<PAGE>
As filed with the Securities and Exchange Commission on May 16, 2000
Securities Act File No. 333-33158
Investment Company Act File No. 811-2733
================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM N-2
[X] REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[X] Pre-Effective Amendment No. 1
[ ] Post-Effective Amendment No.
[X] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[X] Amendment No. 16
THE SALOMON BROTHERS FUND INC
(Exact name of registrant as specified in its charter)
------------------------
7 World Trade Center
38th Floor
New York, New York 10048
(Address of principal executive offices)
(212) 783-5984
(Registrant's telephone number, including area code)
------------------------
Robert A. Vegliante, Esq.
Assistant Secretary
THE SALOMON BROTHERS FUND INC
7 World Trade Center
38th Floor
New York, New York 10048
(Name and address of agent for service)
------------------------
WITH COPIES TO:
SARAH E. COGAN, ESQ.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017-3954
------------------------
Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of this Registration Statement.
------------------------
If any securities being registered on this form will be offered on a
delayed or continuous basis in reliance on Rule 415 under the Securities Act of
1933, other than securities offered in connection with a dividend reinvestment
plan, check the following box. [ ]
If it is proposed that this filing will become effective when declared
effective pursuant to Section 8(c), check the following box. [ ]
If appropriate, check the following box:
[ ] This amendment designates a new effective date for a previously filed
registration statement.
[ ] This Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act and the Securities Act
registration statement number of the earlier effective registration statement
for the same offering is .
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF SECURITIES BEING OFFERING PRICE AGGREGATE REGISTRATION
BEING REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE FEE(2)
<S> <C> <C> <C> <C>
Capital Stock, par value $1.00 per share..... 11,826,140 $18.3125 $216,566,189 $57,173.47
</TABLE>
(1) As calculated pursuant to Rule 457(c) under the Securities Act of 1933, as
amended. Based on the average of the high and low sales prices reported on
the New York Stock Exchange on May 12, 2000.
(2) $59,319.76 previously paid pursuant to filing of the Fund's Registration
Statement on March 23, 2000.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
================================================================================
THE SALOMON BROTHERS FUND INC
FORM N-2
CROSS REFERENCE SHEET
PARTS A AND B OF PROSPECTUS
<TABLE>
<CAPTION>
ITEM NO. CAPTION LOCATION IN PROSPECTUS
- -------- ------------------------------------ -------------------------------------------------
<S> <C> <C>
PART A -- Information Required in a Prospectus
1. Outside Front Cover Front Cover Page
2. Cover Pages; Other Offering Information Front Cover Page
3. Fee Table and Synopsis Prospectus Summary; Fee Table
4. Financial Highlights Financial Highlights
5. Plan of Distribution Front Cover Page; Prospectus Summary; The Offer
6. Selling Shareholders Not Applicable
7. Use of Proceeds Use of Proceeds
8. General Description of the Registrant Front Cover Page; Prospectus Summary; the Fund;
Investment Objectives and Policies; Risk Factors
and Special Considerations; Capital Stock; Net
Asset Value
9. Management Management; Portfolio Transactions; Custodian,
Transfer Agent and Dividend Paying Agent
10. Capital Stock, Long-Term Debt and Other Securities The Offer; Capital Stock; Dividends and
Distributions; Net Asset Value; Taxation
11. Defaults and Arrears on Senior Securities Not Applicable
12. Legal Proceedings Not Applicable
13. Table of Contents of the Statement of Additional Table of Contents of the Statement of Additional
Information Information
PART B -- Information required in a Statement of Additional Information
14. Cover Page Front Cover Page
15. Table of Contents Front Cover Page
16. General Information and History General Information
17. Investment Objectives and Policies Investment Objectives and Policies; Investment
Restrictions
18. Management Management
19. Control Persons and Principal Holders of Securities Capital Stock
20. Investment Advisory and Other Services Management
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEM NO. CAPTION LOCATION IN PROSPECTUS
- -------- ------------------------------------ -------------------------------------------------
<S> <C> <C>
21. Brokerage Allocation and Other Practices Portfolio Transactions
22. Tax Status Taxation
23. Financial Statements Financial Statements
</TABLE>
PART C -- Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
<PAGE>
PROSPECTUS
THE SALOMON BROTHERS FUND INC
9,460,912 SHARES OF CAPITAL STOCK
ISSUABLE UPON EXERCISE OF RIGHTS
TO SUBSCRIBE FOR SHARES
-------------------
The Salomon Brothers Fund Inc (the 'Fund') is issuing to its shareholders
rights to purchase additional shares. You will receive one right for each share
of capital stock you own on the record date, which is May 22, 2000. You need ten
rights to purchase one share at the subscription price per share. The Fund will
not issue fractional shares upon the exercise of less than ten rights. If you
exercise all your rights you will be entitled to subscribe for additional shares
not acquired by other shareholders. The Fund may increase the number of shares
subject to subscription by up to 25%, or 2,365,228 shares, for an aggregate
total of 11,826,140 shares. The rights are not transferable; you may not
purchase or sell them and they will not trade on the New York Stock Exchange
(the 'NYSE') or any other exchange. The shares to be issued pursuant to the
rights will trade on the NYSE under the symbol 'SBF.'
The subscription price per share will be 95% of the lower of:
(1) the volume-weighted average of the sales prices of a share on the NYSE on
the expiration date of the offer and on the previous four business days,
and
(2) the net asset value per share as of the close of business on the
expiration date of the offer.
In no event will the subscription price per share be lower than 87.5% of the
net asset value per share as of the close of business on the expiration date of
the offer.
This floor price will take effect if shares of the Fund are trading at a
discount to net asset value greater than 7.9%.
You will not know the actual subscription price at the time you exercise your
rights. Once you subscribe for shares and the Fund receives payment or a
guarantee of payment, you will not be able to change your decision.
THE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON JUNE 19, 2000,
UNLESS EXTENDED TO NOT LATER THAN JUNE 26, 2000.
The Fund is a closed-end, diversified management investment company. Its
primary investment objectives are growth and conservation of capital. Income
receives secondary consideration. The Fund invests primarily in common stock of
companies in industries the investment manager believes have the potential to
grow at a faster rate than the economy as a whole and that appear to have
above-average earnings growth potential. See 'Risk Factors and Special
Considerations' beginning on page 17 of this prospectus for a more comprehensive
discussion of risks you may incur when making an investment in the Fund. There
can be no assurance that the Fund will achieve its investment objectives.
-------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
ESTIMATED ESTIMATED
SUBSCRIPTION ESTIMATED PROCEEDS TO
PRICE (1) SALES LOAD THE FUND (2)(3)
------------------------ ------------------------ ------------------------
<S> <C> <C> <C>
Per Share................................. None
Total Maximum (4)......................... None
</TABLE>
(1) Estimated on the basis of 95% of the volume-weighted average of the sales
prices of a share on the NYSE on , 2000 and on the previous four
business days. Actual amounts may vary due to rounding.
(2) Before deduction of offering expenses incurred by the Fund, estimated at
$1,400,000.
(3) Funds received by check prior to the final due date of this offer will be
deposited into a segregated interest-bearing account pending allocation and
distribution of shares. Interest on subscription moneys will be paid to the
Fund regardless of whether shares are issued by the Fund.
(4) Assumes all rights are exercised at the estimated subscription price. The
Fund may increase the number of shares subject to subscription by up to 25%
of the shares offered. If the Fund increases the number of shares subject to
subscription by 25%, the aggregate maximum estimated subscription price and
estimated proceeds will be $ and $ , respectively.
-------------------
This prospectus sets forth concisely the information about the Fund that a
prospective investor should know before investing and should be retained for
future reference. A statement of additional information dated , 2000
containing additional information about the Fund has been filed with the
Commission and legally forms a part of this prospectus. The table of contents of
the statement of additional information appears on page 30 of this prospectus.
You may obtain a copy of the statement of additional information without charge
by contacting D.F. King & Co., Inc., the Fund's information agent for the offer.
If you have questions or need further information about the offer, please
call D.F. King & Co., Inc., the information agent, collect at (212) 269-5550
(for banks and brokers) and toll free at (888) 242-8156 (for all others).
THE DATE OF THIS PROSPECTUS IS , 2000
<PAGE>
PROSPECTUS SUMMARY
You should read the entire prospectus, including the statement of additional
information which legally forms part of this prospectus, before you decide
whether to exercise your rights. In particular, you should read carefully the
risks of investing in the shares discussed under 'Risk Factors and Special
Considerations.'
BENEFITS OF THE OFFER
The board of directors has determined that increasing the Fund's assets
through a rights offering may provide the following benefits:
increased ability to take advantage of investment opportunities without
being required to sell current portfolio positions that the Fund wishes to
retain in part due to the capital gains embedded in these positions
additional investment flexibility
lower expense ratios
lower expected capital gains distributions per share. This will occur
because the increase in the number of shares issued and outstanding means
that any capital gain distributed to shareholders will be spread over a
larger number of shares, and therefore the per share amount of capital gain
distributed will decrease. This benefit only applies with respect to
capital gain in positions held by the Fund at the time of the offering, or
realized earlier in the year 2000.
improved liquidity of the trading market for shares on the NYSE
opportunity to purchase additional shares at a price below current market
price
There can be no assurance that the offer will provide any of the benefits
listed above.
The Fund may choose to make additional rights offerings in the future for a
number of shares and on terms which may or may not be similar to this offer.
IMPORTANT TERMS OF THE OFFER
<TABLE>
<S> <C>
Total number of shares available for primary
subscription....................................... 9,460,912
Total number of shares available to cover
over-subscription requests......................... 2,365,228
Number of rights you will receive for each
outstanding share you own on the record date....... One right for every one share
Number of shares you may purchase with your rights at
the subscription price per share................... One share for every ten rights
Subscription price................................... 95% of the lower of (1) the volume-weighted
average of the sales prices per share on the
NYSE on the expiration date and on the
preceding four business days and (2) the net
asset value per share as of the close of
business on the expiration date. In no event
will the subscription price per share be lower
than 87.5% of the net asset value per share as
of the close of business on the expiration
date of the offer. This floor price will take
effect if shares of the Fund are trading at a
discount to net asset value greater than 7.9%.
</TABLE>
2
<PAGE>
HOW TO EXERCISE RIGHTS
To exercise your rights, please follow the following instructions:
If you do not own your shares through a broker, bank or other nominee, you
should have received a subscription certificate. The subscription
certificate elicits the necessary information to enable you to exercise
your rights. Please complete and sign the subscription certificate. Mail it
in the envelope provided or deliver the completed and signed subscription
certificate with payment in full to The Bank of New York, the subscription
agent for the offer, at the address indicated on the subscription
certificate. Your completed and signed subscription certificate and payment
must be received by the expiration date, which is June 19, 2000 (unless
extended). You should calculate the total payment on the basis of an
estimated subscription price of $ per share. If you do not own your
shares through a broker, bank or other nominee and have not received a
subscription certificate, please contact D.F. King & Co., Inc., the
information agent for the offer, collect at (212) 269-5550 (for banks and
brokers) and toll free at (888) 242-8156 (for all others).
If you own your shares through a broker or other nominee, please contact
your broker, banker or trust company. It can arrange to exercise rights on
your behalf and to guarantee payment and delivery of a properly completed
and executed subscription certificate pursuant to a notice of guaranteed
delivery by the close of business on the expiration date. A fee may be
charged for this service. The notice of guaranteed delivery must be
received on or before the expiration date, which is June 19, 2000 (unless
extended).
IMPORTANT DATES TO REMEMBER
Please note that the dates in the table below may change if the offer is
extended.
<TABLE>
<CAPTION>
EVENT DATE
----- ----
<S> <C>
Record date................................................. May 22, 2000
Subscription period......................................... May 22, 2000 to June 19, 2000
Payment for shares or notice of guaranteed delivery due..... June 19, 2000
Expiration and pricing date................................. June 19, 2000
Payment for guarantees of delivery due...................... June 26, 2000
Confirmation to participants................................ July 3, 2000
Final payment for shares.................................... July 17, 2000
</TABLE>
OVER-SUBSCRIPTION PRIVILEGE
If you exercise all your rights, you may subscribe for shares which were not
subscribed for by other shareholders. If sufficient shares are not available to
honor all requests for over-subscriptions, the Fund may increase the number of
shares available for subscription by up to 25%, or 2,365,228 shares, in order to
satisfy these over-subscription requests. Available shares will be allocated
ratably among those who over-subscribe based on the number of rights originally
issued to them.
RIGHTS MAY NOT BE PURCHASED OR SOLD
You may not purchase or sell the rights and they will not trade on any
exchange. If you do not exercise your rights before the conclusion of the rights
offer, your rights will expire without value.
RESTRICTIONS ON FOREIGN SHAREHOLDERS
The Fund will not mail subscription certificates to shareholders whose
record addresses are outside the United States. The Bank of New York will hold
the rights to which subscription certificates relate for foreign shareholder
accounts until instructions are received to exercise the rights. If no
instructions are received prior to the expiration date, these rights will
expire.
3
<PAGE>
FURTHER INFORMATION
If you have any questions or inquiries relating to the offer, please contact
the information agent at:
D.F. King & Co., Inc.
77 Water Street
New York, New York 10005
Banks and Brokers Call Collect: (212) 269-5550
All Others Call Toll Free: (888) 242-8156
OFFERING FEES AND EXPENSES
Salomon Smith Barney, Inc. will act as a financial advisor to the Fund for
the offer. The Fund will pay Salomon Smith Barney, Inc. a fee for its financial
advisory services equal to 0.375% of the subscription price for each share
issued. The Fund will also pay D.F. King & Co., Inc., as information agent, a
fee of $9,000 plus out of pocket expenses and The Bank of New York, as
subscription agent, a fee of $190,000 plus out-of-pocket expenses.
USE OF PROCEEDS
We estimate the net proceeds of the offer to be approximately $ . If
the Fund increases the number of shares subject to subscription by up to 25% in
order to satisfy over-subscription requests, the additional net proceeds will be
approximately $ .
Salomon Brothers Asset Management Inc, the Fund's investment manager,
anticipates that it will take up to one month for the Fund to invest these
proceeds in accordance with its investment objective and policies under current
market conditions.
INFORMATION REGARDING THE FUND
The Fund is a Maryland corporation, organized on January 18, 1977 as a
wholly-owned subsidiary of The Lehman Corporation, a Delaware corporation, which
commenced business operations on September 24, 1929. On April 30, 1977, a merger
of the two corporations was consummated and the Maryland corporation succeeded
to the business and affairs of the Delaware corporation. The Fund is a
diversified, closed-end management investment company registered under the
Investment Company Act of 1940 (the '1940 Act'). Its primary investment
objectives are growth and conservation of capital. The Fund invests primarily in
common stock of companies in industries the investment manager believes have the
potential to grow at a faster rate than the economy as a whole and that appear
to have above-average earnings growth potential.
There can be no assurance that the Fund will achieve its investment
objectives. The shares are listed and traded on the New York Stock Exchange
under the symbol 'SBF.' As of March 31, 2000, the net assets were approximately
$1.97 billion.
INVESTMENT MANAGER; CUSTODIAN AND TRANSFER AGENT
Salomon Brothers Asset Management Inc ('SaBAM') acts as investment manager
to the Fund. SaBAM 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.
PNC Bank, N.A. is the custodian for the Fund.
The Bank of New York is the transfer agent and dividend paying agent for the
Fund.
MANAGEMENT FEES
Since SaBAM receives fees based on net assets, it will benefit from the
increase in assets that will result from the offer.
4
<PAGE>
RISK FACTORS AND SPECIAL CONSIDERATIONS
You should consider the following factors, as well as the other information
in this Prospectus, before making an investment in the Fund under this offer.
YOU WILL INCUR IMMEDIATE DILUTION IN THIS OFFER
If you do not exercise all your rights, after the offer you will own a
smaller proportional interest in the Fund. In addition, whether or not you
exercise your rights, the net asset value per share of your shares will be
reduced as a result of the offer because:
the shares offered will be sold at less than their then current net asset
value
you will indirectly bear the expenses of the offer
the number of shares outstanding after the offer will have increased
proportionately more than the increase in the size of the net assets
YOU MAY LOSE MONEY BY INVESTING IN THE FUND
An investment in the Fund is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
Among the principal risks of investing in the Fund is market risk, which is
the risk that the value of your investment may fluctuate as stock markets
fluctuate.
As an investment company that holds common stocks, the Fund's portfolio is
subject to the possibility that common stock prices will decline over short or
even extended periods. The Fund may remain substantially fully invested during
periods when stock prices generally rise and also during periods when they
generally decline. Risks are inherent in investment in equities, and Fund
shareholders should be able to tolerate significant fluctuations in the value of
their investment in the Fund. The Fund is intended to be a long-term investment
vehicle and is not designed to provide investors with a means of speculating on
short-term stock market movements. Investors should not consider the Fund a
complete investment program.
THERE ARE NO FIXED LIMITATIONS REGARDING PORTFOLIO TURNOVER
Frequency of portfolio turnover is not a limiting factor if the Fund
considers it advantageous to purchase or sell securities. The Fund anticipates
that its annual portfolio turnover rate will not exceed 100%. For the year ended
December 31, 1999, the Fund's portfolio turnover rate was 73%. A higher rate of
portfolio turnover involves correspondingly greater aggregate payments for
brokerage commissions than a lower rate, which expenses must be borne by the
Fund and its shareholders, while a lower rate of portfolio turnover involves
correspondingly lower aggregate payments and shareholder expenses.
THE FUND'S SHARES HAVE TRADED AND MAY CONTINUE TO TRADE AT A DISCOUNT TO NET
ASSET VALUE
Shares of closed-end management investment companies frequently trade at a
discount from their net asset value (the market price per share is less than the
value per share of the net assets). This characteristic is a risk separate and
distinct from the risk that the Fund's net asset value will decrease as a result
of its investment activities and may be greater for investors expecting to sell
their shares relatively soon after completion of this offering. Historically,
the stock has sold sometimes above and sometimes below net asset value. The Fund
cannot predict whether its shares will trade at, above or below net asset value
in the future.
5
<PAGE>
THE FUND'S INVESTMENTS IN FOREIGN SECURITIES MAY SUBJECT YOU TO INCREASED RISK
The Fund may invest up to 25% of its assets in foreign securities. Many
foreign securities may be less liquid and their prices more volatile than
securities of comparable U.S. companies. Other risks of investing in foreign
securities include less governmental supervision and regulations with respect to
the issuance of such securities as compared to in the U.S., less available
information concerning foreign issuers than U.S. issuers and higher brokerage
commissions and longer transaction settlement periods as compared to the U.S. In
addition, with respect to some foreign countries there is the possibility of
nationalization, expropriation or confiscatory taxation. Income earned in a
foreign nation may be subject to taxation (including withholding taxes on
interest and dividends), or other taxes may be imposed with respect to
investments in foreign securities.
FEE TABLE
The following table sets forth certain fees and expenses of the Fund.
<TABLE>
<S> <C>
Shareholder transaction expenses
Sales Load (as a percentage of the subscription price
per share)............................................. 0%
Dividend Reinvestment and Cash Purchase Plan Fees....... *
Annual expenses (as a percentage of net assets attributable
to capital stock)
Management Fees(1)...................................... 0.51%
Other expenses(2)....................................... 0.05%
TOTAL ANNUAL EXPENSES(2).................................... 0.56%
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment
assuming a 5% annual return(3)............................ $6 $18 $31 $70
</TABLE>
- ---------
* Participants in the Fund's Automatic Dividend Reinvestment Plan and Cash
Payment Plan only pay transaction-based charges. Actual costs will vary for
each participant depending on the nature and number of transactions made. For
a description of the charges payable by participants, see 'Dividends and
Distributions -- Cost to Participants.'
(1) The investment manager's compensation is based upon a base fee which ranges
from 0.45-0.65%, depending on the fund's daily net assets, which is then
subject to an increase or decrease based upon the performance of the Fund in
relation to the Standard & Poor's 500 Index of Composite Stocks. See
'Management -- Salomon Brothers Asset Management Inc'. The amount shown is
based upon the net assets of the Fund after giving effect to the offer.
(2) Based upon estimated amounts for the current fiscal year and on the net
assets of the Fund after giving effect to the anticipated net proceeds of
the offer, including proceeds from the issuance of up to 25% of the shares
under the over-subscription privilege. This figure does not include expenses
of the Fund incurred in connection with the offer, estimated at $1,400,000.
Total expenses for the fiscal year ended December 31, 1999 were 0.56% of
average net assets.
(3) The example reflects the expenses of the Fund incurred in connection with
the offer and assumes that all of the rights are exercised and that all
dividends and distributions are reinvested.
WE HAVE PREPARED THE FOREGOING TABLE AND EXAMPLE TO ASSIST YOU IN
UNDERSTANDING THE VARIOUS COSTS AND EXPENSES THAT YOU BEAR, DIRECTLY OR
INDIRECTLY, BUT YOU SHOULD NOT CONSIDER IT AS A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATE OF RETURN. THE ACTUAL EXPENSES OF THE FUND MAY BE GREATER OR
LESS THAN THOSE SHOWN. For more complete descriptions of certain of the Fund's
costs and expenses, see 'Management' in this prospectus and in the statement of
additional information.
6
<PAGE>
FINANCIAL HIGHLIGHTS
The following table describes selected financial data for a share of capital
stock outstanding throughout each year presented. The per share operating
performance and ratios/supplemental data for each of the years, have been
derived from financial statements audited by PricewaterhouseCoopers LLP, the
Fund's independent accountants, whose report is included in the financial
statements which are incorporated by reference into the statement of additional
information. The following information should be read in conjunction with the
financial statements and notes, which legally forms a part of the prospectus and
which is available upon request.
PER SHARE OPERATING PERFORMANCE
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year.............................. $ 18.76 $ 18.51 $ 17.26 $ 15.43 $ 12.88
Net Investment Income........... .18 .26 .27 .33 .35
Net Gains (Losses) on Securities
(both realized and unrealized)
(1)........................... 4.08 3.45 3.93 3.93 4.04
Total from Investment Operations.... 4.26 3.71 4.20 4.26 4.39
Less Dividends and Distributions:
Dividends From Net Investment
Income........................ (.17) (.27) (.27) (.34) (.35)
Distributions From Net Realized
Gain on Investments........... (3.63) 3.19 (2.68) (2.09) (1.49)
------- ------- ------- ------- -------
Total Dividends and Distributions... (3.80) (3.46) (2.95) (2.43) (1.84)
Increase in Net Asset Value due to
Shares Issued on Reinvestment of
Dividends......................... .02 -- -- -- --
------- ------- ------- ------- -------
Net Asset Value, End of Year........ $ 19.24 $ 18.76 $ 18.51 $ 17.26 $ 15.43
Market Price, End of Year........... $ 20.38 $ 18.19 $ 17.69 $ 16.00 $ 13.38
Total Investment Return Based on
Market Price per Share Excluding
Broker Commissions................ +34.6% +22.6% +29.5% +38.7% +43.3%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90(2)
-------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year.............................. $ 14.88 $ 15.16 $ 15.66 $ 13.33 $ 15.58
Net Investment Income........... .33 .34 .40 .45 .46
Net Gains (Losses) on Securities
(both realized and
unrealized)................... (.605) 1.44 .10 3.49 (1.51)
Total from Investment Operations.... (.275) 1.78 .50 3.94 (1.05)
Less Dividends and Distributions:
Dividends From Net Investment
Income........................ (.335) (.34) (.40) (.47) (.49)
Distributions from Net Realized
Gain on Investments........... (1.39) (1.72) (.60) (1.14) (.71)
------- ------- ------- ------- -------
Total Dividends and Distributions... (1.725) (2.06) (1.00) (1.61) (1.20)
Net Asset Value, End of Year........ $ 12.88 $ 14.88 $ 15.16 $ 15.66 $ 13.33
Market Price, End of Year........... $ 10.63 $ 12.75 $ 13.75 $ 13.88 $ 11.00
Total Investment Return Based on
Market Price per Share Excluding
Broker Commissions................ -3.7% +7.9% +6.4% +42.5% -6.4%
</TABLE>
7
<PAGE>
RATIOS/SUPPLEMENTAL DATA
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Assets, End of Year
(millions)........................ $1,820 $1,686 $1,545 $1,441 $1,291
Ratio of Expenses to Average Net
Assets............................ .56% .52% .53% .51% .41%
Ratio of Net Investment Income to
Average Net Assets................ .90% 1.39% 1.46% 1.96% 2.42%
Portfolio Turnover Rate............. 73% 68% 49% 52% 82%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90(2)
-------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
Net Assets, End of Year
(millions)........................ $1,087 $1,176 $1,109 $1,115 $ 906
Ratio of Expenses to Average Net
Assets............................ .49% .41% .43% .43% .46%
Ratio of Net Investment Income to
Average Net Assets................ 2.33% 2.19% 2.62% 3.01% 3.21%
Portfolio Turnover Rate............. 69% 80% 42% 14% 15%
</TABLE>
- ---------
(1) 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.
(2) Since May 1, 1990, the Fund has been managed by SaBAM. Prior thereto, the
Lehman Management Co. division of Shearson Lehman Brothers Inc. served as
the Fund's investment manager.
8
<PAGE>
THE OFFER
BENEFITS OF THE OFFER
The board of directors of the Fund has determined that increasing its assets
through a rights offering is in your best interest.
In consultation with SaBAM, the board determined that the rights offering
may provide the following benefits:
increased ability to take advantage of investment opportunities without
being required to sell current portfolio positions that it wishes to retain
in part due to the capital gains embedded in these positions
additional investment flexibility
lower expense ratios
lower expected capital gains distributions per share. This will occur
because the increase in the number of shares issued and outstanding means
that any capital gain distributed to shareholders will be spread over a
larger number of shares, and therefore the per share amount of capital gain
distributed will decrease. This benefit only applies with respect to
capital gain in positions held by the Fund at the time of the offering, or
realized earlier in the year 2000.
improved liquidity of the trading market for shares on the NYSE
opportunity to purchase additional shares at a price below current market
price
Prior to reaching this conclusion, the board, in consultation with SaBAM and
Salomon Smith Barney, Inc., reviewed the structure, timing and terms of the
offer, and its dilutive effect on both shareholders who exercise their rights
and those who don't. After careful consideration, the board unanimously voted to
approve the offer.
There can be no assurance that the offer will provide any of the benefits
listed above.
The Fund may choose to make additional rights offerings from time to time
for a number of shares and on terms which may or may not be similar to the
offer.
TERMS OF THE OFFER
The Fund is issuing to its shareholders rights to purchase additional
shares. You will receive one right for each share you own on the record date,
which is May 22, 2000. You need ten rights to purchase one share at the
subscription price per share. The Fund will not issue fractional shares upon the
exercise of less than ten rights. You may exercise your rights to acquire shares
at any time during the subscription period, which begins on May 22, 2000 and
ends at 5:00 p.m., New York City time, on June 19, 2000, unless extended by the
Fund to 5:00 p.m., New York City time, on a date which will be no later than
June 26, 2000. The right of a shareholder of record to acquire one share for
every ten rights during the subscription period at the subscription price is
called the 'primary subscription.'
Rights are evidenced by subscription certificates. The Fund will send
subscription certificates to all persons whose names appear on the list of
shareholders of the Fund on May 22, 2000, the record date of the offer.
If you exercise all your rights, you may subscribe for additional shares.
Shares available for purchase pursuant to this over-subscription privilege are
subject to allotment and increase. The over-subscription privilege is more fully
described below. For purposes of determining the maximum number of shares you
may acquire pursuant to the offer, if your shares are held of record by Cede, as
nominee for The Depository Trust Company, or by any other depository or nominee,
you will be deemed to be the holder of the rights that are issued to Cede or
such other depository or nominee on your behalf.
Since the Fund will not issue fractional shares, if you receive or have
remaining fewer than ten rights, you will be unable to purchase shares upon the
exercise of such rights and no cash will be paid to you in lieu of such rights.
You may, however, subscribe for shares pursuant to the over-subscription
privilege provided you have exercised all your rights. Once you subscribe for
shares and the Fund receives payment or a guarantee of payment, you will not be
able to change your decision.
9
<PAGE>
IMPORTANT DATES TO REMEMBER
Please note that the dates in the table below may change if the offer is
extended.
<TABLE>
<CAPTION>
EVENT DATE
----- ----
<S> <C>
Record date................................................. May 22, 2000
Subscription period......................................... May 22, 2000 to June 19, 2000
Payment for shares or notice of guaranteed delivery due..... June 19, 2000
Expiration and pricing date................................. June 19, 2000
Payment for guarantees of delivery due...................... June 26, 2000
Confirmation to participants................................ July 3, 2000
Final payment for shares.................................... July 17, 2000
</TABLE>
OVER-SUBSCRIPTION PRIVILEGE
If shares remain available for purchase after all shareholders have had a
chance to exercise their rights pursuant to the primary subscription, the Fund
will offer such shares to shareholders who have exercised all their rights and
who desire to acquire additional shares. You may subscribe for those additional
shares pursuant to the over-subscription privilege only if you exercise all your
rights pursuant to the primary subscription. If you exercise all your rights and
wish to subscribe for additional shares, please indicate on the subscription
certificate the number of additional shares desired through the over-
subscription privilege.
If sufficient shares remain from unexercised rights, all over-subscriptions
may be honored in full. If sufficient shares are not available to honor all
over-subscription requests, the Fund may issue up to an additional 2,365,228
shares, representing 25% of the shares available pursuant to the primary
subscription, to satisfy over-subscription requests. Whether or not the Fund
issues these additional shares, if there are not enough shares available to
honor all over-subscriptions, the available shares will be allocated among you
and all the other shareholders who subscribe for additional shares pursuant to
the over-subscription privilege in proportion to the number of rights issued to
you and such shareholders. The allocation process may involve a series of
allocations in order to assure that the total number of shares available for
over-subscriptions is distributed on a pro rata basis.
The Fund will not sell any shares that are not subscribed for under the
primary subscription or the over-subscription privilege.
SUBSCRIPTION PRICE
You may purchase one share for every ten rights at the subscription price.
The subscription price is 95% of the lower of:
(1) the volume-weighted average of the sales prices of a share on the
NYSE on the expiration date of the offer (June 19, 2000, unless extended)
and on the four preceding business days; and
(2) the net asset value per share as of the close of business on the
expiration date of the offer (June 19, 2000, unless extended).
In no event will the subscription price per share be lower than 87.5% of the
net asset value per share as of the close of business on the expiration date of
the offer. This floor price will take effect if shares of the Fund are trading
at a discount to net asset value greater than 7.9%.
For example, if the volume-weighted average of the sales prices on the NYSE
on June 19, 2000 and on the four preceding business days of a share of the
Fund's capital stock is $21, and the net asset value as of the close of business
on the pricing date is $20, the subscription price will be $19 (95% of $20). If,
however, the volume-weighted average of the sales prices of a share on that
exchange on June 19, 2000 and on the four preceding business days is $19, and
the net asset value as of the close of business on June 19, 2000 is $20, the
subscription price will be $18.05 (95% of $19). However, if 95% of the volume-
weighted average of sales prices on the NYSE on June 19, 2000 and on the four
preceding business days is less than 87.5% of the net asset value per share as
of the close of business on June 19, 2000, the
10
<PAGE>
subscription price will be $17.50 (87.5% of the net asset value per share as of
the close of business on the expiration date).
The Fund announced the offer on March 23, 2000. The last reported net
asset value per share of common stock at the close of business on ,
2000 and , 2000 was $ and $ , respectively, and the last
reported sales price of a share on the NYSE on those dates was $ and $ ,
respectively. The Fund paid a dividend per share of $0.963, $0.0426 and $2.7961,
respectively, in May, 1999, August, 1999 and December, 1999.
RIGHTS MAY NOT BE PURCHASED OR SOLD
The rights are non-transferable. You may not purchase or sell them. The
rights will not trade on the NYSE or any other exchange. The shares to be issued
under the rights, however, will trade on the NYSE under the symbol 'SBF'. If you
do not exercise your rights before the conclusion of the rights offer, your
rights will expire without value.
EXPIRATION OF THE OFFER AND RIGHTS
The offer will expire at 5:00 p.m., New York City time, on June 19, 2000
unless the Fund extends it until 5:00 p.m., New York City time, to a date not
later than June 26, 2000. Rights will expire at that time and thereafter you
will no longer be able to exercise them. Since the expiration date for exercise
of the rights and the pricing date of the shares subscribed will be the same
date, you will not know the purchase price when you decide to acquire shares.
If the Fund decides to extend the offer, it will make an announcement to
that effect as promptly as practicable. The Fund may elect to extend the offer,
for example, if it determines that shareholders require extra time to exercise
their rights in a timely fashion. The Fund will not, unless otherwise required
by law, have any obligation to publish, advertise or otherwise communicate any
such announcement other than by making a release to the Dow Jones News Service
or such other means of announcement as the Fund deems appropriate.
SUBSCRIPTION AGENT
The subscription agent, The Bank of New York, will receive for its
administrative, processing, invoicing and other services as subscription agent,
a fee estimated to be approximately $190,000 plus reimbursement for its
out-of-pocket expenses related to the offer. If you have any questions regarding
subscription certificates, please call D.F. King & Co., Inc., the information
agent for the offer, collect at (212) 269-5550 (for banks and brokers) and toll
free at (888) 242-8156 (for all others). You must send completed subscription
certificates together with payment of the estimated subscription price to The
Bank of New York by one of the methods described below.
<TABLE>
<S> <C>
By Mail: By Hand or Overnight Courier:
Tender & Exchange Department Tender & Exchange Department
P.O. Box 11248 101 Barclay Street
Church Street Station Receive and Deliver Window
New York, New York 10286-1248 New York, New York 10286
For Information, Telephone
(800) 507-9357
By Facsimile (Eligible Institutions Only):
(212) 815-6213
For Notice Of Guaranteed Delivery Only
with the original Subscription Certificate to be sent by one of the methods above.
Confirm facsimile by telephone at (212) 815-6173.
</TABLE>
The Fund will accept only subscription certificates actually received on a
timely basis. DELIVERY TO AN ADDRESS OTHER THAN THOSE SET FORTH ABOVE DOES NOT
CONSTITUTE GOOD DELIVERY.
11
<PAGE>
HOW TO EXERCISE RIGHTS
Rights will be evidenced by subscription certificates. Except as described
below under 'Restrictions on Foreign Shareholders,' the Fund will mail
subscription certificates directly to you if your shares are registered in your
name or, if you own your shares through a broker, depository or nominee, to Cede
or such other depository or nominee. You may exercise your rights by either:
completing and signing a subscription certificate and mailing it in the
envelope provided, together with payment for the shares to the subscription
agent
contacting your broker, banker or trust company, which can guarantee
payment and delivery of a properly completed and executed subscription
certificate before June 19, 2000. A fee may be charged for this service.
Fractional shares will not be issued. Therefore, if you receive, or have
remaining, fewer than ten rights, you will not be able to purchase any shares
upon the exercise of rights. You will not be entitled to cash for less than ten
rights. You may, however, subscribe for additional shares pursuant to the over-
subscription privilege provided you have exercised all your rights pursuant to
the primary subscription.
The subscription agent must have received at its office indicated above
completed subscription certificates or notices of guaranteed delivery prior to
5:00 p.m., New York City time, on June 19, 2000.
If You Do Not Own Your Shares Through a Broker or Other Nominee. As a record
holder, you can choose between two options set forth under 'Payment for Shares'
below. If time is of the essence, option (2) will permit delivery of the
completed subscription certificate and payment after June 19, 2000.
If You Own Your Shares Through a Broker or Other Nominee. You must contact
that broker or nominee to exercise your rights. In that case, the nominee will
complete the subscription certificate on your behalf and arrange for proper
payment by one of the methods set forth under 'Payment for Shares'.
If You Are a Nominee. If you hold shares for the account of others, you
should notify the beneficial owners of such shares as soon as possible to obtain
instructions. If the beneficial owner so instructs, you should complete the
subscription certificate and submit it to the subscription agent with proper
payment.
RESTRICTIONS ON FOREIGN SHAREHOLDERS
The Fund will not mail subscription certificates to shareholders whose
record addresses are outside the United States. For these purposes, the United
States includes its territories and possessions and the District of Columbia.
The rights to which those subscription certificates relate will be held by The
Bank of New York for foreign shareholders' accounts until instructions are
received to exercise the rights. If no instructions are received prior to
June 19, 2000, such rights will expire.
INFORMATION AGENT
If you have any questions or inquiries relating to the offer, please contact
the information agent at:
D.F. King & Co., Inc.
77 Water Street
New York, NY 10005
Banks and Brokers Call Collect: (212) 269-5550
All Others, Call Toll Free: (888) 242-8156
You may also contact your broker or nominee for information with respect to
the offer.
