UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-2490
Smith Barney Money Funds, Inc.
(Exact name of registrant as specified in charter)
125 Broad Street, New York, NY 10004
(Address of principal executive offices) (Zip code)
Robert I. Frenkel, Esq.
Smith Barney Fund Management LLC
300 First Stamford Place
Stamford, CT 06902
(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 451-2010
Date of fiscal year end: December 31
Date of reporting period: December 31, 2003
ITEM 1. REPORT TO STOCKHOLDERS.
The Annual Report to Stockholders is filed herewith.
SMITH BARNEY
MONEY FUNDS, INC.
ANNUAL REPORT | DECEMBER 31, 2003
[LOGO] Smith Barney
Mutual Funds
Your Serious Money. Professionally Managed.(R)
Your Serious Money. Professionally Managed. is a registered service mark of
Citigroup Global Markets Inc.
NOT FDIC INSURED . NOT BANK GUARANTEED . MAY LOSE VALUE
WHAT'S INSIDE
Letter from the Chairman............ 1
Manager Overview.................... 2
Schedules of Investments............ 5
Statements of Assets and Liabilities 11
Statements of Operations............ 12
Statements of Changes in Net Assets. 13
Notes to Financial Statements....... 15
Financial Highlights................ 22
Tax Information..................... 24
Independent Auditors' Report........ 25
Additional Information.............. 26
LETTER FROM THE CHAIRMAN
[PHOTO]
R. Jay Gerken
R. JAY GERKEN, CFA
Chairman, President and Chief Executive Officer
Dear Shareholder,
After an extended period of uncertainty mottled by questionable business
practices and a faltering economy, business and economic prospects have begun
to look more promising. The Fed's reduction of the federal funds rate/i/
appears to have had its intended result of encouraging economic growth.
Evidence of sustainable economic improvement has emerged. Stronger retail
sales, rising domestic consumption and increasing export activity contributed
to a relatively robust annualized growth rate in gross domestic product
("GDP")/ii/ during the third calendar quarter of 2003. However, to forestall
potential deflationary forces, the Fed indicated that it was likely to leave
rates at prevailing low levels for the foreseeable future, which it did through
the end of the funds' fiscal year in December.
Please read on for a more detailed look at prevailing economic and market
conditions during the funds' fiscal year and to learn how those conditions and
changes made to the portfolio during this time may have affected the
performance of your fund.
Special Shareholder Notice
Effective December 5, 2003, the Retirement Portfolio was reorganized into the
Smith Barney Money Funds, Inc. -- Cash Portfolio.
Information About Your Fund
In recent months several issues in the mutual fund industry have come under the
scrutiny of federal and state regulators. The funds' Adviser and some of its
affiliates have received requests for information from various government
regulators regarding market timing, late trading, fees and other mutual fund
issues in connection with various investigations. The regulators appear to be
examining, among other things, the fund's response to market timing and
shareholder exchange activity, including compliance with prospectus disclosure
related to these subjects. The funds have been informed that the Adviser and
its affiliates are responding to those information requests, but are not in a
position to predict the outcome of these requests and investigations.
As always thank you for your confidence in our stewardship of your assets. We
look forward to helping you continue to meet your financial goals.
Sincerely,
/s/ R. Jay Gerken
R. Jay Gerken, CFA
Chairman, President and Chief Executive Officer
January 6, 2004
1 Smith Barney Money Funds, Inc. | 2003 Annual Report
MANAGER OVERVIEW
[PHOTO]
Martin R. Hanley
MARTIN R. HANLEY
Vice President and
Investment Officer
[PHOTO]
Kevin Kennedy
KEVIN KENNEDY
Vice President and
Investment Officer
Interest Rates Hit 45-Year Low
Short-term interest rates and yields of money market instruments declined
during the funds' fiscal year ended December 31, 2003 as the Fed and Bush
Administration implemented additional measures to stimulate renewed economic
growth.
When the funds' fiscal year began in January of 2003, views of the economy's
prospects were mixed. U.S. corporations reigned in capital spending as the
effects of a declining stock market and corporate accounting scandals took
their toll on investor confidence and business activity. Corporations remained
cautious as it became clearer early in 2003 that the United States and its
allies were likely to go to war in Iraq. In effect, the economy adopted a
"wait-and-see" attitude. Even the Fed indicated at its March 2003 meeting that
it could not adequately assess prevailing economic risks because of the
geopolitical situation. As a result, the U.S. economy expanded sluggishly.
As major combat operations in Iraq wound down in the spring, consumers and
businesses became increasingly optimistic. Improving sentiment was reinforced
by legislation enacting federal tax cuts, including a reduction in taxes on
capital gains and dividends. For its part, the Fed cut short-term interest
rates by another 0.25% in late June, driving the federal funds rate to just 1%,
its lowest level since the Eisenhower Administration. Money market yields
continued to decline as well.
By the end of August, evidence of sustainable economic improvement began to
emerge. Stronger retail sales, rising domestic consumption and increasing
export activity contributed to an improvement in GDP during the third calendar
quarter of 2003, which grew at a rate not seen in over two decades. However, to
forestall potential deflationary forces, the Fed indicated that it was likely
to leave rates at prevailing low levels for the foreseeable future, which it
did through the end of the period in December.
2 Smith Barney Money Funds, Inc. | 2003 Annual Report
SMITH BARNEY MONEY FUNDS
CLASS A SHARE YIELDS
AS OF DECEMBER 31, 2003
Cash Government
Portfolio Portfolio
Seven-Day Current Yield 0.58% 0.59%
Seven-Day Effective Yield 0.58% 0.60%
All figures represent past performance and are not a guarantee of future
results. The funds' yields will vary. Performance for the funds' other share
classes can be found in the Financial Highlights section of this report.
Performance of other share classes may differ.
In the cases where current yield and effective yield are the same, it is due
to rounding. The seven-day effective yield is calculated similarly to the
seven-day current yield but, when annualized, the income earned by an
investment in each fund is assumed to be reinvested. The effective yield
typically will be slightly higher than the current yield because of the
compounding effect of the assumed reinvestment.
Please note that your investment is neither insured nor guaranteed by the
Federal Deposit Insurance Corporation ("FDIC") or any other government
agency. Although each fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in a fund.
Adjustments to the Government Portfolio
In this challenging market environment, we maintained a generally cautious
investment posture. When short-term interest rates fell, we set the fund's
weighted average maturity in a range that we considered neutral to slightly
longer than average. This strategy enabled us to maintain prevailing rates for
as long as we deemed practical, while giving us the flexibility required to
respond to changing market conditions. In fact, there were times during the
reporting period when longer-term yields were lower than their shorter-term
counterparts.
Cash Portfolio Changes
After the Fed reduced short-term interest rates in June, we reduced the fund's
weighted average maturity to a relatively short position. This strategy
reflected our belief that the June rate-cut was probably the last of the
current cycle, and it was designed to help us capture higher yields if they
became available. If rates were to rise, this approach would enable us to roll
over proceeds from maturing
3 Smith Barney Money Funds, Inc. | 2003 Annual Report
securities into potentially higher yielding securities sooner.) Indeed, as of
the reporting period's end, we have begun to see a steeper yield curve,/iii/
which suggests to us that the market may be anticipating higher short-term
interest rates. Of course, we intend to continue to adjust our strategies as
market conditions change.
Thank you for your investment in the Smith Barney Money Funds, Inc. --Cash
Portfolio and Government Portfolio. We appreciate that you have entrusted us to
manage your money and value our relationship with you.
Sincerely,
/s/ Martin R. Hanley /s/ Kevin Kennedy
Martin R. Hanley Kevin Kennedy
Vice President and Vice President and
Investment Officer Investment Officer
January 6, 2004
The information provided is not intended to be a forecast of future events, a
guarantee of future results or investment advice. Views expressed may differ
from those of the firm as a whole.
Portfolio holdings and breakdowns are as of December 31, 2003 and are subject
to change. Please refer to pages 5 through 10 for a list and percentage
breakdown of the fund's holdings.
/i/The federal funds rate is the interest rate that banks with excess reserves
at a Federal Reserve district bank charge other banks that need overnight
loans.
