The Salomon Brothers
Fund Inc
August 3, 1999
To Our Shareholders,
We are pleased to present this semi-annual report for the Salomon Brothers Fund
Inc. ("Fund") for the six months ended June 30, 1999. We hope you find this
report to be useful and informative. A detailed summary of performance and
current Fund holdings can be found in the appropriate sections that follow.
Market Overview & Portfolio Highlights
During the first six months of 1999, the Fund returned 14.24% versus the 12.38%
return for the S&P 500 Index. (The S&P 500 Index is an index of widely held
common stocks listed on the New York and American Stock Exchanges and the
over-the-counter markets.)
We are also pleased to report that your Fund received an overall five-star
rating from Morningstar, Inc.,* a major fund tracking organization.
In our view, the tenor of the stock market changed in the second quarter of 1999
due primarily to the decision by the European Economic Union to reduce interest
rates by 0.5% on April 8, 1999. This action was a signal for investors that
economic growth would accelerate worldwide and reinforced their confidence that
the Asian recovery would continue. In the second quarter of 1999, smaller
capitalization stocks outperformed larger ones for the first time in nearly two
years.
The market leadership during the first quarter was the same as during the fourth
quarter of 1998. Technology stocks, especially Internet names, pharmaceuticals
and other large growth stocks led the way. During the second quarter of 1999,
the market was led by economically sensitive stocks such as commodities, as well
as telecommunications stocks and selected technology companies. The Internet
mania, in our view, appears to have peaked, with many large names off 50% or
more from their early April peaks, although still up for the year to date.
Significant contributors to the Fund's performance included Georgia Pacific,
Liberty Media Group, IBM and Tellabs. The Salomon Brothers Fund is well
diversified, with overweighted sectors including Basic Industries and Energy.
The Fund has an underweighted position in Health Care. Also, the valuation of
the Fund is consistent with that of the previous five years, with a P/E ratio
modestly below, and price to sales and price to book ratios significantly below,
the market's. And while no guarantees can be made, we expect that the Fund's
holdings should grow more rapidly than the market.
Outlook
We are encouraged by the depth of the stock market rally during the past
quarter. In addition, we are enthusiastic about the very strong earnings
performance in 1999 by many U.S. companies, and
- ---------------
* Morningstar, Inc. proprietary ratings reflect historical risk-adjusted
performance as of June 30, 1999. Ratings are load-adjusted, updated monthly and
subject to change. Past performance is not a guarantee of future results.
Morningstar ratings are calculated from the Fund's 3- and 5-year returns (with
fee adjustments) in excess of 90-day T-bill returns. It was rated among 49
domestic equity funds for the 5-year period. Ten percent of the funds in a
rating category receive five stars.
<PAGE>
S A L O M O N B R O T H E R S F U N D I N C
the improvements seen in international economies. We are, however, wary of the
high valuation levels in the U.S. markets. The U.S. market cannot continue to
rise more than 20% a year; at some point earnings have to catch up with stock
prices. The Federal Reserve Board has lifted interest rates once and is
threatening to do so again. Rate hikes make for choppy seas in the stock market.
The extreme valuation disparities among industry groups seen during 1998 have
mitigated. The defensive sectors such as health care are less expensive relative
to the market, and extraordinary bargains amongst the cyclicals are harder to
find. Therefore, the size of the bets that we are making relative to the market
are smaller than they were six months ago. We are currently finding
opportunities in growth stocks that have fallen in price, and in cyclicals where
supply and demand are tight. We believe that the macroeconomic environment
continues to favor long-term financial assets.
The Automatic Dividend Reinvestment and Cash Payment Plan ("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 April 1999 dividends, the Plan Agent
purchased 1,570,330 shares on behalf of participants in the Dividend
Reinvestment Plan for a net total of $31,065,647 and 9,672 shares were issued to
participants.
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 Salomon Brothers Fund can 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 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 your investment in
the Fund. We look forward to earning your trust and confidence in the years
ahead.