12
<PAGE>
PAYMENT FOR SHARES
You may choose between the following methods of payment to exercise your
rights:
(1) You can send the completed subscription certificate together with
payment for shares to the subscription agent. You should calculate the total
payment on the basis of an estimated subscription price of $ per share. To be
accepted, your payment accompanied by a properly executed and completed
subscription certificate must be received by the subscription agent prior to
5:00 p.m., New York City time, on June 19, 2000.
If you pay using this method, please make sure that your payment:
is made in United States dollars by money order or check drawn on a bank
located in the United States
is made to 'The Salomon Brothers Fund Inc'
accompanies an executed subscription certificate.
(2) Alternatively, you may contact your broker, bank or trust company and
request that it sends on your behalf a notice of guaranteed delivery by
facsimile or otherwise to the subscription agent. The subscription agent will
accept all notices of guaranteed delivery received from brokers, banks, trust
companies or NYSE members prior to 5:00 p.m., New York City time, on June 19,
2000. The notice must guarantee delivery to the subscription agent of (a)
payment of the full subscription price for the shares subscribed for pursuant to
the primary subscription and any additional shares subscribed for pursuant to
the over-subscription privilege, and (b) a properly completed and executed
subscription certificate. The subscription agent will not honor a notice of
guaranteed delivery if a properly completed and executed subscription
certificate, together with payment, is not received by the close of business on
June 26, 2000.
No later than July 3, 2000, the subscription agent will send a confirmation
to each shareholder or, if the shareholder's shares are held by Cede or any
other depository or nominee, to Cede or such depository or nominee. This
confirmation will show:
the number of shares you acquired pursuant to the primary subscription;
the number of shares, if any, you acquired pursuant to the
over-subscription privilege;
the per share and total purchase price for the shares; and
any additional amount that you must pay to the Fund or any excess to be
refunded by the Fund to you.
You will not receive any other evidence of title unless you have requested a
stock certificate at the time of exercise of the rights. You must ensure that
the subscription agent receives any additional payment required from you before
July 17, 2000. The subscription agent will mail any excess payment owed to you
within a reasonable time after the expiration date. The Fund will not pay
interest on any excess payment. All your payments to the Fund must be in U.S.
Dollars by money order or check drawn on a bank located in the United States of
America and payable to The Salomon Brothers Fund Inc.
The subscription agent will deposit all checks received by it prior to the
final due date into a segregated interest-bearing account pending distribution
of the shares. Interest will accrue to the benefit of the Fund regardless of
whether shares are issued or not by the Fund.
Issuance and delivery of evidence of title for the shares purchased are
subject to collection of checks and actual payment pursuant to any notice of
guaranteed delivery.
YOU WILL HAVE NO RIGHT TO RESCIND YOUR SUBSCRIPTION AFTER RECEIPT OF YOUR
PAYMENT FOR SHARES BY THE SUBSCRIPTION AGENT.
If you subscribe for shares and do not pay any additional amounts due, the
Fund may:
(1) sell these shares to other shareholders;
(2) sell you only the number of shares your payment covers; and/or
(3) exercise any and all other rights or remedies to which it may be
entitled to collect the additional amount due, including enforcing any
guaranty of payment.
13
<PAGE>
You may choose the method of delivery of subscription certificates and
payment of the subscription price from those indicated above. Whichever method
you choose, you will make delivery and payment at your own risk. If you use
mail, subscription certificates and payment should be sent by registered mail
and properly insured, with return receipt requested. Please allow a sufficient
number of days to ensure delivery to the Fund and clearance of payment prior to
5:00 p.m., New York City time, on the last applicable payment date. Because
uncertified personal checks may take at least five business days to clear, you
are strongly urged to pay, or arrange for payment, by means of certified or
cashier's check or money order.
The Fund will determine all questions concerning the timeliness, validity,
form and eligibility of any exercise of rights. The Fund's determinations will
be final and binding. The Fund may waive any defect or irregularity, or permit a
defect or irregularity to be corrected within such time as it may determine. The
Fund may also reject the purported exercise of any right. Subscriptions will not
be deemed to have been received or accepted until all irregularities have been
waived or cured within such time as the Fund determines. The Fund will not be
under any duty to give notification of any defect or irregularity related to the
submission of subscription certificates. The Fund will not incur any liability
for failure to give any such notification.
DELIVERY OF STOCK CERTIFICATES
The Fund will issue certificates for shares acquired through subscription
only upon request made at the time of exercise of the rights. If a request is
made, stock certificates will be mailed promptly after July 3, 2000 and after
payment for the shares subscribed for has cleared. If you are a participant in
the Fund's dividend reinvestment and cash purchase plan, your shares will be
credited to your account in the plan. The Fund will not issue certificates for
subscription shares credited to plan accounts. If your shares are held of record
by Cede or by any other depository or nominee on your behalf or your
broker-dealer's behalf, the shares that you acquire will be credited to the
account of Cede or such other depository or nominee.
OFFERING FEES AND EXPENSES
Salomon Smith Barney, Inc. will act as a financial advisor to the Fund for
the offer pursuant to a financial advisory agreement with the Fund. The Fund
will pay Salomon Smith Barney, Inc., an affiliate of the Fund and SaBAM, a fee
for its financial advisory services equal to 0.375% of the subscription price
for each share issued. The Fund will also pay D.F. King & Co., Inc., as
information agent, a fee for their efforts equal to $9,000 plus out-of-pocket
expenses and the Bank of New York, as subscription agent, a fee of $190,000
plus out-of-pocket expenses.
Other offering expenses incurred by the Fund are estimated at $360,000.
FEDERAL INCOME TAX CONSEQUENCES
For United States federal income tax purposes, neither the receipt nor the
exercise of the rights will result in taxable income to you. Moreover, you will
not realize a loss if you do not exercise the rights. The holding period for a
share acquired upon exercise of a right begins with the date of exercise. The
basis for determining gain or loss upon the sale of a share acquired upon the
exercise of a right will be equal to the sum of:
the subscription price per share,
any servicing fee charged to you by your broker, bank or trust company, and
the basis, if any, in the rights that you exercised.
A gain or loss recognized upon a sale of a share acquired upon the exercise
of a right will be a capital gain or loss assuming the share is held as a
capital asset at the time of sale. This gain or loss will be a long-term capital
gain or loss if the share has been held at the time of sale for more than one
year.
As noted above, your basis in shares issued under the offer includes your
basis in the rights underlying those shares. The basis of the rights will be
zero unless you elect to allocate your basis of previously owned shares to the
rights issued in the offer. This allocation is based upon the relative fair
14
<PAGE>
market value of such shares and the rights as of the date of distribution of the
rights. Thus, if you make such an election, the basis in the shares you
originally owned will be reduced by an amount equal to the basis you allocated
to the rights. This election must be made in a statement attached to your
federal income tax return for the year in which the offer occurs.
If you do not exercise the rights, however, you will not be able to
recognize a loss or to allocate a portion of your basis in the shares to the
unexercised rights.
The foregoing is a general summary of the material United States federal
income tax consequences of the receipt and exercise of rights. The discussion is
based upon applicable provisions of the U.S. Internal Revenue Code of 1986, U.S.
Treasury regulations and other authorities currently in effect, and does not
cover state, local or foreign taxes. The Code and regulations are subject to
change by legislative or administrative action. You should consult your tax
advisors regarding specific questions as to federal, state, local or foreign
taxes. You should also review the discussion of certain tax considerations
affecting yourself and the Fund set forth under 'Taxation.'
TAX-ADVANTAGED ACCOUNTS
The rules and regulations governing benefit plans are complex and include
penalties for noncompliance. If you hold your shares through an employee benefit
plan that is subject to the Employee Retirement Income Security Act of 1974,
including corporate savings and 401(k) plans, Keogh Plans of self-employed
individuals and Individual Retirement Accounts, please consult counsel and tax
advisors for such plan regarding the consequences under ERISA and the Code of an
exercise of the rights.
INVESTMENT ADVISORY FEES
SaBAM will benefit from the offer because the investment advisory fee is
based on the net assets of the Fund. Assuming all rights are exercised at the
estimated subscription price, including up to an additional 25% of the shares
which may be issued to satisfy over-subscriptions, the annual compensation to be
received by SaBAM, excluding any performance adjustment, would be increased by
approximately $967,000. Actual compensation paid may vary depending on the
number of shares purchased and investment return. One of the Fund's directors
who voted to authorize the offer is an 'interested person' of the Fund within
the meaning of the 1940 Act because of his position as a director and an officer
of SaBAM. This director could benefit indirectly from the offer because of his
affiliation. The other nine directors are not 'interested persons' of the Fund.
DIVIDENDS
The Fund does not expect to pay dividends or other distributions with
respect to the shares acquired pursuant to rights until August 2000. The Fund
expects to make a dividend payment in June 2000, which will include a capital
gains distribution. This distribution will not be payable in respect of the
shares issued upon exercise of the rights because the record date for the
dividend payment will precede the issuance date for the shares issued upon
exercise of the rights.
USE OF PROCEEDS
Assuming the Fund sells all shares offered pursuant to the primary
subscription at the estimated subscription price, the net proceeds of the offer
are estimated to be $ , after payment of the financial advisory fees, the
soliciting fees and the other estimated offering expenses. The Fund will pay
these expenses, which will reduce the net asset value per share. If the Fund
increases the number of shares subject to the offer by 25%, or 2,365,228 shares,
in order to satisfy over-subscription requests, the additional net proceeds will
be approximately $ . SaBAM expects that, under current market conditions,
the Fund will invest substantially all of the net proceeds of the offer in
accordance with its investment objectives and policies approximately within one
month from the date of receipt. Pending such investment, the proceeds will be
invested in certain short-term debt instruments.
15
<PAGE>
THE FUND
The Fund is a Maryland corporation, organized on January 18, 1977 as a
wholly-owned subsidiary of The Lehman Corporation, a Delaware corporation, which
commenced business operations on September 24, 1929. On April 30, 1977, a merger
of the two corporations was consummated and the Maryland corporation succeeded
to the business and affairs of the Delaware corporation. The Fund is a
diversified, closed-end management investment company registered under the 1940
Act. Its shares are traded on the NYSE under the symbol 'SBF.'
16
<PAGE>
RISK FACTORS AND SPECIAL CONSIDERATIONS
Please consider carefully the matters set forth below. You should read the
entire prospectus and the statement of additional information before you decide
whether to exercise your rights.
YOU WILL INCUR IMMEDIATE DILUTION IN THIS OFFER
If you do not exercise all your rights, when the offer is over you will own
a smaller proportional interest in the Fund. The greatest dilution of your
interests in the Fund will occur if the subscription price equals its floor
price, which is 87.5% of the net asset value of the Fund on the expiration date
of the offer. Assuming this subscription price*:
(1) If 50% of the shareholders eligible to participate in the offer elect to
exercise their rights, your interests as a non-participating shareholder in
the Fund will be diluted by [.611]%**
(2) If 100% of the shareholders eligible to participate in the offer elect to
exercise their rights, your interests as a non-participating shareholder in
the Fund will be diluted by [1.221]%**
(3) If 100% of the shareholders eligible to participate in the offer elect to
exercise their rights and also fully exercise their oversubscription
privileges, your interests as a non-participating shareholder in the Fund
will be diluted by [1.52]%**
* Based on a net asset value of $__ on May 17, 2000.
** Example (1) assumes offering expenses of $__, Example (2) assumes offering
expenses of $__ and Example (3) assumes offering expenses of $__. The
financial advisor will receive a fee equal to 0.375% of the subscription
price for each share issued. Therefore, expenses will vary based upon the
number of shareholders who elect to participate and accordingly, the
number of shares issued.
In addition, whether or not you exercise your rights, the per share net
asset value of your shares will be diluted (reduced) immediately as a result of
the offer because:
the shares offered will be sold at less than their then current net asset
value
you will indirectly bear the expenses of the offer
the number of shares outstanding after the offer will have increased
proportionately more than the increase in the size of the net assets.
This dilution may be substantial and will increase if the share price
declines in relation to the net asset value as shown by the following examples:
Scenario 1: Shares trade above per share net asset value (premium)(1)
<TABLE>
<S> <C>
Share Price................................................. $ 21
NAV......................................................... $ 20
Subscription Price (95.0% of NAV)........................... $ 19
Reduction in NAV ($)(2)..................................... $(0.09)
Reduction in NAV (%)........................................ (0.45)%
</TABLE>
Scenario 2: Shares trade below per share net asset value at the time the
offer expires (discount)(1)
<TABLE>
<S> <C>
Share Price................................................. $ 19
NAV......................................................... $ 20
5-day volume-weighted average share price(3)................ $ 19
Subscription Price (95.0% of 5-day volume-weighted average
share price)(4)........................................... $18.05
Reduction in NAV ($)(2)..................................... $(0.18)
Reduction in NAV (%)........................................ (0.89)%
</TABLE>
Scenario 3: Floor Price is triggered, as shares trade below per share net
asset value and formula subscription price is below 87.5% of net asset value(1)
<TABLE>
<S> <C>
Share Price................................................. $ 18
NAV......................................................... $ 20
95% of 5-day volume-weighted average share price............ $17.10
95% of 5-day volume-weighted average share price as
percentage of NAV......................................... 85.5%
Subscription Price (87.5% of NAV)(4)........................ $17.50
Reduction in NAV ($)(2)..................................... $(0.23)
Reduction in NAV (%)........................................ (1.14)%
</TABLE>
(footnotes on next page)
17
<PAGE>
(footnotes from previous page)
(1) Examples assume full primary and over-subscription privilege exercised.
Actual amounts may vary due to rounding.
(2) Assumes $1,400,000 in estimated offering expenses.
(3) The expiration date and the four preceding business days.
(4) In no event will the subscription price per share be lower than 87.5% of the
net asset value per share as of the close of business on the expiration date
of the offer.
YOU MAY LOSE MONEY BY INVESTING IN THE FUND
An investment in the Fund is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
Among the principal risks of investing in the Fund is market risk, which is
the risk that the value of your investment may fluctuate as stock markets
fluctuate.
As an investment company that holds common stocks, the Fund's portfolio is
subject to the possibility that common stock prices will decline over short or
even extended periods. The Fund may remain substantially fully invested during
periods when stock prices generally rise and also during periods when they
generally decline. Risks are inherent in investment in equities, and Fund
shareholders should be able to tolerate significant fluctuations in the value of
their investment in the Fund. The Fund is intended to be a long-term investment
vehicle and is not designed to provide investors with a means of speculating on
short-term stock market movements. Investors should not consider the Fund a
complete investment program.
THERE ARE NO FIXED LIMITATIONS REGARDING PORTFOLIO TURNOVER
Frequency of portfolio turnover is not a limiting factor if the Fund
considers it advantageous to purchase or sell securities. The Fund anticipates
that its annual portfolio turnover rate will not exceed 100%. For the year ended
December 31, 1999, the Fund's portfolio turnover rate was 73%. A higher rate of
portfolio turnover involves correspondingly greater aggregate payments for
brokerage commissions than a lower rate, which expenses must be borne by the
Fund and its shareholders, while a lower rate of portfolio turnover involves
correspondingly lower aggregate payments and shareholder expenses.
THE FUND'S SHARES HAVE TRADED AND MAY CONTINUE TO TRADE AT A DISCOUNT TO NET
ASSET VALUE
Shares of closed-end management investment companies frequently trade at a
discount from their net asset value (the market price per share is less than the
value per share of the net assets). This characteristic is a risk separate and
distinct from the risk that the Fund's net asset value will decrease as a result
of its investment activities and may be greater for investors expecting to sell
their shares relatively soon after completion of this offering. For those
investors, realization of a gain or loss on their investments is likely to be
more dependent upon the existence of a premium or discount than upon portfolio
performance. Historically the stock has sold sometimes above and sometimes below
net asset value. See 'Capital Stock.' The Fund cannot predict whether its shares
will trade at, above or below net asset value in the future.
THE FUND'S INVESTMENTS IN FOREIGN SECURITIES MAY SUBJECT YOU TO INCREASED RISK
The Fund may invest up to 25% of its assets in foreign securities. Many
foreign securities may be less liquid and their prices more volatile than
securities of comparable U.S. companies. The issuance of foreign securities and
the activities of brokers are generally subject to less governmental supervision
and regulation than U.S. securities and brokers, and commissions on foreign
securities are generally higher than negotiated commissions in the United
States. In addition, there may, in certain instances, be delays in the
settlement of transactions effected in foreign markets. Certain countries
restrict foreign
18
<PAGE>
investments in their securities markets. These restrictions may limit or
preclude investment in certain countries or in certain industries or market
sectors, or may increase the cost of investing in securities of particular
companies.
Foreign companies are not generally subject to uniform accounting, auditing,
and financial reporting standards or to other regulatory requirements comparable
to those applicable to U.S. companies. Thus, there may be less available
information concerning non-U.S. issuers of securities held by the Fund than is
available concerning U.S. companies. In addition, with respect to some foreign
countries there is the possibility of nationalization, expropriation or
confiscatory taxation. Income earned in a foreign nation may be subject to
taxation (including withholding taxes on interest and dividends), or other taxes
may be imposed with respect to investments in foreign securities. Other risks
associated with investments in foreign securities include limitations on the
removal of securities, property or other assets of the Fund, difficulties in
pursuing legal remedies and obtaining judgments in foreign courts, political or
social instability, and diplomatic developments that could adversely affect the
Fund's investments in companies located in foreign countries.
INVESTMENT OBJECTIVES AND POLICIES
For a more detailed discussion of the Fund's investment policies, see
'Investment Policies' in the Statement of Additional Information.
GENERAL
The primary investment objectives of the Fund are growth and conservation of
capital. Income receives secondary consideration. To attain these objectives it
is not the policy of the Fund to restrict itself as to the types of securities
(such as bonds, preferred or common stocks) in which it invests or as to the
proportion of the value of its assets that may be invested in any type of
securities. Normally, the assets of the Fund will be invested in common stocks
or securities convertible into common stocks of companies in industries the
investment manager believes have the potential to grow at a faster rate than the
economy as a whole and that appear to have above-average earnings growth
potential. However, subject to the limitations set forth below, the Fund may,
without limit, invest its assets in non-convertible bonds, debentures, notes or
other evidences of indebtedness whether for the short or long term or hold a
portion of its assets in cash, government securities or other types of
securities, whenever the Fund's management deems such investments advisable.
These policies may not be changed unless authorized by the vote of stockholders
of the Fund.
At December 31, 1999, the portfolio of investments was composed as follows
(as a percentage of Total Investments):
<TABLE>
<S> <C>
Common Stocks............................................... 90.4%
Convertible Preferred Stock................................. 1.9%
Corporate Obligations....................................... 2.9%
Repurchase Agreements....................................... 3.9%
Purchased Options........................................... 0.9%
</TABLE>
19
<PAGE>
As of December 31, 1999, the assets were invested in the following
industries and financial instruments:
<TABLE>
<CAPTION>
% OF
INDUSTRY NET ASSETS
-------- ----------
<S> <C>
Basic Industries............................................ 4.6%
Capital Goods............................................... 2.2%
Communication Services...................................... 10.1%
Consumer Cyclicals.......................................... 6.3%
Consumer Non-cyclicals...................................... 8.3%
Energy...................................................... 6.7%
Financial Services.......................................... 12.7%
Health Care................................................. 9.6%
Technology.................................................. 28.2%
Utilities and REIT's........................................ 0.7%
Transportation.............................................. 1.0%
----
Subtotal for Long-term Domestic Investments................. 90.4%
----
----
</TABLE>
The ten largest holdings at December 31, 1999 (as a percentage of net
assets) were:
<TABLE>
<CAPTION>
% OF TOTAL
POSITION INVESTMENTS
-------- -----------
<S> <C>
1) Microsoft Corporation................................... 5.3%
2) Cisco Systems, Inc. .................................... 3.7%
3) Costco Wholesale Corporation............................ 2.8%
4) MCI WorldCom, Inc. ..................................... 2.7%
5) Corning Inc. ........................................... 2.5%
6) The Bank of New York Co., Inc. ......................... 2.5%
7) Federated Department Stores, Inc. ...................... 2.3%
8) GTE Corp. .............................................. 2.2%
9) News Corp. Ltd. ADR..................................... 1.9%
10) Bell Atlantic Corp. .................................... 1.9%
</TABLE>
INVESTMENT POLICIES
The Fund retains flexibility in the management of its portfolio without
restrictions as to the proportion of assets which may be invested in any classes
of securities. The Fund anticipates, however, that its portfolio will consist
primarily of equity securities.
Since there may be periods, including those of unusual market conditions,
during which the Fund's management may deem it advisable to invest varying
portions of the Fund's fixed assets in income securities or to hold substantial
amounts of cash or its equivalent, the Fund retains the flexibility to do so.
The Fund purchases and sells securities as considered advisable by
management. The Fund usually holds securities for the long term, but may sell
portfolio securities whenever the Fund's management deems such sales to be
advisable, regardless of how long the Fund has owned such securities.
In order to enhance returns, reduce risks, and manage taxes and cash flows,
the Fund may invest in derivatives.
The Fund may invest in readily marketable securities, securities with
limited marketability or non-marketable securities. Although the Fund's
portfolio usually will consist of equity securities listed on the New York and
other stock exchanges, issues traded in the over-the-counter market may also be
purchased and held to the extent deemed advisable by the Fund's management.
The Fund may also purchase the securities of non-U.S. issuers. These
securities may be denominated and traded in foreign currencies, and may be
traded in the US or on international stock exchanges.
20
<PAGE>
OTHER INVESTMENT TECHNIQUES
The Fund uses several derivative strategies to hedge market risks (such as
broad or specific market increments, interest rates and currency exchange rates)
and cash flows and to seek to increase the Fund's income or gain, including the
purchase of calls, puts and collars. The Fund owns 'in the money' calls on the
Standard & Poor's 500 Index of Composite Stocks ('S&P 500 Index'), funded by a
combination of cash, high yield bonds and convertible bonds ('in the money'
means the value of the underlying instrument or stock index exceeds, in the case
of a call option, or is less than, in the case of a put option, the exercise
price of the option). This strategy keeps the Fund fully invested, while giving
it the flexibility to easily manage the volatile cash flows that occur when the
Fund pays its capital gains distributions. 'In the money' call options on the
S&P 500 Index fall less than the market does when the value of the S&P 500 Index
nears or falls below the strike price of the option. Therefore this strategy
should make the Fund less volatile than the S&P 500 Index in the event of a
severe market decline. The Fund also owns puts on the S&P 500 Index. This
strategy will protect against a decline in the Fund's return in the event of a
market decline. The Fund writes covered calls in order to increase its returns.
Both of these strategies should make the Fund less volatile than the S&P 500 in
the event of a market decline.
The Fund may purchase put and call options and write covered put and call
options on stocks and stock indices listed on domestic and foreign securities
exchanges in order to hedge against movements in the equity markets or to
increase income or gain to the Fund. In addition, the Fund may purchase options
on stocks that are traded over-the-counter. Options on stock indices are similar
to options on specific securities. However, because options on stock indices do
not involve the delivery of an underlying security, the option represents the
holder's right to obtain from the writer cash in an amount equal to a fixed
multiple of the amount by which the exercise price exceeds (in the case of a
put) or is less than (in the case of a call) the closing value of the underlying
stock index on the exercise date. Stock index options are subject to position
and exercise limits and other regulations imposed by the exchange on which they
are traded.
The Fund may enter into repurchase agreements for cash management purposes.
A repurchase agreement is a transaction in which the seller of a security
commits itself at the time of the sale to repurchase that security from the
buyer at a mutually agreed upon time and price. The Fund will enter into
repurchase agreements only with dealers, domestic banks or recognized financial
institutions which, in the opinion of SaBAM based on guidelines established by
the Fund's Board of Directors, are deemed creditworthy. SaBAM will monitor the
value of the securities underlying the repurchase agreement at the time the
transaction is entered into and at all times during the term of the repurchase
agreement to ensure that the value of the securities always exceeds the
repurchase price. In the event of default by the seller under the repurchase
agreement, the Fund may incur losses and experience time delays in connection
with the disposition of the underlying securities. To the extent that, in the
meantime, the value of the securities that the Fund has purchased has decreased,
the Fund could experience a loss.
FUNDAMENTAL POLICIES
The Fund may invest such percentage of its assets in the securities of one
issuer as the Fund's management deems advisable; provided, however, that at no
time shall the Fund have less than 75% of the value of its assets invested in
cash, cash items, U.S. government securities, securities of other investment
companies and other securities limited in respect of any one issuer to not more
than 5% of the value of the assets of the Fund and to not more than 10% of such
issuer's outstanding voting securities.
The Fund may not issue bonds, debentures or senior equity securities.
The Fund may not borrow money on a long-term basis for the purpose of
creating leverage on its capital stock. The Fund may borrow money when deemed
advisable for temporary corporate purposes; provided, however, that the amount
of such borrowings plus the amount of all of its other outstanding borrowings
does not exceed 25% of the value of the total net assets of the Fund.
The Fund may participate in underwritings to the extent permitted by Section
12(c) of the Investment Company Act of 1940 ('1940 Act'), if and when, in the
opinion of its Board of Directors,
21
<PAGE>
such underwritings are advantageous to the Fund. In certain instances when the
Fund may acquire securities under circumstances where it would be necessary to
register such securities under the Securities Act of 1933 before they could be
reoffered or sold to the public ('restricted securities') the Fund may be deemed
a statutory underwriter for purposes of that Act. No more than 15% of the value
of the total assets of the Fund will be invested in illiquid assets.
The Fund's policy is not to concentrate investments in any one industry. The
Fund may not make an additional investment in any industry if such investment
would result in its having more than 25% of the value of its total assets at
such time in investments in such industry.
The Fund may purchase or otherwise acquire and sell or otherwise dispose of
real estate in its own name or in the name of any majority-owned subsidiary
whenever, in the judgment of its Board of Directors, it is deemed advantageous
to the Fund; provided, however, in the case of purchases, the cost of such real
estate plus the value of all other real estate owned at the time and all other
illiquid assets will not exceed 15% of the value of the total assets of the
Fund.
The Fund may purchase and sell commodities and commodity contracts (which
include, for purposes of this paragraph, futures contracts, including futures
contracts on interest rates, stock indices and currencies, options on futures
contracts, forward currency contracts and options on currencies) whenever it is
deemed advisable by its Board of Directors; provided, however, that it may not
purchase any commodities or enter into any commodity contracts if the cost of
such commodities or commodity contracts plus the value of all other commodities
or commodity contracts and borrowings exceeds 25% of the value of the total
assets of the Fund.
The Fund may make loans (1) when such loans are a part of or incidental to
other transactions in which the Fund may engage, (2) to subsidiaries, (3)
against full collateral and (4) otherwise as deemed advisable; provided,
however, that the Fund shall not make any such other loans if immediately
thereafter the aggregate of all loans made pursuant to this clause (4) at the
time outstanding shall exceed 10% of the value of its total assets; it being
understood that the purchase of an issue of bonds, debentures or other
securities, whether or not upon original issue, is not to be considered the
making of a loan, provided that such bonds, debentures or other securities are
liquid securities.
It is not the policy of the Fund to invest its assets for the purpose of
purchasing control of companies except when and if in the judgment of its Board
of Directors such investment is deemed advisable in order to protect the value
of the investment, subject to the limitations set forth above.
The Fund may purchase the securities of other closed-end investment
companies to the extent permitted by Section 12(d)(1) of the 1940 Act, provided
that no such purchase shall be made if immediately thereafter more than 15% of
the value of the assets of the Fund would be invested in such companies. The
Fund may also consummate mergers with other investment companies to the extent
permitted by Section 12(d)(1) of the 1940 Act whenever the opportunities arise
on terms that are favorable to the Fund in the opinion of its Board of
Directors.
The policies set forth above may not be changed unless authorized by the
vote of stockholders.
22
<PAGE>
MANAGEMENT
SALOMON BROTHERS ASSET MANAGEMENT INC
Salomon Brothers Asset Management Inc ('SaBAM') acts as investment manager
and administrator to the Fund. SaBAM is an indirect wholly-owned subsidiary of
Citigroup, Inc. SaBAM is responsible on a day-to-day basis for the management of
the Fund portfolio in accordance with the Fund's investment objectives and
policies, for making decisions to buy, sell, or hold particular securities, and
for day-to-day administration of the Fund. The agreement with SaBAM was most
recently approved by shareholders at a meeting held on January 15, 1998. SaBAM
is an indirect wholly-owned subsidiary of Citigroup, Inc. Citigroup businesses
produce a broad range of financial services -- asset management, banking and
consumer finance, credit and charge cards, insurance, investments, investment
banking and trading -- and use diverse channels to make them available to
consumer and corporate customers around the world.
SaBAM has delegated certain administrative responsibilities to SSB Citi Fund
Management LLC ('SSBC'), an affiliate of SaBAM, pursuant to a sub-administration
agreement between SaBAM and SSBC.
Certain officers and a director of the Fund are also officers and directors
of the investment manager.
The Fund pays SaBAM 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
Composite Stocks ('S&P 500 Index'). The base fee is paid quarterly based on the
following annual rates:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS ANNUAL FEE RATE
- ------------------------ ---------------
<S> <C>
First $350 million.......................................... .650%
Next $150 million........................................... .550%
Next $250 million........................................... .525%
Next $250 million........................................... .500%
Over $1 billion............................................. .450%
</TABLE>
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 S&P 500
Index by at least one percentage point. For each percentage point 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 occurs if the
Fund's performance exceeds or is exceeded by the S&P 500 Index of 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 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 fiscal years ended December 31, 1999, 1998 and 1997, SaBAM was paid
for advisory services rendered to the Fund $9,170,935, $7,647,618, and
$6,858,516, respectively. These amounts reflect a total decrease of the base
management fee of $28,228, $1,084,003 and $756,750, respectively, due to the
performance adjustment.
SaBAM, a Delaware corporation, is a registered investment adviser under the
Investment Advisers Act of 1940. As of December 31, 1999, SaBAM had global
assets under management of approximately $28.7 billion in multiple product
services, including equities, fixed income, derivatives and balanced portfolios.
SaBAM has been engaged in the investment advisory business in the United States
for 11 years. The principal business address of SaBAM is 7 World Trade Center,
New York, New York 10048.
23
<PAGE>
DIRECTORS AND OFFICERS
The business and affairs of the Fund are managed under the direction of its
board of directors, and day to day operations are conducted through or under the
direction of its officers. For information regarding the directors and officers,
see 'Management -- Directors and Officers' in the statement of additional
information.
PORTFOLIO MANAGEMENT
Michael Kagan is primarily responsible for the management of the Fund's
assets. Mr. Kagan joined SaBAM in December 1994. He served as co-manager for the
Fund from October 1995 through September 1998, and has served as the lead
manager for the Fund since October 1998.
EXPENSES
SaBAM is obligated to pay expenses associated with providing the services
contemplated by the agreements to which it is party, including compensation of
and office space for their officers and employees connected with investment
management and administration of the Fund.
The Fund pays all other expenses incurred in its operation including, among
other things:
legal and auditing expenses
costs of printing proxies, stock certificates and shareholder reports
fees of the custodian, the transfer agent and registrar
Securities and Exchange Commission fees
fees and expenses of the board of directors and its committees
accounting and pricing costs
stock exchange fees
taxes and governmental fees and any membership dues
expenses of registering or qualifying the shares for sale in various states
costs of shareholders meetings and other meetings
PORTFOLIO TRANSACTIONS
SaBAM will select the brokers or dealers that will execute the purchases and
sales of portfolio securities for the Fund. In connection with the selection of
brokers and dealers, the primary objective is to seek to obtain the execution of
each investment transaction at a price and commission which provides the most
favorable total cost or proceeds reasonably obtainable under the circumstances.
The Fund pays brokerage commissions to affiliates. Brokerage commissions of
$219,858 were paid to Salomon Smith Barney Inc. for investment transactions
executed on behalf of the Fund during the year ended December 31, 1999. For a
more detailed discussion of the Fund's brokerage allocation practice, see the
statement of additional information under 'Portfolio Transactions.'
DIVIDENDS AND DISTRIBUTIONS
It is the Fund's present policy to distribute at least semi-annually to
shareholders substantially all of its net investment income and net short-term
capital gains. The board intends to distribute annually any net capital gains
(the excess of net long-term capital gains over net short-term capital losses).
See 'Taxation.'
AUTOMATIC DIVIDEND REINVESTMENT PLAN
Pursuant to the Fund's Automatic Dividend Reinvestment Plan ('DR Plan'),
shareholders whose shares are registered in their own names will have all
dividends and distributions, net of any U.S. withholding tax, automatically
reinvested in additional shares, unless those shareholders elect to receive
24
<PAGE>
cash. The DR Plan is administered by The Bank of New York, agent for
shareholders of the Fund ('Agent'). Shareholders whose shares are held in the
name of a broker or nominee, may elect to have all dividends and distributions
reinvested automatically by the broker or nominee, unless the service is not
provided by the broker or nominee, or unless the shareholder elects to receive
distributions in cash.
Shareholders may choose from three different reinvestment options under the
DR Plan:
(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.
If the Fund declares a dividend or distribution and such distribution is to
be reinvested under the DR Plan, participants under the DR Plan will receive the
dividend or distribution either in newly-issued shares of the Fund or in shares
of the Fund purchased on the New York Stock Exchange or otherwise on the open
market, depending on the relationship between the market price per share of the
Fund and the net asset value per share of the Fund. Whenever the market price
per share plus estimated brokerage commissions equals or exceeds the net asset
value per share, the Agent shall receive the dividend or distribution in newly
issued shares of the Fund on the shareholders' behalf. If, however, on such date
the net asset value per share exceeds the market price per share plus estimated
brokerage commissions, the Agent will purchase shares in the open market. Any
newly-issued shares will be valued at the time specified in the DR Plan, either
at the market price per share of the Fund or at the greater of (a) the net asset
value per share of the Fund and (b) 95% of the market price per share of the
Fund, depending on the relationship between market price and net asset value at
that time. If a dividend or distribution is not large enough to buy a full
share, the Agent will credit a shareholder with a fractional share, computed to
four decimal places, which will earn additional dividends and distributions as
full shares do.
CASH PAYMENT PLAN
Under the Cash Payment Plan, a shareholder has 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. A shareholder may make these payments regularly or from time
to time, as they choose. A shareholder 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 the
Fund 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.
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
Shareholders may deposit with the Agent stock certificates representing
ownership of capital stock in the Fund. 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 will be canceled.
25
<PAGE>
COST TO PARTICIPANTS
Except as specifically noted, shareholders will not bear any of the costs of
administering the DR Plan or the Cash Payment Plan. A shareholder will pay their
proportionate share of the commissions paid on all open-market purchases.
Dividends and distributions, even though automatically reinvested, continue to
be taxable.
The automatic reinvestment of dividends and capital gains distributions does
not relieve participants of any income tax which may be payable on such
dividends or distributions.
The Fund 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
TAXATION
General. The following information is meant to be a summary. Please see the
statement of additional information for additional information. You should rely
on your own tax advisor for advice about the particular federal, state and local
tax consequences to you of investing in the Fund.
Although the Fund intends to operate so that it will not have to pay federal
income or excise tax, if it does have to pay tax, this would adversely affect
investment performance.
The Fund will distribute substantially all of its income and gains to
shareholders every year, and you will be taxed on distributions you receive,
regardless of whether they are paid in cash or are reinvested in shares. If the
Fund declares a dividend in October, November or December but pays it in
January, you may be taxed on the dividend as if you received it in the previous
year.
The Fund will send you a tax report each year. The report will tell you
which dividends and redemptions must be treated as taxable ordinary income and
which, if any, are long-term capital gain. If the Fund designates a dividend as
a capital gain distribution, you will pay tax on that dividend at the long-term
capital gains tax rate, no matter how long you have held your shares.
If you hold your shares in a tax-deferred retirement account, such as an
IRA, you generally will not have to pay tax on dividends until they are
distributed from the account. These accounts are subject to complex tax rules,
and you should consult your tax adviser about investment through a tax-deferred
account.
You will generally have a capital gain or loss if you sell your shares. The
amount of the gain or loss and the rate of tax will depend primarily upon how
much you paid for the shares, how much you sell them for, and how long you held
them.
The Fund may be required to withhold U.S. federal income tax at the rate of
31% of all taxable distributions payable to you if you fail to provide your
correct taxpayer identification number or to make required certifications, or if
you have been notified by the IRS that you are subject to backup withholding.
Backup withholding is not an additional tax. Any amounts withheld may be
credited against your U.S. federal income tax liability.
Foreign Shareholders. If you are a nonresident alien individual, a foreign
trust or estate, a foreign corporation, or a foreign partnership under U.S.
laws, you will be subject to U.S. withholding tax at the rate of 30% (or
applicable lower treaty rate) except where such distributions are effectively
connected with a trade or business carried on by you in the United States.
Under certain circumstances more fully described in the statement of
additional information, distributions of net capital gains to you and gains from
sales of shares by you may not be subject to U.S. income tax.