/ii/Gross domestic product is a market value of goods and services produced by
labor and property in a given country.
/iii/The yield curve is the graphical depiction of the relationship between the
yield on bonds of the same credit quality but different maturities.
4 Smith Barney Money Funds, Inc. | 2003 Annual Report
SCHEDULES OF INVESTMENTS DECEMBER 31, 2003
CASH PORTFOLIO
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
- -------------------------------------------------------------------------------------
U.S. AGENCIES AND INSTRUMENTALITIES -- 4.6%
$ 5,000,000 Federal Home Loan Bank matures 4/12/04 1.11% $ 4,984,417
213,065,000 Federal Home Loan Mortgage Corp.
mature 3/15/04 to 5/10/04 1.09 to 1.11 212,357,236
569,249,000 Federal National Mortgage Association
mature 5/26/04 to 2/25/05 1.12 567,779,472
130,000,000 Federal National Mortgage Association
matures 1/28/05+ 1.13 129,957,929
- -------------------------------------------------------------------------------------
TOTAL U.S. AGENCIES AND INSTRUMENTALITIES
(Cost -- $915,079,054) 915,079,054
- -------------------------------------------------------------------------------------
U.S. TREASURY -- 0.1%
22,000,000 U.S. Treasury Bill matures 1/2/04
(Cost -- $21,999,383) 1.01 21,999,383
- -------------------------------------------------------------------------------------
COMMERCIAL PAPER -- 45.1%
75,000,000 ABN AMRO N.A. Finance Inc. matures 3/16/04 1.08 74,831,250
116,700,000 ABSC Capital Corp. mature 1/20/04 to 3/8/04 1.12 to 1.15 116,592,232
192,050,000 Amstel Funding Corp.
mature 2/5/04 to 3/25/04 1.11 to 1.16 191,692,621
230,000,000 ANZ Delaware Inc. mature 1/9/04 to 1/12/04 1.08 to 1.09 229,931,122
125,000,000 Aquinas Funding LLC matures 3/18/04 1.10 124,705,903
60,179,000 Asset Portfolio Funding matures 2/18/04 1.11 60,089,935
115,192,000 Atlantic Asset Securitization matures 1/2/04 0.98 115,188,864
291,389,000 Atomium Funding Corp.
mature 1/20/04 to 2/19/04 1.11 to 1.13 291,120,114
100,000,000 Brahms Funding Corp. matures 1/29/04 1.15 99,910,556
274,017,000 Bryant Park Funding LLC
mature 1/16/04 to 2/13/04 1.11 to 1.12 273,808,964
191,778,000 Cancara Asset Securities Ltd.
mature 3/10/04 to 3/15/04 1.11 to 1.12 191,360,728
163,000,000 CBA Delaware Finance Inc.
mature 2/9/04 to 2/25/04 1.08 to 1.09 162,764,715
115,000,000 Credit Agricole Indosuez N.A. Inc.
matures 2/2/04 1.08 114,890,111
5,000,000 Credit Lyonnais N.A. Inc. matures 3/19/04 1.13 4,987,867
271,040,000 Crown Point Capital Co.
mature 1/9/04 to 3/16/04 1.12 to 1.13 270,697,419
449,300,000 Danske Corp. mature 1/26/04 to 3/18/04 1.08 to 1.09 448,652,219
222,000,000 Dexia Delaware LLC
mature 1/14/04 to 1/20/04 1.08 221,893,910
50,000,000 Eiffel Funding matures 2/13/04 1.12 49,933,111
67,310,000 Fountain Square Commercial Funding
matures 1/2/04 0.95 67,308,224
See Notes to Financial Statements.
5 Smith Barney Money Funds, Inc. | 2003 Annual Report
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 2003
CASH PORTFOLIO
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
- --------------------------------------------------------------------------------------
COMMERCIAL PAPER -- 45.1% (continued)
$108,650,000 Foxboro Funding Ltd.
mature 1/15/04 to 1/16/04 1.17% to 1.19% $ 108,598,533
23,000,000 Galleon Capital Corp. matures 1/29/04 1.10 22,980,322
315,000,000 General Electric Capital Corp.
mature 2/9/04 to 4/6/04 1.09 to 1.14 314,224,578
260,198,000 Georgetown Funding Co. LLC
mature 1/22/04 to 2/5/04 1.14 to 1.15 259,966,166
281,724,000 Hannover Funding Co. LLC
mature 1/12/04 to 2/27/04 1.11 to 1.12 281,532,911
49,832,000 Hatteras Funding Corp. matures 1/12/04 1.11 49,815,099
190,000,000 HBOS Treasury Service PLC
mature 3/11/04 to 3/17/04 1.09 to 1.10 189,575,949
384,000,000 ING US Funding LLC
mature 2/17/04 to 3/22/04 1.07 to 1.09 383,221,714
20,100,000 Lake Constance Funding LLC matures 1/23/04 1.12 20,086,243
71,655,000 Legacy Capital LLC matures 2/9/04 1.11 71,568,835
100,000,000 Main Street Warehouse Funding
matures 1/23/04 1.20 99,926,666
250,000,000 Mane Funding Corp. mature 2/3/04 to 2/23/04 1.10 to 1.11 249,664,500
239,700,000 Mica Funding LLC mature 2/10/04 to 3/19/04 1.11 to 1.13 239,256,134
166,750,000 Moat Funding LLC mature 3/1/04 to 4/1/04 1.12 to 1.14 166,359,977
200,000,000 Morgan Stanley matures 2/3/04 1.08 199,802,000
280,000,000 Nationwide Building Society
mature 1/7/04 to 2/26/04 1.10 279,678,247
54,505,000 Nieuw Amsterdam Receivables Corp.
mature 2/2/04 to 3/10/04 1.10 to 1.13 54,396,806
579,100,000 Nordea North America, Inc.
mature 1/9/04 to 3/22/04 1.08 to 1.13 578,507,514
50,000,000 Paradigm Funding LLC matures 2/2/04 1.10 49,951,111
115,768,000 Perry Global Funding
mature 3/22/04 to 5/14/04 1.13 to 1.14 115,386,827
48,200,000 Premier Asset LLC matures 2/25/04 1.11 48,118,261
139,289,000 Regency Markets LLC
mature 2/20/04 to 3/8/04 1.07 to 1.11 139,022,766
158,550,000 Saint Germain Holdings Ltd.
mature 1/13/04 to 2/12/04 1.11 to 1.16 158,432,277
80,000,000 San Paolo US Finance Co.
matures 3/2/04 1.10 79,851,567
50,000,000 Scaldis LLC matures 3/24/04 1.10 49,873,194
264,800,000 Societe Generale N.A. Inc.
mature 3/10/04 to 3/15/04 1.09 to 1.10 264,228,486
279,600,000 Spintab-Swedmortgage AB
mature 2/23/04 to 3/25/04 1.10 to 1.12 278,971,566
See Notes to Financial Statements.
6 Smith Barney Money Funds, Inc. | 2003 Annual Report
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 2003
CASH PORTFOLIO
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
- ---------------------------------------------------------------------------------------
COMMERCIAL PAPER -- 45.1% (continued)
$ 74,000,000 Stanfield Victoria Funding LLC
mature 4/5/04 to 4/15/04 1.14% to 1.16% $ 73,774,126
150,000,000 Surrey Funding Corp. matures 1/13/04 1.11 149,944,500
200,760,000 Svenska Handelsbanken Inc.
mature 2/6/04 to 2/25/04 1.08 to 1.09 200,486,757
36,800,000 Tango Finance Corp. matures 3/22/04 1.12 36,707,264
12,681,000 Thames Asset Global Securities
matures 3/10/04 1.14 12,653,292
242,500,000 UBS Finance Delaware LLC
mature 1/5/04 to 2/27/04 0.98 to 1.05 242,329,887
270,224,000 Victory Receivables Corp.
mature 1/8/04 to 1/27/04 1.12 to 1.15 270,072,382
165,900,000 Westpac Capital Corp.