Cordially,
/s/ Heath B. McLendon
HEATH B. MCLENDON
Chairman
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
Major Portfolio Changes for the three months ended June 30, 1999 (unaudited)
ADDITIONS+
- -----------------------------------------------
Shares
----------
ADC Telecommunications, Inc...... 205,000(1)
Champion International Corp...... 200,000(1)
Compuware Corp................... 545,000
Corning Inc...................... 354,500(1)
Emerson Electric Co.............. 151,000(1)
The Goldman Sachs
Group, Inc..................... 213,900(1)
Kimberly-Clark Corp.............. 155,000(1)
Lockheed Martin Corp............. 215,000
MediaOne Group, Inc.............. 251,000(1)
Merck & Co., Inc................. 197,000(1)
Microsoft Corp................... 315,000
Office Depot, Inc................ 425,000(1)
PepsiCo, Inc..................... 253,000
Tellabs, Inc..................... 75,000
York International Corp.......... 235,000
Face
Amount
-------
Tribune Co., 2.000% due
5/15/29........................ $7,500,000(1)
- -----------------------------------------------
REDUCTIONS
- -----------------------------------------------
Shares
----------
Adaptec Inc...................... 500,000(2)
Alcatel Alsthom ADR.............. 300,000(2)
Alcoa Inc........................ 131,000
America Online, Inc.............. 58,000(2)
Applied Materials Inc............ 146,600(2)
AT&T Corp. - Liberty Media
Group, Class A Shares.......... 446,256
CIGNA Corp....................... 157,000
Colgate-Palmolive Co............. 120,000
Costco Cos., Inc................. 152,000
Cytec Industries Inc............. 475,000
Eli Lilly........................ 440,000(2)
Frontier Corp.................... 443,100(2)
Georgia Pacific.................. 95,000(2)
International Business
Machines Corp.................. 117,000
Morgan Stanley Dean
Witter & Co.................... 83,000
Nokia Corp. ADR.................. 150,000
Royal Dutch Petroleum,
5 Guilder...................... 400,000(2)
Teradyne, Inc.................... 140,000
U. S. Industries................. 651,000(2)
Union Pacific Corp............... 311,100
- -----------------------------------------------
(1) New addition.
(2) Elimination.
+ Exclusive of changes resulting entirely from stock
dividends and stock splits.
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
Schedule of Investments (unaudited)
June 30, 1999
<TABLE>
<CAPTION>
Shares Security Value
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock -- 89.9%
Basic Industries -- 5.1%
225,000 Alcoa Inc............................................................ $ 13,921,875
200,000 Champion International Corp.......................................... 9,575,000
285,000 Cominco Ltd.......................................................... 4,880,625
155,000 Cytec Industries Inc.*............................................... 4,940,625
70,000 The Dow Chemical Co.................................................. 8,881,250
200,000 The Geon Co.......................................................... 6,450,000
240,000 Lyondell Chemical Co................................................. 4,950,000
193,000 Rohm and Haas Co..................................................... 8,274,875
683,000 Vulcan Materials Co.................................................. 32,954,750
-------------
94,829,000
-------------
Capital Goods -- 4.2%
192,100 Carlisle Cos. Inc.................................................... 9,244,812
151,000 Emerson Electric Co.................................................. 9,494,125
137,000 General Electric Co.................................................. 15,481,000
325,000 Lockheed Martin Corp................................................. 12,106,250
105,000 PACCAR Inc........................................................... 5,604,375
128,000 Tyco International Ltd............................................... 12,128,000
360,000 York International Corp.............................................. 15,412,500
-------------
79,471,062
-------------
Communication Services -- 1.0%
251,000 MediaOne Group, Inc.*................................................ 18,668,125
-------------
Consumer Cyclicals -- 6.9%
548,000 Costco Cos., Inc.*................................................... 43,874,250
100,000 Dayton Hudson Corp................................................... 6,500,000
810,528 Federated Department Stores, Inc.*................................... 42,907,326
128,000 Lear Corp.*.......................................................... 6,368,000
112,500 The May Department Stores Co......................................... 4,598,438
425,000 Office Depot, Inc.*.................................................. 9,376,562
67,000 SPX Corp.*........................................................... 5,594,500
380,000 Tower Automotive, Inc.*.............................................. 9,666,250
-------------
128,885,326
-------------
Consumer Non-Cyclicals -- 14.3%
540,000 AT&T Corp. - Liberty Media Group, Class A Shares..................... 19,845,000
160,000 Alberto Culver Co., Class B Shares................................... 4,260,000
145,000 Colgate-Palmolive Co................................................. 14,318,750
330,000 The Dial Corp........................................................ 12,271,875
2,655,000 Food Lion Inc., Class A Shares....................................... 31,528,125
719,100 General Motors Corp., Class H Shares*................................ 40,449,375
</TABLE>
See notes to financial statements.