26
<PAGE>
If the income from the Fund is effectively connected with a trade or
business carried on by you, distributions of net investment income and net
long-term capital gains, and any gains realized upon the sale or redemption of
shares, will be subject to U.S. income tax at the graduated rates applicable to
U.S. citizens or domestic corporations.
If you are entitled to claim the benefits of an applicable tax treaty, the
tax consequences to you may be different from those described herein. You are
advised to consult your own tax adviser with respect to the particular tax
consequences to you of an investment in the Fund.
Other Taxation. Income received by the Fund from sources within foreign
countries may be subject to withholding and other taxes imposed by such
countries. Tax conventions between certain countries and the United States may
reduce or eliminate such taxes. It is impossible to determine the effective rate
of foreign tax in advance since the amount of assets to be invested in various
countries is not known.
Distributions also may be subject to additional state, local and foreign
taxes depending on your particular situation. You are advised to consult your
own tax adviser with respect to the particular tax consequences to you of an
investment in the Fund and of the possible impact of proposed changes in
applicable tax laws.
NET ASSET VALUE
The net asset value per share is determined as of the close of business on
the NYSE on the last business day of each week and at month-end, by dividing the
value of the Fund's net assets (the value of its assets less its liabilities,
exclusive of capital stock and surplus) by the total number of shares of capital
stock outstanding. 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.
CAPITAL STOCK
The authorized capital stock of the Fund consists of 125,000,000 shares of
capital stock, $1.00 par value. Shares, when issued, will be fully paid and
nonassessable. All shares are equal as to dividends, assets and voting
privileges and have no conversion, preemptive or other subscription rights. In
the event of liquidation, each share of capital stock is entitled to its
proportion of the Fund's assets after payment of debts and expenses. As a holder
of shares of capital stock, you are entitled to one vote per share and do not
have cumulative voting rights.
Set forth below is information with respect to the capital stock as of May
15, 2000:
<TABLE>
<CAPTION>
AMOUNT HELD BY FUND
AMOUNT AUTHORIZED FOR ITS OWN ACCOUNT AMOUNT OUTSTANDING
----------------- ------------------- ------------------
<S> <C> <C>
125,000,000 Shares 0 Shares 94,609,124 Shares
</TABLE>
The number of shares outstanding as of May 15, 2000, adjusted to give
effect to the issuance of all the shares pursuant to the offer, including 25% of
the shares available for issuance pursuant to the over-subscription privilege,
would be 106,435,264.
The outstanding shares are listed and traded on the NYSE. The average weekly
trading volume of the common stock on the NYSE during the year ended December
31, 1999 was 68,559 shares. The following table sets forth for the quarters
indicated the high and low sales prices on the NYSE per share of common stock
and the net asset value and the premium or discount from net asset value at
which the common stock was trading, expressed as a percentage of net asset
value, at each of the high and low sales prices provided.
27
<PAGE>
<TABLE>
<CAPTION>
PREMIUM/
DISCOUNT
MARKET NET ASSET AS % OF
PRICE (1) VALUE NAV (2)
-------------- ------------- ---------------
QUARTER ENDED HIGH LOW HIGH LOW HIGH LOW
- ------------- ---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C>
March 31, 1998................................... 19 3/16 16 3/8 20.56 17.57 1.02 (10.02)
June 30, 1998.................................... 18 13/16 17 1/2 20.85 19.88 (8.92) (13.07)
September 30, 1998............................... 18 3/4 14 3/4 21.42 17.49 (5.59) (13.39)
December 31, 1998................................ 19 13/16 14 15/16 20.95 17.36 (0.55) (12.15)
March 31, 1999................................... 18 1/2 17 1/8 19.70 18.59 (3.00) (9.16)
June 30, 1999.................................... 19 13/16 17 15/16 20.76 19.60 (1.61) (10.71)
September 30,1999................................ 20 11/16 18 9/16 22.14 19.03 (0.24) (11.08)
December 31, 1999................................ 21 1/2 18 1/4 21.57 18.54 5.91 (2.59)
March 31, 2000................................... 19 13/16 17 15/16 21.05 18.28 1.57 (6.47)
Through May 11, 2000............................. 19 9/16 17 13/16 20.99 18.46 (4.48) (7.99)
</TABLE>
- ---------
(1) As reported by the NYSE.
(2) Based on the Fund's computations.
The Fund presently has provisions in its Charter and Bylaws (together, the
'Charter Documents') that are intended to limit (i) the ability of other
entities or persons to acquire control of the Fund, (ii) the Fund's freedom to
engage in certain transactions and (iii) the ability of the Fund's Directors or
stockholders to amend the Charter Documents or effect changes in the Fund's
management. These provisions of the Charter Documents may be regarded as
'anti-takeover' provisions. Under the Fund's Charter, the affirmative vote of
the holders of two-thirds of the shares entitled to be cast is required to
authorize any of the following actions: (i) a merger or consolidation of the
corporation (in which the corporation is not the surviving corporation) with (a)
an open-end investment company or (b) a closed-end investment company unless
such closed-end investment company's Charter requires a two-thirds or greater
vote of each class of such company's stock entitled to be cast to approve the
types of transactions discussed in this paragraph; (ii) the dissolution of the
corporation; (iii) the sale of all or substantially all of the assets of the
corporation to any person (as such term is defined in the 1940 Act); or (iv) any
amendment to the Charter which makes any class of the corporation's stock a
redeemable security (as such term is defined in the 1940 Act) or reduces the
two-thirds vote required to authorize the actions listed in this paragraph.
The provisions of the Charter Documents described above could have the
effect of depriving the owners of shares of the Fund of opportunities to sell
their shares at a premium over prevailing market prices by discouraging a third
party from seeking to obtain control of the Fund in a tender offer or similar
transaction. The overall effect of these provisions is to render more difficult
the accomplishment of a merger or the assumption of control by a principal
stockholder. The Board of Directors of the Fund has considered the foregoing
anti-takeover provisions and concluded that they are in the best interests of
the Fund and its stockholders.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND PAYING AGENT
The custodian for the Fund is PNC Bank, N.A., located at Airport Business
Center, International Court 2, 200 Stevens Drive, Lester, Pennsylvania 19133.
The transfer agent and dividend paying agent for the Fund is The Bank of New
York, located at 101 Barclay Street, New York, New York 10286.
LEGAL MATTERS
With respect to matters of United States law, the validity of the shares
offered hereby will be passed on for the Fund by Simpson Thacher & Bartlett, New
York, New York. Counsel for the Fund may rely, as to matters of Maryland law, on
Piper Marbury Rudnick & Wolfe LLP, Baltimore, Maryland.
28
<PAGE>
EXPERTS
The financial statements and financial highlights of the Fund as of December
31, 1999 have been incorporated by reference into the statement of additional
information in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting. PricewaterhouseCoopers LLP is located at 1177 Avenue of the
Americas, New York, New York 10036.
FURTHER INFORMATION
Further information concerning these securities and their issuer may be
found in the Registration Statement of which this prospectus constitutes a part
on file with the Securities and Exchange Commission. The Commission maintains a
World Wide Web site on the Internet at http://www.sec.gov. that contains the
prospectus, material incorporated by reference and other information regarding
registrants, such as the Fund, that file electronically with the Commission. The
Registration Statement may also be inspected without charge at the Commission's
office in Washington, D.C., and copies of all or any part thereof may be
obtained from such office after payment of the fees prescribed by the
Commission.
The Fund is subject to the informational requirements of the Securities
Exchange Act of 1934 and the 1940 Act, and in accordance therewith files reports
and other information with the Commission. Such reports and other information
can be inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, NW, Washington, D.C. 20549 and the Commission's
regional offices at Seven World Trade Center, New York, New York 10048. Copies
of such materials can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, NW, Washington, D.C. 20549 at prescribed rates.
Such reports and other information concerning the Fund also may be inspected at
the offices of the NYSE and are available on the Commission's World Wide Web
site on the Internet at http://www.sec.gov.
29
<PAGE>
TABLE OF CONTENTS
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information.........................................
Investment Policies......................................... 2
Investment Restrictions..................................... 5
Management.................................................. 7
Portfolio Transactions...................................... 9
Taxation.................................................... 10
Capital Stock............................................... 14
Financial Statements........................................ 14
</TABLE>
30
<PAGE>
_______________________________________________________________________________
_______________________________________________________________________________
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR THAT
THE FUND HAS REFERRED YOU TO. THE FUND HAS NOT AUTHORIZED ANYONE TO PROVIDE YOU
WITH INFORMATION THAT IS DIFFERENT. THIS PROSPECTUS IS NOT AN OFFER TO SELL
THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY
STATE WHERE THE OFFER, SOLICITATION OR SALE IS NOT PERMITTED. YOU SHOULD NOT
ASSUME THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE FUND SINCE
SUCH DATE.
-------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 2
Fee Table................................................... 6
Financial Highlights........................................ 7
The Offer................................................... 9
Use of Proceeds............................................. 15
The Fund.................................................... 16
Risk Factors and Special Considerations..................... 17
Investment Objectives and Policies.......................... 19
Management.................................................. 23
Portfolio Transactions...................................... 24
Dividends and Distributions................................. 24
Taxation.................................................... 26
Net Asset Value............................................. 27
Capital Stock............................................... 27
Custodian, Transfer Agent and Dividend Paying Agent......... 28
Legal Matters............................................... 28
Experts..................................................... 29
Further Information......................................... 29
</TABLE>
9,460,912 SHARES
THE SALOMON BROTHERS FUND INC
CAPITAL STOCK
($1.00 PAR VALUE)
----------------
PROSPECTUS
----------------
_______________________________________________________________________________
_______________________________________________________________________________
<PAGE>
THE SALOMON BROTHERS FUND INC
STATEMENT OF ADDITIONAL INFORMATION
The Salomon Brothers Fund Inc. is a closed-end, diversified management
investment company. Its primary investment objectives are growth and
conservation of capital. Income receives secondary consideration. The Fund
invests primarily in common stock of companies with strong positions in
industries with the potential to grow faster than the economy as a whole. The
Fund seeks and holds, generally for the long term, the common stock of
well-managed, favorably situated companies we expect will produced above-average
earnings and dividend growth over time.
This statement of additional information is not a prospectus, but you should
read it in conjunction with the prospectus for the Fund dated ,
2000. This statement of additional information does not include all information
that you should consider before purchasing shares, and you should obtain and
read the prospectus prior to purchasing shares. You may obtain a copy of the
prospectus without charge, by calling D.F. King & Co., Inc., the information
agent, collect at (212) 269-5550 (for banks and brokers) and toll free at
(888) 242-8156 (for all others). This statement of additional information
incorporates by reference the entire prospectus.
-------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information.........................................
Investment Policies......................................... 2
Investment Restrictions..................................... 5
Management.................................................. 7
Portfolio Transactions...................................... 9
Taxation.................................................... 10
Capital Stock............................................... 14
Financial Statements........................................ 14
</TABLE>
The prospectus and this statement of additional information omit certain of
the information contained in the registration statement filed with the
Securities and Exchange Commission, Washington, D.C. You may obtain the
registration statement from the Securities and Exchange Commission upon payment
of the fee prescribed, or inspect it at the Securities and Exchange Commission's
office at no charge.
-------------------
This statement of additional information is dated , 2000
<PAGE>
INVESTMENT POLICIES
INVESTMENT POLICIES
The Fund retains flexibility in the management of its portfolio without
restrictions as to the proportion of assets which may be invested in any classes
of securities. The Fund anticipates, however, that its portfolio will consist
primarily of equity securities.
Since there may be periods, including those of unusual market conditions,
during which the Fund's management may deem it advisable to invest varying
portions of the Fund's fixed assets in income securities or to hold substantial
amounts of cash or its equivalent, the Fund retains the flexibility to do so.
The Fund purchases and sells securities as considered advisable by
management. The Fund usually holds securities for the long term, but may sell
portfolio securities whenever the Fund's management deems such sales to be
advisable, regardless of how long the Fund has owned such securities.
In order to enhance returns, reduce risks, and manage taxes and cash flows,
the Fund may invest in derivatives.
The Fund may invest in readily marketable securities, securities with
limited marketability or non-marketable securities. Although the Fund's
portfolio usually will consist of equity securities listed on the New York and
other stock exchanges, issues traded in the over-the-counter market may also be
purchased and held to the extent deemed advisable by the Fund's management.
The Fund may also purchase the securities of non-U.S. issuers. These
securities may be denominated and traded in foreign currencies, and may be
traded in the US or on international stock exchanges.
OTHER INVESTMENT TECHNIQUES
The Fund uses several derivative strategies to hedge market risks (such as
broad or specific market increments, interest rates and currency exchange rates)
and cash flows and to seek to increase the Fund's income or gain, including the
purchase of calls, puts and collars. The Fund owns 'in the money' calls on the
S&P 500 Index, funded by a combination of cash, high yield bonds and convertible
bonds ('in the money' means the value of the underlying instrument or stock
index exceeds, in the case of a call option, or is less than, in the case of a
put option, the exercise price of the option). This strategy keeps the Fund
fully invested, while giving it the flexibility to easily manage the volatile
cash flows that occur when the Fund pays its capital gains distributions. 'In
the money' call options on the S&P 500 Index fall less than the market does when
the value of the S&P 500 Index nears or falls below the strike price of the
option. Therefore this strategy should make the Fund less volatile than the S&P
500 Index in the event of a severe market decline. The Fund also owns puts on
the S&P 500 Index. This strategy will protect against a decline in the Fund's
return in the event of a market decline. The Fund writes covered calls in order
to increase its returns. The Fund purchases collars in order to protect against
near term risk in its equity positions. Both of these strategies should make the
Fund less volatile than the S&P 500 in the event of a market decline.
The Fund may purchase put and call options and write covered put and call
options on stocks and stock indices listed on domestic and foreign securities
exchanges in order to hedge against movements in the equity markets or to
increase income or gain to the Fund. In addition, the Fund may purchase options
on stocks that are traded over-the-counter. Options on stock indices are similar
to options on specific securities. However, because options on stock indices do
not involve the delivery of an underlying security, the option represents the
holder's right to obtain from the writer cash in an amount equal to a fixed
multiple of the amount by which the exercise price exceeds (in the case of a
put) or is less than (in the case of a call) the closing value of the underlying
stock index on the exercise date. Stock index options are subject to position
and exercise limits and other regulations imposed by the exchange on which they
are traded.
Options. In order to hedge against adverse market shifts or to increase
income or gain, the Fund may purchase put and call options or write 'covered'
put and call options on stock indices, interest rates and currencies. In
addition, in order to hedge against adverse market shifts or to increase its
2
<PAGE>
income, the Fund may purchase put and call options and write 'covered' put and
call options on stocks, stock indices and currencies. The Fund may utilize
options on currencies in order to hedge against currency exchange rate risks. A
call option is 'covered' if, so long as the Fund is obligated as the writer of
the option, it will own: (i) the underlying investment subject to the option;
(ii) securities convertible or exchangeable without the payment of any
consideration into the securities subject to the option; or (iii) a call option
on the relevant security or currency with an exercise price no higher than the
exercise price on the call option written. A put option is 'covered' if, to
support its obligation to purchase the underlying investment if a put option
that the Fund writes is exercised, the Fund will either (a) deposit with its
custodian in a segregated account cash, cash equivalents, U.S. government
securities or other high grade liquid debt obligations having a value at least
equal to the exercise price of the underlying investment or (b) continue to own
an equivalent number of puts of the same 'series' (that is, puts on the same
underlying investment having the same exercise prices and expiration dates as
those written by the Fund), or an equivalent number of puts of the same 'class'
(that is, puts on the same underlying investment) with exercise prices greater
than those that it has written (or, if the exercise prices of the puts it holds
are less than the exercise prices of those it has written, it will deposit the
difference with its custodian in a segregated account). Parties to options
transactions must make certain payments and/or set aside certain amounts of
assets in connection with each transaction.
In all cases except for certain options on interest rate futures contracts,
by writing a call, the Fund will limit its opportunity to profit from an
increase in the market value of the underlying investment above the exercise
price of the option for as long as the Fund's obligation as writer of the option
continues. By writing a put, the Fund will limit its opportunity to profit from
a decrease in the market value of the underlying investment below the exercise
price of the option for as long as the Fund's obligation as writer of the option
continues. Upon the exercise of a put option written by the Fund, the Fund may
suffer an economic loss equal to the difference between the price at which the
Fund is required to purchase the underlying investment and its market value at
the time of the option exercise, less the premium received for writing the
option. Upon the exercise of a call option written by the Fund, the Fund may
suffer an economic loss equal to an amount not less than the excess of the
investment's market value at the time of the option exercise over the Fund's
acquisition cost of the investment, less the sum of the premium received for
writing the option and the positive difference, if any, between the call price
paid to the Fund and the Fund's acquisition cost of the investment.
In all cases except for certain options on interest rate futures contracts,
in purchasing a put option, the Fund will seek to benefit from a decline in the
market price of the underlying investment, while in purchasing a call option,
the Fund will seek to benefit from an increase in the market price of the
underlying investment. If an option purchased is not sold or exercised when it
has remaining value, or if the market price of the underlying investment remains
equal to or greater than the exercise price, in the case of a put, or remains
equal to or below the exercise price, in the case of a call, during the life of
the option, the Fund will lose its investment in the option. For the purchase of
an option to be profitable, the market price of the underlying investment must
decline sufficiently below the exercise price, in the case of a put, and must
increase sufficiently above the exercise price, in the case of a call, to cover
the premium and transaction costs.
In the case of certain options on interest rate futures contracts, the Fund
may purchase a put option in anticipation of a rise in interest rates, and
purchase a call option in anticipation of a fall in interest rates. By writing a
covered call option on interest rate futures contracts, the Fund will limit its
opportunity to profit from a fall in interest rates. By writing a covered put
option on interest rate futures contracts, the Fund will limit its opportunity
to profit from a rise in interest rates.
The Fund may choose to exercise the options it holds, permit them to expire
or terminate them prior to their expiration by entering into closing
transactions. The Fund may enter into a closing purchase transaction in which
the Fund purchases an option having the same terms as the option it had written
or a closing sale transaction in which the Fund sells an option having the same
terms as the option it had purchased. A covered option writer unable to effect a
closing purchase transaction will not be able to sell the underlying security
until the option expires or the underlying security is delivered upon exercise,
with the result that the writer will be subject to the risk of market decline in
the underlying security during such period. Should the Fund choose to exercise
an option, the Fund will
3
<PAGE>
purchase in the open market the securities, commodities or commodity futures
contracts underlying the exercised option.
Exchange-listed options on securities and currencies, with certain
exceptions, generally settle by physical delivery of the underlying security or
currency, although in the future, cash settlement may become available.
Frequently, rather than taking or making delivery of the underlying instrument
through the process of exercising the option, listed options are closed by
entering into offsetting purchase or sale transactions that do not result in
ownership of the new option. Index options are cash settled for the net amount,
if any, by which the option is 'in-the-money' (that is, the amount by which the
value of the underlying instrument exceeds, in the case of a call option, or is
less than, in the case of a put option, the exercise price of the option) at the
time the option is exercised.
Put options and call options typically have similar structural
characteristics and operational mechanics regardless of the underlying
instrument on which they are purchased or sold. Thus, the following general
discussion relates to each of the particular types of options discussed in
greater detail below. In addition, many derivatives involving options require
segregation of Fund assets in special accounts.
A put option gives the purchaser of the option, upon payment of a premium,
the right to sell, and the writer of the obligation to buy, the underlying
security, index, currency or other instrument at the exercise price. The Fund's
purchase of a put option on a security, for example, might be designed to
protect its holdings in the underlying instrument (or, in some cases, a similar
instrument) against a substantial decline in the market value of such instrument
by giving the Fund the right to sell the instrument at the option exercise
price. A call option, upon payment of a premium, gives the purchaser of the
option the right to buy, and the seller the obligation to sell, the underlying
instrument at the exercise price. The Fund's purchase of a call option on a
security, financial futures contract, index, currency or other instrument might
be intended to protect the Fund against an increase in the price of the
underlying instrument that it intends to purchase in the future by fixing the
price at which it may purchase the instrument. An 'American' style put or call
option may be exercised at any time during the option period, whereas a
'European' style put or call option may be exercised only upon expiration or
during a fixed period prior to expiration.
Interest Rate and Equity Swaps and Related Transactions. The Fund may
purchase or sell interest rate and equity caps, floors and collars. The Fund may
enter into these transactions in order to hedge against either a decline in
value of the securities included in the Fund's portfolio, or against an increase
in the price of the securities which it plans to purchase, or in order to
preserve or maintain a return or spread on a particular investment or portion of
its portfolio or to achieve a particular return on cash balances, or in order to
increase income or gain. Interest rate and equity swaps involve the exchange by
the Fund with another party of their respective commitments to make or receive
payments based on a notional principal amount. The purchase of an interest rate
or equity cap entitles the purchaser, to the extent that a specified index
exceeds a predetermined level, to receive payments on a contractually-based
principal amount from the party selling the interest rate or equity cap. The
purchase of an interest rate or equity floor entitles the purchaser, to the
extent that a specified index falls below a predetermined rate, to receive
payments on a contractually-based principal amount from the party selling the
interest rate or equity floor. A collar is a combination of a cap and a floor
which preserve a certain return within a predetermined range of values.
The Fund may enter into interest rate and equity swaps, caps, floors and
collars on either an asset-based or liability-based basis, depending on whether
it is hedging its assets or its liabilities, and will usually enter into
interest rate and equity swaps on a net basis (i.e., the two payment streams are
netted out), with the Fund receiving or paying, as the case may be, only the net
amount of the two payments. The net amount of the excess, if any, of the Fund's
obligations over its entitlements with respect to each interest rate or equity
swap will be accrued on a daily basis, and an amount of liquid assets having an
aggregate net asset value at least equal to the accrued excess will be
maintained in a segregated account by the Fund's custodian in accordance with
procedures established by the Board of Directors. If the Fund enters into an
interest rate or equity swap on other than a net basis, the Fund will maintain a
segregated account in the full amount accrued on a daily basis of the Fund's
obligations with respect to the swap. The Fund will only enter into interest
rate and equity swap, cap, floor or collar transactions
4
<PAGE>
with counterparties the investment manager deems to be creditworthy. The
investment manager will monitor the creditworthiness of counterparties to its
interest rate and equity swap, cap, floor and collar transactions on an ongoing
basis. If there is a default by the other party to such a transaction, the Fund
will have contractual remedies pursuant to the agreements related to the
transaction. The swap market has grown substantially in recent years with a
large number of banks and investment banking firms acting both as principals and
agents utilizing standardized swap documentation. The investment manager has
determined that, as a result, the swap market is liquid. Caps, floors and
collars are more recent innovations for which standardized documentation has not
yet been developed and, accordingly, they are less liquid than swaps. To the
extent the Fund sells caps, floors and collars it will maintain in a segregated
account cash and/or, cash equivalents or other liquid high grade debt securities
having an aggregate net asset value at least equal to the full amount, accrued
on a daily basis, of the Fund's obligations with respect to the caps, floors or
collars. The use of interest rate and equity swaps is a highly specialized
activity which involves investment techniques and risks different from those
associated with ordinary portfolio securities transactions. If the investment
manager is incorrect in its forecasts of market values, interest rates and other
applicable factors, the investment performance of the Fund would diminish
compared with what it would have been if these investment techniques were not
utilized. Moreover, even if the investment manager is correct in its forecasts,
there is a risk that the swap position may correlate imperfectly with the price
of the asset or liability being hedged.
The Fund may enter into repurchase agreements for cash management purposes.
A repurchase agreement is a transaction in which the seller of a security
commits itself at the time of the sale to repurchase that security from the
buyer at a mutually agreed upon time and price. The Fund will enter into
repurchase agreements only with dealers, domestic banks or recognized financial
institutions which, in the opinion of SaBAM based on guidelines established by
the Fund's Board of Directors, are deemed creditworthy. SaBAM will monitor the
value of the securities underlying the repurchase agreement at the time the
transaction is entered into and at all times during the term of the repurchase
agreement to ensure that the value of the securities always exceeds the
repurchase price. In the event of default by the seller under the repurchase
agreement, the Fund may incur losses and experience time delays in connection
with the disposition of the underlying securities. To the extent that, in the
meantime, the value of the securities that the Fund has purchased has decreased,
the Fund could experience a loss.
INVESTMENT RESTRICTIONS
The Fund is subject to the following restrictions that may not be changed
without the approval of at least a majority of its outstanding voting
securities, as defined in the 1940 Act. The 1940 Act defines a 'majority' as the
lesser of (1) 67% of the shares represented at a meeting of which more than 50%
of the outstanding shares are present in person or represented by proxy, or (2)
more than 50% of the outstanding shares.
If a percentage restriction on investment or use of assets set forth above
is adhered to at the time a transaction is effected, later changes in
percentages resulting from changing values will not be considered a violation.
Under the 1940 Act, the Fund may neither invest more than 5% of its total
assets in the securities of any one investment company, nor acquire more than 3%
of the outstanding voting securities of any such investment company. In
addition, the Fund may not invest more than 10% of its total assets in
securities issued by all investment companies. As a shareholder in any
investment company, the Fund will bear its ratable share of that investment
company's expenses, and would remain subject to payment of the advisory,
sub-advisory and administrative fees with respect to assets so invested.
The Fund may invest such percentage of its assets in the securities of one
issuer as the Fund's management deem advisable; provided, however, that at no
time shall the Fund have less than 75% of the value of its assets invested in
cash, cash items, U.S. government securities, securities of other investment
companies and other securities limited in respect of any one issuer to not more
than 5% of the value of the assets of the Fund and to not more than 10% of such
issuer's outstanding voting securities.
The Fund may not issue bonds, debentures or senior equity securities.
5
<PAGE>
The Fund may not borrow money on a long-term basis for the purpose of
creating leverage on its capital stock. The Fund may borrow money when deemed
advisable for temporary corporate purposes; provided, however, that the amount
of such borrowings plus the amount of all of its other outstanding borrowings
does not exceed 25% of the value of the total net assets of the Fund.
The Fund may participate in underwritings to the extent permitted by Section
12(c) of the Investment Company Act of 1940 ('1940 Act'), if and when, in the
opinion of its Board of Directors, such underwritings are advantageous to the
Fund. In certain instances when the Fund may acquire securities under
circumstances where it would be necessary to register such securities under the
Securities Act of 1933 before they could be reoffered or sold to the public
('restricted securities') the Fund may be deemed a statutory underwriter for
purposes of that Act. No more than 15% of the value of the total assets of the
Fund will be invested in illiquid assets.
The Fund's policy is not to concentrate investments in any one industry. The
Fund may not make an additional investment in any industry if such investment
would result in its having more than 25% of the value of its total assets at
such time in investments in such industry.
The Fund may purchase or otherwise acquire and sell or otherwise dispose of
real estate in its own name or in the name of any majority-owned subsidiary
whenever, in the judgment of its Board of Directors, it is deemed advantageous
to the Fund; provided, however, in the case of purchases, the cost of such real
estate plus the value of all other real estate owned at the time and all other
illiquid assets will not exceed 15% of the value of the total assets of the
Fund.
The Fund may purchase and sell commodities and commodity contracts (which
include, for purposes of this paragraph, futures contracts, including futures
contracts on interest rates, stock indices and currencies, options on futures
contracts, forward currency contracts and options on currencies) whenever it is
deemed advisable by its Board of Directors; provided, however, that it may not
purchase any commodities or enter into any commodity contracts if the cost of
such commodities or commodity contracts plus the value of all other commodities
or commodity contracts and borrowings exceeds 25% of the value of the total
assets of the Fund.
The Fund may make loans (1) when such loans are a part of or incidental to
other transactions in which the Fund may engage, (2) to subsidiaries, (3)
against full collateral and (4) otherwise as deemed advisable; provided,
however, that the Fund shall not make any such other loans if immediately
thereafter the aggregate of all loans made pursuant to this clause (4) at the
time outstanding shall exceed 10% of the value of its total assets; it being
understood that the purchase of an issue of bonds, debentures or other
securities, whether or not upon original issue, is not to be considered the
making of a loan, provided that such bonds, debentures or other securities are
liquid securities.
It is not the policy of the Fund to invest its assets for the purpose of
purchasing control of companies except when and if in the judgment of its Board
of Directors such investment is deemed advisable in order to protect the value
of the investment, subject to the limitations set forth above.
The Fund may purchase the securities of other closed-end investment
companies to the extent permitted by Section 12(d)(1) of the 1940 Act, provided
that no such purchase shall be made if immediately thereafter more than 15% of
the value of the assets of the Fund would be invested in such companies. The
Fund may also consummate mergers with other investment companies to the extent
permitted by Section 12(d)(1) of the 1940 Act whenever the opportunities arise
on terms that are favorable to the Fund in the opinion of its Board of
Directors.
The policies set forth above may not be changed unless authorized by the
vote of stockholders.
6
<PAGE>
MANAGEMENT
DIRECTORS AND OFFICERS
The names of the directors and principal officers of the Fund are set forth
below, together with their positions and their principal occupations during the
past five years.
The officers manage day to day operations. The officers are directly
responsible to the board of directors. The directors set broad policies and
choose the officers.
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITION WITH THE FUND PRINCIPAL OCCUPATIONS FOR THE PAST FIVE YEARS
--------------------- ---------------------- ---------------------------------------------
<S> <C> <C>
Heath B. McLendon* (66)...... Chairman of the Board Managing Director, Salomon Smith Barney,
and President Inc.; President and Director, SSBC Fund
Management Inc. and Travelers Investment
Advisers, Inc. Prior to July 1993, Senior
Executive Vice President of Shearson Lehman
Brothers Inc., and Vice Chairman of Shearson
Asset Management
Charles F. Barber (83)....... Director Consultant; formerly Chairman of the Board,
ASARCO Incorporated
Andrew L. Breech (47)........ Director President, Dealer Operating Control Service,
Inc.
Carol L. Colman (54)......... Director Consultant, Colman Consulting
William R. Dill (69)......... Director Consultant; formerly President, Boston
Architectural Center; formerly President,
Anna Maria College; President Emeritus,
Babson College
Clifford M. Kirtland, Jr Director Member of the Advisory Committee,
(76)....................... Noro-Moseley Partners; formerly Director,
Oxford Industries, Inc., Shaw Industries,
Inc., Graphic Industries, Inc. and CSX Corp.;
formerly Chairman and President, Cox
Communications
Robert W. Lawless (63)....... Director 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 (58)......... Director Consultant; formerly Chairman and President,
Sterling Winthrop, Inc.
Thomas F. Schlafly (51)...... Director Of counsel to Blackwell Sanders Peper Martin
LLP (attorneys); President, The Saint Louis
Brewery, Inc.
Lewis E. Daidone (40)........ Executive Vice Managing Director, Salomon Smith Barney,
President & Treasurer Inc.; Senior Vice President and Director,
SSBC Fund Management Inc. and Travelers
Investment Advisers, Inc.
Michael A. Kagan (38)........ Executive Vice Director, Salomon Brothers Asset Management
President Inc
Martin L. Roberts (66)....... Vice President Vice President, Salomon Brothers Asset
Management Inc
Christina T. Sydor (46)...... Secretary Managing Director, Salomon Smith Barney,
Inc.; General Counsel, SSBC Fund Management
Inc. and Travelers Investment Advisers, Inc.
</TABLE>
- ---------
* Mr. McLendon is an interested person of the Fund by virtue of his position as
an officer of affiliates of SaBAM.
7
<PAGE>
The Fund pays each of its directors who is not a director, officer or
employee of SaBAM or any affiliate thereof an annual fee of $9,000. In addition,
the Fund reimburses those directors for travel and out-of-pocket expenses
incurred in connection with meetings. The aggregate remuneration paid to all
such unaffiliated directors by the Fund during the fiscal year ended December
31, 1999 was $81,490.
The following table shows certain compensation information for the directors
for the fiscal year ended December 31, 1999. None of the executive officers or
directors who are also officers or directors of SaBAM received any compensation
from the Fund for such period. The Fund has no bonus, profit sharing, pension or
retirement plans.
<TABLE>
<CAPTION>
TOTAL
PENSION OR ESTIMATED COMPENSATION
AGGREGATE RETIREMENT BENEFITS ANNUAL BENFITS FROM FUND AND
COMPENSATION ACCRUED AS PART OF UPON FUND COMPLEX
NAME OF DIRECTOR FROM FUND FUND EXPENSES RETIREMENT PAID TO DIRECTORS
- ---------------- --------- ------------- ---------- -----------------
<S> <C> <C> <C> <C>
Charles F. Barber................ $11,250 $0 $0 $135,100
Andrew L. Breech................. $10,500 $0 $0 $ 26,750
Carol L. Colman.................. $11,250 $0 $0 $ 54,100
William R. Dill.................. $10,500 $0 $0 $ 26,750
Clifford M. Kirtland, Jr......... $11,250 $0 $0 $ 28,250
Robert W. Lawless................ $11,250 $0 $0 $ 29,000
Louis P. Mattis.................. $10,500 $0 $0 $ 26,000
Thomas F. Schlafly............... $11,250 $0 $0 $ 28,250
</TABLE>
The Articles of Incorporation and Bylaws of the Fund provide that it will
indemnify its directors and officers against liabilities and expenses incurred
in connection with litigation in which they may be involved because of their
positions with the Fund to the fullest extent permitted by Maryland law. In
addition, the Articles of Incorporation provide that the directors and officers
will not be liable to the shareholders for money damages, except in limited
instances. However, nothing in the Articles of Incorporation or the Bylaws
protects or indemnifies a director, officer, employee or agent against any
liability to which such person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of such person's office.
ADVISORY ARRANGEMENTS
SaBAM is the investment manager pursuant to an agreement with the Fund dated
as of May 1, 1994 (as amended April 29, 1997) (the 'Investment Management
Agreement') which was most recently approved by the Fund's shareholders on
January 15, 1998. SaBAM is responsible on a day-to-day basis for the management
of the Fund portfolios in accordance with the Fund's investment objectives and
policies, for making decisions to buy, sell, or hold particular securities, and
for day-to-day administration of the Fund. SaBAM has delegated certain
adminstrative responsibilities to SSB Citi Fund Management LLC ('SSBC'), an
affiliate of SaBAM, pursuant to a sub-administration agreement between SaBAM and
SSBC.
The Fund pays SaBAM 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
Composite Stocks ('S&P 500 Index'). The base fee is paid quarterly based on the
following annual rates:
<TABLE>
<CAPTION>
ANNUAL
FEE
AVERAGE DAILY NET ASSETS RATE
- ------------------------ ----
<S> <C>
First $350 million..................................... .650%
Next $150 million...................................... .550%
Next $250 million...................................... .525%
Next $250 million...................................... .500%
Over $1 billion........................................ .450%
</TABLE>
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
8
<PAGE>
the investment record S&P 500 Index by at least one percentage point. For each
percentage point 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 occurs if the Fund's performance exceeds or is exceeded by the S&P
500 Index of 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 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 fiscal years ended December 31, 1999, 1998 and 1997, SaBAM was paid
for advisory services rendered to the Fund $9,170.935, $7,647,618, and
$6,858,516, respectively. These amounts reflect a total decrease of the base
management fee of $28,228, $1,084,003 and $756,750, respectively, due to the
performance adjustment.
Unless earlier terminated as described below, the Investment Management
Agreement remains in effect if approved annually (a) by the board of directors
or by the holders of a majority of the outstanding voting securities (as defined
in the Investment Company Act) and (b) by a majority of the directors who are
not parties to the Investment Management Agreement or 'interested persons' (as
defined in the 1940 Act) of any such party. The Investment Management Agreement
terminates on its assignment by any party and may be terminated without penalty
on 60 days' written notice at the option of the board of directors or by the
vote of the majority of the holders of the shares, or upon 60 days' written
notice, by SaBAM.
The services of SaBAM are not intended to be exclusive, and nothing in the
Investment Management Agreement prevents SaBAM or its affiliates from providing
similar services to other investment companies and other clients (whether or not
such clients' investment objectives and policies are similar to those of the
Fund) or from engaging in other activities.
CUSTODIAN
PNC Bank, N.A. ('PNC'), located at Airport Business Center, International
Court 2, 200 Stevens Drive, Lester, Pennsylvania 19133, acts as custodian under
a Custodian Agreement. As custodian, PNC, among other things, maintains custody
accounts in the name of the Fund, receives and delivers all assets for the Fund
upon purchase and upon sale or maturity, collects and receives all income and
other payments and distributions on account of the assets of the Fund and
makes disbursements on behalf of the Fund. For its services, PNC receives a
monthly fee based upon the daily average market value of securities held in
custody for the Fund. PNC also receives securities transaction charges,
including out-of-pocket expenses.
PORTFOLIO TRANSACTIONS
Decisions to buy and sell securities are made by SaBAM, subject to the
overall review of the board of directors. Portfolio securities transactions are
placed on behalf of the Fund by persons authorized by SaBAM. SaBAM manages other
investment companies and accounts that invest in fixed-income securities.
