<PAGE>
================================================================================
ANNUAL REPORT
================================================================================
1997
1997
1997
1997
1997
Smith Barney
Money Funds, Inc.
---------------------------------------------
December 31, 1997
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.
<PAGE>
==============================
Smith Barney Money Funds, Inc.
==============================
Dear Shareholder:
We are pleased to provide the annual report for the Smith Barney Money Funds,
Inc. for the year ended December 31, 1997. In this report, we summarize the
period's prevailing economic and market conditions and outline our portfolio
strategy. A summary of performance and more detailed financial information can
be found in the appropriate sections that follow.
Performance Summary
The chart below shows the yields for the Cash, Government and Retirement
Portfolios that make up the Smith Barney Money Funds for the seven-day period
ended December 31, 1997.
Smith Barney Money Funds Yields (Class A Shares)
<TABLE>
<CAPTION>
Seven-Day
Portfolio Seven-Day Yield Effective Yield*
================================================================================
<S> <C> <C>
Cash 5.09% 5.22%
Government 5.08% 5.20%
Retirement 5.04% 5.17%
</TABLE>
Please note that your investment in Smith Barney Money Funds is neither insured,
nor guaranteed, by the U.S. government. Moreover, no assurance can be given that
the Smith Barney Money Funds will be able to maintain a stable net asset value
("NAV") of $1.00 per share.
Market Update and Outlook
Despite the recent troubles in the global stock markets, it has been relatively
quiet in the money markets so far this year. The Federal Reserve Board ("Fed")
has stayed patient and has kept its monetary policy relatively unchanged. The
Fed's hands-off approach has helped the U.S. economy to grow moderately while
inflation remains subdued. The Federal Open Market Committee ("FOMC"), a key
committee that sets short-term monetary policy for the Fed, last raised interest
rates in late March 1997. Since then, both long- and short-term interest rates
have traded in a narrow range and investors who were long and fully invested
have been rewarded.
- ----------
* The seven-day effective yield is calculated similarly to the seven-day
yield but, when annualized, the income earned by an investment in the
Portfolio or the Class is assumed to be reinvested. The effective yield
will be slightly higher than the yield because of the compounding effect of
the assumed reinvestment.
1
<PAGE>
Fed Chairman Alan Greenspan recently testified before the Joint Economic
Committee of Congress where he discussed the financial turmoil in Asia and its
possible effects on the U.S. markets. As a result of events in Asia, Greenspan
expects some slowing in U.S. economic growth. In addition, the Fed Chairman
reiterated many points that we have raised throughout the year: namely, that
inflation remains low, labor markets are tight and labor productivity continues
to improve. Greenspan also stated that the U.S. stock market drop of late
October was salutary for the U.S. economy because it could possibly dampen
consumer demand and bring stock valuations back down from their lofty levels.
The U.S. economy is still growing strong. In our view, the key to prolonging the
current expansion is low inflation. However, we have seen a slight pick-up in
labor costs recently. The employment cost index increased 0.8% in the third
quarter, and is running at a 3.0% for the twelve months ended September 1997
versus 2.8% for the comparable period in 1996.
We think that the Asian market crisis should help to keep inflation low.
However, the degree to which it slows the capital spending of U.S. corporations
remains an open question. Weak demand in Asia and a stronger U.S. dollar will
have some modest (although negative) effect on U.S. economic growth in 1998. The
Fed will most likely wait to see the impact of all these events before making
any changes to its monetary policy.
While the outcome of the Asian crisis is still unknown, U.S. leaders, the
International Monetary Fund and the Asian countries involved are working
together to establish reforms that will assist them in stabilizing their
economies. The Asian crisis will put downward pressure on prices of goods as
Korea and Indonesia export goods to the U.S., at cheaper prices. This will keep
prices of U.S. goods low or even reduce prices in order to remain competitive.
This is not a destabilizing force as Chairman Greenspan reiterated in his speech
in early January. He distinguishes between a decline in specific goods price
such as computers, as opposed to sharply sliding real estate and stock prices,
which could cause a deflationary spiral. Chairman Greenspan sees little risk of
deflation because economic growth and consumer demand in the U.S. remain strong.
2
<PAGE>
Investment Strategy
The yield curve remains fairly flat and over the next several months we expect
relatively little interest rate volatility. (The yield curve shows the
difference between short- and long-term yields.) We will continue to invest
across the yield curve if and when we identify good value. We will target the
average maturity for the Cash Portfolio, Government Portfolio and Retirement
Portfolio at 80 days, 70 days and 65 days, respectively.
As you have probably read in various financial papers, major U.S. banks,
brokerage firms and multinational corporations have exposure to Asia. However,
these companies have had several years of excellent profitability and reserve
building among the issuers we purchase for the Portfolios.
We are not anticipating major downgradings in the ratings of any of our issuers.
The Japanese banking system remains in turmoil with major downgradings and some
bankruptcies occurring. Spreads between top European bank certificates of
deposits ("CDs") and Japanese bank CDs have widened by as much as 100 basis
points (1.00%) and are now currently 60 basis points (0.60%). We currently hold
no Japanese bank exposure in the Portfolios.
On a more somber note, we are saddened by the loss of an outstanding physician
and Director of the Fund, Dr. Francis P. Martin. His knowledge and wisdom will
be missed.
In closing, thank you for investing in the Smith Barney Money Funds, Inc. We
look forward to continuing to help you pursue your financial goals.
Sincerely,
/s/ Heath B. McLendon /s/ Phyllis M. Zahorodny
Heath B. McLendon Phyllis M. Zahorodny
Chairman Vice President
January 14, 1998
3
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================
Schedules of Investments December 31, 1997
=================================================================================================
CASH PORTFOLIO
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
=================================================================================================
<S> <C> <C> <C>
U.S. AGENCIES AND INSTRUMENTALITIES -- 4.8%
$ 150,000,000 Federal Farm Credit Bank
matures 1/2/98 5.60% $ 149,999,655
50,000,000 Federal Home Loan Bank
matures 1/30/98 5.50 49,784,513
227,731,000 Federal Home Loan Mortgage Corp.
mature 1/30/98 to 4/8/98 5.50 to 6.00 226,618,218
750,300,000 Federal National Mortgage Corp.
mature 1/5/98 to 6/19/98 5.50 to 6.00 745,031,791
94,300,000 Student Loan Marketing Association
matures 6/10/98 6.00 94,247,502
200,000,000 World Bank
matures 5/7/98 5.60 196,185,000
- -------------------------------------------------------------------------------------------------
TOTAL U.S. AGENCIES AND
INSTRUMENTALITIES
(Cost -- $1,461,866,679) 1,461,866,679
=================================================================================================
MEDIUM TERM NOTES -- 5.8%
50,000,000 Australia and New Zealand Bank
matures 2/19/98 5.70 49,996,463
100,000,000 Bank of America (Illinois)
matures 5/22/98 6.10 99,988,935
245,000,000 Bank of New York
mature 1/15/98 to 5/15/98 5.81 to 6.10 245,009,673
150,000,000 Beta Finance, Inc.
mature 7/15/98 to 11/17/98 5.88 to 5.91 150,000,000
255,000,000 CC USA, Inc.
mature 6/4/98 to 7/17/98 5.90 to 6.00 255,008,519
395,000,000 FCC National Bank
mature 2/4/98 to 6/16/98 5.70 to 6.10 394,979,873
50,000,000 First Chicago Corp.
matures 5/26/98 6.10 49,996,209
50,000,000 First Union National Bank
matures 1/12/98 5.70 50,000,000
85,350,000 Ford Motor Credit Co.
matures 2/26/98 5.86 85,401,368
14,500,000 General Motors Acceptance Corp.
matures 6/8/98 6.10 14,517,119
225,000,000 Merrill Lynch & Co., Inc.
