
A shareholder holding shares for which certificates have not been issued
may appoint the Fund's Sub-Transfer Agent as agent and request, on the
application form, special forms of drafts payable
through Fidelity National Bank ("Fidelity"). The Sub-Transfer Agent
issues these drafts on behalf of the Portfolio in books of ten drafts,
for which there is a charge by PFS of $7.50 per book. These drafts may
be made payable by the shareholder to the order of any person in any
amount of $250 or more. When a draft is presented to Fidelity for
payment, full and fractional shares required to cover the amount of the
draft will be redeemed from the shareholder's account by the Sub-
Transfer Agent at the next determined net asset value. Any gain or loss
realized on the sale of shares is a taxable event. See "Redemption of
Shares". Drafts will not be honored for redemption of shares held less
than fifteen (15) days, or until the Sub-Transfer Agent is presented
with satisfactory evidence that the purchase check has cleared. Any
shares for which there are outstanding certificates may not be redeemed
by draft. If the amount of the draft is greater than the proceeds of
all uncertificated shares held in the shareholder's account, the draft
will be returned and the shareholder may be subject to additional
charges imposed by banks. A shareholder may not liquidate the entire
account by means of a draft. The check writing privilege may be
terminated or suspended at any time by PFS or Fidelity. Retirement
plans and accounts that are subject to backup withholding are not
eligible for the privilege. A "stop payment" system is not available on
the checks. Fidelity will only honor those drafts authorized by PFS.
Minimum Account Size
The Fund reserves the right to redeem involuntarily any shareholder's
account in the Portfolio if the aggregate net asset value of the shares
held in the Portfolio account is less than $500. Any applicable CDSC
will be deducted from the proceeds of this redemption. (If a shareholder
has more
than one account in the Portfolio, each account must satisfy the minimum
account size.) Before the Board of Directors of the Fund elects to
exercise such right, shareholders will receive prior written notice and
will be permitted 60 days to bring accounts up to the minimum to avoid
involuntary redemption.
Yield Information
From time to time the Fund may advertise the yield and effective yield
of the Portfolio. These yield figures are based on historical earnings
and are not intended to indicate future performance. The yield of the
Portfolio or a Class refers to the net investment income generated by an
investment in the Portfolio or the Class over a specific seven-day
period (which will be stated in the advertisement). This net investment
income is then annualized. The effective yield is calculated similarly
but, when annualized, the income earned by an investment in the
Portfolio or the Class is assumed to be reinvested. The effective yield
will be slightly higher than the yield because of the compounding effect
of the assumed reinvestment.
Management of the Fund
Board of Directors
Overall responsibility for management and supervision of the Fund rests
with the Fund's Board of Directors. The Directors approve all
significant agreements between the Fund and the companies that furnish
services to the Fund and the Portfolio, including agreements with the
Fund's distributor, investment manager, custodian and transfer agent.
The day-to-day operations of the Portfolio are delegated to the
Portfolio's investment manager. The Statement of Additional
Smith Barney Money Funds, Inc.
Management of the Fund (continued)
Information contains background information regarding each Director and
executive officer of the Fund.
Manager
Smith Barney Mutual Funds Management Inc. ("SBMFM" or "the Manager") was
incorporated in 1968 under the laws of Delaware. It is a wholly-owned
subsidiary of Smith Barney Holdings Inc., the parent company of Smith
Barney. Smith Barney Holdings Inc. is a wholly-owned subsidiary of
Travelers Group Inc., which is a diversified financial services holding
company engaged, through its subsidiaries, principally in four business
segments: Investment Services, Consumer Finance Services, Life Insurance
Services and Property & Casualty Insurance Services.
SBMFM, Smith Barney and Smith Barney Holdings Inc. are each located at
388 Greenwich Street, New York, New York 10013. SBMFM is also the
investment manager for numerous other investment companies having
aggregate assets as of December 31, 1995 of approximately $68 billion.
For the Fund's last fiscal year ended November 30, 1995 the management
fee was 0.42% of the Portfolio's average daily net assets. The
Portfolio's management agreement provides for daily compensation of the
Manager at the following annual rates: 0.45% on the first $6 billion of
the Portfolio's net assets, 0.425% on the next $6 billion, 0.40% on the
next $6 billion and 0.35% on net assets in excess of $18 billion.
