As filed with the Securities and Exchange Commission on September 12, 1997
Registration No. 333-31761
U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[X] Pre-Effective Amendment No. 1
[ ] Post-Effective Amendment No.
SMITH BARNEY MONEY FUNDS, INC.
(Exact name of Registrant as specified in the Articles of
Incorporation)
Area Code and Telephone Number: (800) 224-7523
388 Greenwich Street, New York, New York 10013
(Address of principal executive offices) (Zip Code)
Christina T. Sydor, Esq.
Smith Barney Inc.
388 Greenwich Street New York, New York 10013 (22nd floor)
(Name and address of agent for service)
copy to:
John E. Baumgardner, Jr., Esq.
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Approximate date of proposed public offering: As soon as possible after
the effective date of this Registration Statement.
Registrant has registered an indefinite amount of securities pursuant to
Rule 24f-2 under the Investment Company Act of 1940, as amended;
accordingly, no fee is payable herewith. Registrant's Rule 24f-2 Notice
for the fiscal period ended December 31, 1996 was filed with the
Securities and Exchange Commission on February 18, 1997.
Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the
Commission, by action pursuant to said Section 8(a), may determine.
Total Number of Pages:
SMITH BARNEY MONEY FUNDS, INC.
CONTENTS OF
REGISTRATION STATEMENT
This Registration Statement contains the following pages and documents:
Front Cover
Contents Page
Cross-Reference Sheet
Letter to Shareholders
Notice of Special Meeting
Instructions for Signing Proxy Cards
Part A - Prospectus/Proxy Statement
Part B - Statement of Additional Information
Part C - Other Information
Signature Page
Exhibits
SMITH BARNEY MONEY FUNDS, INC.
FORM N-14 CROSS REFERENCE SHEET
Pursuant to Rule 481(a) Under the Securities Act of 1933
Prospectus/Proxy
Part A Item No. and Caption Statement Caption
Item 1. Beginning of Registration Cover Page; Cross Reference
Statement and Outside Front Sheet
Cover Page of Prospectus
Item 2. Beginning and Outside Back Table of Contents
Cover Page of Prospectus
Item 3. Synopsis Information and Fee Table; Summary; Risk Factors;
Comparison of
Risk Factors Investment Objectives and Policies
Item 4. Information About the Transaction Summary: Reasons for the
Reorganization;
Information about the Reorganization;
Information on Shareholders' Rights;
Exhibit A (Agreement and Plan of
Reorganization)
Item 5. Information About the Registrant Cover Page; Summary;
Information about
the Reorganization; Comparison of Investment
Objectives and Policies; Information on Shareholders'
Rights; Additional Information about Smith Barney
Money Funds, Inc. - Cash Portfolio and Smith
Barney Funds, Inc. - Income Return
Account Portfolio
Item 6. Information About the Summary; Information About the
Company Being Acquired Reorganization; Comparison of Investment
Objectives and Policies; Information
on Shareholder's
Rights; Additional Information about Smith Barney
Money Funds, Inc. - Cash Portfolio
and Smith Barney
Funds, Inc. - Income Return Account Portfolio
Item 7. Voting Information Summary; Information About the Reorganization;
Information on Shareholders' Rights;
Voting Information
Item 8. Interest of Certain Persons Financial Statements and Experts;
Legal Matters and Experts
Item 9. Additional Information Not Applicable
Required for Reoffering By
Persons Deemed to be Underwriters
Part B Item No. and Caption Statement of Additional
Information Caption
Item 10. Cover Page Cover Page
Item 11. Table of Contents Cover Page
Item 12. Additional Information Cover Page; Statement of Additional
About the Registrant Information of Smith
Barney Money
Funds, Inc. dated April 30, 1997
Item 13 Additional Information Cover Page; Statement of Additional
About the Company Being Information of Smith Barney
Acquired Funds, Inc. dated April 30, 1997
Item 14. Financial Statements Cover Page; Annual Report and Semi-Annual
Report of Smith Barney Money Funds, Inc.
dated December 31, 1996 and June 30, 1997,
respectively, and Annual Report and Semi-
Annual Report of Smith Barney Funds, Inc.
dated December 31, 1996 and June 30, 1997,
respectively
Part C Item No. and Caption Other Information Caption
Item 15. Indemnification Indemnification
Item 16. Exhibits Exhibits
Item 17. Undertakings Undertakings
TO SHAREHOLDERS OF
SMITH BARNEY FUNDS, INC. - INCOME RETURN ACCOUNT PORTFOLIO
Your Vote is Important
Dear Shareholder:
The Board of Directors of Smith Barney Funds, Inc. - Income Return
Account Portfolio ("Income Return Account Portfolio") has recently
reviewed and unanimously endorsed a proposal for a reorganization of
Income Return Account Portfolio which it judges to be in the best
interests of Income Return Account Portfolio shareholders.
Under the terms of the proposal, the Cash Portfolio ("Cash
Portfolio") of Smith Barney Money Funds, Inc. would acquire all or
substantially all of the assets and liabilities of Income Return Account
Portfolio. After the transaction, the Income Return Account Portfolio
would be liquidated and you would become a shareholder of Cash Portfolio,
having received Class A shares of an aggregate value equivalent to the
aggregate value of your investment in Income Return Account Portfolio at
the time of the transaction. No sales charge would be imposed in the
transaction. The transaction will be subject to Federal income taxes.
The Board of Directors of Income Return Account Portfolio believes
that the proposed reorganization is in the best interests of the Income
Return Account Portfolio shareholders due, in large part, to the fact
that the minimal assets of the Income Return Account Portfolio do not
justify maintenance of the Income Return Account Portfolio as a separate
portfolio. Income Return Account Portfolio assets have been declining
since 1993 while its fixed costs have remained constant. As a result,
the Portfolio's investment style has been significantly inhibited for a
number of years and it has become increasingly difficult to provide
competitive returns In fact to maintain a competitive yield, Smith
Barney Mutual Funds Management Inc. (the"Manager") has been waiving its
management fees and has been reimbursing the expenses of the Income
Return Account Portfolio.
To consider this transaction, we have called a Special Meeting of
Shareholders to be held October 17, 1997. We strongly invite your
participation by asking you to review, complete and return your proxy
promptly in the postage paid envelope provided.
Detailed information about the proposed transaction is described in
the enclosed prospectus/proxy statement. If you sign and date your proxy
card but do not provide voting instructions, your shares will be voted
FOR the proposal.
We thank you for your timely response and look forward to
continuing to serve your investment needs. If you have any questions
regarding the proposed transaction, please call your Financial
Consultant, who will be pleased to assist you.
IT IS VERY IMPORTANT THAT YOUR VOTING INSTRUCTIONS BE RECEIVED PROMPTLY.
Sincerely,
Heath B. McLendon
Chairman of the Board
September 15, 1997
SMITH BARNEY FUNDS, INC. - INCOME RETURN ACCOUNT PORTFOLIO
388 Greenwich Street
New York, New York 10013
__________________
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held on October 17, 1997
__________________
Notice is hereby given that a Special Meeting of Shareholders (the
"Meeting") of Smith Barney Funds, Inc. - Income Return Account Portfolio
("Income Return Account Portfolio") will be held at 388 Greenwich Street,
22nd Floor, New York, New York, on October 17, 1997, commencing at 10:00
a.m. for the following purposes:
1. To consider and act upon the Agreement and Plan of
Reorganization (the "Plan") dated as of June 25, 1997,
providing for (i) the acquisition of all or substantially all
of the assets of Income Return Account Portfolio by Smith
Barney Money Funds, Inc. on behalf of its Cash Portfolio
("Cash Portfolio") in exchange for Class A shares of Cash
Portfolio and the assumption by Cash Portfolio of all stated
liabilities of Income Return Account Portfolio; (ii) the
distribution of such shares of the Cash Portfolio to
shareholders of Income Return Account Portfolio in
liquidation of Income Return Account Portfolio; and (iii) the
subsequent termination of Income Return Account Portfolio.
2. To transact such other business as may properly come before
the Meeting or any adjournment or adjournments thereof.
The Directors of Income Return Account Portfolio have fixed the
close of business on July 22, 1997 as the record date for the
determination of shareholders of Income Return Account Portfolio entitled
to notice of and to vote at the Meeting and any adjournment or
adjournments thereof.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO DO
NOT EXPECT TO ATTEND THE SPECIAL MEETING ARE URGED TO SIGN AND RETURN
WITHOUT DELAY THE ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE, WHICH
REQUIRES NO POSTAGE, SO THAT THEIR SHARES MAY BE REPRESENTED AT THE
MEETING. INSTRUCTIONS FOR THE PROPER EXECUTION OF PROXY CARDS ARE SET
FORTH ON THE FOLLOWING PAGE.
By Order of the Board of Directors
Christina T. Sydor
Secretary
September 15, 1997
YOUR PROMPT ATTENTION TO THE ENCLOSED PROXY WILL HELP TO AVOID THE
EXPENSE OF FURTHER SOLICITATION.
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of assistance
to you and avoid the time and expense involved in validating your vote if
you fail to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears in
the registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the
party signing should conform exactly to the name shown in the
registration on the proxy card.
3. All Other Accounts: The capacity of the individual signing the
proxy card should be indicated unless it is reflected in the form of
registration. For example:
Registration Valid Signatures
Corporate Accounts
(1) ABC Corp. ABC Corp.
(2) ABC Corp. John Doe, Treasurer
(3) ABC Corp.
c/o John Doe, Treasurer John Doe
(4) ABC Corp.
Profit Sharing Plan John Doe, Trustee
Trust Accounts
(1) ABC Trust Jane B. Doe, Trustee
(2) Jane B. Doe,
Trustee u/t/d 12/28/78 Jane B. Doe
Custodial or Estate Accounts
(1) John B. Smith,
Cust. f/b/o John B. Smith, Jr. UGMA John B. Smith
(2) John B. Smith John B. Smith, Jr.,
Executor
PROSPECTUS/PROXY STATEMENT dated September 15, 1997
CASH PORTFOLIO
a separate investment portfolio of
SMITH BARNEY MONEY FUNDS, INC.
388 Greenwich Street
New York, New York 10013
(800) 224-7523
INCOME RETURN ACCOUNT PORTFOLIO
a separate investment portfolio of
SMITH BARNEY FUNDS, INC.
388 Greenwich Street
New York, New York 10013
(800) 224-7523
This Prospectus/Proxy Statement is being furnished to shareholders
of Smith Barney Funds, Inc.- Income Return Account Portfolio (the
"Acquired Fund") in connection with a proposed Agreement and Plan of
Reorganization dated June 25, 1997 (the "Plan") to be submitted to
shareholders of the Acquired Fund for consideration at a Special Meeting
of Shareholders to be held on October 17, 1997 at 10:00 a.m. (the
"Meeting") at 388 Greenwich Street, 22nd Floor, New York, New York or any
adjournment or adjournments thereof.
The Plan provides for all or substantially all of the assets of the
Acquired Fund to be acquired by Smith Barney Money Funds, Inc. - Cash
Portfolio (the "Acquiring Fund") in exchange for Class A shares of the
Acquiring Fund and the assumption by the Acquiring Fund of all stated
liabilities of the Acquired Fund (the Acquiring Fund and the Acquired
Fund are sometimes referred to hereinafter collectively as the "Funds"
and individually as a "Fund"). Upon completion of the reorganization,
shares of the Acquiring Fund would be distributed to shareholders of the
Acquired Fund in liquidation of the Acquired Fund. As a result of the
reorganization, each shareholder of the Acquired Fund would receive that
number of shares of the Acquiring Fund having an aggregate value equal to
the aggregate value of such shareholder's shares of the Acquired Fund.
All shareholders of the Acquired Fund would receive Class A shares of the
Acquiring Fund. This transaction will be subject to Federal income taxes.
The Acquiring Fund is a money market fund that invests in high
quality money market instruments. Other portfolios of Smith Barney Money
Funds, Inc. are the Government Portfolio and the Retirement Portfolio.
Smith Barney Mutual Funds Management Inc. ("SBMFM" or the "Manager")
manages the day-to-day operations of the Acquiring Fund. SBMFM is a
subsidiary of Smith Barney Holdings Inc., which is a subsidiary of
Travelers Group Inc., a financial services holding company engaged,
through its subsidiaries, principally in the business of life and
property and casualty insurance services, investment services and
consumer finance services.
Although the Acquiring Fund is a money market fund and the
Acquired Fund is not, the investment objectives of the Acquiring Fund are
substantially similar to those of the Acquired Fund. The Acquiring
Fund's investment objective is maximum current income and preservation of
capital. The Acquired Fund seeks high current income from a portfolio of
high quality debt obligations while employing an immunization strategy to
minimize the risk of loss of account value. Certain differences in the
investment policies of the Acquiring Fund and the Acquired Fund are
described under "Comparison of Investment Objectives and Policies" in
this Prospectus/Proxy Statement.
This Prospectus/Proxy Statement, which should be retained for
future reference, sets forth concisely the information about the
Acquiring Fund that a prospective investor should know before investing.
Certain relevant documents listed below, which have been filed with the
Securities and Exchange Commission ("SEC"), are incorporated in whole or
in part by reference. A Statement of Additional Information dated
September 15, 1997, relating to this Prospectus/Proxy Statement and the
reorganization described herein, has been filed with the SEC and is
incorporated by reference into this Prospectus/Proxy Statement. A copy
of such Statement of Additional Information is available upon request and
without charge by writing to the Acquired Fund at the address listed on
the cover page of this Prospectus/Proxy Statement or by contacting a
Smith Barney Financial Consultant, or by calling (800) 224-7523. The
Prospectus of Smith Barney Money Funds, Inc. dated April 30, 1997 is
incorporated by reference in its entirety and a copy is included herein.
Also accompanying this Prospectus/Proxy Statement as Exhibit A is a
copy of the Plan for the proposed transaction.
The shares of the Acquiring Fund are not insured or guaranteed by
the U.S. Government. There is no assurance that the Acquiring Fund will
be able to maintain a stable net asset value of $1.00 per share.
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/PROXY
STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
Page
Additional Materials
Fee Tables
Summary
Risk Factors
Reasons for the Reorganization
Information about the Reorganization
Information about the Acquiring Fund
Information about the Acquired Fund
Comparison of Investment Objectives and Policies
Information on Shareholders' Rights
Additional Information about Smith Barney Money Funds, Inc. and
Smith Barney Funds, Inc. - Income Return Account Portfolio .
Other Business
Voting Information
Financial Statements and Experts
Legal Matters
Exhibit A: Agreement and Plan of Reorganization
ADDITIONAL MATERIALS
The following additional materials, which have been incorporated by
reference into the Statement of Additional Information dated September
15, 1997 relating to this Prospectus/Proxy Statement and the
Reorganization, will be sent to all shareholders requesting a copy of
such Statement of Additional Information.
1. Statement of Additional Information of Smith Barney Money
Funds, Inc. dated April 30, 1997.
2. Statement of Additional Information of Smith Barney Funds,
Inc. dated April 30, 1997.
3. Annual Report of Smith Barney Money Funds, Inc. for the
fiscal year ended December 31, 1996.
4. Annual Report of Smith Barney Funds, Inc. for the fiscal year
ended December 31, 1996.
5. Semi-Annual Report of Smith Barney Money Funds, Inc. for
the six month period ended June 30, 1997.
6. Semi-Annual Report of Smith Barney Funds, Inc. for the six
month period ended June 30, 1997.
FEE TABLES
Followings are tables showing the current costs and expenses of the
Class A and Class C shares of the Acquired Fund and the Class A shares of
the Acquiring Fund, and the Pro Forma costs and expenses expected to be
incurred by the Acquiring Fund after giving effect to the reorganization,
each based on the maximum sales charge or maximum contingent deferred
sales charge ("CDSC") that may be incurred at the time of purchase or
redemption:
Class A Class A
Shares Shares
Cash Income Return Pro Forma**
Portfolio Account Portfolio
Shareholder Transaction Expenses
Maximum sales charge
imposed on purchases None 2.00% None
(as a percentage of
offering price)
Maximum CDSC
(as a percentage of None None* None
original cost or redemption
proceeds, whichever is lower)
Annual Portfolio Operating Expenses
(as a percentage of average
net assets)
Management fees 0.40% 0.45% 0.40%
12b-1 fees 0.10 None 0.10
Other expenses 0.12 0.81 0.12
Total Portfolio Operating Expenses 0.62% 1.26% 0.62%
______________________
*Purchases of Class A shares, which equal or exceed $500,000 in the
aggregate, will be made at net asset value with no sales charge, but will
be subject to a CDSC of 1.00% on redemptions made within 12 months of
purchase.
**The pro forma financial figures are intended to provide shareholders
information about the continuing impact of the reorganization as if the
reorganization had taken place as of January 1, 1997.
Class A Class A
Shares Shares
Cash Income Return Pro Forma **
Portfolio Account Portfolio
Shareholder Transaction Expenses
Maximum sales charge
imposed on purchases None None None
(as a percentage of
offering price)
Maximum CDSC
(as a percentage of None 1.00% None
original cost or redemption
proceeds, whichever is lower)
Annual Portfolio Operating Expenses
(as a percentage of average
net assets)
Management fees 0.40% 0.45% .40%
12b-1 fees 0.10 0.35* .10
Other expenses 0.12 0.80 .12
Total Portfolio Operating Expenses .62% 1.60% .62%
______________________
*Class C shares do not have a conversion feature and, therefore, are
subject to an ongoing distribution fee. As a result, long-term
shareholders of Class C shares may pay more than the economic equivalent
of the maximum front-end sales charge permitted by the National
Association of Securities Dealers, Inc.
**The pro forma financial figures are intended to provide shareholders
information about the continuing impact of the reorganization as if the
reorganization had taken place as of January 1, 1997.
Examples
The following examples are intended to assist an investor in
understanding the various costs that an investor will bear directly or
indirectly. The examples assume payment of operating expenses at the
levels set forth in the tables above.
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:
Cash Portfolio Class A $ 6 $ 20 $ 35 $ 77
Income Return Account Portfolio Class A 33 59 88 169
Income Return Account Portfolio Class C 26 50 87 190
Pro Forma 6 20 35 77
1 Year 3 Years 5 Years 10 Years
An investor would pay the following
expenses on the same annual return
and no redemption:
Cash Portfolio Class A $ 6 $ 20 $ 35 $ 77
Income Return Account Portfolio Class A 33 59 88 169
Income Return Account Portfolio Class C 16 50 87 190
Pro Forma 6 20 35 77
The examples also 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. However, a fund's
actual return will vary and may be greater or less than 5.00%. These
examples should not be considered representations of past or future
expenses and actual expenses may be greater or less than those shown.
SUMMARY
This summary is qualified in its entirety by reference to the
additional information contained elsewhere in this Prospectus/Proxy
Statement, the Agreement and Plan of Reorganization, a copy of which is
attached to this Prospectus/Proxy Statement as Exhibit A, the
accompanying Prospectus of the Acquiring Fund dated April 30, 1997 and
the Prospectus of the Acquired Fund dated April 30, 1997.
Proposed Reorganization. The Plan provides for the transfer of all
or substantially all of the assets of the Acquired Fund to the Acquiring
Fund in exchange for Class A shares of the Acquiring Fund and the
assumption by the Acquiring Fund of all stated liabilities of the
Acquired Fund. The Plan also calls for the distribution of Class A
shares of the Acquiring Fund to the Acquired Fund's shareholders in
liquidation of the Acquired Fund. (The foregoing proposed transaction is
referred to in this Prospectus/Proxy Statement as the "Reorganization.").
As a result of the Reorganization, each shareholder of the Acquired Fund
will become the owner of that number of full and fractional Class A
shares of the Acquiring Fund having an aggregate value equal to the
aggregate value of the shareholder's shares of the Acquired Fund as of
the close of business on the date that the Acquired Fund's assets are
exchanged for shares of the Acquiring Fund. Shareholders of the Acquired
Fund will receive Class A shares of the Acquiring Fund, whether they
currently own Class A or Class C shares of the Acquired Fund.
For the reasons set forth below under "Reasons for the
Reorganization," the Board of Directors of the Acquired Fund, including
the "Independent Directors" (the Board members who are not "interested
persons" as that term is defined in the Investment Company Act of 1940,
as amended (the "1940 Act")), has unanimously concluded that the
Reorganization would be in the best interests of the shareholders of the
Acquired Fund and that the interests of the Acquired Fund's shareholders
will not be diluted as a result of the transaction contemplated by the
Reorganization, and the Board therefore has submitted the Plan for
approval by the Acquired Fund's shareholders. The Board of Directors of
the Acquiring Fund has reached similar conclusions with respect to the
Acquiring Fund and its shareholders, and has also approved the
Reorganization with respect to the Acquiring Fund.
Approval of the Reorganization will require the vote of a majority
of the outstanding shares of the Acquired Fund at a meeting of
shareholders at which a quorum is present, by the holders of shares
present in person or represented by proxy and entitled to vote on such
action. The presence in person or by proxy of the holders of record of
a majority of the shares of the capital stock of the Acquired Fund issued
and outstanding and entitled to vote will constitute a quorum at the
Meeting. See "Voting Information."
Tax Consequences. This transaction will be subject to Federal
income taxes. See "Information About the Reorganization- Federal Income
Tax Consequences."
Investment Objectives and Policies. The Acquired Fund and the
Acquiring Fund have substantially similar investment objectives, policies
and restrictions. The Acquired Fund seeks high current income for its
shareholders and employs an immunization policy to minimize the loss of
account value, whereas the Acquiring Fund seeks maximum current income
and preservation of capital.