mature 1/15/98 to 7/22/98 5.84 to 5.88 224,998,127
25,000,000 National Bank of Detroit
matures 1/30/98 5.80 24,999,792
50,000,000 NationsBank
matures 3/23/98 5.78 50,000,000
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================
Schedules of Investments (continued) December 31, 1997
=================================================================================================
CASH PORTFOLIO
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
=================================================================================================
<S> <C> <C> <C>
MEDIUM TERM NOTES -- 5.8% (continued)
$ 133,900,000 Westpac
mature 12/11/98 to 12/16/98 5.90% to 5.93% $ 133,883,941
- -------------------------------------------------------------------------------------------------
TOTAL MEDIUM TERM NOTES
(Cost -- $1,828,780,019) 1,828,780,019
=================================================================================================
DOMESTIC CERTIFICATES OF DEPOSIT -- 4.1%
75,000,000 Bank America National Trust Savings
Association matures 5/13/98 5.80 74,986,640
150,000,000 Chase Manhattan Bank
mature 3/23/98 to 4/6/98 5.65 to 5.67 150,000,000
225,000,000 Chase Manhattan Delaware
mature 2/18/98 to 4/6/98 5.65 to 5.75 225,000,000
200,000,000 Harris Trust
matures 1/23/98 5.75 200,000,000
500,000,000 Morgan Guaranty
mature 1/13/98 to 3/17/98 5.76 to 5.95 499,996,577
70,000,000 National Bank of Detroit
mature 1/6/98 to 5/11/98 5.60 to 5.75 69,384,021
50,000,000 NationsBank, NA
matures 1/30/98 5.75 50,000,000
- -------------------------------------------------------------------------------------------------
TOTAL DOMESTIC CERTIFICATES
OF DEPOSIT
(Cost -- $1,269,367,238) 1,269,367,238
=================================================================================================
OTHER CERTIFICATE PROGRAM -- 0.3%
100,000,000 Standard Credit Card Trust Dakota Certificate
Program mature 1/23/98 to 2/20/98
(Cost -- $99,344,140) 5.69 to 5.78 99,344,140
=================================================================================================
TIME DEPOSITS -- 1.7%
50,000,000 Bank America National Trust Savings
Association matures 1/12/98 5.60 50,000,000
236,857,000 First Chicago National Bank
matures 1/2/98 6.75 236,857,000
200,000,000 Republic National Bank of New York
matures 1/2/98 6.75 200,000,000
- -------------------------------------------------------------------------------------------------
TOTAL TIME DEPOSITS
(Cost -- $486,857,000) 486,857,000
=================================================================================================
COMMERCIAL PAPER -- 49.0%
250,000,000 Abbey National North America
mature 1/9/98 to 3/11/98 5.70 to 5.80 248,481,764
200,000,000 ABN AMRO Bank NV
mature 1/12/98 to 4/30/98 5.70 to 5.73 198,644,320
</TABLE>
See Notes to Financial Statements.
5
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================
Schedules of Investments (continued) December 31, 1997
=================================================================================================
CASH PORTFOLIO
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
=================================================================================================
<S> <C> <C> <C>
COMMERCIAL PAPER -- 49.0% (continued)
$ 122,116,000 A.C. Acquisition
mature 1/13/98 to 2/26/98 5.59% to 5.76% $ 121,181,759
10,308,000 AH Robins
matures 3/12/98 5.80 10,229,139
35,000,000 Alliance & Leicester Bank
mature 1/29/98 to 2/26/98 5.63 to 5.65 34,784,167
120,000,000 American Home Products (AC Acquisition)
mature 2/26/98 to 3/13/98 5.67 to 5.80 119,081,947
200,000,000 American Express Credit Corp.
mature 1/26/98 to 4/1/98 5.59 to 5.66 198,228,500
223,445,000 Aspen Funding
mature 3/20/98 to 4/3/98 5.83 to 5.84 220,566,097
457,000,000 Asset Securitization Corp.
mature 1/29/98 to 3/17/98 5.69 to 5.80 453,340,376
350,000,000 Associates Corp. of North America
mature 1/12/98 to 3/18/98 5.59 to 5.76 347,762,264
40,000,000 AT&T Corp.
matures 4/3/98 5.62 39,440,844
50,000,000 Bank Austriengellschaft
matures 2/20/98 5.75 49,606,250
300,000,000 Bank Brussel Lambert
mature 1/7/98 to 5/8/98 5.65 to 5.82 297,553,805
349,000,000 Bank of Montreal
mature 1/22/98 to 2/18/98 5.62 to 5.76 347,005,111
100,000,000 Bank of Nova Scotia
mature 5/7/98 to 6/4/98 5.70 to 5.81 97,823,992
335,000,000 BCI Funding Corp.
mature 1/7/98 to 4/2/98 5.70 to 5.80 332,071,608
110,000,000 Bear, Stearns & Co.
mature 1/16/98 to 2/18/98 5.62 to 5.78 109,454,091
144,500,000 Beta Finance, Inc.
mature 2/18/98 to 3/25/98 5.70 to 5.76 143,122,437
575,000,000 Cades
mature 2/19/98 to 5/7/98 5.63 to 5.75 567,428,688
125,000,000 Cafco
mature 1/16/98 to 2/25/98 5.65 to 5.75 124,235,416
50,000,000 Cariplo Finance Inc.
matures 2/23/98 5.77 49,581,889
25,000,000 CC USA, Inc.
matures 2/12/98 5.76 24,834,334
136,380,000 Centric Capital Corp.
mature 1/14/98 to 1/26/98 5.61 to 5.80 135,992,054
100,000,000 Chase Manhattan Bank Corp.
matures 1/30/98 5.65 99,557,750
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================
Schedules of Investments (continued) December 31, 1997
=================================================================================================
CASH PORTFOLIO
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
=================================================================================================
<S> <C> <C> <C>
COMMERCIAL PAPER -- 49.0% (continued)
$ 100,000,000 Chase Manhattan Bank Corp. USA Delaware
matures 2/12/98 5.65% $ 99,360,667
25,000,000 Ciesco
matures 1/16/98 5.58 24,942,709
290,000,000 CIT Group Holdings, Inc.
mature 1/12/98 to 4/24/98 5.58 to 5.80 286,902,208
220,000,000 Citicorp
matures 2/9/98 5.70 to 5.75 218,674,487
160,000,000 Credito Italiano Delaware, Inc.
mature 1/21/98 to 5/11/98 5.64 to 5.72 158,765,450
50,000,000 Creditanstalt Finance Inc.
matures 3/11/98 5.74 49,458,542
384,600,000 Cregem North America
mature 1/8/98 to 5/7/98 5.65 to 5.77 380,957,814
425,000,000 CXC Inc.
mature 1/12/98 to 4/15/98 5.61 to 5.80 422,840,731
438,000,000 Daimler-Benz North American Corp.
mature 1/23/98 to 4/28/98 5.65 to 5.78 434,038,341
369,753,000 Delaware Funding Corp.
mature 1/23/98 to 3/13/98 5.66 to 5.80 366,616,312
160,000,000 Den Danske Corp.
mature 1/26/98 to 4/6/97 5.65 to 5.77 158,991,375
25,000,000 E.I. du Pont De Nemours
matures 3/26/98 5.66 24,679,167
100,000,000 Eiger Capital
matures 2/20/98 5.90 99,188,889
204,158,000 Enterprise Funding Corp.
mature 1/5/98 to 3/19/98 5.61 to 5.81 203,302,904
115,000,000 Ford Credit Europe PLC
mature 1/9/98 to 4/6/98 5.61 to 5.80 113,880,278
300,000,000 Ford Motor Credit Co.