Although investment decisions for the Fund are made independently from those of
these other accounts, SaBAM may make investments of the type the Fund makes on
behalf of these other accounts. When the Fund and one or more other accounts is
prepared to invest in, or desires to dispose of, the same security, SaBAM will
allocate available investments or opportunities for each in a manner believed by
SaBAM to be equitable to each. In some cases, this procedure may adversely
affect the price paid or received by the Fund or the size of the position it
obtains or disposes of. The Fund may utilize Salomon Smith Barney Inc. and other
affiliates of SaBAM in connection with the purchase or sale of securities in
accordance with rules or exemptive orders adopted by the Securities and Exchange
Commission when SaBAM believes that the charge for the transaction does not
exceed usual and customary levels.
Transactions on U.S. and some foreign stock exchanges involve the payment of
negotiated brokerage commissions, which may vary among different brokers. The
cost of securities purchased from underwriters includes an underwriter's
commission or concession, and the prices at which securities are
9
<PAGE>
purchased from and sold to dealers in the over-the-counter markets include a
dealer's mark-up or mark-down, which normally is not disclosed. Fixed-income
securities are generally traded on a 'net' basis with dealers acting as
principal for their own accounts without a stated commission, although the price
of the security will likely include a profit to the dealer.
In selecting brokers or dealers to execute portfolio transactions on behalf
of the Fund, SaBAM will seek the best overall terms available. In addition,
unless otherwise directed by the board of directors, the Investment Management
Agreement authorizes SaBAM, in selecting brokers or dealers to execute a
particular transaction and in evaluating the best overall terms available, to
consider the brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934) and cause the Fund to pay
a broker-dealer which furnishes such services a higher commission than that
which might be charged by another broker-dealer for effecting the same
transaction, provided that such commission is deemed reasonable in terms of
either that particular transaction or the overall responsibilities of SaBAM to
the Fund. The fees payable under the Investment Management Agreement are not
reduced as a result of SaBAM's receiving such brokerage and research services.
Currently, it is the Fund's policy that SaBAM may at times pay higher
commissions than might otherwise be obtainable in recognition of brokerage
services felt necessary for the achievement of best available price and most
favorable execution of certain securities transactions. SaBAM will only pay such
higher commissions if it believes this to be in the best interest of the Fund.
Some brokers or dealers who may receive such higher commissions in recognition
of brokerage services related to execution of securities transactions are also
providers of research information to SaBAM and/or the Fund. Subject to the
primary objective set forth above, SaBAM has informed the Fund that it may pay
higher commission rates specifically for the purpose of obtaining research
services. The Fund will not pay to any affiliate of SaBAM a higher commission
rate specifically for the purpose of obtaining research services.
The Fund paid total brokerage commissions of $2,221,464, $2,369,816 and
$2,037,664, respectively, in fiscal years ended December 31, 1999, 1998 and
1997.
The Fund paid Salomon Smith Barney Inc. brokerage commissions of $219,858 in
fiscal year ended December 31, 1999. In fiscal year ended December 31, 1998, the
Fund paid brokerage commissions of $12,912 and $66,780, respectively, to Salomon
Brothers Inc and Salomon Smith Barney Inc., prior to the merger of the two
companies in that year and $60,156 to Salomon Smith Barney Inc. subsequent to
the merger. In fiscal year ended December 31, 1997, the Fund paid brokerage
commissions of $150,330 and $67,458, respectively, to Salomon Brothers Inc and
Smith Barney Inc.
The brokerage commissions paid to Salomon Smith Barney Inc. in fiscal year
ended December 31, 1999 represented 9.9% of total brokerage commissions paid by
the Fund in such year.
8.3% of the Fund's aggregate dollar amount of transactions in fiscal year
ended December 31, 1999 were effected through Salomon Smith Barney Inc.
TAXATION
The following is a summary of the material United States federal income tax
considerations, regarding the purchase, ownership and disposition of shares. You
are urged to consult your own tax adviser with respect to the specific federal,
state, local and foreign tax consequences of investing in the Fund. The summary
is based on the laws in effect on the date of this statement of additional
information, which are subject to change.
UNITED STATES FEDERAL INCOME TAXES
The Fund and its Investments. The Fund has qualified and continues to
qualify and elect to be treated as a regulated investment company for each
taxable year under the Code. To so qualify, the Fund must, among other things:
derive at least 90% of its gross income in each taxable year from:
dividends
10
<PAGE>
interest
payments with respect to securities loans
gains from the sale or other disposition of stock or securities or
foreign currencies
other income (including, but not limited to, gains from options,
futures or forward contracts) derived with respect to its business of
investing in such stock, securities or currencies, and
diversify its holdings so that, at the end of each quarter of the taxable
year:
at least 50% of the market value of the assets is represented by cash,
securities of other regulated investment companies, United States
government securities and other securities, with such other securities
limited, in respect of any one issuer, to an amount not greater than 5%
of the Fund's assets and not greater than 10% of the outstanding voting
securities of such issuer, and
not more than 25% of the value of its assets is invested in the
securities (other than United States government securities or
securities of other regulated investment companies) of any one issuer
or any two or more issuers that the Fund controls and are determined to
be engaged in the same or similar trades or businesses or related
trades or businesses.
As a regulated investment company, the Fund is not subject to United States
federal income tax on its net investment income (i.e., its investment company
taxable income as that term is defined in the Code without regard to the
deduction for dividends paid) and its net capital gains (i.e., the excess of its
net long term capital gain over its net short-term capital loss), if any, that
it distributes to its shareholders, provided that an amount equal to at least
90% of the sum of its net investment income is distributed, but is subject to
tax at regular corporate rates on any taxable income or gains that it does not
distribute.
The Code imposes a 4% nondeductible excise tax on the Fund to the extent it
does not distribute by the end of any calendar year at least 98% of its ordinary
income for that year and 98% of its capital gain net income for the one-year
period ending, as a general rule, on October 31 of that year plus 100% of the
ordinary income and capital gain net income from prior years. For this purpose,
however, any income or gain retained by the Fund that is subject to corporate
income tax will be considered to have been distributed by year-end. The Fund
anticipates that it will pay such dividends and will make such distributions as
are necessary in order to avoid the application of this tax.
If, in any taxable year, the Fund fails to qualify as a regulated investment
company under the Code, the Fund would be taxed in the same manner as an
ordinary corporation and distributions to you would not be deductible by the
Fund in computing its taxable income. In addition, in the event of a failure to
qualify, the Fund's distributions, to the extent derived from current or
accumulated earnings and profits, would constitute dividends (eligible for the
corporate dividends-received deduction) which are taxable to you as ordinary
income, even though those distributions might otherwise (at least in part) have
been treated as long-term capital gains when received by you. If the Fund fails
to qualify as a regulated investment company in any year, it must pay out its
earnings and profits accumulated in that year in order to qualify again as a
regulated investment company. In addition, if the Fund failed to qualify as a
regulated investment company for a period greater than one taxable year, it may
be required to recognize any net built-in gains (the excess of the aggregate
gains, including items of income, over aggregate losses that would have been
realized if it had been liquidated) in order to qualify as a regulated
investment company in a subsequent year.
If the Fund retains for investment an amount equal to all or a portion of
its net capital gain, it will be subject to a corporate tax (currently at a rate
of 35%) on the amount retained. In that event, the Fund expects to designate
such retained amounts as undistributed capital gains in a notice to you and you
(a) will be required to include in income for United States federal income tax
purposes, as long-term capital gains, your proportionate share of the
undistributed amount, (b) will be entitled to credit your proportionate share of
the 35% tax paid by the Fund on the undistributed amount against your United
States federal income tax liabilities, if any, and to claim refunds to the
extent your credits exceed your liabilities, if any, and (c) will be entitled to
increase your tax basis, for United States federal
11
<PAGE>
income tax purposes, in your shares by an amount equal to 65% of the amount of
undistributed capital gains included in your income.
Any dividend declared by the Fund in October, November or December of any
calendar year and payable to shareholders of record on a specified date in such
a month shall be deemed to have been received by each shareholder on December 31
of such calendar year and to have been paid by the Fund not later than such
December 31, provided that such dividend is actually paid by the Fund during
January of the following calendar year.
Dividends and Distributions. If you are a U.S. shareholder, dividends of net
investment income, which term includes net realized short-term capital gain, are
taxable to you as ordinary income, whether paid in cash or in shares.
Distributions of net capital gain, if any, that the Fund designates as capital
gains dividends are taxable as long-term capital gain, whether paid in cash or
in shares and regardless of how long you have held shares. Dividends and
distributions paid by the Fund (except for the portion thereof, if any,
attributable to qualifying dividends on stock of U.S. corporations received by
the Fund) will not qualify for the deduction for dividends received by
corporations. Distributions in excess of the Fund's current and accumulated
earnings and profits will, as to you, be treated as a tax-free return of
capital, to the extent of your basis in your shares, and as a capital gain
thereafter (if you hold your shares as capital assets).
If you receive dividends or distributions in the form of additional shares
pursuant to the Dividend Reinvestment and Cash Purchase Plan you should be
treated for United States federal income tax purposes as receiving a
distribution in the amount equal to the amount of money that shareholders
receiving cash dividends or distributions will receive, and should have a cost
basis in the shares received equal to such amount.
If you are considering buying shares just prior to a dividend or capital
gain distribution you should be aware that, although the price of shares just
purchased at that time may reflect the amount of the forthcoming distribution,
such dividend or distribution may nevertheless be taxable to you.
Sales of Shares. Upon the sale or exchange of your shares, you will realize
a taxable gain or loss equal to the difference between the amount realized and
the basis in your shares. Such gain or loss will be treated as capital gain or
loss, if the shares are capital assets in your hands, and will be long-term
capital gain or loss if the shares are held for more than one year. Any loss
realized on a sale or exchange will be disallowed to the extent the shares
disposed of are replaced, including replacement through the reinvesting of
dividends and capital gains distributions in the Fund under the Dividend
Reinvestment and Cash Purchase Plan, within a 61-day period beginning 30 days
before and ending 30 days after the disposition of the shares. In such a case,
the basis of the shares acquired will be increased to reflect the disallowed
loss. Any loss realized by you on the sale of a share held by you for six months
or less will be treated for United States federal income tax purposes as a
long-term capital loss to the extent of any distributions or deemed
distributions of net capital gain received by you with respect to such share.
Backup Withholding. If you fail to provide the Fund with your correct
taxpayer identification number or to make required certifications, or have been
notified by the Internal Revenue Service that you are subject to backup
withholding, the Fund may be required to withhold, for United States federal
income tax purposes, 31% of the dividends and distributions payable. Corporate
shareholders and certain other shareholders are or may be exempt from backup
withholding. Backup withholding is not an additional tax and any amount withheld
may be credited against your United States federal income tax liabilities. If
you are a foreign investor additional tax withholding requirements which apply
are discussed below.
Foreign Shareholders. If you are a foreign investor (such as a nonresident
alien individual, a foreign trust or estate, a foreign corporation or a foreign
partnership) under U.S. laws, taxation depends, in part, on whether your income
from the Fund is 'effectively connected' with a United States trade or business
carried on by you.
If you are a non-resident alien and your income from the Fund is not
effectively connected with a United States trade or business carried on by you,
distributions of net investment income will be subject to a 30% (or lower treaty
rate) United States withholding tax. If you are a non-resident alien
distributions of net capital gain, amounts retained by the Fund which are
designated as undistributed
12
<PAGE>
capital gains, and gains realized upon the sale of shares of the Fund generally
will not be subject to United States tax unless you are physically present in
the United States for more than 182 days during the taxable year and certain
other conditions are met. However, a determination by the Fund not to distribute
long-term capital gains will cause the Fund to incur a U.S. federal tax
liability with respect to retained long-term capital gains, thereby reducing the
amount of cash held by the Fund that is available for investment, and you may
not be able to claim a credit or deduction with respect to such taxes.
In general, if you are a resident alien or if dividends or distributions
from the Fund are effectively connected with a United States trade or business
carried on by you, then dividends of net investment income, distributions of net
capital gain, amounts retained by the Fund that are designated as undistributed
capital gains and any gains realized upon the sale of shares will be subject to
United States income tax at the rates applicable to United States citizens or
domestic corporations. If you are a corporation, and your income from the Fund
is effectively connected with a United States trade or business, you may also be
subject to the 30% (or lower treaty rate) branch profits tax. If you are
entitled to claim the benefits of an applicable tax treaty the tax consequences
to you may be different from those described in this section. You may be
required to provide appropriate documentation to establish your entitlement to
the benefits of such a treaty. You are advised to consult your own tax adviser
with respect to (a) whether your income from the Fund is or is not effectively
connected with a United States trade or business carried on by you, (b) whether
you may claim the benefits of an applicable tax treaty, and (c) any other tax
consequences to you of an investment in the Fund.
Notices. You will be notified annually by the Fund as to the United States
federal income tax status of the dividends, distributions and deemed
distributions made by the Fund to you. Furthermore, you will also receive, if
appropriate, various written notices after the close of the Fund's taxable year
regarding the United States federal income tax status of certain dividends,
distributions and deemed distributions that were paid (or that are treated as
having been paid) by the Fund to you during the preceding taxable year.
Other Taxation. Distributions also may be subject to additional state, local
and foreign taxes depending on your particular situation.
FUND INVESTMENTS
Options, Futures and Forward Contracts. The Fund's transactions in options,
futures and forward contracts, constructive sales and short sales will be
subject to special provisions of the Code that, among other things, may affect
the character of gains and losses realized by the Fund (i.e., it may affect
whether gains or losses are ordinary or capital), accelerate recognition of
income and defer losses. These rules could therefore affect the character,
amount and timing of distributions to you. These provisions also (a) will
require the Fund to mark-to-market certain types of the positions in its
portfolio (i.e., treat them as if they were closed out) and (b) may cause the
Fund to recognize income without receiving cash to pay dividends or make
distributions in amounts necessary to satisfy the distribution requirements for
avoiding income and excise taxes. The Fund will monitor its transactions, will
make the appropriate tax elections and will make the appropriate entries in its
books and records when it acquires any option, futures contract or hedged
investment in order to mitigate the effect of these rules and prevent its
disqualification as a regulated investment company.
Section 988 Gains or Losses. Gains or losses attributable to fluctuations in
exchange rates which occur between the time the Fund accrues income or other
receivables or accrues expenses or other liabilities denominated in a foreign
currency and the time the Fund actually collects such receivables or pays such
liabilities generally are treated as ordinary income or ordinary loss.
Similarly, on disposition of some investments, including debt securities and
certain forward contracts denominated in a foreign currency, gains or losses
attributable to fluctuations in the value of the foreign currency between the
acquisition and disposition of the position also are treated as ordinary gain or
loss. These gains and losses, referred to under the Code as 'section 988' gains
or losses, increase or decrease the amount of the Fund's investment company
taxable income available to be distributed to you as ordinary income. If section
988 losses exceed other investment company taxable income during a taxable year,
the Fund would not be able to make any ordinary dividend distributions, or
distributions made before the losses
13
<PAGE>
were realized would be recharacterized as a return of capital to you, rather
than as an ordinary dividend, reducing the basis in your shares.
THE FOREGOING IS ONLY A SUMMARY OF CERTAIN MATERIAL TAX CONSEQUENCES
AFFECTING THE FUND AND YOURSELF. YOU ARE ADVISED TO CONSULT YOUR OWN TAX ADVISER
WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO YOU OF AN INVESTMENT IN THE
FUND.
CAPITAL STOCK
The authorized capital stock of the Fund is 125,000,000 shares of capital
stock, $1.00 par value. The Fund has no present intention of offering additional
shares other than pursuant to the offer, except that additional shares may be
issued under the Dividend Reinvestment Plan and Cash Purchase Plan. Other
offerings of shares, if made, will require approval of the board of directors.
Any additional offering will be subject to the requirement of the 1940 Act that
shares not be sold at a price below the then current net asset value (exclusive
of underwriting discounts and commissions) except in connection with an offering
to existing shareholders or with the consent of the holders of a majority of the
outstanding voting securities, as such term is defined under the 1940 Act.
BENEFICIAL OWNERSHIP
The Fund does not know of any persons who may be deemed beneficial owners of
5% or more of the shares because they possessed or shared voting or investment
power with respect to them. The officers and directors of the Fund, in the
aggregate, own less than 1% of the outstanding shares.
FINANCIAL STATEMENTS
The financial statements and financial highlights included in the annual
report of the Fund for the fiscal year ended December 31, 1999, which has
previously been provided to you, is incorporated herein by reference into the
statement of additional information. The Fund will furnish to you, without
charge, a copy of this report upon request to The Bank of New York at
(800) 432-8224.
14
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
1. Financial Statements
Contained in Part A:
(a) Financial Highlights
Incorporated in Part B by reference to Registrant's December 31, 1999
annual report:
(1) Statement of Investments as of December 31, 1999
(2) Statement of Assets and Liabilities as of December 31, 1999
(3) Statement of Operations for the year ended December 31, 1999
(4) Statements of Changes in Net Assets for the years ended
December 31, 1999 and December 31, 1998
(5) Notes to Financial Statements
2. Exhibits
(a) Articles of Amendment and Restatement of the Registrant, as
amended
(b) Amended and Restated By-Laws of the Registrant
(c) Not applicable
(d) (1) Specimen Certificate for Shares of Capital Stock of the
Registrant**
(2) Form of Subscription Certificate
(3) Form of Notice of Guaranteed Delivery
(4) Form of DTC Participant Over-Subscription Certificate
(5) Form of Nominee Holder Over-Subscription Certificate
(6) Form of Beneficial Listing
(7) Subscription Agent Agreement between the Registrant and
The Bank of New York
(e) (1) Automatic Dividend Reinvestment Plan***
(2) Cash Payment Plan***
(f) Not Applicable
(g) (1) Investment Management Agreement between the Registrant and
Salomon Brothers Asset Management Inc dated November 28,
1997
(2) Sub-administration Agreement between Salomon Brothers Asset
Management Inc and SSB Citi Fund Management LLC
- ---------------------
** Incorporated by reference from Amendment No. 13 to the Registration
Statement on Form N-2 (File No. 811-2733) previously filed with the
Securities and Exchange Commission.
*** Previously filed and incorporated by reference from the December 31, 1999
annual report as filed with the Securities and Exchange Commission on
March 2, 2000.
II-1
<PAGE>
(h) (1) Form of Financial Advisory Agreement between the Registrant
and Salomon Smith Barney, Inc.
(2) Form of Information Agency Agreement
(i) Not Applicable
(j) Custody between the Registrant and PNC Bank, N.A.
(k) Not Applicable
(l) (1) Opinion of Simpson Thacher & Bartlett
(2) Opinion of Piper Marbury Rudnick & Wolfe LLP
(m) Not Applicable
(n) Consent of PricewaterhouseCoopers LLP
(o) Not Applicable
(p) Not Applicable
(q) Not Applicable
(r) Financial Data Schedule
ITEM 25. MARKETING ARRANGEMENTS
Not Applicable
ITEM 26. OTHER EXPENSES OF ISSUANCE, DISTRIBUTION AND ORGANIZATION
<TABLE>
<S> <C>
Registration Fee......................................................$ 60,000
New York Stock Exchange listing fees.................................. 20,000
National Association of Securities Dealers Regulation fees and
Fees and Expenses of qualification under State Securities
laws (including fees of counsel).................................. 15,000
Printing (other than stock certificates).............................. 35,000
Legal fees............................................................ 125,000
Financial Advisor's fees and expenses................................. 800,000
Information Agent's fees and expenses................................. 50,000
Subscription Agent's fees and expenses................................ 190,000
Miscellaneous expenses................................................ 5,000
Total...............................................................$1,300,000
</TABLE>
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Registrant is not controlled by or under common control with any person and
has no subsidiaries.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
22,752 as of May 15, 2000.
ITEM 29. INDEMNIFICATION
Section 2-418 of the Corporation Law of the State of Maryland gives
Registrant the power to indemnify the directors and officers. Section 2-418
provides in pertinent part:
(b) (1) A corporation may indemnify any director made a party to any
proceeding by reason of service in that capacity unless it is established that:
II-2
<PAGE>
(I) The act or omission of the director was material to the cause of
action adjudicated in the proceeding; and
(1) Was committed in bad faith; or
(2) Was the result of active and deliberate dishonesty; or
(II) The director actually received an improper personal benefit in
money, property or services; or
(III) In the case of any criminal proceeding, the director had
reasonable cause to believe that the act or omission was
unlawful.
(2)(I) Indemnification may be against judgments, penalties, fines,
settlements, and reasonable expenses actually incurred by the director in
connection with the proceeding.
(II) However, if the proceeding was one by or in the right of the
corporation, indemnification may not be made in respect of any proceeding in
which the director shall have been adjudged to be liable to the corporation.
(3) (I) The termination of any proceeding by judgment, order, or
settlement does not create a presumption that the director did not meet
the requisite standard of conduct set forth in this subsection.
(II) The termination of any proceeding by conviction, or a plea of nolo
contendere or its equivalent, or an entry of an order of probation prior
to judgment, creates a rebuttable presumption that the director did not
meet that standard of conduct.
(c) A director may not be indemnified under subsection (b) of this section
in respect of any proceeding charging improper personal benefit to the director,
whether or not involving action in the director's official capacity, in which
the director was adjudged to be liable on the basis that personal benefit was
improperly received.
(d) Unless limited by the charter:
(1) A director who has been successful, on the merits or otherwise, in the
defense of any proceeding referred to in subsection (b) of this section shall be
indemnified against reasonable expenses incurred by the director in connection
with the proceeding.
(2) A court of appropriate jurisdiction, upon application of a director
and such notice as the court shall require, may order indemnification in the
following circumstances:
(i) If it determines a director is entitled to reimbursement under
paragraph (1) of this subsection, the court shall order indemnification,
in which case the director shall be entitled to recover the expenses in
securing such reimbursement; or
(ii) If it determines that the director is fairly and reasonably entitled
to indemnification in view of all the relevant circumstances, whether or
not the director has met the standards of conduct set forth in subsection
(b) of this section or has been adjudged liable under the circumstances
described in subsection (c) of this section, the court may order such
indemnification as the court shall deem proper. However, indemnification
with respect to any proceeding by or in the right of the corporation or in
which liability shall have been adjudged in the circumstances described in
subsection (c) shall be limited to expenses.
(3) A court of appropriate jurisdiction may be the same court in which the
proceeding involving the director's liability took place.
(k) (1) A corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee, or agent of the corporation,
or who, while a director, officer, employee, or agent of the corporation, is or
was serving at the request of the corporation as a director, officer, partner,
trustee, employee, or agent of another foreign or domestic corporation,
partnership, joint venture, trust, other enterprise, or employee benefit plan
against any liability asserted against and incurred by such person in any such
capacity or arising out of such person's position, whether or not the
corporation would have the power to indemnify against liability under the
provisions of this section.
II-3
<PAGE>
(2) A corporation may provide similar protection, including a trust fund,
letter of credit, or surety bond, not inconsistent with this section.
(3) The insurance or similar protection may be provided by a subsidiary or
an affiliate of the corporation.
In addition, the eleventh and twelfth articles of the Fund's Articles of
Incorporation provide that:
ELEVENTH: The corporation shall indemnify (a) its directors and
officers, whether serving the corporation or at its request any other
entity, to the fullest extent required or permitted by the laws of the
State of Maryland now or hereafter in force and the Investment Company Act
of 1940, including the advance of expenses under the procedures required,
and to the fullest extent permitted, by law and (b) other employees and
agents to such extent as shall be authorized by the Board of Directors or
provided by the Corporation's by-laws or by contract and permitted by law.
The foregoing rights of indemnification shall not be exclusive of any
other rights to which those seeking indemnification may be entitled. The
Board of Directors may take such action as is necessary to carry out these
indemnification provisions and is expressly empowered to adopt, approve
and amend from time to time such by-laws, resolutions or contracts
implementing such provisions or such further indemnification arrangements
as may be permitted by law. No amendment of these Articles or repeal of
any of its provisions shall limit or eliminate the right to
indemnification provided hereunder with respect to acts or omissions
occurring prior to such amendment or repeal.
TWELFTH: To the fullest extent permitted by Maryland statutory or
decisional law, as amended or interpreted, no director or officer of the
Corporation shall be personally liable to the Corporation or its
stockholders for money damages, except to the extent such exemption from
liability or limitation thereof is not permitted by the Investment Company
Act of 1940. No amendment of these Articles or repeal of any of its
provisions shall limit or eliminate the benefits provided to directors and
officers under this provision with respect to any act or omission which
occurred prior to such amendment or repeal.
The Fund's By-laws provide that the Fund shall indemnify its directors and
officers against judgments, penalties, fines, excise taxes, settlements and
reasonable expenses to the fullest extent authorized and in the manner
permitted, by applicable federal and state law and the Fund's Articles of
Incorporation.
The Fund has purchased insurance insuring its officers and directors
against certain liabilities incurred in their capacities as such, and insuring
the Fund against any payments which it is obligated to make to such persons
under the foregoing indemnification provisions.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Fund pursuant to the provisions described under Item 29 above, or otherwise,
the Fund has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Fund of expenses incurred or paid by a director, officer or controlling
person of the Fund in the successful defense of any action, suit or proceeding)
is asserted against the Fund by such director, officer or controlling person in
connection with the securities being registered, the Fund will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT MANAGER
Registrant is fulfilling the requirements of this Item 30 to provide a
list of the officers and directors of its investment manager together with
information as to any other business, profession, vocation or employment of a
substantial nature engaged in by that entity or those of its officers and
directors during the past two years, by incorporating by reference the
information contained in the Form ADV filed with the SEC pursuant to the
Investment Advisers Act of 1940 by Salomon Brothers Asset Management Inc. (SEC
File No. )
II-4
<PAGE>
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
The Salomon Brothers Fund Inc
c/o Salomon Brothers Asset
Management Inc
New York, NY 10022
(Registrant's Articles of Incorporation and By-Laws)
Salomon Brothers Asset Management Inc
(with respect to its services as investment manager)
PNC Bank, N.A.
Lester, PA 19133
(with respect to its services as Custodian for the Fund's assets)
ITEM 32. MANAGEMENT SERVICES
Other than the Investment Management Agreement filed as Exhibit (9) and
described in the prospectus contained in Part A, the Registrant is not a party
to any management-related service contract.
ITEM 33. UNDERTAKINGS
(a) The Fund undertakes to suspend offering of the shares covered hereby
until it amends its prospectus contained herein if (1) subsequent to the
effective date of this Registration Statement, its net asset value per share
declines more than 10 percent from its net asset value per share as of the
effective date of this Registration Statement, or (2) its net asset value
increases to an amount greater than its net proceeds as stated in the prospectus
contained herein.
(b) The Registrant hereby undertakes to send by, first class mail or other
means designed to ensure equally prompt delivery, within two business days of
receipt of a written or oral request, any Statement of Additional Information.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment
to the Registration Statement on Form N-2 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, and the State
of New York on the 16th day of May, 2000.
THE SALOMON BROTHERS FUND INC
By: /s/ Heath B. McLendon
--------------------------------
Heath B. McLendon
Chairman of the
Board and President
Pursuant to the requirements of the Securities Act of 1933 and The Investment
Company Act of 1940, this Amendment to the Registration Statement has been
signed below on May 16, 2000 by the following persons in the capacities
indicated:
<TABLE>
<S> <C>
/s/ Heath B. McLendon Chairman of the Board and President
- -----------------------------------------
Heath B. McLendon
* Director
- -----------------------------------------
Charles F. Barber
* Director
- -----------------------------------------
Andrew L. Breech
* Director
- -----------------------------------------
Carol L. Colman
* Director
- -----------------------------------------
William R. Dill
* Director
- -----------------------------------------
Clifford M. Kirtland
* Director
- -----------------------------------------
Robert W. Lawless
* Director
- -----------------------------------------
Louis P. Mattis
* Director
- -----------------------------------------
Thomas F. Schafly
* /s/ Heath B. McLendon
- -----------------------------------------
Heath B. McLendon
Attorney-in-fact
</TABLE>
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
NUMBER EXHIBIT
<S> <C>
(a) Articles of Amendment and Restatement of the Registrant, as amended
(b) Amended and Restated By-Laws of the Registrant
(d)(2) Form of Subscription Certificate
(3) Form of Notice of Guaranteed Delivery
(4) Form of DTC Participant Over-Subscription Certificate
(5) Form of Nominee Holder Over-Subscription Certificate
(6) Form of Beneficial Listing
(7) Subscription Agent Agreement between the Registrant and The Bank of
New York
(g)(1) Investment Management Agreement, between the Registrant and Salomon
Brothers Asset Management Inc, dated November 28, 1997
(2) Sub-administration Agreement between Salomon Brothers Asset
Management Inc and SSB Citi Fund Management LLC
(h)(1) Form of Financial Advisory Agreement between the Registrant and
Salomon Smith Barney, Inc.
(2) Form of Information Agency Agreement
(j) Custody Agreement between the Registrant and PNC Bank, N.A.
(l)(1) Opinion of Simpson Thacher & Bartlett
(2) Opinion of Piper Marbury Rudnick & Wolfe LLP
(n) Consent of Pricewaterhouse Coopers LLP
</TABLE>
STATEMENT OF DIFFERENCES
The division sign shall be expressed as...............................[div]
<PAGE>
ARTICLES OF AMENDMENT AND RESTATEMENT
OF
THE SALOMON BROTHERS FUND INC
THE SALOMON BROTHERS FUND INC, a Maryland corporation, having
its principal office in Baltimore City, Maryland (which is hereinafter called
the 'Corporation'), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Charter of the Corporation is hereby amended and
restated in its entirety to read as follows:
THE SALOMON BROTHERS FUND INC
RESTATED ARTICLES OF INCORPORATION
THIS IS TO CERTIFY:
FIRST: The name of the corporation is THE SALOMON BROTHERS
FUND INC.
SECOND: The post_office address of the principal office of the
corporation in the State of Maryland is c/o The Corporation Trust Incorporated,
32 South Street, Baltimore, Maryland 21202. The name of the resident agent of
the corporation in the State of Maryland is The Corporation Trust Incorporated,
a corporation of the State of Maryland, and the post_office address of the
resident agent is 32 South Street, Baltimore, Maryland 21202.
THIRD: The nature of the business or objects or purposes to be
transacted, promoted or carried on by the corporation are as follows:
To underwrite, purchase, acquire, hold, pledge, hypothecate,
exchange, sell, contract to sell, deal in and dispose of, alone or in
syndicates or otherwise in conjunction with others, stocks, bonds and
other evidences of indebtedness and obligations of any corporation,
association, partnership, syndicate, entity, person or governmental,
municipal or public authority, domestic or foreign, and evidences of
any interest in respect of any such stocks, bonds and other evidences
of indebtedness and obligations; to issue in exchange therefor its own
stocks, bonds or other obligations; and, while the owner or holder of
any such, to exercise all the rights, powers and privileges of
ownership in respect thereof; and, to the extent now or hereafter
permitted by law, to aid by loan, subsidy, guaranty or otherwise those
issuing, creating or responsible for any such stocks, bonds or other
evidences of indebtedness or obligations or evidences of any interest
in respect thereof.
To purchase acquire, hold, mortgage, pledge, hypothecate,
exchange, sell, deal in and dispose of, alone or in syndicates or
otherwise in conjunction with others, commodities and other personal
property and real property of every kind, character and description
whatsoever and wheresoever situated, and any interest therein.
<PAGE>
2
To engage in any mercantile, manufacturing or trading business
of any kind or character whatsoever, within or without the State of
Maryland, and to do all things incidental to any such business; to
cause to be formed, merged or reorganized or liquidated, and to
promote, take charge of and aid in any way permitted by law the
formation, merger, reorganization or liquidation of, any corporation,
association or entity in the United States or abroad.
To enter into any lawful arrangements for sharing profits,
union of interest, reciprocal concession or cooperation, with any
corporation, association, partnership, syndicate, entity, person or
governmental, municipal or public authority, domestic or foreign, in
the carrying on of any business which the corporation is authorized to
carry on or any business or transaction deemed necessary, convenient or
incidental to carrying out any of the purposes of the corporation.
To act in any and all parts of the world in any capacity
whatsoever as financial, commercial or business agent or
representative, general or special, for domestic and foreign
corporations, associations, partnerships, syndicates, entities,
persons, governments, municipalities and other public bodies.
To make, enter into and carry out any arrangements with any
domestic or foreign governmental, municipal or public authority or with
any corporation, association, partnership, syndicate, entity or person,
domestic or foreign, to obtain therefrom or otherwise to acquire by
purchase, lease, assignment or otherwise any powers, rights,
privileges, immunities, franchises, guaranties, grants and concessions;
to acquire, hold, own, exercise, exploit, dispose of and realize upon
the same, and to undertake and prosecute any business dependent
thereon; and to promote, cause to be formed and aid in any way any
corporation, association, partnership, syndicate or entity for any such
purposes.
To acquire, hold, use, sell, assign, lease and grant licenses
or sub-licenses in respect of, pledge or otherwise dispose of, letters
patent of the United States or any foreign country, patent rights,
licenses, privileges, inventions, improvements, processes, copyrights,
trademarks and trade names relating to or useful in connection with any
business of the corporation.
To enter into, make, perform and carry out or cancel and
rescind contracts for any lawful purposes pertaining to its business
with any person, entity, syndicate, partnership, association,
corporation or governmental, municipal or public authority, domestic or
foreign.
To acquire all or any part of the good will, rights, property
and business of any person, entity, partnership, association or
corporation heretofore or hereafter engaged in any business similar to
any business which the corporation has power to conduct, to pay for the
same in cash or in stock, bonds or other obligations of the corporation
or otherwise, to hold, utilize and in any manner dispose of the whole
or any part of the rights and property so acquired, and to assume in
connection therewith any liabilities of
<PAGE>
3
any such person, entity, partnership, association or corporation and
conduct in any lawful manner the whole or any part of the business
thus acquired.
To make any guaranty respecting stocks, dividends, securities,
indebtedness, interest, contracts or other obligations so far as the
same may be permitted to be done by a corporation organized under the
laws of the State of Maryland.
To borrow or raise moneys for any of the purposes of the
corporation and from time to time, without limit as to amount, to draw,
make, accept, endorse, execute and issue promissory notes, drafts,
bills of exchange, warrants, bonds, debentures and other negotiable or
non_negotiable instruments and evidences of indebtedness, and to secure
the payment thereof and of the interest thereon by mortgage on, or
pledge, conveyance or assignment in trust of, the whole or any part of
the assets of the corporation, real, personal or mixed, including
contract rights, whether at the time owned or thereafter acquired, and
to sell, pledge or otherwise dispose of such securities or other
obligations of the corporation for its corporate purposes.
To loan its uninvested funds and/or surplus from time to time
to such extent as the corporation may deem advisable in call and/or in
time loans, upon such security, if any, as the Board of Directors may
determine.
To purchase, hold, sell, transfer, reissue or cancel the
shares of its own capital stock or any securities or other obligations
of the corporation in the manner and to the extent now or hereafter
permitted by the laws of the State of Maryland; provided that the
corporation shall not use its funds or other assets for the purchase of
its own shares of stock when such use would cause any impairment of the
capital of the corporation, and provided further that shares of its own
capital stock belonging to the corporation shall not be voted directly
or indirectly.
In general, to carry on any business not contrary to the laws
of the State of Maryland and to have and exercise all of the powers
conferred by the laws of the State of Maryland upon corporations formed
thereunder; and to do any and all of the acts and things herein set
forth to the same extent as natural persons could do, and in any part
of the world, as principal, factor, agent, contractor, trustee or
otherwise, either alone or in company with any person, entity,
syndicate, partnership, association or corporation; to establish and
maintain offices and agencies within, and anywhere outside of, the
State of Maryland; and to exercise all or any of its corporate powers
and rights in the State of Maryland and in any and all other states,
territories, districts, colonies, possessions or dependencies of the
United States of America and in any foreign countries.
To do everything necessary, proper, advisable or convenient
for the accomplishment of any of the purposes or the attainment of any
of the objects or the furtherance of any of the powers herein set forth
and to do every other act and thing incidental thereto or connected
therewith, provided the same be not forbidden by the laws of the State
of Maryland.
<PAGE>
4
The foregoing clauses shall be construed as powers as well as
objects and purposes, and the matters expressed in each clause shall, except if
otherwise expressly provided, be in no wise limited by reference to or inference
from the terms of any other clause, but shall be regarded as independent
objects, purposes and powers; and the enumeration of specific objects, purposes
and powers shall not be construed to limit or restrict in any manner the meaning
of general terms or the general powers of the corporation; nor shall the
expression of one thing be deemed to exclude another not expressed, although it
be of like nature.
The corporation shall be authorized to exercise and enjoy all
of the powers, rights and privileges granted to, or conferred upon, corporations
of this character by the General Laws of the State of Maryland now or hereafter
in force, and the enumeration of the foregoing powers shall not be deemed to
exclude any powers, rights or privileges so granted or conferred.
