<PAGE>
ANNUAL REPORT
1996
1996
1996
1996
1996
SMITH BARNEY
MONEY FUNDS, INC.
- -----------------
December 31, 1996
[LOGO] SMITH BARNEY MUTUAL FUNDS
Investing for you future.
Every day.
<PAGE>
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SMITH BARNEY MONEY FUNDS, INC.
- --------------------------------------------------------------------------------
Dear Shareholder:
We are pleased to provide you with the annual report for the Smith Barney Money
Funds, Inc. for the year ended December 31, 1996. In this report, we summarize
the period's prevailing economic and market conditions and outline our portfolio
strategy. A more detailed summary of performance can be found in the appropriate
sections that follow in the report.
Performance Summary
The chart below provides the yields for the Cash, Government and Retirement
Portfolios that make up the Smith Barney Money Funds for the seven-day period
ended December 31, 1996.
Smith Barney Money Funds Yields (Class A Shares)
Portfolio Seven-Day Yield Effective Yield*
- -------------------------------------------------------------------------------
Cash 4.90% 5.02%
Government 4.81% 4.93%
Retirement 4.81% 4.92%
*Assumes dividends are reinvested.
You should be aware that your investment in the Smith Barney Money Funds is
neither insured nor guaranteed by the U.S. Government. Moreover, no assurance
can be given that the Smith Barney Money Funds will be able to maintain a stable
net asset value of $1.00 per share.
Asset Growth of Portfolios
Because the Federal Reserve Board (Fed) has kept the federal funds rate (the
benchmark of short-term interest rates and the rate banks charge each other for
overnight loans) unchanged at 5.25% since January 1996, the interest rate
environment for the past year had little impact on the returns for money market
funds. Nevertheless, the growth in 401(k) retirement plans, new money from
insured, fixed-rate bank products and the relatively attractive returns for
money funds compared to bond fund returns have produced another year of double-
digit asset growth for the money fund industry. During 1996, assets under
management in the Cash Portfolio rose 19.5% while assets in the Government and
Retirement Portfolios grew 9.0% and 5.9%, respectively.
Market Update and Outlook
1996 posed a dilemma for both the Fed and investors because of widespread
expectations that the Fed would raise short-term interest rates. Instead, the
Fed chose to remain on the sidelines and left interest rates unchanged. The last
Fed action came in January 1996 when it lowered the federal funds rate from
1
<PAGE>
5.50% to 5.25%. However, despite making few changes to its existing policy, the
Fed has signaled that it will not hesitate to raise interest rates should any
signs of inflationary pressures emerge.
During the third quarter, U.S. economic growth, as measured by Gross Domestic
Product (GDP), rose at a 2.1% annual rate after the second quarter's 4.7% annual
rate. Most of this increase in GDP came not from higher consumer spending but
from a build-up in inventories. This was a departure since U.S. economic growth
in recent quarters has primarily come from investments by businesses and
consumers. The fixed income markets generally performed better in the fourth
quarter due to modest U.S. economic growth, little or no inflation, positive job
growth in line with market expectations and generally upbeat consumers.
The yet-to-be released fourth quarter GDP is expected to show above average
trend growth with estimates ranging from 3.3% to 4.7%. Most of that strength is
predicted to come from exports and overall good Christmas sales.
In our view, the U.S. economy appears to be operating at a sustainable level.
Inventories are under control and real estate prices are fairly stable. Although
job creation remains strong, many U.S. consumers have started to save more and
consumer spending has slowed down from early 1996. Given these conditions, we do
not believe a recession is likely. However, given the fact that the U.S. economy
is now in its sixth year of expansion, it is less likely that the economy can
continue to post two or three quarters of 3.5% growth; a scenario which would
worry the Fed and cause it to tighten monetary policy.
In light of the current state of the U.S. economy, we believe short-term
interest rates will stay in a narrow trading range over the next few months. Fed
Chairman Alan Greenspan's widely circulated comments about too much speculation
in the equity market suggest to us that the Fed is uncomfortable with the stock
market's historically high levels and will monitor the situation closely in the
months ahead.
Investment Strategy
During the Smith Barney Money Funds' fiscal year ended December 31, 1996, the
average life of the Cash Portfolio ranged from 70 to 85 days and the Government
Portfolio's average life ranged from 50 to 70 days. Moreover, during the
reporting period, the Retirement Portfolio's average life ranged from 47 days to
65 days.
Over the near term, we expect to maintain a 60 to 70 day average life for the
Cash Portfolio as data regarding the pace of U.S. economic growth and inflation
is released. In terms of the composition of the Cash Portfolio, we have
2
<PAGE>
increased our governments and agencies exposure to roughly 10% and increased our
holdings in asset-backed commercial paper from 10% to 15% since the issuance of
corporate and industrial paper has been declining. Most corporations continue to
be cash rich and mergers have reduced the number of names from our approved list
of issuers.
In closing, thank you for investing in the Smith Barney Money Funds. We look
forward to continuing to help you achieve your financial goals.
Sincerely,
/s/ Heath B. McLendon /s/ Phyllis M. Zahorodny
Heath B. McLendon Phyllis M. Zahorodny
Chairman and Vice President
Chief Executive Officer
January 13, 1997
3
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments December 31, 1996
- --------------------------------------------------------------------------------
CASH PORTFOLIO
<TABLE>
<CAPTION>
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
=================================================================================================
<S> <C> <C> <C>
U.s. Treasury Obligations -- 0.2%
$ 50,000,000 U.S. Treasury Bill matures 1/9/97
(Cost --$49,946,611) 5.04% $ 49,946,611
=================================================================================================
U.s. Agencies And Instrumentalities -- 10.7%
519,000,000 Federal Farm Credit Bank
mature 2/3/97 to 1/2/98 4.95 to 6.01 518,643,883
295,210,000 Federal Home Loan Bank
mature 1/29/97 to 10/3/97 4.95 to 6.10 295,037,375
119,360,000 Federal Home Loan Mortgage Corp.
mature 3/21/97 to 3/27/97 5.43 to 5.44 117,878,380
1,780,390,000 Federal National Mortgage Association
mature 1/23/97 to 12/16/97 4.98 to 6.10 1,774,648,796
250,000,000 Student Loan Marketing Association
matures 9/12/97 6.02 to 6.10 249,779,333
- -------------------------------------------------------------------------------------------------
TOTAL U.S. AGENCIES AND
INSTRUMENTALITIES
(Cost -- $2,955,987,767) 2,955,987,767
=================================================================================================
Domestic Bank Obligations -- 3.4%
235,000,000 BankAmerica Corp.
mature 1/17/97 to 11/7/97 4.95 to 5.60 234,947,614
100,500,000 Bank of America (Illinois)
mature 1/8/97 to 12/19/97 5.40 to 6.07 100,423,596
25,000,000 Bank of New York matures 1/29/97 5.78 24,984,279
177,500,000 FCC National
mature 2/5/97 to 11/4/97 5.43 to 6.15 177,478,473
100,000,000 First Union National Bank
mature 1/8/97 to 1/16/97 5.36 to 5.10 100,000,000
100,000,000 Morgan Guaranty
mature 1/15/97 to 2/13/97 5.00 to 5.26 99,993,657
100,000,000 National Bank of Detroit matures 1/3/97 5.30 99,999,468
100,000,000 NationsBank Corp.