mature 1/9/98 to 4/3/98 5.59 to 5.63 298,277,694
670,100,000 General Electric Capital Corp.
mature 1/8/98 to 6/1/98 5.59 to 5.82 660,313,445
453,000,000 General Motors Acceptance Corp.
mature 3/23/98 to 5/11/98 5.67 to 5.75 444,600,228
333,000,000 Generale Bank
mature 1/7/98 to 4/6/98 5.65 to 5.74 329,607,484
160,084,000 Glaxo Holdings Inc.
mature 1/6/98 to 3/24/98 5.58 to 5.80 158,498,767
500,000,000 Goldman, Sachs & Co.
mature 2/13/98 to 6/12/98 5.66 to 5.82 491,128,903
275,000,000 Grand Metropolitan Capital Corp.
mature 1/7/98 to 3/31/98 5.63 to 5.78 273,506,181
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================
Schedules of Investments (continued) December 31, 1997
=================================================================================================
CASH PORTFOLIO
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
=================================================================================================
<S> <C> <C> <C>
COMMERCIAL PAPER -- 49.0% (continued)
$ 320,000,000 Halifax Building Society
mature 2/9/98 to 4/3/98 5.63% to 5.78% $ 316,744,283
100,000,000 International Nederlanden US Funding Corp.
mature 3/2/98 to 6/5/98 5.80 to 5.82 98,307,014
25,000,000 JC Penney
matures 3/20/98 5.77 24,692,334
100,000,000 J.P. Morgan & Co.
matures 3/23/98 5.80 98,713,000
40,000,000 Krediet Bank
matures 1/12/98 5.66 39,931,800
345,000,000 Lloyds Bank
mature 1/5/98 to 4/28/98 5.70 to 5.72 343,017,508
100,000,000 Lucent Technologies
matures 2/23/98 5.77 99,160,834
465,000,000 Merrill Lynch & Co. Inc.
mature 1/12/98 to 6/2/98 5.61 to 5.82 459,691,467
690,000,000 Morgan Stanley Dean Witter Discover
mature 1/15/98 to 6/15/98 5.59 to 5.81 680,511,989
200,000,000 National Australia Funding Delaware
matures 2/17/98 5.74 198,522,112
125,000,000 National Bank of Canada Finance USA
mature 2/2/98 to 3/31/98 5.63 to 5.72 123,943,833
300,000,000 NationsBank Corp.
mature 1/12/98 to 3/23/98 5.58 to 5.81 297,226,097
40,000,000 New Center Asset Trust
matures 2/18/98 5.78 39,696,000
120,000,000 Ontario Hydro
mature 2/20/98 to 3/16/98 5.73 to 5.80 118,713,317
97,825,000 Oesterreichische Kontroll Bank
matures 2/27/98 5.84 96,929,739
34,500,000 Panasonic Finance Inc.
matures 3/2/98 5.64 34,183,175
138,110,000 Preferred Receivable Funding Corp.
mature 1/20/98 to 3/5/98 5.79 to 5.81 137,075,927
225,000,000 Rabo Bank
mature 4/1/98 to 4/30/98 5.70 221,214,333
79,775,000 Royal Bank of Canada
matures 4/1/98 5.82 78,634,217
50,000,000 Saint-Gobain Compagnie
matures 6/1/98 5.80 48,817,167
313,000,000 San Paolo US Finance Inc.
mature 1/5/98 to 6/30/98 5.64 to 5.81 309,199,908
250,000,000 Sears & Roebuck Acceptance Corp.
mature 1/12/98 to 3/13/98 5.59 to 5.82 248,303,375
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================
Schedules of Investments (continued) December 31, 1997
=================================================================================================
CASH PORTFOLIO
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
=================================================================================================
<S> <C> <C> <C>
COMMERCIAL PAPER -- 49.0% (continued)
$ 205,000,000 Svenska Handelsbanken
mature 1/27/98 to 5/4/98 5.66% to 5.76% $ 203,101,704
115,251,000 Swedish Export Credit Corp.
mature 4/8/98 to 5/15/98 5.79 to 5.81 113,277,466
125,000,000 Toronto Dominion Holdings USA Inc.
mature 1/7/98 to 1/26/98 5.67 to 5.70 124,662,688
75,000,000 Westdeutsche Landesbank
matures 1/5/98 6.19 74,948,500
300,000,000 Woolwich Bank
mature 1/9/98 to 6/5/98 5.70 to 5.83 297,965,806
- -------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(Cost -- $14,995,726,771) 14,995,726,771
=================================================================================================
FOREIGN CERTIFICATES OF DEPOSIT -- 34.3%
334,000,000 Abbey National PLC
mature 1/14/98 to 5/27/98 5.70 to 6.10 334,004,463
75,000,000 ABN AMRO Bank (Canada)
mature 2/13/98 to 3/5/98 5.66 to 5.75 74,338,871
100,000,000 ABN AMRO Bank (Chicago)
matures 1/22/98 5.81 99,998,899
100,000,000 ABN AMRO Bank (New York)
matures 5/26/98 6.09 99,988,625
165,000,000 ABN AMRO Bank NV
mature 1/9/98 to 5/14/98 5.64 to 5.81 165,002,097
225,000,000 Australia & New Zealand Banking Group
mature 2/12/98 to 4/8/98 5.65 to 5.80 224,987,909
75,000,000 Bank Austriengellschaft
matures 10/29/98 5.80 74,977,246
96,000,000 Bank Brussels Lambert
mature 1/8/98 to 2/20/98 5.65 to 5.77 95,999,933
100,000,000 Bank of Montreal
mature 2/25/98 to 3/25/98 5.75 100,000,000
200,000,000 Bank of Nova Scotia
mature 2/24/98 to 10/1/98 5.75 to 6.10 200,027,177
25,000,000 Banco Santander
matures 2/20/98 5.67 25,001,021
534,000,000 Banque National De Paris
mature 1/14/98 to 7/8/98 5.65 to 6.12 533,988,272
25,000,000 Banque National De Paris (San Francisco)
matures 5/7/98 5.71 25,000,851
500,000,000 Barclays Bank
mature 1/9/98 to 1/23/98 5.59 to 5.81 499,996,442
515,000,000 Bayerische Landesbank
mature 2/18/98 to 7/17/98 5.62 to 5.91 514,980,719
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================
Schedules of Investments (continued) December 31, 1997
=================================================================================================
CASH PORTFOLIO
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
=================================================================================================
<S> <C> <C> <C>
FOREIGN CERTIFICATES OF DEPOSIT -- 34.3% (continued)
$ 440,000,000 Bayerische Vereinsbank
mature 2/19/98 to 10/6/98 5.66% to 5.82% $ 439,985,986
384,000,000 Canadian Imperial Bank Commerce
mature 1/13/98 to 10/6/98 5.75 to 5.95 384,004,185
25,000,000 Cariplo
matures 2/9/98 5.73 25,000,526
460,000,000 Commerzbank
mature 1/6/98 to 8/17/98 5.59 to 6.00 459,994,786
527,000,000 Credit Agricole Indosuez
mature 1/12/98 to 10/7/98 5.61 to 6.00 526,997,010
94,000,000 Credit Suisse
mature 1/5/98 to 1/7/98 5.59 to 5.65 94,000,156
350,000,000 Creditanstalt Bankverein
mature 1/5/98 to 6/9/98 5.60 to 6.10 349,997,362
50,000,000 Credito Italiano
matures 2/19/98 5.80 50,000,671
535,000,000 Deutsche Bank
mature 1/9/98 to 5/27/98 5.64 to 6.10 534,986,367
181,000,000 Dresdner Bank
mature 1/8/98 to 2/19/98 5.73 to 5.75 180,994,517
160,000,000 Generale Bank (New York)
mature 6/18/98 to 7/22/98 5.61 to 5.86 160,027,489
290,000,000 Hessiche Landesbank
mature 1/2/98 to 12/11/98 5.59 to 6.12 289,990,834
253,000,000 International Nederlanden Group
mature 1/13/98 to 3/5/98 5.64 to 5.80 253,006,122
25,000,000 Krediet Bank
matures 1/16/98 5.70 25,000,193
80,000,000 Lloyds Bank
matures 5/11/98 5.70 80,014,269
125,000,000 National Australia Bank
mature 2/20/98 to 5/11/98 5.70 to 5.80 124,999,132
250,000,000 National Bank of Canada
mature 2/10/98 to 12/11/98 5.73 to 6.12 249,988,937
443,000,000 National Westminster Bank PLC
mature 2/20/98 to 5/26/98 5.70 to 6.09 442,767,578
200,000,000 Rabobank
mature 1/14/98 to 7/29/98 5.64 to 5.75 199,992,860
525,000,000 Royal Bank of Canada
mature 1/7/98 to 12/11/98 5.70 to 5.98 524,977,913
600,000,000 Societe Generale (New York)
mature 1/9/98 to 6/5/98 5.64 to 6.10 600,066,105
83,000,000 Svenska Handelsbanken
mature 2/17/98 to 5/12/98 5.70 to 5.76 83,003,898
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================
Schedules of Investments (continued) December 31, 1997
=================================================================================================
CASH PORTFOLIO
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
=================================================================================================
<S> <C> <C> <C>
FOREIGN CERTIFICATES OF DEPOSIT -- 34.3% (continued)
$ 650,000,000 Swiss Bank Corp.
