<PAGE>
[GRAPHIC]
Smith Barney
Money
Funds, Inc.
-------------
ANNUAL REPORT
-------------
December 31, 1998
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.(R)
<PAGE>
Smith Barney
Money
Funds, Inc.
[PHOTO]
HEATH B. MCLENDON
Chairman
[PHOTO]
PHYLLIS M. ZAHORODNY
Vice President
Dear Shareholder:
We are pleased to provide the annual report for the Smith Barney Money Funds,
Inc. for the year ended December 31, 1998. In this report, we summarize the
period's prevailing economic and market conditions and outline our portfolio
strategy. A summary of performance and more detailed financial information can
be found in the appropriate sections that follow.
Performance Summary
The chart below shows the yields for the Cash, Government and Retirement
Portfolios that make up the Smith Barney Money Funds for the seven-day period
ended December 31, 1998.
Smith Barney Money Funds' Yields (Class A Shares)
Seven-Day
Portfolio Seven-Day Yield Effective Yield*
- --------------------------------------------------------------------------------
Cash 4.66% 4.77%
Government 4.51 4.61
Retirement 4.67 4.77
- --------------------------------------------------------------------------------
Please note that your investment in Smith Barney Money Funds is neither insured
nor guaranteed by the U.S. government. Moreover, no assurance can be given that
the Smith Barney Money Funds will be able to maintain a stable net asset value
("NAV") of $1.00 per share.
Market Update and Outlook
The effects of the global events in Russia, Japan and Asia have finally reached
the United States. Many U.S. financial institutions have suffered losses due to
their exposure to Russia and a widening spread on debt instruments in emerging
markets. In fact, the widening spread of debt instruments has even occurred
- ----------
* The effective yield is for a seven-day period, as well, and takes into
account the effects of compounding.
- --------------------------------------------------------------------------------
Smith Barney Money Funds, Inc. 1
<PAGE>
among "AA"-rated banks and brokerage firms as their future earnings continue to
be questioned. Moreover, the near default of a major hedge fund caused spreads
to widen even more as it began to liquidate its portfolio.
Instability in the capital markets and the downturn in the U.S. stock market
prompted the Federal Reserve Board ("Fed") to take three preemptive moves
lowering the federal-funds rate from 5.50% to 4.75%. In our view, this 75-basis
point ease in the Fed's monetary policy has enabled the financial markets to
function once again in an orderly, yet still cautious fashion. It appears that a
full-blown credit crunch and U.S. economic recession have been avoided.
The financial markets are now focused as to what degree the U.S. economy may
slow, and further monetary policy eases by the Fed will depend on how the U.S.
economy performs. The major G-7 countries are closely monitoring the financial
markets and global interest rate cuts have begun. The International Monetary
Fund ("IMF") has devised liquidity plans for emerging market countries in Latin
America and Asia to avoid funding disruptions when global capital flows become
more volatile.
The most recent economic data suggests to us that the U.S. economy is still
healthy and growing at around a 2.5% to 3.0% annual pace as we head into 1999.
Several factors such as low interest rates, a healthy housing and consumer
sector, recent lows in oil prices, a rebound in stock prices, and a bottoming
out in Asia have all helped support global economic growth. On the other hand, a
still weak manufacturing sector and some corporate profit pressures continue to
weigh negatively on the U.S. economy.
Investment Update*
During its past fiscal year, the Smith Barney Cash Portfolio grew approximately
30% in asset size and the Portfolio's investment parameters remained
conservative. We continue to adhere to our belief that managing interest rates
and buying value on the yield curve is more successful over the long term than
purchasing investments that carry additional risks. Recent inflows into the
Portfolio were invested in blue-chip names such as Siemens and Proctor & Gamble,
and the government agency discount note position was increased from 3.5% to
10.0%. The Cash Portfolio remains well diversified with close to 200 issues and
the largest exposure in any one issuer was about 2.5%. At the close of the
reporting period, the Cash Portfolio's assets were 54% in banks, 36% in
corporates and 10% in government agencies.
- ----------
* Please note that the Fund's holdings are subject to change.
- --------------------------------------------------------------------------------
2 1998 Annual Report to Shareholders
<PAGE>
The Smith Barney Government Portfolio grew 15% in asset size during the current
fiscal year. Because of our favorable outlook during the reporting period, the
Portfolio's average maturity was lengthened from 65 days to 75 days. When
financial market turmoil was at its peak in response to the Russian crisis in
October, spreads between U.S. Treasury bills and agencies widened out from 40
basis points to 120 basis points and currently stand at 55 basis points.
Lastly, the Smith Barney Retirement Portfolio grew 23% in asset size over the
past fiscal year. We have lengthened the average maturity of the Retirement
Portfolio from 65 to 75 days because we were bullish that short-term interest
rates would decline throughout the year. The Retirement Portfolio's assets were
65% in banks, 30% in corporates and 5% in government agencies as of December 31,
1998.
In closing, thank you for investing in the Smith Barney Money Funds, Inc. We
encourage you to visit our Web site at www.smithbarney.com. We look forward to
continuing to help you pursue your financial goals.
Sincerely,
/s/ Heath B. McLendon /s/ Phyllis M. Zahorodny
Heath B. McLendon Phyllis M. Zahorodny
Chairman Vice President
January 4, 1999
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Smith Barney Money Funds, Inc. 3
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments December 31, 1998
- --------------------------------------------------------------------------------
CASH PORTFOLIO
<TABLE>
<CAPTION>
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
=======================================================================================================
U.S. AGENCIES AND INSTRUMENTALITIES -- 13.4%
<C> <S> <C> <C>
$ 116,750,000 Federal Farm Credit Bank
matures 3/2/99 5.50% to 5.52% $ 116,724,981
282,279,000 Federal Home Loan Bank
mature 1/4/99 to 1/29/99 5.00 to 5.12 281,653,250
3,266,606,000 Federal Home Loan Mortgage Corp.
mature 1/4/99 to 4/30/99 4.99 to 5.70 3,247,189,983
1,714,408,000 Federal National Mortgage Association
mature 1/4/99 to 5/7/99 4.94 to 5.75 1,702,993,237
- -------------------------------------------------------------------------------------------------------
TOTAL U.S. AGENCIES
AND INSTRUMENTALITIES
(Cost -- $5,348,561,451) 5,348,561,451
=======================================================================================================
MEDIUM-TERM NOTES -- 6.0%
25,000,000 Abbey National PLC
matures 2/5/99 5.50 24,995,831
50,000,000 Banc One Columbus NA
matures 5/11/99 5.74 49,989,768
168,500,000 Bank of New York
mature 2/25/99 to 5/26/99 5.00 to 5.80 168,530,063
350,000,000 FCC National Bank
mature 1/7/99 to 1/15/99 5.45 to 5.75 350,000,415
550,000,000 First Union National Bank
mature 1/8/99 to 11/1/99 4.65 to 5.63 550,000,000
310,000,000 Harris Bank
mature 1/25/99 to 5/10/99 5.00 to 5.20 309,999,983
355,000,000 Merrill Lynch
mature 3/2/99 to 6/28/99 5.68 to 5.82 354,993,484
435,000,000 NationsBank
mature 1/4/99 to 4/26/99 4.87 to 5.63 435,000,000
100,000,000 Wachovia Bank
mature 1/19/99 to 1/20/99 5.07 100,000,000
30,000,000 Walt Disney Co.
