<PAGE>
ANNUAL REPORT
December 31, 1999
Proudly
Serving Investors
for 70 Years!
THE SALOMON BROTHERS
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FUND INC
1929-1999
<PAGE>
Shareholder Letter
Dear Shareholder:
December 1999 was a momentous month. It signaled the passage of an old year, an
old decade and -- by popular acclaim -- an old millennium. It also saw the
dawning of a new century and a new millennium in addition to a birth of a new
year. And December 31, 1999 was yet another important milestone for The Salomon
Brothers Fund Inc ("Fund") as it reached its 70th anniversary -- stronger,
bigger and better than ever.
So it is with great pleasure that we provide you with the annual report for the
fiscal year ended December 31, 1999. Over the years the Fund has grown to
roughly $1.8 billion in assets under management. The Fund's first annual report
dated December 31, 1929, listed assets of approximately $100 million.
Throughout this year's report we are going to take the opportunity to look back
at 1929 and some of the often remarkable contrasts it offers to the world of
investing in the 21st century. Even more remarkable, perhaps, are some of the
similarities that we have found. As usual, we will also discuss the results of
operations from the past year and provide the port folio of investments for the
Fund. Any discussion of the Fund's holdings is as of December 31, 1999. Please
refer to pages 13 through 16 for the Fund's holdings.
Market Overview & Portfolio Highlights
For the year ended December 31, 1999, the Fund returned 34.59% based on market
price and 23.97% based on net asset value ("NAV"). In comparison, the Standard &
Poor's 500 Index ("S&P 500") returned 21.03% for the same time period. (The S&P
500 is a market capitalization-weighted measure of 500 widely held common
stocks.) The Fund ended the year selling at a 5.9% premium to NAV, the largest
year-end premium since 1971.
As in 1998, the stock market's advance in 1999 was narrow, although the
leadership changed from large-capitalization stocks to those with Internet
exposure. Technology stocks rose an amazing 89%, while tele communications
stocks were also very strong. Without technology, the S&P 500 was up only 4.4%,
and without both technology and telecommunications, the S&P 500 actually
declined during 1999. Technology's share of the S&P 500 rose from 19% at the end
of 1998 to almost 30% by the end of 1999.
An acceleration in world economic growth propelled the market's action in 1999.
During the first quarter, the market mirrored the fourth quarter of 1998, with
Internet stocks the most powerful performers. When the European Union ("EU") cut
interest rates 0.5% on April 8, 1999, the tenor of the market shifted
dramatically in favor of commodity and cyclical companies. Technology again took
the lead in the third quarter of 1999 after the Federal Reserve Board ("Fed")
increased interest rates. The fourth quarter saw a speculative blow-off, perhaps
caused by the injection of monetary reserves into the system in anticipation of
Y2K.
Significant contributors to the Fund's performance during the period included
General Motors, Class H shares, Alcoa, Corning Glass and Texas Instruments. The
Fund remains well diversified, with overweighted sectors including basic
industries and energy. The Fund has underweighted positions in capital goods and
consumer cyclicals. While the average holding is less expensive than the U.S.
market, we believe the Fund's holdings should grow more rapidly than the market.
Market Outlook
Our outlook for the stock market in 2000 is one of cautious optimism. The
U.S. economy may be on the verge of becoming too strong. Labor markets are tight
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The Salomon Brothers Fund Inc 1
<PAGE>
and consumer confidence is high. The stock market's return should be greatly
affected by how many rate hikes the Fed is forced to make in order to slow the
economy down.1 Our chief concern is that there will be a reaction to the
speculative excesses of the fourth quarter of 1999. Internet stocks, and many
other stocks in the technology sector, appear to us to be irrationally priced.
We repositioned the Fund late in the fourth quarter to reduce its risk. We see
opportunities in companies with accelerating volume growth and pricing power
such as Pepsi and Kimberly-Clark. Several high- quality, large-capitalization
financial companies, for example, Fannie Mae and Associates First Capital,
appear to offer unusual value to us. We are currently finding opportunities in
consistent growers that have fallen in price, such as Safeway, and some of the
large pharmaceutical companies. We believe that the macroeconomic environment
continues to favor financial assets over the long term.
While current income is not our primary investment objective, we are aware of
the income needs of our shareholders. For the year ended December 31, 1999, the
Fund distributed income dividends totaling $0.17 and capital gains of $3.63 per
share.
Many of our shareholders that seek to build on their holdings in the Fund have
taken advantage of the Automatic Dividend Reinvestment and Cash Payment Plan
("Plan"). Under the terms of the Plan, share holders may arrange to reinvest
their dividends automatically in additional shares. The Plan provides that when
the Fund's shares are traded at a discount to net asset value, dividends and
distributions will be initially payable in the form of shares purchased by The
Bank of New York, the Plan Agent in the open market. To the extent that the
discount converts to a premium during the purchase period or when the
permissible purchase period ends, the balance will be paid in newly issued
shares of the Fund. With respect to the 1999 dividends, the Plan Agent purchased
1,642,148 shares on behalf of participants in the Dividend Reinvestment Plan for
a net total of $32,496,075, and 4,702,110 shares with a value of $91,713,634
were issued to participants. Additional details about the Plan appear on pages
26 through 29 of this report.
Shareholders of the Fund can call 1-800-446-1013, toll free, 24 hours a day to
obtain account information, including account values, portfolio breakdown and
performance information. For information concerning your Fund stock account,
please call The Bank of New York at 1-800-432-8224.
All of us at Salomon Brothers Asset Management Inc appreciate your investment in
the Fund. On the 70th anniversary of The Salomon Brothers Fund Inc we look
forward to continuing to earn your trust and confidence in the new century.
Cordially,
/s/ Heath B. McLendon /s/ Michael A. Kagan
Heath B. McLendon Michael A. Kagan
Chairman and President Executive Vice President
January 24, 2000
1 On Wednesday, February 2, 2000, the Fed raised interest rates by 0.25% to
5.75%, after this letter was written.
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2 1999 Annual Report to Shareholders
<PAGE>
Important Message to Shareholders
Any shareholders who are holding old certificates of The Lehman Corporation, the
Fund's former name, should exchange those certificates, free of charge, for new
ones bearing The Salomon Brothers Fund Inc name. The New York Stock Exchange has
informed us that the old certificates may create settlement problems in the
future if you decide to sell your shares. Please note that while you are not
required to exchange the certificates, we recommend that you do so. Shareholders
who wish to exchange their certificates should send them via registered mail
with a letter requesting exchange for new certificates to:
The Bank of New York
Receive and Deliver Department-11W
Church Street Station
P.O. Box 11002
New York, New York 10286-1002
Top Ten Holdings* As of December 31, 1999
1. Microsoft Corp. 5.3%
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2. Cisco Systems, Inc. 3.7
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3. Costco Wholesale Corp. 2.8
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4. MCIWorldCom, Inc. 2.7
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5. Corning Inc. 2.5
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6. The Bank of New York Co., Inc. 2.5
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7. Federated Department Stores, Inc. 2.3
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8. GTECorp. 2.2
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9. News Corp. Ltd. ADR 1.9
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10. Bell Atlantic Corp. 1.9
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* As a percentage of total net assets.
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The Salomon Brothers Fund Inc 3
<PAGE>
An Interview with Fund Manager Michael Kagan
In celebration of 70 years of solid investment performance in The Salomon
Brothers Fund, we recently spoke with Portfolio Manager Michael Kagan about his
investment philosophy, strategies for investment success and how he manages risk
in volatile markets.
Michael Kagan has more than 17 years of investment experience and has been part
of the management team of the Salomon Brothers Fund since 1995, appointed lead
manager in 1998. He received his BA from Harvard University and attended
graduate school at MIT's Sloan School of Management.
Mike, what changes have been implemented to the Fund since you took over as
manager?
When I assumed management of the Fund, I reduced the widely varying bets versus
the market that the Fund had. My experience as a fund manager has taught me that
the decisions that you do not make can hurt you as much as the decisions that
you do. I altered the Fund's strategy so that if I have no opinion on a sector,
I am more likely to position the Fund closely to the S&P 500, whereas
previously, we would have tended not to have an investment in that area. This
strategy should reduce our swings versus the market, and help to reduce our
risk.
We are also fully invested. Prior to my appointment as manager, cash levels in
the Fund sometimes ran as high as 10%, but today we like to keep cash around 1%
or less. As a closed-end fund, we think this can be beneficial to Fund returns.
How would you describe your investment philosophy?
Our approach is differentiated by our close eye on risk. Whenever we look at a
security, we first consider its risk and reward profile. We seek to find
companies with moderate risk and modest return potential, rather than high risk
and high return. We believe that this approach can yield higher returns and
lower volatility over time.
Can you mention specific stock stories that exemplify your investment
philosophy?
We look for large companies with strong franchises, particularly if we can find
them when the market does not seem to like them, for what seem to us to be the
wrong reasons. Examples of these types of companies would be Gillette, a leading
consumer products company, and soft-drink giant Pepsi. Both of these names were
added to the portfolio last year. Pepsi stock had done poorly in the past
because the company's former management was, in our view, unfocused. They had
restaurants, a bottling operation, Frito-Lay snack foods and the soft-drink
operation. The new management decided to focus on increasing return on capital
by spinning off the restaurants and bottling operation, which made the business
much less cyclical and much more powerful. We feel that Pepsi should sell at a
higher multiple than it has previously. Management's new focus should also be
conducive to faster growth. Pepsi's stock is trading at a discount to the
market. We think it's a great opportunity.
