SEMI-ANNUAL REPORT
June 30, 2000
THE SALOMON BROTHERS
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FUND INC
<PAGE>
Shareholder Letter
Dear Shareholder:
We are pleased pleased to provide you with the semi-annual report for The
Salomon Brothers Fund Inc ("Fund") for the period ended June 30, 2000.
Special Shareholder Notice
During the past six months, the Fund conducted a rights offering, allowing
shareholders of record as of May 22, 2000 to purchase additional shares of the
Fund. As a result of the rights offering, which expired on June 19, 2000, the
Fund raised $68,880,076 by issuing 3,983,810 shares at a price of $17.29 per
share.
Market Overview & Portfolio Highlights
The Salomon Brothers Fund started 2000 on the right foot, with a net asset value
("NAV") return of 6.60% versus the negative 0.43% return for the Standard &
Poor's 500 Index ("S&P 500")1, the Fund's benchmark, for the six months ended
June 30, 2000. For the first six months of 2000, the Fund's market return was a
negative 9.57%.
The stock market during 2000 has been very volatile, even by the high standards
of the past several years. The most striking events during the first half of the
year were the announcements made by noted money managers George Soros and Julian
Robertson. On May 16, 2000, Soros announced he was liquidating $6 billion of
assets from his flagship Quantum Fund in anticipation of a wave of investor
redemptions. On March 30, 2000, Robertson announced plans to liquidate six Tiger
Management Funds due to extensive losses suffered by value stocks. During
January and February, technology stocks continued their run from 1999, only for
the Nasdaq Composite Index2 to fall 37% from March through May, before regaining
half of their losses. During the first half of 2000, the best performing stocks
were in sectors that have historically been considered defensive: the oils and
the pharmaceutical sectors.
The volatile environment this year has presented us with opportunities to buy
what we think are high quality companies, with good fundamentals, at attractive
prices. During June we added to our positions in Costco and Worldcom. Costco
appears to us to be one of the great growth stories in retail. It is the only
retailer that has consistently beaten Wal-Mart head to head, and its comparable
store sales gains are the best of any major retailer. Costco got clobbered in
May, from what appeared to us to be mere growing pains. We were aggressive
buyers after the decline.
Worldcom has a powerful position in the business long distance market, and owns
the best Internet backbone company, Uunet. WorldCom has performed poorly ever
since last September, when the Sprint acquisition was announced. The stock fell
to $37 on rumors that the Sprint acquisition would fail. At less than 19x
estimated 2000 earnings, we found Worldcom, irresistible, and made it one of the
Fund's largest positions.
Significant contributors to the Fund's performance included Worldcom, Corning
Glass, the largest manufacturer of fiber optic cable, Nabisco Group Holdings,
the large food company and Eli Lilly, the maker of Prozac and Zyprexa.
Market Outlook
Due to the efforts of the Federal Reserve Board ("Fed"), the U.S. economy has
begun to slow. We think the stock market is likely to cycle between periods of
enthusiasm that we will experience a soft landing, and periods of fear that we
will fall into a recession. We believe that the U.S. economy is at greater risk
of a hard landing than the consensus does. In particular, high energy prices are
causing cost push inflation such as we have not seen since the 1970s. The
resulting stagflation may force the Fed to increase interest rates more
aggressively than it would like to, in order to preserve its reputation as
an inflation fighter.
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1 The S&P 500 is a market capitalization-weighted measure of 500 widely held
common stocks. An investor cannot invest directly in an index.
2 The Nasdaq Composite Index is a market value-weighted index that measures all
domestic and non-U.S. based securities listed on the Nasdaq stock market.
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The Salomon Brothers Fund Inc 1
<PAGE>
Shareholder Letter (continued)
Although we are concerned about a slowdown in the U.S. economy, we are not
looking for a recession or for a bear market. We are instead looking for a year
similar to 1994, when growth eased, and stocks took a breather, allowing their
earnings to catch up with their prices.
Therefore the Fund is positioned somewhat defensively. Although the portfolio's
sector weightings are very similar to those of the S&P 500, the portfolio is
overweight in consumer staples, and is underweight in capital goods and consumer
cyclical stocks. Instead of highly cyclical companies, we own companies with a
history of growing earnings through recessions, such as Emerson Electric.
Although there is no guarantee that we will be successful, preservation of
capital is important to us, and we strive to avoid stocks that might decline
sharply.
In closing, thank you for your continued confidence in our investment approach.
Cordially,
/s/ Heath B. McLendon /s/ Michael A. Kagan
Heath B. McLendon Michael A. Kagan
Chairman and President Executive Vice President
July 10, 2000
Top Ten Holdings* As of June 30, 2000
1. Cisco Systems, Inc. 4.1%
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2. The Bank of New York Co., Inc. 3.0
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3. WorldCom, Inc. 2.8
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4. Microsoft Corp. 2.4
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5. Intel Corp. 2.3
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6. Costco Wholesale Corp. 2.2
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7. Eli Lilly & Co. 2.1
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8. Corning Inc. 2.1
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9. Federated Department Stores, Inc. 2.0
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10. International Business Machines Corp. 2.0
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* As a percentage of total net assets.
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2 2000 Semi-Annual Report to Shareholders
<PAGE>
Take Advantage of the Fund's
Dividend Reinvestment Plan!
Many of our shareholders that seek to build on their holdings in the Fund have
taken advantage of the Automatic Dividend Reinvestment and Cash Payment Plan
(the "Plan"). Under the terms of the Plan, shareholders may arrange to reinvest
their dividends automatically in additional shares. The Plan provides that when
the Fund's shares are traded at a discount to net asset value, dividends and
distributions will be initially payable in the form of shares purchased by The
Bank of New York, the Plan Agent in the open market. To the extent that the
discount converts to a premium during the purchase period or when the
permissible purchase period ends, the balance will be paid in newly issued
shares of the Fund. Additional details about the Plan appear on page 17 of this
report.
Shareholders of the Fund can call 1-888-777-0102, toll free, to obtain portfolio
breakdown and performance information. For information concerning your Fund
stock account, please call The Bank of New York at 1-800-432-8224.
Important Message to Shareholders
Any shareholders who are holding old certificates of The Lehman Corporation, the
Fund's former name, should exchange those certificates, free of charge, for new
ones bearing The Salomon Brothers Fund Inc name. The New York Stock Exchange has
informed us that the old certificates may create settlement problems in the
future if you decide to sell your shares. Please note that while you are not
required to exchange the certificates, we recommend that you do so. Shareholders
who wish to exchange their certificates should send them via registered mail
with a letter requesting exchange for new certificates to:
The Bank of New York
Receive and Deliver Department-11W
Church Street Station
P.O. Box 11002
New York, New York 10286-1002
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The Salomon Brothers Fund Inc 3
<PAGE>
Major Portfolio Changes (unaudited) For the Three Months Ended June 30, 2000
Additions 1 Shares
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Applied Materials, Inc. 160,000 2
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Cisco Systems, Inc. 150,000
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The Coastal Corp. 200,000
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The Coca-Cola Co. 354,000 2
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Costco Wholesale Corp. 257,000
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Dell Computer Corp. 200,000
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Emerson Electric Co. 155,000
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Federated Department Stores, Inc. 130,000
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General Motors Corp., Class H Shares 100,000
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McDonalds Corp. 375,000
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Micron Technology, Inc. 175,000 2
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Microsoft Corp. 179,000
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Minnesota Mining and Manufacturing Co. 58,000 2
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Nokia Corp. ADR 592,000 2
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Novartis AG ADR 737,000 2
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Oracle Corp. 407,000 2
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Royal Dutch Petroleum Co. - NY Shares 150,000 2
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WorldCom, Inc. 250,000
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Reductions Shares
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Abbott Laboratories 320,700
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Alcoa Inc. 118,920
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American Express Co. 32,000
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American Home Products Corp. 170,000
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Applied Micro Circuits Corp. 65,000
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AT&T Corp. 397,000
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Burlington Resources, Inc. 490,800 3
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Cigna Corp. 122,000 3
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Colgate-Palmolive Co. 68,000
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Corning Inc. 39,500
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Electronic Data Systems Corp. 220,000 3
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IMS Health, Inc. 705,000 3
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Ingersoll-Rand Co. 210,000 3
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Lucent Technologies, Inc. 522,000 3
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Microsoft Corp. 261,000
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Motorola, Inc. 167,025 3
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Pharmacia Corp. 448,000
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Solectron Corp. 310,000 3
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Time Warner Inc. 62,000
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UnitedHealth Group, Inc. 100,000 3
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Vulcan Materials Co. 228,000
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1 Exclusive of changes resulting entirely from stock dividends and stock splits.