mature 2/5/04 to 4/29/04 1.09 to 1.13 165,401,292
13,166,000 WhistleJacket Capital Ltd. matures 4/2/04 1.16 13,127,307
- ---------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(Cost -- $9,027,854,921) 9,027,854,921
- ---------------------------------------------------------------------------------------
PROMISSORY NOTE -- 1.0%
200,000,000 Goldman Sachs Group Inc. matures 2/19/04+
(Cost -- $200,000,000) 1.11 200,000,000
- ---------------------------------------------------------------------------------------
MEDIUM-TERM NOTES -- 10.8%
300,000,000 General Electric Capital Corp.
matures 1/14/05+ 1.23 300,000,000
225,000,000 K2 USA LLC mature 1/8/04 to 12/13/04+ 1.09 to 1.15 224,981,141
250,000,000 Links Finance LLC mature 4/15/04 to 7/28/04+ 1.10 to 1.13 249,974,283
200,000,000 Morgan Stanley matures 7/1/04+ 1.20 200,000,000
158,000,000 Premier Asset Collaterized Entity LLC
mature 5/3/04 to 6/15/04+ 1.09 to 1.14 157,992,535
210,000,000 Sigma Finance Inc.
mature 7/15/04 to 11/12/04+ 1.12 to 1.16 209,966,998
100,000,000 Special Purpose Accounts Receivables Corp.
matures 4/6/04+ 1.15 100,000,000
150,000,000 Stanfield Victoria Finance Ltd.
mature 1/6/04 to 7/15/04+ 1.15 149,995,984
50,000,000 Tango Finance Corp. matures 7/26/04+ 1.12 49,994,509
324,500,000 WhistleJacket Capital Ltd.
mature 1/15/04 to 11/29/04+ 1.08 to 1.15 324,483,335
193,000,000 White Pine Finance LLC
mature 3/12/04 to 8/16/04+ 1.08 to 1.12 192,983,069
- ---------------------------------------------------------------------------------------
TOTAL MEDIUM-TERM NOTES
(Cost -- $2,160,371,854) 2,160,371,854
- ---------------------------------------------------------------------------------------
See Notes to Financial Statements.
7 Smith Barney Money Funds, Inc. | 2003 Annual Report
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 2003
CASH PORTFOLIO
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
- ------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT -- 3.6%
$144,000,000 Bank of America N.A. matures 3/15/04 1.11% $ 144,000,000
572,750,000 Wells Fargo Bank N.A.
mature 1/8/04 to 1/16/04 1.07 to 1.08 572,749,833
- ------------------------------------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT
(Cost -- $716,749,833) 716,749,833
- ------------------------------------------------------------------------------------
FOREIGN CERTIFICATES OF DEPOSIT -- 30.8%
100,000,000 Australia & New Zealand Banking Group NY
matures 1/21/04 1.08 99,999,978
379,000,000 Barclays Bank PLC mature 1/5/04 to 1/24/04 1.10 to 1.16 379,004,310
578,250,000 BNP Paribas mature 2/17/04 to 4/19/04 1.08 to 1.24 578,263,412
282,250,000 Canadian Imperial Bank of Commerce NY
mature 2/3/04 to 2/17/04 1.05 to 1.09 282,250,000
80,000,000 Credit Agricole Indosuez NA matures 3/8/04 1.13 80,000,000
443,500,000 Credit Lyonnais NY mature 1/30/04 to 3/5/04 1.10 to 1.14 443,511,927
339,000,000 CS First Boston NY mature 3/5/04 1.08 to 1.30 339,008,962
100,000,000 CS First Boston NY matures 7/6/04+ 1.17 100,000,000
300,000,000 Dexia Bank NY mature 2/25/04 to 2/26/04 1.07 to 1.08 300,000,000
225,000,000 Fortis Bank NY matures 2/19/04 1.07 225,001,452
490,000,000 HBOS PLC mature 2/17/04 to 4/8/04 1.11 to 1.14 490,009,397
150,000,000 ING Bank NV matures 1/12/04 1.10 150,000,418
53,000,000 Landesbank Baden NV matures 2/11/04 1.08 52,999,671
160,000,000 Landesbank Hessen-Thurin matures 3/4/04 1.10 160,002,792
381,000,000 Lloyds Bank PLC NY mature 1/13/04 to 5/7/04 1.06 to 1.20 380,991,452
350,000,000 Royal Bank of Scotland
mature 3/4/04 to 5/7/04 1.09 to 1.12 350,004,356
305,000,000 Societe Generale mature 2/3/04 to 3/17/04 1.09 to 1.10 304,999,665
259,500,000 Svenska Handelsbanken NY
mature 1/12/04 to 4/5/04 1.10 259,496,323
505,000,000 Toronto Dominion Bank NY
mature 1/22/04 to 3/24/04 1.05 to 1.10 505,000,231
569,000,000 Unicredito Italiano S.p.A. NY
mature 1/22/04 to 4/30/04 1.10 to 1.15 569,002,238
110,000,000 Westdeutsche Landesbank Girozentrale
matures 4/8/04 1.13 110,002,977
- ------------------------------------------------------------------------------------
TOTAL FOREIGN CERTIFICATES OF DEPOSIT
(Cost -- $6,159,549,561) 6,159,549,561
- ------------------------------------------------------------------------------------
See Notes to Financial Statements.
8 Smith Barney Money Funds, Inc. | 2003 Annual Report
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 2003
CASH PORTFOLIO
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
- --------------------------------------------------------------------------------
TIME DEPOSITS -- 4.0%
$330,000,000 National Australia Bank matures 1/2/04 0.97% $ 330,000,000
190,913,000 Royal Bank of Canada matures 1/2/04 0.98 190,913,000
280,000,000 State Street Bank & Trust matures 1/2/04 0.97 280,000,000
- --------------------------------------------------------------------------------
TOTAL TIME DEPOSITS
(Cost -- $800,913,000) 800,913,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0%
(Cost -- $20,002,517,606*) $20,002,517,606
- --------------------------------------------------------------------------------
+Variable interest rate -- subject to periodic change.
*Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
9 Smith Barney Money Funds, Inc. | 2003 Annual Report
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 2003
GOVERNMENT PORTFOLIO
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
- -------------------------------------------------------------------------------------------
U.S. AGENCIES AND INSTRUMENTALITIES -- 92.3%
$337,065,000 Federal Farm Credit Bank
mature 1/15/04 to 8/24/04 1.01% to 1.24% $ 336,780,703
760,803,000 Federal Home Loan Bank
mature 1/6/04 to 11/24/04 0.96 to 1.30 759,242,526
798,935,000 Federal Home Loan Mortgage Corp.
mature 1/15/04 to 9/9/05 1.04 to 1.13 797,472,094
730,943,000 Federal National Mortgage Association
mature 1/14/04 to 2/18/05 1.04 to 1.13 730,146,803
- ------------------------------------------------------------------------------------------
TOTAL U.S. AGENCIES AND INSTRUMENTALITIES
(Cost -- $2,623,642,126) 2,623,642,126
- ------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 7.7%
217,000,000 Goldman, Sachs & Co., 0.99% due 1/2/04;
Proceeds at maturity -- $217,011,935;
(Fully collateralized by U.S. Treasury Bonds,
6.000% to 10.375% due 11/15/09 to 2/15/26;
Market value -- $218,000,998) 217,000,000
1,616,000 J.P. Morgan Chase & Co., 0.83% due 1/2/04;
Proceeds at maturity -- $1,616,075;
(Fully collateralized by U.S. Treasury Bill,
due 3/11/04; Market value -- $1,652,120) 1,616,000
- ------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost -- $218,616,000) 218,616,000
- ------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0%
(Cost -- $2,842,258,126*) $2,842,258,126
- ------------------------------------------------------------------------------------------
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
10 Smith Barney Money Funds, Inc. | 2003 Annual Report
STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2003
Cash Government
Portfolio Portfolio
- --------------------------------------------------------------------------------------------
ASSETS:
Investments, at amortized cost $20,002,517,606 $2,842,258,126
Cash 900 133
Receivable for Fund shares sold 611,720,091 43,381,888
Interest receivable 10,245,591 1,076,684
Deferred compensation 415,532 63,524
Other assets 279,382 --
- -------------------------------------------------------------------------------------------
Total Assets 20,625,179,102 2,886,780,355
- -------------------------------------------------------------------------------------------
LIABILITIES:
Payable for Fund shares reacquired 975,342,932 94,319,366
Management fees payable 6,393,137 1,038,705
Distribution plan fees payable 601,509 86,233
Deferred compensation payable 415,532 63,524
Dividends payable 75,048 17,526
Accrued expenses 4,270,366 493,610
- -------------------------------------------------------------------------------------------
Total Liabilities 987,098,524 96,018,964
- -------------------------------------------------------------------------------------------
Total Net Assets $19,638,080,578 $2,790,761,391
- -------------------------------------------------------------------------------------------
NET ASSETS:
Par value of capital shares
(50,000,000,000 and 10,000,000,000 shares authorized,
respectively; par value $0.01 per share) $ 196,378,914 $ 27,907,420
Capital paid in excess of par value 19,441,512,539 2,762,834,585
Accumulated net realized gain from investment transactions 189,125 19,386
- -------------------------------------------------------------------------------------------
Total Net Assets $19,638,080,578 $2,790,761,391
- -------------------------------------------------------------------------------------------
Shares Outstanding:
Class A 19,509,761,413 2,789,721,472
Class L 381,428 13,978
Class Y 127,748,608 1,006,553
Net Asset Value, per class $1.00 $1.00
- -------------------------------------------------------------------------------------------
See Notes to Financial Statements.