As a money market fund, the Acquiring Fund operates in accordance
with Rule 2a-7 under the 1940 Act. Rule 2a-7 imposes specific
requirements with respect to diversification, concentration and quality
of portfolio assets, as well as the maturity of specific portfolio
securities and the average maturity of the portfolio in the aggregate.
Under Rule 2a-7, the Acquiring Fund must maintain a dollar weighted
average portfolio maturity of less than 90 days; not purchase any assets
having a remaining maturity of more than 397 days; and invest in U.S.
dollar-denominated instruments which the Board determines present minimal
credit risks. Rule 2a-7 provides that money market funds may invest only
in "eligible securities," which are securities rated by at least two
ratings agencies (or by the only rating agency that has rated the
security) in one of the two highest short-term rating categories, or
comparable unrated securities. The Acquiring Fund employs the amortized
cost method of valuing portfolio securities, and the extent of any
deviation in the net asset value per share calculated based upon the
amortized cost method from values based upon market quotations is
determined at reasonable intervals. In the event any such deviation
exceeds 1/2 of 1% ($0.005), certain stabilization procedures would be
promptly considered. This method of operating is intended to provide
safety and liquidity for the Acquiring Fund's portfolio, and to minimize
the potential for fluctuations in the net asset value of the Acquiring
Fund's shares.
The Acquired Fund is not a money market fund and therefore does not
operate under Rule 2a-7. It is permitted to invest in U.S. Government
Obligations, bankers' acceptances, certificates of deposit, securities
backed by letters of credit, commercial paper rated A-1 by Standard &
Poor's Corporation ("S&P") or Prime-1 by Moody's Investors Service, Inc.
("Moody's") and notes and bonds, including floating rate issues, rated A
or better by S&P or Moody's (or, if not rated, of comparable quality as
determined by the Manager). The Acquired Fund's investments in U.S.
Government Obligations may be in obligations with remaining maturities of
five years or less, and its investments in corporate debt obligations may
be in obligations with remaining maturities of three years or less.
Normally, approximately one-third of the Acquired Fund consists of
obligations that have remaining maturities of less than one year; however
there may be occasions when up to 100% of the Acquired Fund is invested
in securities maturing within one year. This portfolio composition is
intended to achieve a higher level of income than would otherwise be
available from an exclusively short-term portfolio (or that might be
obtained from a money market fund) with less risk than that of a
conventional bond or note portfolio.
For a discussion of the differences between the investment policies
of the Acquiring Fund and the Acquired Fund, see "Comparison of
Investment Objectives and Policies."
At the time of the Reorganization, it is anticipated that the
investments held by the Acquired Fund will be compatible with the
investment policies of the Acquiring Fund, and it is anticipated that
there will not be any material expenses incurred by the Acquiring Fund in
aligning its portfolio in preparation for the Reorganization.
Exchange Privileges. Shareholders of both Funds are entitled to
exchange their shares for shares of the same class of certain funds of
the Smith Barney Mutual Funds to the extent shares are offered for sale
in the shareholder's state of residence. As part of the Reorganization,
each shareholder of the Acquired Fund will become the owner of Class A
shares of the Acquiring Fund and will be entitled to exchange such shares
for Class A shares of other funds of the Smith Barney Mutual Funds. Any
exchange will be a taxable event for which a shareholder may have to
recognize a gain or loss under federal income tax provisions.
Dividends. The Acquiring Fund declares a dividend of substantially
all of its net investment income dividends daily and pays income
dividends monthly. 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. Long-
term capital gains, if any, are distributed annually. The Acquired Fund
declares monthly income dividends and makes annual distributions of
capital gains, if any.
Unless a shareholder of the Acquired Fund has elected to receive
dividends and capital gains distributions in cash, dividends and capital
gains distributions are reinvested automatically in additional shares of
the Acquired Fund. Similarly, income dividends paid by the Acquiring
Fund are automatically reinvested in shares of the Acquiring Fund unless
a shareholder has elected to receive distributions in cash. Acquired
Fund shareholders who have elected to receive dividends and distributions
in cash will continue to receive distributions in such manner from the
Acquiring Fund. Subsequent to the Reorganization, such Acquired Fund
shareholders may elect at any time to have their dividends and
distributions reinvested automatically in additional shares of the
Acquiring Fund by contacting their Financial Consultant. See "Dividends,
Automatic Reinvestment and Taxes" in the accompanying Prospectus of the
Acquiring Fund.
Purchase and Redemption Procedures. Purchases of shares of the
Acquiring Fund may be made through a brokerage account maintained with
Smith Barney or with a broker that clears securities transactions through
Smith Barney on a fully disclosed basis. Class A shares of the Acquiring
Fund are sold without an initial sales charge. Class A shares of the
Acquired Fund are sold subject to a maximum initial sales charge of 2.00%
of the public offering price. Purchases of Class A shares of the
Acquired Fund which equal or exceed $500,000 in the aggregate are made at
net asset value with no sales charge, but are subject to a CDSC of 1.00%
on redemptions within 12 months. Class C shares of the Acquired Fund are
sold without an initial sales charge but are subject to higher ongoing
expenses than Class A shares, and a CDSC payable upon certain
redemptions.
Class A shares of both Funds, except as set forth in the preceding
paragraph, may be redeemed, at their respective net asset values per
share next determined without charge. Class C shares of the Acquired
Fund may be redeemed at their net asset value per share, subject to a
CDSC of 1.00% if such shares are redeemed during the first 12 months
following their purchase. Shareholders of either Fund may redeem their
shares on any day such Fund calculates its net asset value. Redemption
requests received prior to the close of regular trading on the New York
Stock Exchange ("NYSE") with respect to the Acquired Fund, or before 12
noon New York City time with respect to the Acquiring Fund, are priced at
the net asset value per share determined on that day; otherwise,
redemption requests are priced at the net asset value as next determined.
See "How to Redeem Shares" in the accompanying Prospectus of the
Acquiring Fund.
Shares of both Funds held by Smith Barney as custodian must be
redeemed by submitting a written request to a Smith Barney Financial
Consultant. All other shares may be redeemed through a Smith Barney
Financial Consultant, Introducing Broker or dealer in the selling group
or by forwarding a written request for redemption to the transfer agent,
First Data Investor Services Group, Inc. ("First Data"). See "Redemption
of Shares" in the accompanying Prospectus of the Acquiring Fund.
Shareholders' Voting Rights. Shareholders of the Acquired Fund and
the Acquiring Fund have similar voting rights. For example, neither
Smith Barney Funds, Inc. nor Smith Barney Money Funds, Inc. holds
meetings of shareholders annually, and there is normally no meeting of
shareholders for the purpose of electing Directors unless and until such
time as less than a majority of the Directors holding office have been
elected by shareholders. In addition, under the laws of the State of
Maryland, shareholders of the Acquired Fund do not have appraisal rights
in connection with a combination or acquisition of the assets of the
Acquired Fund by another entity. Shareholders of the Acquired Fund may,
however, continue to redeem their shares at net asset value prior to the
date of Reorganization. See "Information on Shareholder Rights."
RISK FACTORS
Due to the similarities of investment objectives and policies of
the Acquiring Fund and the Acquired Fund, an investment in the Acquiring
Fund involves investment risks that are substantially similar to those of
the Acquired Fund. For a full description of the risks involved in
investing in the Acquiring Fund, refer to "Investment Objectives and
Policies" in the accompanying Prospectus of the Acquiring Fund.
REASONS FOR THE REORGANIZATION
The Board of Directors of the Acquired Fund has determined that it
is advantageous to combine the Acquired Fund with the Acquiring Fund.
The Funds have substantially similar investment objectives, substantially
similar investment policies and the same Manager and shareholder
servicing agent. In reaching this conclusion, the Board considered a
number of factors as described below.
The Directors considered the fact that the Acquired Fund's assets
have been declining since 1993 which has resulted in the Acquired Fund
not having sufficient assets to justify maintaining it as a separate
fund. Specifically, while much of the Acquired Fund's fixed costs have
remained constant since 1993, the Acquired Fund's assets (for all classes
of shares) have declined from over $60 million at year end 1993, to
approximately $25 million at year end 1994, to under $20 million at year
end 1995, and to under $18 million at year end 1996. This is in contrast
to the assets of the Acquiring Fund which were over $27 billion at the
end of 1996.
The Manager also informed the Directors that since 1993, when
the Acquired Fund assets began to decline, the Acquired Fund's investment
style has been significantly inhibited and it has become increasingly
difficult to provide competitive returns. The Board considered that the
Reorganization would permit the shareholders of the Acquired Fund to
continue to pursue an investment goal involving the maximization of
income from a short-term portfolio with limited volatility. The Board had
been informed that with interests rates at their current levels, the
yield on the Acquired Fund could drop below the money market fund rates,
given the expense ratio of the Acquired Fund. The Board considered the
advantages to the respective Funds, including the removal of the
impediments experienced by the Acquired Fund due to its small size.
The Board members were presented with financial information as of
the year ended December 31, 1996 which indicated that the total expenses
of the Acquired Fund's classes were substantially higher than the total
expenses of the Acquiring Fund (i.e., 1.26% for Class A shares of the
Acquired Fund and 1.60% for Class C shares of the Acquired Fund as
compared to .62% for Class A shares of the Acquiring Fund). The Board
considered pro forma information for the combined fund (assuming the same
level of assets as of December 31, 1996), which reflected the same
expense ratio as that for the Acquiring Fund. The Board considered that
Smith Barney has been subsidizing the Acquired Fund by waiving the
management fee and absorbing expenses.
In light of the foregoing, the Board of Directors of the Acquired
Fund, including the Independent Directors, determined that it is in the
best interests of the Acquired Fund and its shareholders to combine the
Acquired Fund with the Acquiring Fund. The Board also determined that a
combination of the Acquired Fund and the Acquiring Fund would not result
in a dilution of the interests of the Acquired Fund's shareholders.
The Board of Directors also determined that it is
advantageous to the Acquiring Fund to acquire the assets of the Acquired
Fund. Among other reasons, the Board considered that: (1) the impact of
the Reorganization on the current expenses of the Acquiring Fund will be
minimal, and (2) the portfolio securities will be acquired without any
cost to the Acquiring Fund. Accordingly, the Board of the Acquiring
Fund, including a majority of the Independent Directors, determined that
the Reorganization is in the best interests of the Acquiring Fund's
shareholders and that the interests of the Acquiring Fund's shareholders
will not be diluted as a result of the Reorganization.
INFORMATION ABOUT THE REORGANIZATION
Plan of Reorganization. The following summary of the Plan is
qualified in its entirety by reference to the Plan (Exhibit A hereto).
The Plan provides that the Acquiring Fund will acquire all or
substantially all of the assets of the Acquired Fund in exchange for
shares of the Acquiring Fund and the assumption by the Acquiring Fund of
all stated liabilities of the Acquired Fund on October 24, 1997 or such
later date as may be agreed upon by the parties (the "Closing Date").
Prior to the Closing Date, the Acquired Fund will endeavor to
discharge all of its known liabilities and obligations. The Acquiring
Fund will not assume any liabilities or obligations other than those
reflected on an unaudited statement of assets and liabilities of the
Acquired Fund prepared as of the close of regular trading on the NYSE,
currently 4:00 p.m. New York City time, on the Closing Date. The
Acquiring Fund will deliver to the Acquired Fund for distribution to the
Acquired Fund shareholders the number of Class A shares of the Acquiring
Fund, including fractional Class A shares, determined by dividing the
value of the Acquired Fund's net assets attributable to each class of its
shares by the net asset value of one Class A share of the Acquiring Fund.
The net asset value per share will be determined by dividing assets, less
liabilities, by the total number of outstanding shares and will be
computed as of the close of regular trading on the NYSE with respect to
the Funds, both on the Closing Date. If the net asset value of each
class of shares of each Fund on the Closing Date were to be $1.00 per
share, shareholders of the Acquired Fund would receive one Acquiring Fund
share for each Acquired Fund share held on the Closing Date.
The Acquired Fund and the Acquiring Fund will utilize the
procedures set forth under "Valuation of Shares" in the Prospectus of the
Acquiring Fund to determine the value of their respective portfolio
securities and to determine the aggregate value of each Fund's portfolio.
See "Comparison of Investment Objectives and Policies-Primary
Investments" for a description of the amortized cost method of valuation
used by the Acquiring Fund. The method of valuation employed will be
consistent with the requirements set forth in the Prospectus of the
Acquiring Fund, Rule 22c-1 under the 1940 Act and the interpretation of
such rule by the SEC's Division of Investment Management.
At or prior to the Closing Date, the Acquired Fund will and the
Acquiring Fund may declare a dividend or dividends which, together with
all previous such dividends, will have the effect of distributing to
their respective shareholders all taxable income for the period ending on
or prior to the Closing Date. In addition, the Acquired Fund's dividend
will include its net capital gains realized in the period ending on or
prior to the Closing Date (after reductions for any capital loss
carryforward).
As soon after the Closing Date as conveniently practicable, the
Acquired Fund will liquidate and distribute pro rata to shareholders of
record as of the close of business on the Closing Date the full and
fractional shares of the Acquiring Fund received by the Acquired Fund.
Shareholders of the Acquired Fund will receive Class A shares of the
Acquiring Fund. Such liquidation and distribution will be accomplished
by the establishment of accounts in the names of the Acquired Fund's
shareholders on the share records of the Acquiring Fund's transfer agent.
Each account will represent the respective pro rata number of full and
fractional shares of the Acquiring Fund due to each of the Acquired
Fund's shareholders. After such distribution and the winding up of its
affairs, the Acquired Fund will be terminated as a portfolio of Smith
Barney Funds, Inc.
The consummation of the Reorganization is subject to the conditions
set forth in the Plan. Notwithstanding approval of the Acquired Fund's
shareholders, the Plan may be terminated at any time at or prior to the
Closing Date by (1) mutual agreement of Smith Barney Funds, Inc. and
Smith Barney Money Funds, Inc. or (2) by either party to the Plan upon a
material breach by the other party of any representation, warranty or
agreement contained therein.
Approval of the Reorganization will require a vote of a majority
of the outstanding shares of the Acquired Fund.
Description of the Acquiring Fund 's Shares. Full and fractional
shares of common stock of the Acquiring Fund will be issued to the
Acquired Fund in accordance with the procedures detailed in the Plan and
as described in the Acquiring Fund's Prospectus. Generally, the
Acquiring Fund does not issue share certificates to shareholders unless a
specific request is submitted to the Acquiring Fund's transfer agent.
See "Information on Shareholders' Rights" and the Prospectus of the
Acquiring Fund for additional information with respect to the shares of
the Acquiring Fund.
Federal Income Tax Consequences
Due to the recent significant contraction in the size of the
Acquired Fund, the Reorganization will be treated for Federal income tax
purposes as a taxable disposition by the Acquired Fund of its assets in
exchange for shares of the Acquiring Fund (and the assumption by the
Acquiring Fund of certain liabilities of the Acquired Fund), followed by
a liquidating distribution by the Acquired Fund of shares of the
Acquiring Fund.
The Acquired Fund will recognize gain or loss on the taxable
disposition of its assets, but will receive a dividends paid deduction in
respect of the liquidating distribution and will therefore not be subject
to Federal income tax as a result of the Reorganization. The Acquiring
Fund will take a fair market value basis in the assets received from the
Acquired Fund.
Shareholders of the Acquired Fund will recognize gain or loss on
the liquidating distribution of shares of the Acquiring Fund equal to the
excess of the fair market value of the Acquiring Fund Shares received
over their basis in the Acquired Fund shares exchanged therefor. Such
gain or loss will be a capital gain or loss if the shareholder is treated
as holding shares in the Acquired Fund as a capital asset, and will be
long-term capital gain or loss if the shareholder is treated as holding
shares in the Acquired Fund for more than one year. Long-term capital
gains are eligible for reduced tax rates to individuals, and such rates
may be further reduced if the individual's holding period exceeds 18
months. Shareholders of the Acquired Fund will take a fair market value
basis in the shares of the Acquiring Fund.
Shareholders of the Acquired Fund should consult their tax advisors
regarding the effect, if any, of the proposed Reorganization in light of
their individual circumstances. Since the foregoing discussion only
relates to the Federal income tax consequences of the Reorganization,
shareholders of the Acquired Fund should also consult their tax advisors
as to state and local tax consequences, if any, of the Reorganization.
Capitalization. The following table shows the capitalization of
the Acquiring Fund and the Acquired Fund as of August 29, 1997, and on a
pro forma basis as of that date, giving effect to the proposed
acquisition of assets at net asset value.
Cash Portfolio
Income Return Account
Portfolio
Pro Forma for
Reorganization
Class A
Shares
(Unaudited)
Class A
Shares
(Unaudited)
Class C Shares
(Unaudited)
Class A
Shares
(Unaudited)
Net assets.............
$30,280,725,261
Net asset value
per share
1.00
Shares
outstanding......
30,281,631,930
$1,049,344
9.44
111,214
380,396
9.44
40,317
$30,282,155,001
1.00
30,283,061,670
As of July 22, 1997 (the "Record Date"), there were 127,530
outstanding Class A shares and 41,412 outstanding Class C shares of the
Acquired Fund and 29,679,687,925 outstanding Class A shares of the
Acquiring Fund. As of the Record Date, the officers and Directors of
Smith Barney Funds, Inc. beneficially owned as a group less than 1 % of
the outstanding shares of the Acquired Fund. Except as set forth below,
to the best knowledge of the Board of Directors of the Acquired Fund, as
of the Record Date, no shareholder or "group" (as that term is used in
Section 13(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) owned beneficially or of record 5% or more of a Class of
shares of the Acquired Fund. As of the Record Date, the officers and
Directors of Smith Barney Money Funds, Inc. beneficially owned as a group
less than 1% of the outstanding shares of the Acquiring Fund. Except as
set forth below, to the best knowledge of the Board of Directors of the
Acquiring Fund, as of the Record Date, no shareholder or group (as that
term is used in Section 13(d) of the Exchange Act) owned beneficially or
of record more than 5% of the Acquiring Fund.
Name and Address
Percentage of Class
Owned of Record or
Beneficially As of the
Record Date
Upon
Consummation of
the
Reorganization
Income Return Account Portfolio
Class A
Jacque Baker
Smith Barney Inc. Rollover
Cust.
101 Mott Avenue
Santa Cruz, CA 95062-3729
7.24%
Less than 1%
Chicago Foundation for Women
Reserve Fund Account
Attn.: Marianne Philbin
230 W. Superior - #408
Chicago, IL 60610-3536
6.43
Less than 1%
Name and Address
Percentage of Class
Owned of Record or
Beneficially As of the
Record Date
Upon
Consummation of
the
Reorganization
Income Return Account Portfolio
Class C
Marshall E. Redding IRA
Smith Barney Inc. IRA Custodian
Suite A
2530 Atlantic Ave.
Long Beach, CA 90806-2741
53.12
Less than 1%
Osage Hills Apt. Ministries
Inc.
Attn.: S. Gabrielle Kocour
P.O. Box 8014
Tulsa, OK 74101-8014
13.23
Less than 1%
Helen Fierstein
Smith Barney Inc. IRA Custodian
5158 H. Floria Way
Boynton, Beach FL 33437-5230
7.48
Less than 1%
Driven-Ware Systems Inc.
Attn.: Anthony Coppola Jr.
32 Royal County Down
Pinehurst, NC 28374-8176
5.24%
Less than 1%
Atlantic Electric Systems Inc.
401K P/S/Plan U/A/D 12/01/88
Donna L. Butterworth TTEE
77 Corporate Park
3421 A St. Vardell LN
Charlotte, NC 28217-1369
5.20
Less than 1%
Cash Portfolio Class C
Frontier Trust Company TTEE
DAS-CO of Idaho Inc. 401(k)
Plan
411 East Karcher Rd
Nampa, ID 83687
15.69
15.69%
Name and Address
Percentage of Class
Owned of Record or
Beneficially As of the
Record Date
Upon
Consummation of
the
Reorganization
Frontier Trust Company As TTEE
Reynolds Brothers Inc.
Attn. Ed Snyder
1080 Airport Road
Lakewood, NJ 08701
14.58
14.58
Frontier Trust Company TTEE
United Mizrahi 401(k) and
Profit Sharing Plan
611 Wilshire Blvd. Ste. 700
Los Angeles, CA 90017
10.13
10.13
Frontier Trust Company As TTEE
Napoleon Spring Works Inc.
Attn. Patrick Glynn
Rt. 60 South
Archbold, OH 43502
7.13
7.13
Frontier Trust Company As TTEE
Pacific Western Services
Attn. Jo Ann Glaser
3594 NW Byron St.
STE 202/PO Box 3043
Silverdale, WA 98383
5.60
5.60
INFORMATION ABOUT THE ACQUIRING FUND
Management's Discussion and analysis of Market Conditions and Portfolio
Review (through December 31, 1996)
Performance Summary
The chart below provides the yields for the Cash Portfolio of the Smith
Barney Money Funds for the seven-day period ended December 31, 1996.
Smith Barney Money Funds Class A Shares Yield
Portfolio
Seven Day Yield
Effective Yield*
Cash........................
..........................
4.90%
5.02%
*Assumes dividends are reinvested.
Asset Growth: 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%.
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 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 .
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 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.
Management Update (through July 11, 1997)
Performance Summary
The chart below provides the yields for the Cash Portfolio of the Smith
Barney Money Funds for the seven-day period ended June 30, 1997.
Smith Barney Money Funds Class A Shares Yield
Portfolio
Seven Day Yield
Effective Yield*
Cash........................