mature 2/13/97 to 2/20/97 5.35 100,000,000
- -------------------------------------------------------------------------------------------------
TOTAL DOMESTIC BANK
OBLIGATIONS
(Cost -- $937,827,087) 937,827,087
=================================================================================================
Domestic Certificates Of Deposit -- 1.8%
200,000,000 Chase Manhattan USA Delaware
mature 1/17/97 to 6/9/97 4.95 to 6.06 200,000,000
300,000,000 Morgan Guaranty
mature 8/5/97 to 10/3/97 5.70 to 6.00 300,028,241
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TOTAL DOMESTIC
CERTIFICATES OF DEPOSIT
(Cost -- $500,028,241) 500,028,241
=================================================================================================
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
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Schedules of Investments (continued) December 31, 1996
- --------------------------------------------------------------------------------
CASH PORTFOLIO
<TABLE>
<CAPTION>
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
===============================================================================================
<S> <C> <C> <C>
Domestic European Certificates Of Deposit -- 0.6%
$125,000,000 Chase Manhattan
mature 1/13/97 to 3/25/97 5.37% to 5.80% $125,000,000
40,000,000 Republic National Bank of New York
matures 1/16/97 5.21 40,001,248
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TOTAL DOMESTIC EUROPEAN
CERTIFICATES OF DEPOSIT
(Cost -- $165,001,248) 165,001,248
===============================================================================================
Commercial Paper -- 55.0%
215,000,000 Abbey National North America
mature 3/10/97 to 4/8/97 5.50 to 5.82 212,456,583
153,000,000 ABN AMRO Bank N.V.
mature 1/13/97 to 3/18/97 5.37 to 5.64 151,919,493
100,000,000 American Express Co.
matures 3/26/97 5.47 98,740,000
45,000,000 American Home Products
matures 1/29/97 5.39 44,813,450
46,628,000 American Home Products (Robins)
mature 1/24/97 to 3/11/97 5.38 to 5.46 46,330,878
20,000,000 American Home Products (Sherwood)
matures 1/24/97 5.38 19,932,022
199,500,000 ANZ Delaware Inc.
mature 2/3/97 to 3/27/97 5.36 to 5.47 197,717,853
387,000,000 Asset Securitization Corp.
mature 1/14/97 to 2/18/97 5.36 to 5.50 385,320,700
425,000,000 Associates Corp. of North America
mature 1/21/97 to 4/2/97 5.36 to 5.48 422,155,048
35,000,000 Banc One Corp. matures 2/14/97 5.37 34,773,278
50,000,000 Banc One Funding matures 2/7/97 5.41 49,724,556
175,000,000 Banca Commerciale Italiana
mature 2/5/97 to 3/25/97 5.37 to 5.57 173,589,701
170,000,000 Bank America National Trust
Savings Association
mature 1/14/97 to 3/25/97 5.58 to 5.76 168,521,458
50,000,000 Bank Austriengellschaft
matures 2/14/97 5.36 49,676,723
402,355,000 Bank Brussel Lambert
mature 1/7/97 to 6/6/97 5.38 to 5.79 400,066,779
150,000,000 Bank of Montreal
mature 2/3/97 to 2/5/97 5.40 to 5.45 149,231,903
75,000,000 Bank of Nova Scotia
mature 1/6/97 to 3/10/97 5.43 to 5.50 74,474,959
50,000,000 Bankers Trust N.Y. Corp.
matures 1/30/97 5.40 49,785,723
</TABLE>
See Notes to Financial Statements.
5
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) December 31, 1996
- --------------------------------------------------------------------------------
CASH PORTFOLIO
<TABLE>
<CAPTION>
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
===============================================================================================
<S> <C> <C> <C>
Commercial Paper -- 55.0% (continued)
$150,000,000 Barclays U.S. Funding Corp.
mature 1/15/97 to 2/20/97 5.36% to 5.40% $149,161,638
179,696,000 Barton Capital Corp.
mature 1/15/97 to 3/10/97 5.37 to 5.44 178,628,257
50,000,000 Bayerische Landesbank
matures 2/3/97 5.55 49,752,500
125,000,000 Bayerische Vereinsbank
mature 1/3/97 to 2/7/97 5.40 to 5.65 124,553,549
240,000,000 BCI Funding Corp.
mature 1/15/97 to 3/21/97 5.42 to 5.60 238,532,595
220,000,000 Bear Stearns & Co.
mature 1/24/97 to 3/14/97 5.38 to 5.50 218,587,767
80,054,000 British Telecommunications
mature 5/21/97 to 5/27/97 5.43 to 5.44 78,373,082
75,000,000 Cades mature 1/9/97 to 1/16/97 5.40 to 5.60 74,855,806
140,800,000 Cafco mature 2/19/97 to 3/18/97 5.35 to 5.41 139,514,452
250,000,000 Canadian Imperial Holdings Inc.
mature 1/6/97 to 3/5/97 5.35 to 5.37 248,618,868
75,000,000 Cariplo Finance
mature 3/7/97 to 5/12/97 5.43 to 5.47 73,790,111
175,000,000 Chase Manhattan Bank
mature 1/15/97 to 2/10/97 5.35 to 5.65 174,205,528
199,500,000 Cheltenham & Gloucester Building
Society mature 3/20/97 to 5/14/97 5.40 to 5.45 196,408,884
135,000,000 Ciesco L.P.
mature 1/29/97 to 2/14/97 5.34 to 5.36 134,269,879
450,000,000 CIT Group Holdings, Inc.
mature 1/28/97 to 3/31/97 5.35 to 5.50 446,610,000
68,000,000 Citicorp matures 1/2/97 7.00 67,986,779
25,000,000 Commerzbank U.S. Finance
matures 3/20/97 5.43 24,709,667
380,000,000 Corporate Receivables Corp.
mature 1/14/97 to 3/14/97 5.37 to 5.55 378,034,613
78,500,000 Creditanstalt Finance, Inc.
mature 2/11/97 to 3/24/97 5.45 to 5.47 77,709,726
180,000,000 Credito Italiano Delaware, Inc.
mature 1/9/97 to 3/10/97 5.41 to 5.80 178,824,983
360,000,000 CXC, Inc.
mature 1/17/97 to 3/18/97 5.37 to 5.50 357,686,894
399,500,000 Daimler-Benz North American Corp.
mature 1/6/97 to 3/26/97 5.31 to 5.55 397,835,809
120,000,000 Dean Witter, Discover & Co.
mature 2/21/97 to 2/27/97 5.36 to 5.47 118,993,533
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
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Schedules of Investments (continued) December 31, 1996
- --------------------------------------------------------------------------------
CASH PORTFOLIO
<TABLE>
<CAPTION>
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
===============================================================================================
<S> <C> <C> <C>
Commercial Paper -- 55.0% (continued)
$373,167,000 Delaware Funding Corp.
mature 1/21/97 to 3/13/97 5.36% to 5.50% $370,013,428
140,000,000 Den Danske Corp.
mature 1/30/97 to 3/17/97 5.36 to 5.44 138,714,730
150,000,000 Dresdner U.S. Finance, Inc.
mature 1/6/97 to 3/6/97 5.37 to 5.38 149,020,764
50,000,000 E.I. du Pont de Nemours
matures 5/9/97 5.40 49,064,889
50,000,000 Eiger Capital matures 3/17/97 5.42 49,442,709
338,518,000 Enterprise Funding Corp.
mature 1/17/97 to 3/7/97 5.36 to 5.46 336,474,139
60,000,000 Falcon Asset Security Corp.