matures 2/26/99 5.50 29,991,695
- -------------------------------------------------------------------------------------------------------
TOTAL MEDIUM-TERM NOTES
(Cost -- $2,373,501,239) 2,373,501,239
=======================================================================================================
DOMESTIC CERTIFICATES OF DEPOSIT -- 1.9%
50,000,000 American Centurion Bank
matures 2/8/99 5.30 50,000,000
150,000,000 Chase Manhattan Bank
mature 5/10/99 to 5/12/99 5.80 149,967,677
250,000,000 Chase Manhattan Delaware
mature 1/15/99 to 1/21/99 5.62 250,000,000
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
4 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) December 31, 1998
- --------------------------------------------------------------------------------
CASH PORTFOLIO
<TABLE>
<CAPTION>
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
======================================================================================================
DOMESTIC CERTIFICATES OF DEPOSIT -- 1.9% (continued)
<C> <S> <C> <C>
$ 75,000,000 Harris Bank
mature 1/7/99 to 2/1/99 5.61% to 5.64% $ 75,000,000
100,000,000 Morgan Guaranty
mature 2/2/99 to 2/3/99 5.26 to 5.40 99,998,521
50,000,000 NationsBank
matures 10/28/99 4.68 50,000,000
100,000,000 Pittsburgh National Bank
mature 4/13/99 to 4/19/99 4.83 to 5.02 100,034,104
- ------------------------------------------------------------------------------------------------------
TOTAL DOMESTIC CERTIFICATES
OF DEPOSIT
(Cost -- $775,000,302) 775,000,302
======================================================================================================
OTHER CERTIFICATE PROGRAM -- 1.1%
450,000,000 Dakota Certificate Program
mature 1/8/99 to 3/5/99
(Cost -- $448,146,445) 5.27 to 5.63 448,146,445
======================================================================================================
TIME DEPOSITS -- 2.7%
150,000,000 Barclays Bank
matures 1/4/99 5.31 150,000,000
225,000,000 Canadian Imperial Bank of Commerce
matures 1/4/99 5.00 to 5.48 225,000,000
150,000,000 Dresdner Bank
matures 1/4/99 5.47 150,000,000
365,729,000 First Chicago
matures 1/4/99 5.00 365,729,000
200,000,000 Paribas SA
matures 1/4/99 5.00 200,000,000
- ------------------------------------------------------------------------------------------------------
TOTAL TIME DEPOSITS
(Cost -- $1,090,729,000) 1,090,729,000
======================================================================================================
COMMERCIAL PAPER -- 50.1%
278,450,000 Abbey National PLC
mature 1/6/99 to 5/4/99 4.83 to 5.25 275,691,741
250,000,000 ABN AMRO (Canada)
mature 1/15/99 to 5/28/99 4.99 to 5.60 247,242,629
185,500,000 AC Acquisitions
mature 1/20/99 to 3/12/99 5.11 to 5.22 184,142,595
160,000,000 Alliance & Leicester Building Society
mature 1/4/99 to 2/1/99 5.19 to 5.63 159,720,022
100,000,000 American Express Credit Corp.
matures 1/15/99 5.21 99,800,111
80,000,000 American Home Products
mature 2/5/99 to 3/19/99 5.21 to 5.22 79,301,166
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Money Funds, Inc. 5
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) December 31, 1998
- --------------------------------------------------------------------------------
CASH PORTFOLIO
<TABLE>
<CAPTION>
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
====================================================================================================
COMMERCIAL PAPER -- 50.1% (continued)
<C> <S> <C> <C>
$ 298,800,000 ANZ Delaware Inc.
mature 3/3/99 to 3/12/99 5.09% to 5.15% $296,013,761
225,000,000 Aspen Funding
mature 1/22/99 to 2/24/99 5.45 to 5.63 223,721,278
495,000,000 Asset Securitization
mature 1/22/99 to 3/12/99 5.19 to 5.41 491,609,313
350,000,000 Associates Corp. of North America
mature 1/13/99 to 4/19/99 4.81 to 5.23 347,466,014
364,611,000 Atlantis One Funding Corp.
mature 2/11/99 to 5/14/99 5.14 to 5.53 360,601,226
50,000,000 Banc One Corp.
matures 4/20/99 4.99 49,259,708
80,000,000 Bank of New York
mature 1/15/99 to 3/8/99 5.11 to 5.44 79,511,875
220,000,000 BankAmerica Corp.
mature 4/20/99 to 5/5/99 4.89 to 5.03 216,657,389
100,000,000 Bayerische Hypo-und Vereinsbank
matures 4/19/99 4.78 98,599,000
275,000,000 BBL NA Inc.
mature 2/16/99 to 3/16/99 5.11 to 5.32 272,523,291
322,300,000 BCI Funding Corp.
mature 1/5/99 to 6/15/99 4.97 to 5.25 319,161,839
325,000,000 Cades
mature 1/19/99 to 5/25/99 4.98 to 5.15 322,097,458
108,000,000 Canadian Wheat Board
mature 2/8/99 to 4/26/99 4.81 to 5.17 106,869,036
25,000,000 Cariplo Finance Inc.
matures 1/6/99 5.53 24,980,903
100,000,000 CCBP International Inc.
mature 2/24/99 to 3/11/99 5.11 to 5.17 99,133,541
148,750,000 Centric Capital Corp.
mature 1/4/99 to 3/17/99 5.27 to 5.40 148,160,919
300,000,000 Chase Manhattan Bank
mature 1/15/99 to 3/31/99 4.92 to 5.27 298,007,931
400,000,000 CIT Group Holdings, Inc.
mature 1/19/99 to 3/15/99 5.10 to 5.64 397,891,181
282,000,000 Commerzbank US Finance
mature 1/11/99 to 4/19/99 4.80 to 5.60 280,299,198
90,000,000 Compagnie de Saint-Gobain
mature 1/29/99 to 5/27/99 5.00 to 5.12 88,698,563
194,000,000 Credit Suisse First Boston Corp.
mature 1/14/99 to 5/11/99 5.21 to 5.42 192,667,595
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
6 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) December 31, 1998
- --------------------------------------------------------------------------------
CASH PORTFOLIO
<TABLE>
<CAPTION>
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
====================================================================================================
COMMERCIAL PAPER -- 50.1% (continued)
<C> <S> <C> <C>
$ 100,000,000 Credito Italiano Delaware, Inc.
mature 2/4/99 to 2/16/99 5.22% to 5.28% $ 99,423,944
330,000,000 Cregem North America Inc.
mature 1/8/99 to 6/11/99 4.98 to 5.64 326,966,440
431,085,000 Daimler-Benz North America Corp.
mature 1/28/99 to 5/28/99 4.85 to 5.14 425,298,133
291,400,000 Delaware Funding Corp.
mature 1/7/99 to 1/28/99 5.29 to 5.55 290,592,227
199,000,000 Den Danske Bank
mature 1/7/99 to 6/14/99 4.99 to 5.51 197,293,653
120,000,000 Deutsche Bank Finance Inc.
mature 1/5/99 to 1/20/99 5.18 to 5.53 119,779,947
385,000,000 Diageo PLC
mature 1/8/99 to 3/15/99 5.10 to 5.63 382,416,332
50,000,000 Dresdner US Finance Inc.
matures 1/11/99 5.52 49,924,861
250,000,000 E.I. du Pont de Nemours & Co.
mature 1/14/99 to 4/29/99 4.79 to 5.25 248,694,138
250,935,000 Enterprise Funding Corp.
mature 1/15/99 to 3/5/99 5.29 to 5.54 249,996,987
44,013,000 Fleet Funding Inc.
matures 2/12/99 5.31 43,743,420
50,000,000 Ford Credit Europe PLC
matures 1/15/99 5.14 49,901,222
375,000,000 Ford Motor Credit Co.
mature 1/8/99 to 3/1/99 5.17 to 5.60 373,286,784
700,000,000 General Electric Capital Corp.
mature 1/13/99 to 6/10/99 5.00 to 5.64 694,432,848
675,000,000 General Motors Acceptance Corp.
mature 1/6/99 to 2/17/99 5.17 to 5.82 672,904,681
328,000,000 Generale Bank
mature 1/4/99 to 4/26/99 4.88 to 5.65 325,977,464
154,300,000 Glaxo Holdings Inc.
mature 1/8/99 to 2/26/99 5.10 to 5.23 153,499,277
500,000,000 Goldman Sachs & Co.
mature 1/14/99 to 5/17/99 4.87 to 5.71 495,114,743
225,000,000 Halifax Building Society
mature 1/8/99 to 4/26/99 4.82 to 5.60 223,841,243
200,000,000 IBM Credit Corp.
mature 1/11/99 to 2/18/99 5.08 to 5.60 198,984,097
322,285,000 International Lease Finance
mature 1/12/99 to 3/29/99 4.84 to 5.60 320,221,119
250,000,000 International Nederlanden US Funding Corp.
mature 2/22/99 to 5/11/99 4.86 to 5.16 246,835,250
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Money Funds, Inc. 7
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) December 31, 1998
- --------------------------------------------------------------------------------
CASH PORTFOLIO
<TABLE>
<CAPTION>
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
====================================================================================================
COMMERCIAL PAPER -- 50.1% (continued)
<C> <S> <C> <C>
$ 550,000,000 J.P. Morgan & Co.