2 New addition.
3 Elimination.
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4 2000 Semi-Annual Report to Shareholders
<PAGE>
Schedule of Investments (unaudited) June 30, 2000
SHARES SECURITY VALUE
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COMMON STOCK -- 92.3%
Basic Industries -- 2.3%
156,000 Alcoa Inc. $ 4,524,000
105,000 The Dow Chemical Co. 3,169,687
274,000 The Geon Co. 5,069,000
58,000 Minnesota Mining and Manufacturing Co. 4,785,000
275,000 Olin Corp. 4,537,500
150,000 OM Group, Inc. 6,600,000
193,000 Rohm and Hass Co. 6,658,500
170,000 UPM-Keymmene Oyj ADR 4,356,250
87,000 Vulcan Materials Co. 3,713,813
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43,413,750
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Capital Goods -- 2.9%
306,000 Emerson Electric Co. 18,474,750
516,000 General Electric Co. 27,348,000
177,000 Sealed Air Corp. (a) 9,270,375
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55,093,125
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Communications -- 11.3%
3,000 AT&T Corp. 94,875
550,000 Bell Atlantic Corp. 27,946,875
125,000 Digital Microwave Corp. (a) 4,765,625
189,000 General Motors Corp., Class H Shares (a) 16,584,750
555,000 GTE Corp. 34,548,750
170,050 MediaOne Group Inc. 5,377,831
592,000 Nokia Corp. ADR 29,563,000
675,000 SBC Communications Inc. 29,193,750
40,000 Telephone & Data Systems, Inc. 4,010,000
93,000 Time Warner Inc. 7,068,000
100,000 UnitedGlobalCom Inc., Class A Shares (a) 4,675,000
1,187,500 WorldCom, Inc. (a) 54,476,562
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218,305,018
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Consumer Cyclicals -- 6.6%
65,000 Boston Properties, Inc. 2,510,625
1,257,000 Costco Wholesale Corp. (a) 41,481,000
1,150,528 Federated Department Stores, Inc. (a) 38,830,320
150,000 The Home Depot, Inc. 7,490,625
210,000 The Sherwin-Williams Co. 4,449,375
227,000 SPX Corp. (a) 27,452,812
100,000 Target Corp. 5,800,000
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128,014,757
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Consumer Non-Cyclicals -- 11.9%
854,000 AT&T Corp.-Liberty Media Group, Class A Shares(a) 20,709,500
160,000 Alberto-Culver Co., Class B Shares 4,890,000
285,000 Albertson's, Inc. 9,476,250
145,000 Avon Products, Inc. 6,452,500
354,000 The Coca-Cola Co. 20,332,875
67,000 Colgate-Palmolive Co. 4,011,625
92,000 The Estee Lauder Cos. Inc. 4,548,250
870,000 The Gillette Co. 30,395,625
See Notes to Financial Statements.
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The Salomon Brothers Fund Inc 5
<PAGE>
Schedule of Investments (unaudited) (continued) June 30, 2000
SHARES SECURITY VALUE
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Consumer Non-Cyclicals -- 11.9% (continued)
229,500 Kimberly-Clark Corp. $ 13,167,563
540,000 McDonald's Corp. 17,786,250
920,000 Nabisco Group Holdings Corp. 23,862,500
387,000 PepsiCo, Inc. 17,197,312
790,000 Philip Morris Cos. Inc. 20,984,375
785,000 Safeway Inc. (a) 35,423,125
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229,237,750
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Energy -- 6.7%
325,000 Amerada Hess Corp. 20,068,750
435,000 The Coastal Corp. 26,480,625
80,000 Devon Energy Corp. 4,495,000
98,000 El Paso Energy Corp. 4,991,875
266,670 Exxon Mobil Corp. 20,933,595
400 Gas Properties (100% owned) (b) 682,000
Royalty Interest (b) 586,400
150,000 Royal Dutch Petroleum Co. - NY Shares 9,234,375
135,000 Schlumberger Ltd. 10,074,375
140,000 Tosco Corp. 3,963,750
370,777 Total Fina SA ADR 28,480,308
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129,991,053
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Financial Services -- 12.5%
384,000 American Express Co. 20,016,000
238,937 American International Group, Inc. 28,075,097
1,050,000 Associates First Capital Corp. 23,428,125
1,245,000 The Bank of New York Co., Inc. 57,892,500
468,000 Capital One Financial Corp. 20,884,500
520,500 The Chase Manhattan Corp. 23,975,531
80,000 The Chubb Corp. 4,920,000
115,000 Comerica Inc. 5,160,625
592,200 FleetBoston Financial Group, Inc. 20,134,800
273,000 Freddie Mac 11,056,500
112,000 The Goldman Sachs Group, Inc. 10,626,000
180,000 Morgan Stanley Dean Witter & Co. 14,985,000
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241,154,678
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Health Care -- 11.0%
270,000 Abbott Laboratories 12,031,875
497,000 American Home Products Corp. 29,198,750
411,000 Eli Lilly & Co. 41,048,625
46,000 Genentech, Inc. 7,912,000
425,000 Merck & Co., Inc. 32,565,625
737,000 Novartis AG ADR 29,480,000
257,399 Pharmacia Corp. 13,304,311
783,750 Pfizer Inc. 37,620,000
170,000 Schering-Plough Corp. 8,585,000
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211,746,186
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Real Estate Investment Trust -- 0.8%
65,000 Avalonbay Communities, Inc. 2,713,750
95,000 BRE Properties, Inc., Class A Shares 2,743,125
See Notes to Financial Statements.