11 Smith Barney Money Funds, Inc. | 2003 Annual Report
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2003
Cash Government
Portfolio Portfolio
------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $257,192,344 $37,617,006
------------------------------------------------------------------------
EXPENSES:
Management fees (Note 3) 82,168,878 13,626,290
Distribution plan fees (Note 5) 20,705,977 3,152,650
Shareholder servicing fees (Note 5) 10,981,739 559,312
Custody 900,814 152,798
Shareholder communications (Note 5) 475,739 26,349
Registration fees 181,083 186,894
Directors' fees 171,657 27,722
Audit and legal 143,124 74,641
Other 189,686 45,961
------------------------------------------------------------------------
Total Expenses 115,918,697 17,852,617
Less: Management fee waiver (Note 3) -- (28,289)
------------------------------------------------------------------------
Net Expenses 115,918,697 17,824,328
------------------------------------------------------------------------
Net Investment Income 141,273,647 19,792,678
------------------------------------------------------------------------
Net Realized Gain From Investment Transactions 189,125 26,082
------------------------------------------------------------------------
Increase in Net Assets From Operations $141,462,772 $19,818,760
------------------------------------------------------------------------
See Notes to Financial Statements.
12 Smith Barney Money Funds, Inc. | 2003 Annual Report
STATEMENTS OF CHANGES IN NET ASSETS
For the Years
Ended December 31,
Cash Portfolio 2003 2002
- -----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 141,273,647 $ 347,335,927
Net realized gain 189,125 42,844
- ----------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 141,462,772 347,378,771
- ----------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTES 2 AND 6):
Net investment income (141,273,647) (347,378,771)
- ----------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (141,273,647) (347,378,771)
- ----------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 7):
Net proceeds from sale of shares 86,286,428,316 91,261,777,742
Net asset value of shares issued for reinvestment of
dividends 137,283,219 336,979,727
Net asset value of shares issued in connection with the
transfer of the Smith Barney Money Funds, Inc. --
Retirement Portfolio's net assets (Note 9) 646,749,540 --
Cost of shares reacquired (90,616,867,506) (100,599,025,378)
- ----------------------------------------------------------------------------------------------
Decrease in Net Assets From
Fund Share Transactions (3,546,406,431) (9,000,267,909)
- ----------------------------------------------------------------------------------------------
Decrease in Net Assets (3,546,217,306) (9,000,267,909)
NET ASSETS:
Beginning of year 23,184,297,884 32,184,565,793
- ----------------------------------------------------------------------------------------------
End of year $ 19,638,080,578 $ 23,184,297,884
- ----------------------------------------------------------------------------------------------
See Notes to Financial Statements.
13 Smith Barney Money Funds, Inc. | 2003 Annual Report
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
For the Years
Ended December 31,
Government Portfolio 2003 2002
- -----------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 19,792,678 $ 45,672,627
Net realized gain 26,082 51,600
- ----------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 19,818,760 45,724,227
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
(NOTES 2 AND 6):
Net investment income (19,792,678) (45,724,227)
Net realized gains (6,696) --
- ----------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (19,799,374) (45,724,227)
- ----------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 7):
Net proceeds from sale of shares 9,903,440,532 11,059,499,198
Net asset value of shares issued for reinvestment of dividends 19,286,025 44,636,094
Cost of shares reacquired (10,516,977,932) (11,970,131,557)
- ----------------------------------------------------------------------------------------------------
Decrease in Net Assets From Fund Share Transactions (594,251,375) (865,996,265)
- ----------------------------------------------------------------------------------------------------
Decrease in Net Assets (594,231,989) (865,996,265)
NET ASSETS:
Beginning of year 3,384,993,380 4,250,989,645
- ----------------------------------------------------------------------------------------------------
End of year $ 2,790,761,391 $ 3,384,993,380
- ----------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
14 Smith Barney Money Funds, Inc. | 2003 Annual Report
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies
Smith Barney Money Funds, Inc. ("Company"), a Maryland corporation, is
registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company. The Company consists of
two separate investment funds ("Funds"): the Cash Portfolio and the Government
Portfolio.
The significant accounting policies consistently followed by the Funds are: (a)
transactions in money market instruments and U.S. government obligations are
accounted for on trade date; (b) the Funds use 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) class specific expenses are charged to each
Fund and each class; management fees and general fund expenses are allocated on
the basis of relative net assets of each Fund and each class or on another
reasonable basis; (e) gains or losses on the sale of securities are calculated
by using the specific identification method; (f ) the character of income and
gains to be distributed is determined in accordance with income tax regulations
which may differ from accounting principles generally accepted in the United
States of America. At December 31, 2003, reclassifications were made to the
capital accounts of Cash Portfolio to reflect permanent book/tax differences
and income and gains available for distributions under income tax regulations.
Net investment income, net realized gains and net assets were not affected by
this adjustment; (g) the Funds 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 (h)
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 Fund 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 Fund's shares on the payable date.
15 Smith Barney Money Funds, Inc. | 2003 Annual Report
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Capital gain distributions, if any, are taxable to shareholders, and are
declared and paid annually.
3. Management Agreement and Other Transactions
Smith Barney Fund Management LLC ("SBFM"), an indirect wholly-owned subsidiary
of Citigroup Inc. ("Citigroup"), acts as investment manager to the Funds. As
compensation for its services, each Fund pays SBFM a daily fee.
Effective July 1, 2003, the Cash and Government Portfolios pay SBFM a fee
calculated at the following rates: 0.45% on the first $1.0 billion of each of
the Fund's average daily net assets, 0.425% on the next $1.0 billion; 0.40% on
the next $3.0 billion; 0.375% on the next $5.0 billion and 0.35% on each of the
Fund's average daily net assets in excess of $10.0 billion.
Prior to July 1, 2003, the fees were calculated at the following rates: Cash
Portfolio: 0.45% on the first $6.0 billion of the Fund's 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 Fund's average daily net assets in excess of $18.0 billion; and
Government Portfolio: 0.45% on the first $2.5 billion of the Fund's average
daily net assets, 0.40% on the next $2.5 billion and 0.35% on the Fund's
average daily net assets in excess of $5.0 billion. These fees were calculated
daily and paid monthly.
During the year ended December 31, 2003, the Government Portfolio's Class A, L
and Y shares had voluntary expense limitations in place of 0.70% for each class
respectively, resulting in waived management fees totaling $28,289 for Class A
and L shares. These expense limitations can be terminated at any time by SBFM.
Citicorp Trust Bank, fsb. ("CTB"), another subsidiary of Citigroup, acts as the
Funds' transfer agent. PFPC Inc. ("PFPC") and Primerica Shareholder Services
("PSS"), another subsidiary of Citigroup, act as the Funds' sub-transfer
agents. CTB receives account fees and asset-based fees that vary according to
the size and type of account. PFPC and PSS are responsible for shareholder
recordkeeping and financial processing for all shareholder accounts. For the
year ended December 31, 2003, the Funds' paid transfer agent fees of
$14,970,197 and $987,546 for the Cash and Government Portfolios, respectively,
to CTB.