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
Schedule of Investments (unaudited) (continued)
June 30, 1999
<TABLE>
<CAPTION>
Shares Security Value
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Consumer Non-Cyclicals -- 14.3% (continued)
155,000 Kimberly-Clark Corp.................................................. $ 8,835,000
1,213,000 Nabisco Group Holdings Corp.......................................... 23,729,313
471,000 PepsiCo, Inc......................................................... 18,221,812
942,000 Philip Morris Cos. Inc............................................... 37,856,625
539,334 R.J. Reynolds Tobacco Holdings, Inc.*................................ 16,989,021
701,000 Viacom Inc., Class B Shares*......................................... 30,844,000
340,000 Wendy's International, Inc........................................... 9,626,250
-------------
268,775,146
-------------
Energy -- 6.7%
325,000 Amerada Hess Corp.................................................... 19,337,500
564,700 Burlington Resources Inc............................................. 24,423,275
568,000 Conoco Inc., Class A Shares.......................................... 15,833,000
400 Gas Properties (100% owned) (a)...................................... 690,000
202,000 Mobil Corp........................................................... 19,998,000
175,000 Schlumberger Ltd..................................................... 11,145,312
150,000 Sonat Inc............................................................ 4,968,750
200,000 Tosco Corp........................................................... 5,187,500
370,777 Total Fina SAADR..................................................... 23,891,943
Royalty Interest (a)................................................. 840,700
-------------
126,315,980
-------------
Financial Services -- 15.4%
45,000 Aegon N.V. ARS....................................................... 3,330,000
249,700 American Express Co.................................................. 32,492,212
222,000 American General Corp................................................ 16,733,250
111,150 American International Group, Inc.................................... 13,011,497
490,000 Associates First Capital Corp........................................ 21,713,125
1,243,000 The Bank of New York Co., Inc........................................ 45,602,563
500,000 BankBoston Corp...................................................... 25,562,500
60,000 CIGNA Corp........................................................... 5,340,000
347,000 The Chase Manhattan Corp............................................. 30,058,875
360,000 Freddie Mac.......................................................... 20,880,000
213,900 The Goldman Sachs Group, Inc......................................... 15,454,275
140,000 Morgan Stanley Dean Witter & Co...................................... 14,350,000
554,800 Nationwide Financial Services, Inc., Class A Shares.................. 25,104,700
513,200 Provident Cos., Inc.................................................. 20,528,000
-------------
290,160,997
-------------
Health Care -- 6.6%
360,000 Abbott Laboratories.................................................. 16,380,000
525,000 American Home Products Corp.......................................... 30,187,500
197,000 Merck & Co., Inc..................................................... 14,578,000
420,000 Monsanto Co.......................................................... 16,563,750
See notes to financial statements.