Gillette is another stock that we currently like a lot. They are the world
leader in blades, razors, and alkaline batteries. The old management team waited
too long to introduce the new Mach III razor, and had to play accounting games
to reach expected earnings. The stock was negatively impacted last year when the
new managers made admissions regarding these issues. We are satisfied that
management has cleaned things up, and believe that Gillette represents a great
franchise. And while the future cannot be predicted, we expect very good
earnings throughout the next couple of years.
How do you help to manage risk in the Fund?
One way that we help to control risk is by careful and thorough analysis of
company balance sheets. A num-
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4 1999 Annual Report to Shareholders
<PAGE>
An Interview with Fund Manager Michael Kagan (continued)
ber of companies that engaged in aggressive accounting practices, encountered
difficulties in 1999. Our extensive balance sheet analysis enabled the Salmon
Brothers Fund to avoid accounting problems in 1999.
Another way to reduce risk is to participate in hot trends, such as the
Internet, with more conservative stocks that stand to benefit from that trend.
For example, we have a lot of Internet exposure in the portfolio, but it tends
to be through names like telecommunications giant Bell Atlantic-GTE. When people
get on the Internet, they use telephone lines and Bell Atlantic and GTE are the
most advanced of the Bell regionals in offering fully integrated
telecommunications services. We try to avoid companies that have no earnings.
Describe your security selection process.
We want the Fund to be less expensive than the market yet grow faster than the
market. This is usually referred to as a "GARP Strategy" or growth at a
reasonable price.
We employ a bottoms up approach to security selection. Our strategy is to
conduct on-site company visits, to meet with the company management of the
stocks we own and to generate earnings models for every company we cover. If we
become over- or under-weighted in a particular industry, it is not because we
favor that industry, per se, but rather because we have identified many
opportunities in that industry.
We have a team of 15 experienced analysts who provide stock picks. Each analyst
is a specialist in the industry or sector that he or she covers. Every morning,
our team of analysts and fund managers meet to discuss any news regarding the
companies we own.
My role as portfolio manager is to use my experience and expertise to weigh the
recommendations of the analysts against the risks. If I agree with an analyst's
recommendation, I then need to size the position properly, enabling us to
optimize the Fund's risk and reward profile.
What are some of your favorite stock stories in recent years?
Last year, one of my favorite stock stories was General Motors Class H, which
owns DirecTV. In my experience, some of the greatest return potential comes from
a stock in a young growth industry, at the inflection point where the company's
cash flows turn from negative to positive. It looked to me like DirecTV would
turn cash flow positive in late 1999 or early 2000. The stock fell substantially
in the correction of September 1998, falling from $58 to $32, offering me the
opportunity to build a large position in the fund at a low price. The stock was
the biggest single performer in the Fund in 1999, and is currently trading
around $126.
How has the mutual fund industry changed since you've entered the business?
The fund industry has gotten faster, more efficient, and more technologically
advanced. Information is readily available. You have to work a lot harder to
maintain an edge.
What is the most memorable market event you have experienced in your career?
Without a contest, the crash of 1987 was the most memorable for me. I was a
young analyst at the time and I remember portfolio managers taking pictures of
their screens at the end of the day -- the market was down about 580 points.
Trading floors are typically noisy places, but on that day, I will never forget
the absolute silence. The market continued to drop the next day and people
feared it might go down indefinitely. Fear and panic were in the air. I worked
with stock picking legend Peter Lynch and it was fascinating to get his
perspective. Instead of being terrified, he was looking for buy opportunities!
He said, "Mike, don't look at the ticker tape . . . just tell me what stocks you
think I should be buying." In retrospect, his counsel was absolutely right and
was reflected over the next few years in his performance. Looking back, the
correction of 1987 was quite extraordinary and the lessons still resonate with
me.
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The Salomon Brothers Fund Inc 5
<PAGE>
The Salomon Brothers Fund
Celebrating 70 Years of Solid Investment Performance
The Salomon Brothers Fund commenced operations on September 24, 1929 under the
name of the Lehman Corporation. On May 7, 1990 it became The Salomon Brothers
Fund. We are proud to report that since it began, The Salomon Brothers Fund has
delivered consistently competitive performance through four wars, twelve
presidential elections, eleven recessions and the Great Depression.
Companies that Have Stood the Test of Time
The companies' common stock listed below were a part of The Salomon Brothers
Fund's portfolio as of December 31, 1929 as well as December 31, 1999.
As of December 31, 1929 As of December 31, 1999
Number of Shares Number of Shares
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3,000 Federated Department Stores 810,528
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9,000 General Electric 137,000
Then and Now . . .
1929 1999
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Nobel Peace Prize Frank B. Kellog Doctors Without Borders
(U.S. Secretary of State, (Medecins Sans Frontiers)
creator of Kellog-Briand Pact)
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National Hockey League Boston Bruins Dallas Stars
Stanley Cup Winner
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MLB World Series
Champions Philadelphia Athletics New York Yankees
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U.S. President Herbert Hoover Bill Clinton
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6 1999 Annual Report to Shareholders
<PAGE>
Record of a Share of Stock (unaudited)
<TABLE>
<CAPTION>
Net Asset
Distributions Declared From Capital Gain Value Plus
------------------------------------ Net Asset Value Distributions Capital Gain
Year Income Capital Gain End of Year (Cumulative) Distributions*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1929 -- -- $ 3.81 -- $ 3.810
1930 $ 0.094 -- 3.08 -- 3.080
1931 0.119 -- 2.36 -- 2.360
1932 0.100 -- 2.43 -- 2.430
1933 0.100 -- 3.35 -- 3.350
1934 0.100 -- 3.68 -- 3.680
1935 0.117 -- 4.64 -- 4.640
1936 0.125 $ 0.146 5.72 $ 0.146 5.866
1937 0.125 0.396 3.66 0.542 4.202
1938 0.106 -- 4.25 0.542 4.792
1939 0.100 -- 4.09 0.542 4.632
1940 0.106 -- 3.70 0.542 4.242
1941 0.150 -- 3.34 0.542 3.882
1942 0.156 -- 3.69 0.542 4.232
1943 0.156 -- 4.71 0.542 5.252
1944 0.181 -- 5.54 0.542 6.082
1945 0.174 0.301 7.21 0.843 8.053
1946 0.169 0.625 6.55 1.468 8.018
1947 0.192 0.376 6.13 1.844 7.974
1948 0.245 0.192 5.82 2.036 7.856
1949 0.279 0.202 6.60 2.238 8.838
1950 0.335 0.402 7.21 2.640 9.850
1951 0.276 0.360 8.67 3.000 11.670
1952 0.210 0.254 9.15 3.254 12.404
1953 0.245 0.260 8.59 3.514 12.104
1954 0.250 0.312 11.31 3.826 15.136
1955 0.285 0.517 12.56 4.343 16.903
1956 0.310 0.712 12.63 5.055 17.685
1957 0.275 0.650 10.38 5.705 16.085
1958 0.265 0.545 13.84 6.250 20.090
1959 0.270 0.670 14.04 6.920 20.960
1960 0.265 0.590 13.53 7.510 21.040
1961 0.252 0.665 15.80 8.175 23.975
1962 0.255 0.540 12.74 8.715 21.455
1963 0.255 0.605 14.91 9.320 24.230
1964 0.300 0.645 16.01 9.965 25.975
1965 0.312 0.665 18.07 10.630 28.700
1966 0.337 0.735 16.54 11.365 27.905
1967 0.355 0.840 19.97 12.205 32.175
1968 0.365 1.250 19.69 13.455 33.145
1969 0.350 1.350 17.62 14.805 32.425
1970 0.305 1.020 15.03 15.825 30.855
1971 0.305 0.810 17.87 16.635 34.505
1972 0.305 1.270 20.47 17.905 38.375
1973 0.295 0.840 16.50 18.745 35.245
1974 0.305 0.420 10.77 19.165 29.935
1975 0.270 0.670 13.15 19.835 32.985
1976 0.225+ --+ 15.08 19.835 34.915
1977 0.245 1.010 13.12 20.845 33.965
1978 0.340 0.450 13.81 21.295 35.105
1979 0.420 0.910 16.42 22.205 38.625
1980 0.550 1.180 18.88 23.385 42.265
1981 0.720 2.040 15.56 25.425 40.985
1982 0.710 2.010 16.64 27.435 44.075
1983 0.625 1.365 18.25 28.800 47.050
1984 0.545 2.440 14.67 31.240 45.910
1985 0.495 1.085 16.78 32.325 49.105
1986 0.515 3.085 15.42 35.410 50.830
1987 0.490 1.880 13.26 37.290 50.550
1988 0.505 0.490 14.37 37.780 52.150
1989 0.590 1.515 15.58 39.295 54.875
1990 0.485 0.710 13.33 40.005 53.335
1991 0.470 1.140 15.66 41.145 56.805
1992 0.400 0.600 15.16 41.745 56.905
1993 0.340 1.720 14.88 43.465 58.345
1994 0.335 1.390 12.88 44.855 57.735
1995 0.350 1.490 15.43 46.345 61.775
1996 0.335 2.090 17.26 48.435 65.695
1997 0.270 2.680 18.51 51.115 69.625
1998 0.269 3.190 18.76 54.305 73.065
1999 0.167 3.633 19.24 57.938 77.178
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Totals $20.842 $57.938
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<FN>
+ A capital gain dividend of $1.01 per share and an income dividend of $0.02 per share for 1976 were declared in January 1977.
* Does not reflect the effect of reinvestment of income dividends or capital gain distributions.
</FN>
</TABLE>
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The Salomon Brothers Fund Inc 7
<PAGE>
25-Year Record of an Investment in The Salomon Brothers Fund Inc (unaudited)
This chart shows the 25-year record of a $10,000 investment in stock of The
Salomon Brothers Fund Inc at net asset value at the beginning of 1975, assuming
all income dividends and capital gain distributions were reinvested at net asset
value. During the period, the market price of the stock was sometimes above net
asset value and sometimes below; accordingly, the chart should not be construed
as an indication of the record of a shareholder's investment in the Fund based
on market prices. Nor should it be construed as a representation of future
performance of the Fund's net asset value.
