<PAGE>
The Salomon Brothers August 19, 1998
Fund Inc
To Our Shareholders,
WE ARE PLEASED to present our semi-annual report to shareholders for The Salomon
Brothers Fund Inc (the "Fund") for the six months ended June 30, 1998.
THE NET ASSET VALUE as of June 30, 1998 was $20.57. This represents a six month
total return of 13.3%, assuming the distributions from income and capital gains
paid during 1998 were reinvested in additional shares of the Fund, compared
with an increase of 17.7% for the Standard & Poor's 500 Stocks during the same
six month period.
AT A MEETING OF THE FUND'S BOARD OF DIRECTORS held on July 17, 1998, the Board
declared a distribution of $.265 per share from net long-term gain, $.015 per
share from net short-term gain and $.05 per share from net income. The dividend
was payable August 10, 1998 to shareholders of record July 28, 1998.
Investment Objective
LONG-TERM GROWTH of capital. Current income is a secondary objective.
Investment Strategy
THE FUND INVESTS PRIMARILY in common stocks listed on the New York Stock
Exchange and other U.S. exchanges. The portfolio manager maintains a long-term
focus. While we believe that economic forecasting has a role to play in helping
us identify promising stocks, we devote most of our resources to identifying
attractive companies rather than trying to predict market trends. Our stock
selection process continues to be aimed at finding companies with strong
management, accelerating operating trends, healthy balance sheets, and strong
competitive positions.
Market Overview & Portfolio Highlights
DURING THE FIRST SIX MONTHS of 1998, the Salomon Brothers Fund returned 13.3%
based on net asset value. The portfolio return, though strong, underperformed
the powerful advance of the S&P 500 Index which was up 17.7% in the same period.
The S&P 500 Index return was generated to a large extent by the largest 30
stocks of the 500 stocks in the Index. The broader market underperformed these
large capitalization names. The Russell 2000 Index, an index of smaller
capitalization stocks, rose only 5.3% in the first half of 1998.
ASIA WAS THE MOST IMPORTANT FACTOR in determining relative performance. The
Federal Reserve was constrained from raising interest rates, despite the threat
of inflation from a tight U.S. labor market, due to the deflationary pressures
emanating out of Asia. The market was led by defensive names, such as the
pharmaceuticals, consumer products and telecommunications companies. Commodity
and cyclical companies rebounded in the first quarter on hopes that the brunt
of Asia's crisis had already been felt, but fell sharply in the second quarter
as U.S. GDP growth slowed to only 1.4%.
SIGNIFICANT CONTRIBUTORS to the Fund's performance included Warner Lambert,
Tyco International and Viacom. The Fund is well diversified, with overweighted
sectors including Basic Industries and Transportation. The Fund had
underweighted positions in Technology and Health Care relative to the S&P 500
Index. While the average holding is less expensive than the U.S. market, the
Fund's holdings are expected to grow earnings more rapidly than the market will
grow earnings.
<PAGE>
S A L O M O N B R O T H E R S F U N D I N C
Outlook
WE ARE CAUTIOUS in our outlook for the market. The stock market's advance has
become ever more narrow over the past eighteen months and volatility has
increased. The economy remains healthy, but corporate earnings growth has
slowed. Companies have little pricing power, but wages are rising, putting
operating margins at risk. We do not see a recession, but volume growth has
slowed in each of the last four months.
FOR THE FIRST TIME IN THREE YEARS, significant valuation disparities are
emerging between industry groups. The defensive sectors are expensive, while
basic industries and cyclicals are more attractively valued. We are currently
finding opportunities in consistent growers that have fallen in price and are
nibbling at cyclicals where we feel that the price declines are overdone. We
believe that the macroeconomic environment continues to favor long-term
financial assets. However, the stock market is unlikely to post a significant
further advance until expectations for corporate earnings growth are reduced to
more realistic levels.
THE FUND HELD its Annual Meeting of Stockholders on April 28, 1998. At the
meeting, shareholders elected each of the nominees proposed for election to the
Fund's Board of Directors and ratified the selection of PricewaterhouseCoopers
LLP as the independent accountants of the Fund. The following table provides
information concerning the matters voted on at the meeting:
1. Election of Directors
NOMINEES VOTES FOR VOTES WITHHELD
- -----------------------------------------------------------------------
Charles F. Barber 65,612,304 1,910,226
Andrew L. Breech 66,177,555 1,344,975
Carol L. Colman 66,097,293 1,425,237
William R. Dill 66,037,260 1,485,270
Clifford M. Kirtland, Jr. 65,816,596 1,705,934
Robert W. Lawless 66,164,187 1,358,343
Louis P. Mattis 66,145,423 1,377,107
Heath B. McLendon 65,816,694 1,705,836
Thomas F. Schlafly 66,129,292 1,393,238
2. Ratification of PricewaterhouseCoopers LLP as the Independent Accountants
of the Fund:
VOTES FOR VOTES AGAINST VOTES ABSTAINED
- -----------------------------------------------------------------------
65,654,745 712,332 1,155,453
The Board of Directors of the Fund recently reviewed and approved various
amendments to the Fund's bylaws. For example, the bylaws provisions relating to
timely notice for proposals to be brought before an annual meeting of
stockholders (other than a proposal under Rule 14a-8 of the Securities Exchange
Act of 1934 to be included in the Fund's proxy statement) have been amended. As
amended, a stockholder's notice must be delivered to the Fund not less than 60
days nor more than 90 days prior to the first anniversary of the preceding
year's annual meeting. An exception applies in the event the date of the annual
meeting is substantially advanced or delayed from the anniversary date. The
Board believes that the amended timely notice provisions will provide greater
certainty to stockholders because previously, timely notice keyed off the date
of the current year's meeting or the date public disclosure of the current
year's meeting is made. In addition, the
Page 2
<PAGE>
S A L O M O N B R O T H E R S F U N D I N C
provisions provide that any business to be brought before a special meeting of
stockholders must be specified in the notice of meeting or otherwise properly
brought before the meeting by or at the direction of the Board of Directors.
Finally, upon recommendation of the Fund's Maryland counsel, other changes to
certain bylaw provisions were made to conform to the bylaw provisions of more
recently organized Maryland companies.
THE FUND INTENDS to repurchase shares of its stock at such times and prices and
in such amounts as is deemed advisable. We will report all repurchases to
shareholders semi-annually. The Fund has made no share repurchases during 1998.
THE AUTOMATIC DIVIDEND REINVESTMENT and Cash Payment Plan (the "Plan") remains a
popular service for many shareholders seeking to build their holdings in the
Fund. Under the terms of the Plan, shareholders may arrange to reinvest their
dividends automatically in additional shares. The Plan provides that when the
Fund's shares are traded at a discount to net asset value, dividends and
distributions will be initially payable in the form of shares purchased by The
Bank of New York, the "Plan Agent", in the open market. To the extent that the
discount converts to a premium during the purchase period or when the
permissible purchase period ends, the balance will be paid in newly issued
shares of the Fund. With respect to the February, May and August 1998 dividends,
the Plan Agent purchased 1,179,165 shares on behalf of participants in the
Dividend Reinvestment Plan for a net total of $21,986,532.