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
Schedule of Investments (unaudited) (continued)
June 30, 1999
<TABLE>
<CAPTION>
Shares Security Value
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Health Care -- 6.6% (continued)
632,100 Pharmacia & Upjohn, Inc.............................................. $ 35,911,181
67,000 Warner-Lambert Co.................................................... 4,648,125
76,000 Wellpoint Health Networks Inc.*...................................... 6,450,500
-------------
124,719,056
-------------
Technology -- 20.4%
205,000 ADC Telecommunications, Inc.*........................................ 9,340,312
95,000 Applied Micro Circuits Corp.*........................................ 7,813,750
330,000 Cisco Systems, Inc.*................................................. 21,223,125
730,000 Compuware Corp....................................................... 23,223,125
354,500 Corning Inc.......................................................... 24,859,313
220,000 Electronic Data Systems Corp......................................... 12,443,750
370,000 Hewlett-Packard Co................................................... 37,185,000
530,000 IMS Health Inc....................................................... 16,562,500
140,000 Intel Corp........................................................... 8,330,000
371,000 International Business Machines Corp................................. 47,951,750
673,000 Microsoft Corp.*..................................................... 60,696,188
146,000 Nokia Corp. ADR...................................................... 13,368,125
440,000 Seagate Technology, Inc.*............................................ 11,275,000
700,000 Tellabs, Inc.*....................................................... 47,293,750
160,000 Teradyne, Inc.*...................................................... 11,480,000
173,000 Texas Instruments, Inc............................................... 25,085,000
90,000 Xilinx, Inc.*........................................................ 5,152,500
-------------
383,283,188
-------------
Telecommunications and Utilities -- 8.1%
250,000 Azurix Corp.*........................................................ 5,000,000
550,000 Bell Atlantic Corp................................................... 35,956,250
528,000 GTE Corp............................................................. 39,996,000
447,000 MCI WorldCom, Inc.*.................................................. 38,469,938
136,000 Reliant Energy Inc................................................... 3,757,000
355,000 SBC Communications Inc............................................... 20,590,000
95,000 Texas Utilities Co................................................... 3,918,750
125,000 Unicom Corp.......................................................... 4,820,313
-------------
152,508,251
-------------
Transportation -- 1.2%
258,000 Canadian National Railway Co......................................... 17,286,000
82,000 Union Pacific Corp................................................... 4,781,625
-------------
22,067,625
-------------
TOTAL COMMON STOCK (Cost--$1,124,802,105)........................... 1,689,683,756
. -------------
See notes to financial statements.
</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
Schedule of Investments (unaudited) (continued)
June 30, 1999
<TABLE>
<CAPTION>
Shares Security Value
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Convertible Preferred Stock -- 1.7%
Consumer Cyclicals -- 0.0%
100,000 BTI Capital Trust, 6.500%............................................ $ 525,000
-------------
Publishing -- 1.7%
1,021,000 News Corp Ltd. ADR................................................... 32,225,313
-------------
TOTAL CONVERTIBLE PREFERRED STOCK (Cost--$26,586,045)................ 32,750,313
-------------
Rights -- 0.0%
8,000 Terex Stock Appreciation Rights (expiring on 5/15/02)* (Cost-- $0)... 146,000
-------------
Purchased Options -- 3.1%
1,000 S&P 500 Index, Call (expiring Sept. 1999, exercise price $800) (b)*
(Cost--$53,405,000)................................................ 57,537,500
-------------
<CAPTION>
Face
Amount Security Value
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Convertible Corporate Bonds -- 1.1%
Publishing -- 0.5%
$ 7,500,000 Tribune Co., 2.000% due 5/15/29...................................... 9,393,750
-------------
Technology -- 0.3%
2,150,000 Comverse Technology Inc., 5.750% due 10/1/06......................... 5,498,625
-------------
Telecommunications and Utilities -- 0.3%
6,000,000 Bell Atlantic Service, 5.750% due 4/1/03**........................... 6,022,500
-------------
TOTAL CONVERTIBLE CORPORATE BONDS (Cost--$21,540,775)................ 20,914,875
-------------
<CAPTION>
Corporate Bonds -- 1.1%
<S> <C> <C>
Airlines -- 0.2%
4,050,000 Continental Airlines Inc., 9.500% due 12/15/01....................... 4,272,750
-------------
Consumer Cyclicals -- 0.1%
5,000,000 Breed Technologies, 9.25% due 4/15/08................................ 825,000
-------------
Energy -- 0.6%
10,000,000 Pogo Producing Co., 10.375% due 2/15/09.............................. 10,425,000
-------------
Telecommunications and Utilities -- 0.2%
4,750,000 NTL Inc., zero coupon until 4/15/00, (12.750% thereafter) due 4/15/05 4,601,562
-------------
TOTAL CORPORATE BONDS (Cost--$22,961,331)............................ 20,124,312
-------------
See notes to financial statements.