..........................
5.09%
5.22%
*Assumes dividends are reinvested.
Market Overview for the Acquiring Fund and the Acquired Fund
Over the past six months, the U.S. economy has grown vigorously. Gross
Domestic Product, the total output of goods and services, rose at a 5.9%
annual rate in the first quarter of 1997. This comes on the heels of a
3.8% annual rate of growth in the fourth quarter of 1996. Much of the
growth in the first quarter of 1997 came from higher personal consumption
as evidenced by strong motor vehicle and durable goods sales. High
consumer confidence and a low unemployment rate have also contributed to
a healthy first half of the year. Absent from the picture has been any
concrete signs of inflation. For the first five months of 1997 consumer
prices rose only 1.4%, down from the 3.8% for the comparable period of
1996. Nevertheless, the Federal Open Market Committee raised short-term
interest rates by 25 basis points (0.25%) at its meeting in March 1997.
Going forward, we expect economic growth to slow down from its current
pace. Part of the strength in the first quarter of 1997 resulted from a
buildup in business inventories, a factor that should detract from
economic growth in upcoming quarters. Furthermore, reports from auto
manufacturers and department stores suggest that retail sales have slowed
in the second quarter of 1997. This slowdown could be the result of
temporary factors such as autoworker strikes and April tax payments.
The overall trend indicates that both the labor market and corporate
America remain strong. Nevertheless, recently released economic reports
gave the Federal Reserve Board ("Fed") the necessary leeway to leave
interest rates unchanged at their May and July meetings, while it
continues to closely monitor the economy for any signs of excessive
growth and inflationary pressures.
It appears that Fed Chairman Alan Greenspan has adopted a new policy
based on the possibility that we have entered a new economic era.
Chairman Greenspan seems willing to allow faster economic growth because
productivity gains are helping to keep inflation in check. In addition,
successful deficit reduction and real high interest rates (based on our
belief that the current rate of inflation is overstated) has resulted in
the Fed pursuing a less restrictive monetary policy.
We believe the Fed will continue to fine tune monetary policy and there
should be less interest rate volatility over the next several months.
Given this scenario and barring no inflation (as reflected in recent bond
market yield hovering below 7.0%), we will invest across the yield curve
if we identify any
good values.
If inflation reports remain positive over the long term and the annual
rate of economic growth slows down to a 2%-3% range in 1998, the Fed
might lower rates to further prolong the economic expansion. In that
case, we would expect the average maturity of the Smith Barney Money
Funds to be targeted between 65-85 days.
The Cash Portfolio is 50% invested in top-tier U.S. dollar-denominated
foreign obligations and 50% in domestic obligations. The Retirement
Portfolio is 55% in top-tier U.S. dollar-denominated foreign obligations
and 45% in domestic obligations. A few split-rated issuers that we
purchased for the Portfolios such as Fleet Financial, GTE and Nynex have
had their short-term ratings upgraded by several of the nationally
recognized statistical rating organizations. In addition, we have
recently added several high-quality issuers such as Lucent Technologies
and Hertz Corporation to our Portfolios.
INFORMATION ABOUT THE ACQUIRED FUND
Management's Discussion and analysis of Market Conditions and Portfolio
Review (through December 31, 1996)
Market Overview
In our view, one of the most important events for the market in
1996 was the unexpected strength of the U.S. economy during the first
half of the year and weaker economic growth during the second half. In
addition to President Clinton's re-election and Congress maintaining its
Republican majority, other significant market events in 1996 include the
U.S. Treasury's plans to introduce inflation-indexed securities, the
Boskin Report that suggests inflation may be roughly 1% lower than
previously reported, and Russian President Boris Yeltsin surviving both
medically and politically.
Income Return Account Portfolio
Performance and Investment Strategy (through December 31,1996)
For the year ended December 31, 1996, the Income Return Account
Portfolio's Class A shares had a total return of 4.08% and underperformed
versus the 5.67% total return for the Salomon Brothers One-Year Treasury
Index over the same period. In addition, over the past twelve months, the
Portfolio distributed dividends totaling $0.47 per Class A share.
The Income Return Account invests in money market instruments to
help provide stability, and in longer-term securities (not to exceed five
years for U.S. Government securities, and three years for corporate debt
obligations) to provide enhanced return. For defensive purposes, the
Portfolio also employs an immunization strategy. (The Portfolio's
immunization strategy involves the use of proprietary technology that
helps provide support to the manager in avoiding negative quarterly
returns.) While minor day-to-day price fluctuations are unavoidable, this
strategy should produce sufficient income during adverse market
conditions to offset any potential decline in the prices of the
Portfolio's longer term securities. In extremely uncertain or volatile
periods of interest rates, it is possible for the Portfolio to be fully
invested in short-term money market instruments. Unlike money market
funds, which generally seek to maintain a stable net asset value (NAV) of
$1.00 per share, the Income Return Account Portfolio's NAV does fluctuate
with market conditions.
Volatility in the market and the speed of that volatility has risen
during the reporting period. In our view, a primary factor behind this
higher (and faster) volatility has been the increasingly important market
influence of hedge funds, foreign investors and central banks. In this
type of environment, the Portfolio's immunization strategy, although
challenged, has enabled the Portfolio to avoid quarterly negative returns
this past year.
- -------------------------------------------------------------------------
- -------
Historical Performance -- Income Return Account Portfolio - Class A
Shares
- -------------------------------------------------------------------------
- -------
<TABLE>
<CAPTION>
Net Asset Value
-------------------
Beginning End Income Capital Gain Return of Total
Year Ended of Year of Year Dividends Distributions Capital Returns(1)
=========================================================================
===========================================================
<S> <C> <C> <C> <C> <C> <C>
12/31/96 $9.60 $9.48 $0.47 $0.00 $0.03 4.08%
- -------------------------------------------------------------------------
- -----------------------------------------------------------
12/31/95 9.34 9.60 0.51 0.00 0.00 8.43
- -------------------------------------------------------------------------
- -----------------------------------------------------------
12/31/94 9.59 9.34 0.45 0.00 0.00 2.14
- -------------------------------------------------------------------------
- -----------------------------------------------------------
12/31/93 9.68 9.59 0.47 0.00 0.00 4.00
- -------------------------------------------------------------------------
- -----------------------------------------------------------
12/31/92 9.65 9.68 0.52 0.00 0.00 5.85
- -------------------------------------------------------------------------
- -----------------------------------------------------------
12/31/91 9.38 9.65 0.73 0.00 0.00 11.06
- -------------------------------------------------------------------------
- -----------------------------------------------------------
12/31/90 9.31 9.38 0.74 0.00 0.00 9.10
- -------------------------------------------------------------------------
- -----------------------------------------------------------
12/31/89 9.12 9.31 0.75 0.00 0.00 10.67
- -------------------------------------------------------------------------
- -----------------------------------------------------------
12/31/88 9.26 9.12 0.72 0.00 0.00 6.48
- -------------------------------------------------------------------------
- -----------------------------------------------------------
12/31/87 9.43 9.26 0.60 0.06 0.00 5.36
=========================================================================
===========================================================
Total $ 5.96 $0.06 $0.03
=========================================================================
===========================================================
</TABLE>
- -------------------------------------------------------------------------
- -------
Historical Performance -- Income Return Account Portfolio - Class C
Shares
- -------------------------------------------------------------------------
- -------
<TABLE>
<CAPTION>
Net Asset Value
-------------------
Beginning End Income Capital Gain Return of Total
Year Ended of Year of Year Dividends Distributions Capital Returns(1)
=========================================================================
===========================================================
<S> <C> <C> <C> <C> <C> <C>
12/31/96 $9.60 $9.48 $0.44 $0.00 $0.03 3.72%
- -------------------------------------------------------------------------
- -----------------------------------------------------------
12/31/95 9.34 9.60 0.48 0.00 0.00 8.06
- -------------------------------------------------------------------------
- -----------------------------------------------------------
12/31/94 9.58 9.34 0.42 0.00 0.00 1.86
- -------------------------------------------------------------------------
- -----------------------------------------------------------
12/31/93 9.68 9.58 0.43 0.00 0.00 3.53
- -------------------------------------------------------------------------
- -----------------------------------------------------------
Inception*-12/31/92 9.69 9.68 0.04 0.00 0.00 0.31+
=========================================================================
===========================================================
Total $1.81 $0.00 $0.03
=========================================================================
===========================================================
</TABLE>
- -------------------------------------------------------------------------
- -------
Historical Performance -- Income Return Account Portfolio - Class Y
Shares
- -------------------------------------------------------------------------
- -------
<TABLE>
<CAPTION>
Net Asset Value
-------------------
Beginning End Income Capital Gain Return of Total
Year Ended of Year of Year Dividends Distributions Capital Returns(1)
=========================================================================
===========================================================
<S> <C> <C> <C> <C> <C> <C>
12/31/96 $9.60 $9.48 $0.48 $0.00 $0.03 4.18%
- -------------------------------------------------------------------------
- -----------------------------------------------------------
12/31/95 9.34 9.60 0.51 0.00 0.00 8.43
- -------------------------------------------------------------------------
- -----------------------------------------------------------
12/31/94 9.59 9.34 0.44 0.00 0.00 2.01
- -------------------------------------------------------------------------
- -----------------------------------------------------------
Inception*-12/31/93 9.72 9.59 0.42 0.00 0.00 3.01+
=========================================================================
===========================================================
Total $1.85 $0.00 $0.03
=========================================================================
===========================================================
</TABLE>
IT IS THE FUND'S POLICY TO DISTRIBUTE DIVIDENDS MONTHLY AND CAPITAL
GAINS, IF
ANY, ANNUALLY.
- -------------------------------------------------------------------------
- -------
Income Return Account Portfolio
- -------------------------------------------------------------------------
- -------
- -------------------------------------------------------------------------
- -------
Average Annual Total Return
- -------------------------------------------------------------------------
- -------
<TABLE>
<CAPTION>
Without Sales Charge(1)
--------------------------------
- -------
Class A Class C Class Y
=========================================================================
=======
<S> <C> <C> <C>
Year Ended 12/31/96 4.08% 3.72% 4.18%
- -------------------------------------------------------------------------
- ------
Five Years Ended 12/31/96 4.91 N/A N/A
- -------------------------------------------------------------------------
- ------
Ten Years Ended 12/31/96 6.82 N/A N/A
- -------------------------------------------------------------------------
- ------
Inception* through 12/31/96 7.17 4.30 4.48
=========================================================================
=======
</TABLE>
<TABLE>
<CAPTION>
Without Sales Charge(2)
--------------------------------
- -------
Class A Class C Class Y
=========================================================================
=======
<S> <C> <C> <C>
Year Ended 12/31/96 1.95% 2.72% 4.18%
- -------------------------------------------------------------------------
- ------
Five Years Ended 12/31/96 4.48 N/A N/A
- -------------------------------------------------------------------------
- ------
Ten Years Ended 12/31/96 6.61 N/A N/A
- -------------------------------------------------------------------------
- ------
Inception* through 12/31/96 6.99 4.30 4.48
=========================================================================
=======
</TABLE>
- -------------------------------------------------------------------------
- -------
Cumulative Total Return
- -------------------------------------------------------------------------
- -------
<TABLE>
<CAPTION>
Without
Sales Charge(1)
=========================================================================
=======
<S> <C>
Class A (12/31/86 through 12/31/96) 93.40%
- -------------------------------------------------------------------------
- -------
Class C (Inception* through 12/31/96) 18.56
- -------------------------------------------------------------------------
- -------
Class Y (Inception* through 12/31/96) 18.71
=========================================================================
=======
</TABLE>
(1) Assumes reinvestment of all dividends and capital gain
distributions, if any, at net asset value and does not reflect the
deduction of the
applicable sales charge with respect to Class A shares or the
applicable contingent deferred sales charges ("CDSC") with respect to Class C
shares.
(2) Assumes reinvestment of all dividends and capital gain
distributions, if any, at net asset value. In addition, Class A shares
reflect the deduction of the maximum initial sales charge of 2.00%
and Class C shares reflect the deduction of a 1.00% CDSC, which applies
if shares are redeemed within the first year of purchase.
* Inception dates for Class A, C and Y shares are March 4, 1985,
December 16, 1992, and February 1, 1993, respectively.
+ Total return is not annualized, as it may not be representative of
the total return for the year.
- -------------------------------------------------------------------------
- -------
Historical Performance (unaudited)
- -------------------------------------------------------------------------
- -------
Growth of $10,000 Invested in Class A Shares of
the Income Return Account Portfolio vs.
Salomon Brothers 1-Year Treasury Index+
- -------------------------------------------------------------------------
- -------
December 1986 -- December 1996
[GRAPHIC]
<TABLE>
<CAPTION>
Income Return Salomon Brothers
Account Portfolio 1-Year
Treasury Index
------------- ----------------
<S> <C> <C>
12/86 $ 9,874 $ 10,000
12/87 10,343 10,574
12/88 11,014 11,220
12/89 12,188 12,350
12/90 13,262 13,452
12/91 14,863 14,634
12/92 15,732 15,337
12/93 16,361 15,925
12/94 16,703 16,343
12/95 18,112 17,664
12/96 18,851 18,776
</TABLE>
+ Hypothetical illustration of $10,000 invested in Class A shares on
December 31, 1986, assuming deduction of the maximum 2.50% sales charge in
effect at the time of investment and the reinvestment of dividends (after
deduction if applicable sales charge through November 7, 1994, and thereafter
at net asset value) and capital gains, if any, at net asset value through
December 31, 1996. The Salomon Brothers 1-Year Treasury Index is composed of
the most recently issued twelve month United States Treasury Bill which
is used to track the Treasury Bill's total return until its maturity. The
index is unmanaged and is not subject to the same management and trading
expenses of a mutual fund. The performance of the Portfolio's other classes may
be greater or less than the Class A shares' performance indicated on
this chart, depending on whether greater or lesser sales charges and fees
were incurred by shareholders investing in the other classes.
All figures represent past performance and are not a guarantee of
future results. Investment return and principal value will fluctuate and
redemption values may be more or less than the original cost. No
adjustment has been made for shareholder tax liability on dividends or capital
gains.
Management Update (through August 5, 1997)
Market Overview
See "Information about the Acquiring Fund - Management Update (through
July 11, 1997)".
Performance Summary
For the six months ended June 30, 1997, the Income Return Account
Portfolio's Class A shares had a total return of 2.32% and Class C shares
had a total return of 2.02% . Each Class slightly underperformed
the 2.99% total return for the Salomon Brothers One-Year Treasury
Index over the same period.
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
The following discussion comparing investment objectives, policies
and restrictions of the Acquiring Fund and the Acquired Fund is based
upon and qualified in its entirety by the respective discussions in the
prospectuses of the Acquiring Fund and the Acquired Fund. For a full
discussion of the investment objectives, policies and restrictions of the
Acquiring Fund, refer to the Prospectus of the Acquiring Fund, which
accompanies this Prospectus/Proxy Statement, under the caption
"Investment Objectives and Policies," and for a discussion of these
issues as they apply to the Acquired Fund, refer to the Prospectus of the
Acquired Fund under the caption "Investment Objective and Management
Policies."
Investment Objectives. The Acquired Fund and the Acquiring Fund
have substantially similar investment objectives. The Acquired Fund
seeks high current income from a portfolio of high quality debt
obligations and employs an immunization strategy to minimize the risk of
loss of account value. The Acquiring Fund is a money market fund that
seeks maximum current income and preservation of capital. There can be
no assurance that either Fund will be able to achieve its investment
objectives. Both the Acquiring Fund and the Acquired Fund's investment
objectives are considered fundamental policies which cannot be changed
without the affirmative vote of a majority of the outstanding voting
securities, as defined in the 1940 Act, of the respective Fund, which is
the lesser of: (i) 67% of the voting securities of the Fund present at a
meeting of shareholders, if the holders of more than 50% of the
outstanding voting securities of such Fund are present or represented by
proxy; or (ii) more than 50% of the outstanding voting securities of such
Fund.
Primary Investments. The Acquiring Fund seeks to achieve its
objectives by investing in U.S. Government obligations and related
repurchase agreements, bank obligations and high quality commercial
paper, corporate obligations and municipal obligations (as such
instruments are described below). The Acquiring Fund's investments are
limited to United States dollar-denominated instruments that have
received the highest rating from (a) any two nationally recognized
statistical rating organizations ("NRSRO") 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 a rating at the time that the
Fund acquires a security.
The Acquired Fund attempts to achieve its investment objective
by investing in U.S. Government Obligations and repurchase agreements,
bankers' acceptances, certificates of deposit, securities backed by
letters of credit, commercial paper rated A-1 by S&P or by Moody's, and
notes and bonds, including floating rate issues, rated A or better by S&P
or by Moody's, or if not rated, of comparable quality as determined by
the Manager. Normally, approximately one-third of the Acquired Fund
consists of obligations that have remaining maturities of less than one
year; however there may be occasions when up to 100% of the Acquired Fund
is invested in securities maturing within one year. This portfolio
composition is intended to achieve a higher level of income than would
otherwise be available from an exclusively short-term portfolio (or that
might be obtained from a money market fund) with less risk than that of a
conventional bond or note portfolio.
The Acquiring Fund has adopted certain investment policies to
assure that, to the extent reasonably possible, the Acquiring Fund's
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. The
Acquiring Fund uses the "amortized cost method" for valuing securities,
which involves valuing a security at its cost at the time of purchase and
thereafter assuming a constant amortization to maturity of any discount
or premium, regardless of any impact of fluctuating interest rates on the
market value of the instrument. The purpose of such valuation method is
to attempt to maintain a constant net asset value per share, and it is
expected that the price of the Fund's shares will remain at $1.00.
Although there is no assurance that at some future date there will not be
a rapid change in interest rates, a default by an issuer or some other
event that could cause the Acquiring Fund's price per share to change
from $1.00, in order to minimize fluctuations in market price, the
Acquiring Fund 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.
The following is a description of the types of money market
instruments in which the Funds may invest:
U.S. Government Obligations Both Funds may invest in U. S.
Government Obligations. The Acquiring Fund may invest in 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 Bank for Cooperatives, Federal Land Banks, Federal
Intermediate Credit Banks 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. Similarly, the Acquired Fund invests in U.S.
Obligations guaranteed as to payment of principal and interest by one of
its agencies (such as the Government National Mortgage Association) or
others (such as obligations of the Student Loan Marketing Association)
that are supported only by the credit of the instrumentality, and direct
obligations of the U.S. Treasury (including Treasury bills, notes and
bonds) and others (such as obligations of the Federal Home Loan Bank)
that are supported by the right of the issuer to borrow from the
Treasury.
Repurchase Agreements. Both Funds may enter into repurchase
agreement transactions (typically the acquisition of an underlying
security for a relatively short period of time (usually not more than one
week) subject to an obligation of the seller to repurchase, and the Fund
to resell, the security at an agreed upon price and future date (normally
the next business day) 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 Funds' Board of
Directors). The Acquiring Fund, as a matter of fundamental policy, may
not enter into a repurchase agreement if, as a result thereof, more than
10% of its total assets at that time would be invested in repurchase
agreements maturing in more than seven days. The Acquired Fund has a
similar restriction limiting investment in repurchase agreements maturing
in more than seven days and any other illiquid assets to 10% of total
assets.
Reverse Repurchase Agreements. The Acquired Fund is permitted to
invest up to 1/3 of its total assets in reverse repurchase agreements
although the policy has been to limit such investments to no more than 5%
of the Acquired Fund's net assets.
Commercial Paper. Both Funds may invest in commercial paper.
Because the Acquiring Fund is a money market fund, the Board of the
Acquiring Fund must determine that there is limited credit risk in order
for the Fund to invest in commercial paper. The Acquired Fund may invest
in commercial paper rated A-1 by S&P or Prime-1 by Moody's. The
Acquiring Fund may invest in promissory notes that have received the
highest rating from the requisite NRSRO for short-term debt securities or
comparable unrated securities and in the commercial paper of foreign
issuers.
Corporate Obligations. The Acquiring Fund may invest in
obligations of corporations (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 Acquiring Fund may invest
only in corporate obligations with remaining maturities of 13 months or
less.
Bank Obligations. Both Funds may invest in bank obligations.
The Acquiring Fund may invest in obligations (including certificates of
deposit ("CDs"), bankers' acceptances and fixed time deposits ("TDs"))
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 $l billion (as reported in its most
recently published financial statements prior to the date of investment).
The Acquiring Fund intends to maintain at least 25% of its total assets
in obligations of domestic and foreign banks, subject to the foregoing
criteria. The Acquiring Fund intends to limit its investment in fixed
time deposits maturing from two business to seven calendar days to 10% of
its total assets. The Acquired Fund may also invest in bank obligations
(including CDs, bankers' acceptances, and securities backed by letters of
credit).
High Quality Municipal Obligations. The Acquiring Fund may invest
in 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-l or Aa or better by Moody's or,
if not rated, 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 the Acquiring Fund's yield. The Acquiring Fund
will not invest more than 10% of its total assets in municipal
obligations.
Notwithstanding the permitted investments described above, the
Acquiring Fund is a money market fund and, as such, is subject to the
requirements of Rule 2a-7 under the 1940 Act ("Rule 2a-7"). Under Rule
2a-7, money market funds, other than tax-exempt money market funds which
have separate guidelines, are also required to meet certain
diversification tests. Investments in the securities of any one issuer
(other than U.S. Government securities) generally may not exceed 5% of
such a fund's total assets.