mature 2/17/98 to 5/22/98 5.75% to 6.10% $ 649,996,940
315,000,000 Toronto Dominion Bank
mature 1/8/98 to 4/8/98 5.59 to 5.75 315,003,291
100,000,000 Union Bank of Switzerland
matures 3/5/98 5.80 100,001,724
325,000,000 Westdeutsche Landesbank
mature 2/3/98 to 7/9/98 5.63 to 5.90 325,012,785
- -------------------------------------------------------------------------------------------------
TOTAL FOREIGN CERTIFICATES
OF DEPOSIT
(Cost -- $10,538,104,161) 10,538,104,161
=================================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $30,680,046,008*) $30,680,046,008
=================================================================================================
</TABLE>
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
11
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================
Schedules of Investments (continued) December 31, 1997
=================================================================================================
GOVERNMENT PORTFOLIO
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
=================================================================================================
<S> <C> <C> <C>
U.S. OBLIGATIONS -- 0.6%
$ 30,000,000 U.S. Treasury Notes
mature 3/31/98 to 12/18/98 5.74% to 5.84%
(Cost -- $29,916,960) $ 29,916,960
=================================================================================================
U.S. AGENCIES AND INSTRUMENTALITIES -- 89.5%
124,185,000 Federal Farm Credit Bank
mature 1/2/98 to 5/22/98 5.60 to 5.94 122,887,779
955,129,000 Federal Home Loan Bank
mature 1/15/98 to 12/18/98 5.50 to 5.87 946,616,271
891,736,000 Federal Home Loan Mortgage Corp.
mature 1/23/98 to 6/5/98 5.52 to 5.73 884,168,547
2,244,897,000 Federal National Mortgage Association
mature 1/5/98 to 10/16/98 5.49 to 5.97 2,221,932,302
65,000,000 World Bank
mature 3/16/98 to 6/15/98 5.69 to 5.70 63,903,942
- -------------------------------------------------------------------------------------------------
TOTAL U.S. AGENCIES AND
INSTRUMENTALITIES
(Cost -- $4,239,508,841) 4,239,508,841
=================================================================================================
REPURCHASE AGREEMENTS -- 9.9%
150,000,000 Morgan Guaranty, 6.35% due 1/2/98;
Proceeds at maturity -- $150,052,917;
(Fully collateralized by U.S. Treasury Notes, Bonds &
Bills, 5.00% to 13.375% due 1/31/98 to 11/15/04;
Market value -- $153,000,290) 150,000,000
203,413,000 Morgan Stanley Dean Witter Discover, 6.40% due 1/2/98;
Proceeds at maturity -- $203,485,325;
(Fully collateralized by U.S. Treasury Bonds,
FNMA & FHLB, 0.000% to 14.000% due 5/15/01 to 5/15/20;
Market value -- $207,686,656) 203,413,000
115,000,000 Goldman, Sachs & Co., 6.45% due 1/2/98;
Proceeds at maturity -- $115,041,208;
(Fully collateralized by U.S. Treasury Bond,
6.375% due 8/15/27; Market value -- $117,300,501) 115,000,000
- -------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost -- $468,413,000) 468,413,000
=================================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $4,737,838,801*) $4,737,838,801
=================================================================================================
</TABLE>
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
12
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================
Schedules of Investments (continued) December 31, 1997
=================================================================================================
RETIREMENT PORTFOLIO
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
=================================================================================================
<S> <C> <C> <C>
U.S. AGENCIES AND INSTRUMENTALITIES -- 2.8%
$ 3,000,000 Federal Home Loan Bank
matures 1/22/98 5.66% $ 2,999,898
35,800,000 Federal Home Loan Mortgage Corp.
matures 1/30/98 5.75 35,635,330
- -------------------------------------------------------------------------------------------------
TOTAL U.S. AGENCIES AND
INSTRUMENTALITIES
(Cost -- $38,635,228) 38,635,228
=================================================================================================
DOMESTIC BANK OBLIGATIONS -- 1.3%
18,000,000 FCC National
mature 2/10/98 to 3/25/98
(Cost -- $17,997,820) 5.71 to 6.10 17,997,820
=================================================================================================
DOMESTIC CERTIFICATES OF DEPOSIT -- 1.3%
17,000,000 Morgan Guaranty
mature 1/6/98 to 7/28/98
(Cost -- $16,998,307) 5.83 to 5.83 16,998,307
=================================================================================================
TIME DEPOSITS -- 2.2%
30,000,000 Republic National Bank
matures 1/2/98
(Cost -- $30,000,000) 6.75 30,000,000
=================================================================================================
COMMERCIAL PAPER -- 60.8%
10,000,000 Abbey National PLC
matures 4/27/98 5.70 9,821,167
13,000,000 ABN AMRO Bank (Canada)
matures 1/5/98 5.60 12,995,927
38,000,000 Asset Securitization Corp.
mature 2/18/98 to 3/17/98 5.68 to 5.80 37,636,808
8,000,000 Banca Commerciale Italiana
matures 2/17/98 5.75 7,941,511
24,000,000 Bank of America (New York)
matures 4/28/98 5.76 23,561,640
13,000,000 Bank of New York
matures 3/23/98 5.80 12,832,690
20,000,000 Bell Atlantic Financial Services
matures 1/27/98 5.89 19,915,500
37,000,000 Cades
mature 2/19/98 to 6/10/98 5.73 to 5.87 36,433,171
28,000,000 CAFCO
matures 1/27/98 5.86 27,882,509
25,000,000 Centric Capital Corp.
matures 2/23/98 5.80 24,789,472
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================
Schedules of Investments (continued) December 31, 1997
=================================================================================================
RETIREMENT PORTFOLIO
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
=================================================================================================
<S> <C> <C> <C>
COMMERCIAL PAPER -- 60.8% (continued)
$ 21,000,000 Chase Manhattan Bank Corp.
matures 1/30/98 5.65% $ 20,907,128
15,000,000 Citicorp
matures 2/9/98 5.75 14,909,163
18,000,000 Credit Suisse/First Boston
matures 2/20/98 5.77 17,857,875
24,000,000 Credito Italiano
mature 2/18/98 to 5/21/98 5.72 to 5.80 23,618,800
39,800,000 Cregem North America
mature 2/9/98 to 3/16/98 5.67 to 5.8 39,491,125
35,000,000 Daimler-Benz North America
matures 4/8/98 5.82 34,460,572
10,000,000 Finnish Export Credit Ltd.