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
Schedule of Investments (unaudited) (continued)
June 30, 1999
<TABLE>
<CAPTION>
Face
Amount Security Value
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreements -- 3.1%
$ 8,896,000 State Street Bank and Trust Co., 4.700% due 7/1/99; Proceeds at
maturity--$8,987,161; (Fully collateralized by U.S. Treasury Notes,
8.500% due 2/15/20; Market value-- $9,078,003)..................... $ 8,896,000
50,000,000 Warburg Dillon Read, 4.800% due 7/1/99; Proceeds at
maturity--$50,006,668; (Fully collateralized by U.S. Treasury Notes,
7.750% due 2/15/01; Market value-- $51,000,491).................... 50,000,000
--------------
TOTAL REPURCHASE AGREEMENTS (Cost--$58,896,000)...................... 58,896,000
--------------
TOTAL INVESTMENTS -- 100%
(Cost--$1,308,191,256***).......................................... $1,880,052,756
==============
<FN>
- -------------
* Non-income producing security.
** Security is exempt from registration under Rule 144A of the Securities Act
of 1933. This security may be resold in transactions that are exempt from
registration, normally to qualified institutional buyers.
*** Aggregate cost for Federal income tax purposes is substantially the same.
(a) Fair value determined pursuant to procedures established by the Board of
Directors.
(b) One contract relates to 100 shares.
Abbreviations used in this schedule:
ADR - American Depository Receipt.
ARS - American Registered Shares.
</FN>
See notes to financial statements.
</TABLE>
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
Statement of Assets and Liabilities (unaudited)
June 30, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost-- $1,308,191,256)..................................... $ 1,880,052,756
Cash.............................................................................. 34,248
Receivable for securities sold ................................................... 62,975,851
Dividends and interest receivable................................................. 2,304,485
Other assets...................................................................... 14,005
--------------
Total Assets...................................................................... 1,945,381,345
--------------
LIABILITIES:
Payable for securities purchased.................................................. 64,250,788
Management fee payable............................................................ 2,448,576
Dividends payable................................................................. 183,057
Accrued expenses ................................................................. 340,414
--------------
Total Liabilities................................................................. 67,222,835
--------------
Total Net Assets.................................................................... $1,878,158,510
==============
NET ASSETS:
Par value of capital shares ($1.00 par value, authorized 100,000,000 shares;
89,906,753 shares outstanding) ................................................ $ 89,906,753
Capital paid in excess of par value............................................... 982,834,863
Undistributed net investment income............................................... 4,284,426
Accumulated net realized gain on investments and options.......................... 229,270,968
Net unrealized appreciation on investments and options ........................... 571,861,500
--------------
Total Net Assets.................................................................... $1,878,158,510
==============
Net Asset Value, Per Share ($1,878,158,510 / 89,906,753 shares)..................... $20.89
=======
See 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 Operations (unaudited)
For the Six Months Ended June 30, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends......................................................................... $ 10,203,710
Interest.......................................................................... 2,875,513
Oil Royalties..................................................................... 100,702
Less: Foreign tax withholding..................................................... (58,927)
-------------
Total Investment Income........................................................... 13,120,998
-------------
EXPENSES:
Management fees................................................................... 4,362,147
Shareholder and system servicing fees............................................. 181,000
Shareholder communications........................................................ 88,880
Custody........................................................................... 75,297
Audit and legal .................................................................. 72,400
Directors' fees................................................................... 46,155
Other ............................................................................ 57,742
-------------
Net Expenses...................................................................... 4,883,621
-------------
Net Investment Income............................................................... 8,237,377
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND OPTIONS (NOTE 4):
Net Realized Gain (Loss) From:
Security transactions (excluding short-term securities)........................ 222,347,083
Options purchased.............................................................. 7,301,123
Options written................................................................ (216,418)
-------------
Net Realized Gain................................................................. 229,431,788
-------------
Change in Net Unrealized Appreciation on Investments:
Beginning of period............................................................ 531,007,828
End of period.................................................................. 571,861,500
-------------
Increase in Net Unrealized Appreciation........................................... 40,853,672
-------------
Net Gain on Investments and Options................................................. 270,285,460
-------------
Increase in Net Assets From Operations.............................................. $278,522,837
=============
</TABLE>
See notes to financial statements.