Investment Restrictions. The Funds have adopted the following
investment restrictions for the protection of shareholders. These
restrictions may not be changed without the approval of the holders of a
majority, as defined in the 1940 Act, of the voting securities of the
respective Fund.
1. The Acquired Fund may not purchase common stocks,
preferred stocks, warrants, other equity securities or
municipal obligations.
2. Neither Fund may borrow money except from banks
for temporary purposes, in an amount not to exceed 10% of the
value of its total assets and may pledge up to 10% of the
value of its assets to secure such borrowings. The Funds
will only borrow money to accommodate requests for redemption
of shares while effectuating an orderly liquidation of
portfolio securities or to clear securities transactions and
not for leveraging purposes. Whenever borrowings exceed 5%
of the value of the Acquiring Fund's total assets, the
Acquiring Fund will not make additional investments. This
restriction does not prohibit the Acquired Fund from entering
into reverse repurchase agreements so long as not more than
33 1/3 of the Acquired Fund's total assets are subject to
such agreements.
3. Neither Fund may sell securities short. The
Acquired Fund may not purchase securities on margin.
4. Neither Fund may write or purchase put or call
options.
5. The Acquired Fund may not underwrite the
securities of other issuers or knowingly purchase securities
subject to restrictions on disposition under the Securities
Act of 1933 ("restricted securities").
6. Neither Fund may purchase or sell real estate
(except the Acquired Fund may purchase mortgage related
securities issued or guaranteed by the U.S. Government
agencies or instrumentalities), commodities (and, with
respect to the Acquired Fund, commodity futures contracts) or
oil and gas interests.
7. Neither Fund may make loans to others, except
through the purchase of qualified debt obligations and entry
into repurchase agreements, each as described above under
"Comparison of Investment Objectives and Policies" except
that each Fund may purchase and simultaneously resell for
later delivery, obligations issued or guaranteed as to
principal and interest by the U.S. Government its agencies or
instrumentalities; provided that the Fund will not enter into
such a repurchase agreement if as a result more than 10% of
its total assets would be subject to repurchase agreements
maturing in greater than seven days.
8. Neither Fund may with respect to 75% of its
assets invest more than 5% of its assets in the securities of
any one issuer, except securities issued or guaranteed as to
principal and interest by the U.S. Government, its agencies
and instrumentalities. In compliance with Rule 2a-7, the
Acquiring Fund will not purchase securities, other than
obligations of the U.S. Government or its agencies and
instrumentalities, if, immediately after such purchase, more
than 5% of the value of the Fund's total assets would be
invested in securities of any one issuer. The Acquiring
Fund's fundamental policy would give the Fund the ability to
invest, with respect to 25% of the Fund's assets, more than
5% of its assets in any one issuer only in the event that
Rule 2a-7 is amended to authorize this.
9. The Acquired Fund may not purchase any securities
other than obligations of the U.S. Government, its agencies
and instrumentalities if more than 25% of its assets are
invested in the securities of issuers in any single
industry.
10. The Acquiring Fund may not concentrate in
any other industries except that it intends to invest not
less than 25% of its assets in certain domestic and foreign
bank obligations and reserves freedom of action to
concentrate in securities issued or guaranteed as to
principal and interest by the U.S. Government, its agencies
and instrumentalities.
11. Neither Fund may invest in companies for the
purpose of exercising control.
12. Neither Fund may invest in securities of other
investment companies, except as they may be acquired as part
of a merger, consolidation or acquisition of assets.
13. The Acquired Fund may not issue senior securities
except as the Acquired Fund may be deemed to have issued a
senior security by reason of (a) entering into any repurchase
agreement or reverse repurchase agreement; or (b) permitted
borrowings of money.
14. The Acquiring Fund may not purchase illiquid
securities (such as repurchase agreements with maturities in
excess of seven days) or other securities that are not
readily marketable if more than 10% of the Acquiring Fund's
assets would be invested in such securities. The Acquired
Fund has a similar investment restriction limiting the
purchase of repurchase agreements maturing in more than seven
days to 10% of its total assets (see restriction 7 above).
INFORMATION ON SHAREHOLDERS' RIGHTS
General. Smith Barney Money Funds, Inc. and Smith Barney Funds,
Inc. (collectively, the "Companies") are similar in many aspects of
corporate governance. As Maryland corporations, both are governed by
their Articles of Incorporation and By-laws as well as applicable
Maryland and federal law.
Voting Rights. Neither Smith Barney Funds, Inc. nor Smith
Barney Money Funds, Inc. (each a "Company") holds meetings of
shareholders annually, and there normally is no meeting of shareholders
for the purpose of electing Directors unless and until such time as less
than a majority of the Directors holding office have been elected by
shareholders. A meeting of shareholders of either Company, for any
purpose, must be called upon the written request of shareholders holding
at least 25% of such Company's outstanding shares. On each matter
submitted to a vote of the shareholders of one of the Companies, each
shareholder is entitled to one vote for each whole share owned and a
proportionate, fractional vote for each fractional share outstanding in
the shareholder's name on the Company's books. On any matter which
affects only the interests of a Fund, only the holders of shares of such
Fund are entitled to vote. Similarly, holders of shares of a Fund will
not be entitled to vote on matters not affecting their interests (for
example, those affecting only the interest of other portfolios of the
Company). Directors hold office until a successor is elected and
qualified, and vacancies in the Board of Directors may be filled by the
Board of Directors.
Appraisal Rights. Under the laws of the State of Maryland,
shareholders of the Acquired Fund do not have appraisal rights in
connection with a combination or acquisition of the assets of the
Acquired Fund by another entity, such as the Reorganization. Shareholders
of the Acquired Fund may, however, redeem their shares at net asset value
prior to the date of the Reorganization.
Liquidation. In the event of a liquidation of the Acquired
Fund or Acquiring Fund, shareholders of such liquidating Fund are
entitled to receive, when and as declared by the Board of Directors, the
excess of the assets belonging to such liquidating Fund over the
liabilities belonging to such liquidating Fund. In either case, the
assets so distributed to shareholders will be distributed among the
shareholders in proportion to the number of shares held by them and
recorded in the books of the Fund.
Shareholder Liability. Under Maryland law, neither Company's
shareholders have personal liability for the Company's corporate acts and
obligations. Shares of the Acquiring Fund issued to the shareholders of
the Acquired Fund in the Reorganization will be fully paid and
nonassessable when issued with no personal liability attaching to the
ownership thereof and transferable without restrictions and will have no
preemptive or conversion rights.
Liability of Directors. The Articles of Incorporation of each
Company provide that the Company will indemnify its Directors and
officers against liabilities and expenses incurred in connection with
litigation in which they may be involved because of their positions with
the Company. Nothing in the Articles of Incorporation or the By-laws of
either Company, however, protects or indemnifies a Director or officer
against any liability to which such person would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such person's office.
Rights of Inspection. Maryland law permits any shareholder of
the either Fund or any agent of such shareholder to inspect and copy
during the Fund's usual business hours the Company's By-laws, minutes of
shareholder proceedings, annual statements of the Company's affairs and
voting trust agreements on file at its principal office.
The foregoing is only a summary of certain characteristics of
the operations of the Companies, their respective Articles of
Incorporation and By-laws, and Maryland law. The foregoing is not a
complete description of the documents cited. Shareholders should refer
to the provisions of such Articles of Incorporation, By-laws and Maryland
law directly for a more thorough description.
ADDITIONAL INFORMATION ABOUT
SMITH BARNEY MONEY FUNDS, INC. -CASH PORTFOLIO AND
SMITH BARNEY FUNDS, INC. - INCOME RETURN ACCOUNT PORTFOLIO
Smith Barney Funds, Inc. Information about the Acquired Fund is
included in its current Prospectus dated April 30, 1997, and in the
Statement of Additional Information dated April 30, 1997 that has been
filed with the SEC, both of which are incorporated herein by reference.
A copy of the Prospectus and the Statement of Additional Information is
available upon request and without charge by writing the Acquired Fund at
the address listed on the cover page of this Prospectus/Proxy Statement
or by calling toll-free 1-800-224-7523.
Smith Barney Money Funds, Inc. Information about the Acquiring
Fund is incorporated herein by reference from its current Prospectus
dated April 30, 1997, and Statement of Additional Information dated April
30, 1997. A copy of such Statement of Additional Information has been
filed with the SEC and is available upon request and without charge by
writing the Acquiring Fund at the address listed on the cover page of
this Prospectus/Proxy Statement or by calling toll-free 1-800-224-7523.
Both the Acquiring Fund and the Acquired Fund are subject to the
informational requirements of the Exchange Act and in accordance
therewith file reports and other information including proxy material,
reports and charter documents with the SEC. These materials can be
inspected and copies obtained at the Public Reference Facilities
maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549
and at the New York Regional Office of the SEC at 75 Park Place, New
York, New York 10007. Copies of such material can also be obtained from
the Public Reference Branch, Office of Consumer Affairs and Information
Services, SEC, Washington, D.C. 20549 at prescribed rates.
OTHER BUSINESS
The Board of Directors of the Acquired Fund does not intend to
present any other business at the Meeting. If, however, any other
matters are properly brought before the Meeting, the persons named in the
accompanying form of proxy will vote thereon in accordance with their
judgment.
VOTING INFORMATION
This Prospectus/Proxy Statement is furnished in connection with
a solicitation of proxies by the Board of Directors of the Acquired Fund
to be used at the Special Meeting of Shareholders to be held at 10:00
a.m. on October 17, 1997, at 388 Greenwich Street, 22nd Floor, New York,
New York 10013, and at any adjournment thereof. This Prospectus/Proxy
Statement, along with a Notice of the Meeting and a proxy card, is first
being mailed to shareholders of the Acquired Fund on or about September
15, 1997. Only shareholders of record as of the close of business on the
Record Date will be entitled to notice of, and to vote at, the Meeting or
any adjournment thereof. For purposes of determining a quorum for
transacting business at the Meeting, abstentions and broker "non-votes"
(that is, proxies from brokers or nominees indicating that such persons
have not received instructions from the beneficial owner or other persons
entitled to vote shares on a particular matter with respect to which the
brokers or nominees do not have discretionary power) will be treated as
shares that are present but which have not been voted. For this reason,
abstentions and broker non-votes will have the effect of "no" votes for
purposes of obtaining the requisite approval of the Plan. If the
enclosed form of proxy is properly executed and returned in time to be
voted at the Meeting, the proxies named therein will vote the shares
represented by the proxy in accordance with the instructions marked
thereon. Unmarked proxies will be voted FOR the proposed Reorganization
and FOR any other matters deemed appropriate. A proxy may be revoked at
any time on or before the Meeting by written notice to the Secretary of
the Acquired Fund, 388 Greenwich Street, New York, New York 10013.
Unless revoked, all valid proxies will be voted in accordance with the
specifications thereon or, in the absence of such specifications, for
approval of the Plan and the Reorganization contemplated thereby.
Approval of the Plan will require the vote of a majority of the
outstanding shares of the Acquired Fund. Shareholders of the Acquired
Fund are entitled to one vote for each share. Fractional shares are
entitled to proportional voting rights.
Proxy solicitations will be made primarily by mail, but proxy
solicitations also may be made by telephone, telegraph or personal
interviews conducted by officers and employees of Smith Barney, Inc.
("Smith Barney") and/or First Data, transfer agent of the Acquired Fund.
The aggregate cost of solicitation of the shareholders of the Acquired
Fund is expected to be approximately $3,000. Expenses of the
Reorganization, including the costs of the proxy solicitation and the
preparation of enclosures to the Prospectus/Proxy Statement,
reimbursement of expenses of forwarding solicitation material to
beneficial owners of shares of the Acquired Fund and expenses incurred in
connection with the preparation of this Prospectus/Proxy Statement will
be borne by Smith Barney, the Funds' distributor.
In the event that sufficient votes to approve the Reorganization
are not received by October 17, 1997, the persons named as proxies may
propose one or more adjournments of the Meeting to permit further
solicitation of proxies. In determining whether to adjourn the Meeting,
the following factors may be considered: the percentage of votes actually
cast, the percentage of negative votes actually cast, the nature of any
further solicitation and the information to be provided to shareholders
with respect to the reasons for the solicitation. Any such adjournment
will require an affirmative vote by the holders of a majority of the
shares present in person or by proxy and entitled to vote at the Meeting.
The persons named as proxies will vote upon a decision to adjourn the
Meeting.
The votes of the shareholders of the Acquiring Fund are not being
solicited by this Prospectus/Proxy Statement.
FINANCIAL STATEMENTS AND EXPERTS
KPMG Peat Marwick LLP has rendered an opinion on the statements of
assets and liabilities, including the schedules of investments, of the
Acquired Fund and the Acquiring Fund as of December 31, 1996, and the
related statements of operations for the year then ended, changes in net
assets for each of the years in the two-year period then ended and
financial highlights for each of the years in the five-year period then
ended. These financial statements have been incorporated by reference
herein and and into the Statement of Additional Information relating to
this Prospectus/Proxy Statement in reliance upon the report of KPMG Peat
Marwick LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of such firm as experts in
accounting and auditing.
VALIDITY OF SHARES
The validity of shares of the Acquired Fund will be passed upon by
Sullivan & Cromwell, 125 Broad Street, New York, NY 10004. In rendering
such opinion, Sullivan & Cromwell may rely on an opinion of Maryland
counsel.
THE BOARD OF DIRECTORS OF THE ACQUIRED FUND, INCLUDING THE
INDEPENDENT DIRECTORS, UNANIMOUSLY RECOMMEND APPROVAL OF THE PLAN, AND
ANY UNMARKED PROXIES WITHOUT INSTRUCTIONS TO THE CONTRARY WILL BE VOTED
IN FAVOR OF APPROVAL OF THE PLAN.
Exhibit A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this 25th day of June, 1997, by and between SMITH BARNEY MONEY FUNDS,
INC. ("Smith Barney Money Funds"), a Maryland corporation with its
principal place of business at 388 Greenwich Street, New York, New York
10013, on behalf of the CASH PORTFOLIO (the "Acquiring Fund"), an
investment portfolio of Smith Barney Money Funds, and SMITH BARNEY FUNDS,
INC. ("Smith Barney Funds"), a Maryland corporation with its principal
place of business at 388 Greenwich Street New York, New York 10013, on
behalf of the INCOME RETURN ACCOUNT PORTFOLIO (the "Acquired Fund"). The
reorganization (the "Reorganization") will consist of the transfer of all
or substantially all of the assets of the Acquired Fund in exchange for
Class A shares of common stock of the Acquiring Fund (collectively, the
"Acquiring Fund Shares" and each, an "Acquiring Fund Share") and the
assumption by the Acquiring Fund of certain liabilities of the Acquired
Fund and the distribution, after the Closing Date herein referred to, of
Acquiring Fund Shares to the shareholders of the Acquired Fund in
liquidation of the Acquired Fund and the liquidation of the Acquired
Fund, all upon the terms and conditions hereinafter set forth in this
Agreement.
WHEREAS, Smith Barney Money Funds and Smith Barney Funds are
registered investment companies of the management type, and the Acquired
Fund owns securities that generally are assets of the character in which
the Acquiring Fund is permitted to invest;
WHEREAS, both Smith Barney Money Funds and Smith Barney Funds are
authorized to issue shares of common stock;
WHEREAS, the Board of Directors of Smith Barney Funds has
determined that the exchange of all or substantially all of the assets
and certain of the liabilities of the Acquired Fund for Acquiring Fund
Shares and the assumption of such liabilities by Smith Barney Money Funds
on behalf of the Acquiring Fund is in the best interests of the Acquired
Fund's shareholders and that the interests of the existing shareholders
of the Acquired Fund would not be diluted as a result of this
transaction;
WHEREAS, the Board of Directors of Smith Barney Money Funds has
determined that the exchange of all or substantially all of the assets of
the Acquired Fund for Acquiring Fund Shares is in the best interests of
the Acquiring Fund's shareholders and that the interests of the existing
shareholders of the Acquiring Fund would not be diluted as a result of
this transaction.
NOW, THEREFORE, in consideration of the premises and of the
covenants and agreements hereinafter set forth, the parties hereto
covenant and agree as follows:
1. Transfer of Assets of the Acquired Fund in Exchange for the
Acquiring Fund Shares and Assumption of the Acquired Fund's
Scheduled Liabilities and Liquidation of the Acquired Fund
1.1. Subject to the terms and conditions herein set forth and on
the basis of the representations and warranties contained herein,
the Acquired Fund agrees to transfer the Acquired Fund's assets as
set forth in paragraph 1.2 to Smith Barney Money Funds on behalf of
the Acquiring Fund, and Smith Barney Money Funds on behalf of the
Acquiring Fund agrees in exchange therefor: (i) to deliver to the
Acquired Fund the number of Class A Acquiring Fund Shares,
including fractional Class A Acquiring Fund Shares, determined by
dividing the value of the Acquired Fund's net assets attributable
to shares of the Acquired Fund held by shareholders, computed in
the manner and as of the time and date set forth in paragraph 2.1,
by the net asset value of one Class A Acquiring Fund Share,
computed in the manner and as of the time and date set forth in
paragraph 2.2; and (ii) to assume certain liabilities of the
Acquired Fund, as set forth in paragraph 1.3. Such transactions
shall take place at the closing provided for in paragraph 3.1 (the
"Closing"). Smith Barney Money Funds on behalf of the Acquiring
Fund and the Acquired Fund agrees to file, effective at the
Closing, Articles of Transfer with the State of Maryland Department
of Assessments and Taxation.
1.2. (a) The assets of the Acquired Fund to be acquired by Smith
Barney Money Funds on behalf of the Acquiring Fund shall consist of
all or substantially all of its property, including, without
limitation, all cash, securities and dividends or interest
receivables which are owned by the Acquired Fund and any deferred
or prepaid expenses shown as an asset on the books of the Acquired
Fund on the closing date provided in paragraph 3.1 (the "Closing
Date").
(b) The Acquired Fund has provided the Acquiring Fund with
a list of all of the Acquired Fund's assets as of the date of
execution of this Agreement. The Acquired Fund reserves the right
to sell any of these securities but will not, without the prior
approval of the Acquiring Fund, acquire any additional securities
other than securities of the type in which the Acquiring Fund is
permitted to invest. The Acquiring Fund will, within a reasonable
time prior to the Closing Date, furnish the Acquired Fund with a
statement of the Acquiring Fund's investment objectives, policies
and restrictions and a list of the securities, if any, on the
Acquired Fund's list referred to in the first sentence of this
paragraph which do not conform to the Acquiring Fund's investment
objectives, policies and restrictions. In the event that the
Acquired Fund holds any investments which the Acquiring Fund may
not hold, the Acquired Fund will dispose of such securities prior
to the Closing Date. In addition, if it is determined that the
portfolios of the Acquired Fund and the Acquiring Fund, when
aggregated, would contain investments exceeding certain percentage
limitations imposed upon the Acquiring Fund with respect to such
investments, the Acquired Fund, if requested by the Acquiring Fund,
will dispose of and/or reinvest a sufficient amount of such
investments as may be necessary to avoid violating such limitations
as of the Closing Date.
1.3. The Acquired Fund will endeavor to discharge all the
Acquired Fund's known liabilities and obligations prior to the
Closing Date. Smith Barney Money Funds on behalf of the Acquiring
Fund shall assume all liabilities, expenses, costs, charges and
reserves reflected on an unaudited Statement of Assets and
Liabilities of the Acquired Fund prepared by Smith Barney Mutual
Funds Management (the "Manager"), as of the Valuation Date (as
defined in paragraph 2.1), in accordance with generally accepted
accounting principles consistently applied from the prior audited
period. Smith Barney Money Funds on behalf of the Acquiring Fund
shall assume only those liabilities of the Acquired Fund reflected
in that unaudited Statement of Assets and Liabilities and shall not
assume any other liabilities, whether absolute or contingent, not
reflected thereon.
1.4. As provided in paragraph 3.4, as soon after the Closing
Date as is conveniently practicable (the "Liquidation Date"), the
Acquired Fund will liquidate and distribute pro rata to the
Acquired Fund's shareholders of record determined as of the close
of business on the Closing Date (the "Acquired Fund Shareholders"),
the Acquiring Fund Shares it receives pursuant to paragraph 1.1.
Shareholders of the Acquired Fund shall receive Class A Acquiring
Fund Shares. Such liquidation and distribution will be accomplished
by the transfer of the Acquiring Fund Shares then credited to the
account of the Acquired Fund on the books of the Acquiring Fund to
open accounts on the share records of the Acquiring Fund in the
name of the Acquired Fund's shareholders and representing the
respective pro rata number of the Acquiring Fund Shares due such
shareholders. All issued and outstanding shares of the Acquired
Fund will simultaneously be canceled on the books of Smith Barney
Funds, although share certificates representing interests in the
Acquired Fund will represent a number of Acquiring Fund Shares
after the Closing Date as determined in accordance with paragraph
1.1. Smith Barney Funds shall not issue certificates representing
the Acquiring Fund Shares in connection with such exchange.
1.5. Ownership of Acquiring Fund Shares will be shown on the
books of the Acquiring Fund's transfer agent. Acquiring Fund
Shares will be issued in the manner described in the Acquiring
Fund's current prospectus and statement of additional information.
1.6. Any transfer taxes payable upon issuance of the Acquiring
Fund Shares in a name other than the registered holder of the
Acquired Fund shares on the books of Smith Barney Funds as of that
time shall, as a condition of such issuance and transfer, be paid
by the person to whom such Acquiring Fund Shares are to be issued
and transferred.