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6 2000 Semi-Annual Report to Shareholders
<PAGE>
Schedule of Investments (unaudited) (continued) June 30, 2000
SHARES SECURITY VALUE
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Real Estate Investment Trust -- 0.8% (continued)
185,000 Equity Office Properties Trust $ 5,099,063
125,000 Spieker Properties, Inc. 5,750,000
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16,305,938
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Technology -- 25.2%
286,000 3Com Corp. (a) 16,480,750
160,000 Applied Materials, Inc. (a) 14,500,000
62,000 Applied Micro Circuits Corp. (a) 6,122,500
267,000 ASMInternational N.V. (a) 7,075,500
1,246,000 Cisco Systems, Inc. (a) 79,198,875
755,000 Compaq Computer Corp. 19,299,687
150,500 Corning Inc. 40,616,188
230,000 Cypress Semiconductor Corp. (a) 9,717,500
310,000 Dell Computer Corp. (a) 15,286,875
140,000 EMC Corp. 10,771,250
100,000 Genuity Inc. (a) 915,625
145,000 Hewlett-Packard Co. 18,106,875
331,000 Intel Corp. 44,250,562
350,000 International Business Machines Corp. 38,346,875
54,000 Mercury Interactive Corp. (a) 5,224,500
175,000 Micron Technology, Inc. 15,410,938
574,000 Microsoft Corp. (a) 45,920,000
407,000 Oracle Corp. (a) 34,213,438
260,000 Seagate Technology, Inc. (a) 14,300,000
208,000 Tellabs, Inc. (a) 14,235,000
118,000 Teradyne, Inc. (a) 8,673,000
342,000 Texas Instruments Inc. 23,491,125
26,000 Yahoo! Inc. (a) 3,220,750
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485,377,813
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Transportation -- 0.8%
516,000 Canadian National Railway Co. 15,060,750
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Utilities -- 0.3%
125,000 Unicom Corp. 4,835,938
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TOTAL COMMON STOCK
(Cost-- $1,257,999,115) 1,778,536,756
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CONVERTIBLE PREFERRED STOCK -- 1.7%
Publishing -- 1.7%
685,000 The News Corp. Ltd., ADR(Cost-- $13,885,430) 32,537,500
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RIGHTS -- 0.0%
8,000 Terex Stock Appreciation Rights
(expiring on 5/15/02) (a) (Cost-- $0) 113,000
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CONTRACTS SECURITY VALUE
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PURCHASED OPTIONS -- 0.7%
Call Purchased -- 0.7%
500 S&P 500 Index, Call (expiring Sept. 2000,
exercise price $1,200) (a)(c)
(Cost-- $14,251,500) 13,375,000
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See Notes to Financial Statements.
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The Salomon Brothers Fund Inc 7
<PAGE>
Schedule of Investments (unaudited) (continued) June 30, 2000
FACE
AMOUNT SECURITY VALUE
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CONVERTIBLE CORPORATE BONDS -- 1.9%
Communications -- 0.6%
$10,000,000 DSC Communications Corp., 7.000% due 8/1/04 $ 11,437,500
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Consumer Cyclicals -- 0.1%
2,500,000 Amazon.com Inc., 4.750% due 2/1/09 1,584,375
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Telecommunications -- 1.2%
15,000,000 Bell Atlantic Financial Services,
5.750% due 4/1/03 (d) 14,643,750
10,000,000 NTL Inc., 5.750% due 12/15/09 (d) 7,987,500
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22,631,250
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TOTAL CONVERTIBLE CORPORATE BONDS
(Cost-- $36,754,742) 35,653,125
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CORPORATE BONDS -- 1.0%
Airlines -- 0.2%
4,050,000 Continental Airlines Inc., 9.500% due 12/15/01 4,146,188
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Consumer Cyclicals -- 0.0%
6,100,000 Breed Technologies, Inc., 9.250% due 4/15/08 (a)(e) 68,625
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Energy -- 0.5%
10,000,000 Pogo Producing Co., 10.375% due 2/15/09 10,300,000
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Telecommunications & Utilities -- 0.3%
4,750,000 NTL Inc., 12.750% due 4/15/05 4,856,875
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TOTAL CORPORATE BONDS
(Cost-- $23,497,506) 19,371,688
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REPURCHASE AGREEMENT -- 2.4%
46,934,000 J.P. Morgan Securities, 6.400% due 7/3/00;
Proceeds at maturity -- $46,959,029;
(Fully collateralized by U.S. Treasury Notes,
8.875% due 2/15/19; Market value --
$61,893,274) (Cost-- $46,934,000) 46,934,000
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TOTAL INVESTMENTS -- 100%
(Cost-- $1,393,322,293*) $1,926,521,069
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(a) Non-income producing security.
(b) Fair value determined pursuant to procedures established by the Board of
Directors.
(c) Contracts in denomination of 100.
(d) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. This security may be resold in transactions that are exempt from
registration, normally to qualified institutional buyers.
(e) Security is in default.
* Aggregate cost for Federal income tax purposes is substantially the same.
Abbreviation used in this schedule:
-----------------------------------
ADR - American Depository Receipt.
See Notes to Financial Statements.
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8 2000 Semi-Annual Report to Shareholders
<PAGE>
Statement of Assets and Liabilities (unaudited) June 30, 2000
ASSETS:
Investments, at value (Cost -- $1,393,322,293) $1,926,521,069
Cash 463
Receivable for Fund shares subscribed 68,880,075
Receivable for securities sold 5,152,040
Dividends and interest receivable 3,195,048
Other assets 14,108
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Total Assets 2,003,762,803
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LIABILITIES:
Dividends payable 84,050,735
Management fee payable 2,644,782
Payable for securities purchased 1,396,426
Accrued expenses 182,244
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Total Liabilities 88,274,187
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Total Net Assets $1,915,488,616
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NET ASSETS:
Par value of capital shares $ 98,592,934
Capital paid in excess of par value 1,134,742,392
Undistributed net investment income 3,253,256
Accumulated net realized gain from security transactions
and options 145,701,258
Net unrealized appreciation of investments 533,198,776
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Total Net Assets $1,915,488,616
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Shares Outstanding ($1.00 par value, 100,000,000 shares
authorized) 98,592,934
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Net Asset Value, per share $19.43
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See Notes to Financial Statements.
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The Salomon Brothers Fund Inc 9
<PAGE>
Statement of Operations (unaudited) For the Six Months Ended June 30, 2000
INVESTMENT INCOME:
Dividends $ 9,277,895
Interest 3,451,479
Oil royalties 285,552
Less: Foreign withholding tax (48,718)
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Total Investment Income 12,966,208
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EXPENSES:
Management fees (Note 2) 5,403,628
Shareholder and system servicing fees 240,368
Shareholder communications 129,274
Directors' fees 48,931
Audit and legal 48,037
Custody 29,848
Other 27,571
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Total Expenses 5,927,657
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Net Investment Income 7,038,551
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REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND OPTIONS (NOTE 3):
Net Realized Gain (Loss) From:
Security transactions (excluding short-term securities) 154,717,929
Options purchased (7,205,041)
Options written 314,878
Foreign currency transactions 397
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Net Realized Gain 147,828,163
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Change in Net Unrealized Appreciation of Investments:
Beginning of period 573,624,236
End of period 533,198,776
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Decrease in Net Unrealized Appreciation (40,425,460)
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Net Gain on Investments and Options 107,402,703
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Increase in Net Assets From Operations $114,441,254
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See Notes to Financial Statements.
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10 2000 Semi-Annual Report to Shareholders
<PAGE>
Statements of Changes in Net Assets
For the Six Months Ended June 30, 2000 (unaudited)
and the Year Ended December 31, 1999
<TABLE>
<CAPTION>
2000 1999
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<S> <C> <C>
OPERATIONS:
Net investment income $ 7,038,551 $ 16,009,421
Net realized gain 147,828,163 325,074,787
Increase (decrease) in net unrealized appreciation (40,425,460) 42,616,408
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Increase in Net Assets From Operations 114,441,254 383,700,616
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DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (5,250,806) (15,006,165)
Net realized gains (82,584,304) (326,621,565)
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Decrease in Net Assets From Distributions to Shareholders (87,835,110) (341,627,730)
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FUND SHARE TRANSACTIONS:
Value of shares issued in payment of dividends
(4,702,371 shares issued) -- 91,713,634
Value of shares issued through Rights Offering
(3,983,810 shares issued) 68,880,076 --
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Increase in Net Assets From Fund Share Transactions 68,880,076 91,713,634
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Increase in Net Assets 95,486,220 133,786,520
NET ASSETS:
Beginning of period 1,820,002,396 1,686,215,876
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End of period* $1,915,488,616 $1,820,002,396
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* Including undistributed net investment income of: $3,253,256 $1,465,114
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</TABLE>
See Notes to Financial Statements.