mature 1/10/97 to 2/5/97 5.37 to 5.45 59,782,660
75,000,000 Ford Credit Europe PLC
mature 1/13/97 to 2/10/97 5.37 to 5.41 74,748,500
375,000,000 Ford Motor Credit
mature 1/10/97 to 3/31/97 5.37 to 5.66 372,742,250
550,000,000 General Electric Capital Corp.
mature 1/16/97 to 4/30/97 5.36 to 5.85 544,282,002
445,000,000 General Motors Acceptance Corp.
mature 2/10/97 to 6/2/97 5.60 to 5.82 440,325,961
75,000,000 Generale Bank Inc.
mature 1/15/97 to 3/19/97 5.40 to 5.47 74,370,681
248,700,000 Glaxo Holdings PLC
mature 1/15/97 to 3/24/97 5.36 to 5.45 247,018,706
425,000,000 Goldman Sachs Group L.P.
mature 1/10/97 to 6/20/97 5.44 to 5.80 421,281,153
58,500,000 GTE Corp. matures 2/12/97 5.48 to 5.64 58,187,578
100,000,000 Household Finance Corp.
mature 1/28/97 to 2/13/97 5.36 99,485,320
25,000,000 Household International matures 1/10/97 5.41 24,966,500
50,000,000 Indosuez N.A. Inc. matures 3/6/97 5.44 49,522,667
304,139,000 International Securitization
mature 1/10/97 to 3/18/97 5.37 to 5.50 302,838,442
100,000,000 J.P. Morgan & Co.
mature 2/6/97 to 3/17/97 5.42 to 5.52 99,174,209
25,000,000 Krediet Bank matures 1/21/97 5.37 24,926,111
311,200,000 Lucent Technologies
mature 2/7/97 to 3/24/97 5.35 to 5.45 307,963,415
100,000,000 McKenna Triangle
mature 1/9/97 to 2/10/97 5.36 to 5.37 99,646,444
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) December 31, 1996
- --------------------------------------------------------------------------------
CASH PORTFOLIO
<TABLE>
<CAPTION>
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
===============================================================================================
<S> <C> <C> <C>
Commercial Paper -- 55.0% (continued)
$190,000,000 Merrill Lynch & Co., Inc.
mature 1/13/97 to 3/27/97 5.54% to 5.74% $189,186,379
375,000,000 Morgan Stanley Group, Inc.
mature 1/7/97 to 3/24/97 5.39 to 5.60 373,053,486
174,500,000 National Australia Bank
mature 3/17/97 to 3/27/97 5.44 to 5.47 172,447,214
260,000,000 National Bank of Canada Finance
mature 1/6/97 to 5/9/97 5.38 to 5.44 258,210,432
45,000,000 National Westminster Bank PLC Canada
mature 2/10/97 to 3/17/97 5.40 to 5.45 44,627,486
220,000,000 NationsBank Corp.
mature 1/7/97 to 2/4/97 5.37 to 5.78 219,257,578
198,650,000 Oesterreichische Kontrollbank AG
mature 2/6/97 to 2/18/97 5.36 to 5.40 197,500,903
55,000,000 Panasonic Finance Inc.
matures 3/27/97 5.50 54,294,854
189,000,000 Pfizer Inc.
mature 3/5/97 to 4/2/97 5.36 to 5.49 186,918,999
100,000,000 Philip Morris Co., Inc.
mature 1/24/97 to 2/7/97 5.36 to 5.40 99,558,368
311,725,000 Preferred Receivable Funding
mature 1/9/97 to 3/19/97 5.37 to 5.81 309,626,155
76,300,000 Province of British Columbia
mature 1/14/97 to 3/27/97 5.46 to 5.70 75,799,215
103,780,000 Receivable Capital Corp.
mature 1/23/97 to 2/14/97 5.46 to 5.57 103,201,788
15,000,000 Republic National Bank of New York
(Canadian Schedule B)
matures 2/28/97 5.39 15,000,400
130,000,000 Saint-Gobain (Compagnie de)
mature 2/24/97 to 5/2/97 5.36 to 5.89 128,223,650
125,000,000 San Paolo U.S. Finance Inc.
mature 2/14/97 to 3/18/97 5.36 to 5.67 123,828,451
53,000,000 Sara Lee Corp. matures 3/27/97 5.47 52,324,250
80,750,000 Sheffield Receivable Corp.
mature 1/10/97 to 1/17/97 5.38 to 5.39 80,609,254
20,000,000 Siemens Corp. matures 5/6/97 5.42 19,633,333
120,000,000 Toronto Dominion Holdings USA Inc.
mature 3/6/97 to 3/31/97 5.48 to 5.80 118,631,522
69,000,000 Transamerica Financial Corp.
mature 2/5/97 to 3/24/97 5.38 to 5.53 68,357,119
295,000,000 Union Bank of Switzerland
matures 1/2/97 7.10 294,941,819
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) December 31, 1996
- --------------------------------------------------------------------------------
CASH PORTFOLIO
<TABLE>
<CAPTION>
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
===============================================================================================
<S> <C> <C> <C>
Commercial Paper -- 55.0% (continued)
$ 20,000,000 USAA Capital Corp. matures 2/12/97 5.53% $ 19,874,467
150,000,000 Walt Disney Co.
mature 1/21/97 to 2/14/97 5.32 to 5.67 149,314,778
50,000,000 Westdeutsche Landesbank
matures 2/14/97 5.35 49,677,028
244,758,000 Windmill Funding Corp.
mature 1/17/97 to 3/21/97 5.36 to 5.51 242,936,278
40,000,000 WMX Technologies, Inc.
matures 3/18/97 5.66 39,535,556
250,000,000 Woolwich Building Society
mature 1/30/97 to 3/11/97 5.36 to 5.41 248,042,266
- -----------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(Cost -- $15,185,482,313) 15,185,482,313
===============================================================================================
Time Deposits -- 2.5%
402,644,000 Republic National Bank of New York
matures 1/2/97 6.88 402,644,000
300,000,000 Westdeutsche Landesbank
matures 1/2/97 7.00 300,000,000
- -----------------------------------------------------------------------------------------------
TOTAL TIME DEPOSITS
(Cost -- $702,644,000) 702,644,000
===============================================================================================
Foreign Certificates Of Deposit -- 23.7%
284,000,000 Abbey National PLC
mature 1/13/97 to 11/26/97 5.50 to 5.78 283,975,627
125,000,000 ABN AMRO Bank N.V.
mature 1/8/97 to 3/17/97 5.40 to 5.81 124,998,804
80,000,000 ABN AMRO Bank N.V. (Chicago)
mature 3/17/97 to 3/27/97 5.60 to 5.64 80,008,673
50,000,000 ABN AMRO Bank N.V. (New York)
matures 10/10/97 5.70 49,988,892
150,000,000 Australia & New Zealand Bank
mature 2/20/97 to 3/10/97 5.36 to 5.44 150,003,426
100,000,000 Bank Austriengellschaft
mature 1/31/97 to 9/16/97 5.36 to 5.94 99,989,378
175,000,000 Bank of Montreal
mature 1/7/97 to 1/14/97 5.36 to 5.50 175,000,176
355,000,000 Bank of Nova Scotia
mature 1/16/97 to 6/10/97 5.54 to 6.05 354,938,480
50,000,000 Bankers Trust N.Y. Corp.