matures 7/31/97 5.73 9,674,708
25,000,000 Ford Motor Credit
matures 1/23/98 5.68 24,914,444
40,000,000 General Electric Capital Corp.
mature 3/11/98 to 5/26/98 5.80 to 5.81 39,386,729
12,000,000 Generale Bank
matures 1/22/98 5.66 11,961,115
35,100,000 Goldman, Sachs & Co.
mature 1/30/98 to 5/5/98 5.82 to 5.71 34,792,167
11,000,000 Grand Metropolitan Capital Corp.
matures 3/31/98 5.65 10,850,431
33,000,000 J.P. Morgan & Co.
mature 3/18/98 to 3/23/98 5.8 to 5.80 32,593,565
24,000,000 Lloyds Bank
matures 1/5/98 5.72 23,985,173
15,000,000 Merrill Lynch & Co., Inc.
matures 2/27/98 5.67 14,867,950
20,000,000 Morgan Stanley
matures 1/23/98 5.76 19,930,333
16,000,000 National Bank of Canada
matures 2/2/98 5.62 15,921,493
39,000,000 NationsBank Corp.
mature 2/10/98 to 3/23/98 5.8 to 5.81 38,620,761
35,000,000 Oesterreichische Kontroll Bank
mature 1/14/98 to 2/27/98 5.65 to 5.83 34,823,003
18,000,000 Preferred Receivable Funding
matures 1/20/98 5.93 17,943,950
35,000,000 San Paolo US Finance Inc.
mature 3/17/98 to 6/30/98 5.71 to 5.76 34,369,708
31,900,000 Svenska Handelsbanken
matures 1/30/98 5.64 31,757,123
</TABLE>
See Notes to Financial Statements.
14
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================
Schedules of Investments (continued) December 31, 1997
=================================================================================================
RETIREMENT PORTFOLIO
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
=================================================================================================
<S> <C> <C> <C>
COMMERCIAL PAPER -- 60.8% (continued)
$ 29,900,000 Union Bank of Switzerland
matures 1/2/98 6.75% $ 29,894,394
14,000,000 USAA Capital Corp.
matures 2/26/98 5.83 13,874,342
21,000,000 Woolwich Bank
matures 6/5/98 5.84 20,487,338
- -------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(Cost -- $825,703,785) 825,703,785
=================================================================================================
FOREIGN CERTIFICATES OF DEPOSIT -- 30.5%
15,000,000 Abbey National PLC
matures 4/3/98 5.64 15,002,477
10,000,000 Australia & New Zealand
matures 2/19/98 5.69 10,000,040
21,000,000 Bank of Montreal
matures 2/18/98 5.75 21,000,200
24,000,000 Banque De Paris Nationale
matures 2/3/98 5.66 23,997,698
10,000,000 Barclay's Bank
matures 6/24/98 5.99 9,997,264
27,000,000 Bayerische Landesbank
mature 1/14/98 to 6/3/98 5.67 to 5.68 26,998,507
12,000,000 Canadian Imperial Bank of Commerce
mature 3/19/98 to 8/11/98 5.78 to 5.90 12,000,073
15,000,000 Commerzbank
matures 8/17/98 5.90 14,997,760
21,000,000 Credit Agricole Indosuez
matures 2/17/98 5.72 21,000,799
9,000,000 Credit Suisse
matures 3/3/98 5.77 8,998,911
30,000,000 Creditanstalt Bankverein
matures 3/16/98 5.80 30,000,437
29,900,000 Deutsche Bank
mature 1/9/98 to 4/6/98 5.64 to 5.64 29,900,000
10,000,000 International Nederlanden Group
matures 4/9/98 5.75 10,001,806
20,000,000 National Westminster Bank PLC
matures 1/7/98 5.62 20,000,194
28,900,000 Rabobank
mature 2/3/98 to 3/20/98 5.82 to 6.02 28,894,919
10,000,000 Royal Bank of Canada
matures 6/8/98 6.10 9,997,934
28,000,000 Societe Generale (New York)
matures 1/7/98 to 10/7/98 5.77 to 5.82 27,999,163
</TABLE>
See Notes to Financial Statements.
15
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================
Schedules of Investments (continued) December 31, 1997
=================================================================================================
RETIREMENT PORTFOLIO
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
=================================================================================================
<S> <C> <C> <C>
FOREIGN CERTIFICATES OF DEPOSIT -- 30.5% (continued)
$ 42,000,000 Swiss Bank Corp.
mature 2/12/98 to 5/22/98 5.75% to 6.05% $ 41,998,340
11,000,000 Toronto Dominion
matures 6/3/98 6.00 11,005,595
41,000,000 Westdeutsche Landesbank
matures 3/4/98 5.80 40,999,100
- -------------------------------------------------------------------------------------------------
TOTAL FOREIGN CERTIFICATES
OF DEPOSIT
(Cost -- $414,791,217) 414,791,217
=================================================================================================
REPURCHASE AGREEMENTS -- 1.1%
14,843,000 Morgan Stanley Dean Witter Discover, 6.40% due 1/2/98;
Proceeds at maturity -- $14,848,278; (Fully collateralized
by U.S. Treasury Notes, 7.125% due 10/15/98;
Market value -- $15,143,939) (Cost -- $14,843,000) 14,843,000
=================================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $1,358,969,357*) $ 1,358,969,357
=================================================================================================
</TABLE>
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
16
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================
Statements of Assets and Liabilities December 31, 1997
===================================================================================================================
Cash Government Retirement
Portfolio Portfolio Portfolio
===================================================================================================================
<S> <C> <C> <C>
ASSETS:
Investments, at amortized cost $ 30,680,046,008 $4,737,838,801 $1,358,969,357
Cash 408 313 411
Interest receivable 297,184,092 4,475,751 11,758,247
Receivable from manager 28,596 -- --
Other assets 1,514,778 138,908 102,615
- -------------------------------------------------------------------------------------------------------------------
Total Assets 30,978,773,882 4,742,453,773 1,370,830,630
- -------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Dividends payable 72,721,072 10,808,445 3,160,595
Management fees payable 10,172,155 1,649,525 493,656
Distribution fees payable 972,359 104,721 42,661
Deferred compensation payable 163,146 27,265 10,377
Payable for securities purchased -- 98,673,604 --
Accrued expenses 1,968,118 348,074 3,307
- -------------------------------------------------------------------------------------------------------------------
Total Liabilities 85,996,850 111,611,634 3,710,596
- -------------------------------------------------------------------------------------------------------------------
Total Net Assets $30,892,777,032 $4,630,842,139 $1,367,120,034
===================================================================================================================
NET ASSETS:
Capital Stock
(40,000,000,000,
10,000,000,000, and
5,000,000,000 shares
authorized, respectively;
par value $0.01 per share) $308,936,651 $46,308,255 $13,671,200
Capital paid in excess
of par value 30,584,976,255 4,584,533,884 1,353,448,834
Accumulated net realized loss
from security transactions (1,135,874) -- --
- -------------------------------------------------------------------------------------------------------------------
Total Net Assets $30,892,777,032 $4,630,842,139 $1,367,120,034
===================================================================================================================
Shares Outstanding:
Class A 30,827,660,251 4,571,684,155 1,367,120,034
----------------------------------------------------------------------------------------------------------------
Class C 2,015,872 501,534 --
----------------------------------------------------------------------------------------------------------------
Class Y 63,983,067 7,429,607 --
----------------------------------------------------------------------------------------------------------------
Class Z 5,869 51,210,199 --
----------------------------------------------------------------------------------------------------------------
Net Asset Value, per class $1.00 $1.00 $1.00
===================================================================================================================
</TABLE>
See Notes to Financial Statements.