FOURTH: The total number of shares of stock which the
corporation shall have authority to issue is one hundred million (100,000,000),
all of which are to be of the par value of One Dollar ($1.00) per share and of
one class.
No holder of stock of the corporation shall be entitled as
such, as a matter of right, to subscribe for or receive any part of any new or
additional issue of stock of the corporation of any class, whether now or
hereafter authorized and whether issued for money or for a consideration other
than money or by way of dividend, or of any issue of securities convertible into
stock.
FIFTH: The number of directors of the corporation shall be
twenty_one (21) which number may be increased or decreased from time to time
pursuant to the by_laws of the corporation, but shall never be less than three
(3). The names of the directors who shall act until the first annual meeting or
until their successors are duly elected and qualify are: Henry R. Breck, Robert
H. Buckles, John S. Bugas, Charles F. Fogarty, James W. Glanville, F. Warren
Hellman, James M. Hester, C. Charles Hetzel, George H. Heyman, Jr., Ian K.
MacGregor, John M. Martin, Alexander N. McFarlane, Alvin W. Pearson, Peter G.
Peterson, John W. Reavis, Adelaide M. Schlafly, William T. Seawell, Lewis P.
Seiler, F. Ritter Shumway, Gerald H. Trautman and Frazar B. Wilde.
SIXTH: The corporation is to have perpetual existence.
SEVENTH: The private property of the stockholders shall not be
subject to the payment of corporate debts to any extent whatsoever.
EIGHTH: All corporate powers of the corporation shall be
exercised by or under the authority of the Board of Directors except as
otherwise provided by law. If the by_laws of the corporation so provide, the
Board of Directors may, by resolution or resolutions, passed by a majority of
the whole Board, designate one or more committees, each committee to consist of
two or more of the directors of the corporation, which, to the extent provided
in said resolution or resolutions or in the by_laws of the corporation, and
except as otherwise provided by law, shall have and may exercise the powers of
the Board of Directors in the management of the
<PAGE>
5
business and affairs of the corporation, and may have power to authorize the
seal of the corporation to be affixed to all papers which may require it.
The stockholders and the directors may hold their meetings and
have an office or offices outside of the State of Maryland if the by_laws so
provide.
None of the directors need be a stockholder of the corporation
or a resident of the State of Maryland.
Subject to any limitations herein or that may be imposed by
the stockholders, the Board of Directors may make by_laws and from time to time
may alter, amend or repeal any by_laws, but any by_laws made by the Board of
Directors or the stockholders may be altered, amended or repealed by the
stockholders at any annual meeting or at any special meeting, provided that
notice of such proposed alteration, amendment or repeal is included in the
notice of such special meeting.
The Board of Directors shall have power from time to time to
fix the amount to be reserved by the corporation over and above its capital
stock paid in and to fix and determine and to vary the amount of the working
capital of the corporation, and to direct and determine the use and disposition
of the working capital and of any surplus or net profits over and above the
capital stock paid in.
The Board of Directors of the corporation is hereby empowered
to authorize the issuance from time to time of shares of its stock of any class,
whether now or hereafter authorized, or securities convertible into shares of
its stock of any class or classes, whether now or hereafter authorized.
The Board of Directors may from time to time establish,
reestablish, amend, alter or repeal and may put into effect and carry out such a
plan or plans as may from time to time be approved by it for the distribution
among or sale to the officers and employees of the corporation, or any of them,
in addition to their regular salaries or wages, of any moneys or other property
of the corporation, or of any shares of stock of the corporation, of any class,
in consideration for or in recognition of the services rendered by such officers
and employees.
The Board of Directors may from time to time create and issue
whether or not in connection with the issue and sale of any shares of stock or
other securities of the corporation, rights or options entitling the holders
thereof to purchase from the corporation any shares of its capital stock of any
class or classes, such rights or options to be evidenced by or in such
instrument or instruments as shall be approved by the Board of Directors. The
terms upon which, the time or times, which may be limited or unlimited in
duration, at or within which, and the price or prices at which any such shares
may be purchased from the corporation upon the exercise of any such rights or
options shall be such as shall be fixed and stated in a resolution or
resolutions adopted by the Board of Directors providing for the creation and
issue of such rights or options, and, in every case, set forth or incorporated
by reference in the instrument or instruments evidencing such rights or options.
<PAGE>
6
The Board of Directors from time to time shall determine
whether and to what extent and at what times and places and under what
conditions and regulations the accounts and books of the corporation, or any of
them, shall be open to the inspection of the stockholders, and no stockholder
shall have any right to inspect any account, book or document of the corporation
except as conferred by statute or as authorized by resolution of the Board of
Directors.
Any contract, transaction or act of the corporation or of the
Board of Directors which shall be ratified by the holders of a majority of the
stock entitled to vote at any annual meeting or at any special meeting called
for that purpose, shall be as valid and binding as though ratified by every
stockholder of the corporation; provided, however, that any failure to submit
any such contract, transaction or act to the stockholders for approval or
ratification or any failure of the stockholders to approve or ratify such
contract, transaction or act, when submitted, shall not be deemed in any way to
invalidate the same or to deprive the corporation, its directors or officers of
their right to proceed with such contract, transaction or action.
NINTH: The corporation reserves the right to amend, alter,
change or repeal any provision contained in these articles in the manner now or
hereafter prescribed by statute, including any amendment which alters the
contract rights, as expressly set forth in these Articles, of any outstanding
stock; and all rights herein conferred upon the stockholders are granted subject
to this reservation.
TENTH: Notwithstanding any provision of law requiring a
greater proportion than a majority of the votes of all classes or of any class
of stock entitled to be cast, to take or authorize any action, the corporation
may take or authorize such action upon the concurrence of a majority of the
aggregate number of the votes entitled to be cast thereon; except that the vote
of two_thirds of the outstanding shares of each such class of stock entitled to
be cast shall be necessary to authorize any of the following actions: (i) a
merger or consolidation of the corporation (in which the corporation is not the
surviving corporation) with (a) an open_end investment company or (b) a
closed_end investment company unless such closed_end investment company's
Articles of Incorporation require a two_thirds or greater vote of each class of
such company's stock entitled to be cast to approve the types of transactions
covered by clauses (i) through (iv) of this exception to Article Tenth of these
Articles; (ii) the dissolution of the corporation; (iii) the sale of all or
substantially all of the assets of the corporation to any person (as such term
is defined in the Investment Company Act of 1940); or (iv) any amendment to
these Articles which makes any class of the corporation's stock a redeemable
security (as such term is defined in the Investment Company Act of 1940) or
reduces the two_thirds vote required to authorize the actions listed in this
paragraph.
ELEVENTH: The corporation shall indemnify (a) its directors
and officers, whether serving the corporation or at its request any other
entity, to the fullest extent required or permitted by the laws of the State of
Maryland now or hereafter in force and the Investment Company Act of 1940,
including the advance of expenses under the procedures required, and to the
fullest extent permitted, by law and (b) other employees and agents to such
extent as shall be authorized by the Board of Directors or provided by the
Corporation's by_laws or by contract and permitted by law. The foregoing rights
of indemnification shall not be exclusive of any other rights to which those
seeking indemnification may be entitled. The Board of Directors
<PAGE>
7
may take such action as is necessary to carry out these indemnification
provisions and is expressly empowered to adopt, approve and amend from time to
time such by_laws, resolutions or contracts implementing such provisions or such
further indemnification arrangements as may be permitted by law. No amendment of
these Articles or repeal of any of its provisions shall limit or eliminate the
right to indemnification provided hereunder with respect to acts or omissions
occurring prior to such amendment or repeal.
TWELFTH: To the fullest extent permitted by Maryland statutory
or decisional law, as amended or interpreted, no director or officer of the
Corporation shall be personally liable to the Corporation or its stockholders
for money damages, except to the extent such exemption from liability or
limitation thereof is not permitted by the Investment Company Act of 1940. No
amendment of these Articles or repeal of any of its provisions shall limit or
eliminate the benefits provided to directors and officers under this provision
with respect to any act or omission which occurred prior to such amendment or
repeal.
------------------------
SECOND: These provisions hereinabove are all the provisions of
the Charter of the Corporation currently in effect.
THIRD: The amendment does not increase the authorized stock of
the Corporation.
FOURTH: The foregoing amendment and restatement to the Charter
of the Corporation has been advised by the Board of Directors and approved by
the stockholders of the Corporation.
FIFTH: The current address of the principal office of the
Corporation in the State of Maryland is c/o The Corporation Trust Incorporated,
32 South Street, Baltimore, Maryland 21202. The name and address of the
Corporation's current resident agent are The Corporation Trust Incorporated, 32
South Street, Baltimore, Maryland 21202. The number of Directors of the
Corporation is ten and the names of the Directors currently in office are
Charles F. Barber, Andrew L. Breech, Thomas W. Brock, Carol L. Colman, William
R. Dill, Michael S. Hyland, Clifford M. Kirtland, Jr., Robert W. Lawless, Louis
P. Mattis and Thomas F. Schlafly.
SIXTH: The foregoing amendment and restatement to the Charter
of the Corporation will become effective on May 9, 1997.
<PAGE>
8
IN WITNESS WHEREOF, SALOMON BROTHERS FUND INC has caused these
present to be signed in its name and on its behalf by its President and
witnessed by its Secretary on April 29, 1997.
SALOMON BROTHERS FUND INC
By /s/ Michael S. Hyland
---------------------------------------
Name: Michael S. Hyland
Title: President
Witness:
By /s/ Jennifer G. Muzzey
---------------------------------------
Name: Jennifer G. Muzzey
Title: Secretary
THE UNDERSIGNED, President of SALOMON BROTHERS FUND INC, who
executed on behalf of the Corporation the foregoing Articles of Amendment and
Restatement of which this certificate is made a part, hereby acknowledges in the
name and on behalf of the Corporation the foregoing Articles of Amendment and
Restatement to be the corporate act of the Corporation and hereby certifies that
to the best of his knowledge, information, and belief the matters and facts set
forth therein with respect to the authorization and approval thereof are true in
all material respects under the penalties of perjury.
By /s/ Michael S. Hyland
---------------------------------------
Name: Michael S. Hyland
Title: President
<PAGE>
THE SALOMON BROTHERS FUND INC
ARTICLES OF AMENDMENT
THE SALOMON BROTHERS FUND INC, a Maryland corporation, having its
principal office in Baltimore City, Maryland (which is hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Charter of the Corporation is hereby amended as follows:
(a) Article FOURTH of the Charter is amended in its
entirety to read as follows:
THE TOTAL NUMBER OF SHARES OF STOCK WHICH THE CORPORATION
SHALL HAVE AUTHORITY TO ISSUE IS ONE HUNDRED TWENTY-FIVE MILLION
(125,000,000), ALL OF WHICH ARE TO BE OF THE PAR VALUE OF ONE
DOLLAR ($1.00) PER SHARE AND OF ONE CLASS.
NO HOLDER OF STOCK OF THE CORPORATION SHALL BE ENTITLED AS
SUCH, AS A MATTER OF RIGHT, TO SUBSCRIBE FOR OR RECEIVE ANY PART OF
ANY NEW OR ADDITIONAL ISSUE OF STOCK OF THE CORPORATION OF ANY
CLASS, WHETHER NOW OR HEREAFTER AUTHORIZED AND WHETHER ISSUED FOR
MONEY OR FOR A CONSIDERATION OTHER THAN MONEY OR BY WAY OF
DIVIDEND, OR OF ANY ISSUE OF SECURITIES CONVERTIBLE INTO STOCK.
SECOND: (a) As of immediately before the amendment the total number of
shares of stock of all classes which the Corporation has authority to
issue is 100,000,000 shares, of which no shares are Preferred Stock
(par value $1.00 per share) and 100,000,000 shares are Common Stock
(par value $1.00 per share).
(b) As amended the total number of shares of stock of all
classes which the Corporation has authority to issue is 125,000,000
shares, of which no shares are Preferred Stock (par value $1.00 per
share) and 125,000,000 shares are Common Stock (par value $1.00
per share).
(c) The aggregate par value of all shares having a par
value is $100,000,000 before the amendment and $125,000,000 as
amended.
(d) The shares of stock of the Corporation are not divided
into classes.
THIRD: The foregoing amendment to the Charter of the Corporation
has been advised by the Board of Directors and the amendment is limited to a
change expressly permitted by the Maryland General Corporation Law to be made
without action by the stockholders.
- 1 -
<PAGE>
IN WITNESS WHEREOF, The Salomon Brothers Fund Inc has caused these
presents to be signed in its name and on its behalf by its President and
witnessed by its Secretary on May 11, 2000.
WITNESS: THE SALOMON BROTHERS FUND INC
/s/ Robert A. Vegliante By: /s/ Michael S. Hyland
- ----------------------------------------- -----------------------------
Name: Robert A. Vegliante Name: Michael S. Hyland
Title: Assistant Secretary Title: President
THE UNDERSIGNED, President of The Salomon Brothers Fund Inc, who
executed on behalf of the Corporation the foregoing Articles of Amendment of
which this certificate is made a part, hereby acknowledges in the name and on
behalf of said Corporation the foregoing Articles of Amendment to be the
corporate act of said Corporation and hereby certifies that to the best of his
knowledge, information, and belief the matters and facts set forth therein with
respect to the authorization and approval thereof are true in all material
respects under the penalties of perjury.
/s/ Michael S. Hyland
____________________________
Michael S. Hyland, President
- 2 -
<PAGE>
THE SALOMON BROTHERS FUND INC
ARTICLES OF AMENDMENT
THE SALOMON BROTHERS FUND INC, a Maryland corporation, having its
principal office in Baltimore City, Maryland (which is hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Charter of the Corporation is hereby amended as follows:
(a) Article EIGHTH of the Charter is amended by inserting
the following sentence to the end of the sixth paragraph:
A MAJORITY OF THE ENTIRE BOARD OF DIRECTORS, WITHOUT ACTION
BY THE STOCKHOLDERS, MAY AMEND THESE ARTICLES TO INCREASE OR
DECREASE THE AGGREGATE NUMBER OF SHARES OF STOCK OR THE NUMBER OF
SHARES OF STOCK OF ANY CLASS THAT THE CORPORATION HAS AUTHORITY TO
ISSUE.
SECOND: The amendment does not increase the authorized stock of the
Corporation.
THIRD: The foregoing amendment to the Charter of the Corporation
has been advised by the Board of Directors and approved by the stockholders of
the Corporation.
- 1 -
<PAGE>
IN WITNESS WHEREOF, The Salomon Brothers Fund Inc has caused these
presents to be signed in its name and on its behalf by its President and
witnessed by its Secretary on May 11, 2000.
WITNESS: THE SALOMON BROTHERS FUND INC
/s/ Robert A. Vegliante By: /s/ Michael S. Hyland
- ----------------------------------------- -----------------------------
Name: Robert A. Vegliante Name: Michael S. Hyland
Title: Assistant Secretary Title: President
THE UNDERSIGNED, President of The Salomon Brothers Fund Inc, who
executed on behalf of the Corporation the foregoing Articles of Amendment of
which this certificate is made a part, hereby acknowledges in the name and on
behalf of said Corporation the foregoing Articles of Amendment to be the
corporate act of said Corporation and hereby certifies that to the best of his
knowledge, information, and belief the matters and facts set forth therein with
respect to the authorization and approval thereof are true in all material
respects under the penalties of perjury.
/s/ Michael S. Hyland
____________________________
Michael S. Hyland, President
- 2 -
<PAGE>
(As of July 28, 1998)
AMENDED AND RESTATED BY-LAWS
OF
THE SALOMON BROTHERS FUND INC
A Maryland Corporation
ARTICLE I
OFFICES
SECTION 1. Principal Office in Maryland. The Salomon Brothers Fund Inc (the
"Corporation") shall have a principal office in the City of Baltimore, State of
Maryland.
SECTION 2. Other Offices. The Corporation may have offices also at such
other places within and without the State of Maryland as the Board of Directors
may from time to time determine or as the business of the Corporation may
require.
ARTICLE II
STOCKHOLDERS
SECTION 1. Annual Meetings. The annual meeting of the stockholders of the
Corporation shall be held on a date not less than ninety (90) days nor more than
one hundred twenty (120) days following the end of the Corporation's fiscal year
fixed from time to time by the Board of Directors. An annual meeting may be held
at any place in or out of the State of Maryland and at any time, each as may be
determined by the Board of Directors and designated in the notice of the
meeting. Any business of the Corporation may be transacted at an annual meeting
without the purposes having been specified in the notice unless otherwise
provided by statute, the Corporation's Articles of Incorporation, as amended
from time to time (the "Charter"), or these By-Laws.
SECTION 2. Special Meetings. Special meetings of the stockholders for any
purpose or purposes, unless otherwise prescribed by statute or by the
Corporation's Charter, may be held at any place within the United States, and
may be called at any time by the Board of Directors or by the Chairman or the
President, and shall be called by the Secretary (or in his absence, an Assistant
Secretary) at the request in writing of stockholders entitled to cast at least a
<PAGE>
2
majority of the votes entitled to be cast at the meeting upon payment by such
stockholders to the Corporation of the reasonably estimated cost of preparing
and mailing a notice of the meeting (which estimated cost shall be provided to
such stockholders by the Secretary of the Corporation). A written request shall
state the purpose or purposes of the proposed meeting.
SECTION 3. Notice of Meetings. Written or printed notice of the purpose or
purposes and of the time and place of every meeting of the stockholders shall be
given by the Secretary of the Corporation to each stockholder of record entitled
to vote at or to notice of the meeting, by placing the notice in the mail at
least ten (10) days, but not more than ninety (90) days, prior to the date
designated for the meeting addressed to each stockholder at his address
appearing on the books of the Corporation or supplied by the stockholder to the
Corporation for the purpose of notice. Notice of any meeting of stockholders
shall be deemed waived by any stockholder who attends the meeting in person or
by proxy, or who before or after the meeting submits a signed waiver of notice
that is filed with the records of the meeting.
SECTION 4. Notice of Stockholder Business.
(a) At any annual or special meeting of the stockholders, only such
business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an annual meeting, the business must be
(i) (A) specified in the notice of meeting (or any supplement thereto) given by
or at the direction of the Board of Directors, (B) otherwise properly brought
before the meeting by or at the direction of the Board of Directors, or (C)
otherwise properly brought before the meeting by a stockholder in accordance
with Section 4(b) below and (ii) a proper subject under applicable law for
stockholder action. To be properly brought before a special meeting, the
business must be (i) (A) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the Board of Directors, or (B)
otherwise properly brought before the meeting by or at the direction of the
Board of Directors and (ii) a proper subject under applicable law for
stockholder action.
(b) For any stockholder proposal to be presented in connection with an
annual meeting of stockholders of the Corporation (other than proposals made
under Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), including any proposal relating to the nomination of a
director to be elected to the Board of Directors of the Corporation, the
stockholder must have given timely notice thereof in writing to the Secretary of
the Corporation. To be timely, a stockholder's notice shall be delivered to the
Secretary at the principal executive offices of the Corporation not less than 60
days nor more than 90 days prior to the first anniversary of the preceding
year's annual meeting; provided, however, that in the event that the date of the
annual meeting is advanced by more than 30 days or delayed by more than 60 days
from such anniversary date, notice by the stockholder to be timely must be so
delivered not earlier than the 90th day prior to such annual meeting and not
later than the close of business on the later of the 60th day prior to such
annual meeting or the tenth day following the day on which public announcement
of the date of such meeting is first made. Such stockholder's notice shall set
forth (a) as to each person whom the stockholder proposes to nominate for
election or re-election as a director all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors, or is otherwise required, in each
<PAGE>
3
case pursuant to Regulation 14A under the Exchange Act (including such person's
written consent to being named in the proxy statement as a nominee and to
serving as a director if elected); (b) as to any other business that the
stockholder proposes to bring before the meeting, a brief description of the
business desired to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in such business of such
stockholder and of the beneficial owner, if any, on whose behalf the proposal is
made; and (c) as to the stockholder giving the notice and the beneficial owner,
if any, on whose behalf the nomination or proposal is made, (i) the name and
address of such stockholder, as they appear on the Corporation's books, and of
such beneficial owner and (ii) the class and number of shares of stock of the
Corporation which are owned beneficially and of record by such stockholder and
such beneficial owner.
(c) Notwithstanding anything in the By-Laws to the contrary, no business
shall be conducted at any stockholder meeting except in accordance with the
procedures set forth in this Section 4. The Chairman of the stockholder meeting
shall, if the facts warrant, determine and declare to the meeting that business
was not properly brought before the meeting and in accordance with the
provisions of this Section 4, and if he should so determine, he shall so declare
to the meeting that any such business not properly brought before the meeting
shall not be considered or transacted.
SECTION 5. Quorum; Voting. Except as otherwise provided by statute or by
the Corporation's Charter, the presence in person or by proxy of stockholders of
the Corporation entitled to cast at least a majority of the votes entitled to be
cast shall constitute a quorum at each meeting of the stockholders. A majority
of the votes cast at a meeting at which a quorum is present is sufficient to
approve any matter which properly comes before the meeting, except that a
plurality of the votes cast at a meeting at which a quorum is present shall be
sufficient to elect directors. In the absence of a quorum, the stockholders
present in person or by proxy at the meeting, by majority vote and without
notice other than by announcement at the meeting, may adjourn the meeting from
time to time as provided in this Section 5 until a quorum shall attend. The
stockholders present at any duly organized meeting may continue to do business
until adjournment, notwithstanding the withdrawal of enough stockholders to
leave less than a quorum.
SECTION 6. Adjournment. Any meeting of the stockholders may be adjourned
from time to time, without notice other than by announcement at the meeting at
which the adjournment is taken. At any adjourned meeting at which a quorum shall
be present any action may be taken that could have been taken at the meeting
originally called. A meeting of the stockholders may not be adjourned to a date
more than one hundred twenty (120) days after the original record date.
SECTION 7. Organization. At every meeting of the stockholders, the Chairman
of the Board, or in his absence or inability to act, the President, or in his
absence or inability to act, a Vice President, or in the absence or inability to
act of all the Vice Presidents, a chairman chosen by the stockholders, shall act
as chairman of the meeting. The Secretary, or in his or her
<PAGE>
4
absence or inability to act, a person appointed by the chairman of the meeting,
shall act as secretary of the meeting and keep the minutes of the meeting.
SECTION 8. Order of Business. The order of business at all meetings of the
stockholders shall be as determined by the chairman of the meeting.
SECTION 9. Proxies. A stockholder may vote the stock he owns of record
either in person or by written proxy signed by the stockholder or by his duly
authorized agent. Stockholders may authorize others to act as proxies by means
of facsimile signatures, electronic transmissions, internet transmissions,
telephone, telegrams, datagrams, proxygrams and other reasonable means
authorized or accepted by the Corporation, subject to the reasonable
satisfaction of the Corporation that the stockholder has authorized the creation
of the proxy. No proxy shall be valid after the expiration of eleven (11) months
from the date thereof, unless otherwise provided in the proxy. Every proxy shall
be revocable at the pleasure of the stockholder executing it, except in those
cases in which the proxy states that it is irrevocable and in which an
irrevocable proxy is permitted by law.
SECTION 10. Fixing of Record Date for Determining Stockholders Entitled to
Vote at Meeting. The Board of Directors shall set a record date for the purpose
of determining stockholders entitled to vote at any meeting of the stockholders.
The record date for a particular meeting shall be not more than ninety (90) nor
fewer than ten (10) days before the date of the meeting. All persons who were
holders of record of shares as of the record date of a meeting, and no others,
shall be entitled to notice of and to vote at such meeting and any adjournment
thereof.
SECTION 11. Inspectors. The Board of Directors may, in advance of any
meeting of stockholders, appoint one (1) or more inspectors to act at the
meeting or at any adjournment of the meeting. If the inspectors shall not be so
appointed or if any of them shall fail to appear or act, the chairman of the
meeting may appoint inspectors. Each inspector, before entering upon the
discharge of his duties, shall, if required by the chairman of the meeting, take
and sign an oath to execute faithfully the duties of inspector at the meeting
with strict impartiality and according to the best of his ability. The
inspectors, if appointed, shall determine the number of shares outstanding and
the voting power of each share, the number of shares represented at the meeting,
the existence of a quorum and the validity and effect of proxies, and shall
receive votes, ballots or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all
votes, ballots or consents, determine the result, and do those acts as are
proper to conduct the election or vote with fairness to all stockholders. On
request of the chairman of the meeting or any stockholder entitled to vote at
the meeting, the inspectors shall make a report in writing of any challenge,
request or matter determined by them and shall execute a certificate of any fact
found by them. No director or candidate for the office of director shall act as
inspector of an election of directors. Inspectors need not be stockholders of
the Corporation.
SECTION 12. Consent of Stockholders in Lieu of Meeting. Except as otherwise
provided by statute or the Corporation's Charter, any action required or
permitted to be taken at
<PAGE>
5
any annual or special meeting of stockholders may be taken without a meeting,
without prior notice and without a vote, if the following are filed with the
records of stockholders' meetings: (a) a unanimous written consent that sets
forth the action and is signed by each stockholder entitled to vote on the
matter and (b) a written waiver of any right to dissent signed by each
stockholder entitled to notice of the meeting but not entitled to vote at the
meeting.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. General Powers. Except as otherwise provided in the
Corporation's Charter, the business and affairs of the Corporation shall be
managed under the direction of the Board of Directors. All powers of the
Corporation may be exercised by or under authority of the Board of Directors
except as conferred on or reserved to the stockholders by law, by the
Corporation's Charter or by these By-Laws.
SECTION 2. Number, Election and Term of Directors. The number of directors
constituting the entire Board of Directors may be changed from time to time by a
majority of the entire Board of Directors; provided, however, that the number of
directors shall in no event be fewer than that required by law, nor more than
twelve (12). The directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 5 of this Article III, and each
director elected shall hold office for the term provided above and until his
successor shall have been elected and shall have qualified, or until his death,
or until he shall have resigned or have been removed as provided in these
By-Laws, or as otherwise provided by statute or the Corporation's Charter. Any
vacancy created by an increase in directors may be filled in accordance with
Section 5 of this Article III. No reduction in the number of directors shall
have the effect of removing any director from office prior to the expiration of
his term unless the director is specifically removed pursuant to Section 4 of
this Article III at the time of the decrease.
SECTION 3. Resignation. A director of the Corporation may resign at any
time by giving written notice of his resignation to the Board of Directors or
the Chairman of the Board
<PAGE>
6
or to the Vice-Chairman of the Board or the President or the Secretary of the
Corporation. Any resignation shall take effect at the time specified in it or,
should the time when it is to become effective not be specified in it,
immediately upon its receipt. Acceptance of a resignation shall not be necessary
to make it effective unless the resignation states otherwise.
SECTION 4. Removal of Directors. A director of the Corporation may be
removed from office only for cause and then only by vote of the holders of at
least seventy-five percent (75%) of the votes entitled to be cast for the
election of directors.
SECTION 5. Vacancies. Subject to the provisions of the Investment Company
Act of 1940 (the "1940 Act"), any vacancies in the Board of Directors, whether
arising from death, resignation, removal or any other cause except an increase
in the number of directors, shall be filled by a vote of the majority of the
remaining Directors whether or not sufficient to constitute a quorum. A majority
of the entire Board may fill a vacancy that results from an increase in the
number of directors. Notwithstanding the foregoing, if the stockholders of any
class of the Corporation's capital stock are entitled separately to elect one or
more directors, a majority of the remaining directors elected by that class or
the sole remaining director elected by that class may fill any vacancy among the
number of directors elected by that class. Any director appointed by the Board
of Directors to fill a vacancy shall hold office only until the next annual
meeting of stockholders of the Corporation and until a successor has been
elected and qualifies. Any director elected by the stockholders to fill a
vacancy shall hold office for the balance of the term of the director he
replaced.
SECTION 6. Place of Meetings. Meetings of the Board may be held at any
place that the Board of Directors may from time to time determine or that is
specified in the notice of the meeting.
SECTION 7. Regular Meetings. Regular meetings of the Board of Directors may
be held without notice at the time and place determined by the Board of
Directors.
SECTION 8. Special Meetings. Special meetings of the Board of Directors may
be called by two (2) or more directors of the Corporation or by the Chairman of
the Board or the President.
SECTION 9. Annual Meeting. The annual meeting of the newly elected and
other directors shall be the first meeting after the meeting of the stockholders
at which the newly elected directors were elected. No notice of such annual
meeting shall be necessary if such meeting is held immediately after the
adjournment, and at the site, of the meeting of stockholders. If not so held,
notice shall be given as hereinafter provided for special meetings of the Board
of Directors.
SECTION 10. Notice of Special Meetings. Notice of each special meeting of
the Board of Directors shall be given by the Secretary as hereinafter provided.
Each notice shall state the time and place of the meeting and shall be delivered
to each director, either personally or by telephone or other standard form of
telecommunication, at least twenty-four (24) hours
<PAGE>
7
before the time at which the meeting is to be held, or by first-class mail,
postage prepaid, addressed to the director at his residence or usual place of
business, and mailed at least three (3) days before the day on which the meeting
is to be held.
SECTION 11. Waiver of Notice of Meetings. Notice of any special meeting
need not be given to any director who shall, either before or after the meeting,
sign a written waiver of notice that is filed with the records of the meeting or
who shall attend the meeting.
SECTION 12. Quorum and Voting. A majority of the entire Board of Directors
shall constitute a quorum for the transaction of business, and except as
otherwise expressly required by statute, the Corporation's Charter or these
By-Laws, the act of a majority of the directors present at any meeting at which
a quorum is present shall be the act of the Board.
SECTION 13. Organization. The Chairman of the Board shall preside at each
meeting of the Board. In the absence or inability of the Chairman of the Board
to act, the President (if he is a director), or, in his absence or inability to
act, another director chosen by a majority of the directors present, shall act
as chairman of the meeting and preside at the meeting. The Secretary (or, in his
or her absence or inability to act, any person appointed by the chairman) shall
act as secretary of the meeting and keep the minutes of the meeting.
SECTION 14. Committees. The Board of Directors may designate one (1) or
more committees of the Board of Directors, including an executive committee,
each consisting of one (1) or more directors. To the extent provided in the
resolutions adopted by the Board of Directors, and permitted by law, the
committee or committees shall have and may exercise the powers of the Board of
Directors in the management of the business and affairs of the Corporation. Any
committee or committees shall have the name or names determined from time to
time by resolution adopted by the Board of Directors. Each committee shall keep
regular minutes of its meetings and provide those minutes to the Board of
Directors when required. The members of a committee present at any meeting,
whether or not they constitute a quorum, may appoint a director to act in the
place of an absent member.
SECTION 15. Written Consent of Directors in Lieu of a Meeting. Subject to
the provisions of the 1940 Act, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee of the Board may be
taken without a meeting if all members of the Board or committee, as the case
may be, consent thereto in writing, and the writing or writings are filed with
the minutes of the proceedings of the Board or committee.
SECTION 16. Telephone Conference. Members of the Board of Directors or any
committee of the Board may participate in any Board or committee meeting by
means of a conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other at the same
time. Participation by such means shall constitute presence in person at the
meeting, provided, however, that such participation shall not constitute
presence in person with respect to matters which the 1940 Act, and the rules
thereunder require the approval of directors by vote cast in person at a
meeting.
<PAGE>
8
SECTION 17. Compensation. Each director shall be entitled to receive
compensation, if any, as may from time to time be fixed by the Board of
Directors, including a fee for each meeting of the Board or any committee
thereof, regular or special, he attends. Directors may also be reimbursed by the
Corporation for all reasonable expenses incurred in traveling to and from the
place of a Board or committee meeting.
ARTICLE IV
OFFICERS, AGENTS AND EMPLOYEES
SECTION 1. Number and Qualifications. The officers of the Corporation shall
be a Chairman, a President, a Secretary, a Treasurer, and an Assistant
Secretary, each of whom shall be elected by the Board of Directors. The Board of
Directors may elect or appoint a Chairman of the Board of Directors, and one (1)
or more Vice Presidents and may also appoint any other officers, assistant
officers, agents and employees it deems necessary or proper. Any two (2) or more
offices may be held by the same person, except the offices of President and Vice
President, but no officer shall execute, acknowledge or verify in more than one
(1) capacity any instrument required by law to be executed, acknowledged or
verified by more than one officer. Officers shall be elected by the Board of
Directors each year at its first meeting held after the annual meeting of
stockholders, each to hold office until the meeting of the Board following the
next annual meeting of the stockholders and until his successor shall have been
duly elected and shall have qualified, or until his death, or until he shall
have resigned or have been removed, as provided in these By-Laws. The Board of
Directors may from time to time elect such officers (including one or more
Assistant Vice Presidents, one or more Assistant Treasurers and one or more
Assistant Secretaries) and may appoint, or delegate to the President the power
to appoint, such agents as may be necessary or desirable for the business of the
Corporation. Such other officers and agents shall have such duties and shall
hold their offices for such terms as may be prescribed by the Board or by the
appointing authority.
SECTION 2. Resignations. Any officer of the Corporation may resign at any
time by giving written notice of his resignation to the Board of Directors, the
Chairman of the Board, the President or the Secretary. Any resignation shall
take effect at the time specified therein or, if the time when it shall become
effective is not specified therein, immediately upon its receipt. The acceptance
of a resignation shall not be necessary to make it effective unless otherwise
stated in the resignation.
SECTION 3. Removal of Officer, Agent or Employee. Any officer, agent or
employee of the Corporation may be removed by the Board of Directors with or
without cause at any time, and the Board may delegate the power of removal as to
agents and employees not elected or appointed by the Board of Directors. Removal
shall be without prejudice to the person's contract rights, if any, but the
appointment of any person as an officer, agent or employee of the Corporation
shall not of itself create contract rights.
<PAGE>
9
SECTION 4. Vacancies. A vacancy in any office, whether arising from death,
resignation, removal or any other cause, may be filled for the unexpired portion
of the term of the office that shall be vacant, in the manner prescribed in
these By-Laws for the regular election or appointment to the office.
SECTION 5. Compensation. The compensation of the officers of the
Corporation shall be fixed by the Board of Directors, but this power may be
delegated to any officer with respect to other officers under his control.
SECTION 6. Bonds or Other Security. If required by the Board, any officer,
agent or employee of the Corporation shall give a bond or other security for the
faithful performance of his duties, in an amount and with any surety or sureties
as the Board may require.
SECTION 7. Chairman of the Board of Directors. The Chairman of the Board of
Directors shall be the chief executive officer of the Corporation and shall
have, subject to the control of the Board of Directors, general and active
management and supervision of the business, affairs, and property of the
Corporation and its several officers and may employ and discharge employees and
agents of the Corporation, except those elected or appointed by the Board, and
he may delegate these powers. The Chairman shall preside at all meetings of the
stockholders and of the Board of Directors. He shall execute on behalf of the
Corporation all instruments requiring such execution except to the extent that
signing and execution thereof shall be required by the President of the
Corporation or shall be expressly delegated by the Board of Directors to some
other officer or agent of the Corporation.
SECTION 8. Vice-Chairman of the Board of the Directors. The Vice-Chairman
of the Board of Directors shall, in the absence of the Chairman of the Board,
preside at all meetings of the stockholders and directors. He shall have and
exercise all the powers and authority of the Chairman of the Board in the event
of the Chairman's absence or inability to act or during a vacancy in the office
of Chairman of the Board. He shall also have such other duties and
responsibilities as shall be assigned to him by the Chairman or the Board of
Directors.
SECTION 9. President. The President shall, in the absence of the Chairman
and Vice-Chairman of the Board of Directors, preside at all meetings of the
stockholders and directors. He shall have and exercise all the powers and
authority of the Chairman of the Board in the event of the Chairman's and
Vice-Chairman's absence or inability to act or during a vacancy in the offices
of Chairman and Vice-Chairman of the Board. He shall sign and execute all
instruments required to be signed and executed by the President of the
Corporation. He shall also have such other duties and responsibilities as shall
be assigned to him by the Chairman or the Board of Directors.
SECTION 10. Vice President. Each Vice President shall have the powers and
perform the duties that the Board of Directors or the Chairman of the Board may
from time to time prescribe.
<PAGE>
10
SECTION 11. Treasurer. Subject to the provisions of any contract that may
be entered into with any custodian pursuant to authority granted by the Board of
Directors, the Treasurer shall have charge of all receipts and disbursements of
the Corporation and shall have or provide for the custody of the Corporation's
funds and securities; he shall have full authority to receive and give receipts
for all money due and payable to the Corporation, and to endorse checks, drafts,
and warrants, in its name and on its behalf and to give full discharge for the
same; he shall deposit all funds of the Corporation, except those that may be
required for current use, in such banks or other places of deposit as the Board
of Directors may from time to time designate; and, in general, he shall perform
all duties incident to the office of Treasurer and such other duties as may from
time to time be assigned to him by the Board of Directors or the Chairman of the
Board.