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The Salomon Brothers Fund Inc 11
<PAGE>
Notes to Financial Statements (unaudited)
1. Organization and Significant
Accounting Policies
The Salomon Brothers Fund Inc ("Fund"), is registered as a diversified,
closed-end, management investment company under the Investment Company Act of
1940, as amended. The Fund's primary investment objectives are growth and
conservation of capital. Income receives secondary consideration. Following is a
summary of significant accounting policies consistently followed by the Fund in
the preparation of its financial statements. The policies are in conformity with
generally accepted accounting principles ("GAAP"). The preparation of financial
statements in accordance with GAAPrequires management to make estimates and
assumptions that affect the reported amounts and disclosure in the financial
statements. Actual amounts could differ from those estimates.
(a) Securities Valuation. Portfolio securities listed or traded on national
securities exchanges, or reported by the NASDAQ national market system, are
valued at the last sale price, or if there have been no sales on that day, at
the mean of the current bid and asked price which represents the current value
of the security. Over-the-counter securities are valued at the mean of the
current bid and asked price. If no quotations are readily available (as may be
the case for securities of limited marketability), or if "restricted" securities
are being valued, such portfolio securities and other assets are valued at fair
value determined pursuant to procedures established by the Board of Directors.
Short-term securities with less than 60 days remaining to maturity when acquired
by the Fund are valued at amortized cost which approximates market value.
(b) Written Option Contracts. When the Fund writes a call option or a put
option, an amount equal to the premium received is recorded as a liability, the
value of which is marked-to-market daily to reflect the current market value of
the written option. When a written option expires, the Fund realizes a gain
equal to the amount of the premium received. When the Fund enters into a closing
purchase transaction, it realizes a gain (or loss if the cost of the closing
purchase transaction exceeds the premium received when the option was sold)
without regard to any unrealized gain or loss on the underlying security, and
the liability related to such option is eliminated. When a call option is
exercised, the Fund realizes a gain or loss from the sale of the underlying
security and the proceeds from such sale are increased by the premium originally
received. When a put option is exercised, the amount of the premium received
reduces the cost of the security that the Fund purchases upon exercise.
(c) Federal Income Taxes. The Fund has complied and intends to continue to
comply with the requirements of the Internal Revenue Code of 1986, as amended,
applicable to regulated investment companies, and to distribute substantially
all of its taxable income to its shareholders. Therefore, no Federal income or
excise tax provision is required.
(d) Repurchase Agreements. When entering into repurchase agreements, it is the
Fund's policy to take possession, through its custodian, of the underlying
collateral and to monitor its value at the time the arrangement is entered into
and during the term of the repurchase agreement to ensure that it equals or
exceeds the repurchase price. In the event of default of the obligation to
repurchase, the Fund has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. Under certain circumstances, in the
event of default or bankruptcy by the other party to the agreement, realization
and/or retention of the collateral may be subject to legal proceedings.
(e) Other. Securities transactions are recorded as of the trade date. Dividend
income and dividends payable are recorded on the ex-dividend date. Interest is
recognized as interest income when earned. Original issue discount and market
discount on
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12 2000 Semi-Annual Report to Shareholders
<PAGE>
Notes to Financial Statements (unaudited) (continued)
securities purchased is accreted on an effective yield basis over the life of
the security. The character of income and gains distributed are determined in
accordance with income tax regulations which may differ from GAAP.
2. Management Fee and Other
Transactions with Affiliates
Salomon Brothers Asset Management Inc ("SBAM"), a wholly owned subsidiary of
Salomon Brothers Hold-ing Company Inc., which, in turn, is wholly owned by
Salomon Smith Barney Holdings, Inc. ("SSBH"), acts as investment manager to the
Fund. SBAM is responsible on a day-to-day basis for the management of the Fund's
portfolio in accordance with the Fund's investment objectives and policies and
for making decisions to buy, sell, or hold particular securities and is
responsible for day-to-day administration of the Fund.
The investment manager has delegated certain administrative responsibilities to
SSB Citi Fund Management LLC ("SSBC"), an affiliate of the investment manager
pursuant to a Sub-Administration Agreement between the investment manager and
SSBC.
Certain officers and/or directors of the Fund are also officers and/or directors
of the investment manager.
The Fund pays SBAM a base fee subject to an increase or decrease depending on
the extent, if any, to which the investment performance of the Fund exceeds or
is exceeded by the investment record of the Standard & Poor's 500 Index of
Composite Stocks ("S&P 500 Index"). The base fee is paid quarterly based on the
following annual rates:
Average Daily Net Assets Annual Fee Rate
-----------------------------------------------------------------
First $350 million 0.650%
Next $150 million 0.550%
Next $250 million 0.525%
Next $250 million 0.500%
Over $1 billion 0.450%
-----------------------------------------------------------------
The performance adjustment is paid quarterly based on a rolling one year period.
A performance adjustment will only be made after the investment performance of
the Fund exceeds or is exceeded by the investment record of the S&P 500 Index by
at least one percentage point. For each percentage point by which the investment
performance of the Fund exceeds or is exceeded by the investment record of the
S&P 500 Index, the base fee will be adjusted upward or downward by 0.01%
(annualized). The maximum annual adjustment is 0.10% which would occur if the
Fund's performance exceeds or is exceeded by the S&P 500 Index by ten or more
percentage points. For this purpose, the performance fee calculation is based on
the total return value of the S&P 500 Index versus the Fund's total return
calculated based on net asset value and assuming all distributions are
reinvested at net asset value on the record date of the distribution. For the
rolling one year period ended March 31, 1999, the performance of the S&P 500
Index exceeded the Fund's performance by 6.50%. However, for the rolling one
year period ended June 30, 1999, September 30, 1999 and December 31, 1999, the
performance of the S&P 500 Index was exceeded by the Fund's performance by
2.94%, 0.13% and 2.74%, respectively, resulting in a total decrease of the base
management fee of $28,228. For the rolling one year period ended March 31, 2000
and June 30, 2000 the performance of the S&P 500 Index was exceeded by the
Fund's performance by 10.81% and 5.79%, respectively. This resulted in a total
increase of the base management fee of $680,766.
Brokerage commissions of $188,420 were paid to Salomon Smith Barney Inc.,
another subsidiary of SSBH, for investment transactions executed on behalf of
the Fund during the six months ended June 30, 2000.
-------------------------------------------------------------------------------
The Salomon Brothers Fund Inc 13
<PAGE>
Notes to Financial Statements (unaudited) (continued)
3. Investments
For the six months ended June 30, 2000 the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
---------------------------------------------------------------------------
Purchases $720,057,128
---------------------------------------------------------------------------
Sales $705,766,427
---------------------------------------------------------------------------
At June 30, 2000, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were substantially as follows:
---------------------------------------------------------------------------
Gross unrealized appreciation $562,546,434
Gross unrealized depreciation (29,347,658)
---------------------------------------------------------------------------
Net unrealized appreciation $533,198,776
---------------------------------------------------------------------------
The risk of writing a covered call option is that the Fund may forego the
opportunity of profit if the market price of the underlying security increases
and the option is exercised. The risk in writing a put option is that the Fund
may incur a loss if the market price of the underlying security decreases and
the option is exercised. In addition, there is the risk that the Fund may not be
able to enter into a closing transaction because of an illiquid secondary
market.