matures 3/10/97 5.38 50,000,000
492,000,000 Banque National de Paris
mature 1/2/97 to 12/31/97 5.39 to 5.82 491,975,015
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) December 31, 1996
- --------------------------------------------------------------------------------
CASH PORTFOLIO
<TABLE>
<CAPTION>
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
===============================================================================================
<S> <C> <C> <C>
Foreign Certificates Of Deposit -- 23.7% (continued)
$ 50,000,000 Barclays Bank matures 1/24/97 5.36% $ 50,000,756
266,000,000 Bayerische Landesbank
mature 1/13/97 to 9/26/97 5.26 to 5.90 266,010,742
305,000,000 Bayerische Vereinsbank
mature 1/9/97 to 5/12/97 5.40 to 5.80 305,007,771
150,000,000 Canadian Imperial Bank of Commerce
mature 1/8/97 to 3/31/97 5.36 to 5.42 150,000,385
50,000,000 Cariplo mature 1/28/97 to 5/12/97 5.39 to 5.46 50,003,739
250,000,000 Commerzbank AG
mature 1/21/97 to 11/18/97 5.37 to 5.87 249,982,909
304,000,000 Credit Agricole
mature 1/7/97 to 3/31/97 5.35 to 5.47 304,001,085
100,000,000 Credit Suisse matures 2/7/97 5.36 100,001,017
325,000,000 Creditanstalt Bankverein
mature 1/3/97 to 4/7/97 5.35 to 5.42 325,004,807
50,000,000 Credito Italiano matures 2/7/97 5.42 50,000,506
25,000,000 Den Danske Bank matures 1/21/97 5.37 25,000,000
324,000,000 Deutsche Bank
mature 1/21/97 to 9/22/97 5.50 to 6.06 324,027,649
408,200,000 Hessiche Landesbank
mature 2/3/97 to 7/18/97 5.33 to 6.07 408,282,195
88,000,000 International Nederlander Group
mature 1/21/97 to 9/22/97 5.36 to 5.37 88,001,096
50,000,000 National Australia Bank
matures 3/17/97 5.42 50,001,971
100,000,000 National Bank of Canada
mature 3/13/97 to 6/6/97 5.40 to 5.50 100,025,799
240,000,000 National Westminster Bank PLC
mature 1/6/97 to 3/5/97 5.36 to 5.54 239,998,665
245,000,000 Rabobank Nederlands N.V.
mature 1/2/97 to 6/4/97 5.33 to 6.05 244,980,752
325,000,000 Royal Bank of Canada
mature 2/28/97 to 10/17/97 5.53 to 5.93 325,017,475
165,000,000 San Paolo Bank
mature 1/13/97 to 3/24/97 5.41 to 5.52 165,002,131
436,000,000 Societe Generale
mature 1/10/97 to 10/7/97 5.41 to 6.18 435,951,058
20,000,000 Swiss Bank Corp. matures 6/3/97 6.06 19,991,420
170,000,000 Toronto Dominion
mature 1/13/97 to 3/19/97 5.36 to 5.78 170,004,790
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) December 31, 1996
- --------------------------------------------------------------------------------
CASH PORTFOLIO
<TABLE>
<CAPTION>
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
==================================================================================================
<S> <C> <C> <C>
Foreign Certificates Of Deposit -- 23.7% (continued)
$150,000,000 Union Bank of Switzerland
matures 2/10/97 5.40% $ 150,000,000
80,000,000 Westdeutsche Landesbank
mature 2/6/97 to 6/11/97 5.36 to 6.06 80,000,070
- --------------------------------------------------------------------------------------------------
TOTAL FOREIGN CERTIFICATES
OF DEPOSIT
(Cost -- $6,537,177,259) 6,537,177,259
==================================================================================================
Short-term Notes -- 1.5%
27,100,000 Associates Corp. of North America
matures 11/15/97 5.64 27,322,965
50,000,000 General Electric Capital Corp.
matures 1/17/97 5.29 49,999,126
25,000,000 General Motors Acceptance Corp.
matures 10/7/97 5.70 25,007,465
310,000,000 Merrill Lynch & Co., Inc.
mature 1/22/97 to 9/11/97 5.19 to 6.16 310,000,000
- --------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM NOTES
(Cost -- $412,329,556) 412,329,556
==================================================================================================
Other-certificate Program -- 0.6%
184,271,000 Standard Credit Card Trust
Dakota Certificates Program
mature 1/10/97 to 2/10/97
(Cost -- $183,588,589) 5.39 to 5.46 183,588,589
- --------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $27,630,012,671*) $27,630,012,671
==================================================================================================
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) December 31, 1996
- --------------------------------------------------------------------------------
GOVERNMENT PORTFOLIO
<TABLE>
<CAPTION>
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
==============================================================================================
<S> <C> <C> <C>
U.s. Treasury Obligations-- 1.2%
$ 55,000,000 U.S. Treasury Notes
mature 6/30/97 to 9/30/97
(Cost -- $54,920,629) 5.93% to 6.00% $54,920,629
==============================================================================================
U.s. Agencies And Instrumentalities -- 91.7%
292,680,000 Federal Farm Credit Bank
mature 1/2/97 to 12/2/97 4.91 to 5.88 290,378,749
704,540,000 Federal Home Loan Bank
mature 1/9/97 to 12/2/97 4.94 to 5.65 700,466,378
1,110,508,000 Federal Home Loan Mortgage Corp.
mature 1/3/97 to 5/6/97 5.28 to 5.44 1,102,709,989
1,938,590,000 Federal National Mortgage Association
mature 1/3/97 to 10/28/97 4.77 to 5.70 1,920,725,960
45,000,000 Student Loan Marketing Association
mature 9/12/97 to 10/3/97 5.85 to 5.91 44,988,490
20,000,000 World Bank matures 2/18/97 5.64 19,853,333
- ----------------------------------------------------------------------------------------------
TOTAL U.S. AGENCIES AND
INSTRUMENTALITIES
(Cost -- $4,079,122,899) 4,079,122,899
==============================================================================================
Repurchase Agreements -- 7.1%
100,000,000 Goldman Sachs, 6.60% due 1/2/97;
Proceeds at maturity -- $100,036,667; (Fully
collateralized by U.S. Treasury Bond, 7.25% due 5/15/16;
Market value -- $102,000,474) 100,000,000
200,000,000 Morgan Guaranty, 6.60% due 1/2/97;
Proceeds at maturity -- $200,073,333; (Fully
collateralized by U.S. Treasury Notes,
5.25% to 7.125% due 12/31/97 to 3/31/00;
Market value -- $204,004,181) 200,000,000
13,967,000 Morgan Stanley Group, Inc., 6.28% due 1/2/97;
Proceeds at maturity -- $13,971,873; (Fully
collateralized by U.S. Treasury Bills, due 5/8/97;
Market value -- $14,259,032) 13,967,000
- ----------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost -- $313,967,000) 313,967,000
==============================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $4,448,010,528*) $4,448,010,528
==============================================================================================
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) December 31, 1996
- --------------------------------------------------------------------------------
RETIREMENT PORTFOLIO
<TABLE>
<CAPTION>
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
==============================================================================================
<S> <C> <C> <C>
U.s. Treasury Obligations -- 0.7%
$10,000,000 U.S. Treasury Note matures 9/30/97
(Cost -- $9,987,567) 5.93% $ 9,987,567
==============================================================================================
U.s. Agencies And Instrumentalities -- 6.9%
29,000,000 Federal Farm Credit Bank
mature 2/3/97 to 10/1/97 4.91 to 5.80 28,962,275
20,000,000 Federal Home Loan Mortgage Corp.
