<PAGE>
The Salomon Brothers
Fund Inc
Annual Report
DECEMBER 31, 1997
- ---------------------------------------
SALOMON BROTHERS ASSET MANAGEMENT
---------------------------------------
<PAGE>
<TABLE>
<CAPTION>
Board of Directors
<S> <C>
Charles F. Barber Consultant; formerly Chairman, ASARCO Incorporated
Member of the Audit Committee
Andrew L. Breech President, Dealer Operating Control Service, Inc.
Member of the Proxy Committee
Thomas W. Brock Chairman, Managing Director and Chief Executive Officer,
Salomon Brothers Asset Management Inc; Managing Director and
member of the Management Board, Salomon Brothers Inc
Carol L. Colman President, Colman Consulting Co., Inc.
Member of the Audit Committee
William R. Dill Consultant; formerly President, Boston Architectural Center;
formerly President, Anna Maria College
Member of the Nominating Committee
Heath B. McLendon Chairman and President, Managing Director, Smith Barney;
President, Smith Barney Mutual Fund Management Inc.;
Chairman, Smith Barney Strategy Advisors Inc.
Clifford M. Kirtland, Jr. Member of the Advisory Committee, Nero Moseley Partners;
formerly Director, Oxford Industries, Inc., Shaw Industries, Inc.
and Graphic Industries, Inc.; formerly Chairman,
Cox Communications, Inc.
Member of the Proxy Committee
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
Member of the Proxy Committee
Louis P. Mattis Consultant; formerly Chairman and President,
Sterling Winthrop Inc.
Member of the Nominating Committee
Thomas F. Schlafly Of counsel to law firm of Peper, Martin, Jensen, Maichel &
Hetlage; President, The Saint Louis Brewery, Inc.
Member of the Audit and Nominating Committees
</TABLE>
<PAGE>
S A L O M O N B R O T H E R S F U N D I N C
To Our Shareholders The Salomon Brothers Fund Inc
7 World Trade Center
New York, NY 10048
February 20, 1998
THE US EQUITY MARKET posted another year of impressive growth in 1997 and The
Salomon Brothers Fund continued to benefit from that growth. The net asset value
of Fund shares increased by 25.6%, assuming the income and capital gain
distributions made in 1997 were reinvested in additional shares of the Fund.
This compares with the 33.4% gain posted by the Standard and Poor's Index of
500 Stocks. Based on market price, an investment in The Salomon Brothers Fund
appreciated 29.5% during 1997, assuming reinvestment of income and capital gain
distributions in additional Fund shares. We are also pleased to inform you that
recently the Fund's shares traded at a premium to their net asset value--for the
first time since December 1986.
Market Review
EQUITY INVESTORS were rewarded in 1997 with outstanding returns for the third
consecutive year. Indeed, the near perfect combination of moderate US economic
growth with low inflation, declining interest rates and another year of better
than expected earnings growth, propelled the market to new highs. Even fourth
quarter returns were positive, despite the Asian turmoil and higher volatility
in the US markets.
Highlights
THE MARKET'S RISE in the first half of the year was led by the largest
capitalization and technology stocks. During the second half of the year, the
strongest stocks were defensive names. The Fund's excellent nominal returns
reflect the powerful performance from several of the Fund's largest holdings,
including Tyco International, Viacom, Travelers Group and SmithKline Beecham.
Outlook
LOOKING AHEAD, we expect the favorable economic environment in the US to
persist. Inflation should remain low. Profit growth may be constrained by the
lingering effects from the crisis in Asia. In particular, commodity companies
may experience a slowing in demand, and US manufacturing companies may see a
more difficult pricing environment due to competition from Asian imports. But
lower interest rates have sparked a mortgage refinancing boom, and consumer
confidence is high. US growth should remain robust in 1998, although it will
probably slow from the rapid pace seen in 1997.
The challenge in 1998 will be to navigate through these crosscurrents. The
stock market in unlikely to repeat the powerful returns of the past three years.
Valuations for many defensive stocks are high. In our view, the appropriate
near term strategy is to stay with companies with above average earnings growth
and below average valuation -- stocks such as Vulcan Materials and Cytec
Industries. We see many attractive stocks to invest in.
Fund News
THE FUND HELD a Special Meeting of Stockholders on January 15, 1998. At the
meeting, shareholders approved a new management agreement between Salomon
Brothers Asset Management and the Fund by a vote of 53,260,679 for, 1,758,482
against and 2,047,270 abstained.
In response to recent amendments to Maryland corporate law, the Board of
Directors recently reviewed various corporate governance provisions in the
Fund's By-Laws and approved amendments to the Fund's By-Laws to (1) increase
the percentage of stockholder voting power that is required to call a
special meeting of its stockholders to a majority of the votes entitled to be
cast at the meeting and (2) reduce the minimum permissible board committee
size to one director.
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 made no share repurchases during 1997.
Page 1
<PAGE>
S A L O M O N B R O T H E R S F U N D I N C
THE AUTOMATIC DIVIDEND reinvestment and cash payment 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 Plan Agent, The
Bank of New York, in the open market and to the extent the trading converts to
a premium during the purchase period, the balance will be paid in newly issued
shares of the Fund. With respect to the December 1997 dividends, the Plan
Agent purchased 1,372,300 shares on behalf of participants in the Dividend
Reinvestment Plan for a net total of $24,384,291 and 2,866,880 shares were
issued to participants.
WE ARE PLEASED TO inform you that in response to shareholder requests, the
Board has approved some modifications to the Plan which are designed to provide
participants with more flexibility. 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
shareholder will be deemed to have chosen option (1) unless the Bank of New
York, the Plan Agent, is notified of a change in election. Further information
regarding the Plan, including an application, is included later in this report.