<TABLE>
<CAPTION>
Cumulative Net Asset Value of
-----------------------------------
Net Asset Value Capital Gain Income
End of Initial Distributions Dividends Total Total
of Year Investment Reinvested Reinvested Net Asset Value Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1975 $12,210 $ 644 $ 245 $ 13,099 $ 10,458
1976 14,002 758 511 15,251 12,515
1977 12,182 1,651 723 14,556 11,649
1978 12,823 2,323 1,177 16,323 11,672
1979 15,246 4,078 2,012 21,336 17,054
1980 17,530 6,563 3,221 27,314 23,148
1981 14,448 8,283 3,768 26,499 25,545
1982 15,450 13,440 5,738 34,628 36,158
1983 16,945 18,180 7,765 42,890 43,792
1984 13,621 20,140 7,792 41,553 42,488
1985 15,571 26,558 10,616 52,745 50,323
1986 14,318 34,825 11,391 60,534 59,375
1987 12,312 37,284 11,404 61,000 50,603
1988 13,343 42,836 14,765 70,944 57,392
1989 14,466 54,541 18,292 87,299 72,842
1990 12,377 50,879 18,247 81,503 67,257
1991 14,540 67,718 24,439 106,697 94,536
1992 14,076 69,938 26,409 110,423 100,153
1993 13,816 81,648 28,367 123,831 106,105
1994 11,950 81,942 27,197 121,089 99,966
1995 14,327 113,015 36,020 163,362 141,604
1996 16,026 149,640 44,048 209,714 194,405
1997 17,187 193,614 50,406 261,207 249,599
1998 17,419 244,625 54,863 316,907 307,235
1999 17,864 315,820 59,197 392,881 416,059
</TABLE>
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8 1999 Annual Report to Shareholders
<PAGE>
25-Year Record of an Investement in The Salomon Brothers Fund Inc (unaudited)
GROWTH OF $10,000
[GRAPH]
See page 8 for statistical data.
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The Salomon Brothers Fund Inc 9
<PAGE>
Investment Policy
The Salomon Brothers Fund's ("Fund") investment policy has been to concentrate a
large portion of its investments in common stocks. Companies whose stocks are
selected generally have strong positions in industries with the potential to
grow faster than the economy as a whole. Investments are monitored carefully and
are changed from time to time into holdings we believe offer more favorable
opportunities in light of changing economic, social and political conditions.
The common thread of the Fund's policy has been to seek out and to hold common
stocks of well-managed, favorably situated companies we expect will produce
above- average earnings and dividend growth over time. At the same time, we also
look for opportunities in turnaround situations and in securities that appear to
be priced substantially lower than their intrinsic value. While current income
is not a primary consideration, we are mindful of the income needs of our
shareholders.
For the core of our holdings, we look for companies we believe are able to
increase earnings and dividends at an above-average rate and still retain enough
cash to finance future growth in their businesses.
The experience of investors generally shows the great difficulty of consistently
predicting turns in the stock market. There is often the risk that the investor
will become too pessimistic about stocks when their prices are depressed and
sell near the bottom or become overly optimistic when their prices are high and
buy near the top. In our opinion, this natural propensity often accounts for the
poor long-term investment results of many individuals and institutions. For this
reason, the Fund has generally maintained a rather fully invested position in
equities rather than attempting to switch back and forth between equities and
large reserves of cash, short-term instruments and bonds.
From time to time, the Fund may invest in public utility common stocks when it
believes their prices are particularly depressed and total return (price
appreciation plus dividends) from such investments is likely to sufficiently
exceed the yield available from money market instruments to warrant the
investments.
As a general rule, the Fund invests for the longer term. We do not trade in and
out of individual securities on the basis of intermediate price fluctuations,
nor do we attempt to guess the direction of market cycles by continually
shifting from a fully invested to a partially invested position. Even so, we
reappraise our holdings, take profits or losses from time to time and raise
cash to reinvest in newly emerging areas of interest, within the scope of the
Fund's investment policy.
<TABLE>
<CAPTION>
Summary (unaudited) For the Years Ended December 31,
1999 1998 1997 1996 1995
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<S> <C> <C> <C> <C> <C>
Net Assets (millions) $1,820 $1,686 $1,545 $1,441 $1,291
- ----------------------------------------------------------------------------------------------------------------------------------
Shares Outstanding (000's) 94,608 89,907 83,477 83,477 83,657
- ----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value Per Share $19.24 $18.76 $18.51 $17.26 $15.43
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions* $3.80 $3.46 $2.95 $2.43 $1.84
- ----------------------------------------------------------------------------------------------------------------------------------
Market Price Per Share $20.375 $18.188 $17.688 $16.000 $13.375
- ----------------------------------------------------------------------------------------------------------------------------------
Premium (Discount) from NAV at Year End 5.90% (3.05)% (4.44)% (7.30)% (13.32)%
- ----------------------------------------------------------------------------------------------------------------------------------
Market Price Range (NYSE, symbol SBF):
High $21.500 $19.813 $19.688 $17.000 $14.125
- ----------------------------------------------------------------------------------------------------------------------------------
Low $17.125 $14.750 $14.875 $13.250 $10.625
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<FN>
* Income and capital gains.
</FN>
</TABLE>
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10 1999 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
1999 Distributions Declared (unaudited) For the Year Ended December 31, 1999
Net Short-Term Long-Term Total Payment
Payment Date Record Date Investment Income Capital Gains Capital Gains Per Share
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
May May $0.0490 $0.2100 $0.7040 $0.9630
- ----------------------------------------------------------------------------------------------------------------------------------
August August 0.0426 - - 0.0426
- ----------------------------------------------------------------------------------------------------------------------------------
December December 0.0753 0.6453 2.0735 2.7941
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Total $0.1669 $0.8553 $2.7775 $3.7997
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</TABLE>
Automatic Dividend Reinvestment and Cash Payment Plans
Dividend Reinvestment
The Automatic Dividend Reinvestment Plan ("DRPlan"), administered by The Bank of
New York as DR Plan Agent for shareholders of The Salomon Brothers Fund Inc
("Fund"), offers you a prompt, simple and inexpensive way to put your dividends
and distributions to work through reinvestment in additional full and fractional
shares of capital stock of the Fund.
Shareholders may enroll by simply completing the enclosed Authorization Card
with the exception of those shares that are held in the name of a broker or
nominee.
Money from dividends and distributions can lie idle for months at a time;
however, with the DRPlan your dividends and distributions are promptly invested
for you, automatically by The Bank of New York, DRPlan agent, and you will
receive statements from the Agent to simplify your personal records.
The Cash Payment Plan
The Cash Payment Plan allows you to purchase shares of the Fund conveniently and
inexpensively, without committing large dollar amounts. Under the Cash Payment
Plan, you have the option to send a check or money order of at least $25.00 to
the Agent which will be used to buy more shares of the Fund. You may make these
payments regularly or from time to time. You may also vary the amount of each
optional payment as long as it is at least $25.00.
Cost to You
Except as specifically noted, you will not bear any costs of administering the
Plan. You pay only your pro portionate share of the commissions paid on all
open-market purchases. Dividends and distributions, even though automatically
reinvested, continue to be taxable.
To Enroll
The complete Dividend Reinvestment and Cash Payment Plan brochure and
authorization card can be found at the back of this report. You must complete
the Authorization Card and return it in the envelope provided in order to
participate. If you have any questions, contact the Plan agent at
1-800-432-8244. Generally, shareholders who initially invested on or after
November 20, 1995 are automatically enrolled in the DRPlan. However, if your
shares are held in the name of a broker or nominee, you should contact your
broker or nominee for more information about your ability to participate in the
Plan.
- --------------------------------------------------------------------------------
The Salomon Brothers Fund Inc 11
<PAGE>
Major Portfolio Changes (unaudited) For the Three Months Ended December 31, 1999
Additions 1 Shares
- --------------------------------------------------------------------------------
Associates First Capital Corp. 147,000
- --------------------------------------------------------------------------------
AT&T Corp. 400,000 2
- --------------------------------------------------------------------------------
The Chubb Corp. 80,000 2
- --------------------------------------------------------------------------------
Cisco Systems, Inc. 295,000
- --------------------------------------------------------------------------------
Concord Communications, Inc. 88,000 2
- --------------------------------------------------------------------------------
Dell Computer Corp. 200,000
- --------------------------------------------------------------------------------
Eastman Chemical Co. 105,000 2
- --------------------------------------------------------------------------------
Genentech, Inc. 38,000
- --------------------------------------------------------------------------------
General Instrument Corp. 167,000 2
- --------------------------------------------------------------------------------
The Gillette Co. 740,000 2
- --------------------------------------------------------------------------------
Intel Corp. 90,000
- --------------------------------------------------------------------------------
MCI WorldCom, Inc. 60,000
- --------------------------------------------------------------------------------
Merck & Co., Inc. 70,000
- --------------------------------------------------------------------------------
PepsiCo, Inc. 265,000 2
- --------------------------------------------------------------------------------
The Procter & Gamble Co. 85,000 2
- --------------------------------------------------------------------------------
Safeway Inc. 400,000 2
- --------------------------------------------------------------------------------
United HealthCare Corp. 170,000 2
- --------------------------------------------------------------------------------
Warner-Lambert Co. 150,000
- --------------------------------------------------------------------------------
Reductions Shares
- --------------------------------------------------------------------------------
American Express Co. 60,700
- --------------------------------------------------------------------------------
American General Corp. 222,000 3
- --------------------------------------------------------------------------------
American Home Products Corp. 164,000
- --------------------------------------------------------------------------------
Applied Micro Circuits Corp. 77,500
- --------------------------------------------------------------------------------
Carlisle Cos. Inc. 192,100 3
- --------------------------------------------------------------------------------
Colgate-Palmolive Co. 155,000
- --------------------------------------------------------------------------------
Cominco Ltd. 285,000 3
- --------------------------------------------------------------------------------
Compuware Corp. 490,000
- --------------------------------------------------------------------------------
Costco Wholesale Corp. 50,000
- --------------------------------------------------------------------------------
Dell Computer Corp. 380,000
- --------------------------------------------------------------------------------
General Motors Corp., Class H Shares 514,100
- --------------------------------------------------------------------------------
Philip Morris Cos. Inc. 475,000
- --------------------------------------------------------------------------------
R.J. Reynolds Tobacco Holdings, Inc. 206,334 3
- --------------------------------------------------------------------------------
Tellabs, Inc. 215,500
- --------------------------------------------------------------------------------
Texas Instruments, Inc. 182,000
- --------------------------------------------------------------------------------
Union Pacific Corp. 82,000 3
- --------------------------------------------------------------------------------
Viacom Inc., Class B Shares 112,000 3
- --------------------------------------------------------------------------------
Vulcan Materials Co. 236,000
- --------------------------------------------------------------------------------
Wellpoint Health Networks Inc. 143,000 3
- --------------------------------------------------------------------------------
Xilinx, Inc. 90,000 3
- --------------------------------------------------------------------------------
York International Corp. 360,000 3
- --------------------------------------------------------------------------------