Transactions in options written during the six months ended June 30, 2000 were
as follows:
Number of Premiums
Contracts Received (Paid)
------------------------------------------------------------------------------
Options written, outstanding at
December 31, 1999 (1,900) $ (522,406)
Options written (27,053) (6,246,954)
Options closed in purchase
transactions 14,889 4,338,539
Options expired 11,934 2,214,719
Options exercised 2,130 216,102
------------------------------------------------------------------------------
Options written, outstanding at
June 30, 2000 0 $ 0
------------------------------------------------------------------------------
At June 30, 2000, there were no open written call or put option contracts.
-------------------------------------------------------------------------------
14 2000 Semi-Annual Report to Shareholders
<PAGE>
Financial Highlights
For a share of capital stock outstanding throughout each year ended December 31,
except where noted:
<TABLE>
<CAPTION>
2000(1) 1999 1998 1997 1996 1995
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $19.24 $18.76 $18.51 $17.26 $15.43 $12.88
-------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.07 0.18 0.26 0.27 0.33 0.35
Net realized and unrealized gains(2) 1.15 4.08 3.45 3.93 3.93 4.04
-------------------------------------------------------------------------------------------------------------------
Total Income From Operations 1.22 4.26 3.71 4.20 4.26 4.39
-------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.06) (0.17) (0.27) (0.27) (0.34) (0.35)
Net realized gains (0.87) (3.63) (3.19) (2.68) (2.09) (1.49)
-------------------------------------------------------------------------------------------------------------------
Total Distributions (0.93) (3.80) (3.46) (2.95) (2.43) (1.84)
-------------------------------------------------------------------------------------------------------------------
Increase in net asset value
due to shares issued on
reinvestment of dividends -- 0.02 -- -- -- --
-------------------------------------------------------------------------------------------------------------------
Decrease in net asset value
due to shares issued
through Rights Offering (0.10) -- -- -- -- --
-------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $19.43 $19.24 $18.76 $18.51 $17.26 $15.43
-------------------------------------------------------------------------------------------------------------------
Total Return, Based on Market Value (9.6)%++ 34.6% 22.6% 29.5% 38.7% 43.3%
-------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (millions) $1,915 $1,820 $1,686 $1,545 $1,441 $1,291
-------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.65%+ 0.56% 0.52% 0.53% 0.51% 0.41%
Net investment income 0.77+ 0.90 1.39 1.46 1.96 2.42
-------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 39% 73% 68% 49% 52% 82%
-------------------------------------------------------------------------------------------------------------------
Market Value, End of Period $17.563 $20.375 $18.188 $17.688 $16.000 $13.375
-------------------------------------------------------------------------------------------------------------------
<FN>
(1) For the six months ended June 30, 2000 (unaudited).
(2) Includes $0.015 and $0.02 attributable to the increase in net asset value from shares repurchased at a discount
for the years ended 1996 and 1995, respectively.
++ Total return is not annualized, as it may not be representative of the total return for the year.
+ Annualized.
</FN>
</TABLE>
--------------------------------------------------------------------------------
The Salomon Brothers Fund Inc 15
<PAGE>
Additional Shareholder Information (unaudited)
On May 11, 2000, the Annual Meeting of the Fund's Stockholders was held for the
purpose of voting on the following matters:
1. The election of Charles F. Barber, Andrew L. Breech, Carol L. Colman,
William R. Dill, Clifford M. Kirtland, Jr., Robert W. Lawless, Heath B.
McLendon, Louis P. Mattis and Thomas F. Schlafly as Directors of the Fund;
2. The ratification of the selection of PricewaterhouseCoopers LLP as the
Fund's independent accountants for the fiscal year ending December 31,
2000; and
3. The approval of an amendment to the Articles of Incorporation.
The results of the vote on Proposal 1 were as follows:
<TABLE>
<CAPTION>
Votes % of Shares Votes % of Shares
Name of Directors For Voted Against Voted
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Charles F. Barber 75,075,791 97.3% 2,119,726 2.7%
Andrew L. Breech 75,550,897 97.9 1,644,620 2.1
Carol L. Colman 75,482,150 97.8 1,713,367 2.2
William R. Dill 75,435,144 97.7 1,760,373 2.3
Clifford M. Kirtland, Jr. 75,127,756 97.3 2,067,761 2.7
Robert Lawless 75,505,242 97.8 1,690,275 2.2
Heath B. McLendon 75,415,954 97.7 1,779,563 2.3
Louis P. Mattis 75,545,664 97.9 1,649,853 2.1
Thomas F. Schlafly 75,461,129 97.8 1,734,388 2.2
---------------------------------------------------------------------------------------------------------------
</TABLE>
The results of the vote on Proposal 2 were as follows:
<TABLE>
<CAPTION>
Votes % of Shares Votes % of Shares Votes % of Shares
For Voted Against Voted Abstained Voted
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
74,991,591 97.1% 929,285 1.2% 1,274,641 1.7%
-------------------------------------------------------------------------------------------------------------------
</TABLE>
The results of the vote on Proposal 3 were as follows:
<TABLE>
<CAPTION>
Votes % of Shares Votes % of Shares Votes % of Shares
For Voted Against Voted Abstained Voted
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
55,637,734 87.3% 4,459,294 7.0% 3,620,462 5.7%
-------------------------------------------------------------------------------------------------------------------
</TABLE>
-------------------------------------------------------------------------------
16 2000 Semi-Annual Report to Shareholders
<PAGE>
Automatic Dividend Reinvestment and Cash Payment Plans (unaudited)
Salomon Brothers Fund: Helping Investors Grow Their Wealth Since 1929
You've already harnessed the wealth-building power of The Salomon Brothers Fund
("SBF"). Now harness two more wealth-building strategies: the power of
compounding through the Dividend Reinvestment Plan and the convenience of the
Cash Payment Plan - available only to investors of The Salomon Brothers Fund.
We've included brief descriptions of these two Plans, and a section on the most
frequently asked questions.
Dividend Reinvestment Plan (DR Plan)
Money from dividends and distributions can lie idle for months at a time, and
making smaller investments in the stock market can be expensive and difficult.
With the DR Plan, dividends and distributions from the Salomon Brothers Fund are
promptly invested for you in additional shares of SBF. All paper work is done
for you automatically by the Agent for the DR Plan, and you will receive
statements from the Agent to keep in your personal records.
The DR Plan is flexible, and offers investors three different reinvestment
options. Depending on which option you choose, you may automatically reinvest:
1. All dividends and capital gains (long-term and short-term) in
additional shares of SBF
2. All capital gains (long-term and short-term) in additional shares of
SBF and receive dividends in cash
3. All dividends in additional shares of SBF and receive capital gains
(long-term and short-term) in cash.
To make it easy for you to sign up for the DR Plan or to change your option if
you already participate in the Plan, we've included an easy and convenient
mail-in form in the back of this report. Remember to indicate which option you
are selecting; otherwise the Agent will consider you to have chosen option (1)
and reinvest all dividends and capital gains (long-term and short-term) in
additional shares of SBF.