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.
Salomon Brothers Asset Management Inc appreciates the confidence you have
demonstrated in the past and hopes to continue to serve you in future years.
Cordially,
/s/Heath B. Mclendon
HEATH B. MCLENDON
Chairman and President
- -------------------------------------------------------------------------------
IMPORTANT MESSAGE TO SHAREHOLDERS
Any shareholders who are holding old certificates of The Lehman Corporation, the
Fund's former name, should exchange those certificates, free of charge, for new
ones bearing The Salomon Brothers Fund Inc name. The New York Stock Exchange has
informed us that the old certificates may create settlement problems in the
future if you decide to sell your shares. Please note that while you are not
required to exchange the certificates, we recommend that you do so. Shareholders
who wish to exchange their certificates should send them via registered mail
with a letter requesting exchange for new certificates to:
The Bank of New York
Receive and Deliver Department-11W
Church Street Station
P.O. Box 11002
New York, New York 10286-1002
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
Investment Policy
The Salomon Brothers Fund's investment policy has been to concentrate a large
portion of its investments in common stocks. Companies whose stocks are selected
generally have strong positions in industries with the potential to grow faster
than the economy as a whole. Investments are monitored carefully and are changed
from time to time into holdings we believe offer more favorable opportunities in
the light of changing economic, social and political conditions. The common
thread of the Fund's policy has been to seek out and to hold common stocks of
well-managed, favorably situated companies we expect will produce above-average
earnings and dividend growth over time. At the same time, we also look for
opportunities in turnaround situations and in securities that appear to be
priced substantially lower than their intrinsic value. While current income is
not a primary consideration, we are mindful of the income needs of our
shareholders.
For the core of our holdings, we look for companies we believe are able to
increase earnings and dividends at an above-average rate and still retain enough
cash to finance future growth in their businesses.
The experience of investors generally shows the great difficulty of consistently
predicting turns in the stock market. There is often the risk that the investor
will become too pessimistic about stocks when their prices are depressed and
sell near the bottom or become overly optimistic when their prices are high and
buy near the top. In our opinion, this natural propensity often accounts for the
poor long-term investment results of many individuals and institutions. For this
reason, the Fund has generally maintained a rather fully invested position in
equities rather than attempting to switch back and forth between equities and
large reserves of cash, short-term instruments and bonds.
From time to time, the Fund may invest in public utility common stocks when it
believes their prices are particularly depressed and total return (price
appreciation plus dividends) from such investments is likely to sufficiently
exceed the yield available from money market instruments to warrant the
investments.
As a general rule, the Fund invests for the longer term. We do not trade in and
out of individual securities on the basis of intermediate price fluctuations,
nor do we attempt to guess the direction of market cycles by continually
shifting from a fully invested to a partially invested position. Even so, we
reappraise our holdings, take profits or losses from time to time and raise cash
to reinvest in newly emerging areas of interest, within the scope of investment
policy.
SUMMARY (unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31
- -------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Assets (in millions) $ 1,545 $ 1,441 $ 1,291 $ 1,087 $ 1,176
Shares Outstanding (000's) 83,477 83,477 83,657 84,407 79,031
Net Assets Per Share $ 18.51 $ 17.26 $ 15.43 $ 12.88 $ 14.88
Distributions $ 2.95 $ 2.425 $ 1.84 $ 1.725 $ 2.06
Market Price Per Share $17.688 $16.000 $13.375 $10.625 $12.750
Discount from NAV at Year End (4.44)% (7.30)% (13.32)% (17.51)% (14.31)%
Market Price Range (NYSE, symbol SBF):
High $19.688 $17.000 $14.125 $13.875 $14.375
Low $14.875 $13.250 $10.625 $10.500 $12.625
</TABLE>
<TABLE>
<CAPTION>
1997 DISTRIBUTIONS DECLARED
- -----------------------------------------------------------------------------------------------------
Net Short Term Long Term Total Payment
Payment Date Record Date Investment Income Capital Gains Capital Gains Per Share
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
March February $ - $ .05 $ .16 $ .21
May May .06 - - .06
August August .07 - - .07
November November .07 - - .07
December December .07 .20 2.27 2.54
------------------------------------------------------------
Total $ .27 $ .25 $2.43* $2.95
============================================================
<FN>
* Consists of $1.15 of 28% gain and $1.28 from 20% gain.
- -----------------------------------------------------------------------------------------------------
</FN>
Page 3
</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 as DR Plan Agent for shareholders of The Salomon Brothers Fund Inc
(the "Fund"), offers you a prompt, simple and inexpensive way to put your
dividends and distributions to work through reinvestment in additional full and
fractional shares of capital stock of the Fund.
Shareholders may enroll by simply completing the enclosed Authorization Card
with the exception of those shares that are held in the name of a broker
or nominee.
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 by The Bank of New York, DR Plan agent, and
you will receive statements from the Agent to simplify your personal records.
THE CASH PAYMENT PLAN
The Cash Payment Plan allows you to purchase shares of the Fund 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 the Fund. You may
make these payments regularly or from time to time. You may also vary the
amount of each optional payment as long as it is at least $25.00.
COST TO YOU
Except as specifically noted, you will not bear any costs of administering the
Plan. You pay only your proportionate share of the commissions paid on all
open-market purchases. Dividends and distributions, even though automatically
reinvested, continue to be taxable.
