As filed with the Securities and Exchange Commission on April 27,
1998
Securities Act Registration No. 2-51301
Investment Company Act Registration No. 811-2490
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No.
[X] Post-Effective Amendment No. 50
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940,
Amendment No. 50
SMITH BARNEY MONEY FUNDS, INC.
(a Maryland Corporation)
(Exact name of Registrant as Specified in Charter)
388 Greenwich Street, New York, New York 10013
(Address of Principal Executive Offices) (Zip Code)
(212) 816-6474
(Registrant's Telephone Number, including Area Code:)
Christina T. Sydor, Secretary
388 Greenwich Street
New York, New York 10013
(Name and Address of Agent For Service)
Approximate Date of Proposed Public Offering: Continuous
It is proposed that this filing will become effective:
[ ] Immediately upon filing pursuant to Paragraph 485(b)
[ X ] On April 30, 1998 pursuant to paragraph 485(b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] On (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] On (date) pursuant to paragraph (a)(2) of rule 485
If appropriate, check the following box:
[ ] This post-effective amendment designates a new
effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered: Shares of Common Stock
CROSS REFERENCE SHEET
(as required by Rule 495(a)
Part A of Form N-1A Prospectus Caption
1. Cover Page cover page
2. Synopsis "Fee Table"
3. Condensed Financial Information "Financial Highlights"
4. General Description of Registrant "Shares of the Fund"
cover page
"Investment Objectives
and
Policies"
5. Management of the Fund "Management of the Fund"
"Purchase of Shares"
6. Capital Stock and Other Securities "Shares of the Fund"
"Redemption of Shares"
Cover Page
"Dividends, Automatic
Reinvestment and Taxes"
7. Purchase of Securities Being Offered "Purchase of
Shares" "Exchange
Privilege" "Management
of The
Fund" "Determination of
Net
Asset Value"
8. Redemption or Repurchase "Redemption of Shares"
"Minimum Account Size"
9. Legal Proceedings not applicable
Statement of Additional
Part B of Form N-1A Information Caption
10. Cover Page cover page
11. Table of Contents "Table of
Contents"
12. General Information and History not applicable
13. Investment Objectives and Policies "Investment
Restrictions and
Fundamental Policies"
14. Management of the Registrant "Directors and
Officers"
15. Control Persons and Principal
Holders of Securities "Voting Rights"
"Directors and Officers"
16. Investment Advisory and Other Services See Prospectus -
"Management
of The Fund" "Directors
and
Officers" "The
Management
Agreement, Plan of
Distribution
and Other Services"
"Custodian,
Transfer and Dividend
Disbursing
Agent" "Independent
Auditors"
17. Brokerage Allocation "See Prospectus -
Management
of The Fund"
18. Capital Stock and Other Securities See Prospectus -
"Shares of the
Fund" "Voting Rights"
"Investment Restrictions
and
Fundamental Policies"
19. Purchase, Redemptions and Pricing of
Securities Being Offered See Prospectus -
"Management
of the Fund" "IRA and
Other
Prototype Retirement
Plans"
"Valuation of Shares and
Amortized Cost
Valuation"
See Prospectus -
"Valuation
of Shares" See
Prospectus -
"Purchase of Shares"
"Financial
Statements
20. Tax Status See Prospectus -
"Dividends, Automatic
Reinvestment and Taxes"
21. Underwriters See Prospectus -
"Management of The Fund"
22. Calculation of Performance Data "Computation of
Yield"
See Prospectus - "Yield
Information"
23. Financial Statements "Financial
Statements"
Part C of Form N-1A
Information required to be included in Part C is set forth under
the appropriate item, so numbered in Part C of this Post-Effective
Amendment to the Registration Statement.
PART A: Prospectus
<PAGE>
P R O S P E C T U S
Smith Barney
Money Funds,
Inc.
APRIL 30, 1998
PROSPECTUS BEGINS ON PAGE ONE
LOGO Smith Barney Mutual Funds
INVESTING FOR YOUR FUTURE.
EVERY DAY.
<PAGE>
PROSPECTUS
April 30, 1998
Smith Barney Money Funds, Inc.
388 Greenwich Street
New York, New York 10013
(800) 451-2010
Smith Barney Money Funds, Inc. (the "Fund") is a money market fund that
invests in high quality money market instruments.
The Fund seeks to provide:
. Daily Income
. Convenience
. Daily Liquidity
. Stability of Net Asset Value
Shares of the Fund are offered in three Portfolios:
. Cash Portfolio
. Government Portfolio
. Retirement Portfolio
SHARES OF THE FUND ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
THERE IS NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET
VALUE OF $1.00 PER SHARE.
This Prospectus sets forth concisely certain information about the Fund and
the Portfolios, including service fees and expenses, that prospective investors
will find helpful in making an investment decision. Investors are encouraged to
read this Prospectus carefully and retain it for future reference.
Additional information about the Fund is contained in a Statement of Addi-
tional Information dated April 30, 1998, as amended or supplemented from time
to time, that is available upon request and without charge by calling or writ-
ing the Fund at the telephone number or address set forth above or by contact-
ing a Smith Barney Financial Consultant. The Statement of Additional Informa-
tion has been filed with the Securities and Exchange Commission (the "SEC") and
is incorporated by reference into this Prospectus in its entirety.
SMITH BARNEY INC.
Distributor
MUTUAL MANAGEMENT CORP.
Investment Manager
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
FEE TABLE 3
- ------------------------------------------------
FINANCIAL HIGHLIGHTS 5
- ------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES 7
- ------------------------------------------------
VALUATION OF SHARES 11
- ------------------------------------------------
DIVIDENDS, AUTOMATIC REINVESTMENT AND TAXES 11
- ------------------------------------------------
PURCHASE OF SHARES 12
- ------------------------------------------------
REDEMPTION OF SHARES 16
- ------------------------------------------------
EXCHANGE PRIVILEGE 20
- ------------------------------------------------
MINIMUM ACCOUNT SIZE 22
- ------------------------------------------------
YIELD INFORMATION 23
- ------------------------------------------------
MANAGEMENT OF THE FUND 23
- ------------------------------------------------
DISTRIBUTOR 24
- ------------------------------------------------
ADDITIONAL INFORMATION 25
- ------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
No person has been authorized to give any information or to make any
representations in connection with this offering other than those contained in
this Prospectus and, if given or made, such other information and
representations must not be relied upon as having been authorized by the Fund
or Smith Barney Inc. (the "Distributor"). This Prospectus does not constitute
an offer by the Fund or the Distributor to sell or a solicitation of an offer
to buy any of the securities offered hereby in any jurisdiction to any person
to whom it is unlawful to make such offer or solicitation in such jurisdiction.
- --------------------------------------------------------------------------------
2
<PAGE>
FEE TABLE
The following expense table lists the costs and expenses that an investor
will incur either directly or indirectly as a shareholder of each Portfolio
based on its operating expenses for its most recent fiscal year:
<TABLE>
<CAPTION>
CASH PORTFOLIO AND
ALL PORTFOLIOS GOVERNMENT PORTFOLIO ONLY
CLASS A SHARES CLASS C SHARES* CLASS Y SHARES
- --------------------------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Sales Charge Imposed on
Purchases None None None
Sales Charge Imposed on
Reinvested Dividends None None None
Deferred Sales Charge None** None** None
Redemption Fee None None None
Exchange Fee None None None
- --------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RETIREMENT
CASH PORTFOLIO GOVERNMENT PORTFOLIO PORTFOLIO
CLASS A CLASS C CLASS Y CLASS A CLASS C CLASS Y CLASS A
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ANNUAL PORTFOLIO
OPERATING EXPENSES
(AS A PERCENTAGE
OF AVERAGE
NET ASSETS)
Management Fees 0.38% 0.38% 0.38% 0.43% 0.43% 0.43% 0.44%
12b-1 Fees 0.10 0.10 -- 0.10 0.10 -- 0.10
Other Expenses 0.16 0.11 0.5 0.08 0.08 0.08 0.16
- ------------------------------------------------------------------------------------
TOTAL PORTFOLIO
OPERATING EXPENSES 0.64% 0.59% 0.43% 0.61% 0.61% 0.51% 0.70%
- ------------------------------------------------------------------------------------
</TABLE>
* Class C shares are available for purchase only by Participating Plans (as
defined under "Purchase of Shares--Smith Barney 401(k) and ExecChoice(TM)
Programs") opened prior to June 21, 1996, either directly or as part of an
exchange privilege transaction with certain other funds of the Smith Barney
Mutual Funds. Class C shares of the Government Portfolio that represent
previously issued "Class B" shares may only be redeemed or exchanged out of
the Fund. See "Purchase of Shares" and "Exchange Privilege."
** Class A shares acquired as part of an exchange privilege transaction, which
were originally acquired in one of the other Smith Barney Mutual Funds at
net asset value subject to a contingent deferred sales charge ("CDSC"),
remain subject to the original fund's CDSC while held in the Fund. Class C
shares that represent previously issued "Class B" shares of the Government
Portfolio may be subject to a CDSC of 1.00% of redemption proceeds. See
"Purchase of Shares" and "Redemption of Shares--Contingent Deferred Sales
Charge."
Class A shares of the Fund purchased through the Smith Barney AssetOne
Program will be subject to an annual asset-based fee, payable quarterly. The
fee will vary to a maximum of 1.50%, depending on the amount of assets held
through the Program. For more information, please call your Smith Barney Finan-
cial Consultant.
3
<PAGE>
FEE TABLE (CONTINUED)
EXAMPLE
The following example is intended to assist an investor in understanding the
various costs that an investor in the Fund will bear directly or indirectly.
The example assumes payment by the Fund of operating expenses at the levels set
forth in the table above. See "Purchase of Shares," "Redemption of Shares,"
"Management of the Fund" and "Distributor."
<TABLE>
<CAPTION>
SMITH BARNEY MONEY FUNDS, INC. 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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 $ 7 $20 $36 $80
Class C 6 19 33 74
Class Y 4 14 24 54
Government Portfolio
Class A 6 20 34 76
Class C 6 20 34 76
Class Y 5 16 29 64
Retirement Portfolio
Class A 7 22 39 87
- -------------------------------------------------------------------------------
</TABLE>
The example is included to provide a means for the investor to compare
expense levels of funds with different fee structures over varying investment
periods. To facilitate such comparison, all funds are required to utilize a
5.00% annual return assumption. This assumption is unrelated to the Fund's
prior performance and is not a projection of future performance. THIS EXAMPLE
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The following information has been audited by KPMG Peat Marwick LLP, indepen-
dent auditors, whose report thereon appears in the Fund's annual report dated
December 31, 1997. The information set out below should be read in conjunction
with the financial statements and related notes that also appear in the Fund's
Annual Report to Shareholders, which is incorporated by reference into the
Statement of Additional Information.
FOR A SHARE OF EACH CLASS OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
NET ASSET DIVIDENDS NET ASSET RATIOS TO AVERAGE NET
VALUE, NET FROM NET VALUE NET ASSETS ASSETS
YEAR ENDED BEGINNING INVESTMENT INVESTMENT END OF TOTAL END OF YEAR ---------------------
DECEMBER 31, OF YEAR INCOME INCOME YEAR RETURN (IN MILLIONS) NET INCOME EXPENSES
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SMITH BARNEY MONEY FUNDS, INC.
CLASS A
CASH PORTFOLIO:
1997 $1.00 $0.050 $(0.050) $1.00 5.12% $30,827 5.01% 0.64%
1996 1.00 0.050 (0.050) 1.00 4.98 27,434 4.87 0.62
1995 1.00 0.054 (0.054) 1.00 5.53 22,969 5.39 0.62
1994 1.00 0.037 (0.037) 1.00 3.73 17,590 4.10 0.64
1993 1.00 0.026 (0.026) 1.00 2.63 2,953 2.60 0.64
1992 1.00 0.033 (0.033) 1.00 3.31 2,841 3.17 0.60
1991 1.00 0.055 (0.055) 1.00 5.66 1,784 5.55 0.52
1990 1.00 0.076 (0.076) 1.00 7.92 1,998 7.60 0.52
1989 1.00 0.086 (0.086) 1.00 8.97 2,088 8.60 0.54
1988 1.00 0.069 (0.069) 1.00 7.15 1,379 6.93 0.58
GOVERNMENT PORTFOLIO:
1997 1.00 0.049 (0.049) 1.00 5.04 4,572 4.92 0.61
1996 1.00 0.048 (0.048) 1.00 4.89 4,353 4.78 0.61
1995 1.00 0.053 (0.053) 1.00 5.45 4,038 5.31 0.60
1994 1.00 0.036 (0.036) 1.00 3.63 3,695 4.03 0.61
1993 1.00 0.025 (0.025) 1.00 2.55 636 2.53 0.61
1992 1.00 0.032 (0.032) 1.00 3.32 675 3.15 0.55
1991 1.00 0.054 (0.054) 1.00 5.57 394 5.43 0.49
1990 1.00 0.074 (0.074) 1.00 7.76 363 7.39 0.49
1989 1.00 0.082 (0.082) 1.00 8.53 150 8.21 0.51
1988 1.00 0.066 (0.066) 1.00 6.77 105 6.55 0.54
RETIREMENT PORTFOLIO
1997 1.00 0.049 (0.049) 1.00 5.03 1,367 4.92 0.71
1996 1.00 0.048 (0.048) 1.00 4.86 1,355 4.75 0.71
1995 1.00 0.053 (0.053) 1.00 5.42 1,280 5.28 0.72
1994 1.00 0.036 (0.036) 1.00 3.67 1,061 3.57 0.70
1993 1.00 0.026 (0.026) 1.00 2.58 1,184 2.55 0.70
1992 1.00 0.032 (0.032) 1.00 3.26 1,030 3.21 0.64
1991 1.00 0.054 (0.054) 1.00 5.58 972 5.44 0.57
1990 1.00 0.075 (0.075) 1.00 7.83 923 7.51 0.59
1989 1.00 0.085 (0.085) 1.00 8.86 810 8.48 0.63
1988 1.00 0.068 (0.068) 1.00 7.03 463 6.84 0.69
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
NET ASSET DIVIDENDS NET ASSET RATIOS TO AVERAGE NET
VALUE, NET FROM NET VALUE NET ASSETS ASSETS
YEAR ENDED BEGINNING INVESTMENT INVESTMENT END OF TOTAL END OF YEAR ---------------------
DECEMBER 31, OF YEAR INCOME INCOME YEAR RETURN (IN MILLIONS) NET INCOME EXPENSES
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SMITH BARNEY MONEY FUNDS, INC.
CLASS C
CASH PORTFOLIO:
1997 $1.00 $0.051 $(0.051) $1.00 5.17% $2,016 5.05% 0.59%
1996 1.00 0.050 (0.050) 1.00 4.98 2 4.87 0.62
1995 1.00 0.054 (0.054) 1.00 5.53 2 5.39 0.62
1994 (a) 1.00 0.007 (0.007) 1.00 0.007++ 1 4.77+ 0.62+
GOVERNMENT PORTFOLIO:
1997 1.00 0.049 (0.049) 1.00 5.04 502 4.90 0.61
1996 1.00 0.048 (0.048) 1.00 4.89 1 4.78 0.61
1995 1.00 0.053 (0.053) 1.00 5.46 2 5.36 0.60
1994 (b) 1.00 0.036 (0.036) 1.00 3.63 4 3.78 0.61
1993 (c) 1.00 0.025 (0.025) 1.00 2.55++ .2 2.52+ 0.62+
- --------------------------------------------------------------------------------------------------------------------
CLASS Y
CASH PORTFOLIO:
1997 1.00 0.052 (0.052) 1.00 5.32 63,985 5.22 0.43
1996 1.00 0.051 (0.051) 1.00 5.09 52 4.97 0.52
1995 1.00 0.054 (0.054) 1.00 5.50 30 5.29 0.51
1994 (d) 1.00 0.0004 (0.0004) 1.00 0.0004++ .5 5.23+ 0.53+
GOVERNMENT PORTFOLIO:
1997 1.00 0.050 (0.050) 1.00 5.14 7,430 4.98 0.51
1996 1.00 0.049 (0.049) 1.00 4.99 52 4.88 0.51
1995 1.00 0.054 (0.054) 1.00 5.55 5 5.51 0.50
1994 (e) 1.00 0.036 (0.036) 1.00 3.65 1 3.58 0.60
1993 (f) 1.00 0.025 (0.025) 1.00 2.55++ 2 2.52+ 0.62+
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Inception date November 10, 1994.
(b) Represents previously issued "Class B" shares, which were renamed "Class C"
shares on November 7, 1994.
(c) Inception date March 5, 1993.
(d) Inception date December 29, 1994.
(e) Represents previously issued "Class C" shares, which were renamed "Class Y"
shares on November 7, 1994.
(f) Inception date October 28, 1993.
+ Annualized.
++Total return is not annualized, as it may not be representative of the total
return for that period.
6
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The Fund's investment objectives are maximum current income and preservation
of capital. The Fund seeks to achieve its objectives with three separate money
market portfolios -- the Government Portfolio, which invests exclusively in
U.S. Government Obligations and related repurchase agreements, and the Cash
Portfo-lio and the Retirement Portfolio, both of which may invest in Bank
Obligations and high quality Commercial Paper, Corporate Obligations
and Municipal Obliga-tions, in addition to U.S. Government Obligations
and related repurchase agree-ments. The Fund operates as a money market
fund, and utilizes certain invest-ment policies so that, to the extent
reasonably possible, each Portfolio'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. For example, a Portfolio will not purchase a
security which, after giving effect to any demand features, has a remaining
maturity of greater than 13 months, or maintain a dollar-weighted average
portfolio maturity in excess of 90 days (securities used as collateral
for repurchase agreements are not subject to these restrictions).
The Fund's investments are limited to United States dollar-denominated
instruments (and repurchase agreements thereon) that, at the time of acquisi-
tion (including any related credit enhancement features) have received a rating
in one of the two highest categories for short-term debt obligations from the
"Requisite NRSROs", securities of issuers that have received such a rating with
respect to other comparable securities, and comparable unrated securities.
"Requisite NRSROs" means (a) any two nationally recognized statistical rating
organizations ("NRSROs") that have issued a rating with respect to a security
or class of debt obligations of an issuer, or (b) one NRSRO, if only one NRSRO
has issued such a rating at the time that the Fund acquires the security. The
NRSROs currently designated as such by the SEC are Standard & Poor's Ratings
Group ("S&P"), Moody's Investors Service, Inc. ("Moody's"), Duff and Phelps
Inc., Fitch IBCA, Inc. and Thomson BankWatch.
The following is a description of the types of money market instruments in
which the Fund may invest:
U.S. Government Obligations -- Obligations issued or guaranteed as to payment
of principal and interest by the U.S. Government (including Treasury bills,
notes and bonds) or by its agencies and instrumentalities (such as the Govern-
ment National Mortgage Association, the Student Loan Marketing Association, the
Tennessee Valley Authority, the Bank for Cooperatives, the Farmers Home Admin-
istration, Federal Farm Credit Banks, Federal Home Loan Banks, Federal Interme-
diate Credit Banks, Federal Land Banks, the Export-Import Bank of the U.S., the
Federal Housing Administration, the Federal Home Loan Mortgage Corporation, the
U.S. Postal Service, the Federal Financing Bank and the Federal National Mort-
gage Association). Some of these securities (such as Treasury bills) are sup-
ported by the full faith and credit of the U.S. Treasury; others (such as obli-
gations of the Federal
7
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES (CONTINUED)
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 Market-
ing Association) are supported only by the credit of the particular agency or
instrumentality.
Repurchase Agreements -- The Fund may enter into repurchase agreement trans-
actions with any broker/dealer or other financial institution, including the
Fund's custodian, that is deemed creditworthy by the Manager, under guidelines
approved by the Board of Directors. A repurchase agreement arises when the
Fund acquires a security for a Portfolio and simultaneously agrees to resell
it to the vendor at an agreed-upon future date, normally the next business
day. The resale price is greater than the purchase price and reflects an
agreed-upon return unrelated to the coupon rate on the purchased security.
Such transactions afford an opportunity for the Fund to invest temporarily
available cash at no market risk. The Fund requires continual maintenance of
the market value of the collateral in amounts at least equal to the resale
price. The Fund's risk is limited to the ability of the seller to pay the
agreed-upon amount on the delivery date; however, if the seller defaults,
realization upon the collateral by the Fund may be delayed or limited, or the
Fund might incur a loss if the value of the collateral securing the repurchase
agreement declines and might incur disposition costs in connection with liqui-
dating the collateral. The Fund will not enter into a repurchase agreement on
behalf of a Portfolio if, as a result thereof, more than 10% of that Portfo-
lio's net assets at that time would be comprised of repurchase agreements
maturing in more than seven days and/or any other investments deemed to be
illiquid.
The following are permitted investments for the Cash and Retirement Portfo-
lios; the Government Portfolio will invest only in U.S. Government Obligations
and repurchase agreements secured by such obligations.
Commercial Paper and Other Short-term Obligations: Commercial paper (includ-
ing variable amount master demand notes and funding agreements) consists of
short-term, unsecured promissory notes issued by corporations, partnerships,
trusts and other entities to finance short-term credit needs. Short-term obli-
gations also include mortgage-related or asset-backed debt or debt-like
instruments, including pass-through certificates representing participations
in, or bonds and notes backed by, pools of mortgage, credit card, automobile
or other types of receivables. These structured financings will be supported
by sufficient collateral and other credit enhancements, including letters of
credit, insurance, reserve funds and guarantees by third parties, to enable
such instruments to obtain the requisite quality ratings from NRSROs. Commer-
cial paper and such other short-term obligations will be rated in the highest
category for short-term debt obligations by the Requisite NRSROs at the time
of acquisition by the Fund, or will be unrated securities determined to be
comparable thereto.
High Quality Corporate Obligations -- Obligations of corporations that are
originally issued with a maturity of greater than 397 days and are: (1) rated
as
8
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES (CONTINUED)
long-term debt obligations in the two highest rating categories by the
Requisite NRSROs and (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, or are otherwise comparable to short-term debt
obligations having such a rating. A Portfolio will invest only in corporate
obligations with remaining maturities of 13 months or less.