Cash Payment Plan: Buying Additional Shares Directly from / through SBF
The Cash Payment Plan allows investors in The Salomon Brothers Fund to purchase
additional shares of SBF conveniently and inexpensively, without committing
large dollar amounts or paying big brokerage commissions. You can make
additional investments for as little as $25.00 on either a regular basis or when
you have extra money to invest. You also can vary the amount you invest each
time, as long as it is at least $25.00, and there is no maximum limit to the
amount you can invest under the Cash Payment Plan.
The Agent will purchase additional shares of SBF for your account on the next
"Investment Date" following receipt of your optional cash payment. Each Friday
is considered an "Investment Date," or the closest business day prior to it if
Friday is a holiday. Shares purchased under the Cash Payment Plan are held by
the Agent as uncertificated shares, unless separate specific instructions to
issue certificates are received. Only whole shares can be issued as
certificates, fractional shares cannot be issued in certificate form. Dividends
and distributions on those shares held by the Agent will be automatically
reinvested.
-------------------------------------------------------------------------------
The Salomon Brothers Fund Inc 17
<PAGE>
Automatic Dividend Reinvestment and Cash Payment Plans (unaudited) (continued)
Certificate Of Deposit
If you wish, you may also deposit with the Agent stock certificates representing
ownership of capital stock in SBF which you now hold. The Agent will combine
these shares with shares issued or purchased through the DR Plan or Cash Payment
Plan. The actual certificates forwarded by you will be cancelled.
Cost to You
Except as specifically noted, you will not bear any of the costs of
administering the Plan. When the Agent purchases shares of SBF on the open
market, the cost of reinvesting your dividends and distributions or purchasing
additional shares through these Plans is less than the usual brokerage
commissions on smaller or odd lot transactions because the Agent combines the
purchase of shares for all participants and passes the savings in commissions on
to you. You pay your proportionate share of the commissions paid on all open
market purchases. Of course, dividends and distributions remain taxable even if
they are automatically reinvested.
To help you learn more about the DR Plan and Cash Payment Plan, we are including
the answers to some of the most frequently asked questions about these plans.
Who can participate in these Plans?
As a shareholder of Salomon Brothers Fund, you can participate in both the DR
Plan and the Cash Payment Plan.
How does the Dividend Reinvestment Plan work?
If you are a participant in the Plan, you will receive either newly issued
shares or shares that are purchased on the New York Stock Exchange in the open
market, depending on the relationship between the market price per share of SBF
and the net asset value per share of SBF, as described in terms and conditions
of the DR Plan.
The number of common stock shares you receive is determined in the following
way: If the market price of the common stock is equal to or higher than the net
asset value ("NAV") per share at the time of valuation, you will be issued
shares for the equivalent of either the most recently determined NAV per share
or 95% of the market price, whichever is greater. If, on valuation date, the NAV
per share is greater than the market price per share, shares will be purchased
in the open market at market price per share.
However, if the dividend or distribution is not large enough to buy a full
share, the Agent will credit your account with a fractional share, which will be
computed four decimal places. These fractional shares will earn dividends and
distributions for you just the way that full shares do.
How do I enroll in the Dividend Reinvestment Plan?
If you hold your certificates yourself, you probably are already enrolled in the
Dividend Reinvestment Plan. Reinvestment begins with the first dividend after
you purchase your shares. However, if your shares are held in
-------------------------------------------------------------------------------
18 2000 Semi-Annual Report to Shareholders
<PAGE>
Automatic Dividend Reinvestment and Cash Payment Plans (unaudited) (continued)
the name of a broker or nominee, you should contact your broker or nominee about
your ability to participate in the Dividend Reinvestment Plan. If your broker or
nominee does not provide the automatic reinvestment service, you may need to
take your shares out of "street name" and register them in your own name to
guarantee your participation. Otherwise, dividends and distributions will be
paid in cash by your broker or nominee.
Can I withdraw from the Dividend Reinvestment Plan or change my reinvestment
option?
Yes. You can withdraw from the Dividend Reinvestment Plan or change your
reinvestment option by calling the Agent at this toll-free telephone number:
1-800-432-8224.
If you withdraw from the Dividend Reinvestment Plan and then wish to re-enroll,
simply complete the enclosed Authorization Card and mail it to the address given
below. You can also re-enroll by calling the toll-free number for the Agent.
Your participation in the Plan will begin with the next dividend or distribution
payable after the Agent receives your authorization, as long as it is received
before the record date for the dividend or distribution. If your authorization
arrives after the record date, your participation will begin with the following
dividend or distribution.
The Bank of New York
Investor Relations Department
P.O. Box 11258
New York, NY 10286-1258
Tel: 1-800-432-8224
Important Notes to This Section:
The Fund and the Agent may amend or terminate the Dividend Reinvestment Plan and
Cash Payment Plan. The Agent will mail to participants notice at least 30 days
prior to the effective date of any amendment.
The Agent may utilize BNY Brokerage Inc., an affiliate of the Agent, for the
trading activity relating to the Dividend Reinvestment Plan and Cash Payment
Plan on behalf of the participants. BNY Brokerage Inc. receives a commission in
connection with these transactions. Remember your detailed account statement
will include a tear-off portion that you should utilize for all transaction
processing.
If your shares are held in the name of a broker or nominee, you should contact
your broker or nominee for more information about your ability to participate in
the DR Plan. If the broker or nominee does not provide an automatic reinvestment
service, it may be necessay for you to have shares taken out of the "street
name" and registered in your own name to guarantee your participation.
Otherwise, dividends and distributions will be paid in cash by your broker or
nominee.
-------------------------------------------------------------------------------
The Salomon Brothers Fund Inc 19
<PAGE>
Automatic Dividend Reinvestment and Cash Payment Plans (unaudited) (continued)
How are shares purchased for the Cash Payment Plan?
All cash payment shares will be purchased on the open market at the prevailing
market price and in accordance with the Terms and Conditions of Authorization
for Amended and Reinvested Dividend Reinvestment and Cash Payment Plans (Terms
and Conditions).
Who is the "Agent" and what are its responsibilities?
The Bank of New York acts as the Agent for The Salomon Brothers Fund. The Agent
is responsible for doing the paperwork for shareholders, including providing
account statements. The Agent also is responsible for forwarding proxy material
to you, including a proxy form and return envelope, covering all shares owned by
a participant to be voted and returned to the Fund or its proxy agent.
The Agent will hold the shares it has purchased for your account unless you
request otherwise. This convenient feature provides added protection against
loss, theft or accidental destruction of certificates. If you request it, the
Agent will issues certificates for full shares held in your account. However, if
a certificate is lost, the replacement cost is currently 2% of the value of the
shares at the time of loss.
You may also ask the Agent to hold all of your shares of the Salomon Brothers
Fund. The Agent will combine these shares with shares acquired through the
Dividend Reinvestment Plan or Cash Payment Plan. The actual certificates
forwarded by you will be cancelled and replaced with a book-entry in the Agent's
records.
Is there any tax advantage to participate in the Dividend Reinvestment Plan?
No. Even if you do not receive cash when you participate in the Dividend
Reinvestment Plan, you will be taxed on an amount equal to cash received by the
agent on your behalf pursuant to the DR Plan. If you have any further questions
about the tax implications of the Plan, you should consult your tax adviser.
-------------------------------------------------------------------------------
20 2000 Semi-Annual Report to Shareholders
<PAGE>
Terms and Conditions of Authorization for Amended and Restated Automatic
Dividend Reinvestment and Cash Payment Plans
1. (a) The Bank of New York (the "Agent") will act as agent for each participant
in the Amended and Restated Dividend Reinvestment Plan (the "DR Plan") of
Salomon Brothers Fund Inc (the "Corporation").