TO ENROLL
The complete Dividend Reinvestment and Cash Payment Plan brochure and
authorization card can be found at the back of this report. You must complete
the Authorization Card and return it in the envelope provided in order to
participate. If you have any questions, contact the Plan agent at
1-800-432-8244. Generally, shareholders who initially invested on or after
November 20, 1995 are automatically enrolled in the DR Plan. However, 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 Plan.
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
Record of a Share of Stock (unaudited)
<TABLE>
<CAPTION>
Net Asset
Capital Gain Value plus
Distributions Declared From Net Asset Value Distributions Capital Gain
- --------------------------------------------------------------------------------------------------------
Year Income Capital Gain End of Year (Cumulative) Distributions*
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1929 $3.81 $3.81
1930 $.094 3.08 3.08
1931 .119 2.36 2.36
1932 .10 2.43 2.43
1933 .10 3.35 3.35
1934 .10 3.68 3.68
1935 .117 4.64 4.64
1936 .125 $.146 5.72 $.146 5.866
1937 .125 .396 3.66 .542 4.202
1938 .106 4.25 .542 4.792
1939 .10 4.09 .542 4.632
1940 .106 3.70 .542 4.242
1941 .15 3.34 .542 3.882
1942 .156 3.69 .542 4.232
1943 .156 4.71 .542 5.252
1944 .181 5.54 .542 6.082
1945 .174 .301 7.21 .843 8.053
1946 .169 .625 6.55 1.468 8.018
1947 .192 .376 6.13 1.844 7.974
1948 .245 .192 5.82 2.036 7.856
1949 .279 .202 6.60 2.238 8.838
1950 .335 .402 7.21 2.640 9.850
1951 .276 .36 8.67 3.000 11.670
1952 .21 .254 9.15 3.254 12.404
1953 .245 .26 8.59 3.514 12.104
1954 .25 .312 11.31 3.826 15.136
1955 .285 .517 12.56 4.343 16.903
1956 .31 .712 12.63 5.055 17.685
1957 .275 .65 10.38 5.705 16.085
1958 .265 .545 13.84 6.250 20.090
1959 .27 .67 14.04 6.920 20.960
1960 .265 .59 13.53 7.510 21.040
1961 .252 .665 15.80 8.175 23.975
1962 .255 .54 12.74 8.715 21.455
1963 .255 .605 14.91 9.320 24.230
1964 .30 .645 16.01 9.965 25.975
1965 .312 .665 18.07 10.630 28.700
1966 .337 .735 16.54 11.365 27.905
1967 .355 .84 19.97 12.205 32.175
1968 .365 1.25 19.69 13.455 33.145
1969 .35 1.35 17.62 14.805 32.425
1970 .305 1.02 15.03 15.825 30.855
1971 .305 .81 17.87 16.635 34.505
1972 .305 1.27 20.47 17.905 38.375
1973 .295 .84 16.50 18.745 35.245
1974 .305 .42 10.77 19.165 29.935
1975 .27 .67 13.15 19.835 32.985
1976 .225+ + 15.08 19.835 34.915
1977 .245 1.01 13.12 20.845 33.965
1978 .34 .45 13.81 21.295 35.105
1979 .42 .91 16.42 22.205 38.625
1980 .55 1.18 18.88 23.385 42.265
1981 .72 2.04 15.56 25.425 40.985
1982 .71 2.01 16.64 27.435 44.075
1983 .625 1.365 18.25 28.800 47.050
1984 .545 2.44 14.67 31.240 45.910
1985 .495 1.085 16.78 32.325 49.105
1986 .515 3.085 15.42 35.410 50.830
1987 .49 1.88 13.26 37.290 50.550
1988 .505 .49 14.37 37.780 52.150
1989 .59 1.515 15.58 39.295 54.875
1990 .485 .71 13.33 40.005 53.335
1991 .47 1.14 15.66 41.145 56.805
1992 .40 .60 15.16 41.745 56.905
1993 .34 1.72 14.88 43.465 58.345
1994 .335 1.39 12.88 44.855 57.735
1995 .35 1.49 15.43 46.345 61.775
1996 .335 2.09 17.26 48.435 65.695
1997 .27 2.68 18.51 51.115 69.625
------- -------
Totals $20.406 $51.115
======= =======
<FN>
+ A capital gain dividend of $1.01 per share and an income dividend of $.02 per
share for 1976 were declared in January 1977.
* Does not reflect the effect of reinvestment of income dividends or capital
gain distributions.
</FN>
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
25-Year Record of an Investment in
The Salomon Brothers Fund Inc (unaudited)
This chart shows the 25-year record of a $10,000 investment in stock of The
Salomon Brothers Fund Inc at net asset value at the beginning of 1973, assuming
all income dividends and capital gain distributions were reinvested at net asset
value. During the period, the market price of the stock was sometimes above net
asset value and sometimes below; accordingly, the chart should not be construed
as an indication of the record of a shareholder's investment in the Fund based
on market prices. Nor should it be construed as a representation of future
performance of the Fund's net asset value.