1.7. Any reporting responsibility of the Acquired Fund is and
shall remain the responsibility of Smith Barney Funds up to and
including the Closing Date.
2. Valuation
2.1. The value of the Acquired Fund's assets to be acquired by
the Acquiring Fund hereunder shall be the value of such assets
computed as of the close of regular trading on the New York Stock
Exchange, Inc. (the "NYSE") on the Closing Date (such time and date
being hereinafter called the "Valuation Date"), using the valuation
procedures set forth in the Acquiring Fund's then current
prospectus or statement of additional information.
2.2. The net asset value of Acquiring Fund Shares shall be the
net asset value per share computed as of the close of regular
trading on the NYSE on the Valuation Date, using the valuation
procedures set forth in the Acquiring Fund's then current
prospectus or statement of additional information.
2.3. All computations of value shall be made by the Manager in
accordance with its regular practice as pricing agent for the
Acquired Fund and the Acquiring Fund, respectively.
3. Closing and Closing Date
3.1. The Closing Date shall be October 24, 1997, or such later
date as the parties may agree to in writing. All acts taking
place at the Closing shall be deemed to take place simultaneously
as of the close of business on the Closing Date unless otherwise
provided. The Closing shall be held as of 5:00 p.m. at the offices
of Smith Barney Inc., 388 Greenwich Street, New York, New York
10013, or at such other time and/or place as the parties may agree.
3.2. The custodian for the Acquiring Fund (the "Custodian")
shall deliver at the Closing a certificate of an authorized officer
stating that: (a) the Acquired Fund's portfolio securities, cash
and any other assets shall have been delivered in proper form to
the Acquiring Fund within two business days prior to or on the
Closing Date and (b) all necessary transfer taxes including all
applicable federal and state stock transfer stamps, if any, shall
have been paid, or provision for payment shall have been made, in
conjunction with the delivery of portfolio securities.
3.3. In the event that on the Valuation Date (a) the NYSE or
another primary trading market for portfolio securities of the
Acquiring Fund or the Acquired Fund shall be closed to trading or
trading thereon shall be restricted or (b) trading or the reporting
of trading on the NYSE or elsewhere shall be disrupted so that
accurate appraisal of the value of the net assets of the Acquiring
Fund or the Acquired Fund is impracticable, the Closing Date shall
be postponed until the first business day after the day when
trading shall have been fully resumed and reporting shall have been
restored.
3.4. The Acquired Fund shall deliver at the Closing a list of
the names and addresses of the Acquired Fund's shareholders and the
number and percentage ownership of outstanding shares owned by each
such shareholder immediately prior to the Closing, certified on
behalf of the Acquired Fund by its President. The Acquiring Fund
shall issue and deliver a confirmation evidencing the Acquiring
Fund Shares to be credited to the Acquired Fund's account on the
Closing Date to the Secretary of Smith Barney Funds, or provide
evidence satisfactory to the Acquired Fund that such Acquiring Fund
Shares have been credited to the Acquired Fund's account on the
books of the Acquiring Fund. At the Closing, each party shall
deliver to the other such bills of sale, checks, assignments, share
certificates, if any, receipts or other documents as such other
party or its counsel may reasonably request.
4. Representations and Warranties
4.1. Smith Barney Funds represents and warrants to Smith Barney
Money Funds as follows:
(a) The Acquired Fund is a portfolio of Smith Barney Funds,
which is a corporation, duly organized, validly existing and in
good standing under the laws of the State of Maryland;
(b) Smith Barney Funds is a registered investment company
classified as a management company of the open-end type, and its
registration with the Securities and Exchange Commission (the
"Commission") as an investment company under the Investment Company
Act of 1940, as amended (the "1940 Act") is in full force and
effect;
(c) Smith Barney Funds is not, and the execution, delivery
and performance of this Agreement on behalf of the Acquired Fund
will not result, in a material violation of its Articles of
Incorporation or By-laws or of any agreement, indenture,
instrument, contract, lease or other undertaking to which Smith
Barney Funds is a party or by which it is bound;
(d) Smith Barney Funds has no material contracts or other
commitments (other than this Agreement) which will be terminated
with liability to Smith Barney Funds prior to the Closing Date;
(e) No material litigation or administrative proceeding or
investigation of or before any court or governmental body is
presently pending or to its knowledge threatened against Smith
Barney Funds with respect to the Acquired Fund or any of the
Acquired Fund's properties or assets, except as previously
disclosed to the Acquiring Fund. Smith Barney Funds knows of no
facts which might form the basis for the institution of such
proceedings and neither Smith Barney Funds nor the Acquired Fund is
a party to or subject to the provisions of any order, decree or
judgment of any court or governmental body which materially and
adversely affects the Acquired Fund's business or Smith Barney
Funds' ability on behalf of the Acquired Fund to consummate the
transactions herein contemplated;
(f) The Statements of Assets and Liabilities of the
Acquired Fund for each of the fiscal years ended December 31, 1996,
1995, 1994, 1993 and 1992, and for the period December 16, 1992
(inception of Class C shares) to December 31, 1992, with respect to
Class C shares, have been audited by KPMG Peat Marwick LLP,
independent certified public accountants, and are in accordance
with generally accepted accounting principles consistently applied,
and such statements (copies of which have been furnished to the
Acquiring Fund) fairly reflect the financial condition of the
Acquired Fund as of such dates, and there are no known contingent
liabilities of the Acquired Fund as of such dates not disclosed
therein;
(g) At the Closing Date, all federal and other tax returns
and reports of the Acquired Fund required by law then to have been
filed by such dates shall have been filed, and all federal and
other taxes shown as due on such returns shall have been paid so
far as due, or provision shall have been made for the payment
thereof and, to the best of the Acquired Fund's knowledge, no such
return is currently under audit and no assessment has been asserted
with respect to such returns;
(h) For the most recent fiscal year of its operation, the
Acquired Fund has met the requirements of Subchapter M of the Code
for qualification and treatment as a regulated investment company;
(i) All issued and outstanding shares of the Acquired Fund
are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable. All of the issued and
outstanding shares of the Acquired Fund will, at the time of
Closing, be held by the persons and in the amounts set forth in the
records of the transfer agent as provided in paragraph 3.4. The
Acquired Fund does not have outstanding any options, warrants or
other rights to subscribe for or purchase any shares of the
Acquired Fund, nor is there outstanding any security convertible
into any shares of the Acquired Fund;
(j) At the Closing Date, the Acquired Fund will have good
and marketable title to its assets to be transferred to the
Acquiring Fund pursuant to paragraph 1.2 and full right, power and
authority to sell, assign, transfer and deliver such assets
hereunder and, upon delivery and payment for such assets, the
Acquiring Fund will acquire good and marketable title thereto,
subject to no restrictions on the full transfer thereof, including
such restrictions as might arise under the Securities Act of 1933,
as amended (the "1933 Act"), other than as disclosed to the
Acquiring Fund;
(k) The execution, delivery and performance of this
Agreement has been duly authorized by all necessary action on the
part of Smith Barney Fund's Board of Directors and, subject to the
approval of the Acquired Fund's shareholders, assuming due
authorization, execution and delivery by the Acquiring Fund, this
Agreement will constitute a valid and binding obligation of Smith
Barney Fund's on behalf of the Acquired Fund, enforceable in
accordance with its terms, subject as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium and other laws
relating to or affecting creditors' rights and to general equity
principles;
(l) The information to be furnished by the Acquired Fund
for use in no-action letters, applications for exemptive orders,
registration statements, proxy materials and other documents which
may be necessary in connection with the transactions contemplated
hereby shall be accurate and complete in all material respects and
shall comply in all material respects with federal securities and
other laws and regulations thereunder applicable thereof;
(m) The proxy statement of Smith Barney Funds on behalf of
the Acquired Fund (the "Proxy Statement") to be included in the
Registration Statement referred to in paragraph 5.7 (other than
information therein that relates to the Acquiring Fund) will, on
the effective date of the Registration Statement and on the Closing
Date, not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under
which such statements were made, not materially misleading.
4.2. Smith Barney Money Funds represents and warrants to
Smith Barney Funds as follows :
(a) The Acquiring Fund is a portfolio of Smith Barney Money
Funds, which is a corporation, duly organized, validly existing and
in good standing under the laws of the State of Maryland;
(b) Smith Barney Money Funds is a registered investment
company classified as a management company of the open-end type and
its registration with the Commission as an investment company under
the 1940 Act is in full force and effect;
(c) The current prospectus of and statement of additional
information of Smith Barney Money Funds conform in all material
respects to the applicable requirements of the 1933 Act and the
1940 Act and the rules and regulations of the Commission thereunder
and do not include any untrue statement of a material fact or omit
to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not materially
misleading;
(d) At the Closing Date, Smith Barney Money Funds will have
good and marketable title to the Acquiring Fund's assets;
(e) Smith Barney Money Funds is not, and the execution,
delivery and performance of this Agreement on behalf of the
Acquiring Fund will not result, in a material violation of its
Articles of Incorporation or By-laws or of any agreement,
indenture, instrument, contract, lease or other undertaking with
respect to the Acquiring Fund to which Smith Barney Money Funds is
a party or by which it is bound;
(f) No material litigation or administrative proceeding or
investigation of or before any court or governmental body is
presently pending or to its knowledge threatened against Smith
Barney Money Funds with respect to the Acquiring Fund or any of the
Acquiring Fund's properties or assets, except as previously
disclosed in writing to Smith Barney Funds. Smith Barney Money
Funds and the Acquiring Fund know of no facts which might form the
basis for the institution of such proceedings and neither Smith
Barney Money Funds nor the Acquiring Fund is a party to or subject
to the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects the
Acquiring Fund's business or Smith Barney Money Funds' ability on
behalf of the Acquiring Fund to consummate the transactions
contemplated herein;
(g) The Statements of Assets and Liabilities of the
Acquiring Fund for each of the fiscal years ended December 31,
1996, 1995, 1994, 1993 and 1992 have been audited by KPMG Peat
Marwick, independent certified public accountants, and are in
accordance with generally accepted accounting principles
consistently applied, and such statements (copies of which have
been furnished to the Acquired Fund) fairly reflect the financial
condition of the Acquiring Fund as of such dates, and there are no
known contingent liabilities of the Acquiring Fund as of such dates
not disclosed therein;
(h) At the Closing Date, all federal and other tax returns
and reports of the Acquiring Fund required by law then to have been
filed by such dates shall have been filed, and all federal and
other taxes shown as due on said returns and reports shall have
been paid so far as due, or provision shall have been made for the
payment thereof and, to the best of the Acquiring Fund's knowledge,
no such return is currently under audit and no assessment has been
asserted with respect to such returns;
(i) For the most recent fiscal year of its operation, the
Acquiring Fund has met the requirements of Subchapter M of the Code
for qualification and treatment as a regulated investment company
and the Acquiring Fund intends to do so in the future;
(j) At the date hereof, all issued and outstanding shares
of the Acquiring Fund are, and at the Closing Date will be, duly
and validly issued and outstanding, fully paid and non-assessable,
with no personal liability attaching to the ownership thereof. The
Acquiring Fund does not have outstanding any options, warrants or
other rights to subscribe for or purchase any shares of the
Acquiring Fund, nor is there outstanding any security convertible
into shares of the Acquiring Fund;
(k) The execution, delivery and performance of this
Agreement has been duly authorized by all necessary action, if any,
on the part of Smith Barney Money Funds' Board of Directors and,
assuming due authorization, execution and delivery by the Acquired
Fund, this Agreement constitutes a valid and binding obligation of
Smith Barney Money Funds on behalf of the Acquiring Fund,
enforceable in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium
and other laws relating to or affecting creditors' rights and to
general equity principles;
(l) The Acquiring Fund Shares to be issued and delivered to
Smith Barney Funds for the account of the Acquired Fund
Shareholders, pursuant to the terms of this Agreement, will at the
Closing Date have been duly authorized and, when so issued and
delivered, will be duly and validly issued Acquiring Fund Shares,
and will be fully paid and non-assessable with no personal
liability attaching to the ownership thereof;
(m) The information to be furnished by the Acquiring Fund
for use in no-action letters, applications for exemptive orders,
registration statements, proxy materials and other documents which
may be necessary in connection with the transactions contemplated
hereby shall be accurate and complete in all material respects and
shall comply in all material respects with federal securities and
other laws and regulations applicable thereto;
(n) The Proxy Statement to be included in the Registration
Statement (only insofar as it relates to the Acquiring Fund and
Smith Barney Money Funds) will, on the effective date of the
Registration Statement and on the Closing Date, not contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such
statements were made, not materially misleading; and
(o) Smith Barney Money Funds, on behalf of the
Acquiring Fund, agrees to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act and the 1940
Act, and to file notices with state securities commissions as it
may deem appropriate in order to continue the Acquiring Fund's
operations after the Closing Date.
5. Covenants of the Acquired Fund, Smith Barney Funds, the
Acquiring Fund and Smith Barney Money Funds
5.1. Smith Barney Money Funds on behalf of the Acquiring Fund
and Smith Barney Funds on behalf of the Acquired Fund each will
operate its business in the ordinary course between the date hereof
and the Closing Date. It is understood that such ordinary course
of business will include the declaration and payment of customary
dividends and distributions and any other dividends and
distributions deemed advisable, in each case payable either in cash
or in additional shares.
5.2. Smith Barney Funds will call a meeting of Acquired Fund
shareholders to consider and act upon this Agreement and to take
all other action necessary to obtain approval of the transactions
contemplated herein.
5.3. Smith Barney Funds covenants that the Acquiring Fund Shares
to be issued hereunder are not being acquired for the purpose of
making any distribution thereof other than in accordance with the
terms of this Agreement.
5.4. Smith Barney Funds will assist the Acquiring Fund in
obtaining such information as the Acquiring Fund reasonably
requests concerning the beneficial ownership of the Acquired Fund's
shares.
5.5. Subject to the provisions of this Agreement, Smith Barney
Funds on behalf the Acquired Fund and Smith Barney Money Funds on
behalf of the Acquiring Fund each will take, or use to be taken,
all action, and do or cause to be done, all things reasonably
necessary, proper or advisable to consummate and make effective the
transactions contemplated by this Agreement.
5.6. As promptly as practicable, but in any case within sixty
days after the Closing Date, Smith Barney Funds shall furnish the
Acquiring Fund, in such form as is reasonably satisfactory to the
Acquiring Fund, a statement of the earnings and profits of the
Acquired Fund for federal income tax purposes which will be carried
over to the Acquiring Fund as a result of Section 381 of the Code,
and which will be certified by the Chairman and Treasurer or
Assistant Treasurer of the Acquired Fund.
5.7. Smith Barney Funds will provide the Acquiring Fund with
information reasonable necessary for the preparation of a
prospectus (the "Prospectus") which will include the Proxy
Statement, referred to in paragraph 4.1(m), all to be included in a
Registration Statement on Form N-14 of the Acquiring Fund (the
"Registration Statement"), in compliance with the 1933 Act, the
Securities Exchange Act of 1934 (the "1934 Act") and the 1940 Act
in connection with the meeting of the Acquired Fund's shareholders
to consider approval of this Agreement and the transactions
contemplated herein.
6. Conditions Precedent to Obligations of Smith Barney Funds in
respect of the Acquired Fund
The obligations of Smith Barney Funds to consummate the
transactions provided for herein shall be subject, at its election,
to the performance by Smith Barney Money Funds and the Acquiring
Fund of all of the obligations to be performed by them hereunder on
or before the Closing Date and, in addition thereto, the following
further conditions:
6.1. All representations and warranties of Smith Barney
Money Funds and the Acquiring Fund contained in this Agreement
shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the
same force and effect as if made on and as of the Closing Date;
6.2. Smith Barney Money Funds on behalf of the Acquiring Fund
shall have delivered to the Acquired Fund a certificate executed in
its name by its Chairman and its Treasurer or Assistant Treasurer,
in a form reasonably satisfactory to the Acquired Fund and dated as
of the Closing Date, to the effect that the representations and
warranties of Smith Barney Money Funds and the Acquiring Fund made
in this Agreement are true and correct at and as of the Closing
Date, except as they may be affected by the transactions
contemplated by this Agreement; and
6.3. Smith Barney Funds shall have received on the Closing Date
a favorable opinion from Sullivan & Cromwell, counsel to Smith
Barney Money Funds, dated as of the Closing Date, in a form
reasonably satisfactory to Christina T. Sydor, Esq., Secretary of
the Acquired Fund, covering the following points:
That (a) Smith Barney Money Funds is duly organized and validly
existing under the laws of the State of Maryland; (b) Smith
Barney Money Funds is an open-end management investment company
registered under the 1940 Act; (c) this Agreement, the
Reorganization provided for hereunder and the execution of this
Agreement have been duly authorized and approved by all
requisite action of Smith Barney Money Funds, and this Agreement
has been duly executed and delivered by Smith Barney Money Funds
and is a valid and binding obligation of Smith Barney Money
Funds with respect to the Acquiring Fund enforceable in
accordance with its terms against the assets of the Acquiring
Fund, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to
general equity principles; and (d) the Class A Acquiring Fund
Shares to be issued to the Acquired Fund for distribution to its
shareholders pursuant to this Agreement have been duly
authorized and, subject to the receipt by Smith Barney Money
Funds on behalf of the Acquiring Fund of consideration equal to
the net asset value thereof (but in no event less than the par
value thereof), such Class A Acquiring Fund Shares, when issued
in accordance with this Agreement, will be validly issued, fully
paid and nonassessable.
Such opinion may state that it is solely for the benefit of
Smith Barney Funds, its directors and its officers. Such counsel
may rely, as to matters governed by the laws of the State of
Maryland, on an opinion of Maryland counsel.
7. Conditions Precedent to Obligations of Smith Barney Money Funds
in Respect of the
Acquiring Fund
The obligations of Smith Barney Money Funds on behalf of the
Acquiring Fund to complete the transactions provided for herein
shall be subject, at its election, to the performance by Smith
Barney Funds of all the obligations to be performed by it hereunder
on or before the Closing Date and, in addition thereto, the
following conditions:
7.1. All representations and warranties of Smith Barney Funds
contained in this Agreement shall be true and correct in all
material respects as of the date hereof and, except as they may be
affected by the transactions contemplated by this Agreement, as of
the Closing Date with the same force and effect as if made on and
as of the Closing Date;
7.2. Smith Barney Funds on behalf of the Acquired Fund shall
have delivered to the Acquiring Fund a statement of the Acquired
Fund's assets and liabilities, together with a list of the Acquired
Fund's portfolio securities showing the tax costs of such
securities by lot and the holding periods of such securities, as of
the Closing Date, certified by the Treasurer or Assistant Treasurer
of the Acquired Fund;
7.3. Smith Barney Funds shall have delivered to the Acquiring
Fund on the Closing Date a certificate executed in its name by its
Chairman and its Treasurer or Assistant Treasurer, in form and
substance satisfactory to the Acquiring Fund and dated as of the
Closing Date, to the effect that the representations and warranties
of the Smith Barney Funds and the Acquired Fund made in this
Agreement are true and correct at and as of the Closing Date,
except as they may be affected by the transactions contemplated by
this Agreement; and
7.4. The Acquiring Fund shall have received on the Closing Date
a favorable opinion of Sullivan & Cromwell, counsel to the Smith
Barney Funds, in a form satisfactory to Christina T. Sydor, Esq.,
Secretary of Smith Barney Money Funds, covering the following
points:
That (a) the Smith Barney Funds is duly organized and validly
existing under the laws of the State of Maryland; (b) Smith
Barney Funds is an open-end management investment company
registered under the 1940 Act; and (c) this Agreement, the
Reorganization provided for hereunder and the execution of this
Agreement have been duly authorized and approved by all
requisite action of Smith Barney Funds , and this Agreement has
been duly executed and delivered by Smith Barney Funds and is a
valid and binding obligation of Smith Barney Funds enforceable
in accordance with its terms against the assets of the Acquired
Fund, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to
general equity principles.
Such opinion may state that it is solely for the benefit of
Smith Barney Money Funds, its directors and its officers. Such
counsel may rely, as to matters governed by the laws of the State
of Maryland, on an opinion of Maryland counsel.