Bank Obligations -- Obligations (including certificates of deposit, bankers'
acceptances and fixed time deposits) and securities backed by letters of credit
of U.S. Banks or other U.S. financial institutions that are members of the Fed-
eral Reserve System or the Federal Deposit Insurance Corporation ("FDIC") (in-
cluding obligations of foreign branches of such members) if either: (a) the
principal amount of the obligation is insured in full by the FDIC, or (b) the
issuer of such obligation has capital, surplus and undivided profits in excess
of $100 million or total assets of $1 billion (as reported in its most recently
published financial statements prior to the date of investment). Under current
FDIC regulations, the maximum insurance payable as to any one certificate of
deposit is $100,000; therefore, certificates of deposit in denominations
greater than $100,000 that are purchased by the Fund will not be fully
insured. The Cash Portfolio and the Retirement Portfolio each will not purchase
a fixed time deposit with an ultimate maturity of more than six months, and
will limit its investment in fixed time deposits maturing from two business to
seven calendar days and/or any other investments deemed to be illiquid to 10%
of its net assets.
The Cash Portfolio and the Retirement Portfolio each will maintain at least
25% of its total assets invested in obligations of domestic and foreign banks,
subject to the above-mentioned size criteria. Each such Portfolio may invest in
instruments issued by domestic banks, including those issued by their branches
outside the United States and subsidiaries located in Canada, and in instru-
ments issued by foreign banks through their branches located in the United
States and the United Kingdom. In addition, the Cash and Retirement Portfolios
may invest in fixed time deposits of foreign banks issued through their
branches located in Grand Cayman Island, London, Nassau, Tokyo and Toronto.
Foreign Investments. Investments in securities issued by foreign banks or
foreign issuers present certain additional risks. Foreign issuers generally are
not subject to uniform accounting, auditing and financial reporting standards
or to other regulatory practices and requirements applicable to domestic
issuers. In addition, there may be less publicly available information about a
foreign issuer than about a domestic issuer. The Cash Portfolio and Retirement
Portfolio may invest in Eurodollar and Yankee obligations, which are certifi-
cates of deposit issued in U.S. dollars by foreign banks and foreign branches
of U.S. banks. The risks of Eurodollar and Yankee obligations include the pos-
sibility that a foreign government will not allow U.S. dollar-denominated
assets to leave the foreign country and the possi-
9
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES (CONTINUED)
bility that adverse political or economic developments will affect investments
in a foreign country.
High Quality Municipal Obligations -- Debt obligations of states, cities,
counties, municipalities, municipal agencies and regional districts rated SP-1+
or A-1 or AA or better by S&P or MIG 2, VMIG 2 or Prime-1 or Aa or better by
Moody's or, if not rated, are determined by the Manager to be of comparable
quality. At certain times, supply/demand imbalances in the tax-exempt market
cause municipal obligations to yield more than taxable obligations of equiva-
lent credit quality and maturity length. The purchase of these securities could
enhance a Portfolio's yield. Each of the Cash and Retirement Portfolios will not
invest more than 10% of its total assets in municipal obligations.
The following pertains to each Portfolio:
Each Portfolio may, to a limited degree, engage in short-term trading to
attempt to take advantage of short-term market variations, or may dispose of a
portfolio security prior to its maturity if it believes such disposition advis-
able or it needs to generate cash to satisfy redemptions. In such cases, a
Portfolio may realize a gain or loss.
Each Portfolio may borrow money from banks for temporary or emergency purpos-
es, including for the purpose of accommodating requests for the redemption of
shares while effecting an orderly liquidation of portfolio securities, and not
for leveraging purposes.
The Fund seeks to maintain a net asset value of $1.00 per share for purchases
and redemptions. To do so, the Fund uses the amortized cost method of valuing
its securities pursuant to Rule 2a-7 under the Investment Company Act of 1940
(the "Act"), certain requirements of which are summarized as follows. In accor-
dance with Rule 2a-7, each Portfolio will maintain a dollar-weighted average
portfo-lio maturity of 90 days or less, purchase only instruments which, with
any related features, have remaining maturities of 13 months or less, and invest
only in U.S. dollar denominated securities. For further information regarding
the amortized cost method, see "Valuation of Shares and Amortized Cost Valua-
tion" in the Statement of Additional Information. There can be no assurance
that the Fund will be able to maintain a stable net asset value of $1.00 per
share.
General changes in interest rates result in increases or decreases in the
market value of the obligations held by a Portfolio (but do not affect the
amortized cost valuations). The market value of the obligations held by each
Portfolio can be expected to vary inversely to changes in prevailing interest
rates. Investors also should recognize that, in periods of declining interest
rates, each Portfolio's yield will tend to be somewhat higher than prevailing
market rates, and in periods of rising interest rates, each Portfolio's yield
will tend to be somewhat lower. Also, when interest rates are falling, the
inflow of net new money to a Portfolio from the continuous sale of its shares
will likely be invested in instruments producing lower
10
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES (CONTINUED)
yields than the balance of its investments, thereby reducing the Portfolio's
current yield. In periods of rising interest rates, the opposite can be
expected to occur.
None of the Fund's Portfolios may change its investment objective without the
"vote of a majority of the outstanding voting securities" as defined in the
Act. (See "Voting Rights" in the Statement of Additional Information).
Year 2000. The investment management services provided to the Fund by Mutual
Management Corp. (the "Manager") and the services provided to shareholders by
Smith Barney, the Fund's Distributor, depend on the smooth functioning of their
computer systems. Many computer software systems in use today cannot recognize
the year 2000, but revert to 1900 or some other date, due to the manner in
which dates were encoded and calculated. That failure could have a negative
impact on the Fund's operations, including the handling of securities trades,
pricing and account services. The Manager and Smith Barney have advised the
Fund that they have been reviewing all of their computer systems and actively
working on necessary changes to their systems to prepare for the year 2000 and
expect that their systems will be compliant before that date. In addition, the
Manager has been advised by the Fund's custodian, transfer agent and accounting
service agent that they are also in the process of modifying their systems with
the same goal. There can, however, be no assurance that the Manager, Smith Bar-
ney or any other service provider will be successful, or that interaction with
other non-complying computer systems will not impair Fund services at that
time.
VALUATION OF SHARES
The net asset value per share of each Portfolio is determined as of 12 noon
New York City time on each day that the New York Stock Exchange ("NYSE") is
open by dividing the Portfolio's net assets attributable to each Class (i.e.,
the value of its assets less liabilities) by the total number of shares of the
Class outstanding. Each Portfolio may also determine net asset value per share
on days when the NYSE is not open, but when the settlement of securities may
otherwise occur. As noted above, the Fund employs the amortized cost method of
valuing portfolio securities and seeks to continue to maintain a constant net
asset value of $1.00 per share. See "Valuation of Shares and Amortized Cost
Valuation" in the Statement of Additional Information.
DIVIDENDS, AUTOMATIC REINVESTMENT AND TAXES
Each Portfolio declares a dividend of substantially all of its net investment
income on each day the NYSE is open. Net investment income includes interest
accrued and discount earned and all short-term realized gains and losses on
portfolio securities and is less premium amortized and expenses accrued. Income
dividends are paid monthly and will automatically be reinvested in shares of
the same Class of the same Portfolio unless a shareholder has elected to
receive distributions
11
<PAGE>
DIVIDENDS, AUTOMATIC REINVESTMENT AND TAXES (CONTINUED)
in cash. If a shareholder redeems in full an account between payment dates, all
dividends declared up to and including the date of liquidation will be paid
with the proceeds from the redemption of shares. The per share dividends of
Class A and Class C shares of the Cash Portfolio and the Government Portfolio
may be less than the per share dividends of Class Y shares of each such Portfo-
lio principally as a result of the service fee applicable to Class A and Class
C shares. Long-term capital gains, if any, will be in the same per share amount
for each Class and will be distributed annually.
The Fund has qualified and intends to qualify each year as a regulated
investment company under Subchapter M of the Internal Revenue Code. As a regu-
lated investment company, the Fund will not be subject to Federal income taxes
to the extent that it distributes its taxable net income. For Federal income
tax purposes, dividends (other than dividends derived from income on tax-exempt
municipal obligations, if any) and capital gains distributions, if any, whether
in shares or cash, are taxable to shareholders of each Portfolio. Under the
Internal Revenue Code, no portion of the Fund's distributions will be eligible
for the dividends received deduction for corporations.
PURCHASE OF SHARES
Shares may be purchased through a brokerage account maintained with
Smith Barney Inc. ("Smith Barney"). Shares may also be purchased through a bro-
ker that clears securities transactions through Smith Barney on a fully dis-
closed basis (an "Introducing Broker") or an investment dealer in the selling
group. In addition, certain investors, including qualified retirement plans and
certain other institutional investors, may purchase shares directly from the
Fund through the Fund's transfer agent, First Data Investor Services Group,
Inc. ("First Data"). Smith Barney and other broker/dealers may charge their
customers an annual account maintenance fee in connection with a brokerage
account through which an investor purchases or holds shares. Accounts held
directly at First Data are not subject to a maintenance fee. The Fund reserves
the right to waive or change minimums, to decline any order to purchase its
shares and to suspend the offering of shares from time to time. Share certifi-
cates are issued only upon a shareholder's written request to First Data.
For shares purchased through a brokerage account maintained with Smith Barney,
Smith Barney has advised the Fund that depending on the type of securities
account, its clients' free credit balances (i.e., immediately available funds)
will be invested automatically in full shares of the designated Portfolio
either on a daily or weekly basis. In addition to this "sweep" service, share-
holders who open a Smith Barney FMA PLUSSM account, which is a full service
investment account, will also be able to take advantage of, among other things:
a free Individual Retirement Account ("IRA"), free dividend reinvestment,
unlimited checking, 100 free ATM withdrawals each year, gain/loss analysis and
online computer access to
12
<PAGE>
PURCHASE OF SHARES (CONTINUED)
account information. Smith Barney clients should contact their Financial Con-
sultant for more complete information. A complete record of Fund dividends,
purchases and redemptions will be included on such shareholders' regular Smith
Barney statements.
A. CASH PORTFOLIO AND GOVERNMENT PORTFOLIO
The minimum initial investment for Class A is $1,000 for each Cash Portfolio
and Government Portfolio account and the minimum subsequent investment is $50,
except for purchases through (a) IRAs and Self-Employed Retirement Plans, for
which the minimum initial and subsequent investments are $250 and $50, respec-
tively, and (b) retirement plans qualified under Section 403(b)(7) or Section
401(a) of the Internal Revenue Code of 1986, as amended (the "Code"), for
which the minimum initial and subsequent investments are $25. There are no
minimum investment requirements in Class A shares for employees of Travelers
Group Inc. ("Travelers") and its subsidiaries, including Smith Barney, and
Directors or Trustees of any Travelers-affiliated funds, including the Smith
Barney Mutual Funds, and their spouses and children. The minimum initial
investment for Class Y is $15,000,000 for each Cash Portfolio and Government
Portfolio account (except for purchases of Class Y shares by Smith Barney
Concert Allocation Series Inc., for which there is no minimum purchase amount)
and the minimum subse-quent investment is $50. For shareholders purchasing
shares of a Portfolio through the Systematic Investment Plan on a monthly
basis, the minimum initial investment requirement for Class A shares and the
subsequent investment requirement for all Classes is $25. For shareholders
purchasing shares of a Portfolio through the Systematic Investment Plan on a
quarterly basis, the minimum initial investment requirement for Class A shares
and the subsequent investment requirement for all Classes is $50. In addition,
Class Z shares, which are offered pursuant to a separate prospectus, are offered
Exclusively to tax-exempt employee benefit and retirement plans of Smith Barney
and its affiliates.
Class A and Class Y shares of the Cash Portfolio and Government Portfolio
are available for purchase directly by investors. Class C shares of the Cash
Portfolio and Government Portfolio are available for purchase only by Partici-
pating Plans (as defined under "Purchase of Shares--Smith Barney 401(k) and
ExecChoice(TM) Programs") opened prior to June 21, 1996, either directly or as
part of an exchange privilege transaction with certain other funds sponsored
by Smith Barney. Class C shares of the Government Portfolio that represent
previously issued "Class B" shares may only be redeemed or exchanged out of
the Fund.
B. RETIREMENT PORTFOLIO
Shares of the Retirement Portfolio are offered exclusively to retirement
plans under Sections 401 and 408 of the Internal Revenue Code. To purchase
these shares, a brokerage account for your retirement plan must be established
with Smith Barney upon completion of an account application available from
your Finan-
13
<PAGE>
PURCHASE OF SHARES (CONTINUED)
cial Consultant. Smith Barney has advised the Fund that the minimum initial
purchase is $200 for each Retirement Portfolio account, and subsequent invest-
ments may be $1.00 or more. Smith Barney also has advised the Fund that on each
business day it will automatically invest all good funds of $1.00 or more in
the brokerage account in full shares of the Retirement Portfolio, and there is
no charge for this service.
The Fund's shares are sold continuously at their net asset value next deter-
mined after a purchase order is received and becomes effective. A purchase
order becomes effective when the Fund, Smith Barney or an Introducing Broker
receives, or converts the purchase amount into, Federal funds (i.e., monies of
member banks within the Federal Reserve System held on deposit at a Federal
Reserve Bank). When orders for the purchase of Fund shares are paid for in Fed-
eral funds, or are placed by an investor with sufficient Federal funds or cash
balance in the investor's brokerage account with Smith Barney or the Introduc-
ing Broker, the order becomes effective on the day of receipt if received prior
to 12 noon, New York time, on any day the Fund calculates its net asset value.
See "Valuation of Shares." Purchase orders received after 12 noon on any busi-
ness day are effective as of the next time the net asset value is determined.
When orders for the purchase of Fund shares are paid for other than in Federal
funds, Smith Barney or the Introducing Broker, acting on behalf of the invest-
or, will complete the conversion into, or itself advance, Federal funds, and
the order will become effective on the day following its receipt by the Fund,
Smith Barney or the Introducing Broker. Shares purchased directly through First
Data begin to accrue income dividends on the day that the purchase order
becomes effective. All other shares purchased begin to accrue income dividends
on the next business day following the day that the purchase order becomes
effective.
SYSTEMATIC INVESTMENT PLAN
Shareholders may make additions to their accounts at any time by purchasing
shares through a service known as the Systematic Investment Plan. Under the
Systematic Investment Plan, Smith Barney or First Data is authorized through
preauthorized transfers of at least $25 on a monthly basis or at least $50 on a
quarterly basis to charge the regular bank account or other financial institu-
tion indicated by the shareholder, to provide systematic additions to the
shareholder's Portfolio account. A shareholder who has insufficient funds to
complete the transfer will be charged a fee of up to $25 by Smith Barney or
First Data. Additional information is available from the Fund or a Smith Barney
Financial Consultant.
SMITH BARNEY 401(K) AND EXECCHOICE(TM) PROGRAMS
Investors may be eligible to participate in the Smith Barney 401(k) Program
or the Smith Barney ExecChoice(TM) Program. To the extent applicable, the same
terms and conditions, which are outlined below, are offered to all plans par-
ticipating ("Participating Plans") in these programs.
14
<PAGE>
PURCHASE OF SHARES (CONTINUED)
The Cash Portfolio and Government Portfolio each offers to Participating
Plans Class A shares as an investment choice under the Smith Barney 401(k) and
ExecChoice(TM) Programs, provided the Participating Plan makes an initial
investment of $1,000,000 or more in Class A shares of one or more funds of the
Smith Barney Mutual Funds. Class A shares acquired through the Participating
Plans are subject to the same service and/or distribution fees as the Class A
shares acquired by other investors; however, they are not subject to any ini-
tial sales charge or contingent deferred sales charge ("CDSC").
Class C shares of the Cash Portfolio and Government Portfolio are not avail-
able for purchase by Participating Plans opened on or after June 21, 1996, but
may continue to be purchased by any Participating Plan opened prior to such
date and originally investing in such Class. Class C shares acquired are not
subject to any sales charge or CDSC.
In any year after the date a Participating Plan enrolled in the Smith Barney
401(k) Program, if its total Class C holdings in all non-money marketSmith Bar-
ney Mutual Funds equal at least $500,000 as of the calendar year-end, the Par-
ticipating Plan will be offered the opportunity to exchange all of its Class C
shares for Class A shares of the same Portfolio. Such Plans will be notified in
writing within 30 days after the last business day of the calendar year and,
unless the exchange offer has been rejected in writing, the exchange will occur
on or about the last business day of the following March.
Any Participating Plan that has not previously qualified for an exchange into
Class A shares will be offered the opportunity to exchange all of its Class C
shares for Class A shares of the same Portfolio, regardless of asset size, at
the end of the eighth year after the date the Participating Plan enrolled in
the Smith Barney 401(k) Program. Such Participating Plans will be notified of
the pending exchange in writing approximately 60 days before the eighth anni-
versary of the enrollment date and, unless the exchange has been rejected in
writing, the exchange will occur on or about the eighth anniversary date. Once
an exchange has occurred, a Participating Plan will not be eligible to acquire
additional Class C shares of the Portfolio but instead may acquire Class A
shares of the Portfolio.
Participating Plans wishing to acquire shares of the Cash Portfolio and Gov-
ernment Portfolio through the Smith Barney 401(k) Program or the Smith Barney
ExecChoice(TM) Program must purchase such shares directly from First Data. For
further information regarding these Programs, investors should contact a Smith
Barney Financial Consultant.
15
<PAGE>
REDEMPTION OF SHARES
Shareholders may redeem their shares without charge on any day the Fund cal-
culates its net asset value. See "Valuation of Shares." Redemption requests
received in proper form before 12 noon, New York time, are priced at the net
asset value as next determined on that day. Redemption requests received after
12 noon, New York time, are priced at the net asset value next determined.
Redemption requests must be made through Smith Barney, an Introducing Broker
or the securities dealer through whom the shares were purchased, except that
shareholders who purchased shares of the Fund from First Data may also redeem
shares directly through First Data. A shareholder desiring to redeem shares
represented by certificates also must present the certificates to Smith Bar-
ney, the Introducing Broker or First Data endorsed for transfer (or accompa-
nied by an endorsed stock power), signed exactly as the shares are registered.
Redemption requests involving shares represented by certificates will not be
deemed received until the certificates are received by First Data in proper
form.
The Fund normally transmits redemption proceeds on the business day follow-
ing receipt of a redemption request but, in any event, payment will be made
within three days thereafter, exclusive of days on which the NYSE is closed and
the settlement of securities does not otherwise occur, or as permitted under
the Act in extraordinary circumstances. Generally, if the redemption proceeds
are remitted to a Smith Barney brokerage account, these funds will not be
invested for the shareholder's benefit without specific instruction and Smith
Barney will benefit from the use of temporarily uninvested funds. A share-
holder who pays for Fund shares by personal check will be credited with the
proceeds of a redemption of those shares only after the purchase check has
been collected, which may take up to ten days or more. A shareholder who
anticipates the need for more immediate access to his or her investment should
purchase shares with Federal funds, by bank wire or with a certified or cash-
ier's check.
Fund shareholders who purchase securities through Smith Barney or an Intro-
ducing Broker may take advantage of special redemption procedures under which
Class A shares of the Fund will be redeemed automatically to the extent neces-
sary to satisfy debit balances arising in the shareholder's account with Smith
Barney or the Introducing Broker. One example of how an automatic redemption
may occur involves the purchase of securities. If a shareholder purchases
securities but does not pay for them by settlement date, the number of Fund
shares necessary to cover the debit will be redeemed automatically as of the
settlement date, which usually occurs three business days after the trade
date. Class A shares that are subject to a CDSC (see "Redemption of Shares--
Contingent Deferred Sales Charge") are not eligible for such automatic redemp-
tion and will only be redeemed upon specific request. If the shareholder does
not request redemption of such shares, the shareholder's account with Smith
Barney or the Introducing Broker may be margined to satisfy debit balances if
sufficient Fund shares that are not subject to any applicable
16
<PAGE>
REDEMPTION OF SHARES (CONTINUED)
CDSC are unavailable. No fee is currently charged with respect to these auto-
matic transactions. Shareholders not wishing to participate in these arrange-
ments should notify their Smith Barney Financial Consultant or the Introducing
Broker.
A written redemption request must (a) state the Class and number or dollar
amount of shares to be redeemed, (b) identify the shareholder's account number
and (c) be signed by each registered owner exactly as the shares are regis-
tered. If the shares to be redeemed were issued in certificate form, the cer-
tificates must be endorsed for transfer (or be accompanied by an endorsed stock
power) and must be submitted to First Data together with the redemption
request. Any signature appearing on a written redemption request in excess of
$10,000, share certificate or stock power must be guaranteed by an eligible
guarantor institution such as a domestic bank, savings and loan institution,
domestic credit union, member bank of the Federal Reserve System or member firm
of a national securities exchange. Written redemption requests of $10,000 or
less do not require a signature guarantee unless more than one such redemption
request is made in any 10-day period. Redemption proceeds will be mailed to an
investor's address of record. First Data may require additional supporting
documents for redemptions made by corporations, executors, administrators,
trustees or guardians. A redemption request will not be deemed properly
received until First Data receives all required documents in proper form.
TELEPHONE REDEMPTION AND EXCHANGE PROGRAM
To determine if a shareholder is entitled to participate in this program, he
or she should contact First Data at 1-800-451-2010. Once eligibility is con-
firmed, the shareholder must complete and return a Telephone/Wire Authorization
Form, along with a signature guarantee, that will be provided by First Data
upon request. (Alternatively, an investor may authorize telephone redemptions
on the new account application with the applicant's signature guarantee when
making his/her initial investment in the Fund.)
Redemptions. Redemption requests of up to $10,000 of any class or classes of
the Fund's shares may be made by eligible shareholders by calling First Data at
1-800-451-2010. Such requests may be made between 9:00 a.m. and 5:00 p.m. (New
York City time) on any day the NYSE is open. Redemptions of shares (i) by
retirement plans or (ii) for which certificates have been issued are not per-
mitted under this program.
A shareholder will have the option of having the redemption proceeds mailed
to his/her address of record or wired to a bank account predesignated by the
shareholder. Generally, redemption proceeds will be mailed or wired, as the
case may be, on the next business day following the redemption request. In
order to use the wire procedures, the bank receiving the proceeds must be a
member of the Federal Reserve System or have a correspondent relationship with
a member bank. The Fund reserves the right to charge shareholders a nominal fee
for each wire redemption. Such charges, if any, will be assessed against the
shareholder's account from
17
<PAGE>
REDEMPTION OF SHARES (CONTINUED)
which shares were redeemed. In order to change the bank account designated to
receive redemption proceeds, a shareholder must complete a new Telephone/Wire
Authorization Form and, for the protection of the shareholder's assets, will
be required to provide a signature guarantee and certain other documentation.