mature 1/6/99 to 5/20/99 4.89% to 5.63% $543,761,861
45,000,000 Johnson & Johnson
matures 6/24/99 4.96 43,949,476
290,282,000 Kitty Hawk
mature 1/22/99 to 3/15/99 5.17 to 5.45 288,166,143
100,000,000 Kredietbank NA Finance
mature 2/2/99 to 2/4/99 5.21 to 5.31 99,523,944
485,000,000 Lloyds Bank
mature 2/26/99 to 5/18/99 4.85 to 5.24 478,767,864
445,000,000 Merrill Lynch
mature 1/15/99 to 5/24/99 5.02 to 5.67 441,320,777
800,000,000 Morgan Stanley Dean Witter & Co.
mature 1/8/99 to 4/23/99 4.94 to 5.65 796,266,316
150,000,000 National Australia Funding Delaware
mature 1/19/99 to 2/4/99 5.21 to 5.22 149,498,278
50,000,000 National Bank of Canada Finance USA
matures 3/15/99 5.09 49,490,014
30,000,000 National Bank of Detroit
matures 4/27/99 5.00 29,527,300
165,000,000 NationsBank
mature 2/2/99 to 2/9/99 5.60 to 5.66 164,066,333
100,000,000 New Center Asset Trust
matures 1/28/99 5.28 99,610,000
200,000,000 Norwest Corp.
mature 1/22/99 to 1/29/99 5.10 to 5.22 199,327,819
160,000,000 Oesterriesche Kontrollbank
matures 5/18/99 5.02 157,016,445
150,500,000 Ontario Hydro
mature 3/8/99 to 3/15/99 5.05 to 5.06 149,024,746
484,225,000 Preferred Receivable Funding
mature 1/11/99 to 3/4/99 5.16 to 5.56 481,848,669
206,000,000 Procter & Gamble Co.
mature 1/15/99 to 3/19/99 5.09 to 5.60 204,839,990
206,390,000 Province de Quebec
mature 1/11/99 to 5/12/99 5.03 to 5.64 204,546,995
25,800,000 Province of British Columbia
matures 2/12/99 5.50 25,638,513
91,890,000 Province of Ontario
matures 3/22/99 5.10 90,860,832
136,352,000 Quincy Capital Corp.
mature 1/27/99 to 2/5/99 5.36 to 5.48 135,772,873
119,163,000 Receivable Capital Corp.
matures 1/13/99 5.38 118,950,890
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
8 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) December 31, 1998
- --------------------------------------------------------------------------------
CASH PORTFOLIO
<TABLE>
<CAPTION>
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
=======================================================================================================
COMMERCIAL PAPER -- 50.1% (continued)
<C> <S> <C> <C>
$ 170,383,000 Rose Funding
mature 1/8/99 to 2/26/99 5.32% to 5.47% $ 169,712,696
211,000,000 San Paolo US Finance Inc.
mature 1/12/99 to 6/10/99 4.86 to 5.62 209,241,464
100,000,000 Sears & Roebuck Acceptance Corp.
mature 1/25/99 to 2/8/99 5.24 to 5.33 99,548,333
150,000,000 Siemens Corp.
mature 1/8/99 to 4/23/99 4.74 to 5.62 149,099,944
70,800,000 Societe Generale (New York)
mature 1/12/99 to 5/13/99 5.09 to 5.51 69,856,346
95,000,000 Svenska Handelsbanken
mature 1/15/99 to 4/23/99 4.90 to 5.26 94,229,883
300,000,000 Swedish Export Credit Corp.
mature 2/3/99 to 3/29/99 4.85 to 5.19 297,364,792
25,000,000 Toronto Dominion Holdings USA Inc.
matures 2/4/99 5.16 24,879,820
264,200,000 Transamerica Finance Corp.
mature 1/11/99 to 3/1/99 5.06 to 5.61 262,969,503
550,000,000 Union Bank of Switzerland
mature 1/6/99 to 5/10/99 4.90 to 5.62 546,543,498
72,000,000 USAA Capital Corp.
mature 1/28/99 to 3/26/99 4.90 to 5.22 71,458,380
135,000,000 Wachovia Bank
mature 1/14/99 to 3/4/99 5.06 to 5.19 134,157,639
295,925,000 Walt Disney Co.
mature 1/29/99 to 4/29/99 4.75 to 5.07 292,347,640
100,000,000 Wells Fargo Bank
matures 3/12/99 5.14 99,012,223
275,000,000 Westpac
mature 2/2/99 to 3/18/99 5.09 to 5.32 272,981,139
125,000,000 Windmill Funding Corp.
mature 3/4/99 to 3/18/99 5.19 to 5.21 123,792,473
150,000,000 Woolwich Building Society
mature 3/24/99 to 4/23/99 4.81 to 5.16 147,958,083
- -------------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(Cost -- $19,965,888,027) 19,965,888,027
=======================================================================================================
FOREIGN CERTIFICATES OF DEPOSIT -- 24.8%
250,000,000 Abbey National PLC
mature 2/8/99 to 7/27/99 5.09 to 5.72 250,002,733
100,000,000 ABN AMRO Bank (Chicago)
mature 3/1/99 to 5/10/99 5.13 to 5.16 100,003,429
200,000,000 ABN AMRO Bank (New York)
matures 5/10/99 5.04 200,006,989
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Money Funds, Inc. 9
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) December 31, 1998
- --------------------------------------------------------------------------------
CASH PORTFOLIO
<TABLE>
<CAPTION>
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
====================================================================================================
FOREIGN CERTIFICATES OF DEPOSIT -- 24.8% (continued)
<C> <S> <C> <C>
$ 400,000,000 Bank Austriengellschaft
mature 1/25/99 to 7/23/99 5.01% to 5.80% $399,969,458
400,000,000 Bank of Montreal
mature 1/15/99 to 2/18/99 5.22 to 5.60 399,999,887
370,000,000 Bank of Nova Scotia
mature 1/11/99 to 8/23/99 4.85 to 5.70 369,999,373
550,000,000 Banque National de Paris
mature 1/15/99 to 8/2/99 4.88 to 5.88 549,938,326
408,000,000 Barclays Bank
mature 1/7/99 to 4/27/99 4.86 to 5.74 408,025,020
150,000,000 Bayerische Hypo-und Vereinsbank
mature 2/5/99 to 3/17/99 4.78 to 5.30 150,002,870
369,000,000 Bayerische Landesbank
mature 2/2/99 to 10/29/99 4.65 to 5.80 369,037,289
280,000,000 Bayerische Vereinsbank
mature 1/4/99 to 2/5/99 5.45 to 5.64 280,001,498
300,000,000 Canadian Imperial Bank of Commerce
mature 1/13/99 to 6/14/99 5.05 to 5.75 299,988,055
265,000,000 Cariplo
mature 1/4/99 to 5/19/99 5.02 to 5.61 264,985,680
196,000,000 Commerzbank
mature 1/7/99 to 1/21/99 5.32 to 5.63 195,998,701
339,000,000 Credit Agricole Indosuez
mature 1/7/99 to 5/4/99 5.00 to 5.85 339,095,273
21,000,000 Credit Suisse
matures 1/7/99 5.62 20,999,746
225,000,000 Credit Suisse First Boston Corp.
mature 3/25/99 to 8/24/99 5.60 to 5.86 225,043,239
75,000,000 Creditanstalt Bankverein
mature 4/23/99 to 5/26/99 5.08 to 5.75 75,046,036
118,000,000 Credito Italiano
mature 1/4/99 to 2/8/99 5.16 to 5.65 118,001,416
40,000,000 Den Danske Bank
matures 1/7/99 5.64 39,999,732
498,000,000 Deutsche Bank
mature 1/4/99 to 10/29/99 4.65 to 5.81 497,966,897
330,000,000 Dresdner Bank
mature 1/15/99 to 5/6/99 4.87 to 5.75 330,020,791
75,000,000 Generale Bank (New York)
mature 1/12/99 to 2/8/99 5.27 to 5.63 74,996,681
100,000,000 Halifax Building Society
mature 1/8/99 to 2/2/99 5.22 to 5.60 100,000,536
350,000,000 Hessiche Landesbank
mature 1/19/99 to 5/17/99 5.04 to 5.60 350,004,670
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) December 31, 1998
- --------------------------------------------------------------------------------
CASH PORTFOLIO
<TABLE>
<CAPTION>
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
=======================================================================================================
FOREIGN CERTIFICATES OF DEPOSIT -- 24.8% (continued)
<C> <S> <C> <C>
$ 37,000,000 International Nederlanden Group
matures 1/8/99 5.60% $ 36,998,144
15,000,000 Lloyds Bank
matures 1/4/99 5.62 15,000,043
50,000,000 National Australia Bank
matures 3/2/99 5.19 50,000,823
326,500,000 National Bank of Canada
mature 3/24/99 to 7/12/99 4.87 to 5.80 326,478,451
140,000,000 National Westminster Bank PLC
mature 1/19/99 to 4/28/99 5.23 to 5.84 139,987,114
440,000,000 Rabobank Nederland N.V.