THE PLAN OFFERS participants three different reinvestment options: (1)
shareholders may have all of their net investment income dividends and capital
gain distributions (short-term and long-term) automatically reinvested; (2)
shareholders may have all of their net investment income dividends paid in cash
and all of their capital gain distributions (short-term and long-term)
automatically reinvested; or (3) shareholders may have their net investment
income dividends automatically reinvested and their capital gain distributions
(short-term and long-term) paid in cash. A new shareholder or new participant
will be deemed to have chosen option (1) unless the Plan Agent is notified of a
change in election. Additional information regarding these additional optional
features of the Plan can be obtained from the Plan Agent, by calling
1-800-432-8224.
SHAREHOLDERS OF THE FUND may call 1-888-777-0102, toll free, 24 hours a day to
obtain account information, including account values, portfolio breakdown and
performance information. For information concerning your Salomon Brothers Fund
stock account, please call The Bank of New York at 1-800-432-8224.
ALL OF US at Salomon Brothers Asset Management Inc appreciate the confidence you
have demonstrated in the past and hope to continue to serve you in future years.
Cordially,
/s/ Heath B. McLendon
HEATH B. MCLENDON
Chairman and President
Page 3
<PAGE>
S A L O M O N B R O T H E R S F U N D I N C
Major Portfolio Changes for the three months ended June 30, 1998 (unaudited)
ADDITIONS+
- -----------------------------------------------
Shares
------------
Amerada Hess..................... 248,800(1)
Applied Materials................ 240,000(1)
ASM Lithography Holding NV....... 128,000(1)
Cognizant........................ 354,200
Cytec Industries................. 115,000
Food Lion, Class A............... 1,760,000(1)
News Corporation--
ADR Preferred.................. 850,000(1)
Philip Morris Companies.......... 178,900
Sealed Air $2.00 Convertible
Preferred...................... 320,000(1)
Tower Automotive................. 190,000(1)
Wellpoint Health Networks........ 299,200
- -----------------------------------------------
REDUCTIONS
- -----------------------------------------------
Shares
------------
Bay Networks..................... 610,000(2)
Canadian National Railway........ 197,000
Canadian Pacific................. 335,000
General Electric................. 260,000(2)
Host Marriot..................... 815,000(2)
IMC Global....................... 192,000
Mobil............................ 68,400
Royal Dutch Petroleum,
5 Guilder...................... 155,000
Sealed Air....................... 395,000(2)
Sherwin-Williams................. 230,000
SmithKline Beckman--ADR........... 294,300(2)
Tele-Communications--Liberty
Media Group, Class A.......... 374,500
Tyco International............... 284,000
Vulcan Materials................. 126,200
Warner-Lambert................... 90,000
Williams Companies............... 408,000
WorldCom......................... 540,000
- -----------------------------------------------
(1) New addition (2) Elimination
+ Exclusive of changes resulting entirely from stock dividends and stock
splits.
Page 4
<PAGE>
S A L O M O N B R O T H E R S F U N D I N C
Statement of Net Assets June 30, 1998 (unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS -- 82.5% OF NET ASSETS
- ---------------------------------------------------------------------------------------------------------------
SHARES COST VALUE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BASIC INDUSTRIES - 5.4%
965,000 Cytec Industries*...................................... $ 37,634,388 $ 42,701,250
468,000 IMC Global............................................. 15,554,610 14,098,500
275,000 Union Camp............................................. 13,679,396 13,646,875
231,600 Vulcan Materials....................................... 18,254,746 24,708,825
------------ -------------
85,123,140 95,155,450
------------ -------------
CAPITAL GOODS - 4.0%
400,000 AlliedSignal........................................... 3,657,240 17,750,000
232,100 Cooper Industries...................................... 12,734,931 12,750,994
640,000 Tyco International..................................... 23,366,057 40,320,000
------------ -------------
39,758,228 70,820,994
------------ -------------
CONSUMER CYCLICALS - 9.8%
265,000 Avon Products.......................................... 16,073,224 20,537,500
250,000 Breed Technologies..................................... 4,623,260 3,828,125
600,000 Costco Companies*...................................... 14,044,859 37,837,500
405,000 Federated Department Stores*........................... 7,668,103 21,794,063
400,900 Lear*.................................................. 12,572,932 20,571,181
460,500 Sears, Roebuck......................................... 11,410,499 28,119,281
500,000 Sherwin-Williams....................................... 9,559,283 16,562,500
190,000 Tower Automotive....................................... 8,647,428 8,146,250
651,000 U.S. Industries........................................ 6,391,891 16,112,250
------------ -------------
90,991,479 173,508,650
------------ -------------
CONSUMER NON-CYCLICALS - 12.2%
1,760,000 Food Lion, Class A..................................... 17,122,022 18,700,000
200,000 Loews.................................................. 16,813,036 17,425,000
850,000 News Corporation--ADR.................................. 17,232,571 24,012,500
942,000 Philip Morris Companies................................ 35,571,547 37,091,250
661,300 RJRNabisco Holding..................................... 21,211,801 15,705,875
452,000 Tele-Communications--Liberty Media Group, Class A*..... 9,885,174 17,543,250
1,655,770 Tele-Communications--TCIVentures Group, Class A*....... 17,473,064 33,218,886
32,000 Tyson Foods, Class A................................... 612,000 694,000
911,200 Viacom, Class B*....................................... 26,121,654 53,077,400
------------ -------------
162,042,869 217,468,161
------------ -------------
ENERGY - 7.4%
248,800 Amerada Hess........................................... 13,377,054 13,512,950
400 Gas Properties (100% owned) (a)........................ 40,000 703,000
501,600 Mobil.................................................. 18,670,430 38,435,100
699,000 Royal Dutch Petroleum, 5 Guilder....................... 12,111,071 38,313,938
202,000 Shlumberger............................................ 15,034,327 13,799,125
402,777 TOTAL -- ADR........................................... 11,363,654 26,331,546
Royalty Interest (a)................................... -- 754,100
------------ -------------
70,596,536 131,849,759
------------ -------------
FINANCIAL SERVICES - 18.0%
249,700 American Express....................................... 4,402,485 28,465,800
197,500 Associates First Capital............................... 5,727,500 15,182,813
49,900 BankAmerica............................................ 2,853,257 4,313,231
650,000 BankBoston............................................. 13,183,101 36,156,250
Page 5
</TABLE>
<PAGE>
S A L O M O N B R O T H E R S F U N D I N C
Statement of Net Assets June 30, 1998 (unaudited) (continued)
<TABLE>
<CAPTION>
COMMON STOCKS (continued)
- ---------------------------------------------------------------------------------------------------------------
SHARES COST VALUE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FINANCIAL SERVICES (CONTINUED)
845,000 Bank of New York....................................... $ 11,373,345 $ 51,280,938
882,400 Federal Home Loan Mortgage............................. 14,276,815 41,527,950
554,800 Nationwide Financial Services, Class A................. 15,143,962 28,294,800
513,200 Provident Companies.................................... 13,750,954 17,705,400
787,500 SunAmerica............................................. 6,239,151 45,232,031
864,498 Travelers Group........................................ 9,831,284 52,410,191
------------- -------------
96,781,854 320,569,404
------------- -------------
HEALTH CARE - 8.2%
520,000 Abbott Laboratories.................................... 16,875,972 21,255,000
455,000 American Home Products................................. 14,743,654 23,546,250
1,249,500 HEALTHSOUTH*........................................... 25,060,311 33,346,031
290,000 Johnson & Johnson...................................... 16,649,066 21,387,500
270,000 Warner-Lambert......................................... 10,810,159 18,731,250
381,700 Wellpoint Health Networks.............................. 26,328,389 28,245,800