8. Further Conditions Precedent to Obligations of the Acquired
Fund, Smith Barney Funds, the Acquiring Fund and Smith Barney
Money Funds
If any of the conditions set forth below do not exist on or
before the Closing Date with respect to Smith Barney Money Funds on
behalf of the Acquiring Fund, or the Acquired Fund, the other party
to this Agreement shall, at its option, not be required to
consummate the transactions contemplated by this Agreement:
8.1. This Agreement and the transactions contemplated herein
shall have been approved by the requisite vote of the holders of
the outstanding shares of the Acquired Fund in accordance with the
provisions of Smith Barney Fund's Articles of Incorporation and by-
laws and certified copies of the votes evidencing such approval
shall have been delivered to the Acquiring Fund. Notwithstanding
anything herein to the contrary, neither Smith Barney Money Funds
on behalf of the Acquiring Fund nor Smith Barney Funds on behalf of
the Acquired Fund may waive the conditions set forth in this
paragraph 8.1;
8.2. On the Closing Date, no action, suit or other proceeding
shall be pending before any court or governmental agency in which
it is sought to restrain or prohibit, or obtain damages or other
relief in connection with, this Agreement or the transactions
contemplated herein;
8.3. All consents of other parties and all other consents,
orders and permits of federal and if applicable state and local,
regulatory authorities (including those of the Commission and of
state Blue Sky and securities authorities, including "no-action"
positions of and exemptive orders from such federal and state
authorities) deemed necessary by the Acquiring Fund or the Acquired
Fund to permit consummation, in all material respects, of the
transactions contemplated hereby shall have been obtained, except
where failure to obtain any such consent, order or permit would not
involve a risk of a material adverse effect on the assets or
properties of the Acquiring Fund or the Acquired Fund, provided
that either party hereto may for itself waive any of such
conditions;
8.4. The Registration Statement shall have become effective
under the 1933 Act and no stop orders suspending the effectiveness
thereof shall have been issued and, to the best knowledge of the
parties hereto, no investigation or proceeding for that purpose
shall have been instituted or be pending, threatened or
contemplated under the 1933 Act;
8.5. The Acquired Fund shall have declared and paid a dividend
or dividends on the outstanding shares of the Acquired Fund, which,
together with all previous such dividends, shall have the effect of
distributing to the shareholders of the Acquired Fund all of the
investment company taxable income of the Acquired Fund for all
taxable years ending on or prior to the Closing Date. The dividend
declared and paid by the Acquired Fund shall also include all of
such fund's net capital gain realized in all taxable years ending
on or prior to the Closing Date (after reduction for any capital
loss carry forward);
9. Brokerage Fees and Expenses
9.1. Smith Barney Money Funds on behalf of the Acquiring Fund
represents and warrants to the Acquired Fund, and Smith Barney
Funds on behalf of the Acquired Fund hereby represents and warrants
to Smith Barney Money Funds on behalf of the Acquiring Fund, that
there are no brokers or finders entitled to receive any payments in
connection with the transactions provided for herein.
9.2. (a) Except as may be otherwise provided herein, Smith
Barney Inc., the Funds' distributor shall be liable for the
expenses incurred in connection with entering into and carrying out
the provisions of this Agreement, including the expenses of: (i)
counsel and independent accountants associated with the
Reorganization; (ii) printing and mailing the Prospectus/Proxy
Statement and soliciting proxies in connection with the meeting of
shareholders of the Acquired Fund referred to in paragraph 5.2
hereof; (iii) any special pricing fees associated with the
valuation of the Acquired Funds or the Acquiring Funds portfolio on
the Closing Date; (iv) expenses associated with preparing this
Agreement and preparing and filing the Registration Statement under
the 1933 Act covering the Acquiring Fund Shares to be issued in the
Reorganization; (v) registration or qualification fees and expenses
of preparing and filing such forms, if any, necessary under
applicable state securities laws to qualify the Acquiring Fund
Shares to be issued in connection with the Reorganization. The
Acquired Fund shall be liable for: (i) all fees and expenses
related to the liquidation of the Acquired Fund; and (ii) fees and
expenses of the Acquired Fund's custodian and transfer agent
incurred in connection with the Reorganization. The Acquiring Fund
shall be liable for any fees and expenses of the Acquiring Fund's
transfer agent incurred in connection with the Reorganization.
(b) Consistent with the provisions of paragraph 1.3, the
Acquired Fund, prior to the Closing, shall pay for or include in
the unaudited Statement of Assets and Liabilities prepared pursuant
to paragraph 1.3 all of its known and reasonably estimated expenses
associated with the transactions contemplated by this Agreement.
10. Entire Agreement; Survival of Warranties
10.1. The parties hereto agree that no party has made any
representation, warranty or covenant not set forth herein and that
this Agreement constitutes the entire agreement between the
parties.
10.2. The representations, warranties and covenants contained
in this Agreement or in any document delivered pursuant hereto or
in connection herewith shall survive the consummation of the
transactions contemplated hereunder.
11. Termination
11.1. This Agreement may be terminated at any time prior to
the Closing Date by: (1) the mutual agreement of Smith Barney Funds
on behalf of the Acquired Fund and Smith Barney Money Funds on
behalf of the Acquiring Fund; (2) Smith Barney Funds in respect of
the Acquired Fund in the event that Smith Barney Money Funds in
respect of the Acquiring Fund shall, or Smith Barney Money Funds in
respect of the Acquiring Fund in the event that Smith Barney Funds
in respect of the Acquired Fund shall, materially breach any
representation, warranty or agreement contained herein to be
performed at or prior to the Closing Date; or (3) a condition
herein expressed to be precedent to the obligations of the
terminating party has not been met and it reasonably appears that
it will not or cannot be met.
11.2. In the event of any such termination, there shall be no
liability for damages on the part of either Smith Barney Funds on
behalf of the Acquired Fund or Smith Barney Money Funds on behalf
of the Acquiring Fund or their respective directors or officers to
the other party, but each shall bear the expenses incurred by it
incidental to the preparation and carrying out of this Agreement as
provided in paragraph 9.2.
12. Amendments
This Agreement may be amended, modified or supplemented in such
manner as may be mutually agreed upon in writing by the authorized
officers of Smith Barney Funds and Smith Barney Money Funds;
provided, however, that following the meeting of the Acquired Fund
shareholders called by Smith Barney Funds pursuant to paragraph 5.2
of this Agreement, no such amendment may have the effect of
changing the provisions for determining the number of the Acquiring
Fund Shares to be issued to the Acquired Fund's shareholders under
this Agreement to the detriment of such shareholders without their
further approval.
13. Notices
Any notice, report, statement or demand required or permitted by
any provisions of this Agreement shall be in writing and shall be
given by prepaid telegraph, telecopy or certified mail addressed to
Smith Barney Funds, 388 Greenwich Street, 22nd Floor, New York, New
York 10013, Attention: Secretary; or to Smith Barney Money Funds,
388 Greenwich Street, New York, New York 10013, Attention:
Secretary.
14. Headings; Counterparts; Governing Law; Assignment;
Limitation of Liability
14.1 The article and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement.
14.2 This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.
14.3 This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
14.4 This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns, but no
assignment or transfer hereof or of any rights or obligations
hereunder shall be made by any party without the written consent of
the other party. Nothing herein expressed or implied is intended
or shall be construed to confer upon or give any person, firm,
corporation or other entity, other than the parties hereto and
their respective successors and assigns, any rights or remedies
under or by reason of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed by its Chairman of the Board, President or Vice President
and attested by its Secretary or Assistant Secretary.
Attest:
SMITH BARNEY
MONEY FUNDS, INC.
on behalf of the
CASH PORTFOLIO
/s/ Christina T. Sydor
Name: Christina T. Sydor
Title: Secretary
By: /s/ Heath B. McLendon
Name: Heath B. McLendon
Title: Chairman of the Board and
Chief Executive Officer
Attest:
SMITH BARNEY FUNDS, INC.
on behalf of the
INCOME RETURN ACCOUNT PORTFOLIO
/s/ Christina T. Sydor
Name: Christina T. Sydor
Title: Secretary
By: /s/ Heath B. McLendon
Name: Heath B. McLendon
Title: Chairman of the Board
27
STATEMENT OF ADDITIONAL INFORMATION DATED, September 15, 1997
Acquisition Of The Assets Of
INCOME RETURN ACCOUNT PORTFOLIO
a separate investment portfolio of SMITH BARNEY FUNDS, INC., 388
Greenwich Street, New York, New York 10013, (800) 224-7523
By And In Exchange For Class A Shares Of
CASH PORTFOLIO
a separate investment portfolio of SMITH BARNEY MONEY FUNDS, INC., 388
Greenwich Street, New York, 10013, (800) 224-7523
This Statement of Additional Information, relating specifically to the
proposed transfer of all or substantially all of the assets of the Income
Return Account Portfolio of Smith Barney Funds, Inc., (the "Acquired
Fund")to the Cash Portfolio of Smith Barney Money Funds, Inc., (the
"Acquiring Fund") in exchange for Class A shares of the Acquiring Fund
and the assumption by the Acquiring Fund of certain liabilities of the
Acquired Fund, consists of this cover page and the following described
documents, each of which accompanies this Statement of Additional
Information and is incorporated herein by reference.
1. Statement of Additional Information of Smith Barney Funds, Inc. dated
April 30, 1997.
2. Statement of Additional Information of Smith Barney Money Funds, Inc.
dated April 30, 1997
3. Annual Report of Smith Barney Funds, Inc. - Income Return Account
Portfolio for the year ended December 31, 1996.
4. Annual Report of Smith Barney Money Funds, Inc. - Cash Portfolio for
the year ended December 31, 1996.
5. Semi-Annual Report of Smith Barney Funds, Inc. - Income Return
Account Portfolio for the six-month period ended June 30, 1997.
6. Semi-Annual Report of Smith Barney Money Funds, Inc. - Cash Portfolio
for the six-month period ended June 30, 1997.
This Statement of Additional Information is not a Prospectus. A
Prospectus/Proxy Statement dated September 15, 1997, relating to the
above-referenced matter may be obtained without charge by calling or
writing either the Acquiring Fund or the Acquired Fund at the telephone
numbers or addresses set forth above, by contacting any Smith Barney
Financial Consultant, or by calling toll-free 1-800-224-7523. This
Statement of Additional Information should be read in conjunction with
the Prospectus/Proxy Statement dated September 15, 1997.
The date of this Statement of Additional Information is September 15,
1997
PROSPECTUS OF SMITH BARNEY MONEY FUNDS, INC. - CASH PORTFOLIO DATED APRIL
30, 1997 IS INCORPORATED BY REFERENCE TO POST-EFFECTIVE AMENDMENT NO. 49
TO THE SMITH BARNEY FUNDS, INC. REGISTRATION STATEMENT ON FORM N-1A FILED
ON APRIL 23, 1997.
REFERENCE NOS. 2-51301, 811-2490
ACCESSION NUMBER: 91155-97-000209
STATEMENT OF ADDITIONAL INFORMATION OF SMITH BARNEY FUNDS, INC. DATED
APRIL 30, 1997
REFERENCE NOS. 2-25890, 811-1464
ACCESSION NUMBER. 91155-97-000224
STATEMENT OF ADDITIONAL INFORMATION OF SMITH BARNEY MONEY FUNDS, INC.
DATED APRIL 30, 1997
REFERENCE NOS. 2-51301, 811-2490
ACCESSION NUMBER. 91155-97-000209
ANNUAL REPORT OF SMITH BARNEY FUNDS, INC. - INCOME RETURN ACCOUNT
PORTFOLIO FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996.
ACCESSION NUMBER: 91155-97-000132
ANNUAL REPORT OF SMITH BARNEY MONEY FUNDS, INC. - CASH PORTFOLIO FOR THE
FISCAL YEAR ENDED DECEMBER 31, 1996.
ACCESSION NUMBER: 91155-97-000081
SEMI-ANNUAL REPORT OF SMITH BARNEY FUNDS, INC. - INCOME RETURN ACCOUNT
PORTFOLIO FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 1997.
ACCESSION NUMBER: 91155-97-000396
SEMI-ANNUAL REPORT OF SMITH BARNEY MONEY FUNDS, INC. -CASH PORTFOLIO FOR
THE SIX-MONTH PERIOD ENDED JUNE 30, 1997
ACCESSION NUMBER: 91155-97-000384
PART C
OTHER INFORMATION
Item 15. Indemnification
Reference is made to Article SEVENTH of Registrant's Articles of
Incorporation for a complete statement of its terms.
Subparagraph (9) of Article SEVENTH provides: "Anything herein contained
to the contrary notwithstanding, no officer or director of the
corporation shall be indemnified for any liability to the registrant or
its security holders to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office."
Registrant is a named assured on a joint insured bond pursuant to Rule
17g-1 of the Investment Company Act of 1940. Other assured include Smith
Barney Mutual Funds Management Inc. (Registrant's Manager) and affiliated
investment companies.
Item 16. Exhibits
(1) (a) Articles Supplementary to the Articles of
Incorporation dated November 7, 1985, January 30, 1984,
August 12, 1980 and May 8, 1980 are incorporated by
reference to Exhibits (a) through (d) to Post-Effective
Amendment No. 32.
(b) Articles Supplementary to the Articles of
Incorporation dated December 5, 1990 and Articles of
Amendment dated April 19, 1991 are incorporated by
reference to Exhibit 1(b) and (c) to Post-Effective
Amendment No. 35.
(c) Articles of Amendment to the Articles of
Incorporation dated October 28,1992 and Articles
Supplementary to the Articles of Incorporation dated
December 8, 1992 are incorporated by reference to
Exhibit 1(c) and (d) to Post-Effective Amendment No.
41.
(d) Certificate of Correction dated July 15, 1994
(filed herewith).
(e) Articles Supplementary to the Articles of
Incorporation dated July 19, 1994 (filed herewith).
(f) Articles of Amendment to Articles of
Incorporation dated November 3,1994 (filed herewith).
(g) Articles Supplementary to Articles of
Incorporation dated November 3, 1994 (filed herewith).
(h) Articles Supplementary to Articles of
Incorporation dated November 3, 1994(filed herewith).
(i) Articles Supplementary to Articles of
Incorporation dated January 16, 1996 (filed herewith).
(2) Restated Bylaws (filed herewith).
(3) Not applicable.
(4) Form of Agreement and Plan of Reorganization (filed
herewith as Exhibit A to Registrant's Prospectus/Proxy
Statement).
(5) Specimen Stock Certificate for shares of common stock
of the Cash Portfolio, a portfolio of the Registrant,
is incorporated by reference to Exhibit 4(a) to Post-
Effective Amendment No. 32.
(6) Management Agreement for the Cash Portfolio is
incorporated by reference to Exhibit 5(b) to Post-
Effective Amendment No. 44.
(7) Underwriting Agreement is incorporated by reference to
Exhibit 6 to Post-Effective Amendment No. 32.
(8) Not applicable.
(9) (a) Custodian Agreement is incorporated by reference to
Exhibit 8 to Post-Effective Amendment No. 32.
(b) Form of Transfer Agency Agreement is incorporated
by reference to Exhibit 8 to Post-Effective Amendment
No. 49.
(10) Plan of Distribution Pursuant to Rule 12b-1 of Smith
Barney Money Funds, Inc. is incorporated by reference
to Exhibit 15(a) to Post-Effective Amendment No. 44.
(11) Opinion and Consent of Sullivan & Cromwell with
respect to validity of shares (filed herewith)
(12) Not Applicable
(13) Not Applicable
(14) Consent of KPMG Peat Marwick L.L.P. (filed herewith)
(15) Not Applicable.
(16) Not Applicable.
(17) (a) Revised Form of Proxy Card (filed herewith)
(b) Registrant's Declaration pursuant to Rule 24f-2
is incorporated by reference to its initial
Registration Statement.
(c) Powers of Attorney are incorporated by reference
to the Registrant's Registration Statement on Form N-14
(Registration No. 333-31761), filed on July 22, 1997.
Item 17. Undertakings
(1) The undersigned Registrant agrees that prior to any public reoffering
of the securities registered through the use of a prospectus which is a
part of this Registration Statement by any person or party who is deemed
to be an underwriter within the meaning of Rule 145(c) of the Securities
Act of 1933, the reoffering prospectus will contain the information
called for by the applicable registration form for reofferings by persons
who may be deemed underwriters, in addition to the information called for
by the other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to the
Registration Statement and will not be used until the amendment is
effective, and that, in determining any liability under the Securities
Act of 1933, each post-effective amendment shall be deemed to be a new
registration statement for the securities offered therein, and the
offering of the securities at that time shall be deemed to the initial
bona fide offering of them.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, SMITH BARNEY MONEY FUNDS, INC. has duly caused this Amendment
No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of New York,
State of New York on the 10th day of September, 1997.
SMITH BARNEY MONEY FUNDS, INC.
By: \s\ Heath B. McLendon
Heath B. McLendon
Chief Executive Officer
As required by the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the
dates indicated.
Signature Title Date
\s\ Heath B. McLendon Chairman of the Board, September 10, 1997
Heath B. McLendon Chief Executive Officer
\s\ Lewis E. Daidone Senior Vice President and September 10, 1997
Lewis E. Daidone Treasurer (Chief Financial
and Accounting Officer)
/s/Joseph H. Fleiss* Director September 10, 1997
Joseph H. Fleiss
/s/Donald R. Foley* Director September 10, 1997
Donald R. Foley
/s/Paul Hardin* Director September 10, 1997
Paul Hardin
/s/Francis P. Martin* Director September 10, 1997
Francis P. Martin
/s/Roderick C. Rasmussen* Director September 10, 1997
Roderick C. Rasmussen
/s/John P. Toolan* Director September 10, 1997
John P. Toolan
* Signed by Heath B. McLendon, their duly authorized attorney-in-fact,
pursuant to Power of Attorney previously filed.
/s/ Heath B. McLendon
Heath B. McLendon
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
(1) (d)* Certificate of Correction dated July 15, 1994
(1)(e)* Articles Supplementary to the Articles of Incorporation dated
July 19, 1994
(1)(f)* Articles of Amendment to Articles of Incorporation dated
November 3,1994
(1)(g)* Articles Supplementary to Articles of Incorporation dated
November 3, 1994
(1)(h)* Articles Supplementary to Articles of Incorporation dated
November 3, 1994
(1)(i)* Articles Supplementary to Articles of Incorporation dated
January 16, 1996
(2)* Restated By-Laws
(4)* Plan of Reorganization (included as Exhibit A to
Registrant's Prospectus/Proxy Statement contained in
Part A of this Registration Statement).
(11)* Opinion and Consent of Sullivan & Cromwell with respect
to validity of shares.
(14)* Consent of KPMG Peat Marwick LLP
(17) (a)* Form of Proxy Card.
* Filed herewith.
VOTE THIS VOTING INSTRUCTION CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
Please fold and detach card at perforation before mailing
SMITH BARNEY FUNDS, INC. - INCOME RETURN ACCOUNT PORTFOLIO
PROXY SOLICITED BY THE BOARD
OF DIRECTORS
The undersigned holder of shares of Smith Barney Funds, Inc. -
Income Return Account Portfolio (the
"Income Return Account Portfolio") , hereby appoints Heath B. McLendon,
Christina T. Sydor and Marc Schuman attorneys and proxies for
the undersigned with full powers of substitution and revocation, to
represent the undersigned and to vote on behalf of the undersigned all
shares of Income Return Account Portfolio that the undersigned is
entitled to vote at the Special Meeting of Shareholders of the Income
Return Account Portfolio to be held at the offices of the Income Return
Account Portfolio, 388 Greenwich Street, New York, New York on
October 17, 1997 at 10:00 a.m. New York City time and any
adjournment or adjournments thereof. The undersigned hereby acknowledges
receipt of the Notice of Special Meeting and Prospectus/Proxy Statement
dated September 15, 1997 and hereby instructs said
attorneys and proxies to vote said shares as indicated herein.
In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the Special Meeting. A
majority of the proxies present and acting at the Special Meeting in person
or by substitute (or, if only one shall be so present, then that one)
shall have and may exercise all of the power and authority
of said proxies hereunder. The undersigned hereby revokes any
proxy previously given.
PLEASE SIGN, DATE AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE
Date: _______________________
NOTE: Please sign exactly as your
name appears on this Proxy. If joint
owners, EITHER may sign this Proxy.
When signing as attorney, executor,
administrator, trustee, guardian or
corporate officer, please give your
full title.
Signature(s) (Title(s), if
applicable)
VOTE THIS VOTING INSTRUCTION CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
Please fold and detach card at perforation before mailing
Please indicate your vote by an "X" in the appropriate box below.
This proxy, if properly executed,
will be voted in the manner directed by the undersigned shareholder.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE PROPOSAL.
1. To approve the Agreement and Plan of Reorganization dated as
of June 25, 1997 providing for:
(i) the acquisition of all or substantially all of the assets of Smith
Barney Funds, Inc. -
Income Return Account Portfolio (the " Income Return Account Portfolio") by
Smith Barney Money Funds, Inc. - Cash Portfolio (the "Cash Portfolio")
in exchange for Class A shares of the Cash Portfolio and the assumption by
the Cash Portfolio of all stated liabilities of the Income Return Account
Portfolio; (ii) the distribution of such shares of the Cash Portfolio to
shareholders of the Income Return Account Portfolio in
liquidation of the Income Return Account Portfolio; and (iii) the subsequent
termination of the Income Return Account Portfolio.
FOR AGAINST ABSTAIN
SMITH BARNEY MONEY FUNDS, INC.
CERTIFICATE OF CORRECTION
Smith Barney Money Funds, Inc., a Maryland corporation, having its
principal office in Baltimore City, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments
and Taxation of Maryland that:
FIRST: The title of the document being corrected is Articles
Supplementary.
SECOND: The name of the party to the document being corrected is
Smith Barney Money Funds, Inc.
THIRD: The date that the document being corrected was filed is
December 10, 1992.
FOURTH: The following provision of the Articles Supplementary is
hereby corrected as follows:
ARTICLE SECOND (a) of the Articles Supplementary which now reads
as follows:
"(a) The Government Portfolio series of the Common Stock shall
have three classes of shares, which shall be designated Class A, Class B
and Class C, each consisting, until further changed, of the lesser of
(x) 500,000,000 shares or (y) the number of shares that could be issued
by issuing all of the shares of Common Stock of that series less the
total number of shares of all classes of Common Stock of that series
then issued and outstanding."
is corrected to read as follows:
"(a) The Government Portfolio series of the Common Stock shall
have three classes of shares, which shall be designated Class A, Class B
and Class C, each consisting, until further changed, of the lesser of
(x) 2,000,000,000 shares or (y) the number of shares that could be
issued by issuing all of the shares of Common Stock of that series less
the total number of shares of all classes of Common Stock of that series
then issued and outstanding."
FIFTH: The execution of the Articles Supplementary was not
defective.