1 Exclusive of changes resulting entirely from stock dividends and stock splits.
2 New addition.
3 Elimination.
- --------------------------------------------------------------------------------
12 1999 Annual Report to Shareholders
<PAGE>
Schedule of Investments December 31, 1999
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------
COMMON STOCK -- 90.4%
Basic Industries -- 4.6%
225,000 Alcoa Inc. $ 18,675,000
78,000 Champion International Corp. 4,831,125
35,000 The Dow Chemical Co. 4,676,875
105,000 Eastman Chemical Co. 5,007,187
200,000 The Geon Co. 6,500,000
352,000 Olin Corp. 6,974,000
155,000 Reynolds Metals Co. 11,876,875
193,000 Rohm and Haas Co. 7,852,687
447,000 Vulcan Materials Co. 17,852,062
- --------------------------------------------------------------------------------
84,245,811
- --------------------------------------------------------------------------------
Capital Goods -- 2.2%
151,000 Emerson Electric Co. 8,663,625
137,000 General Electric Co. 21,200,750
177,000 Sealed Air Corp. (a) 9,170,812
- --------------------------------------------------------------------------------
39,035,187
- --------------------------------------------------------------------------------
Communications -- 10.1%
400,000 AT&T Corp. 20,300,000
550,000 Bell Atlantic Corp. 33,859,375
205,000 General Motors Corp., Class H Shares (a) 19,680,000
555,000 GTE Corp. 39,162,188
937,500 MCI WorldCom, Inc. (a) 49,746,094
450,000 SBCCommunications Inc. 21,937,500
- --------------------------------------------------------------------------------
184,685,157
- --------------------------------------------------------------------------------
Consumer Cyclicals -- 6.3%
563,000 Costco Wholesale Corp. (a) 51,373,750
100,000 Dayton Hudson Corp. 7,343,750
810,528 Federated Department Stores, Inc. (a) 40,982,322
120,000 SPX Corp. (a) 9,697,500
380,000 Tower Automotive, Inc. (a) 5,866,250
- --------------------------------------------------------------------------------
115,263,572
- --------------------------------------------------------------------------------
Consumer Non-Cyclicals -- 8.3%
38,900 Alberto-Culver Co., Class A Shares 846,075
121,100 Alberto-Culver Co., Class B Shares 3,125,894
427,000 AT&T Corp.-- Liberty Media Group,
Class A Shares (a) 24,232,250
135,000 Colgate-Palmolive Co. 8,775,000
330,000 The Dial Corp. 8,023,125
740,000 The Gillette Co. 30,478,750
229,500 Kimberly-Clark Corp. 14,974,875
1,213,000 Nabisco Group Holdings Corp. 12,888,125
265,000 PepsiCo, Inc. 9,341,250
345,000 Philip Morris Cos. Inc. 7,999,688
85,000 The Procter & Gamble Co. 9,312,813
400,000 Safeway Inc. (a) 14,225,000
340,000 Wendy's International, Inc. 7,012,500
- --------------------------------------------------------------------------------
151,235,345
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
The Salomon Brothers Fund Inc 13
<PAGE>
Schedule of Investments (continued) December 31, 1999
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------
Energy -- 6.7%
325,000 Amerada Hess Corp. $ 18,443,750
490,800 Burlington Resources Inc. 16,227,075
568,000 Conoco Inc., Class A Shares 14,058,000
124,500 Devon Energy Corp. 4,092,938
150,000 El Paso Energy Corp. 5,821,875
266,670 Exxon Mobil Corp. 21,483,602
400 Gas Properties (100% owned) (b) 690,000
Royalty Interest (b) 840,700
135,000 Schlumberger Ltd. 7,593,750
200,000 Tosco Corp. 5,437,500
370,777 Total Fina SAADR 25,676,307
26,136 Transocean Sedco Forex Inc. 880,456
- --------------------------------------------------------------------------------
121,245,953
- --------------------------------------------------------------------------------
Financial Services -- 12.7%
189,000 American Express Co. 31,421,250
238,937 American International Group, Inc. 25,835,063
637,000 Associates First Capital Corp. 17,477,688
1,123,000 The Bank of New York Co., Inc. 44,920,000
347,000 The Chase Manhattan Corp. 26,957,563
80,000 The Chubb Corp. 4,505,000
60,000 CIGNA Corp. 4,833,750
70,000 Fannie Mae 4,370,625
592,200 FleetBoston Financial Corp. 20,615,962
273,000 Freddie Mac 12,848,062
210,000 The Goldman Sachs Group, Inc. 19,779,375
90,000 Morgan Stanley Dean Witter &Co. 12,847,500
205,000 Nationwide Financial Services, Inc., Class A Shares 5,727,188
- --------------------------------------------------------------------------------
232,139,026
- --------------------------------------------------------------------------------
Health Care -- 9.6%
360,000 Abbott Laboratories 13,072,500
467,000 American Home Products Corp. 18,417,312
271,000 Eli Lilly and Co. 18,021,500
161,000 Genentech, Inc. 21,654,500
480,000 Merck & Co., Inc. 32,190,000
314,000 Monsanto Co. 11,186,250
632,100 Pharmacia & Upjohn, Inc. 28,444,500
170,000 United HealthCare Corp. 9,031,250
285,000 Warner-Lambert Co. 23,352,188
- --------------------------------------------------------------------------------
175,370,000
- --------------------------------------------------------------------------------
Real Estate Investment Trust -- 0.5%
65,000 Avalonbay Communities, Inc. 2,230,312
185,000 Equity Office Properties Trust 4,555,625
74,500 Spieker Properties, Inc. 2,714,594
- --------------------------------------------------------------------------------
9,500,531
- --------------------------------------------------------------------------------
Technology -- 28.2%
595,000 3Com Corp. (a)(c) 27,965,000
112,500 Applied Micro Circuits Corp. (a) 14,315,625
154,000 ASM International N.V. (a) 3,542,000
625,000 Cisco Systems, Inc. (a) 66,953,125
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
14 1999 Annual Report to Shareholders
<PAGE>
Schedule of Investments (continued) December 31, 1999
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------
Technology -- 28.2% (continued)
395,000 Compuware Corp. (a) $ 14,713,750
88,000 Concord Communications, Inc. (a) 3,905,000
354,500 Corning Inc. 45,708,344
110,000 Dell Computer Corp. (a) 5,610,000
220,000 Electronic Data Systems Corp. 14,726,250
167,000 General Instrument Corp. (a) 14,195,000
159,000 Hewlett-Packard Co. 18,116,062
530,000 IMS Health Inc. 14,409,375
340,000 Intel Corp. 27,986,250
310,000 International Business Machines Corp. 33,480,000
830,000 Microsoft Corp. (a) 96,902,500
140,000 Motorola, Inc. 20,615,000
440,000 Seagate Technology, Inc. (a) 20,487,500
314,000 Tellabs, Inc. (a) 20,154,875
320,000 Teradyne, Inc. (a) 21,120,000
290,000 Texas Instruments, Inc. 28,093,750
- --------------------------------------------------------------------------------
512,999,406
- --------------------------------------------------------------------------------
Transportation -- 1.0%
516,000 Canadian National Railway Co. 13,577,250
65,500 United Parcel Service, Inc. 4,519,500
- --------------------------------------------------------------------------------
18,096,750
- --------------------------------------------------------------------------------
Utilities -- 0.2%
125,000 Unicom Corp. 4,187,500
- --------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost -- $1,086,727,421) 1,648,004,238
- --------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCK -- 1.9%
Publishing -- 1.9%
1,021,000 The News Corp. Ltd. ADR (Cost -- $21,586,045) 34,139,688
- --------------------------------------------------------------------------------
RIGHTS -- 0.0%
8,000 Terex Stock Appreciation Rights
(expiring on 5/15/02) (a) (Cost -- $0) 160,000
- --------------------------------------------------------------------------------
CONTRACTS SECURITY VALUE
- --------------------------------------------------------------------------------
PURCHASED OPTIONS -- 0.9%
Call Purchased -- 0.9%
500 S&P 500 Index, Call (expiring March 2000,
exercise price $1,300) (a)(d) 9,925,000
400 S&P 500 Index, Call (expiring March 2000,
exercise price $1,350) (a)(d) 6,200,000
- --------------------------------------------------------------------------------
16,125,000
- --------------------------------------------------------------------------------
Put Purchased -- 0.0%
1,400 3Com Corp., Put (expiring Jan. 2000,
exercise $47.50) (a)(d) 420,000
500 3Com Corp., Put (expiring Jan. 2000,
exercise $50.00) (a)(d) 231,250
- --------------------------------------------------------------------------------
651,250
- --------------------------------------------------------------------------------
TOTAL PURCHASED OPTIONS
(Cost-- $15,100,900) 16,776,250
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
The Salomon Brothers Fund Inc 15
<PAGE>
Schedule of Investments (continued) December 31, 1999
FACE
AMOUNT SECURITY VALUE
- --------------------------------------------------------------------------------
CONVERTIBLE CORPORATE BONDS -- 1.8%
Communications -- 0.6%
$10,000,000 DSC Communications Corp., 7.000% due 8/1/04 $ 10,500,000
- --------------------------------------------------------------------------------
Telecommunications & Utilities -- 1.2%
11,000,000 Bell Atlantic Service, 5.750% due 4/1/03 (e) 11,577,500
10,000,000 NTL Inc., 5.750% due 12/15/09 (e) 10,800,000
- --------------------------------------------------------------------------------
22,377,500
- --------------------------------------------------------------------------------
TOTAL CONVERTIBLE CORPORATE BONDS
(Cost -- $31,356,283) 32,877,500
- --------------------------------------------------------------------------------
CORPORATE BONDS -- 1.1%
Airlines -- 0.2%
4,050,000 Continental Airlines Inc., 9.500% due 12/15/01 4,110,750
- --------------------------------------------------------------------------------
Consumer Cyclicals -- 0.0%
6,100,000 Breed Technologies, 9.250% due 4/15/08 (a)(f) 183,000
- --------------------------------------------------------------------------------
Energy -- 0.6%
10,000,000 Pogo Producing Co., 10.375% due 2/15/09 10,350,000
- --------------------------------------------------------------------------------
Telecommunications & Utilities -- 0.3%