Citigroup Global Markets Inc. ("CGM") (formerly known as Salomon Smith Barney
Inc.) and PFS Distributors, Inc., both of which are subsidiaries of Citigroup,
act as the Funds' distributors.
All officers and one Director of the Company are employees of Citigroup or its
affiliates.
16 Smith Barney Money Funds, Inc. | 2003 Annual Report
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. Repurchase Agreements
Each Fund purchases, and the custodian takes possession of , U.S. government
securities from 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 Funds require continual
maintenance of the market value (plus accrued interest) of the collateral in
amounts at least equal to the repurchase price.
At December 31, 2003, the Cash Portfolio did not have any repurchase agreements
outstanding.
5. Class Specific Expenses
Pursuant to a Rule 12b-1 Distribution Plan, each Fund makes payments to CGM for
assistance in distributing Class A and L shares calculated at an annual rate of
0.10% of the average daily net assets of each class, respectively. For the year
ended December 31, 2003, total Rule 12b-1 Distribution Plan fees, which are
accrued daily and paid monthly, were as follows:
Class A Class L
----------------------------------------
Cash Portfolio $20,705,601 $376
----------------------------------------
Government Portfolio 3,152,578 72
----------------------------------------
For the year ended December 31, 2003, total Shareholder Servicing fees were as
follows:
Class A Class L Class Y
------------------------------------------------
Cash Portfolio $10,939,252 $157 $42,330
------------------------------------------------
Government Portfolio 559,107 3 202
------------------------------------------------
For the year ended December 31, 2003, total Shareholder Communication expenses
were as follows:
Class A Class L Class Y
---------------------------------------------
Cash Portfolio $475,696 $20 $23
---------------------------------------------
Government Portfolio 26,339 -- 10
---------------------------------------------
17 Smith Barney Money Funds, Inc. | 2003 Annual Report
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. Distributions Paid to Shareholders by Class
Year Ended Year Ended
Cash Portfolio December 31, 2003 December 31, 2002
---------------------------------------------------------
Net Investment Income
Class A $139,522,047 $340,865,876
Class L 2,519 3,979
Class Y 738,527 846,964
Class Z * 1,010,554 5,661,952
---------------------------------------------------------
Total $141,273,647 $347,378,771
---------------------------------------------------------
Government Portfolio
---------------------------------------------------------
Class A
Net investment income $ 19,757,661 $ 45,443,904
Net realized gains 6,685 --
---------------------------------------------------------
Total $ 19,764,346 $ 45,443,904
---------------------------------------------------------
Class L
Net investment income $ 467 $ 1,376
Net realized gains 0** --
---------------------------------------------------------
Total $ 467 $ 1,376
---------------------------------------------------------
Class Y
Net investment income $ 34,550 $ 278,947
Net realized gains 11 --
---------------------------------------------------------
Total $ 34,561 $ 278,947
---------------------------------------------------------
* As of April 21, 2003, Class Z shares were fully redeemed.
**Amount represents less than $1.
7. Capital Shares
The Company offers 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.
18 Smith Barney Money Funds, Inc. | 2003 Annual Report
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Transactions in shares of each Fund were as follows:
Year Ended Year Ended
Cash Portfolio December 31, 2003 December 31, 2002
------------------------------------------------------------------------------
Class A
Shares sold 86,041,295,627 90,760,175,185
Shares issued on reinvestment 135,909,343 330,807,374
Net asset value of shares issued in
connection with the transfer of the Smith
Barney Money Funds, Inc. -- Retirement
Portfolio's net assets (Note 9) 646,749,540 --
Shares reacquired (90,061,010,242) (100,060,391,471)
------------------------------------------------------------------------------
Net Decrease (3,237,055,732) (8,969,408,912)
------------------------------------------------------------------------------
Class L
Shares sold 97,225 88,366
Shares issued on reinvestment 2,512 3,944
Shares reacquired (65,475) (49,149)
------------------------------------------------------------------------------
Net Increase 34,262 43,161
------------------------------------------------------------------------------
Class Y
Shares sold 114,923,543 168,716,757
Shares issued on reinvestment 418,995 524,759
Shares reacquired (50,994,850) (166,022,311)
------------------------------------------------------------------------------
Net Increase 64,347,688 3,219,205
------------------------------------------------------------------------------
Class Z*
Shares sold 130,111,921 332,797,434
Shares issued on reinvestment 952,375 5,643,650
Shares reacquired (504,796,939) (372,562,447)
------------------------------------------------------------------------------
Net Decrease (373,732,643) (34,121,363)
------------------------------------------------------------------------------
Government Portfolio
------------------------------------------------------------------------------
Class A
Shares sold 9,829,329,633 11,000,216,447
Shares issued on reinvestment 19,251,108 44,356,635
Shares reacquired (10,441,931,975) (11,890,947,145)
------------------------------------------------------------------------------
Net Decrease (593,351,234) (846,374,063)
------------------------------------------------------------------------------
Class L
Shares sold 8,682 42,696
Shares issued on reinvestment 414 1,372
Shares reacquired (126,545) (35,623)
------------------------------------------------------------------------------
Net Increase (Decrease) (117,449) 8,445
------------------------------------------------------------------------------
Class Y
Shares sold 74,102,215 59,240,055
Shares issued on reinvestment 34,503 278,087
Shares reacquired (74,919,412) (79,148,789)
------------------------------------------------------------------------------
Net Decrease (782,694) (19,630,647)
------------------------------------------------------------------------------
*As of April 21, 2003, Class Z shares were fully redeemed.
19 Smith Barney Money Funds, Inc. | 2003 Annual Report
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. Income Tax Information and Distributions to Shareholders
At December 31, 2003, the tax basis components of distributable earnings were:
Cash Government
Portfolio Portfolio
---------------------------------------------------
Undistributed ordinary income $1,715,325 $275,728
---------------------------------------------------
The tax character of distributions paid during the year ended December 31, 2003
were:
Cash Government
Portfolio Portfolio
---------------------------------------------------
Ordinary income $141,273,647 $19,799,374
---------------------------------------------------
At December 31, 2002, the tax basis components of distributable earnings were:
Cash Government
Portfolio Portfolio
---------------------------------------------------
Undistributed ordinary income $1,519,103 $259,927
---------------------------------------------------
The tax character of distributions paid during the year ended December 31, 2002
were:
Cash Government
Portfolio Portfolio
---------------------------------------------------
Ordinary income $347,378,771 $45,724,227
---------------------------------------------------
9. Transfer of Net Assets
On December 5, 2003, the Cash Portfolio acquired the assets and certain
liabilities of Retirement Portfolio pursuant to a plan of reorganization
approved by Retirement Portfolio shareholders on July 30, 2003. Total shares
issued by the Cash Portfolio and the total net assets of the Retirement
Portfolio and the Cash Portfolio on the date of the transfer were as follows:
Shares Issued Total Net Assets
by the Cash Total Net Assets of of the Cash
Acquired Fund Portfolio Retirement Portfolio Portfolio
------------------------------------------------------------------------
Retirement Portfolio 646,749,540 $646,749,540 $19,634,679,276
------------------------------------------------------------------------
Total net assets of the Cash Portfolio immediately after the transfer were
$20,281,428,816. The transaction was structured to qualify as a tax-free
reorganization under the Internal Revenue Code of 1986, as amended.
20 Smith Barney Money Funds, Inc. | 2003 Annual Report
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
10.Additional Information
The Funds have received the following information from Citigroup Asset
Management ("CAM"), the Citigroup business unit which includes the Funds'
Investment Manager and other investment advisory companies, all of which are
indirect, wholly-owned subsidiaries of Citigroup. CAM is reviewing its entry,
through an affiliate, into the transfer agent business in the period 1997-1999.