SECTION 12. Assistant Treasurers. The Assistant Treasurers in the order of
their seniority, unless otherwise determined by the Chairman of the Board or the
Board of Directors, shall, in the absence or disability of the Treasurer,
perform the duties and exercise the powers of the Treasurer. They shall perform
such other duties and have such other powers as the Chairman or the Board of
Directors may from time to time prescribe.
SECTION 13. Secretary. The Secretary shall:
(a) keep or cause to be kept in one or more books provided for the
purpose, the minutes of all meetings of the Board of Directors, the
committees of the Board and the stockholders;
(b) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the Corporation and
affix and attest the seal to all stock certificates of the Corporation
(unless the seal of the Corporation on such certificates shall be a
facsimile, as hereinafter provided) and affix and attest the seal to all
other documents to be executed on behalf of the Corporation under its seal;
(d) see that the books, reports, statements, certificates and other
documents and records required by law to be kept and filed are properly
kept and filed; and
(e) in general, perform all the duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him
by the Board of Directors or the Chairman of the Board.
SECTION 14. Assistant Secretaries. The Assistant Secretaries in the order
of their seniority, unless otherwise determined by the Chairman of the Board or
the Board of Directors, shall, in the absence or disability of the Secretary,
perform the duties and exercise the powers of the Secretary. They shall perform
such other duties and have such other powers as the President or the Board of
Directors may from time to time prescribe.
<PAGE>
11
SECTION 15. Delegation of Duties. In case of the absence of any officer of
the Corporation, or for any other reason that the Board of Directors may deem
sufficient, the Board may confer for the time being the powers or duties, or any
of them, of such officer upon any other officer or upon any director.
ARTICLE V
STOCK
SECTION 1. Stock Certificates. Unless otherwise provided by the Board of
Directors and permitted by law, each holder of stock of the Corporation shall be
entitled upon specific written request to such person as may be designated by
the Corporation to have a certificate or certificates, in a form approved by the
Board, representing the number of shares of stock of the Corporation owned by
him; provided, however, that certificates for fractional shares will not be
delivered in any case. The certificates representing shares of stock shall be
signed by or in the name of the Corporation by the Chairman of the Board, the
Vice-Chairman of the Board, the President or a Vice President and by the
Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer
and may be sealed with the seal of the Corporation. Any or all of the signatures
or the seal on the certificate may be facsimiles. In case any officer, transfer
agent or registrar who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer, transfer agent or
registrar before the certificate is issued, it may be issued by the Corporation
with the same effect as if the officer, transfer agent or registrar was still in
office at the date of issue.
SECTION 2. Stock Ledger. There shall be maintained a stock ledger
containing the name and address of each stockholder and the number of shares of
stock of each class the shareholder holds. The stock ledger may be in written
form or any other form which can be converted within a reasonable time into
written form for visual inspection. The original or a duplicate of the stock
ledger shall be kept at the principal office of the Corporation or at any other
office or agency specified by the Board of Directors.
SECTION 3. Transfers of Shares. Transfers of shares of stock of the
Corporation shall be made on the stock records of the Corporation only by the
registered holder of the shares, or by his attorney thereunto authorized by
power of attorney duly executed and filed with the Secretary or with a transfer
agent or transfer clerk, and on surrender of the certificate or certificates, if
issued, for the shares properly endorsed or accompanied by a duly executed stock
transfer power and the payment of all taxes thereon. Except as otherwise
provided by law, the Corporation shall be entitled to recognize the exclusive
right of a person in whose name any share or shares stand on the record of
stockholders as the owner of the share or shares for all purposes, including,
without limitation, the rights to receive dividends or other distributions and
to vote as the owner, and the Corporation shall not be bound to recognize any
equitable or legal claim to or interest in any such share or shares on the part
of any other person.
<PAGE>
12
SECTION 4. Regulations. The Board of Directors may authorize the issuance
of uncertificated securities if permitted by law. If stock certificates are
issued, the Board of Directors may make any additional rules and regulations,
not inconsistent with these By-Laws, as it may deem expedient concerning the
issue, transfer and registration of certificates for shares of stock of the
Corporation. The Board may appoint, or authorize any officer or officers to
appoint, one or more transfer agents or one or more transfer clerks and one or
more registrars and may require all certificates for shares of stock to bear the
signature or signatures of any of them.
SECTION 5. Lost, Destroyed or Mutilated Certificates. The holder of any
certificate representing shares of stock of the Corporation shall immediately
notify the Corporation of its loss, destruction or mutilation and the
Corporation may issue a new certificate of stock in the place of any certificate
issued by it that has been alleged to have been lost or destroyed or that shall
have been mutilated. The Board may, in its discretion, require the owner (or his
legal representative) of a lost, destroyed or mutilated certificate to give to
the Corporation a bond in a sum, limited or unlimited, and in a form and with
any surety or sureties, as the Board in its absolute discretion shall determine,
to indemnify the Corporation against any claim that may be made against it on
account of the alleged loss or destruction of any such certificate, or issuance
of a new certificate. Anything herein to the contrary notwithstanding, the Board
of Directors, in its absolute discretion, may refuse to issue any such new
certificate, except pursuant to legal proceedings under the laws of the State of
Maryland.
SECTION 6. Fixing of Record Date for Dividends, Distributions, etc. The
Board may fix, in advance, a date not more than ninety (90) days preceding the
date fixed for the payment of any dividend or the making of any distribution or
the allotment of rights to subscribe for securities of the Corporation, or for
the delivery of evidences of rights or evidences of interests arising out of any
change, conversion or exchange of common stock or other securities, as the
record date for the determination of the stockholders entitled to receive any
such dividend, distribution, allotment, rights or interests, and in such case
only the stockholders of record at the time so fixed shall be entitled to
receive such dividend, distribution, allotment, rights or interests.
ARTICLE VI
INDEMNIFICATION AND INSURANCE
SECTION 1. Indemnification of Directors and Officers. Any person who was or
is a party or is threatened to be made a party in any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such person is a current or former
director or officer of the Corporation, or is or was serving while a director or
officer of the Corporation at the request of the Corporation as a director,
officer, partner, trustee, employee, agent or fiduciary of another corporation,
partnership, joint venture, trust, enterprise or employee benefit plan, shall be
indemnified by the Corporation against judgments, penalties, fines, excise
taxes, settlements and reasonable expenses (including attorneys' fees) actually
incurred by such person in connection with such action, suit or proceeding to
the full extent permissible under the Maryland General Corporation Law, the
<PAGE>
13
Securities Act of 1933, as amended (the "1933 Act"), and the 1940 Act, as those
statutes are now or hereafter in force, except that such indemnity shall not
protect any such person against any liability to the Corporation or any
stockholder thereof to which such person would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office ("disabling conduct"). Any repeal
or modification of the 1933 Act, the 1940 Act or these By-Laws shall not in any
way diminish any rights to indemnification hereunder except as required by law.
SECTION 2. Advances. Any current or former director or officer of the
Corporation claiming indemnification within the scope of this Article VI shall
be entitled to advances from the Corporation for payment of the reasonable
expenses incurred by him in connection with proceedings to which he is a party
in the manner and to the full extent permissible under the Maryland General
Corporation Law, the 1933 Act, and the 1940 Act, as those statutes are now or
hereafter in force; provided, however, that the person seeking indemnification
shall provide to the Corporation a written affirmation of his good faith belief
that the standard of conduct necessary for indemnification by the Corporation
has been met and a written undertaking to repay any such advance, if it should
ultimately be determined that the standard of conduct has not been met, and
provided further that at least one of the following additional conditions is
met: (a) the person seeking indemnification shall provide a security in form and
amount acceptable to the Corporation for his undertaking; (b) the Corporation is
insured against losses arising by reason of the advance; or (c) a majority of a
quorum of directors of the Corporation who are neither "interested persons" as
defined in Section 2(a)(19) of the 1940 Act, nor parties to the proceeding
("disinterested non-party directors"), or independent legal counsel, in a
written opinion, shall determine, based on a review of facts readily available
to the Corporation at the time the advance is proposed to be made, that there is
reason to believe that the person seeking indemnification will ultimately be
found to be entitled to indemnification.
SECTION 3. Procedure. At the request of any current or former director or
officer, or any employee or agent whom the Corporation proposes to indemnify,
the Board of Directors shall determine, or cause to be determined, in a manner
consistent with the Maryland General Corporation Law, the 1933 Act, and the 1940
Act, as those statutes are now or hereafter in force, whether the standards
required by this Article VI have been met; provided, however, that
indemnification shall be made only following: (a) a final decision on the merits
by a court or other body before whom the proceeding was brought, finding that
the person to be indemnified was not liable by reason of disabling conduct or
(b) in the absence of such a decision, a reasonable determination, based upon a
review of the facts, that the person to be indemnified was not liable by reason
of disabling conduct, by (i) the vote of a majority of a quorum of disinterested
non-party directors or (ii) an independent legal counsel in a written opinion.
SECTION 4. Indemnification of Employees and Agents. Employees and agents
who are not officers or directors of the Corporation may be indemnified, and
reasonable expenses may be advanced to such employees or agents, in accordance
with the procedures set forth in this Article VI to the extent permissible under
the Maryland General Corporation Law, the 1933 Act, and the 1940 Act, as those
statutes are now or hereafter in force, and to such further extent,
<PAGE>
14
consistent with the foregoing, as may be provided by action of the Board of
Directors or by contract.
SECTION 5. Other Rights. The indemnification provided by this Article VI
shall not be deemed exclusive of any other right, with respect to
indemnification or otherwise, to which those seeking such indemnification may be
entitled under any insurance or other agreement, vote of stockholders or
disinterested directors or otherwise, both as to action by a director or officer
of the Corporation in his official capacity and as to action by such person in
another capacity while holding such office or position, and shall continue as to
a person who has ceased to be a director or officer and shall inure to the
benefit of the heirs, executors and administrators of such a person.
SECTION 6. Insurance. The Corporation shall have the power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or who, while a director, officer,
employee or agent of the Corporation, is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee, agent or
fiduciary of another corporation, partnership, joint venture, trust, enterprise
or employee benefit plan, against any liability asserted against and incurred by
him in any such capacity, or arising out of his status as such, provided that no
insurance may be obtained by the Corporation for liabilities against which it
would not have the power to indemnify him under this Article VI or applicable
law.
ARTICLE VII
SEAL
The seal of the Corporation shall be circular in form and shall bear the
name of the Corporation, the year of its incorporation, the words "Corporate
Seal" and "Maryland" and any emblem or device approved by the Board of
Directors. The seal may be used by causing it or a facsimile to be impressed or
affixed or in any other manner reproduced. In lieu of affixing the seal, it
shall be sufficient to meet the requirements of any law, rule or regulation
relating to a corporate seal to place the word "(seal)" adjacent to the
signature of the person authorized to sign the document on behalf of the
Corporation.
ARTICLE VIII
AMENDMENTS
These By-Laws may be amended by the Board of Directors, subject to the
requirements of the 1940 Act; provided, however, that no amendment of these
By-Laws shall affect any right of any person under Article VI hereof based on
any event, omission or proceeding prior to the amendment. These By-Laws may not
be amended by the stockholders of the Corporation.
<PAGE>
[FORM OF SUBSCRIPTION CERTIFICATE]
THIS OFFER EXPIRES AT 5:00 PM. NEW YORK TIME ON JUNE 19, 2000*
THE SALOMON BROTHERS FUND INC
SUBSCRIPTION RIGHTS FOR CAPITAL STOCK
SUBSCRIPTION CERTIFICATE
Dear Shareholder:
As the registered owner of this Subscription Certificate, you are
entitled to exercise the rights issued to you as of May 22, 2000, the record
date for the rights offering of the Salomon Brothers Fund Inc (the "Fund"), to
subscribe for the number of shares of capital stock of the Fund shown on this
Certificate pursuant to the primary subscription upon the terms and conditions
and at the subscription price for each share of capital stock as specified in
the Fund's Prospectus dated , 2000. The terms and conditions of the
rights offering set forth in the Prospectus are incorporated herein by
reference. In accordance with the over-subscription privilege described in the
Prospectus, you are entitled to subscribe for additional shares if shares
remaining after exercise of rights pursuant to primary subscription are
available and you have fully exercised you primary subscription rights. If there
are not sufficient shares remaining to satisfy all over-subscriptions, the
available shares will be allocated among you and the other shareholders who
oversubscribe generally in proportion to the number of shares you own on the
record date. As described in the Prospectus, the Fund may in its discretion
issue up to an additional 25% of the shares available pursuant to the rights
offering to satisfy over-subscriptions.
SAMPLE CALCULATION
- --------------------------------------------------------------------------------
FULL PRIMARY SUBSCRIPTION ENTITLEMENT
(one share for every ten Rights)
No. of whole shares
owned on the Record 100 DIVIDED BY 10 = 10 new shares
Date (100) = (no. of Rights issued) (ignore
fractions)
- --------------------------------------------------------------------------------
METHOD OF EXERCISE OF RIGHTS
BY MAIL BY HAND OR OVERNIGHT COURIER
Tender & Exchange Department Tender & Exchange Department
P.O. Box 11248 101 Barclay Street
Church Street Station Receive and Deliver Window
New York, New York 10286-1248 New York, New York 10286
For Information Telephone:
(800) 507-9357
In order to exercise your rights, you must present to The Bank of New
York, prior to 5:00 p.m. on June 19, 2000 (the "Expiration Date")* either (1)
a properly completed and executed Subscription Certificate and a money order
or check drawn on a bank located in the United States of America and payable
to The Salomon Brothers Fund Inc for an amount equal to the number of shares
subscribed for under the primary subscription and over-subscription privilege
(if applicable) multiplied by the estimated subscription price of $ ,
or (2) a Notice of Guaranteed Delivery guaranteeing delivery of (i) a properly
completed and executed Subscription Certificate and (ii) a money order or check
drawn on a bank located in the United States of America and payable to The
Salomon Brothers Fund Inc for an amount equal to the number of shares subscribed
for under the primary subscription and over-subscription privilege (if
applicable) multiplied by the estimated subscription price of $ .
<PAGE>
If a Notice of Guaranteed Delivery is used, a properly completed
Subscription Certificate, together with payment in full, as described above,
must be received by The Bank of New York by no later than June 26, 2000.* See
pages and of the Prospectus.
No later than July 3, 2000, The Bank of New York will send you a
confirmation (or, if you own your shares through Cede or any other depository or
nominee, to Cede or such depository or nominee), showing (i) the number of
shares acquired pursuant to the primary subscription, (ii) the number of shares,
if any, acquired pursuant to the over-subscription privilege, (iii) the per
share and total purchase price for the shares, and (iv) any additional amount
payable by you or any excess to be refunded to you. You will not receive any
other evidence of title unless you have requested a stock certificate pursuant
to this certificate (See Item C of Section 1 on reverse) Shares subscribed for
pursuant to the primary subscription and over-subscription privilege will be
evidenced by book-entry registration only. Any refund in connection with your
subscription will be delivered as soon as practicable after June 19, 2000.*
THIS SUBSCRIPTION RIGHT IS NON-TRANSFERABLE. IF YOU DO NOT EXERCISE
YOUR RIGHTS BEFORE THE CONCLUSION OF THE OFFER, YOUR RIGHTS WILL EXPIRE
WITHOUT VALUE.
THE SALOMON BROTHERS FUND INC
By:
--------------------------
Name:
Title:
- ---------------------------------------
* Unless the rights offering is extended.
<PAGE>
PLEASE PRINT ALL INFORMATION CLEARLY AND LEGIBLY
SECTION 1: DETAILS OF SUBSCRIPTION
<TABLE>
<S> <C> <C> <C> <C>
A. Primary Subscription [div] 10 = X $ = $
-------------- ------------- ------------ ------------
(Rights (Full Shares (Subscription (Amount
Exercised) of Capital Price**) Required)
Stock Requested)
B. Over-Subscription X $ = $
Privilege* -------------------- ---------------------- ------------------
(Full Shares of (Subscription Price**) (Amount Required)
Capital Stock
Requested)
</TABLE>
Amount of Check or Money Order Enclosed (Total of A+B) = $
-------------
- ---------------
* YOU CAN ONLY OVER-SUBSCRIBE IF YOU HAVE FULLY EXERCISED YOUR PRIMARY
SUBSCRIPTION RIGHTS.
** NOTE: $ per share is an estimated price only. The final subscription
price will be determined on June 19, 2000, the pricing date (which is also the
date when your rights will expire), and could be higher or lower depending on
changes in the net asset value and share price of the capital stock.
C. I wish to receive stock certificates for the shares I have applied for.
[ ] (Please check if yes)
SECTION 2: TO SUBSCRIBE:
I ACKNOWLEDGE THAT I HAVE RECEIVED THE PROSPECTUS FOR THE RIGHTS OFFERING,
AND I HEREBY IRREVOCABLY SUBSCRIBE FOR THE NUMBER OF NEW SHARES INDICATED ABOVE
ON THE TERMS AND CONDITIONS SET FORTH IN THE PROSPECTUS.
I UNDERSTAND AND AGREE THAT I WILL BE OBLIGATED TO PAY ANY ADDITIONAL
AMOUNT TO THE FUND IF THE SUBSCRIPTION PRICE AS DETERMINED ON THE PRICING DATE
IS IN EXCESS OF THE $ ESTIMATED SUBSCRIPTION PRICE PER SHARE.
I HEREBY AGREE THAT IF I FAIL TO PAY IN FULL FOR THE SHARES FOR WHICH I
HAVE SUBSCRIBED, THE FUND MAY EXERCISE ANY OF THE REMEDIES PROVIDED FOR IN THE
PROSPECTUS.
Signature of Subscriber(s)
------------------------------
Please give your telephone # ( )
-------------------------
If you wish to have your confirmation and refund check (if any) delivered
to an address other than that listed on this Certificate you must have your
signature guaranteed by a member of the New York Stock Exchange or a bank or
trust company. Please provide the delivery address below and note if it is a
permanent change.
<PAGE>
SECTION 3: DESIGNATION OF BROKER-DEALER:
The following broker-dealer is hereby designated as having been
instrumental in the exercise of the Subscription Rights:
FIRM: REPRESENTATIVE
-------------------------------- --------------------------
NAME: REPRESENTATIVE NUMBER:[ ]
--------------------------------
<PAGE>
NOTICE OF GUARANTEED DELIVERY FOR SHARES OF CAPITAL
STOCK OF THE SALOMON BROTHERS FUND INC
SUBSCRIBED FOR PURSUANT TO THE PRIMARY SUBSCRIPTION
AND THE OVER-SUBSCRIPTION PRIVILEGE
THE SALOMON BROTHERS FUND INC RIGHTS OFFERING
As set forth in the Fund's Prospectus dated , 2000 under
the "Offer-Payment for Shares," this form or one substantially equivalent hereto
may be used as a means of effecting subscription and payment for all shares of
the Fund's capital stock subscribed for by exercise of rights pursuant to the
primary subscription and the over-subscription privilege. Such form may be
delivered by hand or sent by facsimile transmission, overnight courier or mail
to The Bank of New York, the subscription agent, and must be received prior to
5:00 p.m. New York City time on June 19, 2000.* The terms and conditions of
the rights offering set forth in the Prospectus are incorporated by reference
herein. Capitalized terms not defined here have the meanings attributed to
them in the Prospectus.
THE SUBSCRIPTION AGENT IS:
THE BANK OF NEW YORK
BY MAIL: BY HAND OR OVERNIGHT COURIER:
Tender & Exchange Department Tender & Exchange Department
P.O. Box 11248 101 Barclay Street
Church Street Station Receive and Deliver Window
New York, New York 10286-1248
By Facsimile:
(For Eligible Institutions Only)
(212) 815-6213
with the original Subscription Certificate
to be sent by one of the methods above.
For Confirmation of Facsimile, Telephone:
(212) 815-6173
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF
INSTRUCTIONS VIA A TELECOPY OR FACSIMILE NUMBER,
OTHER THAN AS SET FORTH ABOVE, DOES NOT CONSTITUTE A VALID DELIVERY
The New York Stock Exchange member firm or bank or trust company which
completes this form must communicate the guarantee and the number of shares
subscribed for under both the primary subscription and the over-subscription
privilege to The Bank of New York and must deliver this Notice of Guaranteed
Delivery guaranteeing delivery of (i) payment in full for all subscribed shares
and (ii) a properly completed and executed Subscription Certificate to The Bank
of New York prior to 5:00 p.m., New York City time, on June 19, 2000.* The
Subscription Certificate and full payment must then be delivered by the close
of business on June 26, 2000* to The Bank of New York. Failure to do so will
result in a forfeiture of the rights.
(CONTINUED ON OTHER SIDE)
- ----------------------
* Unless extended by the Fund.
<PAGE>
GUARANTEE
The undersigned, a member firm of the New York Stock Exchange or a bank
or trust company guarantees delivery of payment to The Bank of New York by the
close of business (5:00 p.m., New York City time) on June 26, 2000 (unless
extended) of (i) a properly completed and executed Subscription Certificate and
(ii) payment of the full subscription price for shares subscribed for on primary
subscription and pursuant to the over-subscription privilege, if applicable,
as subscription for such shares is indicated herein or in the Subscription
Certificate.
Number of primary subscription
shares of which you are
guaranteeing delivery
of rights and payment:
- -----------------------------------------------------
Number of over-subscription
shares of which you are
guaranteeing delivery of payment:
- -----------------------------------------------------
Number of rights to be delivered:
- -----------------------------------------------------
Total subscription price payment to
be delivered:
- -----------------------------------------------------
Method of delivery of rights (circle one)
A. through The Depository Trust Company ("DTC")**
B. direct to The Bank of New York
Please note that if you are guaranteeing for over-subscription shares, and are a
DTC participant, you must also execute and forward to The Bank of New York, a
Nominee Holder Over-Subscription Certification.
<TABLE>
<S> <C>
- --------------------------------------------------------- ------------------------------------------------------
Name of Firm Authorized Signature
- --------------------------------------------------------- ------------------------------------------------------
Address Title
- --------------------------------------------------------- ------------------------------------------------------
Zip Code Name (Please Type or Print)
- ---------------------------------------------------------
Name of Registered Holder (If Applicable)
- --------------------------------------------------------- ------------------------------------------------------
Telephone Number Date
</TABLE>
- --------
**If the rights are to be delivered through DTC, a representative of The
Bank of New York will phone you with a protect identification number,
which needs to be communicated by you to DTC.
<PAGE>
DTC PARTICIPANT OVER-SUBSCRIPTION CERTIFICATE
THIS FORM IS TO BE USED ONLY BY THE DEPOSITORY TRUST COMPANY
PARTICIPANTS TO EXERCISE THE OVER-SUBSCRIPTION PRIVILEGE IN RESPECT OF RIGHTS
WITH RESPECT TO WHICH THE PRIMARY SUBSCRIPTION WAS EXERCISED AND DELIVERED
THROUGH THE FACILITIES OF THE DEPOSITORY TRUST COMPANY. ALL OTHER EXERCISES OF
OVER-SUBSCRIPTION PRIVILEGES MUST BE EFFECTED BY THE DELIVERY OF THE
SUBSCRIPTION CERTIFICATE.
--------------------------------
THE TERMS AND CONDITIONS OF THE RIGHTS OFFERING ARE SET FORTH IN THE
SALOMON BROTHERS FUND'S PROSPECTUS DATED , 2000 AND ARE
INCORPORATED HEREIN BY REFERENCE. COPIES OF THE PROSPECTUS ARE AVAILABLE UPON
REQUEST FROM THE INFORMATION AGENT AND THE SUBSCRIPTION AGENT.
--------------------------------
VOID UNLESS RECEIVED BY THE SUBSCRIPTION AGENT WITH PAYMENT IN FULL OR
WITH A PROPERLY COMPLETED NOTICE OF GUARANTEED DELIVERY BY 5:00 P.M., NEW YORK
CITY TIME, ON JUNE 19, 2000, UNLESS EXTENDED.
--------------------------------
1. The undersigned hereby certifies to the Salomon Brothers Fund Inc (the
"Fund") and The Bank of New York that it is a participant in The
Depository Trust Company ("DTC") and that it has either:
(a) exercised all of its rights under the primary subscription and
delivered these exercised rights to The Bank of New York by way of
transfer to its DTC account or
(b) delivered to The Bank of New York a Notice of Guaranteed Delivery
relating to the exercise of primary subscription rights and will
deliver these rights to The Bank of New York by way of transfer to
its DTC account.
2. The undersigned hereby certifies to the Fund and The Bank of New York
that it owned shares of capital stock on May 22, 2000, the ("record date").
3. The undersigned hereby exercises the over-subscription privilege to
purchase available shares of capital stock and certifies to the Fund and
The Bank of New York that it is exercising the over-subscription privilege on
behalf of the account or accounts of persons (which may include the undersigned)
that have exercised all primary subscription rights.
4. The undersigned understands that:
(a) The Bank of New York must receive payment of the estimated
subscription price of $ for each share of capital stock
subscribed for under the over-subscription privilege before 5:00 p.m.,
New York City time, on June 19, 2000 (unless extended) or
<PAGE>
(b) if a Notice of Guaranteed Delivery is used, payment in full must be
made by the close of business on June 26, 2000.
5. The undersigned understands that $ is an estimated price only. The
subscription price will be determined on June 19, 2000, the pricing date (unless
extended), and could be higher or lower depending on the movement in net asset
value and share price of the Fund's capital stock. Payment of any additional
amounts due must be made by July 17, 2000 (unless the rights offering is
extended). The undersigned represents that this payment, in the aggregate amount
of $ either
(check appropriate box):
[ ] has been or is being delivered to The Bank of New York under the
Notice of Guaranteed Delivery
or
[ ] is being delivered to The Bank of New York herewith
or
[ ] has been delivered separately to The Bank of New York; and, if funds
are not delivered under a Notice of Guaranteed Delivery, is or was
delivered in the following manner (check appropriate box and
complete the following information):
(CONTINUED ON OTHER SIDE)
[ ] uncertified check
[ ] certified check
[ ] bank draft
- --------------------------------------------------------------------------------
Primary Subscription Confirmation Number
- --------------------------------------------------------------------------------
DTC Participant Number
- --------------------------------------------------------------------------------
Name of DTC Participant
<PAGE>
Registration into which shares of capital stock, interest and/or refund checks
should be issued:
Name:
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Certified TIN:
------------------------------------------------------------------
By:
-----------------------------------------------------------------------------
Name:
Title:
Contact Name:
-------------------------------------------------------------------
Phone Number:
-------------------------------------------------------------------
Date: , 2000
---------------------------------------------------------------------
PLEASE ATTACH A BENEFICIAL OWNER LISTING CONTAINING THE RECORD DATE POSITION OF
RIGHTS OWNED, THE NUMBER OF PRIMARY SHARES SUBSCRIBED AND THE NUMBER OF
OVER-SUBSCRIPTION SHARES REQUESTED BY EACH OWNER.
<PAGE>
THE SALOMON BROTHERS FUND INC
RIGHTS OFFERING
NOMINEE HOLDER OVER-SUBSCRIPTION CERTIFICATION
PLEASE COMPLETE ALL APPLICABLE INFORMATION
BY MAIL BY HAND OR OVERNIGHT COURIER:
TENDER & EXCHANGE DEPARTMENT TENDER & EXCHANGE DEPARTMENT
P.O. BOX 11248 101 BARCLAY STREET
CHURCH STREET STATION RECEIVE AND DELIVER WINDOW
NEW YORK, NEW YORK 10286-1248 NEW YORK, NEW YORK 10286
FOR INFORMATION, TELEPHONE
(800) 507-9357
THIS FORM IS TO BE USED ONLY BY NOMINEE HOLDERS TO EXERCISE THE
OVER-SUBSCRIPTION PRIVILEGE IN RESPECT OF RIGHTS WITH RESPECT TO WHICH THE
PRIMARY SUBSCRIPTION WAS EXERCISED IN FULL AND DELIVERED THROUGH THE FACILITIES
OF A COMMON DEPOSITORY. ALL OTHER EXERCISES OF OVER-SUBSCRIPTION PRIVILEGES MUST
BE EFFECTED BY THE DELIVERY OF THE SUBSCRIPTION CERTIFICATES.
THE TERMS AND CONDITIONS OF THE RIGHTS OFFERING ARE SET FORTH IN THE FUND'S
PROSPECTUS DATED , 2000 (THE "PROSPECTUS" ) AND ARE INCORPORATED
HEREIN BY REFERENCE. COPIES OF THE PROSPECTUS ARE AVAILABLE UPON REQUEST FROM
THE INFORMATION AGENT AND THE SUBSCRIPTION AGENT.
VOID UNLESS RECEIVED BY THE SUBSCRIPTION AGENT WITH PAYMENT IN FULL OR WITH
A PROPERLY COMPLETED NOTICE OF GUARANTEED DELIVERY BY 5:00 P.M. , NEW YORK CITY
TIME, ON JUNE 19, 2000 (THE "EXPIRATION DATE"), UNLESS EXTENDED BY THE FUND.
1. The undersigned hereby certifies to the Subscription Agent that it is
a participant in [Name of Depository] (the "Depository") and that it has either
(a) exercised all of its Rights under the Primary Subscription (the
"Primary Subscription Rights") and delivered these exercised Rights to
the Subscription Agent by way of transfer to the Fund's Depository
Account or
(b) delivered to the Subscription Agent a Notice of Guaranteed Delivery
relating to the exercise of Primary Subscription Rights and will
deliver these Rights to the Subscription Agent by way of transfer to
the Fund's Depository Account.
2. The undersigned hereby exercises the Over-Subscription Privilege to
purchase available shares of Capital Stock and certifies to the Subscription
Agent that it is exercising the Over-Subscription Privilege on behalf of the
account or accounts of persons (which may include the undersigned) that have
exercised all Primary Subscription Rights.
<PAGE>
3. The undersigned understands that:
(a) the Subscription Agent must receive payment of the Estimated
Subscription Price of $ for each share of Capital Stock
subscribed for under the Over-Subscription Privilege before 5:00
p.m., New York City time, on the Expiration Date (unless extended) or
(b) if a Notice of Guaranteed Delivery is used, the Subscription Agent
must receive payment in full before the close of business on June 26,
2000.
4. The undersigned represents that payment, in the aggregate amount of
$ either
(check appropriate box):
[ ] has been or is being delivered to the Subscription Agent under the
Notice of Guaranteed Delivery referred to above
or
[ ] is being delivered to the Subscription Agent herewith
or
[ ] has been delivered separately to the Subscription Agent; and, if funds
are not delivered under a Notice of Guaranteed Delivery, is or was
delivered in the following manner (check appropriate box and complete
the following Information):
[ ] uncertified check
[ ] certified check
[ ] bank draft
<PAGE>
- ---------------------------------- -----------------------------------------
Primary Subscription Name of Nominee Holder
Confirmation Number
- ---------------------------------- -----------------------------------------
Depository Participant Number Address
- ---------------------------------- -----------------------------------------
Contact Name: City State Zip Code
By:
- ---------------------------------- -----------------------------------------
Phone Number:
Name: ___________________________________
Dated: , 2000 Title: __________________________________
PLEASE ATTACH A BENEFICIAL OWNER LISTING CONTAINING THE RECORD DATE POSITION OF
RIGHTS OWNED, THE NUMBER OF PRIMARY SHARES SUBSCRIBED AND THE NUMBER OF
OVER-SUBSCRIPTION SHARES, IF APPLICABLE, REQUESTED BY EACH SUCH OWNER.
<PAGE>
BENEFICIAL OWNER LISTING CERTIFICATION
The undersigned, a bank, broker or other nominee holder of Rights
("Rights") to purchase shares of Capital Stock, par value $1.00 per share
("Capital Stock"), of THE SALOMON BROTHERS FUND INC (the "Fund") pursuant to the
Rights Offering (the "Offer") described and provided for in the Fund's
Prospectus dated , 2000 (the "Prospectus"), hereby certifies
to the Fund and to The Bank of New York, as Subscription Agent for such Offer,
that for each numbered line filled in below, the undersigned has exercised, on
behalf of the beneficial owner thereof (which may be the undersigned), the
number of Rights specified on such line pursuant to the Primary Subscription
(as defined in the Prospectus) and such beneficial owner wishes to subscribe for
the purchase of additional shares of Capital Stock pursuant to the
Over-Subscription Privilege (as defined in the Prospectus), in the amount set
forth in the third column of such line.
NUMBER OF NUMBER OF RIGHTS NUMBER OF RIGHTS
RECORD DATE EXERCISED PURSUANT TO EXERCISED PURSUANT
SHARES OWNED PRIMARY SUBSCRIPTION TO OVER-SUBSCRIPTION
PRIVILEGE
1.
- ------------------------ ------------------------ ------------------------
2.
- ------------------------ ------------------------ ------------------------
3.
- ------------------------ ------------------------ ------------------------
4.
- ------------------------ ------------------------ ------------------------
5.
- ------------------------ ------------------------ ------------------------
6.
- ------------------------ ------------------------ ------------------------
7.
- ------------------------ ------------------------ ------------------------
8.
- ------------------------ ------------------------ ------------------------
9.
- ------------------------ ------------------------ ------------------------
10.
- ------------------------ ------------------------ ------------------------
Name of Nominee Holder
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
--------------------------------------------
Dated: , 2000
--------------------------------------
<PAGE>
Provide the following information,
if applicable:
Name of Broker:
- ------------------------------------ --------------------
Depository Trust Corporation ("DTC")
Participant Number
Address:
- ------------------------------------ ---------------------------
DTC Primary Subscription
Confirmation Number(s)
<PAGE>
SUBSCRIPTION AGENCY AGREEMENT
May __, 2000
The Bank of New York
101 Barclay Street - 22W
New York, New York 10286
Attention of _______________
Ladies and Gentlemen:
Subscription Agency Agreement, dated as of May __, 2000 between The
Salomon Brothers Fund Inc (the "Fund") and The Bank of New York, a New York
corporation (the "Agent"). Capitalized terms used and not otherwise defined
herein shall have the respective meanings assigned to them in the Fund's
Prospectus dated May __, 2000 (the "Prospectus"), a copy of which is attached
hereto as Exhibit A.
Section 1. The Rights Offering. The Fund is distributing to the holders
of record of shares of its capital stock, par value $1.00 per share (the
"Shares"), as of the close of business on May 22, 2000 (the "Record Date")
non-transferable rights (the "Rights") to acquire up to a total of 11,826,140
Shares at a price of $[____] per share (the "Subscription Price") on the basis
of one Right for each Share held of record on the Record Date. The subscription
period will run from May 22, 2000 - June 19, 2000 (the "Expiration Date").
Either (1) the completed subscription form evidencing the exercise of the basic
purchase right and/or the over-subscription privilege and payment based upon
the estimated subscription price or (2) a completed Notice of Guaranteed
Delivery must be received by the Agent before 5:00 P.M., New York City time,
on the Expiration Date.
The Fund filed the Registration Statement, including the Prospectus,
relating to the Rights and the Shares to be issued upon exercise of Rights with
the Securities and Exchange Commission under the Securities Act of 1933, as
amended, on March 23, 2000. Said Registration Statement became effective on May
[___], 2000.
The Rights may be exercised by delivering to the Agent a properly
completed and executed subscription form, a form of which is attached hereto as
Exhibit B.
Section 2. The Rights. Ten Rights entitle the holder to purchase one
Share at the Subscription Price and to subscribe for additional
over-subscription Shares at the same price.
Basic purchase right. Ten Rights entitle the holder to receive, upon
payment of the Subscription price, one Share.
<PAGE>
2
Over-subscription privilege. Holders exercising their basic purchase
rights in full are entitled to subscribe for additional over-subscription Shares
up to a total of 11,826,140 Shares. If the rights offering is oversubscribed,
the Fund will allocate those additional over-subscription Shares in accordance
with the terms of the offering.
Reference is made to the Prospectus for a complete description of the
Rights.
Section 3. Fractional Shares. No fractional shares will be issued. Any
fractional share to which holders of Rights would otherwise be entitled will be
rounded down to the nearest whole share.
Section 4. Appointment of Agent.
(a) The Fund hereby appoints you as Agent for the Rights
Offering. In connection with your appointment as Agent, the Fund has also
appointed you as Transfer Agent and as Registrar of the Company for the Rights
and the Shares to be issued upon exercise of Rights, and to act as is customary
in such capacities.
(b) You hereby confirm that you mailed by first class mail on
_____ __, 2000 to each record holder of Shares on the Record Date (1) a copy of
the Prospectus and Subscription Certificate and (2) a return envelope addressed
to the Agent.