4,750,000 NTL Inc., zero coupon until 4/15/00,
(12.750% thereafter) due 4/15/05 4,773,750
- --------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(Cost -- $23,372,072) 19,417,500
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 3.9%
21,238,000 State Street Bank & Trust Co., 3.000% due 1/3/00;
Proceeds at maturity -- $21,243,310; (Fully
collateralized by U.S. Treasury Notes, 6.125%
due 8/15/07; Market value -- $21,662,888) 21,238,000
50,000,000 Warburg Dillon Read, 3.000% due 1/3/00;
Proceeds at maturity-- $50,012,500; (Fully
collateralized by U.S. Treasury Notes, 10.375%
due 11/15/00; Market value -- $51,000,180) 50,000,000
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost -- $71,238,000) 71,238,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $1,249,380,721*) $1,822,613,176
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) Fair value determined pursuant to procedures established by the Board of
Directors.
(c) Shares of 190,000 were held in escrow at December 31, 1999, to cover
outstanding call options written.
(d) Contracts in denomination of 100.
(e) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. This security may be resold in transactions that are exempt from
registration, normally to qualified institutional buyers.
(f) Security is in default.
* Aggregate cost for Federal income tax purposes is substantially the same.
Abbreviation used in this schedule:
-----------------------------------
ADR - American Depository Receipt.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
16 1999 Annual Report to Shareholders
<PAGE>
Statement of Assets and Liabilities December 31, 1999
ASSETS:
Investments, at value (Cost -- $1,249,380,721) $1,822,613,176
Cash 650
Receivable for securities sold 4,307,479
Dividends and interest receivable 2,538,773
Other assets 14,108
- --------------------------------------------------------------------------------
Total Assets 1,829,474,186
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 6,238,487
Management fee payable 2,450,446
Dividends payable 383,127
Options written (Premiums received -- $522,406) (Note 3) 130,625
Accrued expenses 269,105
- --------------------------------------------------------------------------------
Total Liabilities 9,471,790
- --------------------------------------------------------------------------------
Total Net Assets $1,820,002,396
- --------------------------------------------------------------------------------
NET ASSETS:
Par value of capital shares $ 94,608,863
Capital paid in excess of par value 1,069,846,387
Undistributed net investment income 1,465,114
Accumulated net realized gain from security transactions
and options 80,457,796
Net unrealized appreciation of investments and options 573,624,236
- --------------------------------------------------------------------------------
Total Net Assets $1,820,002,396
- --------------------------------------------------------------------------------
Shares Outstanding ($1.00 par value, 100,000,000 shares
authorized) 94,608,863
- --------------------------------------------------------------------------------
Net Asset Value, per share $19.24
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
The Salomon Brothers Fund Inc 17
<PAGE>
Statement of Operations For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 19,206,327
Interest 6,698,200
Oil royalties 302,595
Less: Foreign withholding tax (183,759)
- --------------------------------------------------------------------------------
Total Investment Income 26,023,363
- --------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 9,170,935
Shareholder and system servicing fees 330,390
Shareholder communications 182,089
Audit and legal 102,219
Directors' fees 81,490
Custody 59,862
Stock certificates and listing fees 58,657
Other 28,300
- --------------------------------------------------------------------------------
Total Expenses 10,013,942
- --------------------------------------------------------------------------------
Net Investment Income 16,009,421
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS ANDOPTIONS (NOTE 3):
Net Realized Gain From:
Security transactions 303,349,449
Options purchased 21,573,211
Options written 137,728
Foreign currency transactions 14,399
- --------------------------------------------------------------------------------
Net Realized Gain 325,074,787
- --------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments and
Options:
Beginning of year 531,007,828
End of year 573,624,236
- --------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 42,616,408
- --------------------------------------------------------------------------------
Net Gain on Investments and Options 367,691,195
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $383,700,616
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
18 1999 Annual Report to Shareholders
<PAGE>
Statements of Changes in Net Assets For the Years Ended December 31,
1999 1998
- --------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 16,009,421 $ 23,317,901
Net realized gain 325,074,787 305,938,951
Increase (decrease) in net unrealized
appreciation 42,616,408 (6,697,070)
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations 383,700,616 322,559,782
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (15,006,165) (23,226,617)
Net realized gains (326,621,565) (275,438,541)
- --------------------------------------------------------------------------------
Decrease in Net Assets From Distributions
to Shareholders (341,627,730) (298,665,158)
- --------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS:
Value of shares issued in payment of
dividends (4,702,110 and 6,429,283 shares
issued for the years ended December 31,
1999 and 1998, respectively) 91,713,634 117,023,659
- --------------------------------------------------------------------------------
Increase in Net Assets 133,786,520 140,918,283
NET ASSETS:
Beginning of year 1,686,215,876 1,545,297,593
- --------------------------------------------------------------------------------
End of year* $1,820,002,396 $1,686,215,876
- --------------------------------------------------------------------------------
* Includes undistributed net investment
income of: $1,465,114 $452,480
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
The Salomon Brothers Fund Inc 19
<PAGE>
Notes to Financial Statements
1. Organization and Significant Accounting Policies
The Salomon Brothers Fund Inc ("Fund"), is registered as a diversified,
closed-end, management investment company under the Investment Company Act of
1940, as amended. The Fund's primary investment objectives are growth and
conservation of capital. Income receives secondary consideration.
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles
("GAAP"). The preparation of financial statements in accordance with
GAAPrequires management to make estimates and assumptions that affect the
reported amounts and disclosure in the financial statements. Actual amounts
could differ from those estimates.
(a) Securities Valuation. Portfolio securities listed or traded on national
securities exchanges, or reported by the NASDAQ national market system, are
valued at the last sale price, or if there have been no sales on that day, at
the mean of the current bid and asked price which represents the
current value of the security. Over-the-counter securities are valued at
the mean of the current bid and asked price. If no quotations are readily
available (as may be the case for securities of limited marketability), or if
"restricted" securities are being valued, such portfolio securities and other
assets are valued at fair value determined pursuant to procedures established
by the Board of Directors. Short-term securities with less than 60 days
remaining to maturity when acquired by the Fund are valued at amortized cost
which approximates market value.
(b) Written Option Contracts. When the Fund writes a call option or a put
option, an amount equal to the premium received is recorded as a liability, the
value of which is marked-to-market daily to reflect the current market value of
the written option. When a written option expires, the Fund realizes a gain
equal to the amount of the premium received. When the Fund enters into a
closing purchase transaction, it realizes a gain (or loss if the cost of the
closing purchase transaction exceeds the premium received when the option was
sold) without regard to any unrealized gain or loss on the underlying security,
and the liability related to such option is eliminated. When a call option is
exercised, the Fund realizes a gain or loss from the sale of the underlying
security and the proceeds from such sale are increased by the premium
originally received. When a put option is exercised, the amount of the premium
received reduces the cost of the security that the Fund purchases upon
exercise.
(c) Federal Income Taxes. The Fund has complied and intends to continue to
comply with the requirements of the Internal Revenue Code of 1986, as amended,
applicable to regulated investment companies, and to distribute substantially
all of its taxable income to its shareholders. Therefore, no Federal income or
excise tax provision is required.
(d) Repurchase Agreements. When entering into repurchase agreements, it is the
Fund's policy to take possession, through its custodian, of the underlying
collateral and to monitor its value at the time the arrangement is entered into
and during the term of the repurchase agreement to ensure that it equals or
exceeds the repurchase price. In the event of default of the obligation to
repurchase, the Fund has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. Under certain circumstances, in the
event of default or bankruptcy by the other party to the agreement, realization
and/or retention of the collateral may be subject to legal proceedings.