17
<PAGE>
<TABLE>
<CAPTION>
============================================================================================
Statements of Operations For the Year Ended December 31, 1997
============================================================================================
Cash Government Retirement
Portfolio Portfolio Portfolio
============================================================================================
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $1,681,331,928 $252,681,705 $77,313,170
- --------------------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 3) 117,380,871 19,475,520 5,982,179
Shareholder and system
servicing fees 33,744,537 2,747,659 1,639,792
Distribution fees (Note 3) 29,598,872 4,481,183 1,370,886
Shareholder communications 4,514,806 366,000 297,711
Custody 1,864,067 183,575 67,821
Registration fees 1,715,929 301,665 301,852
Insurance 276,955 44,763 13,653
Directors' fees 208,152 20,000 19,049
Audit and legal 65,765 44,317 27,816
Other 75,659 16,501 3,580
- --------------------------------------------------------------------------------------------
Total Expenses 189,445,613 27,681,183 9,724,339
- --------------------------------------------------------------------------------------------
Net Investment Income 1,491,886,315 225,000,522 67,588,831
- --------------------------------------------------------------------------------------------
Net Realized Gain From
Security Transactions 13,789 1,014 4,875
- --------------------------------------------------------------------------------------------
Increase in Net Assets
From Operations $1,491,900,104 $225,001,536 $67,593,706
============================================================================================
</TABLE>
See Notes to Financial Statements.
18
<PAGE>
<TABLE>
<CAPTION>
==================================================================================
Statements of Changes in Net Assets
==================================================================================
Years Ended December 31,
--------------------------------------
Cash Portfolio 1997 1996
==================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,491,886,315 $ 1,245,706,580
Net realized gain 13,789 282,722
- ----------------------------------------------------------------------------------
Increase in Net Assets From Operations 1,491,900,104 1,245,989,302
- ----------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS (NOTE 2) (1,491,864,232) (1,245,706,580)
- ----------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Proceeds from sale of shares 133,949,259,558 112,463,129,671
Net asset value of shares issued
in connection with the transfer
of net assets of the Smith Barney
Funds, Inc. -- Income Return
Account Portfolio (Note 7) 977,206 --
Net asset value of shares issued
for reinvestment of dividends 1,440,716,985 1,224,522,521
Cost of shares reacquired (131,985,544,414) (109,201,241,036)
- ----------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 3,405,409,335 4,486,411,156
- ----------------------------------------------------------------------------------
Increase in Net Assets 3,405,445,207 4,486,693,878
NET ASSETS:
Beginning of year 27,487,331,825 23,000,637,947
- ----------------------------------------------------------------------------------
End of year $ 30,892,777,032 $ 27,487,331,825
==================================================================================
</TABLE>
See Notes to Financial Statements.
19
<PAGE>
<TABLE>
<CAPTION>
================================================================================
Statements of Changes in Net Assets (continued)
================================================================================
Years Ended December 31,
------------------------------------
Government Portfolio 1997 1996
================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 225,000,522 $ 208,495,636
Net realized gain 1,014 23,025
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations 225,001,536 208,518,661
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS (NOTE 2) (225,001,536) (208,518,661)
- --------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Proceeds from sale of shares 16,950,826,473 16,447,868,058
Net asset value of shares issued
for reinvestment of dividends 218,982,359 207,002,672
Cost of shares reacquired (16,981,687,366) (16,287,630,574)
- --------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 188,121,466 367,240,156
- --------------------------------------------------------------------------------
Increase in Net Assets 188,121,466 367,240,156
NET ASSETS:
Beginning of year 4,442,720,673 4,075,480,517
- --------------------------------------------------------------------------------
End of year $ 4,630,842,139 $ 4,442,720,673
================================================================================
</TABLE>
See Notes to Financial Statements.
20
<PAGE>
<TABLE>
<CAPTION>
================================================================================
Statements of Changes in Net Assets (continued)
================================================================================
Years Ended December 31,
------------------------------------
Retirement Portfolio 1997 1996
===============================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 67,588,831 $ 60,467,590
Net realized gain 4,875 --
- -------------------------------------------------------------------------------
Increase in Net Assets From Operations 67,593,706 60,467,590
- -------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS (NOTE 2) (67,593,706) (60,467,590)
- -------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Proceeds from sale of shares 5,002,210,790 4,577,974,101
Net asset value of shares issued
for reinvestment of dividends 66,161,619 60,304,723
Cost of shares reacquired (5,056,269,867) (4,562,913,860)
- -------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 12,102,542 75,364,964
- -------------------------------------------------------------------------------
Increase in Net Assets 12,102,542 75,364,964
NET ASSETS:
Beginning of year 1,355,017,492 1,279,652,528
- -------------------------------------------------------------------------------
End of year $ 1,367,120,034 $ 1,355,017,492
===============================================================================
</TABLE>
See Notes to Financial Statements.
21
<PAGE>
================================================================================
Notes to Financial Statements
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES
Smith Barney Money Funds, Inc. ("Fund"), a Maryland corporation, is
registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company. The Fund consists of three
separate investment portfolios ("Portfolios"): the Cash Portfolio, the
Government Portfolio and the Retirement Portfolio.
The significant accounting policies consistently followed by the Fund are:
(a) transactions in money market instruments and government obligations are
accounted for on trade date; (b) the Fund uses the amortized cost method for
valuing investments; accordingly, the cost of securities plus accreted discount,
or minus amortized premium, which approximates value; (c) interest income is
recorded on the accrual basis; (d) direct expenses are charged to each Portfolio
and each class; management fees and general fund expenses are allocated on the
basis of relative net assets; (e) gains or losses on the sale of securities are
calculated by using the specific identification method; (f) the Portfolios
intend to comply with the applicable provisions of the Internal Revenue Code of
1986, as amended, pertaining to regulated investment companies and to make
distributions of taxable income sufficient to be relieved from substantially all
Federal income and excise taxes; and (g) estimates and assumptions are required
to be made regarding assets, liabilities and changes in net assets resulting
from operations when financial statements are prepared. Changes in the economic
environment, financial markets and any other parameters used in determining
these estimates could cause actual results to differ.
2. DIVIDENDS
Each Portfolio declares and records a dividend of substantially all of its
net investment income on each business day. Such dividends are paid or
reinvested monthly in each respective Portfolio's shares on the payable date.
3. MANAGEMENT AGREEMENT AND OTHER TRANSACTIONS
Mutual Management Corp. ("MMC"), formerly known as Smith Barney Mutual
Funds Management Inc., a subsidiary of Salomon Smith Barney Holdings, Inc.
("SSBH"), acts as investment manager to the Fund. As compensation for its
services, each Portfolio pays MMC a daily fee calculated at the following rates:
Cash Portfolio: 0.45% on the first $6.0 billion of average daily net assets,
0.425% on the next $6.0 billion, 0.40% on the next $6.0 billion
22
<PAGE>
================================================================================
Notes to Financial Statements (continued)
================================================================================
and 0.35% on the average daily net assets in excess of $18.0 billion; Government
Portfolio: 0.45% on the first $2.5 billion of the average daily net assets,
0.40% on the next $2.5 billion and 0.35% on average daily net assets in excess
of $5.0 billion; and Retirement Portfolio: 0.45% on the first $1.0 billion of
average daily net assets, 0.40% on the next $1.0 billion and 0.35% on average
daily net assets in excess of $2.0 billion. These fees are calculated daily and
paid monthly.