(b) Participants in the DRPlan will have three options, as follows: (i) a
participant may have all net investment income dividends ("dividends")
and capital gain distributions (short-term and long-term)
("distributions") automatically reinvested; (ii) a participant may have
all dividends paid in cash and all distributions automatically
reinvested; or (iii) a participant may have all dividends automatically
reinvested and all distributions paid in cash. Participants will be
deemed to have elected option (i) unless notification is received by the
Agent that the participant elects option (ii) or option (iii).
Participants may change elections by notifying the Agent and a change in
election will be effective with respect to a dividend or distribution if
the Agent is contacted prior to the record date; otherwise it will be
effective with the following dividend or distribution.
(c) Unless the Corporation declares a dividend or distribution which may be
paid to shareholders only in the form of cash, the Agent will apply all
dividends and distributions which are to be reinvested on behalf of a
participant in the manner set forth below.
2. (a) If, on the determination date, the market price per share plus
estimated brokerage commissions equals or exceeds the net asset value
per share on that date (such condition, a "market premium"), the Agent
shall receive the dividend or distribution in newly issued shares of
the Corporation on behalf of shareholders. If, on the determination
date, the net asset value per share exceeds the market price per share
plus estimated brokerage commissions on that date (such condition, a
"market discount"), the Agent will purchase shares in the open market.
The determination date will be the fourth New York Stock Exchange
trading day (a New York Stock Exchange trading day being referred to
herein as a "Trading Day") preceding the payment date for the dividend
or distribution. For purposes herein, "market price" shall mean the
average of the highest and lowest prices at which the Corporation's
stock sells on the New York Stock Exchange on the particular date, or
if there is no sale on that date, the average of the closing bid and
asked quotations.
(b) Purchases by the Agent shall be made in accordance with the conditions
set forth in Item 4 below and may be made on any securities exchange
where such shares are traded, in the over-the-counter market, or in
negotiated transactions, and may be on such terms as to price,
delivery, and otherwise as the Agent may determine. Such purchases
shall be made as soon as practicable commencing on the Trading Day
following the determination date and ending no later than 30 days after
the dividend or distribution date except where temporary curtailment or
suspension of purchase is necessary to comply with applicable
provisions of federal securities laws; provided, however, that such
purchases shall, in any event, terminate on the earlier of (i) 60 days
after the dividend or distribution payment date and (ii) the Trading
Day prior to the "ex-dividend date" next succeeding the dividend or
distribution payment date.
(c) If (i) the Agent is unable to invest the full dividend or distribution
amount in open market purchases during the purchase period provided for
in paragraph (b) above or (ii) a market discount shifts to a market
premium during the purchase period, the Agent will cease making open
market purchases and will receive the uninvested portion of the
dividend or distribution amount in newly issued shares (x) in the case
of (i) above, at the close of business on the date the Agent is
required to terminate making open-market purchases as specified in
paragraph (b) above or (y) in the case of (ii) above at the close of
business on the date such shift occurs; but in no event prior to the
payment date for the dividend or distribution.
(d) In the event that all or part of a dividend or distribution amount is to
be to paid in newly issued shares, such shares will be issued to
participants in accordance with the following formula: (i) if, on the
valuation date, the net asset value per share is less than or equal to
the market price per share, then the newly issued shares shall be
valued at net asset value per share on the valuation date; provided,
however, that if the net asset value per share is less than 95% of the
market price per share on the valuation date, then such shares will be
issued at 95% of the market price and (ii) if, on the valuation date,
the net asset value per share is greater than the market price per
share, the newly issued shares will be valued at the market price per
share on the valuation date. The valuation date shall be the dividend
or distribution payment date except that with respect to shares issued
pursuant to paragraph (c) above, the valuation date shall be the date
such shares are issued. If a date that would otherwise be a valuation
date is not a Trading Day, the valuation date shall be the next
preceding Trading Day.
3. Under the Cash Payment Plan (together with the DR Plan, the "Plans"), cash
payments of at least $25.00 made from time to time by the participant and
received by the Agent will be applied by the Agent in the purchase of
additional shares of capital stock of the Corporation on the Investment
Date next following receipt. The "Investment Date" will be each Friday (or
closest business day prior thereto if a holiday). All cash payment shares
will be purchased by the Agent on the open market at prevailing market
prices and in accordance with the conditions set forth in Item 4 below.
Participants have an unconditional right to obtain the return of any cash
payments up to 48 hours prior to such Investment Date. Checks must be drawn
on United States banks and denominated in U.S. dollars only. Third party
checks will not be accepted. There is no maximum amount of investment
under the Cash Payment Plan. The Agent reserves the right to sell
additional shares from the participant's account to satisfy any returned
checks.
4. In making cash purchases for the participant's account, the Agent will
combine the participant's funds with those of the other participants. The
price at which the Agent shall be deemed to have acquired shares shall be
the average price (including brokerage commissions) of all shares
purchased by it in connection with a particular dividend or distribution
under the DR Plan or in connection with a particular investment under the
Cash Payment Plan, as the case may be.
It is understood that (i) the Agent may hold the shares of all participants
together in its name or in the name of its nominee, (ii) the Agent may
utilize BNY Brokerage Inc., an affiliate of the Agent, for all trading
activity relating to the DR Plan and Cash Payment Plan on behalf of
participants and that BNY Brokerage Inc. receives a commission in
connection with such transactions,
-------------------------------------------------------------------------------
THE SALOMON BROTHERS FUND INC
AUTHORIZATION TO PARTICIPATE IN THE DIVIDEND
REINVESTMENT PLAN FOR SHAREOWNERS OF
THE SALOMON BROTHERS FUND INC
COMMON SHARES
I wish to participate in the Dividend Reinvestment Plan. I appoint The Bank
of New York (the Agent) and authorize THE SALOMON BROTHERS FUND INC to pay to
the Agent for my account all net investment income dividends and capital gain
distributions (short-term and long-term) payable to me on the Common Shares that
are now or may hereafter be registered in my name.
I authorize the Agent to apply all such dividends and distributions in the
following manner, subject to the terms and conditions of the Plan set forth in
the brochure describing the Plan.
[ ](1) All net investment income dividends and capital gain distributions
(short-term and long-term) payable to me shall be automatically
reinvested
[ ](2) All net investment income dividends payable to me shall be paid in
cash and all capital gain distributions (short-term and long-term)
payable to me shall be automatically reinvested
[ ](3) All net investment income dividends payable to me shall be reinvested
and all capital gain distributions (short-term and long-term) shall
be paid in cash
(Choose one of the above.)
I understand that if I do not choose one of the above, I will be deemed to
have chosen option (1).
I understand that the appointment of The Bank of New York as the Agent is
subject to the terms and conditions of the Plan set forth in the brochure
describing the Plan.
In addition, please invest the enclosed optional cash payment in the amount
of $____________ as directed by the terms and conditions of the Plan.
(Please sign on the reverse side of this card.)
-------------------------------------------------------------------------------
The Salomon Brothers Fund Inc 21
<PAGE>
(iii) that government regulations may require the temporary curtailment or
suspension of purchase of shares under the Plans and accordingly, the Agent
shall not be accountable for its inability to make purchases at such times
and (iv) that the Agent shall have no responsibility as to the market value
of the shares acquired for the participant's account.
The Agent will confirm the purchases so made as soon as practicable after
the purchases are made.
5. No certificate with respect to reinvested dividends and distributions will
be issued to a participant unless he or she so requests. No certificate
for a fractional share will be issued.