As CAM currently understands the facts, at the time CAM decided to enter the
transfer agent business, CAM sub-contracted for a period of five years certain
of the transfer agency services to a third party and also concluded a revenue
guarantee agreement with this sub-contractor providing that the sub-contractor
would guarantee certain benefits to CAM or its affiliates (the "Revenue
Guarantee Agreement"). In connection with the subsequent purchase of the
sub-contractor's business by an affiliate of the current sub-transfer agent
(PFPC Inc.) used by CAM on many of the funds it manages, this Revenue Guarantee
Agreement was amended eliminating those benefits in exchange for arrangements
that included a one-time payment from the sub-contractor.
The Boards of CAM-managed funds (the "Boards") were not informed of the Revenue
Guarantee Agreement with the sub-contractor at the time the Boards considered
and approved the transfer agent arrangements. Nor were the Boards informed of
the subsequent amendment to the Revenue Guarantee Agreement when that occurred.
CAM has begun to take corrective actions. CAM will pay to the applicable funds
approximately $17 million (plus interest) that CAM and its affiliates received
from the Revenue Guarantee Agreement and its amendment. CAM also plans an
independent review to verify that the transfer agency fees charged by CAM were
fairly priced as compared to competitive alternatives. CAM is instituting new
procedures and making changes designed to ensure no similar arrangements are
entered into in the future.
CAM has briefed the SEC, the New York State Attorney General and other
regulators with respect to this matter, as well as the U.S. Attorney who is
investigating the matter. CAM is cooperating with governmental authorities on
this matter, the ultimate outcome of which is not yet determinable.
21 Smith Barney Money Funds, Inc. | 2003 Annual Report
FINANCIAL HIGHLIGHTS
For a share of each class of capital stock outstanding throughout each year
ended December 31, unless otherwise noted:
Class A Shares
--------------------------------------
Cash Portfolio 2003 2002 2001 2000 1999
- ----------------------------------------------------------------------------
Net Asset Value, Beginning of Year $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------
Net investment income 0.007 0.013 0.037 0.058 0.046
Dividends from net investment income (0.007) (0.013) (0.037) (0.058) (0.046)
- ----------------------------------------------------------------------------
Net Asset Value, End of Year $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------
Total Return 0.67% 1.28% 3.78% 5.98% 4.73%
- ----------------------------------------------------------------------------
Net Assets, End of Year (billions) $20 $23 $32 $55 $45
- ----------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses/(1)/ 0.56% 0.62% 0.59% 0.57% 0.62%
Net investment income 0.68 1.27 3.93 5.84 4.63
- ----------------------------------------------------------------------------
Class L Shares
--------------------------------------
Cash Portfolio 2003 2002 2001 2000 1999
- ----------------------------------------------------------------------------
Net Asset Value, Beginning of Year $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------
Net investment income 0.007 0.013 0.037 0.058 0.047
Dividends from net investment income (0.007) (0.013) (0.037) (0.058) (0.047)
- ----------------------------------------------------------------------------
Net Asset Value, End of Year $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------
Total Return 0.67% 1.29% 3.81% 6.01% 4.78%
- ----------------------------------------------------------------------------
Net Assets, End of Year (000s) $381 $347 $304 $193 $582
- ----------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses/(1)/ 0.55% 0.61% 0.56% 0.54% 0.57%
Net investment income 0.67 1.28 3.53 5.58 4.70
- ----------------------------------------------------------------------------
Class Y Shares
--------------------------------------
Cash Portfolio 2003 2002 2001 2000 1999
- ----------------------------------------------------------------------------
Net Asset Value, Beginning of Year $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------
Net investment income 0.008 0.014 0.039 0.060 0.048
Dividends from net investment income (0.008) (0.014) (0.039) (0.060) (0.048)
- ----------------------------------------------------------------------------
Net Asset Value, End of Year $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------
Total Return 0.78% 1.45% 3.94% 6.17% 4.91%
- ----------------------------------------------------------------------------
Net Assets, End of Year (millions) $128 $63 $60 $25 $67
- ----------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses/(1)/ 0.44% 0.45% 0.40% 0.38% 0.42%
Net investment income 0.76 1.44 3.96 5.92 4.76
- ----------------------------------------------------------------------------
(1) The fund has a voluntary expense limitation. Expense ratios for each class
will not exceed 0.70%.
22 Smith Barney Money Funds, Inc. | 2003 Annual Report
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of each class of capital stock outstanding throughout each year
ended December 31, unless otherwise noted:
Class A Shares
----------------------------------------
Government Portfolio 2003 2002 2001 2000 1999
------------------------------------------------------------------------------
Net Asset Value, Beginning of Year $1.00 $1.00 $1.00 $1.00 $1.00
------------------------------------------------------------------------------
Net investment income/(1)/ 0.006 0.012 0.036 0.057 0.045
Dividends from net investment income (0.006) (0.012) (0.036) (0.057) (0.045)
Distributions from net realized gains (0.000)* -- -- -- --
------------------------------------------------------------------------------
Net Asset Value, End of Year $1.00 $1.00 $1.00 $1.00 $1.00
------------------------------------------------------------------------------
Total Return/(2)/ 0.62% 1.22% 3.67% 5.85% 4.60%
------------------------------------------------------------------------------
Net Assets, End of Year (billions) $3 $3 $4 $6 $5
------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses/(1)(3)/ 0.56% 0.61% 0.56% 0.59% 0.61%
Net investment income 0.63 1.21 3.74 5.71 4.50
------------------------------------------------------------------------------
Class L Shares
----------------------------------------
Government Portfolio 2003 2002 2001 2000 1999
------------------------------------------------------------------------------
Net Asset Value, Beginning of Year $1.00 $1.00 $1.00 $1.00 $1.00
------------------------------------------------------------------------------
Net investment income/(1)/ 0.006 0.012 0.036 0.057 0.045
Dividends from net investment income (0.006) (0.012) (0.036) (0.057) (0.045)
Distributions from net realized gains (0.000)* -- -- -- --
------------------------------------------------------------------------------
Net Asset Value, End of Year $1.00 $1.00 $1.00 $1.00 $1.00
------------------------------------------------------------------------------
Total Return/(2)/ 0.58% 1.21% 3.68% 5.87% 4.62%
------------------------------------------------------------------------------
Net Assets, End of Year (000s) $14 $131 $123 $121 $113
------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses/(1)(3)/ 0.61% 0.61% 0.63% 0.58% 0.59%
Net investment income 0.65 1.21 3.53 5.70 4.47
------------------------------------------------------------------------------
(1) The investment manager has waived a portion of its fees for the year ended
December 31, 2003. If such fees were not waived, the per share decreases to
net investment income and the actual expense ratios would have been as
follows:
Per Share Decreases to Expense Ratios
Net Investment Income Without Fee Waivers
--------------------- -------------------
2003 2003
---- ----
Class A $0.0001 0.57%
Class L 0.0001 0.62
(2) Performance figures may reflect fee waivers and/or expense reimbursements.
Past performance is no guarantee of future results. In the absence of fee
waivers and/or expense reimbursements, the total return would be reduced.
(3) The fund has a voluntary expense limitation. Expense ratios for each class
will not exceed 0.70%.
* Amount represents less than $0.001 per share.
23 Smith Barney Money Funds, Inc. | 2003 Annual Report
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of each class of capital stock outstanding throughout each year
ended December 31, unless otherwise noted:
Class Y Shares
----------------------------------------
Government Portfolio 2003 2002 2001 2000 1999
- ------------------------------------------------------------------------------
Net Asset Value, Beginning of Year $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------
Net investment income 0.007 0.013 0.037 0.058 0.047
Dividends from net investment income (0.007) (0.013) (0.037) (0.058) (0.047)
Distributions from net realized gains (0.000)* -- -- -- --
- ------------------------------------------------------------------------------
Net Asset Value, End of Year $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------
Total Return 0.75% 1.35% 3.78% 6.02% 4.78%
- ------------------------------------------------------------------------------
Net Assets, End of Year (millions) $1 $2 $21 $20 $8
- ------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses/(1)/ 0.44% 0.48% 0.44% 0.44% 0.45%
Net investment income 0.76 1.38 3.69 5.85 4.64
- ------------------------------------------------------------------------------
(1) The fund has a voluntary expense limitation. Expense ratios for each class
will not exceed 0.70%.