Pursuant to a Distribution Plan, each Portfolio makes payments to Smith
Barney Inc. ("SB"), another subsidiary of SSBH, for assistance in distributing
Class A and C shares, calculated at an annual rate of 0.10% of average daily net
assets of each class, respectively. For the year ended December 31, 1997, total
Distribution Plan fees incurred were:
<TABLE>
<CAPTION>
Portfolio Class A Class C
================================================================================
<S> <C> <C>
Cash $29,596,811 $2,061
Government 4,480,439 744
Retirement 1,370,886 --
================================================================================
</TABLE>
All officers and one Director of the Fund are employees of SB.
4. CAPITAL LOSS CARRYFORWARD
At December 31, 1997, the Cash Portfolio had, for Federal tax purposes,
approximately $1,344,000 of capital loss carryforwards available to offset
future capital gains. To the extent that these carryforward losses are used to
offset capital gains, it is probable that the gains so offset will not be
distributed. The amount and expiration of the carryforwards are indicated below.
Expiration occurs on December 31 of the year indicated:
<TABLE>
<CAPTION>
2000 2001
=============================================================================
<S> <C> <C>
Carryforward Amounts $213,000 $1,131,000
=============================================================================
</TABLE>
5. REPURCHASE AGREEMENTS
The Fund purchases (and its custodian takes possession of) U.S. government
securities from banks and securities dealers subject to agreements to resell the
securities to the sellers at a future date (generally, the next business day) at
an agreed-upon higher repurchase price. The Fund requires continual maintenance
of the market value of the collateral in amounts at least equal to the
repurchase price.
23
<PAGE>
================================================================================
Notes to Financial Statements (continued)
================================================================================
6. CAPITAL SHARES
The Fund has multiple classes of shares within the Cash and Government
Portfolios. Class A and Class Y shares can be purchased directly by investors;
Class C shares can only be purchased by participants in the Smith Barney 401(k)
Program; and, Class Z shares can only be purchased by participants in the Smith
Barney Employee 401(k) Program.
Transactions in shares of each Portfolio were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
Cash Portfolio December 31, 1997 December 31, 1996
================================================================================
<S> <C> <C>
Class A
Shares sold 133,360,262,023 112,083,943,961
Net asset value of shares issued
in connection with the transfer
of net assets of the Smith Barney
Funds, Inc. -- Income Return
Account Portfolio (Note 7) 977,206 --
Shares issued on reinvestment 1,436,817,723 1,222,436,770
Shares redeemed (131,404,913,110) (108,841,816,611)
- -------------------------------------------------------------------------------
Net Increase 3,393,143,842 4,464,564,120
===============================================================================
Class C
Shares sold 1,015,538 2,153,797
Shares issued on reinvestment 103,407 100,716
Shares redeemed (1,255,407) (1,838,758)
- -------------------------------------------------------------------------------
Net Increase (Decrease) (136,462) 415,755
===============================================================================
Class Y
Shares sold 587,981,997 377,031,913
Shares issued on reinvestment 3,795,560 1,984,761
Shares redeemed (579,375,897) (357,585,667)
- -------------------------------------------------------------------------------
Net Increase 12,401,660 21,431,007
===============================================================================
Class Z
Shares sold -- --
Shares issued on reinvestment 295 274
Shares redeemed -- --
- -------------------------------------------------------------------------------
Net Increase 295 274
===============================================================================
</TABLE>
24
<PAGE>
================================================================================
Notes to Financial Statements (continued)
================================================================================
<TABLE>
<CAPTION>
Year Ended Year Ended
Government Portfolio December 31, 1997 December 31, 1996
===============================================================================
<S> <C> <C>
Class A
Shares sold 16,638,043,109 16,321,871,925
Shares issued on reinvestment 215,119,151 204,615,591
Shares redeemed (16,634,487,380) (16,210,993,997)
- -------------------------------------------------------------------------------
Net Increase 218,674,880 315,493,519
===============================================================================
Class C
Shares sold 45,838 97,252
Shares issued on reinvestment 36,492 57,445
Shares redeemed (562,515) (631,770)
- -------------------------------------------------------------------------------
Net Decrease (480,185) (477,073)
===============================================================================
Class Y
Shares sold 293,187,265 118,300,033
Shares issued on reinvestment 1,331,017 616,191
Shares redeemed (338,961,831) (72,418,898)
- -------------------------------------------------------------------------------
Net Increase (Decrease) (44,443,549) 46,497,326
===============================================================================
Class Z
Shares sold 19,550,261 7,598,848
Shares issued on reinvestment 2,495,699 1,713,445
Shares redeemed (7,675,640) (3,585,909)
- -------------------------------------------------------------------------------
Net Increase 14,370,320 5,726,384
===============================================================================
Retirement Portfolio
===============================================================================
Class A
Shares sold 5,002,210,790 4,577,974,101
Shares issued on reinvestment 66,161,619 60,304,723
Shares redeemed (5,056,269,867) (4,562,913,860)
- -------------------------------------------------------------------------------
Net Increase 12,102,542 75,364,964
===============================================================================
</TABLE>
25
<PAGE>
================================================================================
Notes to Financial Statements (continued)
================================================================================
7. TRANSFER OF NET ASSETS
On December 5, 1997, the Cash Portfolio acquired the assets and certain
liabilities of the Smith Barney Funds, Inc. -- Income Return Account Portfolio
("IRAP"), in a taxable transaction pursuant to a plan of reorganization approved
by IRAP shareholders on November 19, 1997. Total shares issued by the Cash
Portfolio and the total net assets of IRAP and the Cash Portfolio on the date of
the transfer were as follows:
<TABLE>
<CAPTION>
Shares Total Net Total Net
Acquired Issued by the Assets of Assets of
Fund Cash Portfolio IRAP Cash Portfolio
============================================================================================
<S> <C> <C> <C>
IRAP 977,206 $977,206 $31,595,186,434
============================================================================================
</TABLE>
The net assets of the Cash Portfolio immediately after the transfer were
$31,596,163,640.
26
<PAGE>
================================================================================
Financial Highlights
================================================================================
For a share of each class of capital stock outstanding throughout each year:
<TABLE>
<CAPTION>
Class A
------------------------------------------------------
Cash Portfolio 1997 1996 1995 1994 1993
===============================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $1.00 $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------
Net investment income 0.050 0.050 0.054 0.037 0.026
Dividends from
net investment income (0.050) (0.050) (0.054) (0.037) (0.026)
- -----------------------------------------------------------------------------------------------
Net Asset Value, End of Year $1.00 $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------
Total Return 5.12% 4.98% 5.53% 3.73% 2.63%
- -----------------------------------------------------------------------------------------------
Net Assets, End of Year (millions) $30,827 $27,434 $22,969 $17,590 $2,953
- -----------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.64% 0.62% 0.62% 0.64% 0.64%
Net investment income 5.01 4.87 5.39 4.10 2.60
===============================================================================================
<CAPTION>
Class C
------------------------------------------------------
Cash Portfolio 1997 1996 1995 1994(1)
===============================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------
Net investment income 0.051 0.050 0.054 0.007
Dividends from
net investment income (0.051) (0.050) (0.054) (0.007)
- -----------------------------------------------------------------------------------------------
Net Asset Value, End of Year $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------
Total Return 5.17% 4.98% 5.53% 0.70%++
- -----------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $2,016 $2,152 $1,737 $1,323
- -----------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.59% 0.62% 0.62% 0.62%+
Net investment income 5.05 4.87 5.39 4.77+
===============================================================================================
<CAPTION>
Class Y
------------------------------------------------------
Cash Portfolio 1997 1996 1995 1994(2)
===============================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------
Net investment income 0.052 0.051 0.054 0.0004
Dividends from
net investment income (0.052) (0.051) (0.054) (0.0004)
- -----------------------------------------------------------------------------------------------
Net Asset Value, End of Year $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------
Total Return 5.32% 5.09% 5.50% 0.40%++
- -----------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $63,985 $51,581 $30,150 $507
- -----------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.43% 0.52% 0.51% 0.53%+
Net investment income 5.22 4.97 5.29 5.23+
===============================================================================================
</TABLE>
(1) For the period from November 10, 1994 (inception date) to December 31,
1994.