6. Participants shall not bear any of the costs of administering the Plan.
Each account will bear its proportionate share of brokerage commissions
paid on open market purchases.
7. It is understood that the investment of dividends and distributions does not
relieve the participant of any taxes which may be payable on such
dividends and distributions. The Agent will report annually to each
participant the amount of dividends and distributions credited to his
account during the year.
8. (a) The Agent will forward all proxy materials, including a form of proxy
and return envelope, covering all shares owned by a participant to be
voted and returned by the participant to the Corporation or its proxy
agent.
(b) A participant may terminate his or her account under the DR Plan or
change his or her election pursuant to paragraph 1(b), at any time by
notifying the Agent prior to the next dividend or distribution record
date. Participation shall be terminated by written notice similarly
received of the death, or adjudicated incompetency of a participant.
(c) In the event written notice of termination, death or adjudicated
incompetency is received by the Agent after a dividend or distribution
record date, but prior to the determination by the Agent of the number
of shares to be issued to or purchased for the participant following
such dividend or distribution record date, participation in the DR
Plan shall be terminated immediately following such determination.
Upon termination by reason of notice of death, or adjudicated
incompetency, no newly issued shares shall be credited to the
participant's account and no purchase of shares shall be made for the
participant's account. The participant's shares and any cash dividends
or distributions paid thereon shall be retained by the Agent subject
to the Terms and Conditions until such time as such participant's
legal representatives shall have been appointed and shall have
furnished proof sufficient to the Agent of his right to receive such
shares and such dividends or distributions. Upon termination by the
participant, the Agent will send the participant a certificate of the
full shares in his or her account and a check in an amount equal to
the then current market price of any fractional share or, the Agent,
upon receipt of instructions from the participant, will sell the
participant's full and fractional shares as soon as practicable
following termination and send to the participant a check representing
the proceeds, less brokerage commissions and any applicable taxes.
If a participant disposes of all shares registered in his or her name on the
books of the Corporation, the Agent will at its discretion, continue to reinvest
dividends and distributions on the shares in the participant's DR Plan account
until otherwise notified by the participant.
9. The Agent may terminate either Plan by notice in writing remitted to all
participants. In such event the Agent will send the participant a
certificate for the full shares in his or her account and cash for any
fractional shares at the then current market price as indicated in Item 8.
10. The Agent shall not be liable hereunder for any act done in good faith, or
for any good faith omissions to act, including, without limitation, any
claims of liability (1) arising out of any such act or omission to act
which occurs prior to the termination of participation pursuant to Item 8
above and (2) with respect to the prices at which shares are purchased or
sold for the participant's account and the times such purchases or sales
are made.
11. The participant agrees to notify the Agent promptly in writing of any change
of address. Notices to the participant may be given by letter addressed to
the participant at his last address of record with the Agent.
12. These Terms and Conditions may be amended or supplemented by the Agent at
any time or times by mailing appropriate notice at least 30 days prior to
the effective date thereof to the participant at his last address of
record. The amendment or supplement shall conclusively be deemed to be
accepted by the participant unless prior to effective date thereof the
Agent receives written notice of the termination of the participant's
account. Any such amendment may include the appointment by the Agent in
its place and stead a successor agent under these Terms and Conditions
provided such successor is a bank or trust company organized under the
laws of the United States or any state thereof. The Corporation is
authorized to pay to such successor agent for the account of each
participant in the Plan all dividends and distributions payable on shares
of the Corporation's capital stock held by the Agent for the participant
or by the participant himself or herself, the shares to be applied by such
successor agent as provided in these Terms and Conditions.
13. You may effect "book-to-book" transfers, which involve transferring shares
from an existing participant account in the Plan to a new participant
account by providing the Bank with a written request in accordance with
the terms and conditions of the Plan. All participants in the current
account must sign the request and their signatures must be guaranteed by a
bank, broker or financial institution that is a member of a signature
Guarantee Medallion Program. The new participant account will
automatically be coded for full dividend reinvestment unless otherwise
instructed.
14. The Terms and Conditions of this authorization shall be governed by the
laws of the State of New York.
Any inquiries regarding the Plans should be directed to the Agent at:
THE BANK OF NEW YORK
Investor Relations Department
P.O. Box 11258
New York, New York 10286-1258
1-800-432-8224
If you desire to participate in The Salomon Brothers Fund Inc Dividend
Reinvestment Plan as described in the brochure, please sign and return this card
to:
THE BANK OF NEW YORK
P.O. Box 1958
Newark, NJ 07101-9774
Att: Dividend Reinvestment Department
DATED:_____________________, 20____
PLEASE SIGN, DATE AND RETURN
USING THE ENCLOSED ENVELOPE
-----------------------------------
Signature
-----------------------------------
Signature (if held jointly)
Please sign exactly as your name(s) appear hereon.
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22 2000 Annual Report to Shareholders
<PAGE>
Board of Directors
Charles F. Barber Consultant; formerly Chairman, ASARCO Inc.
Member of the Audit Committee
Andrew L. Breech President, Dealer Operating Control Service, Inc.
Member of the Proxy Committee
Carol L. Colman Consultant, Coleman Consulting
Member of the Audit Committee
William R. Dill Consultant; formerly President, Boston Architectural
Center; formerly President, Anna Maria College
Member of the Nominating Committee
Heath B. McLendon Chairman and President, Managing Director, Salomon
Smith Barney, Inc.; President and Director, SSB Citi
Fund Management LLC and Travelers Investment Adviser,
Inc.
Clifford M. Kirtland, Jr. Member of the Advisory Committee, Nero Moseley
Partners; formerly Director, Oxford Industries,
Inc., Shaw Industries, Inc. Graphic Industries, Inc.
and CSX Corp.; formerly Chairman and President, Cox
Communications, Inc.
Member of the Proxy Committee
Robert W. Lawless President and Chief Executive Officer, University of
Tulsa; formerly President and Chief Executive
Officer, Texas Tech University and Texas Tech
University Health Sciences Center
Member of the Proxy Committee
Louis P. Mattis Consultant; formerly Chairman and President,
Sterling Winthrop Inc.
Member of the Nominating Committee
Thomas F. Schlafly Of counsel to Blackwell Sanders Peper Martin LLP
(Law Firm); President, The Saint Louis Brewery, Inc.
Member of the Audit and Nominating Committees
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The Salomon Brothers Fund Inc 23
<PAGE>
Officers
Heath B. McLendon Chairman and President
Lewis E. Daidone Executive Vice President & Treasurer
Michael A. Kagan Executive Vice President
Martin L. Roberts Vice President
Anthony Pace Controller
Christina T. Sydor Secretary
Janet S. Tolchin Assistant Treasurer
Robert A. Vegliante Assistant Secretary
Service Providers
Salomon Brothers Asset Management Inc. Investment Manager
7 World Trade Center
New York, New York 10048
The Bank of New York Transfer and Dividend Disbursing Agent
101 Barclay Street
New York, New York 10286
PFPC Trust Company Custodian
8800 Tinicum B'lvd.
Suite 200
Philadelphia, Pennsylvania 19153
Simpson Thacher & Bartlett Legal Counsel
425 Lexington Avenue
New York, New York 10017
PricewaterhouseCoopers LLP Independent Accountants
1177 Avenue of the Americas
New York, New York 10036
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24 2000 Semi-Annual Report to Shareholders
<PAGE>
---------------------
Salomon Brothers
---------------------
Asset Management
SEVEN WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
1-800-SALOMON
WWW.SBAM.COM
SBSEMI 8/00
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