(e) Other. Securities transactions are recorded as of the trade date. Dividend
income and dividends payable are recorded on the ex-dividend date. Interest is
recognized as interest income when earned. Original issue discount and market
discount on securi-
- --------------------------------------------------------------------------------
20 1999 Annual Report to Shareholders
<PAGE>
Notes to Financial Statements (continued)
ties purchased is accreted on an effective yield basis over the life of the
security. The character of income and gains distributed are determined in
accordance with income tax regulations which may differ from GAAP.
2. Management Fee and Other Transactions with Affiliates
Salomon Brothers Asset Management Inc ("SBAM"), a wholly owned subsidiary of
Salomon Brothers Hold-ing Company Inc., which, in turn, is wholly owned by
Salomon Smith Barney Holdings, Inc. ("SSBH"), acts as investment manager to the
Fund. SBAM is responsible on a day-to-day basis for the management of the
Fund's portfolio in accordance with the Fund's investment objectives and
policies and for making decisions to buy, sell, or hold particular securities
and is responsible for day-to-day administration of the Fund.
The investment manager has delegated certain administrative responsibilities to
SSB Citi Fund Management LLC ("SSBC"), an affiliate of the investment manager
pursuant to a Sub-Administration Agreement between the investment manager and
SSBC.
Certain officers and/or directors of the Fund are also officers and/or
directors of the investment manager.
The Fund pays SBAM a base fee subject to an increase or decrease depending on
the extent, if any, to which the investment performance of the Fund exceeds or
is exceeded by the investment record of the Standard & Poor's 500 Index of
Composite Stocks ("S&P 500 Index"). The base fee is paid quarterly based on the
following annual rates:
Average Daily Net Assets Annual Fee Rate
- --------------------------------------------------------------------------------
First $350 million 0.650%
Next $150 million 0.550%
Next $250 million 0.525%
Next $250 million 0.500%
Over $1 billion 0.450%
- --------------------------------------------------------------------------------
The performance adjustment is paid quarterly based on a rolling one year
period. A performance adjustment will only be made after the investment
performance of the Fund exceeds or is exceeded by the investment record of the
S&P 500 Index by at least one percentage point. For each percentage point by
which the investment performance of the Fund exceeds or is exceeded by the
investment record of the S&P 500 Index, the base fee will be adjusted upward or
downward by 0.01% (annualized). The maximum annual adjustment is 0.10% which
would occur if the Fund's performance exceeds or is exceeded by the S&P 500
Index by ten or more percentage points. For this purpose, the performance fee
calculation is based on the total return value of the S&P 500 Index versus the
Fund's total return calculated based on net asset value and assuming all
distributions are reinvested at net asset value on the record date of the
distribution. For the rolling one year period ended March 31, 1998, June 30,
1998, September 30, 1998 and December 31, 1998, the performance of the S&P 500
Index exceeded the Fund's performance by 7.94%, 6.46%, 6.17% and 7.21%,
respectively. This resulted in a total decrease of the base management fee of
$1,084,003. For the rolling one year period ended March 31, 1999, the
performance of the S&P 500 Index exceeded the Fund's performance by 6.50%.
However, for the rolling one year period ended June 30, 1999, September 30,
1999 and December 31, 1999, the performance of the S&P 500 Index was exceeded
by the Fund's performance by 2.94%, 0.13% and 2.74%, respectively, resulting in
a total decrease of the base management fee of $28,228.
Brokerage commissions of $219,858 were paid to Salomon Smith Barney Inc.,
another subsidiary of SSBH, for investment transactions executed on behalf of
the Fund during the year ended December 31, 1999.
- --------------------------------------------------------------------------------
The Salomon Brothers Fund Inc 21
<PAGE>
Notes to Financial Statements (continued)
3. Investments
For the year ended December 31, 1999, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
- --------------------------------------------------------------------------------
Purchases $1,190,132,505
- --------------------------------------------------------------------------------
Sales $1,299,099,765
- --------------------------------------------------------------------------------
At December 31, 1999, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
- --------------------------------------------------------------------------------
Gross unrealized appreciation $602,287,710
Gross unrealized depreciation (29,055,255)
- --------------------------------------------------------------------------------
Net unrealized appreciation $573,232,455
- --------------------------------------------------------------------------------
Transactions in options written during the year ended December 31, 1999 were as
follows:
Number of Premiums
Contracts Received (Paid)
- --------------------------------------------------------------------------------
Options written, outstanding at
December 31, 1998 (1,300) $ (728,580)
Options written (5,205) (1,535,555)
Options closed in purchase
transactions 3,166 999,314
Options expired 1,300 728,580
Options exercised 139 13,835
- --------------------------------------------------------------------------------
Options written, outstanding at
December 31, 1999 (1,900) $ (522,406)
- --------------------------------------------------------------------------------
The following table represents the written call option contracts open at
December 31, 1999:
Number of Strike
Contracts Expiration Price Value
- --------------------------------------------------------------------------------
1,900 3Com Corp. 1/22/00 $55 $130,625
(Premium received - $522,406)
- --------------------------------------------------------------------------------
The risk of writing a covered call option is that the Fund may forego the
opportunity of profit if the market price of the underlying security increases
and the option is exercised. The risk in writing a put option is that the Fund
may incur a loss if the market price of the underlying security decreases and
the option is exercised. In addition, there is the risk that the Fund may not
be able to enter into a closing transaction because of an illiquid secondary
market.
- --------------------------------------------------------------------------------
22 1999 Annual Report to Shareholders
<PAGE>
Financial Highlights
For a share of capital stock outstanding throughout each year ended December 31:
1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Year $18.76 $18.51 $17.26 $15.43 $12.88
- --------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.18 0.26 0.27 0.33 0.35
Net realized and unrealized gains(1) 4.08 3.45 3.93 3.93 4.04
- --------------------------------------------------------------------------------
Total Income From Operations 4.26 3.71 4.20 4.26 4.39
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.17) (0.27) (0.27) (0.34) (0.35)
Net realized gains (3.63) (3.19) (2.68) (2.09) (1.49)
- --------------------------------------------------------------------------------
Total Distributions (3.80) (3.46) (2.95) (2.43) (1.84)
- --------------------------------------------------------------------------------
Increase in net asset value
due to shares issued on
reinvestment of dividends 0.02 -- -- -- --
- --------------------------------------------------------------------------------
Net Asset Value, End of Year $19.24 $18.76 $18.51 $17.26 $15.43
- --------------------------------------------------------------------------------
Total Return, Based on Market Value 34.6% 22.6% 29.5% 38.7% 43.3%
- --------------------------------------------------------------------------------
Net Assets, End of Year (millions) $1,820 $1,686 $1,545 $1,441 $1,291
- --------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.56% 0.52% 0.53% 0.51% 0.41%
Net investment income 0.90 1.39 1.46 1.96 2.42
- --------------------------------------------------------------------------------
Portfolio Turnover Rate 73% 68% 49% 52% 82%
- --------------------------------------------------------------------------------
Market Value, End of Year $20.375 $18.188 $17.688 $16.000 $13.375
- --------------------------------------------------------------------------------
(1) Includes $0.015 and $0.02 attributable to the increase in net asset value
from shares repurchased at a discount for the years ended 1996 and 1995,
respectively.
- --------------------------------------------------------------------------------
The Salomon Brothers Fund Inc 23
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders of
The Salomon Brothers Fund Inc
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Salomon Brothers Fund Inc (the
"Fund") at December 31, 1999, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the five years in the period
then ended, in conformity with accounting principles generally accepted in the
United States. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
February 16, 2000
- --------------------------------------------------------------------------------
24 1999 Annual Report to Shareholders
<PAGE>
Quarterly Financial Information (unaudited)
Summary of quarterly results of operations:
<TABLE>
<CAPTION>
Amounts in Thousands and Per Share
Three Months Ended
- -----------------------------------------------------------------------------------------------------
March 31, 1999 June 30, 1999 Sept. 30, 1999 Dec. 31, 1999
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net investment
income $ 4,322 $0.05 $ 4,109 $0.05 $ 3,386 $ 0.04 $ 4,192 $0.04
Net realized &
unrealized gain (loss) $ 62,602 $0.70 $207,537 $2.31 $(163,430) $(1.82) $260,982 $2.89
Three Months Ended
- -----------------------------------------------------------------------------------------------------
March 31, 1998 June 30, 1998 Sept. 30, 1998 Dec. 31, 1998
- -----------------------------------------------------------------------------------------------------
Net investment
income $ 4,139 $0.04 $ 5,875 $0.07 $ 7,132 $ 0.08 $ 6,172 $0.07
Net realized &
unrealized gain (loss) $197,880 $2.29 $ 4,844 $0.05 $(194,862) $(2.26) $291,380 $3.37
</TABLE>
Tax Information (unaudited)
For Federal tax purposes the Fund hereby designates for the fiscal year ended
December 31, 1999:
o A corporate dividends received deduction of 22.27%.
o Total long-term capital gain distributions paid of $249,736,061.
- --------------------------------------------------------------------------------
The Salomon Brothers Fund Inc 25
<PAGE>
Automatic Dividend Reinvestment and Cash Payment Plans (unaudited)
Salomon Brothers Fund: Helping Investors Grow Their Wealth Since 1929
You've already harnessed the wealth-building power of Salomon Brothers Fund
("SBF"). Now harness two more wealth-building strategies: the power of
compounding through the Dividend Reinvestment Plan and the convenience of the
Cash Payment Plan-available only to investors of The Salomon Brothers Fund.
We've included brief descriptions of these two Plans, and a section on the most
frequently asked questions.