Exchanges. Eligible shareholders may make exchanges by telephone if the
account registration of the shares of the fund being acquired is identical to
the registration of the shares of the fund exchanged. Such exchange requests
may be made by calling First Data at 1-800-451-2010 between 9:00 a.m. and 5:00
p.m. (New York City time) on any day on which the NYSE is open. See "Exchange
Privilege" for more information.
Additional Information regarding Telephone Redemption and Exchange
Program. Neither the Fund nor its agents will be liable for following instruc-
tions communicated by telephone that are reasonably believed to be genuine.
The Fund and its agents will employ procedures designed to verify the identity
of the caller and legitimacy of instructions (for example, a shareholder's
name and account number will be required and phone calls may be recorded). The
Fund reserves the right to suspend, modify or discontinue the telephone
redemption and exchange program or to impose a charge for this service at any
time following at least seven (7) days prior notice to shareholders.
CONTINGENT DEFERRED SALES CHARGE -- CASH PORTFOLIO AND GOVERNMENT PORTFOLIO
Class A shares of the Cash Portfolio and Government Portfolio and Class C
shares of the Government Portfolio that represent previously issued "Class B"
shares acquired as part of an exchange privilege transaction, which were orig-
inally acquired in one of the other Smith Barney Mutual Funds at net asset
value subject to a CDSC, continue to be subject to any applicable CDSC of the
original fund. Therefore, such Class A and Class C shares that are redeemed
within 12 months of the date of purchase of the original fund may be subject
to a CDSC of 1.00%. The amount of any CDSC will be paid to and retained by
Smith Barney. The CDSC will be assessed based on an amount equal to the
account value at the time of redemption, and will not be imposed on increases
in value above the initial purchase price in the original Fund. In addition,
no charge will be assessed on shares derived from reinvestment of dividends or
capital gains distributions.
In determining the applicability of any CDSC, it will be assumed that a
redemption is made first of shares representing capital appreciation, next of
shares representing the reinvestments of dividends and capital gain distribu-
tions and finally of other shares held by the shareholder for the longest
period of time. The length of time that Class A and Class C shares have been
held will be calculated from the date that the shares were initially acquired
in one of the other Smith Barney Mutual Funds, and the amount of shares being
redeemed will be considered to represent, as
18
<PAGE>
REDEMPTION OF SHARES (CONTINUED)
applicable, the value of capital appreciation or dividend and capital gain dis-
tribution reinvestments in such other funds. For Federal income tax purposes,
the amount of the CDSC will reduce the gain or increase the loss, as the case
may be, on the amount realized on redemption.
The CDSC on Class A and Class C shares, if any, will be waived on (a)
exchanges (see "Exchange Privilege" below); (b) redemptions of shares within
twelve months following the death or disability of the shareholder; (c) redemp-
tion of shares made in connection with qualified distributions from retirement
plans or IRAs upon the attainment of age 59 1/2; (d) involuntary redemptions;
and (e) redemptions of shares to effect a combination of a Portfolio with any
investment company by merger, acquisition of assets or otherwise. In addition,
a shareholder who has redeemed shares from other funds of the Smith Barney
Mutual Funds may, under certain circumstances, reinvest all or part of the
redemption proceeds within 60 days and receive pro rata credit for any CDSC
imposed on the prior redemption.
CDSC waivers will be granted subject to confirmation (by Smith Barney in the
case of shareholders who are also Smith Barney clients or by First Data in the
case of all other shareholders) of the shareholder's status or holdings, as the
case may be.
For information concerning the CDSC applicable to Class A and Class C shares
acquired through the Smith Barney 401(k) or ExecChoice(TM) Program, see "Pur-
chase of Shares."
19
<PAGE>
EXCHANGE PRIVILEGE
Except as otherwise noted below, shares of each Class may be exchanged for
shares of the same Class in the following funds of the Smith Barney Mutual
Funds, to the extent shares are offered for sale in the shareholder's state of
residence. Exchanges of Class A and Class C shares are subject to minimum
investment requirements and all shares are subject to other terms or require-
ments of the fund into which exchanges are made and a sales charge may apply.
FUND NAME
Growth Funds
Concert Peachtree Growth Fund
Smith Barney Aggressive Growth Fund Inc.
Smith Barney Appreciation Fund Inc.
Smith Barney Fundamental Value Fund Inc.
Smith Barney Large Capitalization Growth Fund
Smith Barney Managed Growth Fund
Smith Barney Natural Resources Fund Inc.
Smith Barney Small Cap Blend Fund, Inc.
Smith Barney Special Equities Fund
Growth and Income Funds
Concert Social Awareness Fund
Smith Barney Convertible Fund
Smith Barney Funds, Inc. -- Large Cap Value Fund
Smith Barney Large Cap Blend Fund
Smith Barney Premium Total Return Fund
Smith Barney Utilities Fund
Taxable Fixed-Income Funds
*Smith Barney Adjustable Rate Government Income Fund
Smith Barney Diversified Strategic Income Fund
**Smith Barney Funds, Inc. -- Short-Term U.S. Treasury Securities Fund
Smith Barney Funds, Inc. -- U.S. Government Securities Fund
Smith Barney Government Securities Fund
Smith Barney High Income Fund
Smith Barney Investment Grade Bond Fund
Smith Barney Managed Governments Fund Inc.
Smith Barney Total Return Bond Fund
Tax-Exempt Funds
Smith Barney Arizona Municipals Fund Inc.
Smith Barney California Municipals Fund Inc.
Smith Barney Intermediate Maturity California Municipals Fund
20
<PAGE>
EXCHANGE PRIVILEGE (CONTINUED)
Smith Barney Intermediate Maturity New York Municipals Fund
Smith Barney Managed Municipals Fund Inc.
Smith Barney Massachusetts Municipals Fund
Smith Barney Municipal High Income Fund
Smith Barney Muni Funds -- Florida Portfolio
Smith Barney Muni Funds -- Georgia Portfolio
Smith Barney Muni Funds -- Limited Term Portfolio
Smith Barney Muni Funds -- National Portfolio
Smith Barney Muni Funds -- New York Portfolio
Smith Barney Muni Funds -- Pennsylvania Portfolio
Smith Barney New Jersey Municipals Fund Inc.
Smith Barney Oregon Municipals Fund
Global--International Funds
Smith Barney Hansberger Global Small Cap Value Fund
Smith Barney Hansberger Global Value Fund
Smith Barney World Funds, Inc. -- Emerging Markets Portfolio
Smith Barney World Funds, Inc. -- European Portfolio
Smith Barney World Funds, Inc. -- Global Government Bond Portfolio
Smith Barney World Funds, Inc. -- International Balanced Portfolio
Smith Barney World Funds, Inc. -- International Equity Portfolio
Smith Barney World Funds, Inc. -- Pacific Portfolio
Smith Barney Concert Allocation Series Inc.
Smith Barney Concert Allocation Series Inc. -- Balanced Portfolio
Smith Barney Concert Allocation Series Inc. -- Conservative Portfolio
Smith Barney Concert Allocation Series Inc. -- Global Portfolio
Smith Barney Concert Allocation Series Inc. -- Growth Portfolio
Smith Barney Concert Allocation Series Inc. -- High Growth Portfolio
Smith Barney Concert Allocation Series Inc. -- Income Portfolio
Money Market Funds
Smith Barney Municipal Money Market Fund, Inc.
**Smith Barney Muni Funds -- California Money Market Portfolio
**Smith Barney Muni Funds -- New York Money Market Portfolio
- --------------------------------------------------------------------------------
* Available for exchange with Class A and Class C shares of the Fund.
** Available for exchange with Class A and Class Y shares of the Fund.
Class A Exchanges. Class A shares of each Portfolio will be subject to the
applicable sales charge upon the exchange of such shares for Class A shares of
another fund of the Smith Barney Mutual Funds sold with a sales charge.
Class Y Exchanges. Class Y shareholders of a Portfolio who wish to exchange
all or a portion of their Class Y shares for Class Y shares in any of the funds
identified above may do so without imposition of any charge.
21
<PAGE>
EXCHANGE PRIVILEGE (CONTINUED)
Additional Information Regarding the Exchange Privilege. Excessive exchange
transactions may be detrimental to each Portfolio's performance and its share-
holders. The investment manager may determine that a pattern of frequent
exchanges is excessive and contrary to the best interests of a Portfolio's
other shareholders. In this event the Fund may, at its discretion, decide to
limit additional purchases and/or exchanges by the shareholder. Upon such a
determination the Fund will provide notice in writing or by telephone to the
shareholder at least 15 days prior to suspending the exchange privilege and
during the 15 day period the shareholder will be required to (a) redeem his or
her shares in the Portfolio or (b) remain invested in the Portfolio or
exchange into any of the funds of the Smith Barney Mutual Funds ordinarily
available, which position the shareholder would be expected to maintain for a
significant period of time. All relevant factors will be considered in deter-
mining what constitutes an abusive pattern of exchanges.
Certain shareholders may be able to exchange shares by telephone. See
"Redemption of Shares -- Telephone Redemption and Exchange Program". Exchanges
will be processed at the net asset value next determined, plus any applicable
sales charge. Redemption procedures discussed above are also applicable for
exchanging shares, and exchanges will be made upon receipt of all supporting
documents in proper form. If the account registration of the shares of the
fund being acquired is identical to the registration of the shares of the fund
exchanged, no signature guarantee is required. A capital gain or loss for tax
purposes will be realized upon the exchange, depending upon the cost or other
basis of shares redeemed. Before exchanging shares, investors should read the
current prospectus describing the shares to be acquired. These exchange privi-
leges are available to shareholders resident in any state in which the fund
shares being acquired may legally be sold. The Fund reserves the right to mod-
ify or discontinue exchange privileges upon 60 days' prior notice to share-
holders.
MINIMUM ACCOUNT SIZE
The Fund reserves the right to redeem involuntarily any shareholder's
account in the Cash Portfolio or the Government Portfolio if the aggregate net
asset value of the shares held in the account in either Portfolio is less than
$500, and to redeem involuntarily any shareholder's account in the Retirement
Portfolio if the aggregate net asset value of the shares held in the account
is less than $100. With respect to the Cash Portfolio and Government Portfo-
lio, any applicable CDSC will be deducted from the proceeds of this redemp-
tion. (If a shareholder has more than one account in these Portfolios, each
account must satisfy the minimum account size.) Before the Board of Directors
of the Fund elects to exercise such right, shareholders will receive prior
written notice and will be permitted 60 days to bring accounts up to the mini-
mum to avoid involuntary redemption.
22
<PAGE>
YIELD INFORMATION
From time to time the Fund may advertise the yield and effective yield of
its Portfolios. For the Cash Portfolio and Government Portfolio, the Fund may
advertise the yield and effective yield of Class A, Class C and Class Y
shares. These yield figures are based on historical earnings and are not
intended to indicate future performance. The yield of a Portfolio or a Class
refers to the net investment income generated by an investment in the Portfo-
lio or the Class over a specific seven-day period (which will be stated in the
advertisement). This net investment income is then annualized. The effective
yield is calculated similarly but, when annualized, the income earned by an
investment in the Portfolio or the Class is assumed to be reinvested. The
effective yield will be slightly higher than the yield because of the com-
pounding effect of the assumed reinvestment.
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
Overall responsibility for management and supervision of the Fund rests with
the Fund's Board of Directors. The Board approves all significant agreements
between the Fund and the companies that furnish services to the Fund and each
Portfolio, including agreements with the Fund's distributor, investment manag-
er, custodian and transfer agent. The day-to-day operations of each Portfolio
are delegated to the Portfolio's investment manager. The Statement of Addi-
tional Information contains background information regarding each Director and
executive officer of the Fund.
MANAGER
Mutual Management Corp. ("MMC" or the "Manager") (formerly known as Smith
Barney Mutual Funds Management Inc.) was incorporated in 1968 under the laws
of Delaware. It is a wholly-owned subsidiary of Salomon Smith Barney Holdings
Inc., the parent company of Smith Barney. Salomon Smith Barney Holdings Inc.
is a wholly-owned subsidiary of Travelers, which is a diversified
financial services holding company engaged, through its subsidiaries, princi-
pally in four business segments: Investment Services, Consumer Finance Servic-
es, Life Insurance Services and Property & Casualty Insurance Services.
MMC, Smith Barney and Salomon Smith Barney Holdings Inc. are each located at
388 Greenwich Street, New York, New York 10013. MMC is also the investment
manager for numerous other investment companies, and had aggregate assets
under management as of March 31, 1998 of approximately $100.5 billion. For the
Fund's last fiscal year the effective rate of the management fee was 0.38% of
the Cash Portfolio's average daily net assets, 0.43% of the Government Portfo-
lio's average daily net assets and 0.44% of the Retirement Portfolio's average
daily net
23
<PAGE>
MANAGEMENT OF THE FUND (CONTINUED)
assets. Total expenses for the Cash Portfolio were 0.64% of the average daily
net assets for Class A shares, 0.59% for Class C shares and 0.43% of the aver-
age daily net assets for Class Y shares. Total expenses for the Government
Portfolio were 0.61% of the average daily net assets for each of the Class A
and Class C shares and 0.51% of the average daily net assets for Class Y
shares. Total expenses for the Retirement Portfolio were 0.71% of the average
daily net assets. The Portfolios' management agreements provide for compensa-
tion of the Manager at the following annual rates: Cash Portfolio--0.45% on the
first $6 billion of the Portfolio's net assets, 0.425% on the next $6 billion,
0.40% on the next $6 billion and 0.35% on net assets in excess of $18 billion;
Government Portfolio--0.45% on the first $2.5 billion of the Portfolio's net
assets, 0.40% on the next $2.5 billion and 0.35% on net assets in excess of $5
billion; and Retirement Portfolio--0.45% on the first $1 billion of the Portfo-
lio's net assets, 0.40% on the next $1 billion and 0.35% on net assets in
excess of $2 billion.
Under each management agreement, MMC is responsible for furnishing or causing
to be furnished to each Portfolio advice and assistance with respect to the
acquisition, holding or disposal of investments and recommendations with
respect to other aspects and affairs of each Portfolio, bookkeeping, accounting
and administrative services, office space and equipment, and the services of
the officers and employees of the Fund.
The term "Smith Barney" in the title of the Fund has been adopted by permis-
sion of Smith Barney and is subject to the right of Smith Barney to elect that
the Fund stop using the term in any form or combination of its name.
DISTRIBUTOR
Smith Barney serves as principal underwriter of shares of the Fund. The Fund
has adopted for each Portfolio a plan of distribution pursuant to Rule 12b-1
under the Act (the "Plan") under which a service fee is paid by Class A and
Class C shares to Smith Barney at an annual rate of 0.10% of the Class' average
daily net assets. The fee is used by Smith Barney to pay its Financial Consul-
tants for servicing shareholder accounts for as long as a shareholder remains a
holder of the Class. The service fee is also spent by Smith Barney on the fol-
lowing types of expenses: (1) the pro rata share of other employment costs of
such Financial Consultants (e.g., FICA, employee benefits, etc.); (2) employ-
ment expenses of home office personnel primarily responsible for providing
service to a Portfolio's shareholders and (3) the pro rata share of branch
office fixed expenses (including branch overhead allocations).
Smith Barney also advises profit-sharing and pension accounts. Smith Barney
and its affiliates may in the future act as investment advisers for other
accounts.
24
<PAGE>
ADDITIONAL INFORMATION
The Fund, an open-end, diversified management investment company, was incor-
porated under Maryland law on May 28, 1974. The Fund currently has outstanding
three series of shares, representing shares in separate Portfolios -- the Cash
Portfolio, the Government Portfolio and the Retirement Portfolio -- and the
Fund's Board of Directors may authorize the creation of additional series of
shares. Each share of a Portfolio or Class represents an equal proportionate
interest in the net assets of that Portfolio or Class with each other share of
the same Portfolio or Class and is entitled to such dividends and distributions
out of the net income of that Portfolio or Class as are declared in the discre-
tion of the Board. Shareholders are entitled to one vote for each share held
and will vote in the aggregate and not by Portfolio or Class except as other-
wise required by the Act or Maryland law. As described under "Voting Rights" in
the Statement of Additional Information, the Fund ordinarily will not hold
shareholder meetings; however, shareholders have the right to call a meeting
upon a vote of 10% of the Fund's outstanding shares for the purpose of voting
to remove directors and the Fund will assist shareholders in calling such a
meeting as required by the Act.
PNC Bank, National Association, located at 17th and Chestnut Streets,
Philadelphia, Pennsylvania 19103, serves as custodian of each Portfolio's
investments.
First Data, located at Exchange Place, Boston, Massachusetts 02109, serves as
the Fund's transfer agent.
The Fund sends its shareholders a semi-annual report and an audited annual
report, which include listings of the investment securities held by the Fund at
the end of the period covered. In an effort to reduce the Fund's printing and
mailing costs, the Fund plans to consolidate the mailing of its semi-annual and
annual reports by household. This consolidation means that a household having
multiple accounts with the identical address of record will receive a single
copy of each report. Shareholders who do not want this consolidation to apply
to their account should contact their Smith Barney Financial Consultant or
First Data.
25
<PAGE>
SMITH BARNEY
-------------------------------
A Member of TravelersGroup LOGO
SMITH BARNEY MONEY FUNDS, INC.
388 Greenwich Street
New York, New York 10013
FD 2322 4/98
<PAGE>
P R O S P E C T U S
Smith Barney
Money Funds,
Inc.
Class Z Shares Only
APRIL 30, 1998
PROSPECTUS BEGINS ON PAGE ONE
LOGO Smith Barney Mutual Funds
Investing for your future.
Every day.
<PAGE>
PROSPECTUS
April 30, 1998
Smith Barney Money Funds, Inc.
388 Greenwich Street
New York, New York 10013
(800) 451-2010
Smith Barney Money Funds, Inc. (the "Fund") is a money market fund that
invests in high quality money market instruments.
The Fund seeks to provide: daily income, convenience, daily liquidity and
stability of net asset value.
Class Z Shares of the Fund are offered in two Portfolios: Cash Portfolio and
Government Portfolio.
SHARES OF THE FUND ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
THERE IS NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET
VALUE OF $1.00 PER SHARE.
This Prospectus sets forth concisely certain information about the Fund and
the Portfolios, including management fees and expenses, that prospective
investors will find helpful in making an investment decision. Investors are
encouraged to read this Prospectus carefully and retain it for future refer-
ence.
The Class Z shares described in this Prospectus are currently offered
exclusively for sale to tax-exempt employee benefit and retirement plans of
Smith Barney Inc. ("Smith Barney") or any of its affiliates ("Qualified
Plans"). Shares of other classes are offered pursuant to a separate prospectus.
Additional information about the Fund is contained in a Statement of Addi-
tional Information dated April 30, 1998, as amended or supplemented from time
to time, that is available upon request and without charge by calling or writ-
ing the Fund at the telephone number or address set forth above or by contact-
ing a Smith Barney Financial Consultant. The Statement of Additional Informa-
tion has been filed with the Securities and Exchange Commission (the "SEC") and
is incorporated by reference into this Prospectus in its entirety.
SMITH BARNEY INC.
Distributor
MUTUAL MANAGEMENT CORP.
Investment Manager
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
FEE TABLE 3
- ------------------------------------------------
FINANCIAL HIGHLIGHTS 4
- ------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES 5
- ------------------------------------------------
VALUATION OF SHARES 9
- ------------------------------------------------
DIVIDENDS, AUTOMATIC REINVESTMENT AND TAXES 9
- ------------------------------------------------
PURCHASE, EXCHANGE AND REDEMPTION OF SHARES 10
- ------------------------------------------------
YIELD INFORMATION 11
- ------------------------------------------------
MANAGEMENT OF THE FUND 11
- ------------------------------------------------
DISTRIBUTOR 12
- ------------------------------------------------
ADDITIONAL INFORMATION 12
- ------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
No person has been authorized to give any information or to make any
representations in connection with this offering other than those contained in
this Prospectus and, if given or made, such other information and
representations must not be relied upon as having been authorized by the Fund
or Smith Barney Inc. (the "Distributor"). This Prospectus does not constitute
an offer by the Fund or the Distributor to sell or a solicitation of an offer
to buy any of the securities offered hereby in any jurisdiction to any person
to whom it is unlawful to make such offer or solicitation in such jurisdiction.
- --------------------------------------------------------------------------------
2
<PAGE>
FEE TABLE
The following expense table lists the costs and expenses that an investor
will incur either directly or indirectly as a shareholder of Class Z shares of
the Fund, based on its operating expenses for its most recent fiscal year:
<TABLE>
<CAPTION>
CASH GOVERNMENT
PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------
<S> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees 0.38% 0.43%
Other Expenses 0.06 0.08
- -----------------------------------------------------------------
TOTAL FUND OPERATING EXPENSES 0.44% 0.51%
- -----------------------------------------------------------------
</TABLE>
The nature of the services for which the Fund pays management fees is
described under "Management of the Fund." "Other expenses" in the above table
includes fees for shareholder services, custodial fees, legal and accounting
fees, printing costs and registration fees.
EXAMPLE
The following example is intended to assist an investor in understanding the
various costs that an investor in the Fund will bear directly or indirectly.
The example assumes payment by the Fund of operating expenses at the levels set
forth in the table above. See "Purchase and Redemption of Shares" and "Manage-
ment of the Fund."
<TABLE>
<CAPTION>
SMITH BARNEY MONEY FUNDS, INC. 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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 $ 5 $14 $25 $55
Government Portfolio 5 16 29 64
</TABLE>
The example is included to provide a means for the investor to compare
expense levels of funds with different fee structures over varying investment
periods. To facilitate such comparison, all funds are required to utilize a
5.00% annual return assumption. This assumption is unrelated to the Fund's
prior performance and is not a projection of future performance. THIS EXAMPLE
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following information has been audited by KPMG Peat Marwick LLP, indepen-
dent auditors, whose report thereon appears in the Fund's annual report dated
December 31, 1997. The information set out below should be read in conjunction
with the financial statements and related notes that also appear in the Fund's
Annual Report to Shareholders, which is incorporated by reference into the
Statement of Additional Information.