mature 1/4/99 to 5/5/99 4.85 to 5.81 440,082,102
370,000,000 Royal Bank of Canada
mature 2/5/99 to 11/10/99 5.00 to 5.85 369,972,381
134,000,000 San Paolo Bank
mature 1/6/99 to 5/5/99 5.65 to 5.85 133,976,394
150,000,000 Societe Generale
mature 4/30/99 to 8/3/99 5.75 to 5.89 149,969,131
468,500,000 Societe Generale (New York)
mature 1/11/99 to 6/8/99 4.84 to 5.87 468,668,331
205,000,000 Svenska Handelsbanken
mature 1/4/99 to 4/19/99 4.87 to 5.27 205,001,723
442,400,000 Swiss Bank Corp.
mature 3/25/99 to 6/11/99 5.70 to 5.85 442,331,905
315,000,000 Toronto Dominion Holdings USA Inc.
mature 1/4/99 to 7/26/99 5.11 to 5.75 314,976,829
375,000,000 Westdeutsche Landesbank
mature 1/6/99 to 11/3/99 4.70 to 5.63 374,994,777
- -------------------------------------------------------------------------------------------------------
TOTAL FOREIGN CERTIFICATES
OF DEPOSIT
(Cost -- $9,877,572,473) 9,877,572,473
=======================================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $39,879,398,937*) $39,879,398,937
=======================================================================================================
</TABLE>
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Money Funds, Inc. 11
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) December 31, 1998
- --------------------------------------------------------------------------------
GOVERNMENT PORTFOLIO
<TABLE>
<CAPTION>
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
=======================================================================================================
U.S. AGENCIES AND INSTRUMENTALITIES -- 97.7%
<C> <S> <C> <C>
$ 77,800,000 Federal Farm Credit Bank
mature 2/24/99 to 8/3/99 5.42% to 5.69% $ 77,606,448
1,064,642,000 Federal Home Loan Bank
mature 1/4/99 to 7/15/99 4.71 to 5.72 1,059,224,998
2,494,454,000 Federal Home Loan Mortgage Corp.
mature 1/11/99 to 8/13/99 4.65 to 5.65 2,477,427,987
1,629,157,000 Federal National Mortgage Association
mature 1/4/99 to 7/9/99 4.63 to 5.72 1,615,816,275
- -------------------------------------------------------------------------------------------------------
TOTAL U.S. AGENCIES AND
INSTRUMENTALITIES
(Cost -- $5,230,075,708) 5,230,075,708
=======================================================================================================
REPURCHASE AGREEMENT -- 2.3%
121,780,000 Morgan Stanley Dean Witter & Co., 4.65% due 1/4/99; Proceeds
at maturity -- $121,842,920; (Fully collateralized by
U.S. Treasury Notes, Bills, Bonds, 6.00% to 6.38%
due 4/30/99 to 2/15/26; Market value -- $124,216,228)
(Cost -- $121,780,000) 121,780,000
=======================================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $5,351,855,708*) $5,351,855,708
=======================================================================================================
</TABLE>
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) December 31, 1998
- --------------------------------------------------------------------------------
RETIREMENT PORTFOLIO
<TABLE>
<CAPTION>
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
====================================================================================================
U.S. AGENCIES AND INSTRUMENTALITIES -- 4.7%
<C> <S> <C> <C>
$ 40,000,000 Federal Home Loan Mortgage Corp.
mature 2/8/99 to 3/26/99 5.04% to 5.08% $ 39,725,917
40,000,000 Federal National Mortgage Association
mature 2/5/99 to 3/10/99 5.04 to 5.07 39,714,450
- ----------------------------------------------------------------------------------------------------
TOTAL U.S. AGENCIES AND
INSTRUMENTALITIES
(Cost -- $79,440,367) 79,440,367
====================================================================================================
DOMESTIC BANK OBLIGATIONS -- 7.4%
10,000,000 Bank of America NT & SA
matures 2/17/99 5.70 9,996,273
35,000,000 FCC National Bank
matures 2/11/99 5.14 35,000,000
20,000,000 First Union National Bank
matures 2/4/99 5.62 20,000,000
20,000,000 Harris Bank
matures 1/12/99 5.35 20,000,000
40,000,000 NationsBank
mature 2/22/99 to 4/15/99 5.05 to 5.24 40,000,000
- ----------------------------------------------------------------------------------------------------
TOTAL DOMESTIC BANK OBLIGATIONS
(Cost -- $124,996,273) 124,996,273
====================================================================================================
MEDIUM-TERM NOTE -- 0.6%
10,000,000 Abbey National PLC matures 7/27/99
(Cost -- $9,996,738) 5.71 9,996,738
====================================================================================================
COMMERCIAL PAPER -- 61.4%
24,000,000 Alliance & Leicester Building Society
mature 2/1/99 to 4/6/99 4.88 to 5.55 23,808,520
35,000,000 Asset Securitization
mature 2/18/99 to 3/17/99 5.19 to 5.45 34,696,800
15,000,000 Bank of Nova Scotia
matures 2/8/99 5.30 14,917,192
40,000,000 BCI Funding Corp.
mature 1/6/99 to 6/15/99 4.98 to 5.23 39,675,457
27,900,000 Chase Manhattan Bank
mature 1/29/99 to 3/31/99 4.92 to 5.20 27,709,944
35,000,000 Commerzbank US Finance
mature 2/5/99 to 2/12/99 5.16 to 5.60 34,801,462
30,000,000 Compagnie de Saint-Gobain
mature 2/10/99 to 6/14/99 5.00 to 5.33 29,579,550
12,000,000 Credit Suisse First Boston Corp.
matures 1/12/99 5.24 11,981,043
40,000,000 Cregem North America Inc.
mature 1/21/99 to 6/11/99 4.97 to 5.60 39,507,221
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Money Funds, Inc. 13
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) December 31, 1998
- --------------------------------------------------------------------------------
RETIREMENT PORTFOLIO
<TABLE>
<CAPTION>
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
====================================================================================================
COMMERCIAL PAPER -- 61.4% (continued)
<C> <S> <C> <C>
$ 20,000,000 Daimler-Benz North America Corp.
matures 4/26/99 5.07% $ 19,681,833
15,000,000 Den Danske Bank
matures 2/10/99 5.30 14,912,833
23,000,000 E.I. du Pont de Nemours & Co.
mature 2/12/99 to 3/26/99 4.96 to 5.25 22,788,238
40,000,000 Ford Motor Credit Co.
mature 1/11/99 to 2/4/99 5.22 to 5.35 39,873,278
40,000,000 General Electric Capital Corp.
mature 1/12/99 to 4/28/99 5.03 to 5.30 39,604,403
20,000,000 General Motors Acceptance Corp.
matures 2/3/99 5.30 19,904,117
15,000,000 Generale Bank
matures 2/10/99 5.30 14,912,833
20,000,000 Glaxo Holdings Inc.
matures 2/22/99 5.12 19,854,111
45,000,000 Goldman Sachs & Co.
mature 2/11/99 to 5/13/99 5.18 to 5.39 44,471,829
40,000,000 Halifax Building Society
mature 1/25/99 to 2/3/99 5.26 to 5.60 39,831,917
15,000,000 International Nederlanden US Funding Corp.
matures 3/4/99 5.15 14,868,767
45,000,000 J.P. Morgan & Co.
mature 1/19/99 to 6/11/99 4.98 to 5.40 44,678,747
15,000,000 Kredietbank NA Finance
matures 1/26/99 5.32 14,945,208
20,000,000 Lloyds Bank
matures 2/1/99 5.16 19,912,339
30,000,000 Merrill Lynch
matures 1/19/99 5.15 29,923,800
40,000,000 Morgan Stanley Dean Witter & Co.
mature 1/22/99 to 3/23/99 5.34 to 5.65 39,747,919
35,000,000 Oesterriesche Kontrollbank
matures 2/22/99 5.11 34,744,694
18,000,000 Procter & Gamble Co.
mature 1/26/99 to 1/29/99 5.16 to 5.60 17,930,056
13,700,000 Province de Quebec
matures 3/2/99 5.11 13,584,692
28,440,000 Province of Ontario
matures 3/22/99 5.14 28,118,944
41,900,000 San Paolo US Finance Inc.