------------- -------------
110,467,551 146,511,831
------------- -------------
REAL ESTATE INVESTMENT TRUST - 1.1%
400,000 Starwood Hotels & Resorts Trust........................ 11,026,147 19,325,000
------------- -------------
TECHNOLOGY - 8.3%
74,600 ADC Telecommunications................................. 2,193,423 2,725,231
240,000 Applied Materials...................................... 8,513,235 7,080,000
128,000 ASM Lithography Holding NV............................. 5,630,663 3,720,000
524,000 Cognizant.............................................. 28,164,351 33,012,000
210,000 Intel.................................................. 17,418,639 15,566,250
360,000 International Business Machines........................ 22,601,139 41,332,500
260,000 Quantum*............................................... 8,959,848 5,395,000
640,000 Seagate Technology*.................................... 13,578,213 15,240,000
390,000 Texas Instruments...................................... 17,754,677 22,741,875
------------- -------------
124,814,188 146,812,856
------------- -------------
TELECOMMUNICATIONS AND UTILITIES - 4.6%
550,000 Bell Atlantic.......................................... 24,883,149 25,093,750
563,100 Frontier............................................... 14,346,358 17,737,650
516,800 Williams Companies..................................... 6,359,306 17,442,000
460,000 WorldCom............................................... 14,294,730 22,281,250
------------- -------------
59,883,543 82,554,650
------------- -------------
TRANSPORTATION - 3.5%
273,000 Canadian National Railway.............................. 5,826,194 14,503,125
1,325,000 Canadian Pacific....................................... 31,721,229 37,596,875
213,100 Union Pacific.......................................... 11,649,441 9,403,037
------------- -------------
49,196,864 61,503,037
------------- -------------
TOTAL COMMON STOCKS.................................... 900,682,399 1,466,079,792
------------- -------------
Page 6
</TABLE>
<PAGE>
S A L O M O N B R O T H E R S F U N D I N C
Statement of Net Assets June 30, 1998 (unaudited) (continued)
<TABLE>
<CAPTION>
PREFERRED STOCKS--1.9% OF NET ASSETS
- ---------------------------------------------------------------------------------------------------------------
SHARES COST VALUE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CAPITAL GOODS - 0.8%
320,000 Sealed Air $2.00 Convertible........................... $ 18,069,984 $ 13,440,000
------------- -------------
FINANCIAL SERVICES - 0.2%
100,000 BTICapital Trust 6.50%................................. 5,000,000 4,425,000
------------- -------------
TRANSPORTATION - 0.9%
350,000 Union Pacific Capital Trust 6.25% Convertible.......... 18,000,292 16,143,750
------------- -------------
TOTAL PREFERRED STOCKS................................. 41,070,276 34,008,750
------------- -------------
RIGHTS--0.0% OF NET ASSETS
- ---------------------------------------------------------------------------------------------------------------
8,000 Terex Stock Appreciation Rights*....................... -- 176,000
------------- -------------
CORPORATE BONDS AND NOTES -- 1.0% OF NET ASSETS
- ---------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
(THOUSANDS)
- ---------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS - 0.5%
$6,000 Federated Department Stores 5.00% Convertible
due 10/01/03......................................... 6,000,000 9,566,250
------------- -------------
CONSUMER NON-CYCLICALS - 0.1%
2,000 Borg-Warner Security 9.125% due 05/01/03............... 1,899,983 2,095,000
------------- -------------
TELECOMMUNICATIONS AND UTILITIES - 0.4%
6,000 Bell Atlantic Financial Services 5.75% due 04/01/03.... 6,158,727 6,157,500
------------- -------------
TOTAL CORPORATE BONDS AND NOTES........................ 14,058,710 17,818,750
------------- -------------
PURCHASED OPTION -- 1.8% OF NET ASSETS
- ---------------------------------------------------------------------------------------------------------------
PREMIUM
CONTRACTS(B) PAID
- ---------------------------------------------------------------------------------------------------------------
932 S&P 500 Index Call
(expiring September 1998, exercise price $800)....... 30,481,060 31,641,400
------------- -------------
TOTAL INVESTMENTS $ 986,292,445 1,549,724,692
============= =============
Page 7
</TABLE>
<PAGE>
S A L O M O N B R O T H E R S F U N D I N C
Statement of Net Assets June 30, 1998 (unaudited) (concluded)
<TABLE>
<CAPTION>
REPURCHASE AGREEMENTS -- 11.7% OF NET ASSETS
- ----------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
(THOUSANDS) VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
$67,969 J.P. Morgan Securities, 5.48% cost $67,969,000,
dated 06/30/98, $67,979,346 due 07/1/98,
collateralized by $69,854,000 U.S. Treasury Bond,
5.375%, valued at $69,330,095 due 06/30/03......................... $ 67,969,000
70,000 Merrill Lynch, Pierce, Fenner & Smith, 5.65% cost $70,000,000,
dated 6/30/98, $70,010,986 due 07/01/98,
collateralized by $68,165,000 U.S. Treasury
Bond, 6.25%, valued at $71,402,838 due 01/31/02.................... 70,000,000
70,000 State Street Bank RA, 5.70% cost $70,000,000 dated 06/30/98,
$70,011,083 due 07/01/98, collateralized by $61,890,000
U.S. Treasury Bond, 8.375%, valued at
$71,405,588 due 08/15/08.......................................... 70,000,000
--------------
TOTAL REPURCHASE AGREEMENTS.......................................... 207,969,000
--------------
CASH AND RECEIVABLES - 2.1%............................ $ 36,926,772
LIABILITIES - (1.0)%.................................. (18,161,806) 18,764,966
------------- --------------
NET ASSETS - equivalent to $20.57 per share
on 86,344,350 shares outstanding................................... $1,776,458,658
==============
NET ASSETS CONSIST OF:
Capital stock........................................................ $ 86,344,350
Additional paid-in capital (note 3).................................. 919,744,700
Undistributed net investment income.................................. 5,909,913
Undistributed realized gain.......................................... 201,016,092
Net unrealized appreciation.......................................... 563,443,603
--------------
NET ASSETS........................................................... $1,776,458,658
==============
<FN>
- ---------------
* Non-income producing security.
(a) Fair value determined pursuant to procedures established by the Board of Directors.
(b) One contract relates to 100 shares.
See accompanying notes to financial statements.
Page 8
</FN>
</TABLE>
<PAGE>
S A L O M O N B R O T H E R S F U N D I N C
Statement of Operations for the six months ended June 30, 1998 (unaudited)
<TABLE>
INVESTMENT INCOME
<S> <C> <C>
INCOME
Dividends............................................................................ $ 9,047,019
Interest............................................................................. 5,277,174
Oil royalties........................................................................ 183,339
-------------
14,507,532
EXPENSES
Management fee......................................................... $ 3,773,786
Shareholder meeting and reports........................................ 258,940
Shareholder services................................................... 135,750
Legal and auditing fees................................................ 71,475
Stock certificates and listing fees.................................... 70,385
Custodian.............................................................. 67,015
Directors' fees........................................................ 62,155
Other.................................................................. 54,300 4,493,806
------------ -------------
Net investment income................................................................ 10,013,726
-------------
NET REALIZED GAIN ON INVESTMENTS, OPTIONS AND FOREIGN CURRENCY TRANSACTIONS.......... $ 176,984,940
-------------
NET UNREALIZED APPRECIATION OF INVESTMENTS AND OPTIONS
Beginning of period.................................................... 537,704,898
End of period.......................................................... 563,443,603
-----------
Increase in net unrealized appreciation.............................................. 25,738,705
-------------
Net realized gain and increase in net unrealized appreciation........................ 202,723,645
-------------
Net increase in net assets resulting from operations................................. $ 212,737,371
=============
See accompanying notes to financial statements.