FOR EACH SHARE OF CLASS Z CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
NET ASSET DIVIDENDS NET ASSET RATIOS TO AVERAGE NET
VALUE, NET FROM NET VALUE NET ASSETS ASSETS
YEAR ENDED BEGINNING INVESTMENT INVESTMENT END OF TOTAL END OF YEAR ---------------------
DECEMBER 31, OF YEAR INCOME INCOME YEAR RETURN (000S) EXPENSES NET INCOME
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CASH PORTFOLIO:
1997 $1.00 $0.052 $(0.052) $1.00 5.33% $6 0.44% 5.21%
1996 1.00 0.051 (0.051) 1.00 5.06 6 0.53 4.96
1995 1.00 0.055 (0.055) 1.00 5.63 5 0.52 5.49
1994(a) 1.00 0.006 (0.006) 1.00 0.60++ 5 0.47+ 5.12+
GOVERNMENT PORTFOLIO:
1997 1.00 0.050 (0.050) 1.00 5.14 51,210 0.51 5.03
1996 1.00 0.049 (0.049) 1.00 4.99 36,840 0.51 4.88
1995 1.00 0.054 (0.054) 1.00 5.56 31,113 0.50 5.42
1994(b) 1.00 0.007 (0.007) 1.00 0.70++ 29,669 0.51+ 4.93+
</TABLE>
- --------------------------------------------------------------------------------
(a)For the period from November 15, 1994 (inception date) to December 31, 1994.
(b)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.
4
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The Fund's investment objectives are maximum current income and preservation
of capital. The Fund seeks to achieve its objectives with three separate money
market portfolios, two of which are available for purchasers of Class Z
shares -- the Government Portfolio, which invests exclusively in U.S. Govern-
ment Obligations and related repurchase agreements, and the Cash Portfolio,
which may invest in Bank Obligations and high quality Commercial Paper and
other short-term obligations, Corporate Obligations and Municipal Obligations,
in addition to U.S. Government Obligations and related repurchase agreements.
The Fund operates as a money market fund, and utilizes certain investment pol-
icies so that, to the extent reasonably possible, each Portfolio'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. For example, a Portfolio will not
purchase a security which, after giving effect to any demand features, has a
remaining maturity of greater than 13 months, or maintain a dollar-weighted
average portfolio maturity in excess of 90 days (securities used as collateral
for repurchase agreements are not subject to these restrictions).
The Fund's investments are limited to United States dollar-denominated
instruments (and repurchase agreements thereon) that, at the time of acquisi-
tion (including any related credit enhancement features) have received a rat-
ing in one of the two highest categories for short-term debt obligations from
the "Requisite NRSROs", securities of issuers that have received such rating
with respect to other comparable securities, and comparable unrated securi-
ties. "Requisite NRSROs" means (a) any two nationally recognized statistical
rating organizations ("NRSROs") that have issued a rating with respect to a
security or class of debt obligations of an issuer, or (b) one NRSRO, if only
one NRSRO has issued such a rating at the time that the Fund acquires the
security. The NRSROs currently designated as such by the SEC are Standard &
Poor's Ratings Group ("S&P"), Moody's Investors Service, Inc. ("Moody's"),
Duff and Phelps Inc., Fitch IBCA, Inc. and Thomson BankWatch.
The following is a description of the types of money market instruments in
which the Fund may invest:
U.S. Government Obligations -- Obligations issued or guaranteed as to pay-
ment of principal and interest by the U.S. Government (including Treasury
bills, notes and bonds) or by its agencies and instrumentalities (such as the
Government National Mortgage Association, the Student Loan Marketing Associa-
tion, the Tennessee Valley Authority, the Bank for Cooperatives, the Farmers
Home Administration, Federal Farm Credit Banks, Federal Home Loan Banks, Fed-
eral Intermediate Credit Banks, Federal Land Banks, the Export-Import Bank of
the U.S., the Federal Housing Administration, the Federal Home Loan Mortgage
Corporation, the U.S. Postal Service, the Federal Financing Bank and the Fed-
eral National Mortgage Association). Some of these securities (such as Trea-
sury bills) are supported by the full
5
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES (CONTINUED)
faith and credit of the U.S. Treasury; others (such as obligations of the Fed-
eral 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 Mar-
keting Association) are supported only by the credit of the particular agency
or instrumentality.
Repurchase Agreements -- The Fund may enter into repurchase agreement trans-
actions with any broker/dealer or other financial institution, including the
Fund's custodian, that is deemed creditworthy by the Manager, under guidelines
approved by the Board of Directors. A repurchase agreement arises when the Fund
acquires a security for a Portfolio and simultaneously agrees to resell it to
the vendor at an agreed-upon future date, normally the next business day. The
resale price is greater than the purchase price and reflects an agreed-upon
return unrelated to the coupon rate on the purchased security. Such transac-
tions afford an opportunity for the Fund to invest temporarily available cash
at no market risk. The Fund requires continual maintenance of the market value
of the collateral in amounts at least equal to the resale price. The Fund's
risk is limited to the ability of the seller to pay the agreed-upon amount on
the delivery date; however, if the seller defaults, realization upon the col-
lateral by the Fund may be delayed or limited, or the Fund might incur a loss
if the value of the collateral securing the repurchase agreement declines and
might incur disposition costs in connection with liquidating the collateral.
The Fund will not enter into a repurchase agreement on behalf of a Portfolio
if, as a result thereof, more than 10% of that Portfolio's net assets at that
time would be comprised of repurchase agreements maturing in more than seven
days and/or any other investments deemed to be illiquid.
The following are permitted investments for the Cash Portfolio; the Govern-
ment Portfolio will invest only in U.S. Government Obligations and repurchase
agreements secured by such obligations.
Commercial Paper and Other Short-term Obligations -- Commercial paper (in-
cluding variable amount master demand notes and funding agreements) consists of
short-term, unsecured promissory notes issued by corporations, partnerships,
trusts and other entities to finance short-term credit needs. Short-term obli-
gations also include mortgage-related or asset-backed debt or debt-like instru-
ments, including pass-through certificates representing participations in, or
bonds and notes backed by, pools of mortgage, credit card, automobile or other
types of receivables. These structured financings will be supported by suffi-
cient collateral and other credit enhancements, including letters of credit,
insurance, reserve funds and guarantees by third parties, to enable such
instruments to obtain the requisite quality ratings from NRSROs. Commercial
paper and such other short-term obligations will be rated in the highest cate-
gory for short-term debt obligations by the Requisite NRSROs at the time of
acquisition by the Fund, or will be unrated securities determined to be compa-
rable thereto.
6
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES (CONTINUED)
High Quality Corporate Obligations -- Obligations of corporations that are
originally issued with a maturity of more than 397 days and are: (1) rated as
long-term debt obligations in the two highest rating categories by the Requi-
site NRSROs and (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, or are otherwise comparable to short-term debt
obligations having such a rating. The Cash Portfolio will invest only in cor-
porate obligations with remaining maturities of 13 months or less.
Bank Obligations -- Obligations (including certificates of deposit, bankers'
acceptances and fixed time deposits) and securities backed by letters of
credit of U.S. Banks or other U.S. financial institutions that are members of
the Federal Reserve System or the Federal Deposit Insurance Corporation
("FDIC") (including obligations of foreign branches of such members) if
either: (a) the principal amount of the obligation is insured in full by the
FDIC, or (b) the issuer of such obligation has capital, surplus and undivided
profits in excess of $100 million or total assets of $1 billion (as reported
in its most recently published financial statements prior to the date of
investment). Under current FDIC regulations, the maximum insurance payable as
to any one certificate of deposit is $100,000; therefore, certificates of
deposit in denominations greater than $100,000 that are purchased by the
Fund will not be fully insured. The Cash Portfolio will not purchase a fixed
time deposit with an ultimate maturity of more than six months, and will limit
its investment in fixed time deposits maturing from two business to seven cal-
endar days and/or any other investments deemed to be illiquid to 10% of its
net assets.
The Cash Portfolio will maintain at least 25% of its total assets invested
in obligations of domestic and foreign banks, subject to the above-mentioned
size criteria. The Cash Portfolio may invest in instruments issued by domestic
banks, including those issued by their branches outside the United States and
subsidiaries located in Canada, and in instruments issued by foreign banks
through their branches located in London, the United States and the United
Kingdom. In addition, the Cash Portfolio may invest in fixed time deposits of
foreign banks issued through their branches located in Grand Cayman Island,
London, Nassau, Tokyo and Toronto.
Foreign Investments -- Investments in securities issued by foreign banks or
foreign issuers present certain additional risks. Foreign issuers generally
are not subject to uniform accounting, auditing and financial reporting stan-
dards or to other regulatory practices and requirements applicable to domestic
issuers. In addition, there may be less publicly available information about a
foreign issuer than about a domestic issuer. The Cash Portfolio may invest in
Eurodollar and Yankee obligations, which are certificates of deposit issued in
U.S. dollars by foreign banks and foreign branches of U.S. banks. The risks of
Eurodollar and Yankee obligations
7
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES (CONTINUED)
include the possibility that a foreign government will not allow U.S. dollar-
denominated assets to leave the foreign country and the possibility that
adverse political or economic developments will affect investments in a foreign
country.
High Quality Municipal Obligations -- Debt obligations of states, cities,
counties, municipalities, municipal agencies and regional districts rated SP-1+
or A-1 or AA or better by S&P or MIG 2, VMIG 2 or Prime-1 or Aa or better by
Moody's or, if not rated, are determined by the Manager to be of comparable
quality. At certain times, supply/demand imbalances in the tax-exempt market
cause municipal obligations to yield more than taxable obligations of equiva-
lent credit quality and maturity length. The purchase of these securities could
enhance the Cash Portfolio's yield. The Cash Portfolio will not invest more
than 10% of its total assets in municipal obligations.
The following pertains to both Portfolios:
Each Portfolio may, to a limited degree, engage in short-term trading to
attempt to take advantage of short-term market variations, or may dispose of a
portfolio security prior to its maturity if it believes such disposition advis-
able or it needs to generate cash to satisfy redemptions. In such cases, a
Portfolio may realize a gain or loss.
Each Portfolio may borrow money from banks for temporary or emergency purpos-
es, including for the purpose of accommodating requests for the redemption of
shares while effecting an orderly liquidation of portfolio securities, and not
for leveraging purposes.
The Fund seeks to maintain a net asset value of $1.00 per share for purchases
and redemptions. To do so, the Fund uses the amortized cost method of valuing
its securities pursuant to Rule 2a-7 under the Investment Company Act of 1940
(the "Act"), certain requirements of which are summarized as follows. In accor-
dance with Rule 2a-7, each Portfolio will maintain a dollar-weighted average
portfo-lio maturity of 90 days or less, purchase only instruments which,
with any related features, have remaining maturities of 13 months or less,
and invest only in U.S. dollar denominated securities. For further information
regarding the amortized cost method, see "Valuation of Shares and Amortized
Cost Valua-tion" in the Statement of Additional Information. There can be no
Assurance that the Fund will be able to maintain a stable net asset value of
$1.00 per share.
General changes in interest rates result in increases or decreases in the
market value of the obligations held by a Portfolio (but do not affect the
amortized cost valuations). The market value of the obligations held by each
Portfolio can be expected to vary inversely to changes in prevailing interest
rates. Investors also should recognize that, in periods of declining interest
rates, each Portfolio's yield will tend to be somewhat higher than prevailing
market rates, and in periods of rising interest rates, each Portfolio's yield
will tend to be somewhat lower. Also,
8
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES (CONTINUED)
when interest rates are falling, the inflow of net new money to a Portfolio
from the continuous sale of its shares will likely be invested in instruments
producing lower yields than the balance of its investments, thereby reducing
the Portfolio's current yield. In periods of rising interest rates, the oppo-
site can be expected to occur.
None of the Fund's Portfolios may change its investment objective without the
"vote of a majority of the outstanding voting securities" as defined in the
Act. (See "Voting Rights" in the Statement of Additional Information).
Year 2000 -- The investment management services provided to the Fund by
Mutual Management Corp. (the "Manager") and the services provided to sharehold-
ers by Smith Barney, the Fund's Distributor, depend on the smooth functioning
of their computer systems. Many computer software systems in use today cannot
recognize the year 2000, but revert to 1900 or some other date, due to the man-
ner in which dates were encoded and calculated. That failure could have a nega-
tive impact on the Fund's operations, including the handling of securities
trades, pricing and account services. The Manager and Smith Barney have advised
the Fund that they have been reviewing all of their computer systems and
actively working on necessary changes to their systems to prepare for the year
2000 and expect that their systems will be compliant before that date. In addi-
tion, the Manager has been advised by the Fund's custodian, transfer agent and
accounting service agent that they are also in the process of modifying their
systems with the same goal. There can, however, be no assurance that the Manag-
er, Smith Barney or any other service provider will be successful, or that
interaction with other non-complying computer systems will not impair Fund
services at the time.
VALUATION OF SHARES
The net asset value per share of each Portfolio's Class Z shares is deter-
mined as of 12 noon New York City time on each day that the New York Stock
Exchange ("NYSE") is open by dividing the Portfolio's net assets attributable
to the Class (i.e., the value of its assets less liabilities) by the total num-
ber of shares of the Class outstanding. Each Portfolio may also determine net
asset value per share on days when the NYSE is not open, but when the settle-
ment of securities may otherwise occur. As noted above, the Fund employs the
amortized cost method of valuing portfolio securities and seeks to continue to
maintain a constant net asset value of $1.00 per share. See "Valuation of
Shares and Amortized Cost Valuation" in the Statement of Additional Informa-
tion.
DIVIDENDS, AUTOMATIC REINVESTMENT AND TAXES
Each Portfolio declares a dividend of substantially all of its net investment
income on each day the NYSE is open. Net investment income includes interest
9
<PAGE>
DIVIDENDS, AUTOMATIC REINVESTMENT AND TAXES (CONTINUED)
accrued and discount earned and all short-term realized gains and losses on
portfolio securities and is less premium amortized and expenses accrued. Income
dividends are paid monthly and will automatically be reinvested in additional
Class Z shares of the same Portfolio. If a shareholder redeems in full an
account between payment dates, all dividends declared up to and including the
date of liquidation will be paid with the proceeds from the redemption of
shares. The per share dividends of Class Z shares of each Portfolio may be
higher than the per share dividends of each Portfolio's other Classes princi-
pally as a result of lower fees applicable to Class Z shares. Long-term capital
gains, if any, will be in the same per share amount for each Class and will be
distributed annually.
The Fund has qualified and intends to qualify each year as a regulated
investment company under Subchapter M of the Internal Revenue Code. As a regu-
lated investment company, the Fund will not be subject to Federal income taxes
to the extent that it distributes its taxable net income. For Federal income
tax purposes, dividends (other than dividends derived from income on tax-exempt
municipal obligations, if any) and capital gains distributions, if any, whether
in shares or cash, are taxable to shareholders of each Portfolio. Under the
Internal Revenue Code, no portion of the Fund's distributions will be eligible
For the dividends received deduction for corporations.
PURCHASE, EXCHANGE AND REDEMPTION OF SHARES
Purchases of each Portfolio's Class Z shares must be made in accordance with
the terms of a Qualified Plan. The Fund reserves the right to reject any order
to purchase its shares and to suspend the offering of shares from time to time.
There are no minimum investment requirements for Class Z shares; however, the
Fund reserves the right to vary this policy at any time.
The Fund's shares are sold continuously at their net asset value next deter-
mined after a purchase order is received and becomes effective. A purchase
order becomes effective when Smith Barney receives, or converts the purchase
amount into, Federal funds (i.e., monies of members banks within the Federal
Reserve System held on deposit at a Federal Reserve Bank). The order becomes
effective on the day of receipt if received prior to 12 noon, New York time, on
any day the Fund calculates its net asset value. See "Valuation of Shares."
Purchase orders received after 12 noon on any business day are effective as of
the next time the net asset value is determined. Shares purchased begin to
accrue income dividends on the next business day following the day that the
purchase order becomes effective.
Shareholders may redeem their shares on any day the Fund calculates its net
asset value. See "Valuation of Shares." Redemption requests received in proper
10
<PAGE>
PURCHASE, EXCHANGE AND REDEMPTION OF SHARES (CONTINUED)
form before 12 noon, New York time, are priced at the net asset value as next
determined on that day. Redemption requests received after 12 noon, New York
time, are priced at the net asset value next determined. Shareholders acquiring
Class Z shares through a Smith Barney Qualified Plan should consult the terms
of their respective plans for redemption provisions.
Holders of Class Z shares should consult their Qualified Plans for informa-
tion about available exchange options.
YIELD INFORMATION
From time to time the Fund may advertise the yield and effective yield of the
Portfolios' Class Z shares. These yield figures are based on historical earn-
ings and are not intended to indicate future performance. The yield refers to
the net investment income generated by an investment in the Class over a spe-
cific seven-day period (which will be stated in the advertisement). This net
investment income is then annualized. The effective yield is calculated simi-
larly but, when annualized, the income earned by an investment in the Class is
assumed to be reinvested. The effective yield will be slightly higher than the
yield because of the compounding effect of the assumed reinvestment.
MANAGEMENT OF THE FUND
Mutual Management Corp. ("MMC" or the "Manager") (formerly known as Smith
Barney Mutual Funds Management Inc.) manages the day to day operations of each
Portfolio pursuant to management agreements entered into by the Fund on behalf
of each Portfolio, subject to the direction of the Board of Directors of the
Fund. MMC is a subsidiary of Salomon Smith Barney Holdings Inc., which is a
subsidiary of Travelers Group Inc., a financial services holding company
engaged, through its subsidiaries, principally in four business segments:
Investment Services, Consumer Finance Services, Life Insurance Services and
Property & Casualty Services. MMC, Smith Barney and Salomon Smith Barney Hold-
ings Inc. are each located at 388 Greenwich Street, New York, New York 10013.
MMC is also the investment manager for numerous other investment companies, and
had aggregate assets under management as of March 31, 1998 of approximately
$100.5 billion. For the Fund's last fiscal year the effective rate of the man-
agement fee was 0.38% of the Cash Portfolio's average daily net assets and
0.43% of the Government Portfolio's average daily net assets, and total expenses
were 0.44% and 0.51% of average daily net assets, respectively. The Portfo-
lios' management agreements provide for daily compensation of the Manager at
the following annual rates: Cash Portfolio--0.45% on the first $6 billion of
the Portfolio's net assets, 0.425% on the next $6 billion, 0.40% on the next $6
billion and 0.35% on net assets in excess of $18
11
<PAGE>
MANAGEMENT OF THE FUND (CONTINUED)
billion; and Government Portfolio--0.45% on the first $2.5 billion of the Port-
folio's net assets, 0.40% on the next $2.5 billion and 0.35% on net assets in
excess of $5 billion.
DISTRIBUTOR
Smith Barney serves as principal underwriter of shares of the Fund. Smith
Barney also advises profit-sharing and pension accounts. Smith Barney and its
affiliates may in the future act as investment advisers for other accounts. The
term "Smith Barney" in the title of the Fund has been adopted by permission of
Smith Barney and is subject to the right of Smith Barney to elect that the Fund
stop using the term in any form or combination of its name.
ADDITIONAL INFORMATION
The Fund, an open-end, diversified management investment company, was incor-
porated under Maryland law on May 28, 1974. The Fund currently has outstanding
three series of shares, representing shares in separate Portfolios -- the Cash
Portfolio, the Government Portfolio and the Retirement Portfolio -- and the
Fund's Board of Directors may authorize the creation of additional series of
shares. Each share of a Portfolio or Class represents an equal proportionate
interest in the net assets of that Portfolio or Class with each other share of
the same Portfolio or Class and is entitled to such dividends and distributions
out of the net income of that Portfolio or Class as are declared in the discre-
tion of the Board. Shareholders are entitled to one vote for each share held
and will vote in the aggregate and not by Portfolio or Class except as other-
wise required by the Act or Maryland law. As described under "Voting Rights" in
the Statement of Additional Information, the Fund ordinarily will not hold
shareholder meetings; however, shareholders have the right to call a meeting
upon a vote of 10% of the Fund's outstanding shares for the purpose of voting
to remove directors and the Fund will assist shareholders in calling such a
meeting as required by the Act.
PNC Bank, National Association, located at 17th and Chestnut Streets, Phila-
delphia, Pennsylvania 19103, serves as custodian of each Portfolio's invest-
ments.
First Data Investor Services Group, Inc. ("First Data"), a subsidiary of
First Data Corporation, located at Exchange Place, Boston, Massachusetts 02109,
serves as the Fund's transfer agent.
The Fund sends its shareholders a semi-annual report and an audited annual
report, which include listings of the investment securities held by the Fund at
the
12
<PAGE>
ADDITIONAL INFORMATION (CONTINUED)
end of the period covered. In an effort to reduce the Fund's printing and mail-
ing costs, the Fund plans to consolidate the mailing of its semi-annual and
annual reports by household. This consolidation means that a household having
multiple accounts with the identical address of record will receive a single
copy of each report. Shareholders who do not want this consolidation to apply
to their account should contact their Smith Barney Financial Consultant or
First Data.
13
<PAGE>
SMITH BARNEY
------------
A Member of TravelersGroup [LOGO]
SMITH BARNEY
MONEY FUNDS, INC.
388 Greenwich Street
New York, New York 10013
FD 0669 4/98
<PAGE>
CASH PORTFOLIO PROSPECTUS
April 30, 1998
- --------------------------------------------------------------------------------
3100 Breckinridge Blvd., Bldg. 200
Duluth, Georgia 30099-0062
(800) 544-5445
The Cash Portfolio (the "Portfolio") is one of the investment portfolios that
currently comprise Smith Barney Money Funds, Inc. (the "Fund"). The Portfolio
is a money market fund that invests in high quality money market instruments.
The Portfolio seeks to provide:
.Daily Income
.Convenience
.Daily Liquidity
.Stability of Net Asset Value
The Portfolio offers one Class of shares (Class A shares) to investors pur-
chasing through Registered Representatives of PFS Investments Inc. ("PFS
Investments"). In addition to Class A shares, the Portfolio offers Class C and
Class Y shares to investors purchasing through Smith Barney Inc. ("Smith Bar-
ney"), a distributor of the Fund. Those shares have different expenses than
Class A shares, which may affect performance, and are offered by a separate
prospectus.
SHARES OF THE FUND ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
THERE IS NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET
VALUE OF $1.00 PER SHARE.
This Prospectus sets forth concisely certain information about the Fund and
the Portfolio, including service fees and expenses, that prospective investors
will find helpful in making an investment decision. Investors are encouraged to
read this Prospectus carefully and retain it for future reference.
Additional information about the Fund is contained in a Statement of Addi-
tional Information dated April 30, 1998, as amended or supplemented from time
to time, that is available upon request and without charge by calling or writ-
ing the Fund at the telephone number or address set forth above, or by contact-
ing a PFS Investments Registered Representative.
The Statement of Additional Information has been filed with the Securities
and Exchange Commission (the "SEC") and is incorporated by reference into this
Prospectus in its entirety.
PFS DISTRIBUTORS, INC.
Distributor
MUTUAL MANAGEMENT CORP.