Under the management agreement SBMFM is responsible for furnishing or
causing to be furnished to the Portfolio advice and assistance with
respect to the acquisition, holding or disposal of investments and
recommendations with respect to other aspects and affairs of the
Portfolio, bookkeeping, accounting and administrative services, office
space and equipment, and the services of the officers and employees of
the Fund.
The term "Smith Barney" in the title of the Fund has been adopted by
permission of Smith Barney and is subject to the right of Smith Barney
to elect that the Fund stop using the term in any form or combination of
its name.
Distributor
PFS is located at 3100 Breckinridge Boulevard, Duluth, Georgia 30199-
0001. PFS distributes shares of the Fund as principal underwriter and as
such conducts a continuous offering pursuant to a "best efforts"
arrangement requiring PFS to take and pay for only such securities as
may be sold to the public. Pursuant to a plan of distribution adopted by
the Fund under Rule 12b-1 under the 1940 Act (the "Plan"), PFS is paid
an annual service fee with respect to Class A shares of the Fund at the
annual rate of 0.10% of the average daily net assets of the Class A
shares. The fees are paid to PFS which in turn pays PFS Investments to
pay its Investments Representatives for servicing shareholder accounts
for as long as a shareholder remains a holder of the Class. The servic
fee is credited at a rate of 0.10% of the average balance of Class
shares held in the accounts of customers of Investments Representatives.
The service fee is also spent by PFS to cover payments to and expenses
of PFS Investments Representatives and other persons who provide
shareholder services. Shareholder servicing expenses incurred by PFS
Investments but not reimbursed by a Class in any year will not be a
continuing liability of the Class in subsequent years.
Smith Barney Money Funds, Inc.
Management of the Fund (continued)
From time to time, PFS or its affiliates may also pay for certain non-
cash sales incentives provided to PFS Investments Representatives. Such
incentives do not have any effect on the net amount invested. PFS may
from time to time, pay or allow additional reallowances or promotional
incentives, in the form of cash or other compensation to PFS Investments
Representatives that sell shares of the Fund.
Additional Information
The Fund, an open-end, diversified investment company, was incorporated
under Maryland law on May 28, 1974. The Board of Directors has
authorized the issuance of four series of shares, each representing
shares in one of four separate Portfolios - the Cash Portfolio, the
Government Portfolio, the Retirement Portfolio and the U.S. Treasury
Portfolio - and may also authorize the creation of additional series of
shares. Each share of a Portfolio or Class represents an equal
proportionate interest in the net assets of that Portfolio or Class with
each other share of the same Portfolio or Class and is entitled to such
dividends and distributions out of the net income of that Portfolio or
Class as are declared in the discretion of the Board. Shareholders are
entitled to one vote for each share held and will vote in the aggregate
and not by Portfolio or Class except as otherwise required by the Act or
Maryland law. As described under "Voting Rights" in the Statement of
Additional Information, the Fund ordinarily will not hold shareholder
meetings; however, shareholders have the right to call a meeting upon a
vote of 10% of the Fund's outstanding shares for the purpose of voting
to remove directors and the Fund will assist shareholders in calling
such a meeting as required by the Act.
PNC Bank, National Association, located at 17th and Chestnut Streets,
Philadelphia, Pennsylvania 19103, serves as custodian of the Portfolio's
investments.
First Data Investor Services Group, Inc. located at Exchange Place,
Boston, Massachusetts 02109, serves as the Fund's transfer agent.
PFS Shareholder Services is located at 3100 Breckinridge Blvd., Bldg.
200, Duluth, Georgia 30199-0062 and serves as the Fund's Sub-Transfer
Agent.
The Fund sends its shareholders a semi-annual report and an audited
annual report, which include listings of the investment securities held
by the Fund at the end of the period covered. In an effort to reduce the
Fund's printing and mailing costs, the Fund plans to consolidate the
mailing of its semi-annual and annual reports by household. This
consolidation means that a household having multiple accounts with the
identical address of record will receive a single copy of each report.
In addition, the Fund also plans to consolidate the mailing of its
Prospectus so that a shareholder having multiple accounts (that is,
individual, IRA and/or Self-Employed Retirement Plan accounts) will
receive a single Prospectus annually. Shareholders who do not want this
consolidation to apply to their account should contact their PFS
Investments Representative or the Fund's Transfer agent.