(2) For the period from December 29, 1994 (inception date) to December 31,
1994.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
27
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of capital stock outstanding throughout each year:
<TABLE>
<CAPTION>
Class Z
-----------------------------------------------------
Cash Portfolio 1997 1996 1995 1994(1)
===============================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------
Net investment income 0.052 0.051 0.055 0.006
Dividends from
net investment income (0.052) (0.051) (0.055) (0.006)
- -----------------------------------------------------------------------------------------------
Net Asset Value, End of Year $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------
Total Return 5.33% 5.06% 5.63% 0.60%++
- -----------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $6 $6 $5 $5
- -----------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.44% 0.53% 0.52% 0.47%+
Net investment income 5.21 4.96 5.49 5.12+
===============================================================================================
<CAPTION>
Class A
-----------------------------------------------------
Government Portfolio 1997 1996 1995 1994 1993(2)
===============================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $1.00 $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------
Net investment income 0.049 0.048 0.053 0.036 0.025
Dividends from
net investment income (0.049) (0.048) (0.053) (0.036) (0.025)
- -----------------------------------------------------------------------------------------------
Net Asset Value, End of Year $1.00 $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------
Total Return 5.04% 4.89% 5.45% 3.63% 2.55%
- -----------------------------------------------------------------------------------------------
Net Assets, End of Year (millions) $4,572 $4,353 $4,038 $3,695 $636
- -----------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.61% 0.61% 0.60% 0.61% 0.61%
Net investment income 4.92 4.78 5.31 4.03 2.53
===============================================================================================
<CAPTION>
Class C(3)
-----------------------------------------------------
Government Portfolio 1997 1996 1995 1994(4)
===============================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------
Net investment income 0.049 0.048 0.053 0.036
Dividends from
net investment income (0.049) (0.048) (0.053) (0.036)
- -----------------------------------------------------------------------------------------------
Net Asset Value, End of Year $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------
Total Return 5.04% 4.89% 5.46% 3.63%
- -----------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $502 $982 $1,459 $3,961
- -----------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.61% 0.61% 0.60% 0.61%
Net investment income 4.90 4.78 5.36 3.78
===============================================================================================
</TABLE>
(1) For the period from November 15, 1994 (inception date) to December 31,
1994.
(2) Since no difference in expenses existed for Class A, C and Y shares of the
Government Portfolio for 1993, this information is identical for each class
of shares.
(3) The inception date for Class C shares is March 5, 1993.
(4) On November 7, 1994, the former Class C shares were renamed as Class Y
shares.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
28
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of capital stock outstanding throughout each year:
<TABLE>
<CAPTION>
Class Y(1)
-----------------------------------------------------
Government Portfolio 1997 1996 1995 1994(2)
===============================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------
Net investment income 0.050 0.049 0.054 0.036
Dividends from
net investment income (0.050) (0.049) (0.054) (0.036)
- -----------------------------------------------------------------------------------------------
Net Asset Value, End of Year $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------
Total Return 5.14% 4.99% 5.55% 3.65%
- -----------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $7,430 $51,873 $5,376 $917
- -----------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.51% 0.51% 0.50% 0.60%
Net investment income 4.98 4.88 5.51 3.58
===============================================================================================
<CAPTION>
Class Z
-----------------------------------------------------
Government Portfolio 1997 1996 1995 1994(3)
===============================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------
Net investment income 0.050 0.049 0.054 0.007
Dividends from
net investment income (0.050) (0.049) (0.054) (0.007)
- -----------------------------------------------------------------------------------------------
Net Asset Value, End of Year $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------
Total Return 5.14% 4.99% 5.56% 0.70%++
- -----------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $51,210 $36,840 $31,113 $29,669
- -----------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.51% 0.51% 0.50% 0.51%+
Net investment income 5.03 4.88 5.42 4.93+
===============================================================================================
<CAPTION>
Class A
-----------------------------------------------------
Retirement Portfolio 1997 1996 1995 1994 1993
===============================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $1.00 $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------
Net investment income 0.049 0.048 0.053 0.036 0.026
Dividends from
net investment income (0.049) (0.048) (0.053) (0.036) (0.026)
- -----------------------------------------------------------------------------------------------
Net Asset Value, End of Year $1.00 $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------
Total Return 5.03% 4.86% 5.42% 3.67% 2.58%
- -----------------------------------------------------------------------------------------------
Net Assets, End of Year (millions) $1,367 $1,355 $1,280 $1,061 $1,184
- -----------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.71% 0.71% 0.72% 0.70% 0.70%
Net investment income 4.92 4.75 5.28 3.57 2.55
===============================================================================================
</TABLE>
(1) The inception date for Class Y shares is October 28, 1993.
(2) On November 7, 1994, the former Class Y shares were renamed as Class Z
shares.
(3) For the period from November 9, 1994 (inception date) to December 31, 1994.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
29
<PAGE>
================================================================================
Independent Auditors' Report
================================================================================
To the Shareholders and Board of Directors of
The Smith Barney Money Funds, Inc.:
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of Smith Barney Money Funds, Inc.
(comprising of the Cash, Government and Retirement Portfolios) as of December
31, 1997, and the related statements of operations for the year then ended, the
statements of changes in net assets for each of the years in the two-year period
then ended and the financial highlights for each of the years in the five-year
period then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997, by correspondence with the custodian. As to securities
purchased but not received, we performed other appropriate auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the respective portfolios constituting Smith Barney Money Funds, Inc. as
of December 31, 1997, the results of their operations for the year then ended,
the changes in their net assets for each of the years in the two-year period
then ended and the financial highlights for each of the years in the five-year
period then ended, in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
New York, New York
February 10, 1998
30
<PAGE>
================================================================================
Tax Information (unaudited)
================================================================================
For Federal tax purposes the Fund hereby designates for the fiscal year
ended December 31, 1997:
Percentage of ordinary dividends paid by the Fund from net investment
income derived from Federal obligations and that may be exempt from taxation at
the state level:
o Cash Portfolio 2.22%
o Government Portfolio 22.43%
o Retirement Portfolio 1.84%
31
<PAGE>
[This page intentionally left blank]
<PAGE>
Smith Barney SMITH BARNEY
Money Funds, Inc. ------------
A Member of TravelersGroup[LOGO]
Directors Investment Manager
Donald R. Foley Mutual Management Corp.
Paul Hardin
Heath B. McLendon, Chairman Distributors
Roderick C. Rasmussen Smith Barney Inc.
John P. Toolan PFS Distributor, Inc.
Joseph H. Fleiss, Emeritus Custodian
C. Richard Youngdahl, Emeritus PNC Bank, N.A.
Officers Shareholder
Heath B. McLendon Servicing Agent
President and First Data Investor Services Group, Inc.
Chief Executive Officer P.O. Box 9134
Boston, MA 02205-9134
Lewis E. Daidone
Senior Vice President
and Treasurer
Phyllis M. Zahorodny
Vice President This report is submitted for the general
information of the shareholders of Smith
Martin R. Hanley Barney Money Funds, Inc. It is not
Investment Officer authorized for distribution to prospective
investors unless accompanied or
Irving P. David preceded by an effective Prospectus for
Controller the Fund, which contains information
concerning the Fund's investment
Christina T. Sydor policies and expenses as well as other
Secretary pertinent information.
Smith Barney
Money Funds, Inc.
388 Greenwich Street
New York, New York 10013
www.smithbarney.com
FD0858 2/98