Dividend Reinvestment Plan (DR Plan)
Money from dividends and distributions can lie idle for months at a time, and
making smaller investments in the stock market can be expensive and difficult.
With the DR Plan, dividends and distributions from the Salomon Brothers Fund are
promptly invested for you in additional shares of SBF. All paper work is done
for you automatically by the Agent for the DR Plan, and you will receive
statements from the Agent to keep in your personal records.
The DR Plan is flexible, and offers investors three different reinvestment
options. Depending on which option you choose, you may automatically reinvest:
1. All dividends and capital gains (long-term and short-term) in additional
shares of SBF
2. All capital gains (long-term and short-term) in additional shares of SBF
and receive dividends in cash
3. All dividends in additional shares of SBF and receive capital gains
(long-term and short-term) in cash.
To make it easy for you to sign up for the DR Plan or to change your option if
you already participate in the Plan, we've included an easy and convenient
mail-in form in the back of this report. Remember to indicate which option you
are selecting; otherwise the Agent will consider you to have chosen option (1)
and reinvest all dividends and capital gains (long-term and short-term) in
additional shares of SBF.
Cash Payment Plan: Buying Additional Shares Directly from / through SBF
The Cash Payment Plan allows investors in The Salomon Brothers Fund to purchase
additional shares of SBF conveniently and inexpensively, without committing
large dollar amounts or paying big brokerage commissions. You can make
additional investments for as little as $25.00 on either a regular basis or when
you have extra money to invest. You also can vary the amount you invest each
time, as long as it is at least $25.00, and there is no maximum limit to the
amount you can invest under the Cash Payment Plan.
The Agent will purchase additional shares of SBF for your account on the next
"Investment Date" following receipt of your optional cash payment. Each Friday
is considered an "Investment Date," or the closest business day prior to it if
Friday is a holiday. Shares purchased under the Cash Payment Plan are held by
the Agent as uncertificated shares, unless separate specific instructions to
issue certificates are received. Only whole shares can be issued as
certificates, fractional shares cannot be issued in certificate form. Dividends
and distributions on those shares held by the Agent will be automatically
reinvested.
- --------------------------------------------------------------------------------
26 1999 Annual Report to Shareholders
<PAGE>
Automatic Dividend Reinvestment and Cash Payment Plans (unaudited) (continued)
Certificate Of Deposit
If you wish, you may also deposit with the Agent stock certificates representing
ownership of capital stock in SBF which you now hold. The Agent will combine
these shares with shares issued or purchased through the DR Plan or Cash Payment
Plan. The actual certificates forwarded by you will be cancelled.
Cost to You
Except as specifically noted, you will not bear any of the costs of
administering the Plan. When the Agent purchases shares of SBF on the open
market, the cost of reinvesting your dividends and distributions or purchasing
additional shares through these Plans is less than the usual brokerage
commissions on smaller or odd lot transactions because the Agent combines the
purchase of shares for all participants and passes the savings in commissions on
to you. You pay your proportionate share of the commissions paid on all open
market purchases. Of course, dividends and distributions remain taxable even if
they are automatically reinvested.
To help you learn more about the DR Plan and Cash Payment Plan, we are including
the answers to some of the most frequently asked questions about these plans.
Who can participate in these Plans?
As a shareholder of Salomon Brothers Fund, you can participate in both the DR
Plan and the Cash Payment Plan.
How does the Dividend Reinvestment Plan work?
If you are a participant in the Plan, you will receive either newly issued
shares or shares that are purchased on the New York Stock Exchange in the open
market, depending on the relationship between the market price per share of SBF
and the net asset value per share of SBF, as described in terms and conditions
of the DR Plan.
The number of common stock shares you receive is determined in the following
way: If the market price of the common stock is equal to or higher than the net
asset value ("NAV") per share at the time of valuation, you will be issued
shares for the equivalent of either the most recently determined NAV per share
or 95% of the market price, whichever is greater. If, on valuation date, the NAV
per share is greater than the market price per share, shares will be purchased
in the open market at market price per share.
However, if the dividend or distribution is not large enough to buy a full
share, the Agent will credit your account with a fractional share, which will be
computed four decimal places. These fractional shares will earn dividends and
distributions for you just the way that full shares do.
How do I enroll in the Dividend Reinvestment Plan?
If you hold your certificates yourself, you probably are already enrolled in the
Dividend Reinvestment Plan.
- --------------------------------------------------------------------------------
The Salomon Brothers Fund Inc 27
<PAGE>
Automatic Dividend Reinvestment and Cash Payment Plans (unaudited)
Reinvestment begins with the first dividend after you purchase your shares.
However, if your shares are held in the name of a broker or nominee, you should
contact your broker or nominee about your ability to participate in the Dividend
Reinvestment Plan. If your broker or nominee does not provide the automatic
reinvestment service, you may need to take your shares out of "street name" and
register them in your own name to guarantee your participation. Otherwise,
dividends and distributions will be paid in cash by your broker or nominee.
Can I withdraw from the Dividend Reinvestment Plan or change my reinvestment
option?
Yes. You can withdraw from the Dividend Reinvestment Plan or change your
reinvestment option by calling the Agent at this toll-free telephone number:
1-800-432-8224.
If you withdraw from the Dividend Reinvestment Plan and then wish to re-enroll,
simply complete the enclosed Authorization Card and mail it to the address given
below. You can also re-enroll by calling the toll-free number for the Agent.
Your participation in the Plan will begin with the next dividend or distribution
payable after the Agent receives your authorization, as long as it is received
before the record date for the dividend or distribution. If your authorization
arrives after the record date, your participation will begin with the following
dividend or distribution.
The Bank of New York
Investor Relations Department
P.O. Box 11258
New York, NY 10286-1258
Tel: 1-800-432-8224
Important Notes to This Section:
The Fund and the Agent may amend or terminate the Dividend Reinvestment Plan and
Cash Payment Plan. The Agent will mail to participants notice at least 30 days
prior to the effective date of any amendment.
The Agent may utilize BNY Brokerage Inc., an affiliate of the Agent, for the
trading activity relating to the Dividend Reinvestment Plan and Cash Payment
Plan on behalf of the participants. BNY Brokerage Inc. receives a commission in
connection with these transactions. Remember your detailed account statement
will include a tear-off portion that you should utilize for all transaction
processing.
If your shares are held in the name of a broker or nominee, you should contact
your broker or nominee for more information about your ability to participate in
the DR Plan. If the broker or nominee does not provide an automatic reinvestment
service, it may be necessay for you to have shares taken out of the "street
name" and registered in your own name to guarantee your participation.
Otherwise, dividends and distributions will be paid in cash by your broker or
nominee.
- --------------------------------------------------------------------------------
28 1999 Annual Report to Shareholders
<PAGE>
Automatic Dividend Reinvestment and Cash Payment Plans (unaudited)
How are shares purchased for the Cash Payment Plan?
All cash payment shares will be purchased on the open market at the prevailing
market price and in accordance with the Terms and Conditions of Authorization
for Amended and Reinvested Dividend Reinvestment and Cash Payment Plans (Terms
and Conditions).
Who is the "Agent" and what are its responsibilities?
The Bank of New York acts as the Agent for the Salomon Brothers Fund. The Agent
is responsible for doing the paperwork for shareholders, including providing
account statements. The Agent also is responsible for forwarding proxy material
to you, including a proxy form and return envelope, covering all shares owned by
a participant to be voted and returned to the Fund or its proxy agent.
The Agent will hold the shares it has purchased for your account unless you
request otherwise. This convenient feature provides added protection against
loss, theft or accidental destruction of certificates. If you request it, the
Agent will issues certificates for full shares held in your account. However, if
a certificate is lost, the replacement cost is currently 2% of the value of the
shares at the time of loss.
You may also ask the Agent to hold all of your shares of the Salomon Brothers
Fund. The Agent will combine these shares with shares acquired through the
Dividend Reinvestment Plan or Cash Payment Plan. The actual certificates
forwarded by you will be cancelled and replaced with a book-entry in the Agent's
records.
Is there any tax advantage to participate in the Dividend Reinvestment Plan?
No. Even if you do not receive cash when you participate in the Dividend
Reinvestment Plan, you will be taxed on an amount equal to cash received by the
agent on your behalf pursuant to the DR Plan. If you have any further questions
about the tax implications of the Plan, you should consult your tax adviser.
THE SALOMON BROTHERS FUND INC
AUTHORIZATION TO PARTICIPATE IN THE DIVIDEND
REINVESTMENT PLAN FOR SHAREOWNERS OF
THE SALOMON BROTHERS FUND INC
COMMON SHARES
I wish to participate in the Dividend Reinvestment Plan. I appoint The Bank
of New York (the Agent) and authorize THE SALOMON BROTHERS FUND INC to pay to
the Agent for my account all net investment income dividends and capital gain
distributions (short-term and long-term) payable to me on the Common Shares that
are now or may hereafter be registered in my name.
I authorize the Agent to apply all such dividends and distributions in the
following manner, subject to the terms and conditions of the Plan set forth in
the brochure describing the Plan.
[ ](1) All net investment income dividends and capital gain distributions
(short-term and long-term) payable to me shall be automatically
reinvested
[ ](2) All net investment income dividends payable to me shall be paid in
cash and all capital gain distributions (short-term and long-term)
payable to me shall be automatically reinvested
[ ](3) All net investment income dividends payable to me shall be reinvested
and all capital gain distributions (short-term and long-term) shall
be paid in cash
(Choose one of the above.)
I understand that if I do not choose one of the above, I will be deemed to
have chosen option (1).
I understand that the appointment of The Bank of New York as the Agent is
subject to the terms and conditions of the Plan set forth in the brochure
describing the Plan.