* Amount represents less than $0.001 per share.
TAX INFORMATION (UNAUDITED)
For Federal tax purposes, the Fund hereby designates for the fiscal year ended
December 31, 2003:
Percentage of the ordinary dividends paid by the Fund from net investment
income are derived from Federal obligations and may be exempt from taxation
at the state level:
. Cash Portfolio 0.60%
. Government Portfolio 29.24
24 Smith Barney Money Funds, Inc. | 2003 Annual Report
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Directors of 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 and Government Portfolios) ("Funds") as of December 31,
2003, and the related statements of operations for the year then ended, the
statements of changes in net assets for each of the years in the two-year
period then ended and the financial highlights for each of the years in the
five-year period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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, 2003, by
correspondence with the custodian and brokers. 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 the Fund as of December 31, 2003, and
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 accounting principles generally accepted in the United
States of America.
/s/ KPMG LLP
New York, New York
February 13, 2004
25 Smith Barney Money Funds, Inc. | 2003 Annual Report
ADDITIONAL INFORMATION (UNAUDITED)
Information about Directors and Officers
The business and affairs of the Smith Barney Money Funds, Inc. ("Fund") are
managed under the direction of the Board of Directors. Information pertaining
to the Directors and Officers of the Fund is set forth below. The Statement of
Additional Information includes additional information about Directors and is
available, without charge, upon request by calling the Fund's transfer agent
(Citicorp Trust Bank, fsb. at 1-800-451-2010) or the Fund's sub-transfer agent
(Primerica Shareholder Services at 1-800-544-5445).
Number of
Portfolios
Term in Fund Other
of Office* Principal Complex Board
Position(s) and Length Occupation(s) Overseen Memberships
Held with of Time During By Held by
Name, Address and Age Fund Served Past Five Years Director Director
- -------------------------------------------------------------------------------------------------------
Non-Interested Directors:
Lee Abraham Director Since Retired; Former Director of 27 None
13732 LeHavre Drive 1999 Signet Group PLC
Frenchman's Creek
Palm Beach Gardens, FL 33410
Age 76
Allan J. Bloostein Director Since President of Allan Bloostein 34 Taubman
27 West 67th Street 1999 Associates, a consulting Realty
Apt. 5FW firm. Former Director of CVS Corp.
New York, NY 10023 Corp.
Age 74
Jane F. Dasher Director Since Controller of PBK 27 None
Korsant Partners 1999 Holdings Inc., a family
283 Greenwich Avenue investment company
3rd Floor
Greenwich, CT 06830
Age 54
Donald R. Foley Director Since Retired 27 None
3668 Freshwater Drive 1982
Jupiter, FL 33477
Age 81
Richard E. Hanson, Jr. Director Since Retired; Former Head of the 27 None
2751 Vermont Route 140 1999 New Atlanta Jewish
Poultney, VT 05764 Community High School
Age 62
Paul Hardin Director Since Professor of Law & 34 None
12083 Morehead 1994 Chancellor Emeritus at the
Chapel Hill, NC University of North Carolina
27514-8426
Age 72
Roderick C. Rasmussen Director Since Investment Counselor 27 None
9 Cadence Court 1982
Morristown, NJ 07960
Age 77
John P. Toolan Director Since Retired 27 John
13 Chadwell Place 1992 Hancock
Morristown, NJ 07960 Funds
Age 73
26 Smith Barney Money Funds, Inc. | 2003 Annual Report
ADDITIONAL INFORMATION (UNAUDITED) (CONTINUED)
Number of
Portfolios
Term in Fund Other
of Office* Principal Complex Board
Position(s) and Length Occupation(s) Overseen Memberships
Held with of Time During By Held by
Name, Address and Age Fund Served Past Five Years Director Director
- ---------------------------------------------------------------------------------------------------------
Interested Director:
R. Jay Gerken, CFA** Chairman, Since Managing Director of 221 None
Citigroup Asset Management President and 2002 Citigroup Global Markets
("CAM") Chief Inc. ("CGM"); Chairman,
399 Park Avenue Executive President and Chief
4th Floor Officer Executive Officer of Smith
New York, NY 10022 Barney Fund Management
Age 52 LLC ("SBFM"), Travelers
Investment Adviser, Inc
("TIA") and Citi Fund
Management Inc. ("CFM");
President and Chief
Executive Officer of certain
mutual funds associated
with Citigroup Inc.
("Citigroup"); Formerly,
Portfolio Manager of Smith
Barney Allocation Series Inc.
(from 1996 to 2001) and
Smith Barney Growth and
Income Fund (from 1996 to
2000)
Officers:
Andrew B. Shoup Senior Vice Since Director of CAM; Senior Vice N/A N/A
CAM President and 2003 President and Chief
125 Broad Street Chief Administrative Officer of
10th Floor Administrative mutual funds associated
New York, NY 10004 Officer with Citigroup; Treasurer of
Age 47 certain mutual funds
associated with Citigroup;
Head of International Funds
Administration of CAM
(from 2001 to 2003);
Director of Global Funds
Administration of CAM
(from 2000 to 2001); Head
of U.S. Citibank Funds
Administration of CAM
(from 1998 to 2000)
Richard L. Peteka Chief Since Director of CGM; Chief N/A N/A
CAM Financial 2002 Financial Officer and
125 Broad Street Officer and Treasurer of certain mutual
11th Floor Treasurer funds associated with
New York, NY 10004 Citigroup; Director and Head
Age 42 of Internal Control for CAM
U.S. Mutual Fund
Administration (from 1999
to 2002); Vice President,
Head of Mutual Fund
Administration and
Treasurer at Oppenheimer
Capital (from 1996 to 1999)
27 Smith Barney Money Funds, Inc. | 2003 Annual Report
ADDITIONAL INFORMATION (UNAUDITED) (CONTINUED)
Number of
Portfolios
Term in Fund Other
of Office* Principal Complex Board
Position(s) and Length Occupation(s) Overseen Memberships
Held with of Time During By Held by
Name, Address and Age Fund Served Past Five Years Director Director
- --------------------------------------------------------------------------------------------------------
Martin R. Hanley Vice Since Portfolio Manager N/A N/A
CAM President and 1993
399 Park Avenue Investment
4th Floor Officer
New York, NY 10022
Age 36
Kevin Kennedy Vice Since Portfolio Manager N/A N/A
CAM President and 2001
399 Park Avenue Investment
4th Floor Officer
New York, NY 10022
Age 49
Andrew Beagley Chief Since Director of CGM (since N/A N/A
CAM Anti-Money 2002 2000); Director of
399 Park Avenue, 4th Floor Laundering Compliance, North America,
New York, NY 10022 Compliance CAM (since 2000); Chief
Age 40 Officer Anti-Money Laundering
Compliance Officer and Vice
President of certain mutual
funds associated with
Citigroup; Director of
Compliance Europe, the
Middle East and Africa,
CAM (from 1999 to 2000);
Compliance Officer, Salomon
Brothers Asset Management
Limited, Smith Barney Global
Capital Management Inc.,
Salomon Brothers Asset
Management Asia Pacific
Limited (from 1997 to 1999)
Kaprel Ozsolak Controller Since Vice President of CGM; N/A N/A
CAM 2002 Controller of certain funds
125 Broad Street associated with Citigroup
11th Floor
New York, NY 10004
Age 38
Robert I. Frenkel Secretary and Since Managing Director and N/A N/A
CAM Chief Legal 2003 General Counsel of Global
300 First Stamford Place Officer Mutual Funds for CAM and
4th Floor its predecessor (since 1994);
Stamford, CT 06902 Secretary of CFM; Secretary
Age 48 and Chief Legal Officer of
mutual funds associated
with Citigroup
- --------
* Each Director and officer serves until his or her successor has been duly
elected and qualified.
**Mr. Gerken is an "interested person" of the Fund as defined in the
Investment Company Act of 1940, as amended, because Mr. Gerken is an officer
of SBFM and certain of its affiliates.
28 Smith Barney Money Funds, Inc. | 2003 Annual Report
SMITH BARNEY
MONEY FUNDS, INC.