mature 2/8/99 to 6/22/99 5.05 to 5.64 41,420,752
25,000,000 Shell Oil
matures 1/4/99 5.00 24,989,583
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
14 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) December 31, 1998
- --------------------------------------------------------------------------------
RETIREMENT PORTFOLIO
<TABLE>
<CAPTION>
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
=======================================================================================================
COMMERCIAL PAPER -- 61.4% (continued)
<C> <S> <C> <C>
$ 28,000,000 Siemens Corp.
matures 1/20/99 4.98% $ 27,927,293
20,000,000 Swedish Export Credit Corp.
matures 3/2/99 5.12 19,831,333
15,000,000 Toronto Dominion Holdings USA Inc.
matures 6/1/99 5.02 14,691,708
15,000,000 Transamerica Finance Corp.
matures 1/14/99 5.12 14,972,592
40,000,000 Union Bank of Switzerland
matures 3/22/99 4.90 39,573,333
25,000,000 Wachovia Bank
matures 1/25/99 5.26 24,913,333
30,000,000 Westpac
matures 2/5/99 5.30 29,847,458
- -------------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(Cost -- $1,029,135,132) 1,029,135,132
=======================================================================================================
DOMESTIC CERTIFICATES OF DEPOSIT -- 0.6%
10,000,000 Chase Manhattan Bank
matures 5/11/99 (Cost -- $9,997,240) 5.81 9,997,240
=======================================================================================================
FOREIGN CERTIFICATES OF DEPOSIT -- 18.3%
30,000,000 ABN AMRO Bank NV
mature 1/20/99 to 3/1/99 5.12 to 5.63 30,000,794
10,000,000 Bank Austriengellschaft
matures 1/25/99 5.18 10,001,538
25,000,000 Bank of Nova Scotia
mature 2/25/99 to 3/29/99 5.73 to 5.80 24,990,936
10,000,000 Bayerische Landesbank
matures 8/25/99 5.60 9,997,519
5,000,000 Bayerische Vereinsbank
matures 2/2/99 5.61 4,999,877
20,000,000 Canadian Imperial Bank of Commerce
matures 1/14/99 5.27 20,000,000
10,000,000 Cariplo
matures 2/24/99 5.55 10,000,883
20,000,000 Credit Agricole Indosuez
mature 2/26/99 to 4/16/99 5.71 to 5.82 19,996,974
20,000,000 Deutsche Bank
mature 4/16/99 to 5/3/99 5.68 to 5.75 20,001,132
20,000,000 Dresdner Bank
matures 2/18/99 5.10 20,000,000
5,000,000 International Nederlanden Group
matures 1/29/99 5.64 5,000,066
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Money Funds, Inc. 15
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) December 31, 1998
- --------------------------------------------------------------------------------
RETIREMENT PORTFOLIO
<TABLE>
<CAPTION>
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
=======================================================================================================
FOREIGN CERTIFICATES OF DEPOSIT -- 18.3% (continued)
<C> <S> <C> <C>
$ 5,000,000 Kredietbank NA Finance
matures 3/29/99 5.62% $ 4,999,397
30,000,000 National Bank of Canada
mature 2/5/99 to 6/10/99 5.25 to 5.82 29,997,692
30,000,000 Rabobank Nederland N.V.
mature 3/24/99 to 4/27/99 4.85 to 5.75 30,020,836
10,000,000 Societe Generale
matures 5/5/99 5.85 9,999,025
12,000,000 Swiss Bank Corp.
matures 2/10/99 5.60 11,998,900
19,000,000 Toronto Dominion Holdings USA Inc.
mature 1/4/99 to 6/25/99 5.23 to 5.62 18,999,897
25,000,000 Westdeutsche Landesbank
mature 1/28/99 to 3/22/99 5.16 to 5.31 25,000,895
- -------------------------------------------------------------------------------------------------------
TOTAL FOREIGN CERTIFICATES OF DEPOSIT
(Cost -- $306,006,361) 306,006,361
=======================================================================================================
TIME DEPOSITS -- 6.3%
30,000,000 Bank Austriengellshcaft
matures 1/4/99 5.13 30,000,000
30,000,000 Paribas Finance Inc. Banque Paribas
matures 1/4/99 5.00 30,000,000
25,000,000 Republic National Bank of New York
matures 1/4/99 5.44 25,000,000
20,000,000 Westdeutsche Landesbank
matures 1/4/99 5.25 20,000,000
- -------------------------------------------------------------------------------------------------------
TOTAL TIME DEPOSITS
(Cost -- $105,000,000) 105,000,000
=======================================================================================================
REPURCHASE AGREEMENT -- 0.7%
11,501,000 Morgan Stanley Dean Witter & Co., 4.65% due 1/4/99;
Proceeds at maturity -- $11,506,942;
(Fully collateralized by U.S. Treasury Notes and Bills,
7.50% due 8/19/99 to 11/15/01; Market value -- $11,791,539)
(Cost -- $11,501,000) 11,501,000
=======================================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $1,676,073,111*) $1,676,073,111
=======================================================================================================
</TABLE>
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
16 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Assets and Liabilities December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cash Government Retirement
Portfolio Portfolio Portfolio
===============================================================================================
<S> <C> <C> <C>
ASSETS:
Investments, at amortized cost $ 39,879,398,937 $5,351,855,708 $1,676,073,111
Cash 128 531 264
Interest receivable 310,530,832 6,936,233 10,670,695
Other assets -- 16,072 --
- -----------------------------------------------------------------------------------------------
Total Assets 40,189,929,897 5,358,808,544 1,686,744,070
- -----------------------------------------------------------------------------------------------
LIABILITIES:
Dividends payable 90,721,048 12,052,354 3,795,454
Management fees payable 12,686,789 1,870,868 529,321
Distribution fees payable 1,319,695 128,097 56,473
Deferred compensation payable 159,083 26,625 10,167
Accrued expenses 7,418,378 -- 264,019
- -----------------------------------------------------------------------------------------------
Total Liabilities 112,304,993 14,077,944 4,655,434
- -----------------------------------------------------------------------------------------------
Total Net Assets $ 40,077,624,904 $5,344,730,600 $1,682,088,636
===============================================================================================
NET ASSETS:
Par value of capital shares
(50,000,000,000,
10,000,000,000 and
5,000,000,000 shares
authorized, respectively;
par value $0.01 per share) $ 400,783,817 $ 53,447,140 $ 16,820,867
Capital paid in excess of
par value 39,677,845,699 5,291,283,460 1,665,265,793
Undistributed net investment
income -- -- 1,976
Accumulated net realized loss
from security transactions (1,004,612) -- --
- -----------------------------------------------------------------------------------------------
Total Net Assets $ 40,077,624,904 $5,344,730,600 $1,682,088,636
===============================================================================================
Shares Outstanding:
Class A 39,917,400,854 5,284,001,687 1,682,086,660
---------------------------------------------------------------------------------------------
Class L 412,144 206,474 --
---------------------------------------------------------------------------------------------
Class Y 158,530,798 3,658,866 --
---------------------------------------------------------------------------------------------
Class Z 2,037,873 56,846,929 --
---------------------------------------------------------------------------------------------
Net Asset Value, per class $1.00 $1.00 $1.00
===============================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Money Funds, Inc. 17
<PAGE>
- --------------------------------------------------------------------------------
Statements of Operations For the Year Ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cash Government Retirement
Portfolio Portfolio Portfolio
=====================================================================================
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $1,994,782,487 $278,879,265 $82,580,806
- -------------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 3) 138,431,850 21,476,822 6,375,587
Shareholder and system
servicing fees 42,375,675 2,888,800 1,993,582
Distribution fees (Note 3) 35,598,591 5,019,128 1,468,261
Shareholder communications 5,853,915 397,640 345,753
Custody 2,164,351 195,088 63,375
Registration fees 1,791,064 358,919 304,505
Directors' fees 169,631 28,144 11,515
Insurance 155,673 60,927 14,326
Audit and legal 91,586 49,785 29,785
Other 73,531 27,125 5,370
- -------------------------------------------------------------------------------------
Total Expenses 226,705,867 30,502,378 10,612,059
Less: Management
fee waiver (Note 3) -- -- (385,222)
- -------------------------------------------------------------------------------------
Net Expenses 226,705,867 30,502,378 10,226,837
- -------------------------------------------------------------------------------------
Net Investment Income 1,768,076,620 248,376,887 72,353,969
- -------------------------------------------------------------------------------------
Net Realized Gain From
Security Transactions 69,008 5,119 --
- -------------------------------------------------------------------------------------
Increase in Net Assets
From Operations $1,768,145,628 $248,382,006 $72,353,969
=====================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
18 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended December 31,
Cash Portfolio 1998 1997
========================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,768,076,620 $ 1,491,886,315
Net realized gain 69,008 13,789
