SALOMON BROTHERS FUND INC /DE/, 497, 2000-05-22

SALOMON BROTHERS FUND INC /DE/
497, 2000-05-22

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<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.

ESTIMATED ESTIMATED
SUBSCRIPTION ESTIMATED PROCEEDS TO
PRICE (1) SALES LOAD THE FUND (2)(3)
<S> <C> <C> <C>
Per Share................................. 17.35 None 17.35
Total (4)................................. 164,146,823 None 164,146,823
</TABLE>

(1) Estimated on the basis of 95% of the volume-weighted average of the sales
prices of a share on the NYSE on May 17, 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
$1,100,000 (assuming 100% of the rights are exercised) to $1,250,000
(assuming 100% of the rights are exercised and the over-subscription
privileges are fully exercised).

(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 each be $205,183,529.
-------------------

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 May 18, 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 MAY 18, 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>

<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 $17.35 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.

<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 a fee of $4.00 per telephone call received from or directed
to Fund shareholders and reimbursement for 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 $163,046,823.
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 $40,886,706.

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.

<PAGE>

MANAGEMENT FEES

Since SaBAM receives fees based on net assets, it will benefit from the
increase in assets that will result from the offer.

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.

<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 $1,250,000
(assuming 100% of the rights are exercised and the over-subscription
privileges are fully exercised). 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.

<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%

<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>

<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%

<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.

<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

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.

<PAGE>

IMPORTANT DATES TO REMEMBER

Please note that the dates in the table below may change if the offer is
extended.

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

<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 March 22, 2000 and
May 17, 2000 was $20.64 and $19.33, respectively, and the last reported sales
price of a share on the NYSE on those dates was $19.44 and $18.19, 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

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>

<PAGE>

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.

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.

<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 $17.35 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.

<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 a fee of $4.00
per telephone call received from or directed to Fund shareholders and
reimbursement for 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 $260,000.

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.

<PAGE>

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
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 $917,000. 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 $163,046,823, after payment of the financial advisory 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 $40,886,706. SaBAM expects that, under current market conditions,
the Fund will invest substantially all of the net proceeds of the offer in
accordance with its
15

<PAGE>

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.

THE FUND

<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 .655%**

(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 1.282%**

(3) If 100% of the shareholders eligible to participate in the offer elect
to exercise their rights and also fully exercise their over-subscription
privileges, your interests as a non-participating shareholder in the
Fund will be diluted by 1.629%**

* Based on a net asset value of $19.33 on May 17, 2000.

** Example (1) assumes offering expenses of $800,000, example (2) assumes
offering expenses of $1,100,000 and example (3) assumes offering expenses
of $1,250,000. 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>
5-day volume-weighted average share price(3)................ $21
NAV (May 17, 2000).......................................... $19.33
Subscription Price (95.0% of NAV)........................... $18.36
Reduction in NAV ($)(2)..................................... $(0.13)
Reduction in NAV (%)........................................ (0.69)%
</TABLE>

Scenario 2: Shares trade below per share net asset value at the time the
offer expires (discount)(1)

<TABLE>
<S> <C>
5-day volume-weighted average share price(3)................ $18.36
NAV (May 17, 2000).......................................... $19.33
Subscription Price (95.0% of 5-day volume-weighted average
share price)(4)........................................... $17.45
Reduction in NAV ($)(2)..................................... $(0.25)
Reduction in NAV (%)........................................ (1.29)%
</TABLE>

<PAGE>

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>
5-day volume-weighted average share price(3)................ $17.29
NAV (May 17, 2000).......................................... $19.33
95% of 5-day volume-weighted average share price............ $16.43
95% of 5-day volume-weighted average share price as
percentage of NAV......................................... 85.0%
Subscription Price (87.5% of NAV)(4)........................ $16.91
Reduction in NAV ($)(2)..................................... $(0.32)
Reduction in NAV (%)........................................ (1.63)%
</TABLE>

(1) Examples assume full primary and over-subscription privileges exercised.
Actual amounts may vary due to rounding.

(2) Based on estimated offering expenses of $1,250,000 (assuming 100% of the
rights are exercised and the over-subscription privileges are fully
exercised).

(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.

THERE ARE NO FIXED LIMITATIONS REGARDING PORTFOLIO TURNOVER

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

<PAGE>

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 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>

<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.

<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,

<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.

<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.

<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

<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.

<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.

<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.

<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.

<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.

<PAGE>

TABLE OF CONTENTS
STATEMENT OF ADDITIONAL INFORMATION

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Policies......................................... 2
Investment Restrictions..................................... 5
Management.................................................. 7
Portfolio Transactions...................................... 9
Taxation.................................................... 10
Capital Stock............................................... 14
Financial Statements........................................ 14
</TABLE>

<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 May 18, 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

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 May 18, 2000

<PAGE>

INVESTMENT POLICIES

In order to enhance returns, reduce risks, and manage taxes and cash flows,
the Fund may invest in derivatives.

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.

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

<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

<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

<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.

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.

<PAGE>

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 policies set forth above may not be changed unless authorized by the
vote of stockholders.

<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.

<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.

<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

<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

<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

<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

<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

<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

<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.