DIRECTORS OFFICERS (continued)
Lee Abraham Kaprel Ozsolak
Allan J. Bloostein Controller
Jane F. Dasher
Donald R. Foley Robert I. Frenkel
R. Jay Gerken, CFA Secretary and Chief
Chairman Legal Officer
Richard E. Hanson, Jr.
Paul Hardin INVESTMENT MANAGER
Roderick C. Rasmussen Smith Barney Fund
John P. Toolan Management LLC
OFFICERS DISTRIBUTORS
R. Jay Gerken, CFA Citigroup Global Markets Inc.
President and PFS Distributors, Inc.
Chief Executive Officer
CUSTODIAN
Andrew B. Shoup State Street Bank and
Senior Vice President Trust Company
and Chief Administrative
Officer TRANSFER AGENT
Citicorp Trust Bank, fsb.
Richard L. Peteka 125 Broad Street, 11th Floor
Chief Financial Officer New York, New York 10004
and Treasurer
SUB-TRANSFER AGENTS
Martin R. Hanley PFPC Inc.
Vice President and P.O. Box 9699
Investment Officer Providence, Rhode Island
02940-9699
Kevin Kennedy
Vice President and Primerica Shareholder Services
Investment Officer P.O. Box 9662
Providence, Rhode Island
Andrew Beagley 02940-9662
Chief Anti-Money
Laundering Compliance
Officer
Smith Barney Money Funds, Inc.
Cash Portfolio
Government Portfolio
The Funds are separate investment funds of the Smith Barney Money Funds,
Inc., a Maryland corporation.
This report is submitted for general information of the shareholders of Smith
Barney Money Funds, Inc., but it may also be used as sales literature when
preceded or accompanied by the current prospectus which gives details about
changes, expenses, investment objectives and operating policies of the Funds.
If used as sales material after March 31, 2004, this report must be
accompanied by performance information for the most recently completed
calendar quarter.
SMITH BARNEY MONEY FUNDS, INC.
Smith Barney Mutual Funds
125 Broad Street
10th Floor, MF-2
New York, New York 10004
For complete information on any Smith Barney Mutual Funds, including
management fees and expenses, call or write your financial professional for a
free prospectus. Read it carefully before you invest or send money.
(C)2003 Citigroup Global Markets Inc.
Member NASD, SIPC
FD0858 2/04 04-6084
ITEM 2. CODE OF ETHICS.
The registrant has adopted a code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Board of Directors of the registrant has determined that Jane
Dasher, the Chairman of the Board's Audit Committee, possesses the
technical attributes identified in Instruction 2(b) of Item 3 to Form
N-CSR to qualify as an "audit committee financial expert," and has
designated Ms. Dasher as the Audit Committee's financial expert. Ms.
Dasher is an "independent" Trustee pursuant to paragraph (a)(2) of Item
3 to Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Item 4. Principal Accountant Fees and Services
(a) Audit Fees for Smith Barney Money Funds, Inc. of $99,000 and
$111,000 for the years ended 12/31/03 and 12/31/02.
(b) Audit-Related Fees for Smith Barney Money Funds, Inc. of $6,000
and $0 for the years ended 12/31/03 and 12/31/02.
(c) Tax Fees for Smith Barney Money Funds, Inc. of $6,000 and $5,700
for the years ended 12/31/03 and 12/31/02. These amounts
represent aggregate fees paid for tax compliance, tax advice and
tax planning services, which include (the filing and amendment of
federal, state and local income tax returns, timely RIC
qualification review and tax distribution and analysis planning)
rendered by the Accountant to Smith Barney Money Funds, Inc.
(d) There were no all other fees for Smith Barney Money Funds, Inc.
for the years ended 12/31/03 and 12/31/02.
(e) (1) Audit Committee's pre-approval policies and procedures
described in paragraph (c) (7) of Rule 2-01 of Regulation S-X.
The Charter for the Audit Committee (the "Committee") of the
Board of each registered investment company (the "Fund") advised
by Smith Barney Fund Management LLC or Salomon Brothers Asset
Management Inc. or one of their affiliates (each, an "Adviser")
requires that the Committee shall approve (a) all audit and
permissible non-audit services to be provided to the Fund and (b)
all permissible non-audit services to be provided by the Fund's
independent auditors to the Adviser and any Covered Service
Providers if the engagement relates directly to the operations
and financial reporting of the Fund. The Committee may implement
policies and procedures by which such services are approved other
than by the full Committee.
The Committee shall not approve non-audit services that the
Committee believes may impair the independence of the auditors.
As of the date of the approval of this Audit Committee Charter,
permissible non-audit services include any professional services
(including tax services), that are not prohibited services as
described below, provided to the Fund by the independent
auditors, other than those provided to the Fund in connection
with an audit or a review of the financial statements of the
Fund. Permissible non-audit services may not include: (i)
bookkeeping or other services related to the accounting records
or financial statements of the Fund; (ii) financial information
systems design and implementation; (iii) appraisal or valuation
services, fairness opinions or contribution-in-kind reports; (iv)
actuarial services; (v) internal audit outsourcing services; (vi)
management functions or human resources; (vii) broker or dealer,
investment adviser or investment banking services; (viii) legal
services and expert services unrelated to the audit; and (ix) any
other service the Public Company Accounting Oversight Board
determines, by regulation, is impermissible.
Pre-approval by the Committee of any permissible non-audit
services is not required so long as: (i) the aggregate amount of
all such permissible non-audit services provided to the Fund, the
Adviser and any service providers controlling, controlled by or
under common control with the Adviser that provide ongoing
services to the Fund ("Covered Service Providers") constitutes
not more than 5% of the total amount of revenues paid to the
independent auditors during the fiscal year in which the
permissible non-audit services are provided to (a) the Fund, (b)
the Adviser and (c) any entity controlling, controlled by or
under common control with the Adviser that provides ongoing
services to the Fund during the fiscal year in which the services
are provided that would have to be approved by the Committee;
(ii) the permissible non-audit services were not recognized by
the Fund at the time of the engagement to be non-audit services;
and (iii) such services are promptly brought to the attention of
the Committee and approved by the Committee (or its delegate(s))
prior to the completion of the audit.
(2)
(f) N/A
(g) Non-audit fees billed - $100,000 and $1.2 million for the years
ended 12/31/2003 and 12/31/2002.
(h) Yes. The Smith Barney Money Funds, Inc. Audit Committee has
considered whether the provision of non-audit services that were
rendered to Service Affiliates which were not pre-approved (not
requiring pre-approval) is compatible with maintaining the
Accountant's independence. All services provided by the
Accountant to the Smith Barney Money Funds, Inc. or to Service
Affiliates which were required to be pre-approved were pre-
approved as required.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal
financial officer have concluded that the registrant's disclosure
controls and procedures (as defined in Rule 30a- 3(c) under the
Investment Company Act of 1940, as amended (the "1940 Act")) are
effective as of a date within 90 days of the filing date of this
report that includes the disclosure required by this paragraph,
based on their evaluation of the disclosure controls and
procedures required by Rule 30a-3(b) under the 1940 Act and
15d-15(b) under the Securities Exchange Act of 1934.
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940
Act) that occurred during the registrant's last fiscal half-year
(the registrant's second fiscal half-year in the case of an annual
report) that have materially affected, or are likely to materially
affect the registrant's internal control over financial reporting.
ITEM 10. EXHIBITS.
(a) Code of Ethics attached hereto.
Exhibit 99.CODE ETH
(b) Attached hereto.
Exhibit 99.CERT Certifications pursuant to section 302 of the
Sarbanes-Oxley Act of 2002
Exhibit 99.906CERT Certifications pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this Report to be
signed on its behalf by the undersigned, there unto duly authorized.
Smith Barney Money Funds, Inc.
By: /s/ R. Jay Gerken
R. Jay Gerken
Chief Executive Officer of
Smith Barney Money Funds, Inc.
Date: March 8, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ R. Jay Gerken
(R. Jay Gerken)
Chief Executive Officer of
Smith Barney Money Funds, Inc.
Date: March 8, 2004
By: /s/ Richard L. Peteka
(Richard L. Peteka)
Chief Financial Officer of
Smith Barney Money Funds, Inc.
Date: March 8, 2004