Section 5. Duties of the Agent. As Agent you are authorized and
directed to:
(a) mail promptly by first class mail the Prospectus and
Subscription Certificate to each person who submits a request to you before the
Expiration Date;
(b) accept subscriptions and notices of guaranteed delivery
upon the exercise of Rights in accordance with the terms of the Prospectus and
the Instructions to the form of Subscription Certificate up to 5:00 P.M., New
York City time, on the Expiration Date;
(c) accept subscriptions, without further authorization from
the Fund, without procuring supporting legal papers or other proof of authority
to sign (including proof of appointment of a fiduciary or other person acting in
a representative capacity):
(i) where the Shares are registered in the name of a
fiduciary, the subscription form is executed by such fiduciary, and the Shares
are to be issued in the name of the registered owner of the Shares as of the
Record Date;
(ii) where the Shares are in the name of a corporation and the
subscription form is executed by an officer thereof, and the Ordinary Shares are
to be issued in the name of such corporation; or
(iii) where the Shares are registered in the name of a
decedent and the subscription form is executed by a subscriber purporting to act
as the decedent's executor or administrator, the
<PAGE>
3
Shares are to be registered in the name of the subscriber as executor or
administrator of the estate of the deceased registered holder; and
(iv) in each of the cases under (i), (ii) and (iii), there is
no evidence indicating that the subscriber is not the duly authorized
representative that he/she purports to be;
(d) accept subscriptions and notices of guaranteed delivery
executed, as agent for the subscriber, by a firm having membership on a national
securities exchange or by a bank or trust company having an office or a
correspondent in the United States;
(e) accept full payment for the total number of shares
subscribed for prior to 10:00 A.M., New York City time, on June 19, 2000; and
(f) refer to the Fund for specific instructions as to
acceptance or rejection of subscriptions received after the Expiration Date,
subscriptions not authorized to be accepted pursuant to paragraph (b), (c) or
(d) above, and subscriptions otherwise failing to comply with the requirements
of the Prospectus and the Instructions to the form of Subscription Certificate.
(g) Upon acceptance of subscriptions, the Agent shall;
(i) hold in trust for the Fund, until 10:00 A.M., New York
City time, [July 17, 2000], in an interest bearing account consisting of
instruments which accrue interest at the prevailing federal funds rate, all
funds collected in payment of subscriptions;
(ii) by no later than 12:00 P.M., New York City time, [July
17, 2000], transfer the funds to the Fund's current account with The Bank of New
York, Account #______ unless for any reason the rights offering is terminated,
in which case the Agent shall refund to subscribers without interest all funds
collected and refund to the Fund all interest accrued on subscription funds;
(iii) advise the Fund daily by telecopy and confirmed by
letter as to the total number of Shares subscribed for and the amount of funds
received (identified in accordance with (i) above), deposited, available or
transferred in accordance with (i) above, with cumulative totals;
(iv) as promptly as possible following the Expiration Date,
advise the Fund in accordance with (ii) above of the number of Shares subscribed
and the number of Shares unsubscribed; and
(v) by no later than July 3, 2000 mail confirmations to
subscribers showing information as to the Shares acquired (as set forth in the
Prospectus) and on [June 19, 2000] issue certificates as Transfer Agent for
these Shares with respect to which subscribers have requested certificates
countersigned with the signature of the Agent, registered in the names specified
by the subscribers, and mail or deliver such certificates as instructed by the
subscribers as soon as practicable in accordance with the rules of the NASD,
after collection of remittance for subscriptions.
<PAGE>
4
Section 6. Agent Compensation. The Fund agrees that it will pay to the
Agent compensation for its services of $190,000 to act as Agent. The Fund
further agrees that it will reimburse the Agent for its necessary and reasonable
expenses incurred in the performance of its duties as such, including without
limitation reasonable postage, stationery and supplies and counsel fees.
Section 7. Confidential Information. The Agent acknowledges the
confidential and proprietary nature of the Fund's shareholder records and
information related thereto which it may receive pursuant to the exercise of its
duties under this Agreement. The Agent agrees that it shall maintain the
confidentiality thereof and, except as necessary to fulfill any duty under this
Agreement, shall not disclose the contents or nature thereof without the express
prior written authorization of any two of the following persons: ___________,
__________ and __________.
Section 8. Instructions. The Agent will be entitled to rely upon any
instructions or directions furnished to it in writing by any officer of the
Fund, and will be entitled to treat as genuine, and as the document purports to
be, any letter or other document furnished to it by any officer of the Fund.
Section 9. Indemnification. The Fund further agrees that the Fund will
indemnify, protect and hold harmless the Agent from any and all liability, cost
or expense resulting from any act, omission, delay or refusal, made by it in
reliance upon any signature, endorsement, assignment, certificate, order,
request, notice, instructions or other instrument or document believed by it in
good faith to have been duly authorized, and in delaying or refusing in good
faith to accept any subscription. The Agent shall, in issuing and registering
Shares as Transfer Agent and Registrar pursuant to duly exercised Rights, be
liable for and shall indemnify and hold the Fund harmless from any and all
liability, cost or expense as a result of or arising out of its own negligence
or bad faith or that of its agents, servants or employees.
Section 10. Amendments. This Agreement may be amended, supplemented or
otherwise modified only by a written instrument executed and delivered by each
of the Fund and the Agent.
Section 11. Governing Law. This Agreement will be governed by, and
construed and interpreted in accordance with, the laws of the State of New York.
Section 12. Counterparts. This Agreement may be executed by the parties
hereto on separate counterparts, which counterparts taken together will be
deemed to constitute one and the same instrument.
If the foregoing is acceptable to you, please indicate your acceptance
of your appointment as Agent upon the terms set forth above by signing and
return to us one copy of this Agreement.
Very truly yours,
The Salomon Brothers Fund Inc
By:________________________________
<PAGE>
Name:______________________________
Title:_____________________________
Accepted and agreed to as of
the [__] day of May, 2000
THE BANK OF NEW YORK
By:_______________________
Name:_____________________
Title:____________________
<PAGE>
INVESTMENT MANAGEMENT AGREEMENT
THE SALOMON BROTHERS FUND INC
Seven World Trade Center
New York, New York 10048
INVESTMENT MANAGEMENT AGREEMENT as of the 28th day of
November, 1997 between THE SALOMON BROTHERS FUND INC, a Maryland corporation
(hereinafter called the "Corporation"), and SALOMON BROTHERS ASSET MANAGEMENT
INC, a Delaware corporation (hereinafter called "SBAM").
1. The Corporation hereby employs SBAM and SBAM hereby accepts
the employment by the Corporation for the period and on the terms and conditions
hereinafter set forth in this management agreement entered into by the
Corporation with SBAM pursuant to the powers granted to the Corporation in its
Articles of Incorporation.
2. Subject to the Board of Directors of the Corporation, SBAM
shall manage the investment operations of the Corporation, and shall provide
management and other services specified in this agreement and especially shall
make purchases and sales of portfolio securities on behalf of the Corporation in
accordance with the best judgment of SBAM and within the investment objectives
and restrictions set forth in the Corporation's Articles of Incorporation,
By-Laws and Registration Statement, the Investment Company Act of 1940, as
amended, the provisions of the Internal Revenue Code with respect to regulated
investment companies, and when requested by such Board of Directors, supply the
reasons and considerations that prompted SBAM's decisions.
3. SBAM shall at its expense provide the Corporation with
office facilities, including space, furniture and equipment and all personnel
reasonably necessary for the operation of the Corporation. Other than as herein
specifically indicated, SBAM shall not be responsible for any expenses of the
Corporation. Specifically SBAM shall not be responsible, except to the extent of
the reasonable compensation of employees of the Corporation whose services may
be involved, for the Corporation's legal and auditing expenses; fees and
expenses of its Board of Directors, Executive of special committees; taxes and
governmental fees and any membership dues; fees of custodian, transfer agent and
registrar, if any; expense of preparing share certificates and other expenses of
issue, sale, underwriting, distribution or repurchase of the Corporation's
shares; expense of registering or qualifying securities for sale; expense of
preparing and distributing reports, notices and dividends to shareholders; cost
of stockholders' and other meetings; or fees in connection with the listing of
its shares on any stock exchange. Should SBAM determine that services which
would ordinarily be rendered by the employees of the Corporation at its office
can be better rendered by some other agency, SBAM shall bear the costs of
employing that agency.
4. It is understood that SBAM shall from time to time employ
or associate with itself such persons as it believes to be particularly fitted
to assist it in the execution of this agreement, the compensation of such
persons to be paid by SBAM. No obligation may be incurred on behalf of the
Corporation in any such respect. During the continuance of this agreement, SBAM
shall provide persons satisfactory to the Board of Directors of the Corporation
<PAGE>
2
to serve as officers and employees of the Corporation. These may be a chairman
of the board, chairman of the executive committee, president, one or more
vice-presidents, a secretary, a treasurer, and such additional officers and
employees as may reasonably be necessary for the conduct of the Corporation's
business and SBAM agrees to pay the compensation of all such persons.
5. In consideration of the foregoing, the Corporation will pay
SBAM quarterly, promptly after the last day of each March, June, September and
December, a fee consisting of a base fee as computed below (the "Base Fee") plus
a performance adjustment. The Base Fee shall be calculated as follows:
<TABLE>
<CAPTION>
BASE FEE (AVERAGE DAILY NET ASSETS) QUARTERLY FEE RATE
- ----------------------------------- ------------------
<S> <C>
First $350 million................................................................ .1620000%
Next $150 million................................................................. .1375 %
Next $250 million................................................................. .13125%
Next $250 million................................................................. .125 %
Over $1 billion................................................................... .1125 %
</TABLE>
The Base Fee shall be calculated using the daily net assets
averaged over the most recent calendar quarter. For each percentage point by
which the investment performance of the Corporation exceeds or is exceeded by
the investment record of the S&P 500 Index of Composite Stocks (the "S&P 500
Index") over the one year period ending on the last day of each calendar quarter
(except as described in the next paragraph), the Base Fee will be adjusted
upward or downward by the product of (i) 1/4 of .01% multiplied by (ii) the
Corporation's average daily net assets for the one year period ending on the
last day of the calendar quarter. If the amount by which the Corporation
outperforms or underperforms the S&P 500 Index is not a whole percentage point,
a pro rata adjustment shall be made. However, there will be no performance
adjustment unless the investment performance of the Corporation exceeds or is
exceeded by the investment record of the S&P 500 Index by at least one
percentage point over the same period. The maximum quarterly adjustment is 1/4
of .1%, which would occur if the Corporation's performance exceeds or is
exceeded by the S&P 500 Index by ten or more percentage points.
No performance adjustment will be paid until the end of the
first quarter in which this agreement has been in effect for one year (the
"First Adjustment Date"). The advisory fee payable during this period will be
the Base Fee calculated as described above, subject to an adjustment for the one
year period ending on that date. On the First Adjustment Date, 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 over the one year period
ending on that date, the Base Fee will be adjusted upward or downward by the
product of (i) .01% multiplied by (ii) the average daily net assets of the Fund
for the one year period ending on the First Adjustment Date. If the amount by
which the Corporation outperforms or underperforms the S&P 500 Index is not a
whole percentage point, a pro rata adjustment shall be made. Thereafter,
performance adjustments will be made quarterly based on a rolling one year
period (i.e., the most recent four quarters). If the new fee arrangement becomes
effective on a date which is not the beginning of a calendar quarter, the
management fee will be prorated with the Fund paying SBAM the current
<PAGE>
3
management fee for the number of days in the quarter prior to effectiveness of
the new fee arrangement and the new Base Fee for the number of days in the
quarter following such effectiveness.
The investment performance of the Corporation, for a period of
one year, shall mean the sum of (i) the change in the Corporation's net asset
value per share during such period, (ii) the value of cash distributions per
share accumulated to the end of such period and (iii) the value of capital gains
taxes per share paid or payable on undistributed realized long-term capital
gains accumulated to the end of such period; expressed as a percentage of the
Corporation's net asset value per share at the beginning of such period. For
this purpose, the value of distributions per share of realized capital gains, of
dividends per share paid from investment income and of capital gains taxes per
share paid or payable on undistributed realized long-term capital gains shall be
treated as reinvested in shares of the Corporation at the net asset value per
share in effect at the close of business on the record date for the payment of
such distributions and dividends and the date on which provision is made for
such taxes, after giving effect to such distributions, dividends and taxes.
However, notwithstanding the foregoing, the investment performance of the
Corporation shall not include, and there shall be excluded from the change in
the net asset value per share for such period, and the value of the
Corporation's cash distributions per share accumulated to the end of such period
shall be adjusted for, any increase or decrease in the investment performance of
the Corporation resulting from the issuance, sale or repurchase of any shares of
the capital stock or any other securities of the Corporation.
The investment record of the S&P 500 Index, for a period of
one year, shall mean the sum of (i) the change in the level of the index during
such period and (ii) the value, computed consistently with the index, of cash
distributions made by companies whose securities comprise the index accumulated
to the end of such period; expressed as a percentage of the index level at the
beginning of such period. For this purpose, cash distributions on the securities
which comprise the index shall be treated as reinvested in the index at least as
frequently as the end of each calendar quarter following the payment of the
dividend.
If the fee payable to the Investment Manager pursuant to this
agreement begins to accrue on a date prior to the end of any quarter or if this
agreement terminates before the end of any quarter, compensation for the period
from such date to the end of such quarter or from the end of the last quarter
ending prior to such termination to the date of termination shall be prorated
and shall be payable promptly at the end of such quarter or after the date of
termination, as the case may be.
6. Upon the expiration or sooner termination of this agreement
and/or in the event of a breach of this agreement by the Corporation, the
Corporation covenants that it will at the request of SBAM to be evidenced by
written notice to the Corporation, forthwith change its corporate name so as to
eliminate all reference to "Salomon Brothers" and will not thereafter transact
any business in a corporate name using the words "Salomon Brothers" in any form
or combination whatsoever, or otherwise use the words "Salomon Brothers" or any
other reference to "Salomon Brothers" and for the purpose of requiring such
discontinuance the judgment of SBAM (or, if SBAM shall no longer be in
existence, Salomon Inc) as to whether this agreement
<PAGE>
4
has been breached by the Corporation shall be final and conclusive. The exercise
of its right to require such discontinuance of use of name shall not deprive
SBAM, or any affiliate thereof which has "Salomon Brothers" in its name, of, but
shall be in addition to, any other rights or remedies to which it may be
entitled in law or equity by reason of any such breach of this agreement by the
Corporation; nor shall the omission of SBAM to request such discontinuance in
any case in which it shall be so deemed a waiver of its right to require such
discontinuance at any time thereafter, for the same or any subsequent breach. It
is agreed that the damage to SBAM, or any affiliate thereof which has "Salomon
Brothers" in its name, through any failure of the Corporation after demand to
discontinue the use of the name of "Salomon Brothers" would be irreparable and
impossible of ascertainment in terms of money, and the Corporation consents that
in any such case an injunction may issue against it restraining it from the
further use of such name.
7. The Board of Directors of the Corporation may include
officers and/or directors of SBAM, Salomon Brothers Inc, Salomon Inc or any of
their affiliates and its officers may be, in whole or in part, officers and/or
directors of SBAM, Salomon Brothers Inc, Salomon Inc or any of their affiliates.
SBAM, Salomon Brothers Inc, Salomon Inc or any of their affiliates may,
nevertheless, deal freely with the Corporation as bankers or otherwise, and no
contract or transaction shall be invalidated or in any way affected by those
facts, even though the vote of director or directors or the action of the
officer or officers who are officers or directors of SBAM, Salomon Brothers Inc,
Salomon Inc or any of their affiliates shall have been necessary to obligate the
Corporation in such contract or transaction; and neither SBAM nor Salomon
Brothers Inc nor Salomon Inc nor any of their affiliates nor any officer or
director thereof shall be liable to the Corporation or to any stockholder or
creditor thereof or to any other person by reason of such contract or
transaction or for any loss resulting therefrom or for any profit derived
therefrom, provided that such contract or transaction shall, at the time at
which it was entered into, have been a reasonable one to have been entered into
and shall have been on terms that at that time were fair. Nothing contained in
this Article 7, however, shall validate, authorize or apply to any act
prohibited by the Investment Company Act of 1940, as amended, or shall protect
any director or officer of the Corporation or any officer or director of SBAM,
Salomon Brothers Inc, Salomon Inc or any of their affiliates against any
liability to the Corporation or to its security holders to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office or under this agreement.
8. This agreement, unless sooner terminated as provided in
this agreement, shall remain in effect for twelve months from the date hereof
and thereafter shall continue automatically for a period of one year so long as
such continuance is specifically approved annually by the Board of Directors of
the Corporation or by vote of a majority of the outstanding voting securities of
the Corporation and, in either case, by the vote of a majority of directors who
are not parties to this agreement or interested persons of any such party cast
in person at a meeting called for the purpose of voting on such approval;
provided, however, that this agreement may be terminated at any time, without
the payment of any penalty, by the Board of Directors of the Corporation or by
vote of a majority of the outstanding voting securities of the
<PAGE>
5
Corporation on sixty days' written notice to SBAM or by SBAM on sixty days'
written notice to the Corporation.
9. The services of SBAM to the Corporation hereunder are not
to be deemed exclusive, and SBAM shall continue to be free to act as investment
adviser to others.
10. This agreement may be amended by mutual consent, but this
agreement as amended must be approved by the Board of Directors of the
Corporation (by vote including a majority of directors who are not parties to
such agreement or interested persons of any such party), or by vote of a
majority of the outstanding voting securities of the Corporation given at any
meeting of the stockholders, the notice of which shall have stated the proposed
amendment to be one of the objects of the meeting, and otherwise as may be
required by the Investment Company Act of 1940, as amended, provided that the
compensation payable to SBAM pursuant to Article 5 hereof may not be increased
except by a vote of a majority of the outstanding voting securities of the
Corporation.
11. This agreement shall bind and inure to the benefit of any
corporation or association with which or into which the Corporation shall be
consolidated or merged or any corporation or association acquiring substantially
all of the assets of the Corporation.
12. This agreement shall terminate automatically in the event
of its assignment.
IN WITNESS WHEREOF, the parties hereto have executed this
agreement as of the day and year first above written.
Very truly yours,
THE SALOMON BROTHERS FUND INC
By: /s/ Michael Hyland
_________________________________
Michael Hyland
ACCEPTED:
SALOMON BROTHERS ASSET MANAGEMENT INC
By: /s/ Michael Hyland
_________________________________
Michael Hyland
<PAGE>
1
SUB-ADMINISTRATION AGREEMENT
JANUARY 1, 2000
SSB CITI FUND MANAGEMENT LLC
388 GREENWICH STREET
NEW YORK, NEW YORK 10013
Dear Sirs:
Salomon Brothers Asset Management Inc ("SBAM"), a corporation organized
under the laws of the State of Delaware, confirms its agreement with SSB Citi
Fund Management LLC ("SSBC") with respect to Salomon Brothers Fund Inc (the
"Company"), as follows:
1. APPOINTMENT; INVESTMENT DESCRIPTION
The Company employs SBAM as administrator pursuant to an Administration
Agreement dated as of January 1, 2000 (the "Administration Agreement"). Pursuant
to Section 1 of the Administration Agreement, SBAM may delegate some or all of
its duties and obligations thereunder to third parties, provided that such
persons remain under the general supervision of SBAM. SBAM desires to delegate
all of its duties and obligations under the Administration Agreement to SSBC,
and SBAM hereby appoints SSBC as sub-administrator with respect to the Company.
SSBC accepts this appointment and agrees to furnish services to the Company as
described herein for the compensation set forth below, it being understood that
SSBC shall at all times remain under the general supervision of SBAM with
respect to its duties to be performed hereunder.
The Company desires to employ its capital by investing and reinvesting in
investments of the kind and in accordance with the limitations specified in the
Articles of Incorporation of the Company, as amended from time to time, in its
Prospectus and Statement of Additional Information as from time to time in
effect, and in such manner and to the extent as may from time to time be
approved by the Board of Directors of the Company. Copies of the Company's
Prospectus, Statement of Additional Information and the Articles of
Incorporation of the Company have been submitted to SSBC.
<PAGE>
2
2. SERVICES AS ADMINISTRATOR
Subject to the supervision and direction of the Board of Directors of the
Company and SBAM, SSBC will (a) assist in supervising all aspects of the
Company's operations except those performed by SBAM under its investment
advisory agreement with respect to the Company; (b) supply the Company with
office facilities (which may be SSBC's own offices) for providing its services
under this Agreement, statistical and research data, data processing services,
clerical, accounting and bookkeeping services, including but not limited to, the
calculation of the net asset value of shares of the Company, internal auditing
and legal services, internal executive and administrative services, and
stationary and office supplies; and (c) prepare Board materials, reports to the
shareholders of the Company, tax returns and reports to and filings with the
Securities and Exchange Commission and state blue sky authorities.
3. COMPENSATION
In consideration of services rendered pursuant to this Agreement, SBAM will
pay SSBC on the first business day of each month a fee for the previous month at
an annual rate of 0.05% of the Company's average daily net assets. Upon any
termination of this Agreement before the end of any month, the fee for such part
of the month shall be prorated according to the proportion which such period
bears to the full monthly period and shall be payable upon the date of
termination of this Agreement. For the purpose of determining fees payable to
SSBC, the value of the Company's net assets shall be computed at the times and
in the manner specified in the Prospectus and Statement of Additional
Information as from time to time in effect.
4. EXPENSES
SSBC will bear all expenses in connection with the performance of its
services under this Agreement. The Company will bear certain other expenses to
be incurred in its operation, including: taxes, interest, brokerage fees and
commissions, if any; fees of Directors of the Company who are not officers,
directors, or employees of Citigroup Inc., Salomon Smith Barney Inc. or SBAM;
Securities and Exchange Commission fees and state blue sky qualification fees;
charges of custodians and transfer and dividend disbursing agents; the Company's
and Board members' proportionate share of insurance premiums, professional
association dues and/or assessments; outside auditing and legal expenses; costs
of maintenance of corporate existence; costs attributable to investor services,
including without limitation, telephone and personnel expenses; costs of
preparing and printing prospectuses and statements of additional information for
regulatory purposes and for distribution to existing shareholders; costs of
shareholders' reports and meetings, and meetings of the officers or Board of
Directors of the Company; and any extraordinary expenses.
<PAGE>
3
5. STANDARD OF CARE
SSBC shall exercise its best judgment in rendering the services listed in
paragraph 2 above. SSBC shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Company in connection with the matters to
which this Agreement relates provided that nothing in this Agreement shall be
deemed to protect or purport to protect SSBC against liability to the Company or
to its shareholders to which SSBC would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or by reason of SSBC's reckless disregard of its
obligations and duties under this Agreement.
6. TERM OF AGREEMENT
This Agreement shall continue in effect for so long as the Administration
Agreement remains in effect between SBAM and the Company. This Agreement is
terminable by either party, without penalty, on 60 days' written notice to the
other.
7. SERVICE TO OTHER COMPANIES OR ACCOUNTS
SBAM understands that SSBC now acts, will continue to act and may act in
the future as administrator to one or more other investment companies, and SBAM
has no objection to SSBC's so acting. SBAM understands that the persons employed
by SSBC to assist in the performance of SSBC's duties hereunder will not devote
their full time to such service and nothing contained herein shall be deemed to
limit or restrict the right of SSBC or any affiliate of SSBC to engage in and
devote time and attention to other businesses or to render services of whatever
kind or nature.
<PAGE>
4
If the foregoing is in accordance with your understanding, kindly indicate
your acceptance hereof by signing and returning to us the enclosed copy hereof.
Very truly yours,
Salomon Brothers Asset Management Inc
By: /s/ Heath B. McLendon
-------------------------------------
Heath B. McLendon
Accepted:
SSB Citi Fund Management LLC
By: /s/ Heath B. McLendon
------------------------------
Heath B. McLendon
<PAGE>
Salomon Brothers Fund
7 World Trade Center
New York, New York 10013
Attention:
Ladies and Gentlemen:
We are pleased that the Salomon Brothers Fund (the "Company") has chosen to
engage Salomon Smith Barney Inc. ("SSB") as its exclusive financial adviser in
connection with a possible Transaction as defined below. We look forward to
working with you on this engagement, and have set forth below the agreed upon
terms of our engagement.
Scope of engagement. As we have discussed, in the course of our engagement
as your exclusive financial adviser, we will perform such financial advisory and
investment banking services for the Company in connection with the proposed
Transaction as are customary and appropriate in transactions of this type and as
you reasonably request. For purposes of this agreement, "Transaction" means, a
rights offering by the Company. As requested by the Company, SSB shall advise
the Company with respect to its planned rights offering, specifically
regarding, 1) structuring the offering, 2) assisting in the preparation of
materials to be presented to the Board and assisting in such presentation,
3) the hiring of the Information and Subscription Agent, 4) participating in the
drafting and reviewing of all documentation and notifications, 5) providing
relevant information to the reorganization department for dissemination to the
SSB sales force and the general broker community, 6) monitoring and advising
during the entire offering process, and coordinating with both the Information
and Subscription Agent in an effort to keep the Company apprised of the offering
and related developments, and 7) reviewing final closing documentation and
monitoring the closing process.
Fees and Expenses. For our services, the Company will pay to SSB a cash
fee equal to 0.375% of the Transaction Value as defined below, payable promptly
upon consummation of a Transaction. For the purpose of calculating a
Transaction Fee, "Transaction Value" equals the total proceeds and other
consideration received by the Company in the Transaction.
In addition to any fees that may be payable to SSB hereunder and regardless
of whether any Transaction is proposed or consummated, the Company will promptly
reimburse SSB, from time to time upon request, for all reasonable travel and
other expenses incurred in performing our services hereunder, including
reasonable fees and expenses if our legal counsel is such counsel is employed.
Use of Information. The Company recognizes and confirms that SSB in acting
pursuant to this engagement will be using publicly available information and
information in reports and other materials provided by others, including,
without limitation, information provided by or on behalf of the Company, and
that SSB does not assume responsibility for and may rely, without independent
verification, on the accuracy and completeness of any such information. The
Company agrees to furnish or cause to be furnished to SSB all necessary or
appropriate information for use in its
<PAGE>
engagement and hereby warrants that any information relating to the Company
or the Transaction that is furnished to SSB by or on behalf of the Company will
be true and correct in all material respects and not misleading. The Company
agrees that any information or advice rendered by SSB or any of our
representatives in connection with this engagement is for the confidential use
of the Company only in its evaluation of a Transaction and the Company
will not, and will not permit any third party to, use it for any other purpose
or disclose or otherwise refer to such advice or information, or to SSB, in any
manner without our prior written consent.
Certain Acknowledgments. The Company acknowledges that SSB has been
retained hereunder solely as an adviser to the Company, and not as an adviser to
or agent of any other person, and that the Company's engagement of SSB is as an
independent contractor and not in any other capacity including as a fiduciary.
SSB may, to the extent it deems appropriate, render the services hereunder
through one or more of its affiliates. Neither this engagement, nor the delivery
of any advice in connection with this engagement, is intended to confer rights
upon any persons not a party hereto (including security holders, employees or
creditors of the Company) as against SSB or our affiliates or their respective
directors, officers, agents and employees. SSB may, at our own expense, place
announcements or advertisements in financial newspapers and journals describing
our services hereunder.
Indemnity. SSB and the Company have entered into a separate letter
agreement, dated the date hereof, providing for the indemnification of SSB
by the Company in connection with SSB's engagement hereunder, the terms of
which are incorporated into this agreement in their entirety.
Termination of Engagement. SSB's engagement will commence on the date
hereof and will continue until the earlier of the consummation of a Transaction
and 24 months after the date hereof, unless extended by mutual written consent
or earlier terminated as provided below. Either the Company or SSB may
terminate this agreement at any time, with or without cause, by giving written
notice to the other party; provided, however, that no such termination will
affect the matters set out in this section or under the captions "Use of
Information," "Certain Acknowledgments" and "Miscellaneous" or in the separate
letter agreement relating to indemnification. It is expressly agreed that
following the expiration or termination of this agreement, SSB will continue to
be entitled to receive fees as described above that have accrued prior to such
expiration or termination but are unpaid, as well as reimbursement for expenses
as contemplated above. It is also expressly agreed that, if a Transaction is
consummated within 24 months after the date of expiration or termination of this
agreement or if a definitive agreement that results in a Transaction is entered
into during the term of this agreement or within such period, SSB shall be
entitled to its full fees as described above.
Miscellaneous. This agreement is governed by the laws of the State of New
York without regard to conflicts of law principles, and will be binding upon and
inure to the benefit of the Company and SSB and their respective successors and
assigns. The Company and SSB agree to waive trial by jury in any action,
proceeding or counterclaim brought by or on behalf of either party with respect
to any matter whatsoever relating to or arising out of any actual or proposed
transaction, or the engagement of or performance by SSB hereunder. This
agreement may be executed in two or more counterparts, each of which shall be
deemed to be an original, but all of which shall constitute one and the same
agreement.
<PAGE>
[Client Name
Date
Page 3]
We are delighted to accept this engagement and look forward to working with
you on this matter. Please confirm that the foregoing is in accordance with your
understanding of our agreement by signing and returning to us a copy of this
letter.
Very truly yours,
SALOMON SMITH BARNEY INC.
By
--------------------------------------
[Name and title]
Accepted and agreed to as of
the date set forth above:
[NAME OF CLIENT]
By
------------------------------------
[Name and title]
<PAGE>
(Letterhead of D.F. King & Co., Inc.)
___ , 2000
- -------------------------------------
- -------------------------------------
- -------------------------------------
- -------------------------------------
Dear ______________:
This Letter Agreement sets forth the terms and conditions pursuant to which
_____ (the "Company") has retained D. F. King & Co., Inc. ("King") in connection
with a proposed rights offering.
The Company proposes to issue to holders of shares of its capital stock,
$1.00 par value (the "Stock") rights to purchase additional shares of Stock. The
offer to issue the rights is herein referred to as the "Rights Offer."
1. The Company hereby retains King as Information Agent for advisory and
consulting services in connection with the Rights Offer and requests and
authorizes King to contact, and to provide information with respect to the
Rights Offer to, holders of the Stock. For this purpose, King is authorized
to use, and will be supplied by the Company with as many copies as King may
reasonably request of, the following materials filed with the Securities
and Exchange Commission (the "Commission") or publicly released (or to be
filed or publicly released) by the Company in connection with the Rights
Offer (collectively, the "Rights Offer Materials"): (i) a Prospectus and
Statement of Additional Information to Purchase; (ii) a Letter of
Transmittal; (iii) press releases and newspaper advertisements; (iv) letter
to securities dealers, banks and trust companies, and letter from
securities dealers, banks and trust companies to their customers; and (v)
any and all amendments or supplements to any of the foregoing.
2. The Company agrees to pay King as compensation for its services a fee of
$9,000, $2,500 of which is due upon execution of this agreement, and the
balance of which is due upon the completion, expiration or termination, as
the case may be, of the Rights Offer. In the event the Company extends the
term of the Rights Offer, the Company agrees to pay King an additional fee
of $1,000 for each such extension. Further, the Company agrees to pay King
$4.00 for each completed telephone contact (incoming
<PAGE>
- -------------------------------------
- -------------------------------------
______, 2000
Page 2
or outgoing) in connection with the Rights Offer. In the event the Company
requests King to provide additional services, the Company agrees to pay
King reasonable and customary compensation, in an amount, if any, to be
mutually agreed upon. The Company further agrees to reimburse King for all
reasonable out-of-pocket expenses (including reasonable counsel's fees and
disbursements) incurred by King in retention hereunder. The Company will
meet these expenses from an Expense Advance Account (the "Account")
established with King by an immediate advance of $2,500. The Account will
be replenished by the Company from time-to-time, promptly upon King's
request, accompanied by a summary of prior expenses. Any unused portion of
the Account will be returned promptly to the Company at the end of the term
of this engagement. The Company agrees and acknowledges that its obligation
under this paragraph 2 is not in any way conditional upon the successful
consummation of the Rights Offer or dependent upon the amount of Stock
subscribed to pursuant to the Rights Offer.
3. The Company agrees that King shall have the right to pass upon and approve
any and all references to King in the Rights Offer Materials. The Company
shall not file with the Commission, any other governmental or regulatory
authority or body or any court, or otherwise make public, any document
containing any reference to King unless and until King shall have approved
such reference.
4. The Company represents and warrants to King that:
(i) this letter agreement is a valid and binding agreement on the
Company's part;
(ii) all necessary corporate action will be duly taken by the Company
prior to the commencement of the Rights Offer to authorize the Rights
Offer, and the issuance of rights to purchase of Stock in connection
with the Rights Offer;
(iii) all Rights Offer Materials will comply, in all material respects,
with the Securities Exchange Act of 1934, as amended, and the rules
and regulations of the Commission thereunder, and none of the Rights
Offer Materials, and no other report, filing, document, release or
communication published or filed by the Company in connection with
the Rights Offer, will contain any untrue or misleading statement of
a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein not
misleading;
(iv) the Rights Offer, and the issuance of rights to purchase of Stock in
connection with the Rights Offer, will comply, in all material
respects, with all applicable
<PAGE>
- -------------------------------------
- -------------------------------------
______, 2000
Page 3
requirements of law including the applicable rules or regulations of
any governmental or regulatory authority or body, and no material
consent or approval of, or filing with, any governmental or
regulatory authority or body (other than any required filings under
the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Commission promulgated thereunder) is required in
connection with the making or consummation of the Rights Offer (or,
if any such material consent, approval or filing is required it will
be duly obtained or made prior to the commencement of the Rights
Offer); and
(v) the Rights Offer, and the issuance of rights to purchase of Stock in
connection with the Rights Offer, and or execution, delivery and
performance of this letter agreement, will not conflict with or
result in a breach of or constitute a default under the Company's
certificate of incorporation or by-laws, or any material agreement,
indenture, mortgage, note or other instrument by which the Company is
bound.
5. The Company will advise King promptly of the occurrence of any event which
would cause it not to proceed with, or to withdraw or abandon the Rights
Offer. The Company will also advise King promptly of any proposal or
requirement to amend or supplement any of the Rights Offer Materials.
6. The Company hereby agrees to indemnify and hold harmless King, King's
controlling persons, officers, directors, employees, agents and
representatives (collectively, the "Indemnified Persons") from and against
any and all losses, claims, damages, liabilities and expenses whatsoever
(including but not limited to, all reasonable counsel fees, disbursements
and other out-of-pocket expenses) incurred by such Indemnified Persons in
investigating, preparing to defend or defending (or appearing or preparing
for appearance as a witness in connection with) any claim, litigation,
proceeding, investigation, or governmental or stock exchange inquiry,
commenced or threatened or any claim whatsoever: (i) arising out of or
based upon any facts or circumstances constituting a violation of, or in
conflict with, any of the representations and warranties set forth in
paragraph 4 above; or (ii) arising out of, relating to or in connection
with the Rights Offer except for the Indemnified Person's willful
misconduct or gross negligence. The Company shall reimburse such
Indemnified Persons for such reasonable counsel fees and disbursements and
other out-of-pocket expenses at such time as they are paid or incurred by
such Indemnified Persons. The foregoing indemnity shall be in addition to
any liability which the Company might otherwise have to the Indemnified
Persons.
<PAGE>
- -------------------------------------
- -------------------------------------
______, 2000
Page 4
7. King agrees to notify the Company promptly of the assertion of any claim
against any of the Indemnified Persons in connection with the Rights Offer;
and the Company agrees to notify King promptly of the assertion of any
claim against the Company or any of its officers, directors, employees or
agents in connection with the Rights Offer. At the Company's election,
unless there is a conflict of interest, the defense of the Indemnified
Persons shall be conducted by the Company's counsel who shall be reasonably
satisfactory to King and the Indemnified Persons who are defendants in the
action or proceeding. Notwithstanding the Company's election to assume the
defense of such action or proceeding, an Indemnified Person may employ
separate counsel to represent it or defend it in such action or proceeding
and the Company will pay the reasonable fees and expenses of such counsel
as set forth above if such Indemnified Person reasonably determines that
there are defenses available to such Indemnified Person which are different
from, or in addition to, those available to the Company, or if a conflict
of interest exists which makes representation by counsel chosen by the
Company not advisable; provided however, unless there are actual or
potential conflicts of interest among the Indemnified Persons, the Company
will not be required to pay the fees and expenses of more than one separate
counsel for all Indemnified Persons in any jurisdiction in any single
action or proceeding. In any action or proceeding the defense of which the
Company assumes, the Indemnified Persons shall nevertheless be entitled to
participate in such action or proceeding and retain its own counsel at such
Indemnified Person's own expense. The Company shall not settle or
compromise any such action or proceeding without the Indemnified Person's
prior written consent, unless the terms of the settlement or compromise
include an unconditional release of any such Indemnified Person from all
liability or loss arising out of such action or proceeding.
8. The representations and warranties contained in paragraph 4 above and the
indemnity agreement contained in paragraphs 6 and 7 above shall remain
operative and in full force and effect regardless of: (i) the termination,
expiration or consummation of the Rights Offer; and (ii) any investigation
made by or on behalf of any party.