<TABLE>
<CAPTION>
Cumulative Net Asset Value of
-------------------------------
Net Asset Value Capital Gain Income
End of of Initial Distributions Dividends Total Total
Year Investment Reinvested Reinvested Net Asset Value Market Value
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1973 $8,061 $ 427 $ 135 $ 8,623 $ 6,924
1974 5,261 511 226 5,998 4,663
1975 6,424 1,009 422 7,855 6,272
1976 7,367 1,157 622 9,146 7,506
1977 6,409 1,612 709 8,730 6,986
1978 6,746 2,048 995 9,789 7,000
1979 8,021 3,224 1,551 12,796 10,228
1980 9,223 4,831 2,328 16,382 13,883
1981 7,601 5,705 2,586 15,892 15,320
1982 8,129 8,849 3,790 20,768 21,686
1983 8,915 11,769 5,051 25,735 26,264
1984 7,167 12,774 4,981 24,922 25,482
1985 8,192 16,723 6,718 31,633 30,181
1986 7,533 21,618 7,155 36,306 35,611
1987 6,478 22,990 7,118 36,586 30,350
1988 7,020 26,373 9,157 42,550 34,421
1989 7,611 33,450 11,297 52,358 43,687
1990 6,512 31,147 11,223 48,882 40,338
1991 7,650 41,357 14,986 63,993 56,698
1992 7,406 42,665 16,157 66,228 60,068
1993 7,269 49,675 17,325 74,269 63,637
1994 6,287 49,756 16,581 72,624 59,955
1995 7,538 68,513 21,927 97,978 84,928
1996 8,432 90,567 26,780 125,779 116,596
1997 9,043 116,999 30,619 156,661 149,700
</TABLE>
Page 6
<PAGE>
S A L O M O N B R O T H E R S F U N D I N C
CUMULATIVE CUMULATIVE
NET ASSET NET ASSET
NET ASSET VALUE OF VALUE OF
VALUE OF CAPITAL INCOME TOTAL TOTAL
INITIAL GAIN DIVIDENDS MARKET NET ASSET
INVESTMENT DISTRIBUTION REINVESTED VALUE VALUE
YEAR a b c d e
1973 8061 427 135 6924 8623
1974 5261 511 226 4663 5998
1975 6424 1009 422 6272 7855
1976 7367 1157 622 7506 9146
1977 6409 1612 709 6986 8730
1978 6746 2048 995 7000 9789
1979 8021 3224 1551 10228 12796
1980 9223 4831 2328 13883 16382
1981 7601 5705 2586 15320 15892
1982 8129 8849 3790 21686 20768
1983 8915 11769 5051 26264 25735
1984 7167 12774 4981 25482 24922
1985 8192 16723 6718 30181 31633
1986 7533 21618 7155 35611 36306
1987 6478 22990 7118 30350 36586
1988 7020 26373 9157 34421 42550
1989 7611 33450 11297 43687 52358
1990 6512 31147 11223 40338 48882
1991 7650 41357 14986 56698 63993
1992 7406 42665 16157 60068 66228
1993 7269 49675 17325 63637 74269
1994 6287 49756 16581 59955 72624
1995 7538 68513 21927 84928 97978
1996 8432 90567 26780 116596 125779
1997 9043 116999 30619 149700 156661
Page 7
<PAGE>
S A L O M O N B R O T H E R S F U N D I N C
Largest Investments (unaudited)
The ten largest investments in the Fund's portfolio at December 31, 1997 are
listed below. The total market value of these securities approximates 29% of the
Fund's net assets at that date and the same percentage of the aggregate net
asset value of each stockholder's Fund shares. For example, an investment in
1,000 shares of The Salomon Brothers Fund stock at December 31, 1997 had an
aggregate net asset value of $18,510, of which 29%, or $5,368, was invested in
these ten securities.
Shares Value
------------------------------
Tyco International............................... 1,200,000 $54,075,000
SmithKline Beecham -- ADR........................ 959,000 49,328,563
Bank of New York................................. 845,000 48,851,562
Travelers Group.................................. 864,498 46,574,830
Royal Dutch Petroleum, 5 Guilder................. 854,000 46,276,125
Canadian Pacific................................. 1,660,000 45,235,000
Mobil............................................ 570,000 41,146,875
Cytec Industries................................. 850,000 39,896,875
Viacom, Class B.................................. 911,200 37,757,850
International Business Machines.................. 360,000 37,642,500
------------
Total............................................. $446,785,180
============
- -------------------------------------------------------------------------------
FEDERAL TAX STATUS OF DISTRIBUTIONS (unaudited)
For corporate taxpayers, approximately 30% of the ordinary dividends paid in
March and 37% of the ordinary dividends paid in May, August, November and
December qualify for the corporate dividends received deduction.
- -------------------------------------------------------------------------------
Page 8
<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 (unaudited)
Listed below are the Fund's major portfolio changes during the three months
ended December 31, 1997. Excluded from the list are changes resulting entirely
from stock dividends and stock splits.