matures 3/21/97 5.42 19,765,194
44,000,000 Federal National Mortgage Association
mature 2/10/97 to 7/17/97 4.81 to 5.67 43,541,338
- ----------------------------------------------------------------------------------------------
TOTAL U.S. AGENCIES AND
INSTRUMENTALITIES
(Cost -- $92,268,807) 92,268,807
==============================================================================================
Domestic Bank Obligations -- 5.6%
26,000,000 Bank of America
mature 1/29/97 to 11/21/97 5.13 to 5.60 25,993,798
30,000,000 FCC National
mature 2/5/97 to 2/20/97 5.40 to 5.57 30,002,508
20,000,000 NationsBank Corp. matures 2/10/97 5.38 20,000,000
- ----------------------------------------------------------------------------------------------
TOTAL DOMESTIC BANK OBLIGATIONS
(Cost -- $75,996,306) 75,996,306
==============================================================================================
Commercial Paper -- 43.6%
10,000,000 Abbey National PLC matures 3/10/97 5.82 9,893,278
30,000,000 Asset Securitization Corp.
mature 1/21/97 to 2/13/97 5.36 to 5.44 29,859,179
15,000,000 Australia & New Zealand Bank
matures 2/26/97 5.37 14,876,450
10,000,000 Banca Commerciale Italiana
matures 1/2/97 5.53 9,998,486
15,000,000 Bank Brussels Lambert
matures 1/27/97 5.38 14,942,475
8,900,000 Bank of America (BankAmerica Corp.)
matures 3/11/97 5.76 8,804,473
30,000,000 Bank of New York matures 1/14/97 5.40 29,942,150
15,000,000 Bank of Nova Scotia matures 1/16/97 5.54 14,966,000
15,000,000 Bear Stearns & Co. matures 2/5/97 5.39 14,922,271
12,000,000 Cades mature 2/20/97 to 3/10/97 5.37 to 5.53 11,897,640
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) December 31, 1996
- --------------------------------------------------------------------------------
RETIREMENT PORTFOLIO
<TABLE>
<CAPTION>
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
==============================================================================================
<S> <C> <C> <C>
Commercial Paper -- 43.6% (continued)
$34,000,000 Chase Manhattan Bank Corp.
mature 1/27/97 to 3/10/97 5.37% to 5.46% $33,745,481
18,000,000 Ciesco L.P. matures 2/10/97 5.38 17,893,400
10,000,000 Daimler-Benz North America Co.
matures 2/10/97 5.53 9,940,222
15,000,000 Dean Witter, Discover & Co.
matures 1/14/97 5.50 14,970,858
20,000,000 First Union Corp. matures 2/18/97 5.36 19,858,933
25,000,000 Ford Motor Credit Corp.
matures 2/3/97 5.36 24,878,771
37,000,000 General Electric Capital Corp.
mature 1/16/97 to 4/17/97 5.36 to 5.56 36,685,243
10,000,000 Generale Bank matures 1/16/97 5.64 9,976,917
26,000,000 Goldman Sachs Group, L.P.
mature 1/17/97 to 3/21/97 5.39 to 5.51 25,863,420
20,000,000 J.P. Morgan & Co.
matures 3/24/97 5.40 19,757,644
10,000,000 McKenna Triangle matures 2/12/97 5.37 9,937,933
25,000,000 Merrill Lynch & Co., Inc.
mature 1/21/97 to 1/24/97 5.39 to 5.40 24,919,310
10,000,000 Morgan Stanley Group, Inc.
matures 1/29/97 5.38 9,958,700
10,000,000 Pfizer Inc. matures 3/5/97 5.36 9,907,425
25,000,000 Preferred Receivable Funding
matures 2/11/97 5.39 24,848,813
15,710,000 Raytheon matures 1/13/97 5.77 15,679,889
15,000,000 Saint Gobain (Compagnie de)
matures 3/31/97 5.40 14,803,458
35,000,000 San Paolo U.S. Finance Inc.
mature 2/13/97 to 3/17/97 5.41 to 5.45 34,666,967
15,000,000 Sheffield Receivable Corp.
matures 1/15/97 5.53 14,967,917
13,800,000 Siemens Corp. matures 2/4/97 5.37 13,730,923
10,000,000 Transamerica Finance Corp.
matures 5/15/97 5.42 9,803,467
11,800,000 USAA Capital Corp.
matures 2/25/97 5.50 11,701,749
</TABLE>
See Notes to Financial Statements.
14
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) December 31, 1996
- --------------------------------------------------------------------------------
RETIREMENT PORTFOLIO
<TABLE>
<CAPTION>
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
==============================================================================================
<S> <C> <C> <C>
Commercial Paper -- 43.6% (continued)
$20,000,000 Woolwich Building Society
matures 3/11/97 5.40% $19,795,683
- ----------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(Cost -- $588,395,525) 588,395,525
==============================================================================================
Domestic Certificates Of Deposit -- 2.8%
20,000,000 Bankers Trust N.Y. Corp.
matures 3/20/97 5.46 20,000,000
18,000,000 Morgan Guaranty matures 1/8/97 5.40 17,999,994
- ----------------------------------------------------------------------------------------------
TOTAL DOMESTIC CERTIFICATES
OF DEPOSIT
(Cost -- $37,999,994) 37,999,994
==============================================================================================
Foreign Certificates Of Deposit -- 33.5%
15,000,000 Abbey National PLC
matures 4/15/97 5.50 15,000,386
20,000,000 ABN-AMRO Bank N.V.
mature 1/28/97 to 2/18/97 5.36 to 5.40 20,000,263
10,000,000 ABN-AMRO Bank N.V. (Chicago)
matures 4/29/97 5.39 10,000,165
25,000,000 Bank of Montreal
mature 1/10/97 to 1/13/97 5.37 to 5.40 25,000,000
15,000,000 Bank of Nova Scotia matures 3/10/97 5.79 15,000,275
20,000,000 Banque National de Paris
matures 1/24/97 5.41 20,000,000
35,000,000 Barclays Bank
mature 1/27/97 to 2/6/97 5.37 to 5.40 34,999,965
33,000,000 Bayerische Vereinsbank
mature 1/9/97 to 6/3/97 5.47 to 5.71 32,997,002
35,000,000 Canadian Imperial Bank of Commerce
mature 1/17/97 to 3/10/97 5.39 to 5.60 35,000,446
25,000,000 Cariplo mature 1/24/97 to 1/28/97 5.39 to 5.41 25,000,215
29,000,000 Credit Agricole
mature 1/27/97 to 2/6/97 5.37 to 5.52 28,999,622
11,000,000 Credit Suisse matures 2/13/97 5.55 10,999,133
20,000,000 Creditanstalt Bankverein
matures 1/6/97 5.53 20,000,144
22,000,000 Credito Italiano
mature 1/22/97 to 2/18/97 5.39 to 5.41 22,000,103
16,000,000 Deutsche Bank
mature 2/3/97 to 4/10/97 5.70 to 5.88 15,994,459
</TABLE>
See Notes to Financial Statements.