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 Changes in Net Assets
For the Six Months Ended June 30, 1999 (unaudited)
and the Year Ended December 31, 1998
<TABLE>
<CAPTION>
1999 1998
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................... $ 8,237,377 $ 23,317,901
Net realized gain........................................ 229,431,788 305,938,951
Increase (decrease) in net unrealized appreciation....... 40,853,672 (6,697,070)
--------------- --------------
Increase in Net Assets from Operations................... 278,522,837 322,559,782
--------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.................................... (4,405,431) (23,226,617)
Net realized gains....................................... (82,174,772) (275,438,541)
--------------- ---------------
Decrease in Net Assets From Distributions to
Shareholders........................................... (86,580,203) (298,665,158)
--------------- ---------------
FUND SHARE TRANSACTIONS:
Value of shares issued in payment of dividends (6,429,283
shares issued for the year ended December 31, 1998).... -- 117,023,659
--------------- --------------
Increase in Net Assets..................................... 191,942,634 140,918,283
--------------- --------------
NET ASSETS
Beginning of period...................................... 1,686,215,876 1,545,297,593
--------------- ---------------
End of period*........................................... $1,878,158,510 $1,686,215,876
=============== ==============
* Includes undistributed net investment income of:......... $4,284,426 $452,480
=============== ==============
See notes to financial statements.
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
Notes to Financial Statements (unaudited)
Note 1. Significant Accounting Policies
The Salomon Brothers Fund Inc ("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.
Short-term securities with less than 60 days remaining to maturity when acquired
by the Fund are valued at amortized cost which approximates market value.
(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 event of default of the
obligation to repurchase, the Fund has the right to liquidate the collateral and
apply the proceeds in
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
Notes to Financial Statements (unaudited) (continued)
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 character of income and gains distributed are determined in accordance with
income tax regulations which may differ from GAAP.
Note 2. Dividend After June 30, 1999
On July 27, 1999, the Fund declared a distribution of $.0426 per share from net
investment income, payable August 24, 1999 to shareholders of record on August
10, 1999.
Note 3. Management Fee and Other Transactions with Affiliates
Salomon Brothers Asset Management Inc. ("SBAM"), a wholly owned subsidiary of
Salomon Brothers Holding Company Inc., which in turn is wholly owned by Salomon
Smith Barney Holdings, Inc. ("SSBH"), acts as investment manager to the Fund.
SBAM is responsible on a day-to-day basis for the management of the Fund's
portfolio in accordance with the Fund's investment objectives and policies and
for making decisions to buy, sell, or hold particular securities and is
responsible for day-to-day administration of the Fund.
Certain officers and/or directors of the Fund are also officers and/or directors
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"). The base fee is paid quarterly based on the
following annual rates:
Average Daily Net Assets Annual Fee Rate
----------------------- ----------------
First $350 million 0.650%
Next $150 million 0.550
Next $250 million 0.525
Next $250 million 0.500
Over $1 billion 0.450
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) (continued)
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 0.01%
(annualized). The maximum annual adjustment is 0.10% 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, 1998, June 30, 1998, September 30, 1998,
and December 31, 1998, the performance of the S&P 500 Index exceeded the Fund's
performance by 7.94%, 6.46%, 6.17% and 7.21%, respectively. This resulted in a
total decrease of the base management fee of $1,084,003. For the rolling one
year period ended March 31, 1999 and June 30, 1999, the performance of the S&P
500 Index exceeded and was exceeded by the Fund's performance by 6.50% and
2.94%, respectively, resulting in a decrease of base management fee of $150,563.