- ----------------------------------------------------------------------------------------
Increase in Net Assets From Operations 1,768,145,628 1,491,900,104
- ----------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS (NOTE 2) (1,768,014,366) (1,491,864,232)
- ----------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Proceeds from sale of shares 161,515,398,630 133,949,259,558
Net asset value of shares issued
in connection with the transfer
of net assets of the Smith Barney
Funds, Inc. -- Income Return
Account Portfolio (Note 7) -- 977,206
Net asset value of shares issued
for reinvestment of dividends 1,705,807,910 1,440,716,985
Cost of shares reacquired (154,036,489,930) (131,985,544,414)
- ----------------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 9,184,716,610 3,405,409,335
- ----------------------------------------------------------------------------------------
Increase in Net Assets 9,184,847,872 3,405,445,207
NET ASSETS:
Beginning of year 30,892,777,032 27,487,331,825
- ----------------------------------------------------------------------------------------
End of year $ 40,077,624,904 $ 30,892,777,032
========================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Money Funds, Inc. 19
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended December 31,
Government Portfolio 1998 1997
======================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 248,376,887 $ 225,000,522
Net realized gain 5,119 1,014
- --------------------------------------------------------------------------------------
Increase in Net Assets From Operations 248,382,006 225,001,536
- --------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS (NOTE 2) (248,382,006) (225,001,536)
- --------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sales of shares 18,766,441,650 16,950,826,473
Net asset value of shares issued
for reinvestment of dividends 242,100,573 218,982,359
Cost of shares reacquired (18,294,653,762) (16,981,687,366)
- --------------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 713,888,461 188,121,466
- --------------------------------------------------------------------------------------
Increase in Net Assets 713,888,461 188,121,466
NET ASSETS:
Beginning of year 4,630,842,139 4,442,720,673
- --------------------------------------------------------------------------------------
End of year $ 5,344,730,600 $ 4,630,842,139
======================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
20 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (continued)
- --------------------------------------------------------------------------------
For the Years Ended December 31,
Retirement Portfolio 1998 1997
================================================================================
OPERATIONS:
Net investment income $ 72,353,969 $ 67,588,831
Net realized gain -- 4,875
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations 72,353,969 67,593,706
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS (NOTE 2) (72,351,993) (67,593,706)
- --------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sales of shares 5,440,139,414 5,002,210,790
Net asset value of shares issued
for reinvestment of dividends 70,372,913 66,161,619
Cost of shares reacquired (5,195,545,701) (5,056,269,867)
- --------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 314,966,626 12,102,542
- --------------------------------------------------------------------------------
Increase in Net Assets 314,968,602 12,102,542
NET ASSETS:
Beginning of year 1,367,120,034 1,355,017,492
- --------------------------------------------------------------------------------
End of year $ 1,682,088,636 $ 1,367,120,034
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Money Funds, Inc. 21
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
Smith Barney Money Funds, Inc. ("Fund"), a Maryland corporation, is registered
under the Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Fund consists of three separate investment
portfolios ("Portfolios"): the Cash Portfolio, the Government Portfolio and the
Retirement Portfolio.
The significant accounting policies consistently followed by the Fund are: (a)
transactions in money market instruments and U.S. government obligations are
accounted for on trade date; (b) the Fund uses the amortized cost method for
valuing investments; accordingly, the cost of securities plus accreted discount,
or minus amortized premium approximates value; (c) interest income is recorded
on the accrual basis; (d) direct expenses are charged to each Portfolio and each
class; management fees and general fund expenses are allocated on the basis of
relative net assets; (e) gains or losses on the sale of securities are
calculated by using the specific identification method; (f) the Portfolios
intend to comply with the applicable provisions of the Internal Revenue Code of
1986, as amended, pertaining to regulated investment companies and to make
distributions of taxable income sufficient to be relieved from substantially all
Federal income and excise taxes; and (g) estimates and assumptions are required
to be made regarding assets, liabilities and changes in net assets resulting
from operations when financial statements are prepared. Changes in the economic
environment, financial markets and any other parameters used in determining
these estimates could cause actual results to differ.
2. Dividends
Each Portfolio declares and records a dividend of substantially all of its net
investment income on each business day. Such dividends are paid or reinvested
monthly in each respective Portfolio's shares on the payable date.
3. Management Agreement and Other Transactions
Mutual Management Corp. ("MMC"), a subsidiary of Salomon Smith Barney Holdings,
Inc. ("SSBH"), acts as investment manager to the Fund. As compensation for its
services, each Portfolio pays MMC a daily fee calculated at the following rates:
Cash Portfolio: 0.45% on the first $6.0 billion of average daily net assets,
0.425% on the next $6.0 billion, 0.40% on the next $6.0 billion and 0.35% on the
average daily net assets in excess of $18.0 billion; Government Portfolio: 0.45%
on the first $2.5 billion of the average daily
- --------------------------------------------------------------------------------
22 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
net assets, 0.40% on the next $2.5 billion and 0.35% on average daily net assets
in excess of $5.0 billion; and Retirement Portfolio: 0.45% on the first $1.0
billion of average daily net assets, 0.40% on the next $1.0 billion and 0.35% on
average daily net assets in excess of $2.0 billion. These fees are calculated
daily and paid monthly. For the year ended December 31, 1998, MMC waived
$385,222 of its management fee for the Retirement Portfolio.
On October 8, 1998, CFBDS, Inc. became the Fund's distributor. Prior to that
date Salomon Smith Barney Inc. ("SSB"), another subsidiary of SSBH, was the
Fund's distributor. SSB, as well as certain other broker-dealers, continues to
sell Fund shares to the public as members of the selling group.
On June 12, 1998, the Portfolios existing Class C shares were renamed as Class L
shares.
Pursuant to a Distribution Plan, each Portfolio makes payments to SSB, for
assistance in distributing Class A and L shares, calculated at an annual rate of
0.10% of average daily net assets of each class, respectively.
For the year ended December 31, 1998, total Distribution Plan fees incurred
were:
Portfolio Class A Class L
================================================================================
Cash $35,597,897 $694
Government 5,018,837 291
Retirement 1,468,261 --
================================================================================
All officers and one Director of the Fund are employees of SSB.
4. Capital Loss Carryforward
At December 31, 1998, the Cash Portfolio had, for Federal tax purposes,
approximately $1,275,000 of capital loss carryforwards available to offset
future capital gains. To the extent that these carryforward losses are used to
offset capital gains, it is probable that the gains so offset will not be
distributed. The amount and expiration of the carryforwards are indicated below.
Expiration occurs on December 31 of the year indicated:
2000 2001
================================================================================
Carryforward Amounts $144,000 $1,131,000
================================================================================
- --------------------------------------------------------------------------------
Smith Barney Money Funds, Inc. 23
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
5. Repurchase Agreements
The Fund purchases (and its custodian takes possession of) U.S. government
securities from banks and securities dealers subject to agreements to resell the
securities to the sellers at a future date (generally, the next business day) at
an agreed-upon higher repurchase price. The Fund requires continual maintenance
of the market value of the collateral in amounts at least equal to the
repurchase price.
6. Capital Shares
The Fund has multiple classes of shares within the Cash and Government
Portfolios. Class A and Class Y shares can be purchased directly by investors;
Class L shares can only be purchased by participants in the Smith Barney 401(k)
Program; and, Class Z shares can only be purchased by participants in the Smith
Barney Employee 401(k) Program. Effective June 12, 1998, the Fund adopted the
renaming of existing Class C shares as Class L shares.