15
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) December 31, 1996
- --------------------------------------------------------------------------------
RETIREMENT PORTFOLIO
<TABLE>
<CAPTION>
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
==============================================================================================
<S> <C> <C> <C>
Foreign Certificates Of Deposit -- 33.5% (continued)
$15,000,000 Hessiche Landesbank
matures 2/5/97 5.38% $15,000,000
20,000,000 International Nederlander Group
matures 1/21/97 5.38 20,000,110
17,800,000 National Westminster Bank PLC
mature 1/17/97 to 1/21/97 5.40 to 5.62 17,799,770
17,000,000 Rabobank Nederlands N.V.
mature 6/5/97 to 12/4/97 5.54 to 6.10 16,996,384
30,000,000 Societe Generale
mature 1/16/97 to 2/14/97 5.36 to 5.54 30,000,228
11,000,000 Toronto Dominion matures 1/13/97 5.78 11,000,089
10,000,000 Westdeutsche Landesbank
matures 2/12/97 5.52 10,000,321
- ----------------------------------------------------------------------------------------------
TOTAL FOREIGN CERTIFICATES
OF DEPOSIT
(Cost -- $451,789,080) 451,789,080
==============================================================================================
Time Deposits -- 5.9%
25,000,000 Bank Austriengellschaft
matures 1/2/97 7.00 25,000,000
30,000,000 Republic National Bank of New York
matures 1/2/97 6.87 30,000,000
25,000,000 Westdeutsche Landesbank
matures 1/2/97 7.00 25,000,000
- ----------------------------------------------------------------------------------------------
TOTAL TIME DEPOSITS
(Cost -- $80,000,000) 80,000,000
==============================================================================================
Repurchase Agreement --1.0%
13,436,000 Morgan Stanley Group, Inc., 6.28% due 1/2/97;
Proceeds at maturity -- $13,440,688; (Fully collateralized
by U.S. Treasury Note, 6.75% due 5/31/97;
Market value -- $13,710,091)(Cost -- $13,436,000) 13,436,000
==============================================================================================
TOTAL INVESTMENTS -- 100%
(Cost --$1,349,873,279*) $1,349,873,279
==============================================================================================
</TABLE>
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
16
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cash Government Retirement
Portfolio Portfolio Portfolio
=============================================================================================
<S> <C> <C> <C>
ASSETS:
Investments, at amortized cost $27,630,012,671 $4,448,010,528 $1,349,873,279
Cash 459 903 320
Interest receivable 175,122,276 4,477,068 8,229,151
Other assets 4,587,461 1,809,039 260,570
- ---------------------------------------------------------------------------------------------
Total Assets 27,809,722,867 4,454,297,538 1,358,363,320
- ---------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 249,871,044 -- --
Dividends payable 58,279,964 9,366,922 2,820,690
Management fees payable 9,255,999 1,617,892 424,137
Distribution fees payable 2,583,150 99,357 42,345
Deferred compensation payable 134,991 23,425 9,462
Accrued expenses 2,265,894 469,269 49,194
- ---------------------------------------------------------------------------------------------
Total Liabilities 322,391,042 11,576,865 3,345,828
- ---------------------------------------------------------------------------------------------
Total Net Assets $27,487,331,825 $4,442,720,673 $1,355,017,492
=============================================================================================
NET ASSETS CONSIST OF:
Capital Stock
(40,000,000,000,
10,000,000,000, and
5,000,000,000 shares
authorized, respectively;
par value $0.01 per share) $ 274,882,557 $ 44,427,040 $ 13,550,175
Capital paid in excess
of par value 27,213,621,014 4,398,293,633 1,341,467,317
Accumulated net realized
loss from security
transactions (1,171,746) -- --
- ---------------------------------------------------------------------------------------------
Total Net Assets $27,487,331,825 $4,442,720,673 $1,355,017,492
=============================================================================================
Shares Outstanding:
Class A 27,434,516,409 4,353,009,274 1,355,017,492
- ---------------------------------------------------------------------------------------------
Class C 2,152,334 981,719 --
- ---------------------------------------------------------------------------------------------
Class Y 51,581,407 51,873,156 --
- ---------------------------------------------------------------------------------------------
Class Z 5,574 36,839,879 --
- ---------------------------------------------------------------------------------------------
Net Asset Value, per Class $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
17
<PAGE>
- --------------------------------------------------------------------------------
Statements of Operations For the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cash Government Retirement
Portfolio Portfolio Portfolio
==========================================================================================
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $1,403,732,878 $235,143,395 $69,480,905
- ------------------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 3) 103,013,084 18,688,740 5,588,496
Distribution fees (Note 3) 25,523,263 4,310,750 1,272,124
Shareholder and system servicing fees 24,044,376 2,613,954 1,696,927
Shareholder communications 1,747,752 171,478 101,760
Custody 1,640,022 172,846 58,966
Registration fees 1,352,898 537,449 210,061
Insurance 349,889 63,581 --
Directors' fees 260,004 25,000 24,998
Audit and legal 91,112 57,165 14,905
Other 3,898 6,796 45,078
- ------------------------------------------------------------------------------------------
Total Expenses 158,026,298 26,647,759 9,013,315
- ------------------------------------------------------------------------------------------
Net Investment Income 1,245,706,580 208,495,636 60,467,590
- ------------------------------------------------------------------------------------------
Net Realized Gain From
Security Transactions 282,722 23,025 --
- ------------------------------------------------------------------------------------------
Increase in Net Assets
From Operations $1,245,989,302 $208,518,661 $60,467,590
==========================================================================================
</TABLE>
See Notes to Financial Statements.
18
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
Years Ended December 31,
-----------------------------------
CASH PORTFOLIO 1996 1995
===============================================================================
OPERATIONS:
Net investment income $ 1,245,706,580 $ 1,110,789,278
Net realized gain 282,722 406,767
- -------------------------------------------------------------------------------
Increase in Net Assets From Operations 1,245,989,302 1,111,196,045
- -------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS (NOTE 2) (1,245,706,580) (1,109,614,260)
- -------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Proceeds from sale of shares 112,463,129,671 95,078,500,639
Net asset value of shares issued
for reinvestment of dividends 1,224,522,521 1,061,864,432
Cost of shares reacquired (109,201,241,036) (90,733,030,654)
- -------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 4,486,411,156 5,407,334,417
- -------------------------------------------------------------------------------
Increase in Net Assets 4,486,693,878 5,408,916,202
NET ASSETS:
Beginning of year 23,000,637,947 17,591,721,745
- -------------------------------------------------------------------------------
End of year $ 27,487,331,825 $ 23,000,637,947
===============================================================================
See Notes to Financial Statements.
19
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (continued)
- --------------------------------------------------------------------------------
Years Ended December 31,
-----------------------------------
<S> <C> <C>
Government Portfolio 1996 1995
===============================================================================
OPERATIONS:
Net investment income $ 208,495,636 $ 212,199,200
Net realized gain 23,025 404,836
- -------------------------------------------------------------------------------
Increase in Net Assets From Operations 208,518,661 212,604,036
- -------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS (NOTE 2) (208,518,661) (211,997,883)
- -------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Proceeds from sale of shares 16,447,868,058 16,176,144,568
Net asset value of shares issued
for reinvestment of dividends 207,002,672 205,431,104
Cost of shares reacquired (16,287,630,574) (16,036,689,142)
- -------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 367,240,156 344,886,530
- -------------------------------------------------------------------------------
Increase in Net Assets 367,240,156 345,492,683
NET ASSETS:
Beginning of year 4,075,480,517 3,729,987,834
- -------------------------------------------------------------------------------
End of year $ 4,442,720,673 $ 4,075,480,517
===============================================================================
</TABLE>
See Notes to Financial Statements.
20
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (continued)
- --------------------------------------------------------------------------------
Years Ended December 31,
---------------------------------
Retirement Portfolio 1996 1995
===============================================================================
OPERATIONS:
Net investment income $ 60,467,590 $ 60,061,754
- -------------------------------------------------------------------------------
Increase in Net Assets From Operations 60,467,590 60,061,754
- -------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS (NOTE 2) (60,467,590) (60,061,754)
- -------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Proceeds from sale of shares 4,577,974,101 4,330,327,073
Net asset value of shares issued
for reinvestment of dividends 60,304,723 58,412,308
Cost of shares reacquired (4,562,913,860) (4,170,429,234)
- -------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 75,364,964 218,310,147
- -------------------------------------------------------------------------------
Increase in Net Assets 75,364,964 218,310,147
NET ASSETS:
Beginning of year 1,279,652,528 1,061,342,381
- -------------------------------------------------------------------------------
End of year $ 1,355,017,492 $ 1,279,652,528
===============================================================================
See Notes to Financial Statements.