Brokerage commissions of $146,700 were paid to Salomon Smith Barney Inc.,
another subsidiary of SSBH, for investment transactions executed on behalf of
the Fund during the six months ended June 30, 1999.
Note 4. Portfolio Activity
For the six months ended June 30, 1999, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
Purchases............................................... $687,423,665
============
Sales................................................... $683,081,414
============
At June 30, 1999, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were substantially as follows:
Gross unrealized appreciation........................... $585,585,012
Gross unrealized depreciation........................... (13,723,512)
------------
Net unrealized appreciation............................. $571,861,500
============
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
Notes to Financial Statements (unaudited) (continued)
Transactions in options written during the six months ended June 30, 1999 were
as follows:
Number of Premiums
Contracts Received
--------- ---------
Options written, outstanding at December 31, 1998... (1,300) $(728,580)
Options written during the six months ended
June 30, 1999..................................... (1,810) (359,938)
Options closed in purchase transactions............. 1,671 346,103
Options expired..................................... 1,300 728,580
Options exercised .................................. 139 13,835
------ ---------
Options written, outstanding at June 30, 1999....... -- $ 0
====== =========
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 15
<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
Data for a share of capital stock outstanding throughout each year ended
December 31, except where noted:
<TABLE>
<CAPTION>
1999(1) 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.... $ 18.76 $ 18.51 $ 17.26 $15.43 $12.88 $14.88
------- ------- ------- ------- ------- -------
Income (Loss) From Operations:
Net investment income................ 0.14 0.26 0.27 0.33 0.35 0.33
Net realized and unrealized
gain (loss)(2)..................... 2.95 3.45 3.93 3.93 4.04 (0.60)
------- ------- ------- ------- ------- -------
Total Income (Loss) From Operations..... 3.09 3.71 4.20 4.26 4.39 (0.27)
------- ------- ------- ------- ------- -------
Less Distributions From:
Net investment income................ (0.05) (0.27) (0.27) (0.34) (0.35) (0.34)
Net realized gains................... (0.91) (3.19) (2.68) (2.09) (1.49) (1.39)
------- ------- ------- ------- ------- -------
Total Distributions..................... (0.96) (3.46) (2.95) (2.43) (1.84) (1.73)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period.......... $ 20.89 $ 18.76 $ 18.51 $17.26 $15.43 $12.88
======= ======= ======= ======= ======= =======
Per Share Market Value, End of Period... $19.813 $18.188 $17.688 $16.000 $13.375 $10.625
======= ======= ======= ======= ======= =======
Total Return, Based on Market Value..... 14.24%++ 22.62% 29.50% 38.74% 43.26% (3.70)%
======= ======= ======= ======= ======= =======
Net Assets, End of Period (millions)..... $1,878 $1,686 $1,545 $1,441 $1,291 $1,087
======= ======= ======= ======= ======= =======
Ratios to Average Net Assets:
Operating expenses.................... 0.56%+ 0.52% 0.53% 0.51% 0.41% 0.49%
Net investment income................. 0.94%+ 1.39% 1.46% 1.96% 2.42% 2.33%
Portfolio Turnover Rate.................. 42% 68% 49% 52% 82% 69%
<FN>
- -------------------------------------------------------------------------------
(1) For the six months ended June 30, 1999 (unaudited).
(2) Includes $0.015 and $0.02 attributable to the increase in net asset value
from shares repurchased at a discount for the years ended 1996 and 1995,
respectively.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
</FN>
</TABLE>
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
Additional Shareholder Information (unaudited)
On April 28, 1999, the Annual Meeting of the Fund's Stockholders was held for
the purpose of voting on the following matters:
1. The election of Directors of the Fund; and
2. The ratification of the selection of PricewaterhouseCoopers LLP as the
Fund's independent accountants for the fiscal year ended June 30, 2000.