Additions
- -------------------------------------------------------------------------------
Shares
Increased
------------
Abbott Laboratories................................................ 260,000(1)
Breed Technologies................................................. 250,000(1)
BTI Capital Trust 6.50% Convertible Preferred...................... 100,000(1)
Frontier........................................................... 332,800(1)
HEALTHSOUTH........................................................ 150,000
IMC Global......................................................... 200,000
PacifiCare Health Systems, Class B................................. 7,300
Philip Morris Companies............................................ 24,600
Seagate Technology................................................. 510,000(1)
Sherwin-Williams................................................... 20,400
Tele-Communications-Liberty Media Group, Class A................... 551,000(1)
Tyco International................................................. 110,000
Viacom, Class B.................................................... 229,600
Vulcan Materials................................................... 26,800
Warner-Lambert..................................................... 150,000(1)
Reductions
- -------------------------------------------------------------------------------
Shares/
Principal Amount
Decreased
----------------
Aetna........................................................... 359,500(2)
American Home Products.......................................... 227,500
Bank of New York................................................ 268,400
BankAmerica..................................................... 28,700
BankBoston...................................................... 63,000
Cognizant....................................................... 84,600(2)
Cytec Industries................................................ 75,000
Fannie Mae...................................................... 187,400
Finlay Fine Jewelry 10.625% due 5/1/03.......................... $2,000,000(2)
First Data...................................................... 1,058,000(2)
General Electric................................................ 55,500
Gulfstream Aerospace............................................ 591,800
Highwoods Properties............................................ 450,000(2)
Host Marriott................................................... 114,500
Kroger.......................................................... 735,100(2)
Lear............................................................ 17,100
PacifiCare Health Systems, Class A.............................. 7,300(2)
Praxair......................................................... 13,000
Sears, Roebuck.................................................. 34,200
Tele-Communications--TCI Ventures Group, Class A................ 105,000
Vencor.......................................................... 435,000(2)
Western Digital................................................. 200,000(2)
(1) New Addition (2) Elimination
Page 9
<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 Investments December 31, 1997
COMMON STOCKS -- 92.9% OF NET ASSETS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Value
Shares Cost (Note 1a)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Basic Industries -- 12.1%
218,200 Aluminum Company of America........................ $ 14,901,003 $ 15,355,825
850,000 Cytec Industries*.................................. 32,568,928 39,896,875
260,000 Du Pont (E.I.) de Nemours.......................... 8,045,258 15,616,250
660,000 IMCGlobal.......................................... 22,519,895 21,615,000
487,000 Praxair............................................ 13,478,443 21,915,000
335,000 Sealed Air*........................................ 17,276,352 20,686,250
400,000 Union Camp......................................... 19,887,933 21,475,000
302,500 Vulcan Materials................................... 24,168,899 30,892,813
------------ ------------
152,846,711 187,453,013
------------ ------------
Capital Goods -- 6.2%
400,000 AlliedSignal....................................... 3,657,240 15,575,000
260,000 General Electric................................... 898,819 19,077,500
258,200 Gulfstream Aerospace*.............................. 5,874,862 7,552,350
1,200,000 Tyco International................................. 43,817,257 54,075,000
------------ ------------
54,248,178 96,279,850
------------ ------------
Consumer Cyclicals -- 10.1%
250,000 Breed Technologies................................. 4,623,260 4,562,500
600,000 Costco Companies*.................................. 14,044,859 26,775,000
405,000 Federated Department Stores*....................... 7,668,103 17,440,312
1,030,000 Host Marriott*..................................... 10,683,499 20,213,750
567,900 Lear*.............................................. 18,308,662 26,975,250
460,500 Sears, Roebuck..................................... 11,410,499 20,837,625
730,000 Sherwin-Williams................................... 13,592,283 20,257,500
651,000 U.S. Industries.................................... 6,391,891 19,611,375
------------ ------------
86,723,056 156,673,312
------------ ------------
Consumer Non-Cyclicals -- 10.2%
70,300 Avon Products...................................... 4,008,272 4,314,663
525,800 Hormel Foods....................................... 12,602,984 17,219,950
200,000 Loews.............................................. 16,813,036 21,225,000
818,100 Philip Morris Companies............................ 27,104,352 37,070,156
551,000 Tele-Communications-Liberty Media Group, Class A*.. 18,155,383 19,973,750
32,000 Tyson Foods, Class A............................... 612,000 656,000
911,200 Viacom, Class B*................................... 26,121,654 37,757,850
150,000 Warner-Lambert..................................... 18,444,559 18,600,000
------------ ------------
123,862,240 156,817,369
------------ ------------
Energy -- 10.6%
335,300 Amoco.............................................. 19,098,473 28,542,412
562,500 Dresser Industries................................. 19,029,217 23,589,844
400 Gas Properties (100% owned) (a).................... 40,000 754,000
570,000 Mobil.............................................. 21,712,087 41,146,875
854,000 Royal Dutch Petroleum, 5 Guilder................... 17,192,475 46,276,125
402,777 TOTAL-- ADR........................................ 11,363,654 22,354,124
Royalty Interest (a)............................... -- 835,300
----------- -----------
88,435,906 163,498,680
----------- -----------
</TABLE>
Page 10
<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 Investments December 31, 1997 (continued)
Common Stocks continued
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Value
Shares Cost (Note 1a)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Financial Services -- 19.1%
249,700 American Express................................... $ 4,402,485 $ 22,285,725
197,500 Associates First Capital........................... 5,727,500 14,047,188
107,100 BankAmerica........................................ 6,123,924 7,818,300
338,500 BankBoston......................................... 13,853,902 31,797,844
845,000 Bank of New York................................... 11,373,345 48,851,562
187,600 Fannie Mae......................................... 8,040,114 10,704,925