Transactions in shares of each Portfolio were as follows:
Year Ended Year Ended
Cash Portfolio December 31, 1998 December 31, 1997
================================================================================
Class A
Shares sold 160,978,115,930 133,360,262,023
Net asset value of shares issued
in connection with the transfer
of net assets of the Smith Barney
Funds, Inc. -- Income Return
Account Portfolio (Note 7) -- 977,206
Shares issued on reinvestment 1,702,308,541 1,436,817,723
Shares redeemed (153,590,683,868) (131,404,913,110)
- --------------------------------------------------------------------------------
Net Increase 9,089,740,603 3,393,143,842
================================================================================
Class L*
Shares sold 532,262 1,015,538
Shares issued on reinvestment 36,582 103,407
Shares redeemed (2,172,572) (1,255,407)
- --------------------------------------------------------------------------------
Net Decrease (1,603,728) (136,462)
================================================================================
Class Y
Shares sold 533,737,417 587,981,997
Shares issued on reinvestment 3,343,643 3,795,560
Shares redeemed (442,533,329) (579,375,897)
- --------------------------------------------------------------------------------
Net Increase 94,547,731 12,401,660
================================================================================
Class Z
Shares sold 3,013,021 --
Shares issued on reinvestment 119,144 295
Shares redeemed (1,100,161) --
- --------------------------------------------------------------------------------
Net Increase 2,032,004 295
================================================================================
* On June 12, 1998, Class C shares were renamed Class L shares.
- --------------------------------------------------------------------------------
24 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
Year Ended Year Ended
Government Portfolio December 31, 1998 December 31, 1997
================================================================================
Class A
Shares sold 18,703,029,473 16,638,043,109
Shares issued on reinvestment 238,831,953 215,119,151
Shares redeemed (18,229,543,894) (16,634,487,380)
- --------------------------------------------------------------------------------
Net Increase 712,317,532 218,674,880
================================================================================
Class L*
Shares sold 17,492 45,838
Shares issued on reinvestment 14,544 36,492
Shares redeemed (327,096) (562,515)
- --------------------------------------------------------------------------------
Net Decrease (295,060) (480,185)
================================================================================
Class Y
Shares sold 50,233,404 293,187,265
Shares issued on reinvestment 393,725 1,331,017
Shares redeemed (54,397,870) (338,961,831)
- --------------------------------------------------------------------------------
Net Decrease (3,770,741) (44,443,549)
================================================================================
Class Z
Shares sold 13,161,281 19,550,261
Shares issued on reinvestment 2,860,351 2,495,699
Shares redeemed (10,384,902) (7,675,640)
- --------------------------------------------------------------------------------
Net Increase 5,636,730 14,370,320
================================================================================
Retirement Portfolio
================================================================================
Class A
Shares sold 5,440,139,414 5,002,210,790
Shares issued on reinvestment 70,372,913 66,161,619
Shares redeemed (5,195,545,701) (5,056,269,867)
- --------------------------------------------------------------------------------
Net Increase 314,966,626 12,102,542
================================================================================
* On June 12, 1998, Class C shares were renamed Class L shares.
- --------------------------------------------------------------------------------
Smith Barney Money Funds, Inc. 25
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
7. Transfer of Net Assets
On December 5, 1997, the Cash Portfolio acquired the assets and certain
liabilities of the Smith Barney Funds, Inc. -- Income Return Account Portfolio
("IRAP"), in a taxable transaction pursuant to a plan of reorganization approved
by IRAP shareholders on November 19, 1997. Total shares issued by the Cash
Portfolio and the total net assets of IRAP and the Cash Portfolio on the date of
the transfer were as follows:
Shares Total Net Total Net
Acquired Issued by the Assets of Assets of
Fund Cash Portfolio IRAP Cash Portfolio
================================================================================
IRAP 977,206 $977,206 $31,595,186,434
================================================================================
The net assets of the Cash Portfolio immediately after the transfer were
$31,596,163,640.
- --------------------------------------------------------------------------------
26 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended December 31:
<TABLE>
<CAPTION>
Class A Shares
-------------------------------------------------------------
Cash Portfolio 1998 1997 1996 1995 1994
===================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------
Net investment income 0.050 0.050 0.050 0.054 0.037
Dividends from
net investment income (0.050) (0.050) (0.050) (0.054) (0.037)
- ---------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------
Total Return 5.07% 5.12% 4.98% 5.53% 3.73%
- ---------------------------------------------------------------------------------------------------
Net Assets, End of Year (billions) $40 $31 $27 $23 $18
- ---------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.63% 0.64% 0.62% 0.62% 0.64%
Net investment income 4.95 5.01 4.87 5.39 4.10
===================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class L Shares(1)
--------------------------------------------------------------
Cash Portfolio 1998 1997 1996 1995 1994(2)
====================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------
Net investment income 0.050 0.051 0.050 0.054 0.007
Dividends from
net investment income (0.050) (0.051) (0.050) (0.054) (0.007)
- ----------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------
Total Return 5.12% 5.17% 4.98% 5.53% 0.70%++
- ----------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $412 $2,016 $2,152 $1,737 $1,323
- ----------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.59% 0.59% 0.62% 0.62% 0.62%+
Net investment income 5.07 5.05 4.87 5.39 4.77+
====================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class Y Shares
--------------------------------------------------------------
Cash Portfolio 1998 1997 1996 1995 1994(3)
====================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------
Net investment income 0.052 0.052 0.051 0.054 0.0004
Dividends from
net investment income (0.052) (0.052) (0.051) (0.054) (0.0004)
- ----------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------
Total Return 5.29% 5.32% 5.09% 5.50% 0.40%++
- ----------------------------------------------------------------------------------------------------
Net Assets, End of Year (millions) $159 $64 $52 $30 $0.5
- ----------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.42% 0.43% 0.52% 0.51% 0.53%+
Net investment income 5.17 5.22 4.97 5.29 5.23+
====================================================================================================
</TABLE>
(1) On June 12, 1998, Class C shares were renamed Class L shares.
(2) For the period from November 10, 1994 (inception date) to December 31,
1994.
(3) For the period from December 29, 1994 (inception date) to December 31,
1994.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Smith Barney Money Funds, Inc. 27
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended December 31:
<TABLE>
<CAPTION>
Class Z Shares
--------------------------------------------------------------
Cash Portfolio 1998 1997 1996 1995 1994(1)
====================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------
Net investment income 0.052 0.052 0.051 0.055 0.006
Dividends from
net investment income (0.052) (0.052) (0.051) (0.055) (0.006)
- ----------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------
Total Return 5.29% 5.33% 5.06% 5.63% 0.60%++
- ----------------------------------------------------------------------------------------------------
Net Assets, End of Year (millions) $2 $6 $6 $5 $5
- ----------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.43% 0.44% 0.53% 0.52% 0.47%+
Net investment income 5.21 5.21 4.96 5.49 5.12+
====================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class A Shares
--------------------------------------------------------------
Government Portfolio 1998 1997 1996 1995 1994
====================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------
Net investment income 0.049 0.049 0.048 0.053 0.036
Dividends from
net investment income (0.049) (0.049) (0.048) (0.053) (0.036)
- ----------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------
Total Return 5.00% 5.04% 4.89% 5.45% 3.63%
- ----------------------------------------------------------------------------------------------------
Net Assets, End of Year (billions) $5 $5 $4 $4 $4
- ----------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.60% 0.61% 0.61% 0.60% 0.61%
Net investment income 4.88 4.92 4.78 5.31 4.03
====================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class L Shares(2)(3)
--------------------------------------------------------------
Government Portfolio 1998 1997 1996 1995 1994
====================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------
Net investment income 0.049 0.049 0.048 0.053 0.036
Dividends from
net investment income (0.049) (0.049) (0.048) (0.053) (0.036)
- ----------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------
Total Return 5.01% 5.04% 4.89% 5.46% 3.63%
- ----------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $206 $502 $982 $1,459 $3,961
- ----------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.59% 0.61% 0.61% 0.60% 0.61%
Net investment income 4.94 4.90 4.78 5.36 3.78
====================================================================================================
</TABLE>
(1) For the period from November 15, 1994 (inception date) to December 31,
1994.
(2) The inception date for Class L shares is March 5, 1993.
(3) On June 12, 1998, Class C shares were renamed Class L shares.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
28 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended December 31:
<TABLE>
<CAPTION>
Class Y Shares
--------------------------------------------------------------
Government Portfolio 1998 1997 1996 1995 1994(1)
====================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------
Net investment income 0.050 0.050 0.049 0.054 0.036
Dividends from
net investment income (0.050) (0.050) (0.049) (0.054) (0.036)
- ----------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------
Total Return 5.13% 5.14% 4.99% 5.55% 3.65%
- ----------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $3,659 $7,430 $51,873 $5,376 $917
- ----------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.48% 0.51% 0.51% 0.50% 0.60%
Net investment income 5.06 4.98 4.88 5.51 3.58
====================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class Z Shares
--------------------------------------------------------------
Government Portfolio 1998 1997 1996 1995 1994(2)(3)
====================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------
Net investment income 0.050 0.050 0.049 0.054 0.007
Dividends from
net investment income (0.050) (0.050) (0.049) (0.054) (0.007)
- ----------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------
Total Return 5.13% 5.14% 4.99% 5.56% 0.70%++
- ----------------------------------------------------------------------------------------------------
Net Assets, End of Year (millions) $57 $51 $37 $31 $30
- ----------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.47% 0.51% 0.51% 0.50% 0.51%+
Net investment income 5.01 5.03 4.88 5.42 4.93+
====================================================================================================
</TABLE>
(1) On November 7, 1994, the former Class C shares were renamed as Class Y
shares.