Page 9
</TABLE>
<PAGE>
S A L O M O N B R O T H E R S F U N D I N C
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income...................................... $ 10,013,726 $ 23,150,805
Net realized gain on investments, options and
foreign currency transactions............................ 176,984,940 258,117,184
Increase in net unrealized appreciation.................... 25,738,705 69,603,429
-------------- --------------
Increase in net assets resulting from operations........... 212,737,371 350,871,418
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income...................................... (4,317,217) (22,789,609)
Net realized gain on investments........................... (27,630,182) (223,469,182)
-------------- --------------
(31,947,399) (246,258,791)
-------------- --------------
CAPITAL SHARE TRANSACTIONS
Value of shares issued in payment of dividends............. 50,371,093 --
-------------- --------------
Total increase in net assets............................... 231,161,065 104,612,627
-------------- --------------
NET ASSETS
Beginning of period........................................ 1,545,297,593 1,440,684,966
-------------- --------------
End of period (includes undistributed net investment income of
$5,909,913 and $213,404, respectively.................... $1,776,458,658 $1,545,297,593
============== ==============
See accompanying notes to financial statements.
Page 10
</TABLE>
<PAGE>
S A L O M O N B R O T H E R S F U N D I N C
Notes to Financial Statements (unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
The Salomon Brothers Fund Inc (the "Fund") is registered as a diversified,
closed-end, management investment company under the Investment Company Act of
1940, as amended. The Fund's primary investment objectives are growth and
conservation of capital. Income receives secondary consideration. Following is a
summary of significant accounting policies consistently followed by the Fund in
the preparation of its financial statements. The policies are in conformity with
generally accepted accounting principles (GAAP). The preparation of financial
statements in accordance with GAAP requires management to make estimates and
assumptions that effect the reported amounts and disclosure in the financial
statements. Actual amounts could differ from those estimates.
(A) SECURITIES VALUATION. Portfolio securities listed or traded on
national securities exchanges, or reported by the NASDAQ national market
system, are valued at the last sale price, or if there have been no sales
on that day, at the mean of the current bid and ask price which represents
the current value of the security. Over-the-counter securities are valued
at the mean of the current bid and ask price. If no quotations are readily
available (as may be the case for securities of limited marketability), or
if "restricted" securities are being valued, such portfolio securities and
other assets are valued at fair value determined pursuant to procedures
established by the Board of Directors.
(b) WRITTEN OPTION CONTRACTS. When the Fund writes a call option or a
put option, an amount equal to the premium received is recorded as a
liability, the value of which is marked-to-market daily to reflect the
current market value of the written option. When a written option expires,
the Fund realizes a gain equal to the amount of the premium received. When
the Fund enters into a closing purchase transaction, it realizes a gain
(or loss if the cost of the closing purchase transaction exceeds the
premium received when the option was sold) without regard to any
unrealized gain or loss on the underlying security, and the liability
related to such option is eliminated. When a call option is exercised, the
Fund realizes a gain or loss from the sale of the underlying security and
the proceeds from such sale are increased by the premium originally
received. When a put option is exercised, the amount of the premium
received reduces the cost of the security that the Fund purchases upon
exercise.
(C) FEDERAL INCOME TAXES. The Fund has complied and intends to
continue to comply with the requirements of the Internal Revenue Code of
1986, as amended, applicable to regulated investment companies, and to
distribute all of its taxable income to its shareholders. Therefore, no
Federal income tax or excise tax provision is required.
(d) REPURCHASE AGREEMENTS. When entering into repurchase agreements,
it is the Fund's policy to take possession, through its custodian, of the
underlying collateral and to monitor its value at the time the arrangement
is entered into and at all times during the term of the repurchase
agreement to ensure that it always equals or exceeds the repurchase price.
In the
Page 11
<PAGE>
S A L O M O N B R O T H E R S F U N D I N C
Notes to Financial Statements (unaudited) (continued)
event of default of the obligation to repurchase, the Fund has the
right to liquidate the collateral and apply the proceeds in satisfaction
of the obligation. Under certain circumstances, in the event of default or
bankruptcy by the other party to the agreement, realization and/or
retention of the collateral may be subject to legal proceedings.
(e) OTHER. Securities transactions are recorded as of the trade date.
Dividend income and dividends payable are recorded on the ex-dividend
date. Interest is recognized as interest income when earned. Original
issue discount on securities purchased is accreted on an effective yield
basis over the life of the security. The Fund owns shares of real estate
investment trusts ("REITs") which report information on the source of
their distributions annually. A portion of distributions received from
REITs during the year is estimated to be a return of capital.
2. DIVIDEND AFTER JUNE 30, 1998
On July 17, 1998, the Fund declared a distribution of $.265 per share from
long-term capital gain, $.015 per share from short-term capital gain and $.05
per share from net investment income, payable August 10, 1998 to shareholders of
record July 28, 1998.
3. CAPITAL STOCK TRANSACTIONS
Capital stock transactions were as follows:
1998 1997
---- ----
Shares issued in payment of dividends............ (2,866,880) --
--------- --------
Net change........................... (2,866,880) --
========= ========
4. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund retains Salomon Brothers Asset Management Inc ("SBAM"), an indirect,
wholly owned subsidiary of Travelers Group Inc. ("Travelers") to act as
investment manager of the Fund subject to supervision by the Board of Directors
of the Fund. SBAM furnishes the Fund with office space and pays the compensation
of its officers. The management agreement with SBAM was most recently approved
by shareholders at a special meeting held on January 15, 1998. Approval of the
agreement was necessary due to the merger of Salomon Inc, which had been the
ultimate parent company of the investment manager, with and into Smith Barney
Holdings Inc., a subsidiary of Travelers, which occurred on November 28, 1997.