9. This agreement shall be construed and enforced in accordance with the laws
of the State of New York. It is agreed that any action, suit or proceeding
arising out of or based upon this agreement shall be brought in the United
States District Court for the Southern District of New York or any court of
the State of New York of competent jurisdiction located in such District,
and the parties hereto hereby consent to the in personam jurisdiction and
venue of any such court and to service of process by certified mail, return
receipt requested.
<PAGE>
CUSTODIAN SERVICES AGREEMENT
THIS AGREEMENT is made as of January , 2000 by and between PNC BANK,
NATIONAL ASSOCIATION, a national banking association ("PNC Bank"), and THE
SALOMON BROTHERS FUND INC, a Maryland corporation (the "Fund").
W I T N E S S E T H:
WHEREAS, the Fund is registered as a closed-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Fund wishes to retain PNC Bank to provide custodian services
to it and PNC Bank wishes to furnish custodian services, either directly or
through an affiliate or affiliates, as more fully described herein.
NOW, THEREFORE, In consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Definitions. As Used in This Agreement:
(a) "1933 Act" means the Securities Act of 1933, as amended.
(b) "1934 Act" means the Securities Exchange Act of 1934, as amended.
(c) "Authorized Person" means any officer of the Fund and any other
person duly authorized by the Fund's Board of Directors to give Oral
Instructions and Written Instructions on behalf of the Fund and listed on the
Authorized Persons Appendix attached hereto and made a part hereof or any
amendment thereto as may be received by PNC Bank. An Authorized Person's scope
of authority may be limited by the Fund by setting forth such limitation in the
Authorized Persons Appendix.
(d) "Book-Entry System" means Federal Reserve Treasury book-entry
system for United States and federal agency securities, its successor or
successors, and its nominee or
<PAGE>
2
nominees and any book-entry system maintained by an exchange registered with
the SEC under the 1934 Act.
(e) "CEA" means the Commodities Exchange Act, as amended.
(f) "Oral Instructions" mean oral instructions received by PNC Bank
from an Authorized Person or from a person reasonably believed by PNC Bank to be
an Authorized Person.
(g) "PNC Bank" means PNC Bank, National Association or a subsidiary or
affiliate of PNC Bank, National Association.
(h) "SEC" means the Securities and Exchange Commission.
(i) "Securities Laws" mean the 1933 Act, the 1934 Act, the 1940 Act
and the CEA.
(j) "Shares" mean the shares of beneficial interest of any series or
class of the Fund.
(k) "Property" means:
(i) any and all securities and other investment items
which the Fund may from time to time deposit, or cause to
be deposited, with PNC Bank or which PNC Bank may from
time to time hold for the Fund;
(ii) all income in respect of any of such securities or
other investment items;
(iii) all proceeds of the sale of any of such securities or
investment items; and
(iv) all proceeds of the sale of securities issued by the
Fund, which are received by PNC Bank from time to time,
from or on behalf of the Fund.
<PAGE>
3
(l) "Written Instructions" mean written instructions signed by two
Authorized Persons and received by PNC Bank. The instructions may be delivered
by hand, mail, tested telegram, cable, telex or facsimile sending device.
2. Appointment. The Fund hereby appoints PNC Bank to provide custodian
services to the Fund and PNC Bank accepts such appointment and agrees to furnish
such services.
3. Delivery of Documents. The Fund has provided or, where applicable, will
provide PNC Bank with the following:
(a) certified or authenticated copies of the resolutions of the
Fund's Board of Directors, approving the appointment of PNC Bank or its
affiliates to provide services;
(b) a copy of the Fund's most recent effective registration
statement;
(c) a copy of the Fund's advisory agreement;
(d) a copy of the Fund's administration agreement if PNC Bank is
not providing the with such services;
(e) copies of any shareholder servicing agreements made in
respect of the Fund; and
(f) certified or authenticated copies of any and all amendments
or supplements to the foregoing.
4. Compliance With Laws.
PNC Bank undertakes to comply with all applicable requirements of the
Securities Laws and any laws, rules and regulations of governmental authorities
having jurisdiction with respect to the duties to be performed by PNC Bank
hereunder. Except as specifically set forth herein, PNC Bank assumes no
responsibility for such compliance by the Fund.
5. Instructions.
(a) Unless otherwise provided in this Agreement, PNC Bank shall act
only upon Oral Instructions and Written Instructions.
<PAGE>
4
(b) PNC Bank shall be entitled to rely upon any Oral Instructions and
Written Instructions it receives from an Authorized Person (or from a person
reasonably believed by PNC Bank to be an Authorized Person) pursuant to this
Agreement. PNC Bank may assume that any Oral Instructions or Written
Instructions received hereunder are not in any way inconsistent with the
provisions of organizational documents of the Fund or of any vote, resolution or
proceeding of the Fund's Board of Directors or of the Fund's shareholders,
unless and until PNC Bank receives Written Instructions to the contrary.
(c) The Fund agrees to forward to PNC Bank Written Instructions
confirming Oral Instructions (except where such Oral Instructions are given by
PNC Bank or its affiliates) so that PNC Bank receives the Written Instructions
by the close of business on the same day that such Oral Instructions are
received. The fact that such confirming Written Instructions are not received by
PNC Bank shall in no way invalidate the transactions or enforceability of the
transactions authorized by the Oral Instructions. Where Oral Instructions or
Written Instructions reasonably appear to have been received from an Authorized
Person, PNC Bank shall incur no liability to the Fund in acting upon such Oral
Instructions or Written Instructions provided that PNC Bank's actions comply
with the other provisions of this Agreement.
6. Right to Receive Advice.
(a) Advice of the Fund. If PNC Bank is in doubt as to any action
it should or should not take, PNC Bank may request directions or advice,
including Oral Instructions or Written Instructions, from the Fund.
(b) Advice of Counsel. If PNC Bank shall be in doubt as to any
question of law pertaining to any action it should or should not take, PNC Bank
may request advice at its own
<PAGE>
5
cost from such counsel of its own choosing (who may be counsel for the Fund, the
Fund's investment adviser or PNC Bank, at the option of PNC Bank).
(c) Conflicting Advice. In the event of a conflict between directions,
advice or Oral Instructions or Written Instructions PNC Bank receives from the
Fund, and the advice it receives from counsel, PNC Bank shall be entitled to
rely upon and follow the advice of counsel. In the event PNC Bank so relies on
the advice of counsel, PNC Bank remains liable for any action or omission on the
part of PNC Bank which constitutes willful misfeasance, bad faith, gross
negligence or reckless disregard by PNC Bank of any duties, obligations or
responsibilities set forth in this Agreement.
(d) Protection of PNC Bank. PNC Bank shall be protected in any action
it takes or does not take in reliance upon directions, advice or Oral
Instructions or Written Instructions it receives from the Fund or from counsel
and which PNC Bank believes, in good faith, to be consistent with those
directions, advice or Oral Instructions or Written Instructions. Nothing in this
section shall be construed so as to impose an obligation upon PNC Bank (i) to
seek such directions, advice or Oral Instructions or Written Instructions, or
(ii) to act in accordance with such directions, advice or Oral Instructions or
Written Instructions unless, under the terms of other provisions of this
Agreement, the same is a condition of PNC Bank's properly taking or not taking
such action. Nothing in this subsection shall excuse PNC Bank when an action or
omission on the part of PNC Bank constitutes willful misfeasance, bad faith,
gross negligence or reckless disregard by PNC Bank of any duties, obligations or
responsibilities set forth in this Agreement.
7. Records; Visits. The books and records pertaining to the Fund, which are
in the possession or under the control of PNC Bank, shall be the property of the
Fund. Such books and
<PAGE>
6
records shall be prepared and maintained as required by the 1940 Act and other
applicable securities laws, rules and regulations. The Fund and Authorized
Persons shall have access to such books and records at all times during PNC
Bank's normal business hours. Upon the reasonable request of the Fund, copies of
any such books and records shall be provided by PNC Bank to the Fund or to an
authorized representative of the Fund, at the Fund's expense.
8. Confidentiality. PNC Bank agrees to keep confidential all records of the
Fund and information relating to the Fund and its shareholders, unless the
release of such records or information is otherwise consented to, in writing, by
the Fund. The Fund agrees that such consent shall not be unreasonably withheld
and may not be withheld where PNC Bank may be exposed to civil or criminal
contempt proceedings or when required to divulge such information or records to
duly constituted authorities.
9. Cooperation with Accountants. PNC Bank shall cooperate with the Fund's
independent public accountants and shall take all reasonable action in the
performance of its obligations under this Agreement to ensure that the necessary
information is made available to such accountants for the expression of their
opinion, as required by the Fund.
10. Disaster Recovery. PNC Bank shall enter into and shall maintain in
effect with appropriate parties one or more agreements making reasonable
provisions for emergency use of electronic data processing equipment to the
extent appropriate equipment is available. In the event of equipment failures,
PNC Bank shall, at no additional expense to the Fund, take reasonable steps to
minimize service interruptions. PNC Bank shall have no liability with respect to
the loss of data or service interruptions caused by equipment failure provided
such loss or interruption is not caused by PNC Bank's own willful misfeasance,
bad faith, gross negligence or reckless disregard of its duties or obligations
under this Agreement.
<PAGE>
7
11. Compensation. As compensation for custody services rendered by PNC Bank
during the term of this Agreement, the Fund will pay to PNC Bank a fee or fees
as may be agreed to in writing from time to time by the Fund and PNC Bank.
12. Indemnification. The Fund agrees to indemnify and hold harmless PNC
Bank and its affiliates from all taxes, charges, expenses, assessments, claims
and liabilities (including, without limitation, liabilities arising under the
Securities Laws and any state and foreign securities and blue sky laws, and
amendments thereto, and expenses, including (without limitation) attorneys' fees
and disbursements, arising directly or indirectly from any action or omission to
act which PNC Bank takes (i) at the request or on the direction of or in
reliance on the advice of the Fund or (ii) upon Oral Instructions or Written
Instructions. Neither PNC Bank, nor any of its affiliates, shall be indemnified
against any liability (or any expenses incident to such liability) arising out
of PNC Bank's or its affiliates' own willful misfeasance, bad faith, gross
negligence or reckless disregard of its duties under this Agreement.
13. Responsibility of PNC Bank.
(a) PNC Bank shall be under no duty to take any action on behalf of
the Fund except as specifically set forth herein or as may be specifically
agreed to by PNC Bank in writing. PNC Bank shall be obligated to exercise care
and diligence in the performance of its duties hereunder, to act in good faith
and to use its best efforts, within reasonable limits, in performing services
provided for under this Agreement. PNC Bank shall be liable for any damages
arising out of PNC Bank's failure to perform its duties under this agreement to
the extent such damages arise out of PNC Bank's willful misfeasance, bad faith,
gross negligence or reckless disregard of its duties under this Agreement.
<PAGE>
8
(b) Without limiting the generality of the foregoing or of any other
provision of this Agreement, (i) PNC Bank shall not be under any duty or
obligation to inquire into and shall not be liable for (A) the validity or
invalidity or authority or lack thereof of any Oral Instruction or Written
Instruction, notice or other instrument which conforms to the applicable
requirements of this Agreement, and which PNC Bank reasonably believes to be
genuine; or (B) subject to section 10, delays or errors or loss of data
occurring by reason of circumstances beyond PNC Bank's control, including acts
of civil or military authority, national emergencies, fire, flood, catastrophe,
acts of God, insurrection, war, riots or failure of the mails, transportation,
communication or power supply.
(c) Notwithstanding anything in this Agreement to the contrary,
neither PNC Bank nor its affiliates shall be liable to the Fund for any
consequential, special or indirect losses or damages which the Fund may incur or
suffer by or as a consequence of PNC Bank's or its affiliates' performance of
the services provided hereunder, whether or not the likelihood of such losses or
damages was known by PNC Bank or its affiliates.
14. Description of Services.
(a) Delivery of the Property. The Fund will deliver or arrange for
delivery to PNC Bank, all the Property owned by the Fund, including cash
received as a result of the distribution of Shares, during the period that is
set forth in this Agreement. PNC Bank will not be responsible for such property
until actual receipt.
(b) Receipt and Disbursement of Money. PNC Bank, acting upon Written
Instructions, shall open and maintain separate accounts in the Fund's name using
all cash received from or for the account of the Fund, subject to the terms of
this Agreement.
PNC Bank shall make cash payments from or for the account of the Fund
only for:
(i) purchases of securities in the name of the Fund or PNC
Bank or PNC Bank's nominee as provided in sub-section (j)
and for which PNC Bank has received a copy of the broker's
or dealer's confirmation or payee's invoice, as
appropriate;
(ii) purchase or redemption of Shares of the Fund
delivered to PNC Bank;
(iii) payment of, subject to Written Instructions, interest,
taxes, administration, accounting, distribution, advisory,
management fees or similar expenses which are to be borne
by the Fund;
(iv) payment to, subject to receipt of Written
Instructions, the Fund's transfer agent, as agent for the
shareholders, an amount equal to the amount of dividends
and distributions stated in the Written Instructions to be
distributed in cash by the transfer agent to shareholders,
or, in lieu of paying the Fund's transfer agent, PNC Bank
may arrange for the direct payment of cash dividends and
distributions to shareholders in accordance
<PAGE>
9
with procedures mutually agreed upon from time to time by
and among the Fund, PNC Bank and the Fund's transfer
agent.
(v) payments, upon receipt Written Instructions, in
connection with the conversion, exchange or surrender of
securities owned or subscribed to by the Fund and held by
or delivered to PNC Bank;
(vi) payments of the amounts of dividends received with
respect to securities sold short;
(vii) payments made to a sub-custodian pursuant to
provisions in sub-section (c) of this Section; and
(viii) payments, upon Written Instructions, made for
other proper Fund purposes.
PNC Bank is hereby authorized to endorse and collect all checks,
drafts or other orders for the payment of money received as custodian for the
account.
(c) Receipt of Securities; Subcustodians.
(i) PNC Bank shall hold all securities received by it for
the Accounts in a separate account that physically
segregates such securities from those of any other
persons, firms or corporations, except for securities held
in a Book-Entry System. All such securities shall be held
or disposed of only upon Written Instructions of the Fund
pursuant to the terms of this Agreement. PNC Bank shall
have no power or authority to assign, hypothecate, pledge
or otherwise dispose of any such securities or investment,
except upon the express terms of this Agreement and upon
Written Instructions, accompanied by a certified
resolution of the Fund's Board of Directors, authorizing
the transaction. In no case may any member of the Fund's
Board of Directors, or any officer, employee or agent of
the Fund withdraw any securities.
At PNC Bank's own expense and for its own convenience, PNC
Bank may enter into sub-custodian agreements with other
United States banks or trust companies to perform duties
described in this subsection (c). Such bank or trust
company shall have an aggregate capital, surplus and
undivided profits, according to its last published report,
of at least one million dollars ($1,000,000), if it is a
subsidiary or affiliate of PNC Bank, or at least twenty
million dollars ($20,000,000) if such bank or trust company
is not a subsidiary or affiliate of PNC Bank. In addition,
such bank or trust company must be qualified to act as
custodian and agree to comply with the relevant provisions
of the 1940 Act and other
<PAGE>
10
applicable rules and regulations. Any such arrangement will
not be entered into without prior written notice to the
Fund.
PNC Bank shall remain responsible for the performance of
all of its duties as described in this Agreement and shall
hold the Fund and each Portfolio harmless from its own acts
or omissions, under the standards of care provided for
herein, or the acts and omissions of any sub-custodian
chosen by PNC Bank under the terms of this sub-section (c).
(d) Transactions Requiring Instructions. Upon receipt of Oral
Instructions or Written Instructions and not otherwise, PNC Bank, directly or
through the use of the Book-Entry System, shall:
(i) deliver any securities held for the Fund against the
receipt of payment for the sale of such securities;
(ii) execute and deliver to such persons as may be
designated in such Oral Instructions or Written
Instructions, proxies, consents, authorizations, and any
other instruments whereby the authority of the Fund as
owner of any securities may be exercised;
(iii) deliver any securities to the issuer thereof, or its
agent, when such securities are called, redeemed, retired
or otherwise become payable; provided that, in any such
case, the cash or other consideration is to be delivered
to PNC Bank;
(iv) deliver any securities held for the Fund against
receipt of other securities or cash issued or paid in
connection with the liquidation, reorganization,
refinancing, tender offer, merger, consolidation or
recapitalization of any corporation, or the exercise of
any conversion privilege;
(v) deliver any securities held for the Fund to any
protective committee, reorganization committee or other
person in connection with the reorganization,
refinancing, merger, consolidation, recapitalization or
sale of assets of any corporation, and receive and hold
under the terms of this Agreement such certificates of
deposit, interim receipts or other instruments or
documents as may be issued to it to evidence such
delivery;
(vi) make such transfer or exchanges of the assets of the
Fund and take such other steps as shall be stated in said
Oral Instructions or Written Instructions to be for the
purpose of effectuating a duly authorized plan of
liquidation, reorganization, merger, consolidation or
recapitalization of the Fund;
<PAGE>
11
(vii) release securities belonging to the Fund to any bank
or trust company for the purpose of a pledge or
hypothecation to secure any loan incurred by the Fund;
provided, however, that securities shall be released only
upon payment to PNC Bank of the monies borrowed, except
that in cases where additional collateral is required to
secure a borrowing already made subject to proper prior
authorization, further securities may be released for that
purpose; and repay such loan upon redelivery to it of the
securities pledged or hypothecated therefor and upon
surrender of the note or notes evidencing the loan;
(viii) release and deliver securities owned by the Fund in
connection with any repurchase agreement entered into on
behalf of the Fund, but only on receipt of payment
therefor; and pay out moneys of the Fund in connection
with such repurchase agreements, but only upon the
delivery of the securities;
(ix) release and deliver or exchange securities owned by
the Fund in connection with any conversion of such
securities, pursuant to their terms, into other
securities;
(x) release and deliver securities owned by the fund for
the purpose of redeeming in kind shares of the Fund upon
delivery thereof to PNC Bank; and
(xi) release and deliver or exchange securities owned by
the Fund for other corporate purposes.
PNC Bank must also receive a certified resolution
describing the nature of the corporate purpose and the
name and address of the person(s) to whom delivery shall
be made when such action is pursuant to sub-paragraph d.
(e) Use of Book-Entry System. The Fund shall deliver to PNC Bank
certified resolutions of the Fund's Board of Directors approving, authorizing
and instructing PNC Bank on a continuous basis, to deposit in the Book-Entry
System all securities belonging to the Fund eligible for deposit therein and to
utilize the Book-Entry System to the extent possible in connection with
settlements of purchases and sales of securities by the Fund, and deliveries and
returns of securities loaned, subject to repurchase agreements or used as
collateral in connection
<PAGE>
12
with borrowings. PNC Bank shall continue to perform such duties until it
receives Written Instructions or Oral Instructions authorizing contrary actions.
PNC Bank shall administer the Book-Entry System as follows:
(i) With respect to securities of the Fund which are
maintained in the Book-Entry System, the records of PNC
Bank shall identify by Book-Entry or otherwise those
securities belonging to the Fund. PNC Bank shall furnish
to the Fund a detailed statement of the Property held for
the Fund under this Agreement at least monthly and from
time to time and upon written request.
(ii) Securities and any cash of the Fund deposited in the
Book-Entry System will at all times be segregated from any
assets and cash controlled by PNC Bank in other than a
fiduciary or custodian capacity but may be commingled with
other assets held in such capacities. PNC Bank and its
sub-custodian, if any, will pay out money only upon receipt
of securities and will deliver securities only upon the
receipt of money.
(iii) All books and records maintained by PNC Bank which
relate to the Fund's participation in the Book-Entry
System will at all times during PNC Bank's regular
business hours be open to the inspection of Authorized
Persons, and PNC Bank will furnish to the Fund all
information in respect of the services rendered as
it may require.
PNC Bank will also provide the Fund with such reports on its own
system of internal control as the Fund may reasonably request from time to time.
(f) Registration of Securities. All Securities held for the Fund which
are issued or issuable only in bearer form, except such securities held in the
Book-Entry System, shall be held by PNC Bank in bearer form; all other
securities held for a Portfolio may be registered in the name of the Fund, PNC
Bank, the Book-Entry System, a sub-custodian, or any duly appointed nominees of
the Fund, PNC Bank, Book-Entry System or sub-custodian. The Fund reserves the
right to instruct PNC Bank as to the method of registration and safekeeping of
the securities of the Fund. The Fund agrees to furnish to PNC Bank appropriate
instruments to enable PNC Bank to hold or deliver in proper form for transfer,
or to register in the name of its nominee or in the
<PAGE>
13
name of the Book-Entry System, any securities which it may hold for the accounts
and which may from time to time be registered in the name of the Fund.
(g) Voting and Other Action. Neither PNC Bank nor its nominee shall
vote any of the securities held pursuant to this Agreement by or for the account
of the Fund, except in accordance with Written Instructions. PNC Bank, directly
or through the use of the Book-Entry System, shall execute in blank and promptly
deliver all notices, proxies and proxy soliciting materials to the registered
holder of such securities. If the registered holder is not the Fund, then
Written Instructions or Oral Instructions must designate the person who owns
such securities.
(h) Transactions Not Requiring Instructions. In the absence of
contrary Written Instructions, PNC Bank is authorized to take the following
actions:
(i) Collection of Income and other Payments.
(A) collect and receive for the account of the Fund, all
income, dividends, distributions, coupons, option
premiums, other payments and similar items, included or
to be included in the Property, and, in addition,
promptly advise the Fund of such receipt and credit such
income, as collected, to the Fund's custodian account;
(B) endorse and deposit for collection, in the name of the
Fund, checks, drafts, or other orders for the payment of
money;
(C) receive and hold for the account of the Fund all
securities received as a distribution on the Fund's
securities as a result of a stock dividend, share
split-up or reorganization, recapitalization,
readjustment or other rearrangement or distribution of
rights or similar securities issued with respect to any
securities belonging to the Fund and held by PNC Bank
hereunder;
(D) present for payment and collect the amount payable upon
all securities which may mature or be called, redeemed,
or retired, or otherwise become payable on the date such
securities become payable; and
(E) take any action which may be necessary and proper in
connection with the collection and receipt of such
income
<PAGE>
14
and other payments and the endorsement for collection of
checks, drafts, and other negotiable instruments.
(ii) Miscellaneous Transactions.
(A) deliver or cause to be delivered Property against
payment or other consideration or written receipt
therefor in the following cases:
(1) for examination by a broker or dealer selling for
the account of a Portfolio in accordance with
street delivery custom;
(2) for the exchange of interim receipts or temporary
securities for definitive securities; and
(3) for transfer of securities into the name of the
Fund or PNC Bank or nominee of either, or for
exchange of securities for a different number of
bonds, certificates, or other evidence,
representing the same aggregate face amount or
number of units bearing the same interest rate,
maturity date and call provisions, if any;
provided that, in any such case, the new
securities are to be delivered to PNC Bank.
(B) Unless and until PNC Bank receives Oral Instructions or
Written Instructions to the contrary, PNC Bank shall:
(1) pay all income items held by it which call for
payment upon presentation and hold the cash
received by it upon such payment for the account
of the Fund;
(2) collect interest and cash dividends received, with
notice to the Fund, to the account of the Fund;
(3) hold for the account of the Fund all stock
dividends, rights and similar securities issued
with respect to any securities held by PNC Bank;
and
(4) execute as agent on behalf of the Fund all
necessary ownership certificates required by the
Internal Revenue Code or the Income Tax
Regulations of the United States Treasury
Department or under the laws of any state now or
hereafter in effect, inserting the Fund's name, on
such certificate as the owner of the securities
covered thereby, to the extent it may lawfully do
so.
<PAGE>
15
(i) Segregated Accounts.
(i) PNC Bank shall upon receipt of Written Instructions or
Oral Instructions establish and maintain segregated
accounts on its records for and on behalf of the Fund. Such
accounts may be used to transfer cash and securities,
including securities in the Book-Entry System:
(A) for the purposes of compliance by the Fund with the
procedures required by a securities or option exchange,
providing such procedures comply with the 1940 Act and
any releases of the SEC relating to the maintenance of
segregated accounts by registered investment companies;
and
(B) Upon receipt of Written Instructions, for other proper
corporate purposes.
(ii) PNC Bank shall arrange for the establishment of IRA
custodian accounts for such shareholders holding Shares
through IRA accounts, in accordance with the Fund's
prospectuses, the Internal Revenue Code of 1986, as amended
(including regulations promulgated thereunder), and with
such other procedures as are mutually agreed upon from time
to time by and among the Fund, PNC Bank and the Fund's
transfer agent.
(j) Purchases of Securities. PNC Bank shall settle purchased
securities upon receipt of Oral Instructions or Written Instructions from the
Fund or its investment advisers that specify:
(i) the name of the issuer and the title of the securities,
including CUSIP number if applicable;
(ii) the number of shares or the principal amount purchased
and accrued interest, if any;
(iii) the date of purchase and settlement;
(iv) the purchase price per unit;
(v) the total amount payable upon such purchase; and
(vi) the name of the person from whom or the broker through
whom the purchase was made. PNC Bank shall upon receipt of
securities purchased by or for the Fund pay out of the
moneys held
<PAGE>
16
for the account of the Fund the total amount payable to the
person from whom or the broker through whom the purchase was
made, provided that the same conforms to the total amount
payable as set forth in such Oral Instructions or Written
Instructions.
(k) Sales of Securities. PNC Bank shall settle sold securities upon
receipt of Oral Instructions or Written Instructions from the Fund that specify:
(i) the name of the issuer and the title of the security,
including CUSIP number if applicable;
(ii) the number of shares or principal amount sold, and
accrued interest, if any;
(iii) the date of trade and settlement;
(iv) the sale price per unit;
(v) the total amount payable to the Fund upon such sale;
(vi) the name of the broker through whom or the person to
whom the sale was made; and
(vii) the location to which the security must be delivered
and delivery deadline, if any.
PNC Bank shall deliver the securities upon receipt of the total amount
payable to the Fund upon such sale, provided that the total amount payable is
the same as was set forth in the Oral Instructions or Written Instructions.
Subject to the foregoing, PNC Bank may accept payment in such form as shall be
satisfactory to it, and may deliver securities and arrange for payment in
accordance with the customs prevailing among dealers in securities.
(l) Reports; Proxy Materials.
(i) PNC Bank shall furnish to the Fund the following reports:
(A) such periodic and special reports as the Fund may
reasonably request;
(B) a monthly statement summarizing all transactions and
entries for the account of the Fund, listing each
portfolio security belonging to the Fund with the
adjusted average cost of each issue and the market
value at the end of such
<PAGE>
17
month and stating the cash account of the Fund
including disbursements;
(C) the reports required to be furnished to the Fund
pursuant to Rule 17f-4; and
(D) such other information as may be agreed upon from time
to time between the Fund and PNC Bank.
(ii) PNC Bank shall transmit promptly to the Fund any proxy
statement, proxy material, notice of a call or conversion or
similar communication received by it as custodian of the
Property. PNC Bank shall be under no other obligation to
inform the Fund as to such actions or events.
(m) Collections. All collections of monies or other property in
respect, or which are to become part, of the Property (but not the safekeeping
thereof upon receipt by PNC Bank) shall be at the sole risk of the Fund. If
payment is not received by PNC Bank within a reasonable time after proper
demands have been made, PNC Bank shall notify the Fund in writing, including
copies of all demand letters, any written responses, memoranda of all oral
responses and shall await instructions from the Fund. PNC Bank shall not be
obliged to take legal action for collection unless and until reasonably
indemnified to its satisfaction. PNC Bank shall also notify the Fund as soon as
reasonably practicable whenever income due on securities is not collected in due
course and shall provide the Fund with periodic status reports of such income
collected after a reasonable time.
15. Duration and Termination. This Agreement shall continue until
terminated by the Fund or by PNC Bank on sixty (60) days' prior written notice
to the other party. In the event this Agreement is terminated (pending
appointment of a successor to PNC Bank or vote of the shareholders of the Fund
to dissolve or to function without a custodian of its cash, securities or other
property), PNC Bank shall not deliver cash, securities or other property of the
Portfolios to the Fund. It may deliver them to a bank or trust company of PNC
Bank's choice, having an aggregate capital, surplus and undivided profits, as
shown by its last published report, of not less
<PAGE>
18
than twenty million dollars ($20,000,000), as a custodian for the Fund to
be held under terms similar to those of this Agreement. PNC Bank shall not be
required to make any such delivery or payment until full payment shall have been
made to PNC Bank of all of its fees, compensation, costs and expenses. PNC Bank
shall have a security interest in and shall have a right of setoff against the
Property as security for the payment of such fees, compensation, costs and
expenses.
16. Notices. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. Notice shall be addressed (a) if to PNC Bank at
Airport Business Center, International Court 2, 200 Stevens Drive, Lester,
Pennsylvania 19113, marked for the attention of the Custodian Services
Department (or its successor), (b) if to the Fund, at 7 World Trade Center,
Attn: Anthony Pace or (c) if to neither of the foregoing, at such other address
as shall have been given by like notice to the sender of any such notice or
other communication by the other party. If notice is sent by confirming
telegram, cable, telex or facsimile sending device, it shall be deemed to have
been given immediately. If notice is sent by first-class mail, it shall be
deemed to have been given five days after it has been mailed. If notice is sent
by messenger, it shall be deemed to have been given on the day it is delivered.
17. Amendments. This Agreement, or any term hereof, may be changed or
waived only by a written amendment, signed by the party against whom enforcement
of such change or waiver is sought.
18. Delegation; Assignment. PNC Bank may assign its rights and delegate its
duties hereunder to any wholly-owned direct or indirect subsidiary of PNC Bank,
National Association or PNC Bank Corp., provided that (i) PNC Bank gives the
Fund thirty (30) days' prior written notice; (ii) the delegate (or assignee)
agrees with PNC Bank and the Fund to comply with all relevant provisions of the
1940 Act; and (iii) PNC Bank and such delegate (or assignee) promptly
<PAGE>
19
provide such information as the Fund may request, and respond to such
questions as the Fund may ask, relative to the delegation (or assignment),
including (without limitation) the capabilities of the delegate (or assignee).
19. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
20. Further Actions. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
21. Miscellaneous.
(a) Entire Agreement. This Agreement embodies the entire agreement and
understanding between the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof, provided that the parties
may embody in one or more separate documents their agreement, if any, with
respect to delegated duties and Oral Instructions.
(b) Captions. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
(c) Governing Law. This Agreement shall be deemed to be a contract
made in Pennsylvania and governed by Pennsylvania law, without regard to
principles of conflicts of law.
(d) Partial Invalidity. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
(e) Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
<PAGE>
20
(f) Facsimile Signatures. The facsimile signature of any party to this
Agreement shall constitute the valid and binding execution hereof by such party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
PNC BANK, NATIONAL ASSOCIATION
By:
--------------------------------
Title:
-----------------------------
THE SALOMON BROTHERS FUND INC
By:
--------------------------------
Title:
-----------------------------
<PAGE>
21
AUTHORIZED PERSONS APPENDIX
NAME (Type) SIGNATURE
- ------------- ----------
- ------------- ----------
- ------------- ----------
- ------------- ----------
- ------------- ----------
- ------------- ----------
<PAGE>
(212) 455-2000
May 16, 2000
The Salomon Brothers Fund Inc
7 World Trade Center, 38th Floor
New York, New York 10048
Ladies and Gentlemen:
We have acted as counsel to The Salomon Brothers Fund Inc, a Maryland
corporation (the "Fund"), in connection with the Registration Statement on Form
N-2 (the "Registration Statement") filed by the Fund with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Act"), relating to the issuance by the Fund to its stockholders of
non-transferable rights (the "Rights") entitling the holders thereof to
subscribe for up to 11,826,140 shares of capital stock of the Fund, par value
$1.00 per share (the "Shares").
We have examined the Registration Statement and a form of the share
certificate which has been filed with the Commission and incorporated by
reference in the Registration Statement. We also have examined the originals, or
duplicates or certified or conformed copies, of such records, agreements,
instruments and other documents and have made such other and further
investigations as we have deemed relevant and necessary in connection with the
opinion expressed herein. As to questions of fact material to this
<PAGE>
The Salomon Brothers Fund Inc -2- May 16, 2000
opinion, we have relied upon certificates of public officials and of officers
and representatives of the Fund.
In such examination, we have assumed the genuineness of all signatures, the
legal capacity of natural persons, the authenticity of all documents submitted
to us as originals, the conformity to original documents of all documents
submitted to us as duplicates or certified or conformed copies, and the
authenticity of the originals of such latter documents.
Based upon the foregoing, and subject to the qualifications and limitations
stated herein, we are of the opinion that the issuance and sale of the Shares by
the Fund have been duly authorized and, upon payment and delivery as
contemplated by the Registration Statement, the Shares will be validly issued,
fully paid and nonassessable.
Insofar as the opinion expressed herein relates to or is dependent upon
matters governed by the laws of the State of Maryland, we have relied upon the
opinion of Piper Marbury Rudnick & Wolfe LLP dated the date hereof.
We are members of the Bar of the State of New York and we do not express
any opinion herein concerning any law other than the law of the State of New
York.
<PAGE>
The Salomon Brothers Fund Inc -3- May 16, 2000
We hereby consent to the filing of this opinion letter as an exhibit to the
Registration Statement and to the reference to us under the caption "Legal
Matters" in the Prospectus forming a part thereof.
Very truly yours,
/s/ Simpson Thacher & Bartlett
SIMPSON THACHER & BARTLETT
<PAGE>
6225 Smith Avenue
Baltimore, Maryland 21209-3600
www.piperrudnick.com
PHONE (410) 580-3000
FAX (410) 580-3001
May 16, 2000
The Salomon Brothers Fund Inc
Seven World Trade Center
38th Floor
New York, New York 10048
Ladies and Gentlemen:
We have acted as counsel to The Salomon Brothers Fund Inc, a Maryland
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended, of 11,826,140 shares of Capital Stock, par
value $1.00 per share to be issued by the Company (the "Shares") pursuant to a
Registration Statement on Form N-2 (File No. 333-33158) filed with the
Securities and Exchange Commission on March 23, 2000 (the "Commission"), as
amended by Pre-Effective Amendment No. 1 filed on May 16, 2000 (the
"Registration Statement"). This opinion is being provided at your request in
connection with the filing of the Registration Statement.
In our capacity as counsel, we have reviewed originals or copies, certified
or otherwise identified to our satisfaction, of the following documents:
(a) The Charter of the Company certified by the Maryland State
Department of Assessments and Taxation (the "MSDAT").
(b) The By-Laws of the Company.
(c) The Registration Statement.
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The Salomon Brothers Fund Inc -2- May 16, 2000
(d) The minutes of proceedings of the Company relating to (i) the
authorization of the issuance of the Shares, and (ii) the authorization of
the Registration Statement and the transactions contemplated thereby.
(e) A short-form Good Standing Certificate for the Company, dated a
recent date, issued by the MSDAT.
(f) A Certificate of Secretary of the Company, dated as of the date
hereof, as to certain factual matters (the "Certificate").
(g) A form of stock certificate for the Shares.
(h) Such other documents as we have considered necessary to the
rendering of the opinion expressed below.
In such examination of the aforesaid documents, we have assumed, without
independent investigation, the genuineness of all signatures, the legal capacity
of all individuals who have executed any of the aforesaid documents, the
authenticity of all documents submitted to us as originals, the conformity with
originals of all documents submitted to us as copies (and the authenticity of
the originals of such copies), and the accuracy and completeness of all public
records reviewed by us. As to factual matters, we have relied on the Certificate
and have not independently verified the matters stated therein.
Based upon the foregoing, having regard for such legal considerations as we
deem relevant, and limited in all respects to applicable Maryland law, we are of
the opinion and advise you that:
(1) The Company has been duly incorporated and is validly existing as
a corporation under the laws of the State of Maryland.
(2) The issuance and the sale of the Shares by the Company have been
duly authorized and, upon payment and delivery as contemplated by the
Registration Statement, the Shares will be validly issued, fully paid, and
nonassessable.
Simpson Thacher & Bartlett is authorized to rely on this opinion, as if it
were addressed to them, in rendering their opinion in connection with the
Registration Statement. This opinion may not be relied on by any other person or
in any other connection without our prior written approval. This opinion is
limited to the matters set forth herein, and no other opinion should be inferred
beyond the matters expressly stated.
We hereby consent to the filing of this opinion with the Commission as an
Exhibit to the Registration Statement and to the reference to our firm under
the heading "Legal Matters" in the Registration Statement.
Very truly yours,
/s/ Piper Marbury Rudnick & Wolfe LLP
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CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-2 of our report dated
February 16, 2000, relating to the financial statements and financial highlights
which appears in the December 31, 1999 Annual Report to Shareholders of The
Salomon Brothers Fund Inc, which are also incorporated by reference into the
Registration Statement. We also consent to the references to us under the
headings 'Financial Highlights' and 'Experts' in such Registration Statement.
PricewaterhouseCoopers LLP
New York, NY
May 12, 2000