IN WITNESS WHEREOF, Smith Barney Money Funds, Inc. has caused
these presents to be signed in its name and on its behalf by its
Chairman of the Board and Chief Executive Officer and witnessed by its
Secretary on this July 15, 1994.
Witness: SMITH BARNEY MONEY FUNDS, INC.
/s/ Christina T. Sydor By: /s/ Stephen J.Treadway
Christina T. Sydor Stephen J. Treadway
Secretary Chairman of the Board
and Chief Executive Officer
THE UNDERSIGNED, the Chairman of the Board and Chief Executive
Officer of Smith Barney Money Funds, Inc. who executed on behalf of the
Corporation the foregoing Certificate of Correction, hereby acknowledges
in the name and on behalf of the Corporation the foregoing Certificate
of Correction to be the corporate act of said Corporation and hereby
certifies that the matters and facts set forth herein are true in all
material respects under the penalties of perjury.
/s/ Stephen J. Treadway
Stephen J. Treadway
Chairman of the Board
and Chief Executive Officer
SMITH BARNEY MONEY FUNDS, INC.
ARTICLES SUPPLEMENTARY
Smith Barney Money Funds, Inc., a Maryland corporation, having its
principal office in Baltimore City, Maryland (the "Corporation"), hereby
certifies to the State Department of Taxation of Maryland that:
FIRST: Pursuant to the authority of the Board of Directors to
classify and reclassify unissued shares of Common Stock, the Board of
Directors has divided the Cash Portfolio series of the Common Stock of
the Corporation into Classes A, C, Y and Z and has provided for the
issuance of shares of such classes.
SECOND: The terms of the Common Stock as set by the Board of
Directors are as follows:
(a) The Cash Portfolio series of the Common Stock shall have
four classes of shares, which shall be designated Class A,
Class C, Class Y and Class Z, each consisting, until further
changed, of the lesser of (x) 4,000,000,000 shares or (y) the
number of shares that could be issued by issuing all of the
shares of Common Stock of that series less the total number
of shares of all other classes of Common Stock of that series
then issued and outstanding.
(b) All Classes of such series of Common Stock of the
Corporation shall represent the same interest in the
Corporation and have identical voting, dividend, liquidation,
and other rights with any other shares of Common Stock of
that series; provided, however, that notwithstanding anything
in the charter of the Corporation to the contrary:
(1) The Class A Shares shall be subject to such front-end
sales loads as may be established by the Board of
Directors from time to time in accordance with the
Investment Company Act of 1940 (the "Investment Company
Act") and applicable rules and regulations of the National
Association of Securities Dealers, Inc. ("NASD").
(2) The Class A and Class C Shares shall be subject to
such contingent deferred sales charges (which may differ
between Classes) as may be established from time to time
by the Board of Directors in accordance with the
Investment Company Act and applicable rules and
regulations of the NASD.
(3) The Class Y and Class Z Shares shall be subject to
such front-end sales loads or such contingent deferred
sales charges or both as may be established by the Board
of Directors from time to time in accordance with the
Investment Company Act and applicable rules and
regulations of the NASD and as disclosed in the then
current Prospectus.
(4) Expenses related solely to a particular Class of such
series (including, without limitation, distribution
expenses under a Rule 12b-1 plan and administrative
expenses under an administration or service agreement,
plan or other arrangement, however designated, which may
differ among the various Classes) shall be borne by that
Class and shall be appropriately reflected (in the manner
determined by the Board of Directors) in the net asset
value, dividends, distribution and liquidation rights of
the shares of that Class.
(5) At such time as may be determined by the Board of
Directors in accordance with the Investment Company Act
and applicable rules and regulations of the NASD and
reflected in the current registration statement relating
to such series, shares of a particular Class of such
series may be automatically converted into shares of
another Class; provided, however, that such conversion
shall be subject to the continuing availability of an
opinion of counsel to the effect that such conversion does
not constitute a taxable event under federal income tax
law and shall otherwise be in accordance with the
Investment Company Act. The Board of Directors, in its
sole discretion, may suspend any conversion rights if such
opinion is no longer available.
(6) As to any matter with respect to which a separate
vote of any Class is required by the Investment Company
Act or by the Maryland General Corporation Law (including,
without limitation, approval of any plan, agreement or
other arrangement referred to in subsection (3) above),
such requirement as to a separate vote by that Class shall
apply in lieu of single class voting, and, if permitted by
the Investment Company Act or any rules, regulations, or
order thereunder and the Maryland General Corporation Law,
the Classes of more than one series shall vote together as
a single Class on any such matter which shall have the
same effect on each such Class. As to any matter that
does not affect the interest of a particular Class, only
the holders of shares of the affected Classes shall be
entitled to vote.
THIRD: The Shares aforesaid have been duly classified by the Board
of Directors
pursuant to authority and power contained in the Charter of the
Corporation.
IN WITNESS WHEREOF, Smith Barney Money Funds, Inc. has caused these
presents to be signed in its name and on its behalf by its Chairman of
the Board and Chief Executive Officer and witnessed by its Secretary on
July 19, 1994.
WITNESS: SMITH BARNEY MONEY FUNDS, INC.
By:
Christina T. Sydor, Secretary Stephen J. Treadway,
Chairman of the Board and
Chief Executive Officer
THE UNDERSIGNED, Chairman of the Board and Chief Executive Officer
of Smith Barney Money Funds, Inc., who executed on behalf of the
Corporation Articles Supplementary of which this Certificate is made a
part, hereby acknowledges in the name and on behalf of said Corporation
the foregoing Articles Supplementary to be the corporate act of said
Corporation and hereby certifies that the matters and facts set forth
herein with respect to the authorization and approval thereof are true in
all material respects under the penalties of perjury.
Stephen J. Treadway,
Chairman of the Board and
Chief Executive Officer.
SMITH BARNEY MONEY FUNDS, INC.
ARTICLES OF AMENDMENT
CHANGING NAME OF CLASSES
PURSUANT TO MGCL SECTION 2-605
Smith Barney Money Funds, Inc., a Maryland corporation, having its
principal office in Baltimore City, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments
and Taxation of Maryland that:
FIRST: The Charter of the Corporation is hereby amended to
provide as follows:
(A) The name and designation of the Class C Shares of the
Government Portfolio series of capital stock are hereby changed to Class
Y Shares of such series or portfolio.
(B) The name and designation of the Class B Shares of the
Government Portfolio series of capital stock are hereby changed to Class
C Shares of such series or portfolio.
SECOND: The amendment does not change the outstanding capital
stock of the Corporation or the aggregate par value thereof.
THIRD: The foregoing amendment to the Charter of the Corporation
has been approved by the Board of Directors and is limited to changes
expressly permitted by Section 2-605 of the Maryland General Corporation
Law.
FOURTH: The Corporation is registered as an open-end investment
company under the Investment Company Act of 1940.
IN WITNESS WHEREOF, the Corporation has caused these presents to
be signed in its name and on its behalf by its Chairman of the Board and
witnessed by its Secretary on this 3rd day of November, 1994.
Attest: SMITH BARNEY MONEY FUNDS, INC.
_________________________ By:
____________________________
Christina T. Sydor Stephen J. Treadway
Secretary Chairman of the Board
THE UNDERSIGNED, the Chairman of the Board of Smith Barney Money
Funds, Inc. who executed on behalf of the Corporation the foregoing
Articles of Amendment of which this certificate is made a part, hereby
acknowledges in the name and on behalf of the Corporation the foregoing
Articles
of Amendment to be the corporate act of the Corporation and hereby
certifies to the best of his knowledge, information and belief the
matters and facts set forth herein with respect to the authorization and
approval thereof are true in all material respects under the penalties
of perjury.
_____________________________
Stephen J. Treadway
Chairman of the Board
SMITH BARNEY MONEY FUNDS, INC.
ARTICLES SUPPLEMENTARY
INCREASING AUTHORIZED STOCK
AS AUTHORIZED BY SECTION 2-105(c) OF
THE MARYLAND GENERAL CORPORATION LAW
Smith Barney Money Funds, Inc., a Maryland corporation, having its
principal office in Baltimore City, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments
and Taxation of Maryland that:
FIRST: In accordance with Section 2-105(c) of the Maryland
General Corporation Law, the Board of Directors has increased the
authorized capital stock of (1) the Cash Portfolio series of the
Corporation to 25,000,000,000 shares of Common Stock (par value $.01 per
share); (2) the Government Portfolio series of the Corporation to
10,000,000,000 shares of Common Stock (par value $.01 per share); and
(3) the Retirement Portfolio series of the Corporation to 5,000,000,000
shares of Common Stock (par value $.01 per share).
SECOND: (a) As of immediately before the increase the total
number of shares of stock of: (1) all classes which the Cash Portfolio
series of the Corporation has authority to issue is 4,000,000,000 shares
of Common Stock (par value $.01 per share); (2) all classes which the
Government Portfolio series of the Corporation has authority to issue is
2,000,000,000 shares of Common Stock (par value $.01 per share); and (3)
all classes which the Retirement Portfolio series of the Corporation has
authority to issue is 2,000,000,000 shares of Common Stock (par value
$.01 per share).
(b) As increased the total number of shares of stock of: (1) all
classes which the Cash Portfolio series of the Corporation has authority
to issue is 25,000,000,000 shares of Common Stock (par value $.01 per
share); (2) all classes which the Government Portfolio series of the
Corporation has authority to issue is 10,000,000,000 shares of Common
Stock (par value $.01 per share); and (3) all classes which the
Retirement Portfolio series of the Corporation has authority to issue is
5,000,000,000 shares of Common Stock (par value $.01 per share).
(c) The aggregate par value of: (1) all shares of the Cash
Portfolio having a par value is $40,000,000 before the increase and
$250,000,000 as increased; (2) all shares of the Government
Portfolio having a par value is $20,000,000 before the increase and
$100,000,000 as increased; and (3) all shares of the Retirement
Portfolio having a par value is $20,000,000 before the increase and
$50,000,000 as increased.
THIRD: The Corporation is registered as an open-end investment
company under the Investment Company Act of 1940.
IN WITNESS WHEREOF, the Corporation has caused these presents to
be signed in its name and on its behalf by its Chairman of the Board and
witnessed by its Secretary on this 3rd day of November, 1994.
Attest: SMITH BARNEY MONEY FUNDS, INC.
_________________________ By:
____________________________
Christina T. Sydor Stephen J. Treadway
Secretary Chairman of the Board
THE UNDERSIGNED, the Chairman of the Board of Smith Barney Money
Funds, Inc. who executed on behalf of the Corporation the foregoing
Articles Supplementary of which this certificate is made a part, hereby
acknowledges in the name and on behalf of the Corporation the foregoing
Articles Supplementary to be the corporate act of the Corporation and
hereby certifies to the best of his knowledge, information and belief
the matters and facts set forth herein with respect to the authorization
and approval thereof are true in all material respects under the
penalties of perjury.
_____________________________
Stephen J. Treadway
Chairman of the Board
SMITH BARNEY MONEY FUNDS, INC.
ARTICLES SUPPLEMENTARY
Smith Barney Money Funds, Inc., a Maryland corporation, having its
principal office in Baltimore City, Maryland (the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: Pursuant to the authority of the Board of Directors to
classify and reclassify unissued shares of capital stock of the
Corporation, the Board of Directors has reclassified (1) a portion
of the authorized but unissued shares of capital stock of each of
the "Cash Portfolio" and the "Government Portfolio" into Class Y
shares of capital stock of such series or portfolios, (2) a portion
of the authorized but unissued shares of capital stock of each of
the "Cash Portfolio" and the "Government Portfolio" into Class Z
shares of capital stock of such series or portfolios and (3) a
portion of the authorized but unissued shares of capital stock of
the "Retirement Portfolio" into Class Y shares of capital stock of
such series or portfolio, in each case having the preferences,
conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications or terms or conditions
of redemption of such shares as contained in the charter and as
supplemented by the provisions hereinafter set forth.
SECOND: All Classes of any series or portfolio of Common Stock of
the Corporation shall represent the same interest in the
Corporation and have identical preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends,
qualifications or terms or conditions of redemption as any other
shares of Common Stock of that series or portfolio; provided,
however, that notwithstanding anything in the charter of the
Corporation to the contrary:
(1) The Class A shares, Class C shares, Class Y shares and
Class Z shares of each series or portfolio shall be subject
to such front-end sales loads or such contingent deferred
sales charges as may be established by the Board of Directors
from time to time in accordance with the Investment Company
Act of 1940 (the "Investment Company Act") and applicable
rules and regulations of the National Association of
Securities Dealers, Inc. (the "NASD") and set forth in the
then current prospectus for such shares;
(2) Expenses related solely to a particular Class of a series
or portfolio (including, without limitation, distribution
expenses under a Rule 12b-1 plan and administrative expenses
under an administration or service agreement, plan or other
arrangement, however designated, which may differ among the
various Classes) shall be borne by that Class and shall be
appropriately reflected (in the manner determined by the
Board of Directors) in the net asset value, dividends,
distribution and liquidation of that Class;
(3) At such time as may be determined by the Board of
Directors in accordance with the Investment Company Act and
applicable rules and regulations of the NASD and reflected in
the current registration statement relating to a series or
portfolio, shares of a particular Class of a series or
portfolio may be automatically converted into shares of
another Class; provided, however, that such conversion shall
be subject to the continuing availability of an opinion of
counsel to the effect that such conversion does not
constitute a taxable event under federal income tax law and
shall otherwise be in accordance with the Investment Company
Act. The Board of Directors, in its sole discretion, may
suspend any conversion rights if such opinion is no longer
available; and
(4) As to any matter with respect to which a separate vote of
any Class is required by the Investment Company Act or by the
Maryland General Corporation Law (including without
limitation, approval of any plan, agreement or other
arrangement referred to in subsection (2) of this Article
SECOND), such requirement as to a separate vote by the Class
shall apply in lieu of single class voting, and, if permitted
by the Investment Company Act or any rules, regulations, or
order thereunder and the Maryland General Corporation Law,
the Classes of more than one series or portfolio shall vote
together as a single Class on any such matter which shall
have the same effect on each such Class. As to any matter
that does not affect the interest of a particular Class, only
the holders of shares of the affected Classes shall be
entitled to vote.
THIRD: After giving effect to the reclassification of shares
herein provided for, the Cash Portfolio has been divided into four
classes of shares, designated Class A, Class C, Class Y and Class
Z, and each consisting, until further changed, of the lesser of (x)
25,000,000,000 shares or (y) the number of shares that could be
issued by issuing all of the shares of Common Stock of that series
or portfolio less the total number of shares of all other classes
of Common Stock of that series or portfolio then issued and
outstanding.
FOURTH: After giving effect to the reclassification of shares
herein provided for, the Government Portfolio has been divided into
four classes of shares, designated Class A, Class C, Class Y and
Class Z, and each consisting, until further changed, of the lesser
of (x) 10,000,000,000 shares or (y) the number of shares that could
be issued by issuing all of the shares of Common Stock of that
series or portfolio less the total number of shares of all other
classes of Common Stock of that series or portfolio then issued and
outstanding.
FIFTH: After giving effect to the reclassification of shares
herein provided for, the Retirement Portfolio has been divided into
two classes of shares, designated Class A and Class Y, and each
consisting, until further changed, of the lesser of (x)
5,000,000,000 shares or (y) the number of shares that could be
issued by issuing all of the shares of Common Stock of that series
or portfolio less the total number of shares of all other classes
of Common Stock of that series or portfolio then issued and
outstanding.
SIXTH: These Articles Supplementary do not change the outstanding
capital stock of the Corporation or the aggregate par value
thereof.
IN WITNESS WHEREOF, the Corporation has caused these presents to be
signed in its name and on its behalf by its Chairman of the Board and
witnessed by its Secretary on this 3rd day of November, 1994.
WITNESS: SMITH BARNEY MONEY FUNDS, INC.
By:
Christina T. Sydor Stephen J. Treadway
Secretary Chairman of the Board
THE UNDERSIGNED, the Chairman of the Board of Smith Barney Money
Funds, Inc., who executed on behalf of the Corporation the foregoing
Articles Supplementary of which this certificate is made a part, hereby
acknowledges in the name and on behalf of said Corporation the foregoing
Articles Supplementary to be the corporate act of the Corporation and
hereby certifies to the best of his knowledge, information and belief the
matters and facts set forth herein with respect to the authorization and
approval thereof are true in all material respects under the penalties of
perjury.
Stephen J. Treadway
Chairman of the Board
U:\sorrenti\sbm\artsupp.N94
SMITH BARNEY MONEY FUNDS, INC.
ARTICLES SUPPLEMENTARY
INCREASING AUTHORIZED STOCK
AS AUTHORIZED BY SECTION 2-105(c) OF
THE MARYLAND GENERAL CORPORATION LAW
Smith Barney Money Funds, Inc., a Maryland corporation, having its
principal office in Baltimore City, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments
and Taxation of Maryland that:
FIRST: The Corporation is registered as an open-end investment
company under the Investment Company Act of 1940.
SECOND: In accordance with Section 2-105(c) of the Maryland
General Corporation Law, the Board of Directors has increased the
authorized capital stock of the Corporation to 55,000,000,000 shares of
Common Stock (par value $.01 per share).
THIRD: (a) As of immediately before the increase the total number
of shares of stock of all classes which the Corporation had authority to
issue was 40,000,000,000 shares, of which no shares were Preferred Stock
and 40,000,000,000 shares were Common Stock (par value $.01 per share),
divided into three series designated as the Cash Portfolio series, the
Government Portfolio series and the Retirement Portfolio series. The
Cash Portfolio series consisted of four classes of shares, designated
Class A, Class C, Class Y and Class Z, each such class consisting, until
further changed, of the lesser of (x) 25,000,000,000 shares or (y) the
number of shares that could be issued by issuing all of the shares of
Common Stock of that series or portfolio less the total number of shares
of all other classes of Common Stock of that series or portfolio then
issued and outstanding. The Government Portfolio series consisted of
four classes of shares, designated Class A, Class C, Class Y and Class Z
shares, each such class consisting, until further changed, of the lesser
of (x) 10,000,000,000 shares or (y) the number of shares that could be
issued by issuing all of the shares of Common Stock of that series or
portfolio less the total number of shares of all other classes of Common
Stock of that series or portfolio then issued and outstanding. The
Retirement Portfolio series consisted of two classes of shares,
designated Class A and Class Y shares, each such class consisting, until
further changed, of the lesser of (x) 5,000,000,000 shares or (y) the
number of shares that could be issued by issuing all of the shares of
Common Stock of that series or portfolio less the total number of shares
of all other classes of Common Stock of that series or portfolio then
issued and outstanding.
(b) As increased the total number of shares of stock of all
classes which the Corporation has authority to issue is 55,000,000,000
shares, of which no shares are Preferred Stock and 55,000,000,000 shares
are Common Stock (par value $.01 per share), which shall consist, until
further changed of the Cash Portfolio series, the Government Portfolio
series and the Retirement Portfolio series. The Cash Portfolio series
consists of four classes of shares, designated Class A, Class C, Class Y
and Class Z, each such class consisting, until further changed, of the
lesser of (x) 40,000,000,000 shares or (y) the number of shares that
could be issued by issuing all of the shares of Common Stock of that
series or portfolio less the total number of shares of all other classes
of Common Stock of that series or portfolio then issued and outstanding.
The Government Portfolio series consists of four classes of shares,
designated Class A, Class C, Class Y and Class Z shares, each such class
consisting, until further changed, of the lesser of (x) 10,000,000,000
shares or (y) the number of shares that could be issued by issuing all of
the shares of Common Stock of that series or portfolio less the total
number of shares of all other classes of Common Stock of that series or
portfolio then issued and outstanding. The Retirement Portfolio series
consists of two classes of shares, designated Class A and Class Y shares,
each such class consisting, until further changed, of the lesser of (x)
5,000,000,000 shares or (y) the number of shares that could be issued by
issuing all of the shares of Common Stock of that series or portfolio
less the total number of shares of all other classes of Common Stock of
that series or portfolio then issued and outstanding.
(c) The aggregate par value of all shares of the Corporation
having a par value is $400,000,000 before the increase and $550,000,000
as increased.
FOURTH: The terms of the Class A, Class C, Class Y and Class Z
shares of the Cash Portfolio series are set forth in the Charter of the
Corporation. The terms of the Class A, Class C, Class Y and Class Z
shares of the Government Portfolio series are set forth in the Charter of
the Corporation. The terms of the Class A and Class Y shares of the
Retirement Portfolio series are set forth in the Charter of the
Corporation.
IN WITNESS WHEREOF, Smith Barney Money Funds, Inc. has caused
these presents to be signed in its name and on its behalf by its Chairman
of the Board and witnessed by its Secretary on this 17th day of January,
1996.
Attest: SMITH BARNEY MONEY FUNDS, INC.
_________________________ By:
____________________________
Christina T. Sydor Heath B. McLendon
Secretary Chairman of the Board
THE UNDERSIGNED, the Chairman of the Board of Smith Barney Money
Funds, Inc. who executed on behalf of the Corporation the foregoing
Articles Supplementary of which this certificate is made a part, hereby
acknowledges in the name and on behalf of the Corporation the foregoing
Articles Supplementary to be the corporate act of the Corporation and
hereby certifies to the best of his knowledge, information and belief the
matters and facts set forth therein with respect to the authorization and
approval thereof are true in all material respects under the penalties of
perjury.
_____________________________
Heath B. McLendon
Chairman of the Board
g:\funds\smfi\misc\artsupp.J96
As amended through 3/3/95
and restated as of 9/10/97
SMITH BARNEY MONEY FUNDS, INC.