882,400 Federal Home Loan Mortgage......................... 14,276,815 37,005,650
554,800 Nationwide Financial Services, Class A............. 15,143,962 20,042,150
585,800 Provident Companies................................ 15,719,902 22,626,525
787,500 SunAmerica......................................... 6,239,151 33,665,625
864,498 Travelers Group.................................... 9,831,284 46,574,830
----------- -------------
110,732,384 295,420,324
----------- -------------
Health Care -- 9.4%
260,000 Abbott Laboratories................................ 16,875,971 17,046,250
227,500 American Home Products............................. 14,743,654 17,403,750
1,249,500 HEALTHSOUTH*....................................... 25,060,311 34,673,625
290,000 Johnson & Johnson.................................. 16,649,066 19,103,750
154,900 PacifiCare Health Systems, Class B*................ 12,018,356 8,112,887
959,000 SmithKline Beecham-- ADR........................... 23,692,654 49,328,563
----------- -------------
109,040,012 145,668,825
----------- -------------
Real Estate Investment Trust -- 1.5%
400,000 Starwood Hotels & Resorts Trust.................... 11,026,147 23,150,000
----------- -------------
Technology -- 4.2%
349,000 Data General*...................................... 9,589,813 6,085,687
360,000 International Business Machines.................... 22,601,139 37,642,500
260,000 Quantum*........................................... 8,959,848 5,216,250
510,000 Seagate Technology*................................ 14,059,160 9,817,500
173,600 3Com*.............................................. 9,146,776 6,065,150
----------- -------------
64,356,736 64,827,087
----------- -------------
Telecommunications & Utilities-- 4.6%
332,800 Frontier........................................... 7,979,322 8,008,000
617,115 Tele-Communications--TCIGroup, Class A*............. 11,583,535 17,240,650
697,885 Tele-Communications--TCI Ventures Group, Class A*... 13,821,819 19,758,869
924,800 Williams Companies................................. 11,500,392 26,241,200
----------- -------------
44,885,068 71,248,719
----------- -------------
Transportation -- 4.9%
624,600 Canadian National Railway.......................... 15,338,910 29,512,350
1,660,000 Canadian Pacific .................................. 39,535,286 45,235,000
----------- -------------
54,874,196 74,747,350
----------- -------------
TOTAL COMMON STOCKS................................ 901,030,634 1,435,784,529
----------- -------------
Page 11
</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 Investments December 31, 1997 (continued)
Convertible Preferred Stock -- 0.3% of Net Assets
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Value
Shares Cost (Note 1a)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FINANCIAL SERVICES -- 0.3%
100,000 BTI Capital Trust 6.50% .......................... $ 5,000,000 $ 4,837,500
------------ --------------
<CAPTION>
CORPORATE BONDS AND NOTES -- 1.3% of Net Assets
- -------------------------------------------------------------------------------------------------
Principal
Amount
(Thousands)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Basic Industries -- 0.1%
$2,500 United International Holding Zero Coupon
due 11/15/99.................................... 1,969,254 2,087,500
----------- -------------
Capital Goods -- 0.1%
1,329 Terex 13.25% due 5/15/02.......................... 1,235,213 1,521,705
8,000 Terex Stock Appreciation Rights*.................. -- 104,000
----------- -------------
1,235,213 1,625,705
----------- -------------
Consumer Cyclicals -- 0.7%
6,000 Federated Department Stores 5% Convertible
due 10/1/03..................................... 6,000,000 8,085,000
2,000 Hines Horticulture 11.75% due 10/15/05............ 2,089,728 2,190,000
----------- -------------
8,089,728 10,275,000
----------- -------------
Consumer Staples -- 0.1%
2,000 Borg-Warner Security 9.125% due 5/1/03............ 1,892,238 2,052,500
----------- -------------
Telecommunications & Utilities -- 0.3%
1,000 American Media Operation 11.625% due 11/15/04..... 1,029,881 1,090,000
3,000 Marcus Cable zero coupon until 6/15/00, 14.25%
thereafter, due 12/15/05........................ 2,557,911 2,610,000
----------- -------------
3,587,792 3,700,000
----------- -------------
TOTAL CORPORATE BONDS AND NOTES................... 16,774,225 19,740,705
----------- -------------
<CAPTION>
Purchased Options -- 1.7% of Net Assets
- -------------------------------------------------------------------------------------------------
Contracts (b) Premium Paid
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
932 S&P 500 Index Call
(expiring 3/21/98 exercise price $700)............ 25,681,260 25,828,050
----------- --------------
TOTAL INVESTMENTS................................. $948,486,119 $1,486,190,784
============ ==============
<CAPTION>
REPURCHASE AGREEMENTS -- 8.1% of Net Assets
- -------------------------------------------------------------------------------------------------
Principal
Amount Value
(Thousands) (Note 1a)
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
$62,387 J.P. Morgan Securities, 6.25%, cost $62,387,000,
dated 12/31/97, $62,408,662 due 1/2/98,
collateralized by $47,622,000 U.S. Treasury Bond,
10.75%, valued at $63,634,898 due 8/15/05....... $ 62,387,000
62,387 Merrill Lynch, Pierce, Fenner & Smith, 6.60%, cost
$62,387,000, dated 12/31/97, $62,409,875 due
1/2/98, collateralized by $62,390,000 U.S. Treasury
Bond, 6.375%, valued at $63,637,800 due 4/30/99. 62,387,000
--------------
TOTAL REPURCHASE AGREEMENTS....................... $ 124,774,000
==============
<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.
</FN>
See accompanying notes to financial statements
Page 12
</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
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996
- -----------------------------------------------------------------------------------------------------
Investment Income
<S> <C> <C>
Income
Dividends (net of foreign withholding tax of $364,338 for 1997
and $468,914 for 1996)...................................... $ 19,739,861 $ 24,315,312
Interest...................................................... 10,818,997 9,519,870
Royalties..................................................... 1,031,068 485,615
------------- -------------
31,589,926 34,320,797
------------- -------------
Expenses
Management fee ............................................... 6,858,516 5,894,684
Legal and auditing fees ...................................... 461,485 201,190
Shareholder meeting and reports .............................. 364,150 403,720
Shareholder services ......................................... 260,160 203,600
Custodian .................................................... 132,770 120,360
Directors' fees .............................................. 79,275 91,810
Stock certificates and listing fees........................... 55,520 61,260
Other ........................................................ 227,245 97,350
------------- -------------
8,439,121 7,073,974
------------- -------------
Net investment income......................................... 23,150,805 27,246,823
------------- -------------
Net Realized Gain on Investments, Options and
Foreign Currency Transactions........................... 258,117,184 150,197,562
Net Unrealized Appreciation on Investments,
Foreign Currency Translations and Other Assets..........