The Fund pays SBAM a base fee subject to an increase or decrease depending
on the extent, if any, to which the investment performance of the Fund exceeds
or is exceeded by the investment record of the Standard & Poor's 500 Index of
Composite Stocks ("S&P 500 Index"). For the period
Page 12
<PAGE>
S A L O M O N B R O T H E R S F U N D I N C
January 1, 1997 through April 28, 1997 the base fee was paid quarterly based
on the following annual percentages of the Fund's average daily net assets:
first $350 million--.50%; next $150 million--.40%; next $250 million--.375%;
next $250 million--.35%; excess over $1 billion--.30%. At its Annual Meeting
on April 29, 1997, the Fund's shareholders approved an amendment to the Fund's
Management Agreement between the Fund and SBAM to increase the base fee
component of the management fee. Accordingly, as of April 29, 1997, the base
fee is paid quarterly based on the following annual rates:
AVERAGE DAILY NET ASSETS ANNUAL FEE RATE
----------------------- ----------------
First $350 million .650%
Next $150 million .550%
Next $250 million .525%
Next $250 million .500%
Over $1 billion .450%
The performance adjustment is paid quarterly based on a rolling one year
period. A performance adjustment will only be made after the investment
performance of the Fund exceeds or is exceeded by the investment record of the
S&P 500 Index by at least one percentage point. For each percentage point by
which the investment performance of the Fund exceeds or is exceeded by the
investment record of the S&P 500 Index, the base fee will be adjusted upward or
downward by .01% (annualized). The maximum annual adjustment is .10% which would
occur if the Fund's performance exceeds or is exceeded by the S&P 500 Index by
ten or more percentage points. For this purpose, the performance fee calculation
is based on the total return value of the S&P 500 Index versus the Fund's total
return calculated based on net asset value and assuming all distributions are
reinvested at net asset value on the record date of the distribution. For the
rolling one year period ended March 31, 1997, there was no performance
adjustment. For the rolling one year period ended June 30, 1997, September 30,
1997 and December 31, 1997, the performance of the S&P 500 Index exceeded the
Fund's performance by 3.47%, 7.28% and 8.68%, respectively. This resulted in a
total decrease of the base management fee of $756,750. For the rolling one year
period March 31, 1998 and June 30, 1998, the performance of the S&P 500 Index
exceeded the Fund's performance by 7.94% and 6.46%, respectively, resulting in a
decrease of base management fee of $596,145.
Brokerage commissions of $12,912 and $24,996 were paid to Salomon Brothers
Inc and Smith Barney Inc., respectively, for investment transactions executed on
behalf of the Fund during the six months ended June 30, 1998.
Page 13
<PAGE>
S A L O M O N B R O T H E R S F U N D I N C
Notes to Financial Statements (unaudited) (concluded)
5. PORTFOLIO ACTIVITY
The cost of securities purchased and proceeds from securities sold (other than
short-term investments and written options) during the six months ended June 30,
1998 aggregated $508,367,341 and $642,555,213, respectively.
Cost of securities held (excluding short-term investments and written
options) on June 30, 1998 for Federal income tax purposes was substantially the
same as for book purposes. As of June 30, 1998, total unrealized appreciation
and depreciation in value of investments held was $591,028,611 and $27,596,364,
respectively, resulting in net unrealized appreciation of $563,432,247.
Transactions in options written during the period ended December 31, 1997
were as follows:
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ---------
Options outstanding at December 31, 1996.............. -- --
--------- ---------
Options written....................................... (1,500) $(256,851)
Options terminated in closing purchase transactions... 750 77,622
Options exercised .................................... 750 $ 179,229
--------- ---------
Options outstanding at December 31, 1997.............. -- --
========= =========
During the year ended December 31, 1997 realized gain from written option
transactions amounted to $90,539. During the year ended December 31, 1997 net
realized gain from purchased option transactions amounted to $6,675,106, for a
net realized gain on all option transactions of $6,765,645. During the six
months ended June 30, 1998 net realized gain from purchased option transactions
amounted to $12,351,481.
The risk of writing a covered call option is that the Fund may forego the
opportunity of profit if the market price of the underlying security increases
and the option is exercised. The risk in writing a put option is that the Fund
may incur a loss if the market price of the underlying security decreases and
the option is exercised. In addition, there is the risk that the Fund may not be
able to enter a closing transaction because of an illiquid secondary market.
Page 14
<PAGE>
S A L O M O N B R O T H E R S F U N D I N C
Financial Highlights
Selected data per share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------------
1998* 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance:
Net asset value,
beginning of period.......... $18.51 $17.26 $15.43 $12.88 $14.88 $15.16
------ ------ ------ ------ ------ ------
Net investment income............ .12 .27 .33 .35 .33 .34
Net gains (losses) on securities
(both realized and unrealized) (a) 2.31 3.93 3.925 4.04 (.605) 1.44
------ ------ ------ ------ ------ ------
Total from investment
operations............. 2.43 4.20 4.255 4.39 (.275) 1.78
------ ------ ------ ------ ------ ------
Less dividends and distributions:
Dividends from net investment
income....................... (.05) (.27) (.335) (.35) (.335) (.34)
Distributions from net realized
gain on investments.......... (.32) (2.68) (2.09) (1.49) (1.39) (1.72)
------ ------ ------ ------ ------ ------
Total dividends and
distributions.......... (.37) (2.95) (2.425) (1.84) (1.725) (2.06)
------ ------ ------ ------ ------ ------
Net asset value, end of period... $20.57 $18.51 $17.26 $15.43 $12.88 $14.88
====== ====== ====== ====== ====== ======
Market price, end of period...... $18.000 $17.688 $16.00 $13.375 $10.625 $12.75
Total investment return based on
market price per share
excluding broker commissions. +3.8% +29.5% +38.7% +43.3% -3.70% +7.86%
Ratios/Supplemental Data:
Net assets, end of period
(millions)................... $1,776 $1,545 $1,441 $1,291 $1,087 $1,176
Ratio of expenses to average
net assets................... .54%** .53% .51% .41% .49% .41%
Ratio of net investment income to
average net assets............. 1.19%** 1.46% 1.96% 2.42% 2.33% 2.19%
Portfolio turnover rate.......... 34% 49% 52% 82% 69% 80%
<FN>
- ------------
(a) Includes $.015 and $.02 attributable to the increase in net asset value from
shares repurchased at a discount for the years ended 1996 and 1995,
respectively.
* Unaudited.
** Annualized.
See accompanying notes to financial statements.
Page 15
</FN>
</TABLE>
<PAGE>
S A L O M O N B R O T H E R S F U N D I N C
Automatic Dividend Reinvestment
and Cash Payment Plans
DIVIDEND REINVESTMENT
The Automatic Dividend Reinvestment Plan ("DR Plan") administered by The Bank of
New York, Agent for shareholders of The Salomon Brothers Fund Inc ("SBF"),
offers you a prompt, simple, and inexpensive way to put your dividends and
distributions to work through reinvestment in additional shares of capital stock
of SBF. All new shareholders will automatically be enrolled in the DR Plan,
unless the shares are held in the name of a broker or nominee. All other share
holders may enroll by simply completing the attached Authorization Card. If your
shares are held in the name of a broker or nominee, you should contact your
broker or nominee about your ability to participate in the DRPlan.
Money from dividends and distributions can lie idle for months at a time;
however, with the DR Plan your dividends and distributions are promptly invested
for you, automatically increasing your holdings in SBF. All paper work is done
for you automatically by The Bank of New York, Agent for the DR Plan, and you
will receive statements from the Agent to simplify your personal records. The DR
Plan also acts as a form of forced savings program.
The DR Plan also offers shareholders the flexibility to choose from three
different reinvestment options.
(1) shareholders may have all of their net investment income dividends and
capital gain distributions (short-term and long-term) automatically reinvested.
(2) shareholders may have all of their net investment income dividends paid in
cash and all of their capital gain distributions (short-term and long-term)
automatically reinvested; or
(3) shareholders may have their net investment income dividends automatically
reinvested and their capital gain distributions (short-term and long-term) paid
in cash.
A shareholder will be deemed to have chosen option (1) unless the Agent is
notified of a change in election.