The results of the vote on Proposal 1 were as follows:
<TABLE>
<CAPTION>
Shares % of Shares Shares % of Shares
Name of Directors Voted For Voted Voted Against Voted
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Charles F. Barber 64,688,421 97.3% 1,774,020 2.7%
Andrew L. Breech 65,221,742 98.1 1,240,699 1.9
Carol L. Colman 65,141,480 98.0 1,320,961 2.0
William R. Dill 65,082,447 97.9 1,379,994 2.1
Clifford M. Kirtland, Jr 64,861,783 97.6 1,600,658 2.4
Robert W. Lawless 65,209,688 98.1 1,252,753 1.9
Heath B. McLendon 64,861,881 97.6 1,600,56 2.4
Louis P. Mattis 65,190,610 98.1 1,271,831 1.9
Thomas F. Schlafly 65,173,793 98.1 1,288,648 1.9
- -------------------------------------------------------------------------------
</TABLE>
The results of the vote on Proposal 2 were as follows:
<TABLE>
<CAPTION>
% of Shares % of Shares Votes % of Shares
Votes For Voted Votes Against Voted Abstained Abstained
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
64,703,215 97.4% 622,432 0.9% 1,136,794 1.7%
- -------------------------------------------------------------------------------------------------------------------
Page 17
</TABLE>
<PAGE>
S A L O M O N B R O T H E R S F U N D I N C
Other Information (unaudited)
Year 2000. The investment management services provided to the Fund by Salomon
Brothers Asset Management Inc. ("SBAM") depend in large part on the smooth
functioning of its computer systems. Many computer software systems in use today
cannot recognize the year 2000, but revert to 1900 or some other date, due to
the manner in which the dates were encoded or calculated. The capability of
these systems to recognize the year 2000 could have a negative impact on SBAM's
provision of investment advisory services, including handling of securities
trades, pricing and account services. SBAM has advised the Fund that it has
been reviewing all of their computer systems and actively working on necessary
changes to its systems to prepare for the year 2000 and expects that given the
extensive testing which it is undertaking, its systems will be year 2000
compliant before such date. In addition, SBAM has been advised by certain of the
Fund's service providers that they are also in the process of modifying their
systems with the same goal. There can, however, be no assurance that SBAM or any
other service provider will be successful in achieving year 2000 compliance, or
that interaction with other non-complying computer systems will not impair
services to the Fund at that time.
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
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 DRPlan 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 19
<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
20 Page
<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 22
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 21
<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.
(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
Page 22
<PAGE>
S A L O M O N B R O T H E R S F U N D I N C
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.
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>
S A L O M O N B R O T H E R S F U N D I N C
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.
(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
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
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>
PLEASE SIGN, DATE AND RETURN USING THE ENCLOSED ENVELOPE
S A L O M O N B R O T H E R S F U N D I N C
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
<PAGE>
S A L O M O N B R O T H E R S F U N D I N C
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<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, Salomon Smith Barney, Inc.;
President and Director, SSBC Fund Management Inc. and Travelers
Investment Adviser, 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
LEWIS E. DAIDONE
Executive Vice President & Treasurer
MICHAEL A. KAGAN
Executive Vice President
MARTIN L. ROBERTS
Vice President
CHRISTINA T. SYDOR
Secretary
ANTHONY PACE
Controller
JANET TOLCHIN
Assistant Treasurer
ROBERT A. VEGLIANTE
Assistant Secretary
INVESTMENT MANAGER
Salomon Brothers Asset Management Inc.
7 World Trade Center
New York, New York 10048
CUSTODIAN
PNC Bank, N.A.
17th & Chestnut Streets
Philadelphia, Pennsylvania 19103
DIVIDEND DISBURSING AND TRANSFER AGENT
The Bank of New York
101 Barclay Street
New York, New York 10286
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
LEGAL COUNSEL
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
NEW YORK STOCK EXCHANGE SYMBOL
SBF
<PAGE>
The Bank of New York
101 Barclay Street
New York, New York 10286
The Salomon Brothers
Fund Inc
Semi-Annual Report
JUNE 30, 1999
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Salomon Brothers Asset Management
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SBFSEMI 6/99
BULK RATE
U.S. POSTAGE
PAID
NEWARK, NJ
PERMIT No. 4