Beginning of year ............................................ 468,101,469 290,623,635
End of year .................................................. 537,704,898 468,101,469
------------- -------------
Increase in net unrealized appreciation ...................... 69,603,429 177,477,834
------------- -------------
Net realized gain and increase in net unrealized appreciation 327,720,613 327,675,396
------------- -------------
Net increase in net assets from operations ................... $350,871,418 $354,922,219
============= =============
See accompanying notes to financial statements
Page 13
</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 Assets and Liabilities
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investments (cost 1997 -- $948,486,119;
1996 -- $964,526,485).......................................$1,486,190,784 $1,432,628,327
Repurchase agreements ........................................ 124,774,000 50,099,000
Cash ......................................................... 16,609 106,288
Receivable for securities sold ............................... 9,653,681 -
Receivable for excise tax..................................... 753,813 -
Dividends and interest receivable ............................ 1,139,190 1,643,301
-------------- --------------
Total assets ............................................. 1,622,528,077 1,484,476,916
============== ==============
Liabilities
Payable for dividends declared................................ 61,118,719 41,891,174
Payable for securities purchased ............................. 13,252,229 -
Management fee payable ....................................... 1,828,488 1,609,860
Excise tax payable............................................ 753,813 -
Accrued expenses ............................................. 277,235 290,916
-------------- --------------
Total liabilities ........................................ 77,230,484 43,791,950
============== ==============
Net Assets
Capital stock................................................. 83,477,470 83,477,470
Additional paid-in capital.................................... 872,240,487 872,240,487
Undistributed (distributions in excess of) net
investment income......................................... 213,404 (147,792)
Undistributed net realized gains.............................. 51,661,334 17,013,332
Net unrealized appreciation on investments, foreign currency
translations and other assets............................. 537,704,898 468,101,469
-------------- --------------
Net assets ...............................................$1,545,297,593 $1,440,684,966
============== ==============
Shares of capital stock, $1.00 par value,
authorized 100,000,000; outstanding ...................... 83,477,470 83,477,470
Net Asset Value Per Share..................................... $18.51 $17.26
Statement of Changes in Net Assets
<CAPTION>
Year Ended December 31,
1997 1996
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income ........................................$ 23,150,805 $ 27,246,823
Net realized gain on investments, options and foreign
currency transactions................................... 258,117,184 150,197,562
Increase in net unrealized appreciation....................... 69,603,429 177,477,834
-------------- --------------
Increase in net assets from operations........................ 350,871,418 354,922,219
-------------- --------------
Distributions to Shareholders from
Net investment income ........................................ (22,789,609) (27,995,467)
Net realized gain on investments ............................. (223,469,182) (174,555,862)
-------------- --------------
(246,258,791) (202,551,329)
-------------- --------------
Capital Share Transactions
Repurchase of capital stock (note 3).......................... - (2,694,828)
-------------- --------------
Total increase in net assets ................................. 104,612,627 149,676,062
-------------- --------------
Net Assets
Beginning of year ............................................ 1,440,684,966 1,291,008,904
End of year ..................................................$1,545,297,593 $1,440,684,966
============== ==============
See accompanying notes to financial statements
Page 14
</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
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 substantially all of its taxable income to its shareholders.
Therefore, no Federal income 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 during the term of the repurchase agreement to ensure
that it equals or exceeds the repurchase price. In the 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
interest method 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.
Page 15
<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 (continued)
2. DISTRIBUTION AFTER DECEMBER 31, 1997
On January 27, 1998, the Fund declared a distribution from long-term capital
gains of $.32 per share, payable February 20, 1998 to shareholders of record
February 9, 1998.
3. CAPITAL STOCK TRANSACTIONS
Capital stock transactions were as follows:
1997 1996
-------- ---------
Shares repurchased
(weighted average discount 13.9%).......... -- (179,500)
-------- --------
Net change........................... -- (179,500)
======== ========
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.
Travelers is now the ultimate parent company of the investment manager.
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 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, 1996, June 30, 1996, September 30, 1996
and December 31, 1996 the Fund's performance exceeded the S&P 500 Index by
1.72%, 2.50%, 5.67% and 5.51%, respectively. In 1996, this resulted in a total
increase of the base management fee of $526,920
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
Notes to Financial Statements (concluded)
covering the year ended December 31, 1996. 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.
Brokerage commissions of $150,330 and $150,180 were paid to Salomon
Brothers Inc for investment transactions executed on behalf of the Fund during
the years ended December 31, 1997 and December 31, 1996, respectively.
5. PORTFOLIO ACTIVITY
The cost of securities purchased and proceeds from securities sold (other than
short-term investments and written options) during the year ended December 31,
1997 aggregated $701,772,375 and $1,019,619,258, respectively. Included in the
cost of securities purchased and proceeds from securities sold are amounts
related to a merger of a wholly-owned subsidiary of Tyco International. This
merger resulted in a taxable gain of $24,180,355 which was recognized by the
Fund. The cost of securities purchased and proceeds from securities sold (other
than short-term investments and written options) during the year ended December
31, 1996 aggregated $675,795,858 and $751,392,898, respectively.
Cost of securities held (excluding short-term investments and written
options) on December 31, 1997 for Federal income tax purposes was substantially
the same as for book purposes. As of December 31, 1997, total unrealized
appreciation and depreciation was $557,309,531 and $19,604,633, respectively,
resulting in net unrealized appreciation of $537,704,898.
For the year ended December 31, 1997, the Fund is subject to an excise tax
provision of $753,813. The total amount of this expense will be reimbursed to
the Fund, thus there is no impact on the net assets at December 31, 1997 or the
net increase in net assets from operations for the year ended December 31, 1997.