(2) For the period from November 9, 1994 (inception date) to December 31,
1994.
(3) On November 7, 1994, the former Class Y shares were renamed as Class Z
shares.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Smith Barney Money Funds, Inc. 29
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended December 31:
<TABLE>
<CAPTION>
Class A Shares
--------------------------------------------------------------
Retirement Portfolio 1998 1997 1996 1995 1994
====================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------
Net investment income(1) 0.049 0.049 0.048 0.053 0.036
Dividends from
net investment income (0.049) (0.049) (0.048) (0.053) (0.036)
- ----------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------
Total Return 5.04% 5.03% 4.86% 5.42% 3.67%
- ----------------------------------------------------------------------------------------------------
Net Assets, End of Year (millions) $1,682 $1,367 $1,355 $1,280 $1,061
- ----------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(1)(2) 0.70% 0.71% 0.71% 0.72% 0.70%
Net investment income 4.92 4.92 4.75 5.28 3.57
====================================================================================================
</TABLE>
(1) The investment manager waived a portion of their management fees for the
year ended December 31, 1998. If such fees were not waived, the per share
decrease on net investment income and the actual expense ratio would have
been 0.0002 and 0.72%, respectively.
(2) As a result of the 0.70% voluntary expense limitation for the ratio of
expenses to average net assets, the investment manager will reimburse fees
for the amount that exceeds the limitation.
- --------------------------------------------------------------------------------
Tax Information (unaudited)
- --------------------------------------------------------------------------------
Percentage of ordinary dividends paid by the Fund from net investment income
derived from Federal obligations and that may be exempt from taxation at the
state level:
o Cash Portfolio 0.66%
o Government Portfolio 13.73%
o Retirement Portfolio 0.57%
- --------------------------------------------------------------------------------
30 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
The Smith Barney Money Funds, Inc.:
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of Smith Barney Money Funds, Inc.
(comprised of the Cash, Government and Retirement Portfolios) as of December 31,
1998, the related statements of operations for the year then ended, the
statements of changes in net assets for each of the years in the two-year period
then ended and the financial highlights for each of the years in the five-year
period then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1998, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective portfolios constituting Smith Barney Money Funds, Inc. as of
December 31, 1998, the results of their operations for the year then ended, the
changes in their net assets for each of the years in the two-year period then
ended and the financial highlights for each of the years in the five-year period
then ended, in conformity with generally accepted accounting principles.
/s/ KPMG LLP
New York, New York
February 9, 1999
- --------------------------------------------------------------------------------
Smith Barney Money Funds, Inc. 31
<PAGE>
- --------------------------------------------------------------------------------
Additional Shareholder Information (unaudited)
- --------------------------------------------------------------------------------
On March 9, 1998, a special meeting of shareholders of the Fund was held for the
purpose of voting on the following matters:
1. To elect Directors of the Fund; and
2. To approve or disapprove the reclassification, modification and/or
elimination of certain fundamental investment policies.
The results of the vote on Proposal 1 were as follows:
<TABLE>
<CAPTION>
Shares Voted Percentage Shares Voted Percentage
Name of Directors For Shares Voted Against Shares Voted
==================================================================================================
<S> <C> <C> <C> <C>
Donald R. Foley 18,263,787,910.365 96.800% 603,735,474.755 3.200%
Paul Hardin 18,286,836,891.365 96.922 580,686,493.755 3.078
Heath B. McLendon 18,292,038,763.375 96.950 575,484,621.745 3.050
Roderick C. Rasmussen 18,273,216,574.365 96.850 594,306,810.755 3.150
John P. Toolan 18,287,545,987.335 96.926 579,977,397.785 3.074
==================================================================================================
</TABLE>
Proposal 2 requested that shareholders approve certain changes to the
fundamental policies of the Fund in order to modernize them in view of certain
regulatory, business or industry developments that have occurred since original
adoption of these policies by the Fund. The following chart demonstrates that
all proposals were approved by shareholders.
Please note that "M" indicates a modification of the policy; "E" indicates the
elimination of the policy; and "R" indicates the reclassification of the policy
from fundamental (which would require shareholder approval to change) to
non-fundamental (which can be changed by a vote of the Board of Trustees).
Cash, Government
and Retirement
Portfolios
================================================================================
M Diversification Approved
- --------------------------------------------------------------------------------
M Borrowing Approved
- --------------------------------------------------------------------------------
E Ability to Pledge Assets Approved
- --------------------------------------------------------------------------------
M Lending by the Fund Approved
- --------------------------------------------------------------------------------
R Margin and Short Sales Approved
- --------------------------------------------------------------------------------
M Real Estate and Commodities Approved
- --------------------------------------------------------------------------------
R Restricted and Illiquid Securities Approved
- --------------------------------------------------------------------------------
R Purchases of Securities of Other Investment Companies Approved
- --------------------------------------------------------------------------------
R Exercising Control or Management Approved
- --------------------------------------------------------------------------------
R Investing in Oil, Gas and Mineral Exploration Approved
- --------------------------------------------------------------------------------
R Puts, Calls and Combinations Thereof Approved
================================================================================
- --------------------------------------------------------------------------------
32 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Additional Shareholder Information (unaudited) (continued)
- --------------------------------------------------------------------------------
The information below reports the lowest percentage of shares voting for the
proposals, the highest percentage of shares voting against and abstaining by
shareholders of the Fund on all proposals.
Cash Portfolio
<TABLE>
<CAPTION>
Percentage Percentage Percentage
Shares Voted of Shares Shares Voted of Shares Shares of Shares
For Voted Against Voted Abstaining Abstained
========================================================================================================
<S> <C> <C> <C> <C> <C>
14,035,433,186.926 88.557% 487,786,317.900 3.077% 1,325,878,358.894 8.366%
========================================================================================================
</TABLE>
Government Portfolio
<TABLE>
<CAPTION>
Percentage Percentage Percentage
Shares Voted of Shares Shares Voted of Shares Shares of Shares
For Voted Against Voted Abstaining Abstained
========================================================================================================
<S> <C> <C> <C> <C> <C>
2,036,513,417.080 86.940% 110,887,522.200 4.734% 195,024,730.770 8.326%
========================================================================================================
</TABLE>
Retirement Portfolio
<TABLE>
<CAPTION>
Percentage Percentage Percentage
Shares Voted of Shares Shares Voted of Shares Shares of Shares
For Voted Against Voted Abstaining Abstained
========================================================================================================
<S> <C> <C> <C> <C> <C>
594,961,438.160 87.278% 28,170,032.930 4.132% 58,555,395.010 8.590%
========================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Smith Barney Money Funds, Inc. 33
<PAGE>
SALOMON SMITH BARNEY
--------------------
A member of citigroup [LOGO]
Directors
Donald R. Foley
Paul Hardin
Heath B. McLendon, Chairman
Roderick C. Rasmussen
John P. Toolan
Joseph H. Fleiss, Emeritus
Officers
Heath B. McLendon
President and
Chief Executive Officer
Lewis E. Daidone
Senior Vice President
and Treasurer
Phyllis M. Zahorodny
Vice President
Martin R. Hanley
Vice President
Irving P. David
Controller
Christina T. Sydor
Secretary
Investment Manager
Mutual Management Corp.
Distributor
CFBDS, Inc.
Custodian
PNC Bank, N.A.
Shareholder
Servicing Agent
First Data Investor Services Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is submitted for the general information of the shareholders of
Smith Barney Money Funds, Inc. It is not authorized for distribution to
prospective investors unless accompanied or preceded by a current Prospectus for
the Fund, which contains information concerning the Fund's investment policies
and expenses as well as other pertinent information.
Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
Smith Barney
Money Funds, Inc.
388 Greenwich Street
New York, New York 10013
www.smithbarney.com
FD0858 2/99