CASH PAYMENT PLAN
The Cash Payment Plan allows you to purchase shares of SBF conveniently and
inexpensively, without committing large dollar amounts. Under the Cash Payment
Plan, you have the option to send a check or money order of at least $25.00 to
the Agent which will be used to buy more shares of SBF. You may make these
payments regularly or from time to time, as you choose. You may also vary the
amount of each optional payment as long as it is at least $25.00. Optional cash
payments received by the Agent will be applied by the Agent to the purchase of
additional shares of SBF on the Investment Date next following receipt. The
"Investment Dates" will be each Friday (or closest
Page 16
<PAGE>
S A L O M O N B R O T H E R S F U N D I N C
business day prior thereto, if a holiday). All cash payment shares will be
purchased on the open market at prevailing market prices and in accordance with
the "Terms and Conditions of Authorization for Amended and Restated Dividend
Reinvestment and Cash Payment Plans ("Terms and Conditions"). There is no
maximum amount of investment under the Cash Payment Plan.
Shares purchased under the Cash Payment Plan will be held as uncertificated
shares, unless separate specific instructions to issue certificates are
received. Fractional shares cannot be issued in certificate form, and dividends
and distributions on those shares held by the Agent will be automatically
reinvested.
CERTIFICATE OF DEPOSIT
If you wish, you may deposit with the Agent stock certificates representing
ownership of capital stock in SBF which you now hold. The Agent will combine the
shares represented thereby with the shares issued or purchased through the DR
Plan or Cash Payment Plan. The actual certificates forwarded by you will be
cancelled.
COST TO YOU
Except as specifically noted, you will not bear any of the costs of
administering the Plan. When the Agent makes open-market purchases, the cost of
reinvesting your dividends and distributions or purchasing additional shares
through these Plans is less than the usual brokerage commission on odd-lot
transactions because the Agent combines the purchase of shares for all
participants and passes the savings in commissions on to you. You pay your
proportionate share of the commissions paid on all open-market purchases.
Dividends and distributions, even though automatically reinvested, continue to
be taxable.
How the Automatic Dividend Reinvestment and Cash Payment Plans Work:
1. As a participant in the DR Plan, you will have three options, as follows: (i)
all net investment income dividends ("dividends") and capital gain distributions
(short-term and long-term) ("distributions") will be automatically reinvested;
(ii) all dividends will be paid in cash and all distributions will be
automatically reinvested; or (iii) all dividends will be automatically
reinvested and all distributions will be paid in cash. You will be deemed to
have elected option (i) unless notification is received by the Agent that you
elect option (ii) or option (iii).
2. If SBF declares a dividend or distribution and such distribution is to be
reinvested on your behalf, you will receive the dividend or distribution either
in newly-issued shares of SBF or in shares of SBF purchased on the New York
Stock Exchange or otherwise on the open market, depending on the relationship
between the market price per share of SBF and the net asset value per share of
SBF, as described in the terms and conditions of the DR Plan. Any newly-issued
shares will be valued at the time specified in the Plan, either at the market
price per share of SBF or at the greater of (a) the net asset value per share of
SBF and (b) 95% of the market price per share of SBF, depending on the
relationship between market price and net asset value at that time. If your
dividend or distribution is not large enough to buy a full share, the Agent
will credit you with a
Page 17
<PAGE>
S A L O M O N B R O T H E R S F U N D I N C
fractional share, computed to four decimal places, which will earn additional
dividends and distributions for you just the way full shares do.
3. You will receive a detailed statement of your Plan account following each
investment by the Agent showing total dividends and distributions and additional
cash payments, shares purchased and issued, and total shares held by you and the
Agent on your behalf. The statement will contain a tear-off portion which you
should utilize for all transaction processing.
4. The Agent will hold the shares it has purchased for you unless you otherwise
request. This convenience provides added protection against loss, theft, or
inadvertent destruction of certificates. Certificates for full shares held by
the Agent will be issued to you upon your request. If a certificate is lost,
the replacement cost is currently 2% of the value of the shares at the time of
loss.
5. You may terminate your participation in the DR Plan at any time up to a
record date, and future dividends and distributions that were previously
reinvested will thereafter be sent directly to you. Upon termination, stock
certificates for any full shares will be issued in your name, or, upon receipt
of your instructions, your shares will be sold for you and the proceeds sent to
you less brokerage commissions and any applicable taxes. Any fractional shares
at the time of termination will be converted to cash on the basis of the then
current market price of SBF capital stock.
6. The Agent will forward all proxy materials, including a form of proxy and
return envelope, covering all shares owned by a participant to be voted and
returned by the participant to SBF or its proxy agent.
7. Your attention is directed to the Terms and Conditions set forth on page 19
which govern the operation of the Plan.
If you wish to withdraw from the DRPlan or you wish to change your reinvestment
option, please contact the Agent at the toll-free telephone number listed below.
If you withdraw and subsequently wish to re-enroll, simply complete the enclosed
Authorization Card and mail it to the address below or call the number above.
Your participation will commence with the next dividend or distribution payable
after receipt of your authorization, provided it is received prior to the record
date for the dividend or distribution. Should your authorization arrive after
the record date, your participation will take effect with the following dividend
or distribution.
If you wish to change you reinvestment option, simply call the
Agent at the toll free number listed below. Your change will be effective
commencing with the next dividend or distribution payable after your instruction
to change your election, provided you contact the Agent prior to the record date
for that dividend or distribution. Should you contact the Agent after the record
date to change your reinvestment option, the change will take effect with the
following dividend or distribution.
PLEASE BE ADVISED THAT THE AGENT MAY UTILIZE BNY BROKERAGE INC., AN AFFILIATE OF
THE AGENT, FOR ALL TRADING ACTIVITY RELATING TO THE DR PLAN AND CASH PAYMENT
PLAN ON BEHALF OF PARTICIPANTS. BNY BROKERAGE INC. RECEIVES A COMMISSION IN
CONNECTION WITH SUCH TRANSACTIONS.
REMEMBER, THE DETAILED STATEMENT OF YOUR ACCOUNT WILL INCLUDE A TEAR-OFF PORTION
WHICH YOU SHOULD UTILIZE FOR ALL TRANSACTION PROCESSING.
Page 18
<PAGE>
S A L O M O N B R O T H E R S F U N D I N C
IF YOUR SHARES ARE HELD IN THE NAME OF A BROKER OR NOMINEE, YOU SHOULD CONTACT
YOUR BROKER OR NOMINEE FOR MORE INFORMATION ABOUT YOUR ABILITY TO PARTICIPATE IN
THE DR PLAN. IF THE BROKER OR NOMINEE DOES NOT PROVIDE AN AUTOMATIC REINVESTMENT
SERVICE, IT MAY BE NECESSARY FOR YOU TO HAVE YOUR SHARES TAKEN OUT OF "STREET
NAME" AND REGISTERED IN YOUR OWN NAME TO GUARANTEE YOUR PARTICIPATION.
OTHERWISE, DIVIDENDS AND DISTRIBUTIONS WILL BE PAID IN CASH BY YOUR BROKER OR
NOMINEE.
SBF and the Agent may amend or terminate the Plan. The Agent will mail to
participants notice at least 30 days prior to the effective date of any
amendment.
Any inquiries concerning the Plans should be directed to the Agent at:
The Bank of New York
Investor Relations Department
P.O. Box 11258
New York, New York 10286-1258
1-800-432-8224
Terms and Conditions of Authorization for Amended and Restated Automatic
Dividend Reinvestment and Cash Payment Plans
1. (a) The Bank of New York (the "Agent") will act as agent for each
participant in the Amended and Restated Dividend Reinvestment Plan (the "DR
Plan") of Salomon Brothers Fund Inc (the "Corporation").