21
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
Smith Barney Money Funds, 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 Fund consists of three
separate investment portfolios ("Portfolios"): the Cash Portfolio, the
Government Portfolio and the Retirement Portfolio.
The significant accounting policies consistently followed by the Fund are:
(a) transactions in money market instruments and government obligations are
accounted for on trade date; (b) the Fund uses the amortized cost method for
valuing investments; accordingly, the cost of securities plus accreted discount,
or minus amortized premium, approximates market value; (c) interest income is
recorded on the accrual basis; (d) direct expenses are charged to each portfolio
and each class; management fees and general fund expenses are allocated on the
basis of relative net assets; (e) gains or losses on the sale of securities are
calculated using the specific identification method; (f) the Portfolios intend
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 be relieved from substantially all
Federal income and excise taxes; and (g) estimates and assumptions are required
to be made regarding assets, liabilities and changes in net assets resulting
from operations when financial statements are prepared. Changes in the economic
environment, financial markets and any other parameters used in determining
these estimates could cause actual results to differ.
2. Dividends
Each Portfolio declares and records a dividend of substantially all of its
net investment income on each business day. Such dividends are paid or
reinvested monthly in each respective Portfolio's shares on the payable date.
3. Management Agreement and Other Transactions
Smith Barney Mutual Funds Management Inc. ("SBMFM"), a subsidiary of Smith
Barney Holdings, Inc. ("SBH"), acts as investment manager to the Fund. As
compensation for its services, each Portfolio pays SBMFM a daily fee calculated
at the following rates: Cash: 0.45% on the first $6.0 billion of average daily
net assets, 0.425% on the next $6.0 billion, 0.40% on the next $6.0 billion and
0.35% on the average daily net assets in excess of $18.0 billion; Government:
0.45% on the first $2.5 billion of the average daily net assets, 0.40% on the
next $2.5 billion and
22
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
0.35% on average daily net assets in excess of $5.0 billion; and Retirement:
0.45% on the first $1.0 billion of average daily net assets, 0.40% on the next
$1.0 billion and 0.35% on average daily net assets in excess of $2.0 billion.
These fees are calculated daily and paid monthly.
Pursuant to a Distribution Plan, each Portfolio makes payments to Smith
Barney Inc. ("SB"), another subsidiary of SBH, for assistance in distributing
Class A and C shares, calculated at the annual rate of 0.10% of average daily
net assets of each class, respectively. For the year ended December 31, 1996,
total Distribution Plan fees incurred were:
Portfolio Class A Class C
================================================================================
Cash $25,521,166 $2,097
Government 4,309,555 1,195
Retirement 1,272,124 --
================================================================================
All officers and two Directors of the Fund are employees of SB.
4. Capital Loss Carryforward
At December 31, 1996, the Cash Portfolio had, for Federal tax purposes,
approximately $1,357,000 of capital loss carryforwards available to offset
future capital gains. To the extent that these carryforward losses are used to
offset capital gains, it is probable that the gains so offset will not be
distributed. The amount and expiration of the carryforwards are indicated below.
Expiration occurs on December 31, of the year indicated:
Portfolio 2000 2001
================================================================================
Capital Loss Carryforward $226,000 $1,131,000
================================================================================
5. Repurchase Agreements
The Fund purchases (and its custodian takes possession of) U.S. Government
securities from banks and securities dealers subject to agreements to resell the
securities to the sellers at a future date (generally, the next business day) at
an agreed-upon higher repurchase price. The Fund requires continual maintenance
of the market value of the collateral in amounts at least equal to the
repurchase price.
6. Capital Shares
The Fund has multiple classes of shares within the Cash and Government
Portfolios. Class A and Class Y shares can be purchased directly by investors;
Class C shares can only be purchased by participants in the Smith Barney 401(k)
Program; and, Class Z shares can only be purchased by participants in the Smith
Barney Employee 401(k) Program.
23
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
Transactions in shares of each Portfolio were as follows:
Year Ended Year Ended
Cash Portfolio December 31, 1996 December 31, 1995
===============================================================================
Class A
Shares sold 112,083,943,961 94,844,353,231
Shares issued on reinvestment 1,222,436,770 1,060,968,654
Shares redeemed (108,841,816,611) (90,528,044,829)
- -------------------------------------------------------------------------------
Net Increase 4,464,564,120 5,377,277,056
===============================================================================
Class C
Shares sold 2,153,797 1,759,379
Shares issued on reinvestment 100,716 76,027
Shares redeemed (1,838,758) (1,421,588)
- -------------------------------------------------------------------------------
Net Increase 415,755 413,818
===============================================================================
Class Y
Shares sold 377,031,913 232,388,029
Shares issued on reinvestment 1,984,761 819,469
Shares redeemed (357,585,667) (203,564,237)
- -------------------------------------------------------------------------------
Net Increase 21,431,007 29,643,261
===============================================================================
Class Z
Shares sold -- --
Shares issued on reinvestment 274 282
Shares redeemed -- --
- -------------------------------------------------------------------------------
Net Increase 274 282
===============================================================================
24
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
Year Ended Year Ended
Government Portfolio December 31, 1996 December 31, 1995
===============================================================================
Class A
Shares sold 16,321,871,925 16,082,844,648
Shares issued on reinvestment 204,615,591 203,071,713
Shares redeemed (16,210,993,997) (15,944,430,768)
- -------------------------------------------------------------------------------
Net Increase 315,493,519 341,485,593
===============================================================================
Class C
Shares sold 97,252 112,576
Shares issued on reinvestment 57,445 117,703
Shares redeemed (631,770) (2,732,614)
- -------------------------------------------------------------------------------
Net Decrease (477,073) (2,502,335)
===============================================================================
Class Y
Shares sold 118,300,033 84,418,479
Shares issued on reinvestment 616,191 559,403
Shares redeemed (72,418,898) (80,518,760)
- -------------------------------------------------------------------------------
Net Increase 46,497,326 4,459,122
===============================================================================
Class Z
Shares sold 7,598,848 8,768,865
Shares issued on reinvestment 1,713,445 1,682,285
Shares redeemed (3,585,909) (9,007,000)
- -------------------------------------------------------------------------------
Net Increase 5,726,384 1,444,150
===============================================================================
Retirement Portfolio
===============================================================================
Class A
Shares sold 4,577,974,101 4,330,327,073
Shares issued on reinvestment 60,304,723 58,412,308
Shares redeemed (4,562,913,860) (4,170,429,234)
- -------------------------------------------------------------------------------
Net Increase 75,364,964 218,310,147
===============================================================================
25
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year:
<TABLE>
<CAPTION>
Class A
-----------------------------------------------------
Cash Portfolio 1996 1995 1994 1993 1992
=====================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------------------------------------------------------
Net investment income 0.050 0.054 0.037 0.026 0.033
Dividends from net investment income (0.050) (0.054) (0.037) (0.026) (0.033)
- -----------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------------------------------------------------------
Total Return 4.98% 5.53% 3.73% 2.63% 3.31%
- -----------------------------------------------------------------------------------------------------
Net Assets, End of Year (in millions) $27,434 $22,969 $17,590 $ 2,953 $ 2,841
- -----------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.62% 0.62% 0.64% 0.64% 0.60%
Net investment income 4.87 5.39 4.10 2.60 3.17
=====================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class C Class Y
----------------------------- -------------------------------
Cash Portfolio 1996 1995 1994(1) 1996 1995 1994(2)
=====================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------------------------------------------------------
Net investment income 0.050 0.054 0.007 0.051 0.054 0.0004
Dividends from net investment
income (0.050) (0.054) (0.007) (0.051) (0.054) (0.0004)
- -----------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------------------------------------------------------
Total Return 4.98% 5.53% 0.70%+++ 5.09% 5.50% 0.40%+++
- -----------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $ 2,152 $ 1,737 $ 1,323 $51,581 $30,150 $ 507
- -----------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.62% 0.62% 0.62%+ 0.52% 0.51% 0.53%+
Net investment income 4.87 5.39 4.77+ 4.97 5.29 5.23+
=====================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class Z
-----------------------------
Cash Portfolio 1996 1995 1994(3)
================================================================================
<S> <C> <C> <C>
Net Asset Value, Beginning of Year $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------------------------------------------
Net investment income 0.051 0.055 0.006
Dividends from net investment income (0.051) (0.055) (0.006)
- --------------------------------------------------------------------------------
Net Asset Value, End of Year $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------------------------------------------
Total Return 5.06% 5.63% 0.60%+++
- --------------------------------------------------------------------------------
Net Assets, End of Year (000s) $ 6 $ 5 $ 5
- --------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.53% 0.52% 0.47%+
Net investment income 4.96 5.49 5.12+
================================================================================
</TABLE>
(1) For the period from November 10, 1994 (inception date) to December 31, 1994.