(formerly NATIONAL LIQUID RESERVES, INC.)
* * * * *
B Y - L A W S
* * * * *
ARTICLE I
OFFICES
Section 1. The principal office shall be in the City of
Baltimore, State of Maryland.
Section 2. The corporation may also have offices at such other
places both within and without the state of Maryland as the board of
directors may from time to time determine or the business of the
corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of stockholders shall be held at the
office of the corporation in New York City, State of New York. Meetings
may be held at the principal office in this State or at such other place
within the United States as designated in the by-laws or fixed by the
Board of Directors pursuant to the by-laws.
Section 2. Annual Meeting. The annual meeting of stockholders
of the Corporation for the election of directors and for the transaction
of such other business as may properly be brought before the meeting
shall be held on such day in each year as shall be designated annually
by the Board of Directors; provided however, that an annual meeting of
stockholders shall not be required to be held in any year in which none
of the following is required to be acted on by stockholders pursuant to
the Investment Company Act of 1940: election of directors; approval of
the management agreement; ratification of the selection of independent
public accountants; and approval of a distribution agreement.
Section 3. At any time in the interval between annual meetings
special meetings of the stockholders may be called by the board of
directors, or by the president, a vice-president, the secretary, or an
assistant secretary.
Section 4. Special meetings of stockholders shall be called by
the secretary upon the written request of the holders of shares entitled
to not less than twenty-five percent of all the votes entitled to be
cast at such meeting. Such request shall state the purpose or purposes
of such meeting and the matters proposed to be acted on thereat. The
secretary shall inform such stockholders of the reasonably estimated
cost of preparing and mailing such notice of the meeting, and upon
payment to the corporation of such costs the secretary shall give notice
stating the purpose or purposes of the meeting to all stockholders
entitled to vote at such meeting. No special meeting need be called
upon the request of the holders of shares entitled to cast less than a
majority of all votes entitled to be cast at such meeting, to consider
any matter which is substantially the same as a matter voted upon at any
special meeting of the stockholders held during the preceding twelve
months.
Section 5. Not less than ten nor more than ninety days before
the date of every stockholders' meeting, the secretary shall give to
each stockholder entitled to vote at such meeting, and to each
stockholder not entitled to vote who is entitled by statute to notice,
written or printed notice stating the time and place of the meeting and,
in the case of a special meeting, the purpose or purposes for which the
meeting is called, either by mail or by presenting it to him personally
or by leaving it at his residence or usual place of business. If
mailed, such notice shall be deemed to be given when deposited in the
United States mail addressed to the stockholder at his post-office
address as it appears on the records of the corporation, with postage
thereon prepaid.
Section 6. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
Section 7. At any meeting of stockholders the presence in person
or by proxy of stockholders entitled to cast a majority of the votes
thereat shall constitute a quorum; but this section shall not affect any
requirement under the statute or under the charter for the vote
necessary for the adoption of any measure.
Section 8. A majority of the votes cast at a meeting of
stockholders, duly called and at which a quorum is present, shall be
sufficient to take or authorize action upon any matter which may
properly come before the meeting, unless more than a majority of the
votes cast is required by the statute or by the charter.
Section 9. Each outstanding share of stock having voting power
shall be entitled to one vote on each matter submitted to vote at a
meeting of stockholders; but no share shall be entitled to vote if any
installment payable thereon is overdue and unpaid. A stockholder may
vote the shares owned of record by him either in person or by proxy
executed in writing by the stockholder or by his duly authorized
attorney-in-fact. No proxy shall be valid after eleven months from its
date, unless otherwise provided in the proxy. At all meetings of
stockholders, unless the voting is conducted by inspectors, all
questions relating to the qualification of voters and the validity of
proxies and the acceptance or rejection of votes shall be decided by the
chairman of the meeting.
Section 10. A meeting of stockholders convened on the date for
which it was called may be adjourned as permitted by Maryland Law. If a
quorum shall not be present or represented at such meeting of
stockholders, a majority of the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn
the meeting. At any adjourned session of a meeting which a quorum shall
be present or represented any business may be transacted that might have
been transacted at the meeting as originally noticed.
Section 11. Any action required or permitted to be taken at any
meeting of stockholders may be taken without a meeting, if a consent in
writing, setting forth such action, is signed by all the stockholders
entitled to vote on the subject matter thereof and any other
stockholders entitled to notice of a meeting of stockholders (but not to
vote thereat) have waived in writing any rights which they may have to
dissent from such action, and such consent and waiver are filed with the
records of the corporation.
ARTICLE III
DIRECTORS
Section 1. The number of directors of the corporation shall be
ten. By vote of a majority of the entire board of directors, the number
of directors fixed by the charter or by these by-laws may be increased
or decreased from time to time not exceeding 15 nor less than 3, but the
tenure of office of a director shall not be affected by any decrease in
the number of directors so made by the board. Until the first annual
meeting of stockholders or until successors are duly elected and
qualify, the board shall consist of the persons named as such in the
charter. At the first annual meeting of stockholders and at each annual
meeting thereafter, the stockholders shall elect directors to hold
office until the next annual meeting or until their successors are
elected and qualify. Directors need not be stockholders in the
corporation.
Section 2. Any vacancy occurring in the board of directors for
any cause other than by reason of an increase in the number of directors
may be filled by a majority of the remaining members of the board of
directors, although such majority is less than a quorum. Any vacancy
occurring by reason of an increase in the number of directors may be
filled by action of a majority of the entire board of directors. A
director elected by the board of directors to fill a vacancy shall be
elected to hold office until the next annual meeting of stockholders or
until his successor is elected and qualifies.
Section 3. The business and affairs of the corporation shall be
managed by its board of directors, which may exercise all of the powers
of the corporation, except such as are by law or by the charter or by
these by-laws conferred upon or reserved to the stockholders.
Section 4. At any meeting of stockholders, duly called and at
which a quorum is present, the stockholders may, by the affirmative vote
of the holders of a majority of the votes entitled to be cast thereon,
remove any director or directors from office and may elect a successor
or successors to fill any resulting vacancies for the unexpired terms of
removed directors.
MEETINGS OF THE BOARD OF DIRECTORS
Section 5. Meetings of the board of directors, regular or
special, may be held at any place in or out of the State of Maryland as
the board may from time to time determine.
Section 6. The first meeting of each newly elected board of
directors shall be held at such time and place as shall be fixed by the
vote of the stockholders at the annual meeting, and no notice of such
meeting shall be necessary to the newly elected directors in order
legally to constitute the meeting, provided a quorum shall be present.
In the event of the failure of the stockholders to fix the time or place
of such first meeting of the newly elected board of directors, or in the
event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings
of the board of directors, or as shall be specified in a written waiver
signed by all of the directors.
Section 7. Regular meetings of the board of directors may be
held without notice at such time and place as shall from time to time be
determined by the board of directors.
Section 8. Special meetings of the board of directors may be
called at any time by the board of directors or the executive committee,
if one be constituted, by vote at a meeting, or by the president or by a
majority of the directors or a majority of the members of the executive
committee in writing with or without a meeting. Special meetings may be
held at such place or places within or without Maryland as may be
designated from time to time by the board of directors; in the absence
of such designation such meeting shall be held at such places as may be
designated in the call.
Section 9. Notice of the place and time of every special meeting
of the board of directors shall be served on each director or sent to
him by telegraph or by mail, or by leaving the same at his residence or
usual place of business at least two days before the date of the
meeting. If mailed, such notice shall be deemed to be given when
deposited in the United States mail addressed to the director at his
post-office address as it appears on the records of the corporation,
with postage thereon prepaid.
Section 10. At all meetings of the board a majority of the
entire board of directors shall constitute a quorum for the transaction
of business and the action of a majority of the directors present at any
meeting at which a quorum is present shall be the action of the board of
directors unless the concurrence of a greater proportion is required for
such action by statute, the articles of incorporation or these by-laws.
If a quorum shall not be present at any meeting of directors, the
directors present thereat may by a majority vote adjourn the meeting
from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 11. Any action required or permitted to be taken at any
meeting of the board of directors or of any committee thereof may be
taken without a meeting, if a written consent to such action is signed
by all members of the board or of such committee, as the case may be,
and such written consent is filed with the minutes of proceedings of the
board or committee.
COMMITTEES OF DIRECTORS
Section 12. The board of directors may appoint from among its
members an executive committee and other committees composed of two or
more directors, and may delegate to such committees, in the intervals
between meetings of the board of directors, any or all of the powers of
the board of directors in the management of the business and affairs of
the corporation, except the power to declare dividends, to issue stock
or to recommend to stockholders any action requiring stockholders'
approval. In the absence of any member of any such committee, the
members thereof present at any meeting, whether or not they constitute a
quorum, may appoint a member of the board of directors to act in the
place of such absent members.
Section 13. The committees shall keep minutes of their
proceedings and shall report the same to the board of directors at the
meeting next succeeding, and any action by the committees shall be
subject to revision and alteration by the board of directors, provided
that no rights of third persons shall be affected by any such revision
or alteration.
COMPENSATION OF DIRECTORS
Section 14. Directors may receive compensation for services to
the corporation in their capacities as directors or otherwise in such
manner and in such amounts as may be fixed from
time to time by the board of directors.
ARTICLE IV
NOTICES
Section 1. Notices to directors and stockholders shall be in
writing and delivered personally or mailed to the directors or
stockholders at their addresses appearing on the books of the
corporation. Notice by mail shall be deemed to be given at the time
when the same shall be mailed. In the case of stockholders' meetings
the notice may be left at the stockholders residence or usual place of
business. Notice to directors may also be given by telegram.
Section 2. Whenever any notice of the time, place or purpose of
any meeting of stockholders, directors or committee is required to be
given under the provisions of the statute or under the provisions of the
charter or these bylaws, a waiver thereof in writing, signed by the
person or persons entitled to such notice and filed with the records of
the meeting, whether before or after the holding thereof, or actual
attendance at the meeting stockholders in person or by proxy or at the
meeting of directors or committee in person, shall be deemed equivalent
to the giving of such notice to such persons.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by
the board of directors and shall be a president, a vice-president, a
secretary and a treasurer. The president shall be selected from among
the directors. The board of directors may also choose additional vice-
presidents, and one or more assistant secretaries and assistant
treasurers. Two or more offices, except those of president and vice-
president, may be held by the same person but no officer shall execute,
acknowledge or verify any instrument in more than one capacity, if such
instrument is required by law, the charter or these by-laws to be
executed, acknowledged or verified by two or more officers.
Section 2. The board of directors at its first meeting after
each annual meeting of stockholders shall choose a president from among
the directors, and shall choose one or more vice-presidents, a secretary
and a treasurer, none of whom need be a member of the board.
Section 3. The board of directors may appoint such other
officials and agents as it shall deem necessary, who shall hold their
offices for such terms and shall exercise such powers and perform such
duties as shall be determined from time to time by the board.
Section 4. The salaries of all officers and agents of the
corporation shall be fixed by the board of directors.
Section 5. The officers of the corporation shall serve for one
year and until their successors are chosen and qualify. Any officer or
agent may be removed by the board of directors whenever, in its
judgment, the best interests of the corporation will be served thereby,
but such removal shall be without prejudice to the contractual rights,
if any, of the person so removed. If the office of any officer becomes
vacant for any reason, the vacancy shall be filled by the board of
directors.
THE PRESIDENT
Section 6. The president shall be the chief executive officer of
the corporation; he shall preside at all meetings of the stockholders
and directors, shall have general and active management of the business
of the corporation, and shall see that all orders and resolutions of the
board are carried into effect.
Section 7. He shall execute in the corporate name all authorized
deeds, mortgages, bonds, contracts or other instruments requiring a
seal, under the seal of the corporation, except in cases in which the
signing or execution thereof shall be expressly delegated by the board
of directors to some other officer or agent of the corporation.
VICE-PRESIDENTS
Section 8. The vice-president, or if there shall be more than
one, the vice-presidents in the order determined by the board of
directors, shall, in the absence or disability of the president, perform
the duties and exercise the powers of the president, and shall perform
such other duties and have such other powers as the board of directors
may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 9. The secretary shall attend all meetings of the board
of directors and all meetings of the stockholders and record all the
proceedings of the meetings of the corporation and of the board of
directors in a book to be kept for that purpose and shall perform like
duties for the standing committees when required. He shall give, or
cause to be given, notice of all meetings of the stockholders and
special meetings of the board of directors, and shall perform such other
duties as may be prescribed by the board of directors or president,
under whose supervision he shall be. He shall keep in safe custody the
seal of the corporation and, when authorized by the board of directors,
affix the same to any instrument requiring it and, when so affixed, it
shall be attested by this signature or by the signature of an assistant
secretary.
Section 10. The assistant secretary, or if there be more than
one, the assistant secretaries in the order determined by the board of
directors, shall, in the absence or disability of the secretary, perform
the duties and exercise the powers of the secretary and shall perform
such other duties and have such other powers as the board of directors
may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts
of receipts and disbursements in books belonging to the corporation and
shall deposit all moneys and other valuable effects in the name and to
the credit of the corporation in such depositories as may be designated
by the board of directors.
Section 12. He shall disburse the funds of the corporation as
may be ordered by the board of directors, taking proper vouchers for
such disbursements, and shall render to the president and the board of
directors, at its regular meetings, or when the board of directors so
requires an account of all his transactions as treasurer and of the
financial condition of the corporation.
Section 13. If required by the board of directors, he shall give
the corporation a bond in such sum and with such surety or sureties as
shall be satisfactory to the board for the faithful performance of the
duties of his office and for the restoration to the corporation, in case
of his death, resignation, retirement or removal from office, of all
books, papers, vouchers, money and other property of whatever kind in
his possession or under his control belonging to the corporation.
Section 14. The assistant treasurer, or if there shall be more
than one, the assistant treasurers in the order determined by the board
of directors, shall, in the absence or disability of the treasurer,
perform the duties and exercise the powers of the treasurer and shall
perform such other duties and have such other powers as the board of
directors may from time to time prescribe.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Each stockholder shall be entitled to a certificate
or certificates which shall represent and certify the number and kind of
class of shares owned by him in the corporation. Each certificate shall
be signed by the president or a vice-president and countersigned by the
secretary or an assistant secretary or the treasurer or an assistant
treasurer or an assistant treasurer and may be sealed with the corporate
seal.
Section 2. The signatures may be either manual or facsimile
signatures and the seal may be either facsimile or any other form of
seal. In case any officer who as signed any certificate ceases to be an
officer of the corporation before the certificates is issued, the
certificate may nevertheless be issued by corporation with the same
effect as if the officer had not ceased to be such officer as of the
date of its issue. Every certificate representing stock issued by a
corporation which is authorized to issue stock of more than one class
shall set forth upon the face or back of the certificate, a full
statement or summary of the designations, preferences, limitations, and
relative rights of the shares of each class authorized to be issued and,
if the corporation is authorized to issue any preferred or special class
in series, the variations in the relative rights and preferences between
the shares of each such series so far as the same have been fixed and
determined and the authority of the board of directors to fix and
determine the relative rights and preferences of subsequent series. A
summary of such information included in a registration statement
permitted to become effective under the Federal Securities Act of 1933,
as now or hereafter amended, shall be acceptable summary for the
purposes of this section. In lieu of such full statement or summary,
there may be set forth upon the face or back of the certificate a
statement that the corporation will furnish to any stockholder upon
request and without charge, a full statement of such information. Every
certificate representing shares which are restricted or limited as to
transferability by the corporation issuing such shares shall either (i)
set forth upon the face or back of the certificate a full statement of
such restriction or limitation or (ii) state that the corporation will
furnish such a statement upon request and without charge to any holder
of such shares. No certificate shall be issued for any share of stock
until such share is full [sic] paid.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate
or certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been stolen, lost
or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be stolen, lost or destroyed. When
authorizing such issue of a new certificate or certificates, the board
of directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such stolen, lost or destroyed
certificate or certificates, or his legal representative, to advertise
the same in such manner as it shall require and to give the corporation
a bond, with sufficient surety, to the corporation to indemnify it
against any loss or claim which may arise by reason of the issuance of a
new certificate.
TRANSFERS OF STOCK
Section 4. Upon surrender to the corporation or the transfer
agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new
certificate to the person entitled thereto, cancel the old certificate
and record the transaction upon its books.
RECORD DATE
Section 5. The board of directors may fix, in advance, a date as
the record date for the purpose of determining stockholders entitled to
notice of, or to vote at, any meeting of stockholders, or stockholders
entitled to receive payment of any dividend or the allotment of any
rights, or in order to make a determination of stockholders for any
other proper purpose. Such date, in any case, shall be not more than
sixty days, and in case of a meeting of stockholders not less than ten
days, prior to the date on which the particular action requiring such
determination of stockholders is to be taken.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of
shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the
owner of shares, and shall not be bound to recognize any equitable or
other claim to or interest in such shares on the part of any other
person, whether or not it shall have express or other notice thereof,
except as otherwise provided by the laws of Maryland.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation,
subject to the provisions of the articles of incorporation, if any, may
be declared by the board of directors at any regular or special meeting,
pursuant to law. Dividends may be paid in cash, in property, or in its
own shares, subject to the provisions of the statute and of the articles
of incorporation.
Section 2. Before payment of any dividend, there may be set
aside out of any funds of the corporation available for dividends such
sum or sums as the directors from time to time, in their absolute
discretion, think proper as a reserve fund to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property the
corporation, or for such other purpose as the directors shall think
conducive to the interests of the corporation, and the directors may
modify or abolish any such reserve in the manner in which it was
created.
ANNUAL STATEMENT
Section 3. The president or a vice-president or the treasurer
shall prepare or cause to be prepared annually a full and correct
statement of the affairs of the corporation, including a balance sheet
and a financial statement of operations for the preceding fiscal year,
which shall be submitted at the annual meeting and shall be filed within
twenty days filed within twenty days thereafter at the principal office
of the corporation in the State of Maryland.
CHECKS
Section 4. All checks, drafts, and orders for the payment of
money, notes and other evidences of indebtedness, issued in the name of
the corporation shall be signed by such officer or officers as the board
of directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall be fixed by
resolution of the board of directors.
SEAL
Section 6. The corporate seal shall have inscribed thereon the
name of the corporation, the year of its organization and the words
"Corporate Seal, Maryland." The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
STOCK LEDGER
Section 7. The corporation shall maintain at Provident Financial
Processing Corporation, Wilmington, Delaware an original stock ledger
containing the names and addresses of all stockholders and the number of
shares of each class held by each stockholder. Such stock ledger may be
in written form or any other form capable of being converted into
written form within a reasonable time for visual inspection.
ARTICLE VIII
AMENDMENTS
Section 1. The board of directors shall have the power, at any
regular meeting or at any special meeting if notice thereof be included
in the notice of such special meeting, to alter or repeal any by-laws of
the corporation and to make new by-laws, except that the board of
directors shall not alter or repeal any by-laws made by the
stockholders.
Section 2. The stockholders shall have the power, at any annual
meeting or at any special meeting if notice thereof be included in the
notice of such special meeting, to alter or repeal any by-laws of the
corporation and to make new by-laws.
14
u:\legal\funds\smfi\orgdocs\By-laws
September 9, 1997
Smith Barney Money Funds, Inc.
388 Greenwich Street,
New York, New York 10013.
Dear Sirs:
In connection with the registration under the Securities Act of
1933 (the "Act") of shares (the "Shares") of Common Stock,
par value $.01 per share, of Smith Barney Money Funds, Inc., a
Maryland Corporation (the "Company"), we, as your counsel, have examined
such corporate records, certificates and other documents, and such questions of
law, as we have considered necessary or appropriate for the purposes of this
opinion.
Upon the basis of such examination, we advise you that, in our
opinion, when not more Shares than are authorized by the
Articles of Incorporation but are unissued are issued and sold in
accordance with the Company's
Registration Statement on Form N-14 (File No. 333-31761) under the Act in
connection with the acquisition by the Company on behalf of the Cash
Portfolio of all or substantially all of the assets, and the assumption of
certain liabilities, of the Income Return Portfolio, a series of
Smith Barney Funds, Inc. and in accordance with the Articles of Incorporation
and By-Laws of the Company, the Shares will be validly issued, fully paid
and nonassessable.
The foregoing opinion is limited to the laws of the General
Corporation Law of the State of Maryland,
and we are expressing no opinion as to the effect of the
laws of any other jurisdiction. With respect to all matters of Maryland
law we have, with your approval, relied upon the opinion dated September 9,
1997 of Piper & Marbury, and our opinion is subject to the same
assumptions, qualifications and limitations with respect to such matters as
are contained in such opinion of Piper & Marbury. We believe you and
we are justified in relying on such opinion for such matters.
We have relied as to certain matters on information obtained
from public officials, officers of the Company and other sources believed by us
to be responsible.
We hereby consent to the filing of this opinion as an exhibit to
the Company's Registration Statement. In giving such consent, we do not
thereby admit that we are in the category of persons whose consent
is required under Section 7 of the Securities Act of 1933.
Very truly yours,
/s/ Sullivan & Cromwell
Independent Auditors' Consent
To the Shareholders and Board of Directors of
Smith Barney Money Funds, Inc.:
We consent to the use of our reports dated February 5, 1997 and
February 19, 1997 for the Smith Barney Money Funds, Inc. and the Smith
Barney Funds, Inc., respectively, incorporated herein by reference and
to the references to our Firm under the heading "Financial Statements
and Experts" in the Prospectus/Proxy Statement.
KPMG Peat Marwick LLP
New York, New York
September 10, 1997