Investment Manager
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
FEE TABLE 3
- ------------------------------------------------
FINANCIAL HIGHLIGHTS 4
- ------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES 6
- ------------------------------------------------
VALUATION OF SHARES 10
- ------------------------------------------------
DIVIDENDS, AUTOMATIC REINVESTMENT AND TAXES 10
- ------------------------------------------------
PURCHASE OF SHARES 11
- ------------------------------------------------
REDEMPTION OF SHARES 12
- ------------------------------------------------
EXCHANGE PRIVILEGE 15
- ------------------------------------------------
MINIMUM ACCOUNT SIZE 17
- ------------------------------------------------
YIELD INFORMATION 17
- ------------------------------------------------
MANAGEMENT OF THE FUND 17
- ------------------------------------------------
DISTRIBUTOR 18
- ------------------------------------------------
ADDITIONAL INFORMATION 18
- ------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
No person has been authorized to give any information or to make any
representations in connection with this offering other than those contained in
this Prospectus and, if given or made, such other information and
representations must not be relied upon as having been authorized by the Fund
or the PFS Distributors, Inc. (the "Distributor"). This Prospectus does not
constitute an offer by the Fund or the Distributor to sell or a solicitation of
an offer to buy any of the securities offered hereby in any jurisdiction to any
person to whom it is unlawful to make such offer or solicitation in such
jurisdiction.
- --------------------------------------------------------------------------------
2
<PAGE>
FEE TABLE DATE
The following expense table lists the costs and expenses that an investor
will incur either directly or indirectly as a shareholder of the Portfolio
based on its operating expenses for its most recent fiscal year:
<TABLE>
<S> <C>
CASH PORTFOLIO--CLASS A
- ------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
Sales Charge Imposed on Purchases None
Sales Charge Imposed on Reinvested Dividends None
Deferred Sales Charge None*
Redemption Fee None
Exchange Fee None
- ------------------------------------------------------
ANNUAL PORTFOLIO OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees 0.38%
12b-1 Fees 0.10
Other Expenses 0.16
- ------------------------------------------------------
TOTAL PORTFOLIO OPERATING EXPENSES 0.64%
- ------------------------------------------------------
</TABLE>
* Class A shares acquired as part of an exchange privilege transaction, which
were originally acquired in one of the other Smith Barney Mutual Funds at
net asset value subject to a contingent deferred sales charge ("CDSC"),
remain subject to the original fund's CDSC while held in the Portfolio. See
"Redemption of Shares--Contingent Deferred Sales Charge."
EXAMPLE
The following example is intended to assist an investor in understanding the
various costs that an investor in the Portfolio will bear directly or indirect-
ly. The example assumes payment by the Portfolio of operating expenses at the
levels set forth in the table above. See "Purchase of Shares," "Redemption of
Shares," "Management of the Fund" and "Distributor."
<TABLE>
<CAPTION>
CASH PORTFOLIO--CLASS A 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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: $ 7 $20 $36 $80
</TABLE>
- --------------------------------------------------------------------------------
The example is included to provide a means for the investor to compare
expense levels of funds with different fee structures over varying investment
periods. To facilitate such comparison, all funds are required to utilize a
5.00% annual return assumption. This assumption is unrelated to the Portfolio's
prior performance and is not a projection of future performance. THIS EXAMPLE
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
3
<PAGE>
FINANCIAL HIGHLIGHTS DATE
The following information has been audited by KPMG Peat Marwick LLP, indepen-
dent auditors, whose report thereon appears in the Fund's annual report dated
December 31, 1997. The information set out below should be read in conjunction
with the financial statements and related notes that also appear in the Fund's
Annual Report to Shareholders, which is incorporated by reference into the
Statement of Additional Information.
FOR A SHARE OF CLASS A STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
CASH PORTFOLIO 12/31/97 12/31/96 12/31/95
- -------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------
Net Investment Income 0.050 0.050 0.054
Dividends from Net Investment Income (0.050) (0.050) (0.054)
- -------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------
TOTAL RETURN 5.12% 4.98% 5.53%
- -------------------------------------------------------------------
NET ASSETS, END OF YEAR (IN MILLIONS) $30,827 $27,434 $22,969
- -------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Net Income 5.01% 4.87% 5.39%
Expenses 0.64% 0.62 0.62
- -------------------------------------------------------------------
</TABLE>
4
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------------------------------------------
0.037 0.026 0.033 0.055 0.076 0.086 0.069
(0.037) (0.026) (0.033) (0.055) (0.076) (0.086) (0.069)
- --------------------------------------------------------------------------------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------------------------------------------
3.73% 2.63% 3.31% 5.66% 7.92% 8.97% 7.15%
- --------------------------------------------------------------------------------
$17,590 $ 2,953 $ 2,841 $ 1,784 $ 1,998 $ 2,088 $ 1,379
- --------------------------------------------------------------------------------
4.10% 2.60% 3.17% 5.55% 7.60% 8.60% 6.93%
0.64 0.64 0.60 0.52 0.52 0.54 0.58
- --------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES DATE
The Portfolio's investment objectives are maximum current income and preser-
vation of capital. The Portfolio seeks to achieve its objectives by investing
in Bank Obligations and high quality Commercial Paper and other short-term
obligations, Corporate Obligations and Municipal Obligations, in addition to
U.S. Government Obligations and related repurchase agreements. The Portfolio
operates as a money market fund, and utilizes certain investment policies so
that, to the extent reasonably possible, its price per share will not change
from $1.00, although no assurance can be given that this goal will be achieved
on a continuous basis. For example, the Portfolio will not purchase a security
which, after giving effect to any demand features, has a remaining maturity of
greater than 13 months, or maintain a dollar-weighted average portfolio matu-
rity in excess of 90 days (securities used as collateral for repurchase agree-
ments are not subject to these restrictions).
The Portfolio's investments are limited to United States dollar-denominated
instruments (and repurchase agreements thereon) that, at the time of acquisi-
tion (including any related credit enhancement features) have received a rat-
ing in one of the two highest categories for short-term debt obligations from
the "Requisite NRSROs", securities of issuers that have received such a rating
with respect to other comparable securities, and comparable unrated securi-
ties. "Requisite NRSROs" means (a) any two nationally recognized statistical
rating organizations ("NRSROs") that have issued a rating with respect to a
security or class of debt obligations of an issuer, or (b) one NRSRO, if only
one NRSRO has issued such a rating at the time that the Portfolio acquires the
security. The NRSROs currently designated as such by the SEC are Standard &
Poor's Ratings Group ("S&P"), Moody's Investors Service, Inc. ("Moody's"),
Duff and Phelps Inc., Fitch IBCA, Inc. and Thomson BankWatch.
The following is a description of the types of money market instruments in
which the Portfolio may invest:
U.S. Government Obligations--Obligations issued or guaranteed as to payment
of principal and interest by the U.S. Government (including Treasury bills,
notes and bonds) or by its agencies and instrumentalities (such as the Govern-
ment National Mortgage Association, the Student Loan Marketing Association,
the Tennessee Valley Authority, the Bank for Cooperatives, the Farmers Home
Administration, Federal Farm Credit Banks, Federal Home Loan Banks, Federal
Intermediate Credit Banks, Federal Land Banks, the Export-Import Bank of the
U.S., the Federal Housing Administration, the Federal Home Loan Mortgage Cor-
poration, the U.S. Postal Service, the Federal Financing Bank and the Federal
National Mortgage Association). Some of these securities (such as Treasury
bills) are supported by the full faith and credit of the U.S. Treasury; others
(such as obligations of the Federal Home Loan Bank) are supported by the right
of the issuer to borrow from the Treasury; while still others (such as obliga-
tions of the Student Loan Marketing Association) are supported only by the
credit of the particular agency or instrumentality.
6
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES (CONTINUED) DATE
Repurchase Agreements--The Portfolio may enter into repurchase agreement
transactions with any broker/dealer or other financial institution, including
the Fund's custodian, that is deemed creditworthy by the Manager, under guide-
lines approved by the Board of Directors. A repurchase agreement arises when
the Portfolio acquires a security and simultaneously agrees to resell it to the
vendor at an agreed-upon future date, normally the next business day. The
resale price is greater than the purchase price and reflects an agreed-upon
return unrelated to the coupon rate on the purchased security. Such transac-
tions afford an opportunity for the Portfolio to invest temporarily available
cash at no market risk. The Portfolio requires continual maintenance of the
market value of the collateral in amounts at least equal to the resale price.
The Portfolio's risk is limited to the ability of the seller to pay the agreed-
upon amount on the delivery date; however, if the seller defaults, realization
upon the collateral by the Portfolio may be delayed or limited, or the Portfo-
lio might incur a loss if the value of the collateral securing the repurchase
agreement declines and might incur disposition costs in connection with liqui-
dating the collateral. The Portfolio will not enter into a repurchase agreement
if, as a result thereof, more than 10% of its net assets at that time would be
comprised of repurchase agreements maturing in more than seven days and/or any
other investments deemed to be illiquid.
The following are permitted investments for the Portfolio:
Commercial Paper and Other Short-term Obligations--Commercial paper (includ-
ing variable amount master demand notes and funding agreements) consists of
short-term, unsecured promissory notes issued by corporations, partnerships,
trusts and other entities to finance short-term credit needs. Short-term obli-
gations also include mortgage-related or asset-backed debt or debt-like instru-
ments, including pass-through certificates representing participations in, or
bonds and notes backed by, pools of mortgage, credit card, automobile or other
types of receivables. These structured financings will be supported by suffi-
cient collateral and other credit enhancements, including letters of credit,
insurance, reserve funds and guarantees by third parties, to enable such
instruments to obtain the requisite quality ratings from NRSROs. Commercial
paper and such other short-term obligations will be rated in the highest cate-
gory for short-term debt obligations by the Requisite NRSROs at the time of
acquisition by the Fund, or will be unrated securities determined to be compa-
rable thereto.
High Quality Corporate Obligations--Obligations of corporations that are
originally issued with a maturity of greater than 397 days and are: (1) rated
as long-term debt obligations in the two highest rating categories by the Req-
uisite NRSROs and (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, or are otherwise comparable to short-term debt obliga-
tions having such a rating. The Portfolio will invest only in corporate obliga-
tions with remaining maturities of 13 months or less.
7
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES (CONTINUED) DATE
Bank Obligations--Obligations (including certificates of deposit, bankers'
acceptances and fixed time deposits) and securities backed by letters of credit
of U.S. Banks or other U.S. financial institutions that are members of the Fed-
eral Reserve System or the Federal Deposit Insurance Corporation ("FDIC") (in-
cluding obligations of foreign branches of such members) if either: (a) the
principal amount of the obligation is insured in full by the FDIC, or (b) the
issuer of such obligation has capital surplus and undivided profits in excess
of $100 million or total assets of $1 billion (as reported in its most recently
published financial statements prior to the date of investment). Under current
FDIC regulations, the maximum insurance payable as to any one certificate of
deposit is $100,000; therefore, certificates of deposit in denominations
greater than $100,000 that are purchased by the Fund will not be fully
insured. The Portfolio will not purchase a fixed time deposit with an ultimate
maturity of more than six months, and will limit its investment in fixed time
deposits maturing from two business to seven calendar days and/or any other
investments deemed to be illiquid to 10% of its net assets.
The Portfolio will maintain at least 25% of its total assets invested in
obligations of domestic and foreign banks, subject to the above-mentioned size
criteria. The Portfolio may invest in instruments issued by domestic banks,
including those issued by their branches outside the United States and subsidi-
aries located in Canada, and in instruments issued by foreign banks through
their branches located in the United States and the United Kingdom. In addi-
tion, the Portfolio may invest in fixed time deposits of foreign banks issued
through their branches located in Grand Cayman Island, London, Nassau, Tokyo
and Toronto.
Foreign Investments--Investments in securities issued by foreign banks
orforeign issuers present certain additional risks. Foreign issuers generally
are not subject to uniform accounting, auditing and financial reporting stan-
dards or to other regulatory practices and requirements applicable to domestic
issuers. In addition, there may be less publicly available information about a
foreign issuer than about a domestic issuer. The Cash Portfolio may invest in
Eurodollar and Yankee obligations, which are certificates of deposit issued in
U.S. dollars by foreign banks and foreign branches of U.S. banks. The risks of
Eurodollar and Yankee obligations include the possibility that a foreign gov-
ernment will not allow U.S. dollar-denominated assets to leave the foreign
country and the possibility that adverse political or economic developments
will affect investments in a foreign country.
High Quality Municipal Obligations--Debt obligations of states, cities, coun-
ties, municipalities, municipal agencies and regional districts rated SP-1+ or
A-1 or AA or better by S&P or MIG 2, VMIG 2 or Prime-1 or Aa or better by
Moody's or, if not rated, are determined by the Manager to be of comparable
quality. At certain times, supply/demand imbalances in the tax-exempt market
cause municipal obligations to yield more than taxable obligations of equiva-
lent credit quality and maturity length. The purchase of these securities could
enhance the Portfolio's
8
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES (CONTINUED) DATE
yield. The Portfolio will not invest more than 10% of its total assets in
municipal obligations.
The Portfolio may, to a limited degree, engage in short-term trading to
attempt to take advantage of short-term market variations, or may dispose of a
portfolio security prior to its maturity if it believes such disposition advis-
able or it needs to generate cash to satisfy redemptions. In such cases, the
Portfolio may realize a gain or loss.
The Portfolio may borrow money from banks for temporary or emergency
purposes, including for the purpose of accommodating requests for the redemp-
tion of shares while effecting an orderly liquidation of portfolio securities,
and not for leveraging purposes.
The Fund seeks to maintain a net asset value of $1.00 per share for purchases
and redemptions. To do so, the Fund uses the amortized cost method of valuing
its securities pursuant to Rule 2a-7 under the Investment Company Act of 1940
(the "Act"), certain requirements of which are summarized as follows. In accor-
dance with Rule 2a-7, the Fund will maintain a dollar-weighted average portfo-
lio maturity of 90 days or less, purchase only instruments which, with any
related features, have remaining maturities of 13 months or less, and invest
only in U.S. dollar denominated securities. For further information regarding
the amortized cost method, see "Valuation of Shares and Amortized Cost Valua-
tion" in the Statement of Additional Information. There can be no assurance
that the Fund will be able to maintain a stable net asset value of $1.00 per
share.
General changes in interest rates result in increases or decreases in the
market value of the obligations held by the Portfolio (but do not affect the
amortized cost valuations). The market value of the obligations held by the
Portfolio can be expected to vary inversely to changes in prevailing interest
rates. Investors also should recognize that, in periods of declining interest
rates, the Portfolio's yield will tend to be somewhat higher than prevailing
market rates, and in periods of rising interest rates, the Portfolio's yield
will tend to be somewhat lower. Also, when interest rates are falling, the
inflow of net new money to the Portfolio from the continuous sale of its shares
will likely be invested in instruments producing lower yields than the balance
of its investments, thereby reducing the Portfolio's current yield. In periods
of rising interest rates, the opposite can be expected to occur.
The Portfolio cannot change its investment objective without the "vote of a
majority of the outstanding voting securities" as defined in the Act. (See
"Voting Rights" in the Statement of Additional Information).
Year 2000--The investment management services provided to the Fund by Mutual
Management Corp. (the "Manager") and the services provided to shareholders by
Smith Barney, the Fund's Distributor, depend on the smooth functioning of their
computer systems. Many computer software systems in use today cannot recognize
the year 2000, but revert to 1900 or some other date, due to the manner
9
<PAGE>
DATE
INVESTMENT OBJECTIVES AND POLICIES (CONTINUED)
in which dates were encoded and calculated. That failure could have a negative
impact on the Fund's operations, including the handling of securities trades,
pricing and account services. The Manager and Smith Barney have advised the
Fund that they have been reviewing all of their computer systems and actively
working on necessary changes to their systems to prepare for the year 2000 and
expect that their systems will be compliant before that date. In addition, the
Manager has been advised by the Fund's custodian, transfer agent and account-
ing service agent that they are also in the process of modifying their systems
with the same goal. There can, however, be no assurance that the Manager,
Smith Barney or any other service provider will be successful, or that inter-
action with other non-complying computer systems will not impair Fund services
at that time.
VALUATION OF SHARES
The net asset value per share of the Portfolio is determined as of 12 noon
New York City time on each day that the New York Stock Exchange ("NYSE") is
open by dividing the Portfolio's net assets ( i.e., the value of its assets
less liabilities) by the total number of shares outstanding. The Portfolio may
also determine net asset value per share on days when the NYSE is not open,
but when the settlement of securities may otherwise occur. As noted above, the
Portfolio employs the amortized cost method of valuing portfolio securities
and seeks to continue to maintain a constant net asset value of $1.00 per
share. See "Valuation of Shares and Amortized Cost Valuation" in the Statement
of Additional Information.
DIVIDENDS, AUTOMATIC REINVESTMENT AND TAXES
The Portfolio declares a dividend of substantially all of its net investment
income on each day the NYSE is open. Net investment income includes interest
accrued and discount earned and all short-term realized gains and losses on
portfolio securities and is less premium amortized and expenses accrued.
Income dividends are paid monthly and will automatically be reinvested in
shares of the Portfolio unless a shareholder has elected to receive distribu-
tions in cash. If a shareholder redeems in full an account between payment
dates, all dividends declared up to and including the date of liquidation will
be paid at the end of the month in which the redemption occurs. Long-term cap-
ital gains, if any, will be distributed annually.
The Portfolio has qualified and intends to qualify each year as a regulated
investment company under Subchapter M of the Internal Revenue Code. As a regu-
lated investment company,the Portfolio will not be subject to Federal income
taxes to the extent that it distributes its taxable net income. For Federal
income tax purposes, dividends (other than dividends derived from income on
tax-exempt municipal obligations, if any) and capital gains distributions, if
any, whether in shares or cash, are
10
<PAGE>
DATE
DIVIDENDS, AUTOMATIC REINVESTMENT AND TAXES (CONTINUED)
taxable to shareholders of the Portfolio. Under the Internal Revenue Code, no
portion of the Portfolio's distributions will be eligible for the dividends
received deduction for corporations.
PURCHASE OF SHARES
The Portfolio offers one Class of shares (Class A shares) to investors pur-
chasing through PFS Investments Registered Representatives. Class A shares are
sold to investors without an initial sales charge.
Initial purchases of shares must be made through a PFS Investments Registered
Representative by completing the appropriate application found in the prospec-
tus. The completed application should be forwarded to PFS Shareholder Services
(the Fund's "Sub-Transfer Agent"), 3100 Breckinridge Blvd., Bldg 200, Duluth,
Georgia 30099-0062. Checks drawn on foreign banks must be payable in U.S. dol-
lars and have the routing number of the U.S. bank encoded on the check. Subse-
quent investments may be sent directly to the Sub-Transfer Agent.
The minimum initial investment is $1,000 and the minimum subsequent invest-
ment is $50, except for purchases through (a) Individual Retirement Accounts
("IRAs") and Self-Employed Retirement Plans, for which the minimum initial and
subsequent investments are $250 and $50, respectively, and (b) retirement plans
qualified under Section 403(b)(7) or Section 401(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), for which the minimum initial and subse-
quent investments are $25. For the Fund's Systematic Investment Plan, the mini-
mum initial and subsequent requirement is $25. There are no minimum investment
requirements for employees of Travelers Group Inc. ("Travelers") and its sub-
sidiaries, including Smith Barney, and Directors or Trustees of any Travelers-
affiliated funds, including the Smith Barney Mutual Funds, and their spouses
and children. The Fund reserves the right to waive or change minimums,
to decline any order to purchase its shares and to suspend the offering
of shares from time to time. Share certifi-cates are issued only
upon a shareholder's written request to the Sub-Transfer Agent.
A shareholder who has insufficient funds to complete any purchase will
be charged a fee by PFS Distributors, Inc. ("PFS"), the Fund's distributor, or
the Sub-Transfer Agent of $25 per returned purchase.
The Portfolio's shares are sold continuously at their net asset value next
determined after a purchase order is received and becomes effective. A purchase
order becomes effective when the Sub-Transfer Agent receives, or converts the
purchase amount into, Federal funds (i.e., monies of member banks within the
Federal Reserve System held on deposit at a Federal Reserve Bank). When orders
for the purchase of Portfolio shares are paid for in Federal funds, the order
becomes effective on the day of receipt if received prior to 12 noon, New York
time, on any day the Portfolio calculates its net asset value. See "Valuation
of Shares." Purchase
11
<PAGE>
DATE
PURCHASE OF SHARES (CONTINUED)
orders received after 12 noon on any business day are effective as of the next
time the net asset value is determined. When orders for the purchase of Port-
folio shares are paid for other than in Federal funds, the Sub-Transfer Agent,
acting on behalf of the investor, will complete the conversion into, or itself
advance, Federal funds, and the order will become effective on the day follow-
ing its receipt by the Sub-Transfer Agent. All shares purchased begin to
accrue income dividends on the next business day following the day that the
purchase order becomes effective.
SYSTEMATIC INVESTMENT PLAN
Shareholders may make additions to their accounts at any time by purchasing
shares through a service known as the Systematic Investment Plan. Under the
Systematic Investment Plan, the Sub-Transfer Agent is authorized through pre-
authorized transfers of $25 or more to charge the regular bank account or
other financial institution indicated by the shareholder on a monthly basis to
provide systematic additions to the shareholder's Portfolio account. A share-
holder who has insufficient funds to complete the transfer will be charged a
fee of up to $25 by PFS or the Sub-Transfer Agent. A shareholder who places a
stop payment on a transfer or the transfer is returned because the account has
been closed, will be charged a fee of $25 by PFS or the Sub-Transfer Agent.
REDEMPTION OF SHARES
Shareholders may redeem for cash some or all of their shares of the Portfo-
lio at any time by sending a written request in proper form directly to the
Sub-Transfer Agent, PFS Shareholder Services, at 3100 Breckinridge Blvd.,
Bldg. 200, Duluth, Georgia 30099-0062. If you should have any questions con-
cerning how to redeem your account after reviewing the information below,
please contact the Sub-Transfer Agent at (800) 544-5445 or Spanish-speaking
representatives at (800) 544-7278, or TDD Line for the Hearing Impaired at
(800) 824-1721.
The request for redemption must be signed by all persons in whose names the
shares are registered. Signatures must conform exactly to the account regis-
tration. If the proceeds of the redemption exceed $50,000, or if the proceeds
are not paid to the record owner(s) at the record address, if the sharehold-
er(s) has had an address change in the past 45 days, or if the shareholder is
a corporation, sole proprietor, partnership, trust or fiduciary, signature(s)
must be guaranteed by one of the following: a bank or trust company; a broker-
dealer; a credit union; a national securities exchange, registered securities
association or clearing agency; a savings and loan association; or a federal
savings bank.