(2) For the period from December 29, 1994 (inception date) to December 31, 1994.
(3) For the period from November 15, 1994 (inception date) to December 31, 1994.
+++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
26
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year:
<TABLE>
<CAPTION>
Class A
------------------------------------------------------
Government Portfolio 1996 1995 1994 1993(1) 1992
============================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------------------------------------------------------
Net investment income 0.048 0.053 0.036 0.025 0.032
Dividends from net investment income (0.048) (0.053) (0.036) (0.025) (0.032)
- ------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------------------------------------------------------
Total Return 4.89% 5.45% 3.63% 2.55% 3.32%
- ------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (in millions) $ 4,353 $ 4,038 $ 3,695 $ 636 $ 675
- ------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.61% 0.60% 0.61% 0.61% 0.55%
Net investment income 4.78 5.31 4.03 2.53 3.15
============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class C (2) Class Y (3)
------------------------------ --------------------------------
Government Portfolio 1996 1995 1994(4) 1996 1995 1994(5)
==============================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------------------------------------------------------------------------
Net investment income 0.048 0.053 0.036 0.049 0.054 0.036
Dividends from net investment
income (0.048) (0.053) (0.036) (0.049) (0.054) (0.036)
- --------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------------------------------------------------------------------------
Total Return 4.89% 5.46% 3.63% 4.99% 5.55% 3.65%
- --------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $ 982 $ 1,459 $ 3,961 $51,873 $ 5,376 $ 917
- --------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.61% 0.60% 0.61% 0.51% 0.50% 0.60%
Net investment income 4.78 5.36 3.78 4.88 5.51 3.58
==============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class Z
------------------------------
Government Portfolio 1996 1995 1994(6)
==============================================================================
<S> <C> <C> <C>
Net Asset Value, Beginning of Year $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------------------------
Net investment income 0.049 0.054 0.007
Dividends from net investment income (0.049) (0.054) (0.007)
- ------------------------------------------------------------------------------
Net Asset Value, End of Year $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------------------------
Total Return 4.99% 5.56% 0.70%+++
- ------------------------------------------------------------------------------
Net Assets, End of Year (000s) $36,840 $31,113 $29,669
- ------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.51% 0.50% 0.51%+
Net investment income 4.88 5.42 4.93+
==============================================================================
</TABLE>
(1) Since no difference in expenses existed for Class A, C and Y shares of the
Government Portfolio for 1993, this information is identical for each
class of shares.
(2) The inception date for Class C shares is March 5, 1993.
(3) The inception date for Class Y shares is October 28, 1993.
(4) On November 7, 1994, the former Class C shares were renamed as Class Y
shares.
(5) On November 7, 1994, the former Class Y shares were renamed as Class Z
shares.
(6) For the period from November 9, 1994 (inception date) to December 31,
1994.
+++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
27
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of capital stock outstanding throughout each year:
<TABLE>
<CAPTION>
Class A
-----------------------------------------------
Retirement Portfolio 1996 1995 1994 1993 1992
============================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------------------------------------------------------
Net investment income 0.048 0.053 0.036 0.026 0.032
Dividends from net investment income (0.048) (0.053) (0.036) (0.026) (0.032)
- --------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------------------------------------------------------
Total Return 4.86% 5.42% 3.67% 2.58% 3.26%
- --------------------------------------------------------------------------------------------
Net Assets, End of Year (in millions) $ 1,355 $ 1,280 $ 1,061 $ 1,184 $ 1,030
- --------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.71% 0.72% 0.70% 0.70% 0.64%
Net investment income 4.75 5.28 3.57 2.55 3.21
- --------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
The Smith Barney Money Funds, Inc.:
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of Smith Barney Money Funds, Inc.
(comprising of the Cash, Government and Retirement Portfolios) as of December
31, 1996, and the related statements of operations for the year then ended,
statements of changes in net assets for each of the years in the two-year period
then ended and the financial highlights for each of the years in the five-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.
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
December 31, 1996, by correspondence with the custodian. As to securities
purchased but not received, we performed other appropriate auditing 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
each of the respective portfolios constituting Smith Barney Money Funds, Inc. as
of December 31, 1996, the results of their operations for the year then ended,
the changes in their net assets for each of the years in the two-year period
then ended and the financial highlights for each of the years in the five-year
period then ended, in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
New York, New York
February 5, 1997
29
<PAGE>
SMITH BARNEY
MONEY FUNDS, INC.
DIRECTORS
Jessica M. Bibliowicz
Joseph H. Fleiss
Donald R. Foley
Paul Hardin
Francis P. Martin, M.D.
Heath B. McLendon, Chairman
Roderick C. Rasmussen
John P. Toolan
OFFICERS
Heath B. McLendon
Chief Executive Officer
Jessica M. Bibliowicz
President
Lewis E. Daidone
Senior Vice President
and Treasurer
Phyllis M. Zahorodny
Vice President
Martin R. Hanley
Investment Officer
Irving P. David
Controller
Christina T. Sydor
Secretary
SMITH BARNEY
- ---------------------------------
A Member of TravelersGroup [LOGO]
INVESTMENT MANAGER
Smith Barney Mutual Funds
Management Inc.
DISTRIBUTORS
Smith Barney Inc.
PFS Distributor, Inc.
CUSTODIAN
PNC Bank, N.A.
SHAREHOLDER
SERVICING AGENT
First Data Investor Services Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is submitted for the general information of the shareholders of
Smith Barney Money Funds, Inc. It is not authorized for distribution to
prospective investors unless accompanied or preceded by an effective Prospectus
for the Fund, which contains information concerning the Fund's investment
policies and expenses as well as other pertinent information.
SMITH BARNEY
MONEY FUNDS, INC.
388 Greenwich Street
New York, New York 10013
FD0858 2/97