Transactions in options written during the periods ended December 31, 1996
and December 31, 1997 were as follows:
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- --------
Options outstanding at December 31, 1995............ (50) $ (4,850)
Options exercised .................................. 50 4,850
----- --------
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, 1996 realized gain from written option
transactions amounted to $4,850. During the year ended December 31, 1996 net
realized gain from purchased option transactions amounted to $1,214,152, for a
net realized gain on all option transactions of $1,219,002. During the year
ended December 31, 1997 net 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.
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 17
<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 year:
<TABLE>
<CAPTION>
For the Year Ended December 31,
-----------------------------------------------------
1997 1996 1995 1994 1993
-----------------------------------------------------
Per share operating performance:
<S> <C> <C> <C> <C> <C>
Net asset value
beginning of year..................... $17.26 $15.43 $12.88 $14.88 $15.16
------ ------ ------ ------ ------
Net investment income .................. .27 .33 .35 .33 .34
Net gains (losses) on securities
(both realized and unrealized) (a).... 3.93 3.925 4.04 (.605) 1.44
------ ------ ------ ------ ------
Total from investment
operations........................ 4.20 4.255 4.39 (.275) 1.78
------ ------ ------ ------ ------
Less dividends and distributions:
Dividends from net investment
income ............................... (.27) (.335) (.35) (.335) (.34)
Distributions from net realized gain
on investments........................ (2.68) (2.09) (1.49) (1.39) (1.72)
------ ------ ------ ------ ------
Total dividends and
distributions .................... (2.95) (2.425) (1.84) (1.725) (2.06)
------ ------ ------ ------ ------
Net asset value end of year ............ $18.51 $17.26 $15.43 $12.88 $14.88
====== ====== ====== ====== ======
Market price end of year................ $17.688 $16.00 $13.375 $10.625 $12.75
Total investment return based on
market price per share
excluding broker commissions.......... +29.5% +38.7% +43.3% -3.70% +7.86%
Ratios/Supplemental Data:
Net assets end of year
(millions)............................ $1,545 $1,441 $1,291 $1,087 $1,176
Ratio of expenses to average
net assets ........................... .53% .51% .41% .49% .41%
Ratio of net investment income to
average net assets ................... 1.46% 1.96% 2.42% 2.33% 2.19%
Portfolio turnover rate ................ 49% 52% 82% 69% 80%
Average broker commission
rate ............................... $.0593 $0.0596 N/A N/A N/A
<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.
</FN>
See accompanying notes to financial statements
Page 18
</TABLE>
<PAGE>
S A L O M O N B R O T H E R S F U N D I N C
Report of Independent Accountants
To the Board of Directors and Shareholders of
The Salomon Brothers Fund Inc
In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments at December 31, 1997, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of The Salomon Brothers
Fund Inc (the "Fund") at December 31, 1997 and 1996, the results of its
operations and the changes in its net assets for the years then ended and the
financial highlights for each of the five years in the period ended December 31,
1997, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1997 and 1996 by correspondence with the custodian and brokers,
provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
February 23, 1998
Quarterly Financial Information
Summary of quarterly results of operations (unaudited):
<TABLE>
<CAPTION>
Amounts in Thousands and Per Share
Three Months Ended
- ----------------------------------------------------------------------------------------------------
March 31, 1997 June 30, 1997 Sept. 30, 1997 Dec. 31, 1997
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net investment
income ................. $ 4,728 $.06 $ 6,379 $ .08 $ 6,148 $ .07 $ 6,284 $ .06
Net realized gain &
change in net unrealized
appreciation............ $ 637 $.01 $191,147 $2.29 $113,296 $1.36 $ 22,252 $ .27
<CAPTION>
- ----------------------------------------------------------------------------------------------------
March 31, 1996 June 30, 1996 Sept. 30, 1996 Dec. 31, 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net investment
income ................. $ 6,656 $ .08 $ 8,089 $ .10 $ 6,638 $ .08 $ 5,864 $ .07
Net realized gain &
change in net unrealized
appreciation............ $101,396 $1.21 $34,706 $ .41 $ 73,743 $ .88 $117,830 $1.41
Page 19
</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 DR Plan.
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 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.
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S A L O M O N B R O T H E R S F U N D I N C
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 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.
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S A L O M O N B R O T H E R S F U N D I N C
7. Your attention is directed to the Terms and Conditions set forth on page 16
which govern the operation of the Plan.
If you wish to withdraw from the DR Plan 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 your 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.
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 DR Plan 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.
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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 diIstributions 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.
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.
/ / (1) All net investment income dividends and capital gain distributions
(short-term and long-term) payable to me shall be automatically
reinvested
/ / (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
/ / (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 23
<PAGE>
S A L O M O N B R O T H E R S F U N D I N C
(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.
(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.
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
-----------------------------------
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
Officers
Heath B. McLendon Chairman and President
Richard E. Dahlberg Executive Vice President
Allan R. White, III Executive Vice President
Michael A. Kagan Vice President
Martin L. Roberts Vice President
Alan M. Mandel Treasurer
Noel B. Daugherty Secretary
Janet S. Tolchin Assistant Treasurer
Jennifer G. Muzzey Assistant Secretary
Salomon Brothers Asset Management Inc Investment Manager
New York, New York
The Bank of New York Custodian, Transfer and Dividend
New York, New York Disbursing Agent
Simpson Thacher & Bartlett Legal Counsel
New York, New York
Price Waterhouse LLP Independent Accountants
New York, New York
<PAGE>
THE SALOMON BROTHERS FUND INC
7 WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
This report has been printed on recycled paper.