Generally, a properly completed Redemption Form with any required signature
guarantee is all that is required for a redemption. In some cases, however,
other documents may be necessary. For example, in the case of shareholders
holding certificates, the certificates for the shares being redeemed must
accompany the
12
<PAGE>
REDEMPTION OF SHARES (CONTINUED) DATE
redemption request. Additional documentary evidence of authority is also
required by the Sub-Transfer Agent in the event redemption is requested by a
corporation, partnership, trust, fiduciary, executor or administrator. Addi-
tionally, if a shareholder requests a redemption from a Retirement Plan account
(IRA, SEP or 403(b)(7)), such request must state whether or not federal income
tax is to be withheld from the proceeds of the redemption check. A shareholder
may utilize the Sub-Transfer Agent's FAX to redeem shares as long as a signa-
ture guarantee or other documentary evidence is not required. Redemption
requests should be properly signed by all owners of the account and faxed to
the Sub-Transfer Agent at (800) 554-2374. Facsimile redemptions may not be
available if the shareholder cannot reach the Sub-Transfer Agent by FAX,
whether because all telephone lines are busy or for any other reason; in such
case, a shareholder would have to use the Portfolio's regular redemption proce-
dure described above. Facsimile redemptions received by the Sub-Transfer Agent
prior to 12:00 p.m. Eastern time on a regular business day will be processed at
the net asset value per share determined that day.
In all cases, the redemption price is the net asset value per share of the
Portfolio next determined after the request for redemption is received in
proper form by the Sub-Transfer Agent. Payment for shares redeemed will be made
by check mailed within three days after acceptance by the Sub-Transfer Agent of
the request and any other necessary documents in proper order. Such payment may
be postponed or the right of redemption suspended as provided by the rules of
the SEC. If the shares to be redeemed have been recently purchased by check or
draft, the Sub-Transfer Agent may hold the payment of the proceeds until the
purchase check or draft has cleared, usually a period of up to 15 days. Any
taxable gain or loss will be recognized by the shareholder upon redemption of
shares.
After following the above-stated redemption guidelines, a shareholder(s) may
elect to have the redemption proceeds wire-transferred directly to the share-
holder's bank account of record (defined as a currently established pre-autho-
rized draft on the shareholder's account with no changes within the previous 45
days), as long as the bank account is registered in the same name(s) as the
account with the Portfo- lio. If the proceeds are not to be wired to the bank
account of record, or mailed to the registered owner(s), a signature guarantee
will be required from all shareholder(s). A $25 service fee will be charged by
the Sub-Transfer Agent to help defray the administrative expense of executing a
wire redemption. Redemption proceeds will normally be wired to the designated
bank account on the next business day following the redemption, and should
ordinarily be credited to the shareholders' bank account by his/her bank within
48 to 72 hours.
CONTINGENT DEFERRED SALES CHARGE
Class A shares of the Cash Portfolio, that were originally acquired in one of
the other Smith Barney Mutual Funds at net asset value subject to a CDSC, con-
tinue to be subject to any applicable CDSC of the original fund. Therefore,
such Class A
13
<PAGE>
REDEMPTION OF SHARES (CONTINUED) DATE
shares that are redeemed within 12 months of the date of purchase of the orig-
inal fund may be subject to a CDSC of 1.00%. The amount of any CDSC will be
paid to PFS. The CDSC will be assessed based on an amount equal to the account
value at the time of redemption, and will not be imposed on increases in value
above the initial purchase price in the original Fund. In addition, no charge
will be assessed on shares derived from reinvestment of dividends or capital
gains distributions.
In determining the applicability of any CDSC, it will be assumed that a
redemption is made first of shares representing capital appreciation, next of
shares representing the reinvestments of dividends and capital gain distribu-
tions and finally of other shares held by the shareholder for the longest
period of time. The length of time that Class A shares have been held will be
calculated from the date that the shares were initially acquired in one of the
other Smith Barney Mutual Funds, and the amount of shares being redeemed will
be considered to represent, as applicable, the value of capital appreciation
or dividend and capital gain distribution reinvestments in such other funds.
For Federal income tax purposes, the amount of the CDSC will reduce the gain
or increase the loss, as the case may be, on the amount realized on redemp-
tion.
The CDSC on Class A shares, if any, will be waived on (a) exchanges (see
"Exchange Privilege" below); (b) automatic cash withdrawals in amounts equal
to or less than 1.00% per month of the value of the shareholder's shares at
the time the withdrawal plan commences (see "Redemption of Shares--Automatic
Cash Withdrawal Plan"): (c) redemptions of shares within twelve months follow-
ing the death or disability of the shareholder; (d) redemptions of shares made
in connection with qualified distributions from retirement plans or IRAs upon
the attainment of age 59 1/2; (e) involuntary redemptions; and (f) redemptions
of shares to effect a combination of the Portfolio with any investment company
by merger, acquisition of assets or otherwise. In addition, a shareholder who
has redeemed shares from other funds of the Smith Barney Mutual Funds may,
under certain circumstances, reinvest all or part of the redemption proceeds
within 60 days and receive pro rata credit for any CDSC imposed on the prior
redemption.
CDSC waivers will be granted subject to confirmation by PFS of the share-
holder's status or holdings, as the case may be.
AUTOMATIC CASH WITHDRAWAL PLAN
The Portfolio offers shareholders an automatic cash withdrawal plan, under
which shareholders who own shares with a value of at least $10,000 may elect
to receive periodic cash payments of at least $50 monthly or quarterly.
Retirement plan accounts are eligible for automatic cash withdrawal plans only
where the shareholder is eligible to receive qualified distributions and has
an account value of at least $5,000. The withdrawal plan will be carried over
on the exchanges between funds. Any applicable CDSC will not be waived on
amounts withdrawn by a shareholder that exceed 1.00% per month of the value of
the shareholder's shares subject
14
<PAGE>
REDEMPTION OF SHARES (CONTINUED)
to the CDSC at the time the withdrawal plan commences. For further information
regarding the automatic cash withdrawal plan, shareholders should contact the
Sub-Transfer Agent.
EXCHANGE PRIVILEGE
Except as otherwise noted below, Class A shares may be exchanged for Class A
shares of the following funds of the Smith Barney Mutual Funds, to the extent
shares are offered for sale in the shareholder's state of residence. Exchanges
of Class A shares are subject to minimum investment requirements and all shares
are subject to other terms or requirements of the fund into which exchanges are
made, including the appropriate sales charge.
FUND NAME
Concert Investment Series
Emerging Growth Fund
International Equity Fund
Growth Fund
Growth and Income Fund
Government Fund
Municipal Bond Fund
Concert Social Awareness Fund
Smith Barney Appreciation Fund Inc.
Concert Peachtree Growth Fund
Smith Barney Concert Allocation Series Inc.
Balanced Portfolio
Conservative Portfolio
Global Portfolio
Growth Portfolio
High Growth Portfolio
Income Portfolio
Smith Barney Investment Grade Bond Fund
Class A shares of the Portfolio will be subject to the applicable sales
charge upon the exchange of such shares for Class A shares of another fund of
the Smith Barney Mutual Funds sold with a sales charge.
Excessive exchange transactions may be detrimental to the Portfolio's perfor-
mance and its shareholders. The investment manager may determine that a pattern
of frequent exchanges is excessive and contrary to the best interests of the
Portfolio's other shareholders. In this event the Portfolio may, at its discre-
tion, decide to limit additional purchases and/or exchanges by the shareholder.
Upon such a determination by the Portfolio, PFS will provide notice in writing
or by telephone to the shareholder at least 15 days prior to suspending the
exchange privilege and during
15
<PAGE>
EXCHANGE PRIVILEGE (CONTINUED)
the 15 day period the shareholder will be required to (a) redeem his or her
shares in the Portfolio or (b) remain invested in the Portfolio or exchange
into any of the funds of the Smith Barney Mutual Funds listed under "Exchange
Privilege," which position the shareholder would be expected to maintain for a
significant period of time. All relevant factors will be considered in deter-
mining what constitutes an abusive pattern of exchanges.
Exchanges will be processed at the net asset value next determined, plus any
applicable sales charge. Redemption procedures discussed above are also appli-
cable for exchanging shares, and exchanges will be made upon receipt of all
supporting documents in proper form. If the account registration of the shares
of the fund being acquired is identical to the registration of the shares of
the fund exchanged, no signature guarantee is required. A capital gain or loss
for tax purposes will be realized upon the exchange, depending upon the cost or
other basis of shares redeemed. Before exchanging shares, investors should read
the current prospectus describing the shares to be acquired. These exchange
privileges are available to shareholders resident in any state in which the
fund shares being acquired may legally be sold. The Fund reserves the right to
modify or discontinue exchange privileges upon 60 days' prior notice to share-
holders.
CHECK WRITING PRIVILEGE
A shareholder holding shares for which certificates have not been issued may
appoint the Fund's Sub-Transfer Agent as agent and request, on the application
form, special forms of drafts payable through Fidelity National Bank ("Fideli-
ty"). The Sub-Transfer Agent issues these drafts on behalf of the Portfolio in
books of ten drafts, for which there is a charge by PFS of $7.50 per book.
These drafts may be made payable by the shareholder to the order of any person
in any amount of $250 or more. When a draft is presented to Fidelity for pay-
ment, full and fractional shares required to cover the amount of the draft will
be redeemed from the shareholder's account by the Sub-Transfer Agent at the
next determined net asset value. Any gain or loss realized on the sale of
shares is a taxable event. See "Redemption of Shares". Drafts will not be hon-
ored for redemption of shares held less than fifteen (15) days, or until the
Sub-Transfer Agent is presented with satisfactory evidence that the purchase
check has cleared. Any shares for which there are outstanding certificates may
not be redeemed by draft. If the amount of the draft is greater than the pro-
ceeds of all uncertificated shares held in the shareholder's account, the draft
will be returned and the shareholder may be subject to additional charges
imposed by banks. A shareholder may not liquidate the entire account by means
of a draft. The check writing privilege may be terminated or suspended at any
time by PFS or Fidelity. Retirement plans and accounts that are subject to
backup withholding are not eligible for the privilege. A "stop payment" system
is not available on the checks. Fidelity will only honor those drafts autho-
rized by PFS. A shareholder who has insufficient funds to honor a draft will be
charged a
16
<PAGE>
EXCHANGE PRIVILEGE (CONTINUED)
fee of $25 by PFS or the Sub-Transfer Agent. To defray administration expenses
involved with providing copies of money market drafts, there is a $10 fee for
each draft copy requested.
MINIMUM ACCOUNT SIZE
The Fund reserves the right to redeem involuntarily any shareholder's
account in the Portfolio if the aggregate net asset value of the shares held
in the Portfolio account is less than $500. Any applicable CDSC will be
deducted from the proceeds of this redemption. (If a shareholder has more than
one account in the Portfolio, each account must satisfy the minimum account
size.) Before the Fund elects to exercise such right, shareholders will
receive prior written notice and will be permitted 60 days to bring accounts
up to the minimum to avoid involuntary redemption.
YIELD INFORMATION
From time to time the Fund may advertise the yield and effective yield of
the Portfolio. These yield figures are based on historical earnings and are
not intended to indicate future performance. The yield of the Portfolio or a
Class refers to the net investment income generated by an investment in the
Portfolio or the Class over a specific seven-day period (which will be stated
in the advertisement). This net investment income is then annualized. The
effective yield is calculated similarly but, when annualized, the income
earned by an investment in the Portfolio or the Class is assumed to be rein-
vested. The effective yield will be slightly higher than the yield because of
the compounding effect of the assumed reinvestment.
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
Overall responsibility for management and supervision of the Fund rests with
the Fund's Board of Directors. The Board approves all significant agreements
between the Fund and the companies that furnish services to the Fund and the
Portfolio, including agreements with the Fund's distributor, investment manag-
er, custodian and transfer agent. The day-to-day operations of the Portfolio
are delegated to the Portfolio's investment manager. The Statement of Addi-
tional Information contains background information regarding each Director and
executive officer of the Fund.
MANAGER
Mutual Management Corp. ("MMC" or the "Manager") (formerly known as Smith
Barney Mutual Funds Management Inc.) was incorporated in 1968 under the laws
of Delaware. It is a wholly-owned subsidiary of Salomon Smith Barney Holdings
Inc., the parent company of Smith Barney. Salomon Smith Barney Holdings Inc.
17
<PAGE>
MANAGEMENT OF THE FUND (CONTINUED) DATE
is a wholly-owned subsidiary of Travelers, which is a diversified
financial services holding company engaged, through its subsidiaries, princi-
pally in four business segments: Investment Services, Consumer Finance Servic-
es, Life Insurance Services and Property & Casualty Insurance Services.
MMC, Smith Barney and Salomon Smith Barney Holdings Inc. are each located at
388 Greenwich Street, New York, New York 10013. MMC is also the investment
manager for numerous other investment companies, and had aggregate assets
under management as of March 31, 1998 of approximately $100.5 billion. For the
Fund's last fiscal year ended December 31, 1997 the effective rate of the man-
agement fee was 0.38% of the Portfolio's average daily net assets. The Portfo-
lio's management agreement provides for compensation of the Manager at the
following annual rates: 0.45% on the first $6 billion of the Portfolio's net
assets, 0.425% on the next $6 billion, 0.40% on the next $6 billion and 0.35%
on net assets in excess of $18 billion.
Under the management agreement MMC is responsible for furnishing or causing
to be furnished to the Portfolio advice and assistance with respect to the
acquisition, holding or disposal of investments and recommendations with
respect to other aspects and affairs of the Portfolio, bookkeeping, accounting
and administrative services, office space and equipment, and the services of
the officers and employees of the Fund.
The term "Smith Barney" in the title of the Fund has been adopted by permis-
sion of Smith Barney and is subject to the right of Smith Barney to elect that
the Fund stop using the term in any form or combination of its name.
DISTRIBUTOR
PFS is located at 3100 Breckinridge Boulevard, Duluth, Georgia 30099-0062.
PFS distributes shares of the Fund as principal underwriter and as such con-
ducts a continuous offering pursuant to a "best efforts" arrangement requiring
PFS to take and pay for only such securities as may be sold to the public.
Pursuant to a plan of distribution adopted by the Fund under Rule 12b-1 under
the 1940 Act (the "Plan"), PFS is paid an annual service fee with respect to
Class A shares of the Fund at the annual rate of 0.10% of the average daily
net assets of the Class A shares. The fees are paid to PFS which in turn pays
PFS Investments to pay its Registered Representatives for servicing share-
holder accounts for as long as a shareholder remains a holder of the Class.
The service fee is also spent by PFS to cover payments to and expenses of PFS
Investments Registered Representatives and other persons who provide share-
holder services.
ADDITIONAL INFORMATION
From time to time, PFS or its affiliates may also pay for certain non-cash
sales incentives provided to PFS Investments Registered Representatives. Such
incentives do not have any effect on the net amount invested. PFS may from
time to
18
<PAGE>
ADDITIONAL INFORMATION (CONTINUED)
time, pay or allow additional reallowances or promotional incentives, in the
form of cash or other compensation to PFS Investments Registered Representa-
tives that sell shares of the Fund.
The Fund, an open-end, diversified management investment company, was incor-
porated under Maryland law on May 28, 1974. The Fund currently has outstanding
three series of shares, representing shares in separate Portfolios--the Cash
Portfolio, the Government Portfolio and the Retirement Portfolio --and the
Fund's Board of Directors may authorize the creation of additional series of
shares. Each share of a Portfolio or Class represents an equal proportionate
interest in the net assets of that Portfolio or Class with each other share of
the same Portfolio or Class and is entitled to such dividends and distributions
out of the net income of that Portfolio or Class as are declared in the discre-
tion of the Board. Shareholders are entitled to one vote for each share held
and will vote in the aggregate and not by Portfolio or Class except as other-
wise required by the Act or Maryland law. As described under "Voting Rights" in
the Statement of Additional Information, the Fund ordinarily will not hold
shareholder meetings; however, shareholders have the right to call a meeting
upon a vote of 10% of the Fund's outstanding shares for the purpose of voting
to remove directors and the Fund will assist shareholders in calling such a
meeting as required by the Act.
PNC Bank, National Association, located at 17th and Chestnut Streets, Phila-
delphia, Pennsylvania 19103, serves as custodian of the Portfolio's invest-
ments.
First Data Investor Services Group, Inc. located at Exchange Place, Boston,
Massachusetts 02109, serves as the Fund's transfer agent.
PFS Shareholder Services is located at 3100 Breckinridge Blvd., Bldg. 200,
Duluth, Georgia 30099-0062 and serves as the Fund's Sub-Transfer Agent.
The Fund sends its shareholders a semi-annual report and an audited annual
report, which include listings of the investment securities held by the Fund at
the end of the period covered. In an effort to reduce the Fund's printing and
mailing costs, the Fund plans to consolidate the mailing of its semi-annual and
annual reports by household. This consolidation means that a household having
multiple accounts with the identical address of record will receive a single
copy of each report. Shareholders who do not want this consolidation to apply
to their account should contact their PFS Investments Registered Representative
or the Fund's Sub-Transfer agent.
Also available at the shareholder's request, is an Account Transcript identi-
fying every financial transaction in an account since it was opened. To defray
administrative expenses involved with providing multiple years worth of infor-
mation, there is a $15 charge for each Account Transcript requested.
Additional copies of tax forms are available at the shareholder's request. A
$10 charge for each tax form will be assessed.
Additional information regarding the Sub-Transfer Agent's services may be
obtained by contacting the Client Services Department at (800) 544-5445.
19
<PAGE>
- --------------------------------------------------------------------------------
SMITH BARNEY
-------------------------------
A Member of TravelersGroup LOGO
SMITH BARNEY MONEY FUNDS, INC.
3100 Breckinridge Blvd., Bldg. 200
Duluth, Georgia 30199-0062
(800) 544-5445
Part B: Statement of Additional Information
SMITH BARNEY MONEY FUNDS, INC.
388 Greenwich Street
New York, New York 10013
STATEMENT OF ADDITIONAL INFORMATION
April 30, 1998
Smith Barney Money Funds, Inc. is a money market
fund that invests in high quality money market
instruments. The Fund seeks to provide:
Daily Income Convenience Daily Liquidity
Stability of Net Asset Value
Shares of the Fund are currently offered in three Portfolios:
Cash Portfolio
Government Portfolio
Retirement Portfolio
This Statement of Additional information is not a Prospectus. It is
intended to provide more detailed information about Smith Barney Money Funds,
Inc. (the "Fund") as well as matters already discussed in the Prospectus and
therefore should be read in conjunction with the April 30, 1998 Prospectus
which may be obtained from the Fund or a Smith Barney Financial Consultant.
TABLE OF CONTENTS
Statement of Additional Information Page
Directors and Officers 2
Investment Restrictions and Fundamental Policies 4
Computation of Yield 7
Valuation of Shares and Amortized Cost Valuation 7
IRA and Other Prototype Retirement Plan 8
Purchase of Shares 9
The Management Agreement, Plan of Distribution and Other Services 9
Voting Rights 11
Custodian, Transfer and Dividend Disbursing Agents 13
Independent Auditors 13
Financial Statements 13
Appendix - Securities Ratings 14
DIRECTORS AND OFFICERS
DONALD R. FOLEY, Director
Retired; 3668 Freshwater Drive, Jupiter, Florida 33477. Director of ten
investment companies associated with Smith Barney. Formerly Vice President of
Edwin Bird Wilson, Incorporated (advertising); 75.
PAUL HARDIN, Director
Professor of Law at University of North Carolina at Chapel Hill; 12083
Morehead, Chapel Hill, North Carolina 27514; Director of twelve investment
companies associated with Smith Barney; Director of The Summit Bancorporation;
Formerly, Chancellor of the University of North Carolina at Chapel Hill,
University of North Carolina; 66.
*HEATH B. McLENDON, Chairman of the Board, President and Chief Executive
Officer
Managing Director of Smith Barney; Director of forty-two investment companies
associated with Smith Barney; Director and President of Mutual Management
Corp. ("MMC or the "Manager") (formerly known as Smith Barney Mutual Funds
Management Inc.) and Travelers Investment Adviser, Inc. ("TIA"); Chairman of
the Board of Smith Barney Strategy Advisors Inc.; Prior to July 1993, Senior
Executive Vice President of Shearson Lehman Brothers Inc.; Vice Chairman of
Shearson Asset Management; Director of PanAgora Asset Management, Inc. and
PanAgora Asset Management Limited; 64.
RODERICK C. RASMUSSEN, Director
Investment Counselor; 9 Cadence Court, Morristown, New Jersey 07960. Director
of ten investment companies associated with Smith Barney. Formerly Vice
President of Dresdner and Company Inc. (investment counselors); 71.
JOHN P. TOOLAN, Director
Retired; 13 Chadwell Place, Morristown, New Jersey 07960. Director of ten
investment companies associated with Smith Barney. Formerly, Director and
Chairman of Smith Barney Trust Company, Director of Smith Barney Holdings Inc.
and the Manager and Senior Executive Vice President, Director and Member of
the Executive Committee of Smith Barney; 67.
LEWIS E. DAIDONE, Senior Vice President and Treasurer
Managing Director of Smith Barney; Senior Vice President and Treasurer of
forty-two investment companies associated with Smith Barney; Director and
Senior Vice President of the Manager and TIA; 40.
PHYLLIS M. ZAHORODNY, Vice President and Investment Officer
Managing Director of Smith Barney; Prior to August, 1993, Managing Director
and Portfolio Manager of Shearson Lehman Brothers Inc.; 39.
MARTIN R. HANLEY, Investment Officer
Vice President of Smith Barney; Prior to August, 1993, Vice President and
Senior Trader of Shearson Lehman Brothers; 31.
__________________
* Designates a director who is an "interested person" of the Fund, as defined
under the Investment Company Act of 1940.
IRVING DAVID, Controller and Assistant Secretary
Vice President of Smith Barney and the Manager; Controller of 2 investment
companies associated with Smith Barney. Prior to March, 1994, Assistant
Treasurer of First Investment Management Company; 36.
CHRISTINA T. SYDOR, Secretary
Managing Director of Smith Barney; Secretary of forty-two investment companies
associated with Smith Barney; Secretary and General Counsel of the Manager and
TIA; 47.