(b) Participants in the DRPlan will have three options, as follows: (i) a
participant may have all net investment income dividends ("dividends") and
capital gain distributions (short-term and long-term) ("distributions")
automatically reinvested; (ii) a participant may have all dividends paid in cash
and all distributions automatically reinvested; or (iii) a participant may have
all dividends automatically reinvested and all distributions paid in cash.
Participants will be deemed to have elected option (i) unless notification is
received by the Agent that the participant elects option (ii) or option (iii).
Participants may change elections by notifying the Agent and a change in
election will be effective with respect to a dividend or distribution if the
Agent is contacted prior to the record date; otherwise it will be effective with
the following dividend or distribution.
(c) Unless the Corporation declares a dividend or distribution which may be
paid to shareholders only in the form of cash, the Agent will apply all
dividends and distributions which are to be reinvested on behalf of a
participant in the manner set forth below.
2. (a) If, on the determination date, the market price per share plus estimated
brokerage commissions equals or exceeds the net asset value per share on that
date (such condition, a "market premium"), the Agent shall receive the dividend
or distribution in newly issued shares of the Corporation on behalf of
shareholders. If, on the determination date, the net asset value per share
exceeds the market price per share plus estimated brokerage commissions on that
date (such condition, a "market discount"), the Agent will purchase shares in
the open market. The determination date will be the fourth New York Stock
Exchange trading day (a New York Stock Exchange trading day being referred to
herein as a "Trading Day") preceding the payment date for the dividend or
distribution. For purposes herein, "market price" shall mean the average of the
highest and lowest prices at which the Corporation's stock sells on the New
York Stock Exchange on the particular date, or if there is no sale on that
date, the average of the closing bid and asked quotations.
(b) Purchases by the Agent shall be made in accordance with the conditions
set forth in Item 4 below and may be made on any securities exchange where such
shares are traded, in the over-the-counter market, or in negotiated
transactions, and may be on such terms as to price, delivery, and otherwise as
the Agent may determine. Such purchases shall be made as soon as practicable
commencing on the Trading Day following the determination date and ending no
later than 30 days after the dividend or distribution date except where
temporary curtailment or suspension of purchase is necessary to comply with
applicable provisions of federal securities laws; provided, however, that such
purchases shall, in any event, terminate on the earlier of (i) 60 days after
the dividend or distribution payment date and (ii) the Trading Day prior to the
"ex-dividend date" next succeeding the dividend or distribution payment date.
Page 19
<PAGE>
S A L O M O N B R O T H E R S F U N D I N C
(c) If (i) the Agent is unable to invest the full dividend or distribution
amount in open market purchases during the purchase period provided for in
paragraph (b) above or (ii) a market discount shifts to a market premium during
the purchase period, the Agent will cease making open market purchases and will
receive the uninvested portion of the dividend or distribution amount in newly
issued shares (x) in the case of (i) above, at the close of business on the date
the Agent is required to terminate making open-market purchases as specified in
paragraph (b) above or (y) in the case of (ii) above at the close of business on
the date such shift occurs; but in no event prior to the payment date for the
dividend or distribution.
(d) In the event that all or part of a dividend or distribution amount is to
be to paid in newly issued shares, such shares will be issued to participants in
accordance with the following formula: (i) if, on the valuation date, the net
asset value per share is less than or equal to the market price per share, then
the newly issued shares shall be valued at net asset value per share on the
valuation date; provided, however, that if the net asset value per share is less
than 95% of the market price per share on the valuation date, then such shares
will be issued at 95% of the market price and (ii) if, on the valuation date,
the net asset value per share is greater than the market price per share, the
newly issued shares will be valued at the market price per share on the
valuation date.The valuation date shall be the dividend or distribution payment
date except that with respect to shares issued pursuant to paragraph (c) above,
the valuation date shall be the date such shares are issued. If a date that
would otherwise be a valuation date is not a Trading Day, the valuation date
shall be the next preceding Trading Day.
3. Under the Cash Payment Plan (together with the DR Plan, the "Plans"), cash
payments of at least $25.00 made from time to time by the participant and
received by the Agent will be applied by the Agent in the purchase of
additional shares of capital stock of the Corporation on the Investment Date
next following receipt. The "Investment Date" will be each Friday (or closest
business day prior thereto if a holiday). All cash payment shares will be
purchased by the Agent on the open market at prevailing market prices and in
accordance with the conditions set forth in Item 4 below. Participants have an
unconditional right to obtain the return of any cash payments up to 48 hours
prior to such Investment Date. Checks must be drawn on United States banks and
denominated in U.S. dollars only. Third party checks will not be accepted.
There is no maximum amount of investment under the Cash Payment Plan. The Agent
reserves the right to sell additional shares from the participant's account to
satisfy any returned checks.
4. In making cash purchases for the participant's account, the Agent will
combine the participant's funds with those of the other participants. The price
at which the Agent shall be deemed to have acquired shares shall be the average
price (including brokerage commissions) of all shares purchased by it in
connection with a particular dividend or distribution under the DR Plan or in
connection with a particular investment under the Cash Payment Plan, as the
case may be.
It is understood that (i) the Agent may hold the shares of all participants
together in its name or in the name of its nominee, (ii) the Agent may utilize
BNY Brokerage Inc., an affiliate of the Agent, for all trading activity relating
to the DR Plan and Cash Payment Plan on behalf of participants and that BNY
Brokerage Inc. receives a commission in connection with such transactions, (iii)
that government regulations may require the temporary curtailment or suspension
of purchase of shares under the Plans and accordingly, the Agent shall not be
accountable for its inability to make purchases at such times and (iv) that the
Agent shall have no responsibility as to the market value of the shares acquired
for the participant's account.
The Agent will confirm the purchases so made as soon as practicable after
the purchases are made.
5. No certificate with respect to reinvested dividends and distributions will be
issued to a participant unless he or she so requests. No certificate for a
fractional share will be issued.
6. Participants shall not bear any of the costs of administering the Plan. Each
account will bear its proportionate share of brokerage commissions paid on open
market purchases.
7. It is understood that the investment of dividends and distributions does not
relieve the participant of any taxes which may be payable on such dividends and
distributions. The Agent will report annually to each participant the amount of
dividends and distributions credited to his account during the year.
8. (a) The Agent will forward all proxy materials, including a form of proxy and
return envelope, covering all shares owned by a participant to be voted and
returned by the participant to the Corporation or its proxy agent.
(b) A participant may terminate his or her account under the DR Plan or
change his or her election pursuant to paragraph 1(b), at any time by notifying
the Agent prior to the next dividend or distribution record date. Participation
shall be terminated by written notice similarly received of the death, or
adjudicated incompetency of a participant.
Page 20
<PAGE>
(c) In the event written notice of termination, death or adjudicated
incompetency is received by the Agent after a dividend or distribution record
date, but prior to the determination by the Agent of the number of shares to be
issued to or purchased for the participant following such dividend or
distribution record date, participation in the DR Plan shall be terminated
immediately following such determination. Upon termination by reason of notice
of death, or adjudicated incompetency, no newly issued shares shall be credited
to the participant's account and no purchase of shares shall be made for the
participant's account. The participant's shares and any cash dividends or
distributions paid thereon shall be retained by the Agent subject to the Terms
and Conditions until such time as such participant's legal representatives shall
have been appointed and shall have furnished proof sufficient to the Agent of
his right to receive such shares and such dividends or distributions. Upon
termination by the participant, the Agent will send the participant a
certificate of the full shares in his or her account and a check in an amount
equal to the then current market price of any fractional share or, the Agent,
upon receipt of instructions from the participant, will sell the participant's
full and fractional shares as soon as practicable following termination and send
to the participant a check representing the proceeds, less brokerage commissions
and any applicable taxes.