The business address of each of the officers of the Fund listed above is
388 Greenwich Street, New York, NY 10013. Such persons are compensated by
Smith Barney and are not separately compensated by the Fund. On April 3, 1998,
directors and officers owned in the aggregate less than 1% of the outstanding
securities of each Portfolio.
The following table shows the compensation paid by the Fund to each
director during the Fund's last fiscal year. None of the officers of the Fund
received any compensation from the Fund for such period. Officers and
interested directors of the Fund are compensated by Smith Barney.
COMPENSATION TABLE
<TABLE>
<CAPTION>
Total
Number
Pension or of Funds
Retirement for Which
Benefits Person
Accrued as Total Serves
Aggregate Part of Compensation Within
Name Compensation Fund's from Fund Fund
of Person From the Fund Expenses Complex Complex
<S> <C> <C> <C> <C>
Joseph H. Fleiss**+ $32,984.00 $0 $54,900 10
Donald R. Foley** 33,084.00 0 55,400 10
Paul Hardin 33,084.00 0 73,000 12
Francis P. Martin** 32,784.00 0 53,000 10
Heath B. McLendon* 0 0 0 42
Roderick C. Rasmussen 33,084.00 0 55,400 10
John P. Toolan** 33,084.00 0 55,400 10
</TABLE>
________________________________________
* Designates a director who is an "interested person" of the Fund.
** Pursuant to a deferred compensation plan, the indicated persons elected to
defer the following amounts of their compensation from the Fund: Joseph H.
Fleiss: $15,642, Donald R. Foley: $15,642, Francis P. Martin: $32,784 and
John P. Toolan: $33,084, and the following amounts of their total
compensation from the Fund Complex: Joseph H. Fleiss: $21,000, Donald R.
Foley: $21,000, Francis P. Martin: $53,000 and John P. Toolan: $55,400
+ Effective January 1, 1998, Mr. Fleiss became a Director Emeritus. Upon
attainment of age 72 the Fund's current Directors may elect to change to
emeritus status. Any directors elected or appointed to the Board of
Directors in the future will be required to change to emeritus status upon
attainment of age 80. Directors Emeritus are entitled to serve in emeritus
status for a maximum of 10 years during which time they are paid 50% of the
annual retainer fee and meeting fees otherwise applicable to the Fund's
directors, together with reasonable out-of-pocket expenses for each meeting
attended. During the Fund's last fiscal year aggregate compensation from the
Fund to Emeritus Directors totaled $16,292.
INVESTMENT RESTRICTIONS AND FUNDAMENTAL POLICIES
The Portfolios are subject to following restrictions and policies that
are "fundamental," which means that they cannot be changed without approval by
a "vote of a majority of the outstanding voting securities" of a Portfolio
affected by the change, as defined in the Investment Company Act of 1940 (the
"Act") and in accordance with Rule 18f-2 thereunder (see "Voting Rights").
The Portfolios are subject to other restrictions and policies that are "non-
fundamental" and which may be changed by the Fund's Board of Directors without
shareholder approval, subject to any applicable disclosure requirements.
Fundamental Policies - All Portfolios. Without the approval of a majority of
its outstanding voting securities, no Portfolio may:
1. invest in a manner that would cause it to fail to be a "diversified
company" under the 1940 Act and the rules, regulations and orders
thereunder taking into account any rule or order of the SEC exempting
the Portfolio from the limitation imposed by Section 12(d)(1) of the
1940 Act. (However, since each of the Portfolios operates as money
market fund under Rule 2a-7 under the Act, compliance with Rule 2a-7 is
deemed to satisfy the diversification requirements otherwise applicable
to diversified investment companies under the 1940 Act.)
2. issue "senior securities" as defined in the 1940 Act and the rules,
regulations and orders thereunder, except as permitted under the 1940
Act and the rules, regulations and orders thereunder.
3. borrow money, except that (a) the Portfolio may borrow from banks for
temporary or emergency (not leveraging) purposes, including the meeting
of redemption requests which might otherwise require the untimely
disposition of securities, and (b) the Portfolio may, to the extent
consistent with its investment policies, enter into reverse repurchase
agreements, forward roll transactions and similar investment strategies
and techniques. To the extent that it engages in transactions described
in (a) and (b), the Portfolio will be limited so that no more than 33 -
1/3% of the value of its total assets (including the amount borrowed),
valued at the lesser of cost or market, less liabilities (not including
the amount borrowed) valued at the time the borrowing is made, is
derived from such transactions.
4. make loans. This restriction does not apply to: (a) the purchase of debt
obligations in which the Portfolio may invest consistent with its
investment objectives and policies; (b) repurchase agreements; and (c)
loans of its portfolio securities, to the fullest extent permitted under
the 1940 Act.
5. purchase or sell real estate, real estate mortgages, real estate
investment trust securities, commodities or commodity contracts, but
this restriction shall not prevent the Fund from (a) investing in
securities of issuers engaged in the real estate business or the
business of investing in real estate (including interests in limited
partnerships owning or otherwise engaging in the real estate business
or the business of investing in real estate) and securities which
are secured by real estate or interests therein; (b) holding or selling
real estate received in connection with securities it holds or held; or
(c) trading in futures contracts and options on futures contracts
(including options on currencies to the extent consistent with the
Funds' investment objective and policies).
Additional Fundamental Policies - Cash and Retirement Portfolios. In addition
to the fundamental policies stated above for all Portfolios:
1. Neither the Cash Portfolio nor the Retirement Portfolio may invest less
than 25% of its assets in bank obligations (including both 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.
Nonfundamental Policies. As a nonfundamental policy, no Portfolio may:
1. purchase any securities on margin (except for such short-term credits as
are necessary for the clearance of purchases and sales of portfolio
securities) or sell any securities short (except "against the box"). For
purposes of this restriction, the deposit or payment by the Portfolio of
underlying securities and other assets in escrow and collateral
agreements with respect to initial or maintenance margin in connection
with futures contracts and related options and options on securities,
indexes or similar items is not considered to be the purchase of a
security on margin;
2. invest in securities of other investment companies except as may be
acquired as part of a merger, consolidation, or acquisition of assets;
3. purchase or otherwise acquire any security if, as a result, more than
10% of its net assets would be invested in securities that are illiquid;
4. invest in oil and gas interests;
5. invest in any company for the purpose of exercising control;
6. write or purchase put or call options.
All of the foregoing restrictions which are stated in terms of
percentages will apply at the time an investment is made; a subsequent
increase or decrease in the percentage that may result from changes in values
or net assets will not result in a violation of the restriction.
Notwithstanding any of the foregoing investment restrictions, each of the Cash
Portfolio, the Government Portfolio and the Retirement Portfolio may invest up
to 100% of its assets in U.S. Government Obligations.
Reverse Repurchase Agreements. The Government Portfolio may invest 1/3
of its total assets in reverse repurchase agreements and to enter into reverse
repurchase agreements with broker/dealers and other financial institutions
including the Fund's custodian. Such agreements involve the sale of portfolio
securities with an agreement to repurchase the securities at an agreed-upon
price, date and interest payment and have the characteristics of borrowing.
Since the proceeds of borrowings under reverse repurchase agreements are
invested, this would introduce the speculative factor known as "leverage." Such
transactions are only advantageous if the Government Portfolio has an
opportunity to earn a greater rate of interest on the cash derived from the
transaction than the interest cost of obtaining that cash. Opportunities to
realize earnings from the use of the proceeds equal to or greater than the
interest required to be paid may not always be available, and the Fund intends
to use the reverse repurchase technique only when the Manager believes it will
be advantageous to the Government Portfolio. The use of reverse repurchase
agreements may exaggerate any interim increase or decrease in the value of the
Government Portfolio's assets. The Fund's custodian bank will maintain a
separate account for the Government Portfolio with securities having a value
equal to or greater than such commitments.
Time Deposits. The Cash Portfolio and the Retirement Portfolio may
invest in fixed time deposits with an ultimate maturity of not more than six
months. In addition, each of these Portfolios currently intends to limit to 10%
of its total assets investment in fixed time deposits with a maturity of from
two business to seven calendar days and will invest only if, when combined with
other illiquid assets of the Portfolio, not more than 10% of its assets would
be invested in all such instruments. Fixed time deposits, unlike negotiable
certificates of deposit, generally do not have a market and may be subject to
penalties for early withdrawal of funds.
Asset-Backed Securities. The Cash and Retirement Portfolios may invest
in asset-backed securities arising through the grouping by governmental,
government-related and private organization of loans, receivables and other
assets originated by various lenders. Interests in pools of these assets
differ from other forms of debt securities, which normally provide for periodic
payment of interest in fixed amounts with principal paid at maturity or
specified call dates. Instead, asset-backed securities provide periodic
payments which generally consist of both interest and principal payments.
The estimated life of an asset-backed security varies with the prepayment
experience with respect to the underlying debt instruments. The rate of such
prepayments, and hence the life of an asset-backed security, will be primarily
a function of current market interest rates, although other economic and
demographic factors may be involved. For example, falling interest rates
generally result in an increase in the rate of prepayments of mortgage loans
while rising interest rates generally decrease the rate of prepayments. An
acceleration in prepayments in response to sharply falling interest rates will
shorten the security's average maturity and limit the potential appreciation in
the security's value relative to a conventional debt security. In periods of
sharply rising rates, prepayments generally slow, increasing the security's
average life and its potential for price depreciation.
Illiquid and Restricted Securities. Each Portfolio may purchase
securities that are not registered ("restricted securities") under the
Securities Act of 1933, as amended (the "1933 Act"), but can be offered and
sold to "qualified institutional buyers" under Rule 144A under the 1933 Act
("Rule 144A"). Each Portfolio may also invest a portion of its assets in
illiquid investments, which include repurchase agreements maturing in more than
seven days. The Board of Directors may determine, based upon a continuing
review of the trading markets for the specific restricted security, that such
restricted securities are liquid. The Board of Directors has adopted
guidelines and delegated to management the daily function of determining and
monitoring liquidity of restricted securities available pursuant to Rule 144A.
The Board, however, retains sufficient oversight and is ultimately responsible
for the determinations. Since it is not possible to predict with assurance
exactly how the market for Rule 144A restricted securities will develop, the
Board will monitor each Portfolio's investments in these securities, focusing
on such important factors, among others, as valuation, liquidity and
availability of information. Investments in restricted securities could have
the effect of increasing the level of illiquidity in a Portfolio to the extent
that qualified institutional buyers become for a time uninterested in
purchasing these restricted securities. The Portfolios may also purchase
restricted securities that are not registered under Rule 144A.
The Articles of Incorporation of the Fund permit the Board of Directors
to establish additional Portfolios of the Fund from time to time. The
investment restrictions applicable to any such additional Portfolio would be
established by the Board of Directors at the time such Portfolio were
established and may differ from those set forth above. In the event of the
liquidation or dissolution of a Portfolio or of the Fund, shares of a Portfolio
are entitled to receive the assets belonging to that Portfolio and a
proportionate distribution of any general assets not belonging to any
particular Portfolio that are available for distribution based upon the
relative net assets of the respective Portfolios.
COMPUTATION OF YIELD
For the seven-day period ended December 31, 1997, the yield for the Cash
Portfolio was 5.09% (the effective yield was 5.22%) for Class A shares, 5.15%
(the effective yield was 5.28%) for Class C shares, and 5.30% (the effective
yield was 5.45%) for Class Y shares, with an average dollar-weighted portfolio
maturity of 73 days; the yield for the Government Portfolio was 5.08% (the
effective yield was 5.20%) for the Class A and Class C shares and 5.19% (the
effective yield was 5.33%) for the Class Y shares with an average dollar-
weighted maturity of 68 days; and the yield for the Retirement Portfolio was
5.04% (the effective yield was 5.17%) with an average dollar-weighted portfolio
maturity of 65 days. The Fund quotes current yield of each Portfolio and class
by dividing the net change in the value of a hypothetical pre-existing account
having a balance of one share at the beginning of a recent seven-day base
period by the value of the account at the beginning of the base period and
multiplying this base period return by 365/7. (Net change in account value
being the value of additional shares purchased with dividends from original
shares and dividends declared on both original shares and any additional
shares, but does not include any changes in unrealized appreciation or
depreciation.) In addition, for each Portfolio and class the Fund may from
time to time quote effective yield figures assuming the compounding of
dividends. The effective yield will be slightly higher than the yield because
of the compounding effect. The Fund also quotes for each Portfolio and class
the average dollar-weighted portfolio maturity for the corresponding seven-day
period.
Although principal is not insured and there can be no assurance that a
$1.00 per share net asset value will be maintained, it is not expected that the
net asset value of any Portfolio's shares will fluctuate because the Fund uses
the amortized cost method of valuation. (See "Valuation of Shares" below.)
Investors should bear in mind that yield is a function of the type, quality and
maturity of the instruments in a Portfolio, and the Portfolio's operating
expenses. While current yield information may be useful, investors should
realize that each Portfolio's current yield will fluctuate, is not necessarily
representative of future results and may not provide a basis for comparison
with bank deposits or other investments that pay a fixed yield for a stated
period of time.
VALUATION OF SHARES AND AMORTIZED COST VALUATION
The Prospectus states that net asset value will be determined on any day
the New York Stock Exchange is open and that the net asset value may be
determined on any day that the settlement of securities otherwise occurs. The
New York Stock Exchange is closed on the following holidays: New Year's Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
The Fund uses the "amortized cost method" for valuing portfolio
securities pursuant to Rule 2a-7 under the Act. The amortized cost method of
valuation of the Fund's portfolio securities involves valuing a security at its
cost at the time of purchase and thereafter assuming a constant amortization to
maturity of any discount from or premium to the stated principal amount of the
security, regardless of the impact of fluctuating interest rates its market
value. The market value of portfolio securities will fluctuate on the basis of
the creditworthiness of the issuers of such securities and with changes in
interest rates generally. While the amortized cost method provides certainty
in valuation, it may result in periods during which value, as determined by
amortized cost, is higher or lower than the price the Portfolio would receive
if it sold the instrument. During such periods the yields to investors in the
Fund may differ somewhat from that obtained in a similar company that uses
mark-to-market values for all its portfolio securities. For example, if the
use of amortized cost resulted in a lower (higher) aggregate portfolio value on
a particular day, a prospective investor in the Fund would be able to obtain a
somewhat higher (lower) yield than would result from investment in such similar
company, and existing investors would receive less (more) investment income.
The purpose of this method of valuation 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; however, shareholders should be aware that
despite procedures that will be followed to have a stabilized price, including
maintaining a maximum dollar-weighted average portfolio maturity of 90 days and
investing in securities with remaining maturities of only 13 months or less,
there is no assurance that at some future date there will not be a rapid change
in prevailing interest rates, a default by an issuer or some other event that
could cause the Fund's price per share to change from $1.00.
IRA AND OTHER PROTOTYPE RETIREMENT PLANS
Copies of the following plans with custody or trust agreements have been
approved by the Internal Revenue Service and are available from the Fund or
Smith Barney; investors should consult with their own tax or retirement
planning advisors prior to the establishment of a plan.
IRA, Rollover IRA and Simplified Employee Pension - IRA
The Small Business Job Protection Act of 1996 changed the eligibility
requirements for participants in Individual Retirement Accounts ("IRAs").
Under these new provisions, if you or your spouse have earned income, each of
you may establish an IRA and make maximum annual contributions equal to the
lesser of earned income or $2,000. As a result of this legislation, married
couples where one spouse is non-working may now contribute a total of $4,000
annually to their IRAs.
The Taxpayer Relief Act of 1997 has changed the requirements for
determining whether or not you are eligible to make a deductible IRA
contribution. Under the new rules effective beginning January 1, 1998, if you
are considered an active participant in an employer-sponsored retirement plan,
you may still be eligible for a full or partial deduction depending upon your
combined adjusted gross income* ("AGI"). For married couples filing jointly, a
full deduction is permitted if your combined AGI is $50,000 or less ($30,000
for unmarried individuals); a partial deduction will be allowed when AGI is
between $50,000-$60,000 ($30,000-$40,000 for an unmarried individual); and no
deduction when AGI is $60,000 or more ($40,000 for an unmarried individual).
However, if you are married and your spouse is covered by a employer-sponsored
retirement plan, but you are not, you will be eligible for a full deduction if
your combined AGI is $150,000 or less. A partial deduction is permitted if
your combined AGI is between $150,000-$160,000 and no deduction is permitted
after $160,000.
A Rollover IRA is available to defer taxes on lump sum payments and other
qualifying rollover amounts (no maximum) received from another retirement plan.
An employer who has established a Simplified Employee Pension - IRA
("SEP-IRA") on behalf of eligible employees may make a maximum annual
contribution to each participant's account of 15% (up to $24,000) of each
participant's compensation. Compensation is capped at $160,000 for 1997.
Paired Defined Contribution Prototype
Corporations (including Subchapter S corporations) and non-corporate
entities may purchase shares of the Fund through the Smith Barney Prototype
Paired Defined Contribution Plan (the "Prototype"). The Prototype permits
adoption of profit-sharing provisions, money purchase pension provisions, or
both, to provide benefits for eligible employees and their beneficiaries. The
Prototype provides for a maximum annual tax deductible contribution on behalf
of each Participant of up to 25% of compensation, but not to exceed $30,000
(provided that a money purchase pension plan or both a profit-sharing plan and
a money purchase pension plan are adopted thereunder).
PURCHASE OF SHARES
Letter of Intent - Class Y Shares. A Letter of Intent may be used as a
way for investors to meet the minimum investment requirement for Class Y
shares. Such investors must make an initial minimum purchase of $5,000,000 in
Class Y shares of the Fund and agree to purchase a total of $15,000,000 of
Class Y Shares of the Fund within 13 months from the date of the Letter. If a
total investment of $15,000,000 is not made within the 13-month period, all
Class Y shares purchased during such period will be transferred to Class A
shares, where they will be subject to all fees (including a service fee of
0.25%) and expenses applicable to the Fund's Class A shares, which may include
a CDSC of 1.00%. Please contact a Smith Barney Financial Consultant or the
Transfer Agent for further information.
THE MANAGEMENT AGREEMENT, PLAN OF DISTRIBUTION AND OTHER SERVICES
Manager
MMC manages the day to day operations of each Portfolio pursuant to
management agreements entered into by the Fund on behalf of each Portfolio.
Under the management agreements, the Manager offers each Portfolio advice and
assistance with respect to the acquisition, holding or disposal of securities
and recommendations with respect to other aspects of the business and affairs
of each Portfolio. It also furnishes each Portfolio with executive and other
personnel; management, bookkeeping, accounting and administrative services;
office space and equipment; and the services of the officers and employees of
the Fund. MMC is a subsidiary of Salomon Smith Barney Holdings, Inc., which is
a subsidiary of Travelers Group Inc., a publicly owned financial services
company.
For the years 1995, 1996 and 1997, the management fee for the Cash
Portfolio was $85,620,015, $103,013,084 and $117,380,871, respectively; the
management fee for the Government Portfolio was $17,222,206, $18,688,740 and
$19,475,520, respectively, and for the Retirement Portfolio was $5,043,576,
$5,588,496 and $5,982,179, respectively.
The respective Portfolios' management agreements, which were approved by
their shareholders on September 16, 1994 and became effective on November 21,
1994, provide for daily compensation of the Manager at the following annual
rates: (1) Cash Portfolio - 0.45% on the first $6 billion of the Portfolio's
net assets, 0.425% on the next $6 billion, 0.40% on the next $6 billion and
0.35% on net assets in excess of $18 billion; (2) Government Portfolio - 0.45%
on the first $2.5 billion of the Portfolio's net assets, 0.40% on the next $2.5
billion and 0.35% on net assets in excess of $5 billion; and (c) Retirement
Portfolio - 0.45% on the first $1 billion of the Portfolio's net assets, 0.40%
on the next $1 billion and 0.35% on net assets in excess of $2 billion.
Each Portfolio's management agreement further provides that all other
expenses not specifically assumed by the Manager under the agreement are borne
by the Fund. Expenses payable by the Fund include, but are not limited to, all
charges of custodians (including sums as custodian and sums for keeping books,
performing portfolio valuations, and for rendering other services to the Fund)
and shareholder servicing agents, filing fees and expenses relating to the
registration and qualification of the Fund's shares under Federal or state
securities laws and maintaining such registrations and qualifications
(including the printing of the Fund's registration statements and
prospectuses), expenses of preparing, printing and distributing all proxy
material, reports and notices to shareholders, out-of-pocket expenses of
directors and fees of directors who are not "interested persons" as defined in
the Act, fees of auditors and legal counsel, interest, taxes, fees and
commissions of every kind, expenses of issue, repurchase or redemption of
shares, and all other costs incident to the Fund's corporate existence and
extraordinary expenses such as litigation and indemnification expenses. Direct
expenses are charged to each Portfolio; general corporate expenses are
allocated on the basis of relative net assets. No sales or promotion expenses
are incurred by the Fund, but expenses incurred in complying with laws
regulating the issue or sale of the Fund's shares are not deemed sales or
promotion expenses.
The Manager has agreed that if in any fiscal year the total expenses of
any Portfolio, exclusive of taxes, brokerage, interest and extraordinary
expenses, exceed 0.70% of the average daily net assets for that fiscal year of
the Portfolio, the Manager will reduce its fee to the extent of such excess, or
reimburse any such excess amount to the relevant Portfolio. The 0.70%
voluntary expense limitation shall be in effect until it is terminated by 14
days' written notice to shareholders and by supplement to the then current
prospectus.
Each Portfolio's management agreement will continue in effect if
specifically approved annually by a majority of the directors of the Fund,
including a majority of the directors who are not parties to such contract or
"interested persons" of any such party. Each agreement may be terminated
without penalty by either of the parties on 60 days' written notice and must
terminate in the event of its assignment. It may be amended or modified only
if approved by vote of the holders of "a majority of the outstanding voting
securities" of such Portfolio as defined in the Act and Rules thereunder which
is discussed below under "Voting Rights."
Each agreement provides that the Manager is not liable for any act or
omission in the course of or in connection with rendering services under the
agreement in the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations or duties.
Plan of Distribution
The Fund has adopted for each Portfolio a plan of distribution pursuant
to Rule 12b-1 under the Act (the "Plan") under which a service fee is paid by
each of Class A and Class C to Smith Barney for shares of the Portfolios
attributable to Smith Barney at an annual rate of 0.10% of such Class A shares'
average daily net assets. See "Distributor" in the Prospectus. In addition,
the Plan provides for a service fee to be paid to PFS Distributors, Inc. by
each Class A share held in accounts attributable to PFS Distributors, Inc. at
an annual rate of 0.10% of such Class A shares average daily net assets.