If a participant disposes of all shares registered in his or her name
on the books of the Corporation, the Agent will at its discretion, continue to
reinvest dividends and distributions on the shares in the participant's DR Plan
account until otherwise notified by the participant.
9. The Agent may terminate either Plan by notice in writing remitted to all
participants. In such event the Agent will send the participant a certificate
for the full shares in his or her account and cash for any fractional shares at
the then current market price as indicated in Item 8.
10. The Agent shall not be liable hereunder for any act done in good faith, or
for any good faith omissions to act, including, without limitation, any claims
of liability (1) arising out of any such act or omission to act which occurs
prior to the termination of participation pursuant to Item 8 above and (2) with
respect to the prices at which shares are purchased or sold for the
participant's account and the times such purchases or sales are made.
11. The participant agrees to notify the Agent promptly in writing of any
change of address. Notices to the participant may be given by letter addressed
to the participant at his last address of record with the Agent.
THE SALOMON BROTHERS FUND INC
AUTHORIZATION TO PARTICIPATE IN THE DIVIDEND
REINVESTMENT PLAN FOR SHAREOWNERS OF
THE SALOMON BROTHERS FUND INC
COMMON SHARES
I wish to participate in the Dividend Reinvestment Plan. I appoint The Bank
of New York (the Agent) and authorize THE SALOMON BROTHERS FUND INC to pay to
the Agent for my account all net investment income dividends and capital gain
distributions (short-term and long-term) payable to me on the Common Shares that
are now or may hereafter be registered in my name.
I authorize the Agent to apply all such dividends and distributions in the
following manner, subject to the terms and conditions of the Plan set forth in
the brochure describing the Plan.
/X/ (1) All net investment income dividends and capital gain distributions
(short-term and long-term) payable to me shall be automatically reinvested
/X/ (2) All net investment income dividends payable to me shall be paid in
cash and all capital gain distributions (short-term and long-term) payable to me
shall be automatically reinvested
/X/ (3) All net investment income dividends payable to me shall be
reinvested and all capital gain distributions (short-term and long-term) shall
be paid in cash
(Choose one of the above.)
I understand that if I do not choose one of the above, I will be deemed to
have chosen option (1).
I understand that the appointment of The Bank of New York as the Agent is
subject to the terms and conditions of the Plan set forth in the brochure
describing the Plan.
In addition, please invest the enclosed optional cash payment in the
amount of $_________ as directed by the terms and conditions of the Plan.
(Please sign on the reverse side of this card.)
<PAGE>
S A L O M O N B R O T H E R S F U N D I N C
12. These Terms and Conditions may be amended or supplemented by the Agent at
any time or times by mailing appropriate notice at least 30 days prior to the
effective date thereof to the participant at his last address of record. The
amendment or supplement shall conclusively be deemed to be accepted by the
participant unless prior to effective date thereof the Agent receives written
notice of the termination of the participant's account. Any such amendment may
include the appointment by the Agent in its place and stead a successor agent
under these Terms and Conditions provided such successor is a bank or trust
company organized under the laws of the United States or any state thereof. The
Corporation is authorized to pay to such successor agent for the account of each
participant in the Plan all dividends and distributions payable on shares of the
Corporation's capital stock held by the Agent for the participant or by the
participant himself or herself, the shares to be applied by such successor agent
as provided in these Terms and Conditions.
13. You may effect "book-to-book" transfers, which involve transferring shares
from an existing participant account in the Plan to a new participant account
by providing the Bank with a written request in accordance with the terms and
conditions of the Plan. All participants in the current account must sign the
request and their signatures must be guaranteed by a bank, broker or financial
institution that is a member of a signature Guarantee Medallion Program. The
new participant account will automatically be coded for full dividend
reinvestment unless otherwise instructed.
14. The Terms and Conditions of this authorization shall be governed by the
laws of the State of New York.
Any inquiries regarding the Plans should
be directed to the Agent at:
THE BANK OF NEW YORK
Investor Relations Department
P.O. Box 11258
New York, New York 10286-1258
1-800-432-8224
If you desire to participate in The Salomon Brothers Fund Inc Dividend
Reinvestment Plan as described in the brochure, please sign and return this card
to:
THE BANK OF NEW YORK
P.O. Box 1958
Newark, NJ 07101-9774
Att: Dividend Reinvestment Department
DATED:_____________________, 19____
PLEASE SIGN, DATE AND RETURN
USING THE ENCLOSED ENVELOPE
--------------------------------------
Signature
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Signature (if held jointly)
Please sign exactly as your name(s) appear hereon.
THIS IS NOT A PROXY
<PAGE>
S A L O M O N B R O T H E R S F U N D I N C
Directors
CHARLES F. BARBER
Consultant; formerly Chairman, ASARCO
Incorporated
ANDREW L. BREECH
President, Dealer Operating Control
Service, Inc.
CAROL L. COLMAN
President, Colman Consulting Co., Inc.
WILLIAM R. DILL
Consultant; formerly President, Boston
Architectural Center; formerly President,
Anna Maria College
HEATH B. MCLENDON
Chairman and President, Managing Director,
Smith Barney, Inc.; President and Director,
Mutual Management Corp. and Travelers
Investment Adviser, Inc.; Chairman of
Smith Barney Strategy Advisers Inc.
CLIFFORD M. KIRTLAND, JR.
Member of the Advisory Committee, Nero-
Moseley Partners; formerly Director, Oxford
Industries, Inc., Shaw Industries, Inc.,
Graphic Industries, Inc. and CSX Corp.;
formerly Chairman and President, Cox
Communications, Inc.
ROBERT W. LAWLESS
President and Chief Executive Officer,
University of Tulsa; formerly President and
Chief Executive Officer, Texas Tech University
and Texas Tech University Health
Sciences Center
LOUIS P. MATTIS
Consultant; formerly Chairman and President,
Sterling Winthrop Inc.
THOMAS F. SCHLAFLY
Of counsel to Blackwell Sanders Peper Martin
LLP (law firm); President, The Saint Louis
Brewery, Inc.
Officers
HEATH B. MCLENDON
Chairman and President
RICHARD E. DAHLBERG
Executive Vice President
ALLAN R. WHITE, III
Executive Vice President
LEWIS E. DAIDONE
Executive Vice President & Treasurer
MICHAEL A. KAGAN
Vice President
MARTIN L. ROBERTS
Vice President
NOEL B. DAUGHERTY
Secretary
JANET TOLCHIN
Assistant Controller
ANTHONY PACE
Assistant Controller
<PAGE>
Salomon Brothers Asset Management
Seven World Trade Center
New York, New York 10048
The Salomon Brothers
Fund Inc
Semi-Annual Report
JUNE 30, 1998
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Salomon Brothers Asset Management
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BULK RATE
U.S. POSTAGE
PAID
NEWARK, NJ
PERMIT No. 4