Brokerage
The Manager places orders for the purchase and sale of securities for the
Portfolios of the Fund. All of the Fund's portfolio transactions have been
principal transactions with major dealers in money market instruments, on which
no brokerage commissions are paid. Purchases from or sales to dealers serving
as market-makers include the spread between the bid and asked prices. No
portfolio transactions are handled by Smith Barney.
VOTING RIGHTS
As permitted by Maryland law, there will normally be no meetings 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. At that time, the directors then in office will call a
shareholders' meeting for the election of directors. The directors must call a
meeting of shareholders for the purpose of voting upon the question of removal
of any director when requested in writing to do so by the record holders of not
less than 10% of the outstanding shares of the fund. At such a meeting, a
director may be removed after the holders of record of not less than a majority
of the outstanding shares of the Fund have declared that the director be
removed either by declaration in writing or by votes cast in person or by
proxy. Except as set forth above, the directors shall continue to hold office
and may appoint successor directors.
Rule 18f-2 under the Act provides that any matter required to be
submitted by the provisions of the Act or applicable state law, or otherwise,
to the holders of the outstanding voting securities of an investment company
shall not be deemed to have been effectively acted upon unless approved by
"vote of a majority of the outstanding voting securities" (as defined below) of
each Portfolio or class affected by the matter. Rule 18f-2 further provides
that a Portfolio or class shall be deemed to be affected by a matter unless it
is clear that the interests of each Portfolio or class in a matter are
identical or that the matter does not affect any interest of the Portfolio or
class. Under the Rule the approval of a management agreement or any change in
a fundamental investment policy would be effectively acted upon with respect to
a Portfolio only if approved by a majority of the outstanding voting securities
of the Portfolio affected by the matter. The Rule, however, also provides that
the ratification of independent public accountants, the election of directors,
and the approval of a distribution agreement that is submitted to shareholders
are not subject to the separate voting requirements and may be effectively
acted upon by a vote of the holders of a majority of all Fund shares voting
without regard to Portfolio.
As used in the Prospectus and this Statement of Additional Information, a
"vote of a majority of the outstanding voting securities" means the affirmative
vote of the lesser of (a) more than 50% of the outstanding shares of the Fund
(or the affected Portfolio or class) or (b) 67% or more of such shares present
at a meeting if more than 50% of the outstanding shares of the Fund (or the
affected Portfolio or class) are represented at the meeting in person or by
proxy.
Following are the names, addresses and percent of ownership of each
person who owns of record or is known by the Fund to own of record of
beneficially 5% or more of any Class of the Cash Portfolio as of April 3, 1998:
Cash Portfolio Class C Shares
Frontier Trust Company as TTEE, Laser Technologies Employees 401K Plan,
PO Box 190, Exton, PA, 19341 owned of record 57,691.74 shares (12.60%);
Frontier Trust Company as TTEE, Mens Apparel Guild in California, Attn.: Joe
Loggia, 6200 Canoga Avenue, Suite 303, Woodland Hills, CA 91367, owned of
record 57,292.37 shares (12.51%); Frontier Trust Company as TTEE, Greenhill &
Co. 401K Plan, 31 West 52nd Street, New York, NY 10101 owned of record
49,140.04 shares (10.73%); Frontier Trust Company as TTEE, Sioux City Tent &
Awning Co. Inc., DBA Mullin Awning & Siding 401k Plan, 811 Steuben Street,
Sioux City, IA 51101 owned of record 33,120.24 shares (7.23%); Health Partners
of Philadelphia Inc., Zubair M. Ali, 23 Sumac Court, Newark, DE 19702 owned of
record 32,902.68 shares (7.19%); Frontier Trust Company as TTEE, Northstar
Sportswear Company 401K Plan, PO Box 569, Kingston, WA 98346 owned of record
32,176.58 shares (7.03%); Frontier Trust Company as TTEE, Peer Bearing Company
Union Employees Money Purchase Plan, 241 W Palatine Road, Wheeling, IL 60090
owned of record 28,031.47 shares (6.12%); Tanco Engineering Inc. C/O Leggette &
Co., Attn.: Mary V. Boggs, 4131 N. Central Expressway, Suite 1100, Dallas, TX
owned of record 27,214.94 shares (5.94%); Frontier Trust Company as TTEE,
Medford Electrical Contracting Corp., Attn.: John B. Giacalone, 1011 Fellsway,
Medford, MA 02155 owned of record 23,701.39 shares (5.18%).
Cash Portfolio Class Y Shares
Cogen Tech Financial Ser. LP, Attn.: Dick Lydecker, 711 Louisiana Street,
33rd Floor, Houston, TX 77002 owned of record 10,000,000.00 shares (20.35%);
Jay Norton Zidell TTEE, FBO Jay Norton Zidell Trust, U/A/D 11/01/91, 6900 SE
Riverside Drive #27, Vancouver, WA 98664 owned of record 8,521,301.07 shares
(17.33%); Cynthia L. Ulstron, 5141 N. Alto Lane, Oak Harbor, WA 98277 owned of
record 4,694,705.79 shares (9.55%); Rooke Corp., D/B/A Aviation Equipment Inc.,
Attn.: Jim Shaw V.P./CFO, 7230 Fulton Avenue, North Hollywood, CA 91605 owned
of record 4,396,561.06 shares (8.94%); Patricia E. Rodeheaver TTEE, FBO
Patricia E. Rodeheaver U/A/D 5/11/90, 1 Lakeridge Lane, Warrentown, MO 63383
owned of record 4,282,787.74 (8.71%); Edward W. Machala, PO Box 568, Exeter, RI
02822 owned of record 3,013,131.84 (6.13%); QAD Inc., Attn.: Treasury, 6450 Via
Real, Carpinteria, CA 93013 owned of record 2,946,028.55 shares (5.99%).
Cash Portfolio Class Z Shares
Citibank NA TTEE, Travelers Group Inc. Master TR, 401K Savings Plan,
Attn.: Nancy Kronenberg, 111 Wall Street, New York, NY 10005 owned of record
2,787,477.55 shares (99.79%).
Following are the names, addresses and percent ownership of each person
who owns of record or is known by the Fund to own of record or beneficially 5%
or more of any Class of the Government Portfolio as of April 3, 1998:
Government Portfolio Class C Shares
Jerry L. Calkins, Smith Barney Inc. Rollover Custodian, 8694 W. 101
Street, Overland Park, KS 66212 owned of record 61,745.47 shares (25.56%);
Frontier Trust Company as TTEE, Southern Floral Company, PO Box 1313, Houston,
TX 77251 owned of record 37,261.43 shares (15.43%); H. Walker Harris MD,
Smith Barney Inc. Rollover Custodian, 2860 Cromwell Drive, Columbus, GA 31906
owned of record 25,138.11 shares (10.41%); Terry Donofrio, Smith Barney Inc.
IRA Custodian, 21 Glenair Avenue, Waldwick, NJ 07463 owned of record 22,507.03
shares (9.32%); Henry N. Hand, 18 Chestnut Oak Drive, Cape May Court House, NJ
08210 owned of record 18,074.92 shares (7.48%); James F. Burgess Jr., M.
Kathleen Burgess JTWROS, 5901 Lakeshore Drive, Columbia, SC 29206 owned of
record 17,451.50 shares (7.22%); Ward G. Pennebaker, Smith Barney Inc. Sep.
Custodian. 7510 Inwood, Houston, TX 77063 owned of record 16,199.88 shares
(6.70%).
Government Portfolio Class Y Shares
Rodney A. Hanes Jr., 364 Laurel Road, New Canaan Court 06840 owned or
record 8,078,970.19 shares (50.95%); William M. Haber, 54 Wilton Road,
Westport, CT 06880 owned of record 5,453,177.94 shares (34.39%); James E.
Smith and Jeralyn K. Talcott JTWROS, Main Court, 2525 Trumble Creek Road,
Kalispell, MT 59901 owned of record 1,110,389.27 shares (7.00%).
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENTS
PNC Bank, National Association, a national banking association with
offices at 17th and Chestnut Streets, Philadelphia, Pennsylvania, (the
"Custodian"), serves as custodian of the Fund's investments. First Data
Investor Services Group, Inc., Exchange Place, Boston, Massachusetts 02109,
serves as the Fund's dividend disbursing and transfer agent.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, 345 Park Avenue, New York, New York 10154, has
been selected as independent auditors for the Fund for its fiscal year ending
December 31, 1998 to examine and report on their examination of the financial
statements and financial highlights of the Fund.
FINANCIAL STATEMENTS
The following financial information is hereby incorporated by reference
to the Fund's 1997 Annual Report to Shareholders, a copy of which is furnished
with this Statement of Additional information:
Pages in
Annual Report
Statements of Assets and Liabilities 17
Statements of Operations 18
Statement of Changes in Net Assets 19-21
Notes to Financial Statements 22-26
Financial Highlights 27-29
Independent Auditors' Report 30
APPENDIX - SECURITIES RATINGS
BOND (AND NOTES) RATINGS
Moody's Investors Service, Inc.
Aaa - Bonds that are rated "Aaa" are judged to be of the best
quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edged." Interest payments are protected
by a large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa - Bonds that are rated "Aa" are judged to be of high quality by
all standards. Together with the "Aaa" group they comprise what are
generally known as high grade bonds. They are rated lower than the best
bonds because margins of protection may not be as large as in "Aaa"
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present that make the long term
risks appear somewhat larger than in "Aaa" securities.
Note: The modifier 1 indicates that the security ranks in the
higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the issue ranks in
the lower end of its generic rating category.
Standard & Poor's Rating Group
AAA - Debt rated "AAA" has the highest rating assigned by Standard
& Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA - Debt rated "AA" has a very strong capacity to pay interest and
repay principal and differs from the highest rated issues only in small
degree.
Plus (+) or Minus (-): The rating of "AA" may be modified by the
addition of a plus or minus sign to show relative standing within the
major rating categories.
Provisional Ratings: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of
the project being financed by the debt being rated and indicates that
payment of debt service requirements is largely or entirely dependent
upon the successful and timely completion of the project. This rating,
however, while addressing credit quality subsequent to completion of the
project, makes no comment on the likelihood of, or the risk of default
upon failure of, such completion. The investor should exercise judgment
with respect to such likelihood and risk.
L - The letter "L" indicates that the rating pertains to the
principal amount of those bonds where the underlying deposit collateral
is fully insured by the Federal Savings & Loan Insurance Corp. or the
Federal Deposit Insurance Corp.
- Continuance of the rating is contingent upon S&P's receipt of
closing documentation confirming investments and cash flow.
* - Continuance of the rating is contingent upon S&P's receipt of
an executed copy of the escrow agreement.
Fitch IBCA, Inc.
AAA - Bonds rated AAA by Fitch have the lowest expectation of
credit risk. The obligor has an exceptionally strong capacity for timely
payment of financial commitments which is highly unlikely to be adversely
affected by foreseeable events.
AA - Bonds rated AA by Fitch have a very low expectation of credit
risk. They indicate very strong capacity for timely payment of financial
commitments. This capacity is not significantly vulnerable to
foreseeable events.
Plus (+) Minus (-): Plus and minus signs are used with a rating
symbol to indicate the relative position of a credit within the rating
category. Plus and minus signs, however, are not used in the "AAA"
category.
COMMERCIAL PAPER RATINGS
Moody's Investors Service, Inc.
Issuers rated "Prime-1" (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations.
Prime-1 repayment will normally be evidenced by the following
characteristics: leading market positions in well-established industries;
high rates of return on funds employed; conservative capitalization
structures with moderated reliance on debt and ample asset protection;
broad margins in earnings coverage of fixed financial changes and high
internal cash generation; well-established access to a range of financial
markets and assured sources of alternate liquidity.
Issuers rated "Prime-2" (or related supporting institutions) have
strong capacity for repayment of short-term promissory obligations. This
will normally be evidenced by many of the characteristics cited above but
to a lesser degree. Earnings trends and coverage rations, while sound,
will be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained.
Standard & Poor's Ratings Group
A-1 - This designation indicates that the degree of safety
regarding timely payment is either overwhelming or very strong. Those
issuers determined to possess overwhelming safety characteristics will be
denoted with a plus (+) sign designation.
A-2 - Capacity for timely payment on issues with this designation
is strong. However, the relative degree of safety is not as high as for
issues designated A-1.
Fitch IBCA, Inc.
Fitch's short-term ratings apply to debt obligations that are
payable on demand or have original maturities of generally up to three
years, including commercial paper, certificates of deposit, medium-term
notes, and municipal and investment notes.
The short-term rating places greater emphasis than a long-term
rating on the existence of liquidity necessary to meet financial
commitment in a timely manner.
Fitch's short-term ratings are as follows:
F1+ - Issues assigned this rating are regarded as having the
strongest capacity for timely payments of financial commitments. The "+"
denotes an exceptionally strong credit feature.
F1 - Issues assigned this rating are regarded as having the
strongest capacity for timely payment of financial commitments.
F2 - Issues assigned this rating have a satisfactory capacity for
timely payment of financial commitments, but the margin of safety is not
as great as in the case of the higher ratings.
Duff & Phelps Inc.
Duff 1+ - Indicates the highest certainty of timely payment: short-
term liquidity is clearly outstanding, and safety is just below risk-free
United States Treasury short-term obligations.
Duff 1 - Indicates a high certainty of timely payment.
Duff 2 - Indicates a good certainty of timely payment: liquidity
factors and company fundamentals are sound.
The Thompson BankWatch ("TBW")
TBW-1 - Indicates a very high degree of likelihood that
principal and interest will be paid on a timely basis.
TBW-2 - while the degree of safety regarding timely repayment
of principal and interest is strong, the relative degree of safety
is not as high as for issues rated TBW-1.
PART C - OTHER INFORMATION
Item 24. Financial Statement and Exhibits
(a) Financial Statements
Location in:
Part A Part B
Annual Report
Statements of Assets and Liabilities - *
Statements of Operations - *
Statements of Changes in Net Assets - *
Notes to Financial Statements - *
______________
*The Registrant's Annual Reports for the fiscal year ended December
31, 1997 and the Reports of Independent Accountants dated February
10 1998 are incorporated by reference to the N-30D filed on March
2, 1998 as Accession # 91155-98-000128.
All other statements and schedules are omitted because they are not
applicable or the required information will be shown in the
financial statements or notes thereto.
(b) 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 October28,1992 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.
(2) Bylaws are incorporated by reference to Exhibit 2 to
Post-Effective Amendment No. 32.
(3) Not applicable.
(4) Specimen Stock Certificates for the Cash Portfolio,
Government Portfolio and Retirement Portfolio are
incorporated by reference to Exhibits 4(a) through (c)
to Post-Effective Amendment No. 32.
(5) (a) Management Agreement - U.S. Treasury Portfolio is
incorporated by reference to Exhibit 5(a) to Post-
Effective Amendment No. 34.
(b) Management Agreement for the Cash Portfolio is
incorporated by reference to Exhibit 5(b) to Post-
Effective Amendment No. 44.
c) Management Agreement for the Government Portfolio is
incorporated by reference to Exhibit 5(c) to Post-
Effective Amendment No. 44.
(d) Management Agreement for the Retirement Portfolio is
incorporated by reference to Exhibit 5(d) to Post-
Effective Amendment No. 44.
(6) Underwriting Agreement is incorporated by reference to
Exhibit 6 to Post-Effective Amendment No. 32.
(7) Not applicable.
(8) Custodian Agreement is incorporated by reference to
Exhibit 8 to Post-Effective Amendment No. 32.
(9) Form of Transfer Agency Agreement is incorporated by
reference to Exhibit 9 to Post-Effective Amendment No.
49.
(10) Previously Filed
(11) (i) Auditors' Report (see the Annual Report to
Shareholders which is incorporated by reference in the
Statement of Additional Information)
(ii) Auditors' Consent (filed herewith)
(12) Previously Filed.
(13) Not applicable.
(14) Previously Filed.
(15) (a) Plan of Distribution Pursuant to Rule 12b-1 for the
Cash Portfolio is incorporated by reference to
Exhibit 15(a) to Post-Effective Amendment No. 44.
(b) Plan of Distribution Pursuant to Rule 12b-1 for the
Government Portfolio is incorporated by reference to
Exhibit 15(b) to Post-Effective Amendment No. 44.
(c) Plan of Distribution Pursuant to Rule 12b-1 for the
Retirement Portfolio is incorporated by reference to
Exhibit 15 to Post-Effective Amendment No. 42.
(16) Schedule of 7 Day Yield Computation is incorporated by
reference to Exhibit 16 to Post-Effective Amendment No.
29.
(17) Financial Data Schedule (filed herewith)
(18) Plan 3 pursuant to Rule 18f-3 is incorporated by
reference to Exhibit 18 to Post-Effective Amendment No.
47.
Item 25. Persons Controlled by or under Common Control with
Registrant
(None)
Item 26. Number of Holders of Securities Number of Record Holders
on
Title of Class April 3, 1998
Cash Portfolio
Class A 2,419,870
Class C 90
Class Y 36
Class Z 2
Government Portfolio
Class A 213,325
Class C 30
Class Y 12
Class Z 1
Retirement Portfolio
Class A 163,305
Item 27. 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 assureds include Mutual Management Corp.
(Registrant's Manager) (formerly Smith Barney Mutual Funds
Management Inc.) and affiliated investment companies.
Item 28. Business and other Connections of Investment Adviser
Information as to the Directors and Officers of Mutual
Management Corp. is included in its Form ADV (File No.
801-8314), filed with the Commission, which is
incorporated herein by reference thereto.
Item 29. Principal Underwriters
(a) Smith Barney Inc. ("Smith Barney ") acts as
principal underwriter for
Concert Investment Series
Consulting Group Capital Markets Funds
Global Horizons Investment Series (Cayman Islands)
Greenwich Street California Municipal Fund Inc.
Greenwich Street Municipal Fund Inc.
Greenwich Street Series Fund
High Income Opportunity Fund Inc.
The Italy Fund Inc.
Managed High Income Portfolio Inc.
Managed Municipals Portfolio II Inc.
Managed Municipals Portfolio Inc.
Municipal High Income Fund Inc.
Puerto Rico Daily Liquidity Fund Inc.
Smith Barney Adjustable Rate Government Income Fund
Smith Barney Aggressive Growth Fund Inc.
Smith Barney Appreciation Fund Inc.
Smith Barney Arizona Municipals Fund Inc.
Smith Barney California Municipals Fund Inc.
Smith Barney Concert Allocation Series Inc.
Smith Barney Equity Funds
Smith Barney Fundamental Value Fund Inc.
Smith Barney Funds, Inc.
Smith Barney Income Funds
Smith Barney Institutional Cash Management Fund, Inc.
Smith Barney Intermediate Municipal Fund, Inc.
Smith Barney Investment Funds Inc.
Smith Barney Investment Trust
Smith Barney Managed Governments Fund Inc.
Smith Barney Managed Municipals Fund Inc.
Smith Barney Massachusetts Municipals Fund
Smith Barney Money Funds, Inc.
Smith Barney Muni Funds
Smith Barney Municipal Fund, Inc.
Smith Barney Municipal Money Market Fund, Inc.
Smith Barney Natural Resources Fund Inc.
Smith Barney New Jersey Municipals Fund Inc.
Smith Barney Oregon Municipals Fund Inc.
Smith Barney Principal Return Fund
Smith Barney Small Cap Blend Fund, Inc.
Smith Barney Telecommunications Trust
Smith Barney Variable Account Funds
Smith Barney World Funds, Inc.
Smith Barney Worldwide Special Fund N.V. (Netherlands
Antilles)
Travelers Series Fund Inc.
The USA High Yield Fund N.V.(Netherlands Antilles)
Worldwide Securities Limited (Bermuda)
Zenix Income Fund Inc.
and various series of unit investment trusts.
(b) The information required by this Item 29 with
respect to each director and officer of Smith Barney
is incorporated by reference to Schedule A of Form BD
filed by Smith Barney pursuant to the Securities
Exchange Act of 1934 (SEC File No. 8-8177)
(c) not applicable
Item 30. Location of Accounts and Records
PNC Bank, National Association, 17th and Chestnut Streets,
Philadelphia, Pennsylvania 19103, and First Data Investor
Services Group, Inc., 53 State Street, Boston,
Massachusetts 02109, will maintain the custodian and the
shareholders servicing agent records, respectively,
required by Section 31(a) of the 1940 Act.
All other records required by Section 31(a) are maintained
at the offices of the Registrant at 388 Greenwich Street,
New York, New York 10013 (and preserved for the periods
specified by Rule 31a-2) of the 1940 Act.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Not applicable
(b) Not applicable
(c) Registrant undertakes to furnish each person to
whom a prospectus is delivered with a copy of
Registrant's latest report to shareholders, upon
request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it
meets all of the requirements for effectiveness of this Post-
Effective Amendment to the Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment to its Registration Statement to be signed
on its behalf by the undersigned, and where applicable, the true
and lawful attorney-in-fact, thereto duly authorized, in the City
of New York, and State of New York on the27th day of April 1998.
SMITH BARNEY MONEY FUNDS, INC.
By: /s/ Heath B. McLendon
Heath B. McLendon
Chairman of the Board, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been
signed below by the following persons in the capacities and on the
date indicated.
Signatures Title Date
/s/Heath B. McLendon Chairman of the
Board, April 27, 1998
(Heath B. McLendon) President and Chief
Executive Officer
/s/Donald R. Foley* Director April
27, 1998
(Donald R. Foley)
/s/ Paul Hardin* Director April
27, 1998
(Paul Hardin)
/s/Roderick C. Rasmussen* Director April
27, 1998
(Roderick C. Rasmussen)
/s/John P. Toolan* Director April
27, 1998
(John P. Toolan)
/s/Lewis E. Daidone Treasurer
(Principal April 27, 1998
(Lewis E. Daidone) Financial and
Accounting Officer)
*By: /s/ Christina T. Sydor April 27,
1998
Christina T. Sydor
Pursuant to Power of Attorney
EXHIBIT INDEX
Exhibit No. Exhibit
(11) (ii) Consent of KPMG Peat Markwick LLP
(17) Financial Data Schedule
Independent Auditors' Consent
To the Shareholders and Board of Trustees of
Smith Barney Money Funds, Inc.:
We consent to the use of our report dated February 10, 1998 for
the Cash, Government, and Retirement Portfolios of Smith Barney
Money Funds, Inc. incorporated herein by reference and to the
references to our Firm under the headings "Financial Highlights"
in the Prospectus and "Independent Auditors" in the Statement of
Additional Information.
KPMG Peat Marwick LLP
New York, New York
April 21, 1998
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