In addition, please invest the enclosed optional cash payment in the amount
of $____________ as directed by the terms and conditions of the Plan.
(Please sign on the reverse side of this card.)
- --------------------------------------------------------------------------------
The Salomon Brothers Fund Inc 29
<PAGE>
Terms and Conditions of Authorization for Amended and Restated Automatic
Dividend Reinvestment and Cash Payment Plans
1. (a) The Bank of New York (the "Agent") will act as agent for each participant
in the Amended and Restated Dividend Reinvestment Plan (the "DR Plan") of
Salomon Brothers Fund Inc (the "Corporation").
(b) Participants in the DRPlan will have three options, as follows: (i) a
participant may have all net investment income dividends ("dividends")
and capital gain distributions (short-term and long-term)
("distributions") automatically reinvested; (ii) a participant may have
all dividends paid in cash and all distributions automatically
reinvested; or (iii) a participant may have all dividends automatically
reinvested and all distributions paid in cash. Participants will be
deemed to have elected option (i) unless notification is received by the
Agent that the participant elects option (ii) or option (iii).
Participants may change elections by notifying the Agent and a change in
election will be effective with respect to a dividend or distribution if
the Agent is contacted prior to the record date; otherwise it will be
effective with the following dividend or distribution.
(c) Unless the Corporation declares a dividend or distribution which may be
paid to shareholders only in the form of cash, the Agent will apply all
dividends and distributions which are to be reinvested on behalf of a
participant in the manner set forth below.
2. (a) If, on the determination date, the market price per share plus
estimated brokerage commissions equals or exceeds the net asset value
per share on that date (such condition, a "market premium"), the Agent
shall receive the dividend or distribution in newly issued shares of
the Corporation on behalf of shareholders. If, on the determination
date, the net asset value per share exceeds the market price per share
plus estimated brokerage commissions on that date (such condition, a
"market discount"), the Agent will purchase shares in the open market.
The determination date will be the fourth New York Stock Exchange
trading day (a New York Stock Exchange trading day being referred to
herein as a "Trading Day") preceding the payment date for the dividend
or distribution. For purposes herein, "market price" shall mean the
average of the highest and lowest prices at which the Corporation's
stock sells on the New York Stock Exchange on the particular date, or
if there is no sale on that date, the average of the closing bid and
asked quotations.
(b) Purchases by the Agent shall be made in accordance with the conditions
set forth in Item 4 below and may be made on any securities exchange
where such shares are traded, in the over-the-counter market, or in
negotiated transactions, and may be on such terms as to price,
delivery, and otherwise as the Agent may determine. Such purchases
shall be made as soon as practicable commencing on the Trading Day
following the determination date and ending no later than 30 days after
the dividend or distribution date except where temporary curtailment or
suspension of purchase is necessary to comply with applicable
provisions of federal securities laws; provided, however, that such
purchases shall, in any event, terminate on the earlier of (i) 60 days
after the dividend or distribution payment date and (ii) the Trading
Day prior to the "ex-dividend date" next succeeding the dividend or
distribution payment date.
(c) If (i) the Agent is unable to invest the full dividend or distribution
amount in open market purchases during the purchase period provided for
in paragraph (b) above or (ii) a market discount shifts to a market
premium during the purchase period, the Agent will cease making open
market purchases and will receive the uninvested portion of the
dividend or distribution amount in newly issued shares (x) in the case
of (i) above, at the close of business on the date the Agent is
required to terminate making open-market purchases as specified in
paragraph (b) above or (y) in the case of (ii) above at the close of
business on the date such shift occurs; but in no event prior to the
payment date for the dividend or distribution.
(d) In the event that all or part of a dividend or distribution amount is to
be to paid in newly issued shares, such shares will be issued to
participants in accordance with the following formula: (i) if, on the
valuation date, the net asset value per share is less than or equal to
the market price per share, then the newly issued shares shall be
valued at net asset value per share on the valuation date; provided,
however, that if the net asset value per share is less than 95% of the
market price per share on the valuation date, then such shares will be
issued at 95% of the market price and (ii) if, on the valuation date,
the net asset value per share is greater than the market price per
share, the newly issued shares will be valued at the market price per
share on the valuation date. The valuation date shall be the dividend
or distribution payment date except that with respect to shares issued
pursuant to paragraph (c) above, the valuation date shall be the date
such shares are issued. If a date that would otherwise be a valuation
date is not a Trading Day, the valuation date shall be the next
preceding Trading Day.
If you desire to participate in The Salomon Brothers Fund Inc Dividend
Reinvestment Plan as described in the brochure, please sign and return this card
to:
THE BANK OF NEW YORK
P.O. Box 1958
Newark, NJ 07101-9774
Att: Dividend Reinvestment Department
DATED:_____________________, 20____
PLEASE SIGN, DATE AND RETURN
USING THE ENCLOSED ENVELOPE
-----------------------------------
Signature
-----------------------------------
Signature (if held jointly)
Please sign exactly as your name(s) appear hereon.
- --------------------------------------------------------------------------------
30 1999 Annual Report to Shareholders
<PAGE>
3. Under the Cash Payment Plan (together with the DR Plan, the "Plans"), cash
payments of at least $25.00 made from time to time by the participant and
received by the Agent will be applied by the Agent in the purchase of
additional shares of capital stock of the Corporation on the Investment
Date next following receipt. The "Investment Date" will be each Friday (or
closest business day prior thereto if a holiday). All cash payment shares
will be purchased by the Agent on the open market at prevailing market
prices and in accordance with the conditions set forth in Item 4 below.
Participants have an unconditional right to obtain the return of any cash
payments up to 48 hours prior to such Investment Date. Checks must be drawn
on United States banks and denominated in U.S. dollars only. Third party
checks will not be accepted. There is no maximum amount of investment
under the Cash Payment Plan. The Agent reserves the right to sell
additional shares from the participant's account to satisfy any returned
checks.
4. In making cash purchases for the participant's account, the Agent will
combine the participant's funds with those of the other participants. The
price at which the Agent shall be deemed to have acquired shares shall be
the average price (including brokerage commissions) of all shares
purchased by it in connection with a particular dividend or distribution
under the DR Plan or in connection with a particular investment under the
Cash Payment Plan, as the case may be.
It is understood that (i) the Agent may hold the shares of all participants
together in its name or in the name of its nominee, (ii) the Agent may
utilize BNY Brokerage Inc., an affiliate of the Agent, for all trading
activity relating to the DR Plan and Cash Payment Plan on behalf of
participants and that BNY Brokerage Inc. receives a commission in
connection with such transactions, (iii) that government regulations may
require the temporary curtailment or suspension of purchase of shares
under the Plans and accordingly, the Agent shall not be accountable for
its inability to make purchases at such times and (iv) that the Agent
shall have no responsibility as to the market value of the shares acquired
for the participant's account.
The Agent will confirm the purchases so made as soon as practicable after
the purchases are made.
5. No certificate with respect to reinvested dividends and distributions will
be issued to a participant unless he or she so requests. No certificate
for a fractional share will be issued.
6. Participants shall not bear any of the costs of administering the Plan.
Each account will bear its proportionate share of brokerage commissions
paid on open market purchases.
7. It is understood that the investment of dividends and distributions does not
relieve the participant of any taxes which may be payable on such
dividends and distributions. The Agent will report annually to each
participant the amount of dividends and distributions credited to his
account during the year.
8. (a) The Agent will forward all proxy materials, including a form of proxy
and return envelope, covering all shares owned by a participant to be
voted and returned by the participant to the Corporation or its proxy
agent.
(b) A participant may terminate his or her account under the DR Plan or
change his or her election pursuant to paragraph 1(b), at any time by
notifying the Agent prior to the next dividend or distribution record
date. Participation shall be terminated by written notice similarly
received of the death, or adjudicated incompetency of a participant.
(c) In the event written notice of termination, death or adjudicated
incompetency is received by the Agent after a dividend or distribution
record date, but prior to the determination by the Agent of the number
of shares to be issued to or purchased for the participant following
such dividend or distribution record date, participation in the DR
Plan shall be terminated immediately following such determination.
Upon termination by reason of notice of death, or adjudicated
incompetency, no newly issued shares shall be credited to the
participant's account and no purchase of shares shall be made for the
participant's account. The participant's shares and any cash dividends
or distributions paid thereon shall be retained by the Agent subject
to the Terms and Conditions until such time as such participant's
legal representatives shall have been appointed and shall have
furnished proof sufficient to the Agent of his right to receive such
shares and such dividends or distributions. Upon termination by the
participant, the Agent will send the participant a certificate of the
full shares in his or her account and a check in an amount equal to
the then current market price of any fractional share or, the Agent,
upon receipt of instructions from the participant, will sell the
participant's full and fractional shares as soon as practicable
following termination and send to the participant a check representing
the proceeds, less brokerage commissions and any applicable taxes.
If a participant disposes of all shares registered in his or her name on
the books of the Corporation, the Agent will at its discretion,
continue to reinvest dividends and distributions on the shares in the
participant's DR Plan account until otherwise notified by the
participant.
9. The Agent may terminate either Plan by notice in writing remitted to all
participants. In such event the Agent will send the participant a
certificate for the full shares in his or her account and cash for any
fractional shares at the then current market price as indicated in Item 8.
10. The Agent shall not be liable hereunder for any act done in good faith, or
for any good faith omissions to act, including, without limitation, any
claims of liability (1) arising out of any such act or omission to act
which occurs prior to the termination of participation pursuant to Item 8
above and (2) with respect to the prices at which shares are purchased or
sold for the participant's account and the times such purchases or sales
are made.
11. The participant agrees to notify the Agent promptly in writing of any change
of address. Notices to the participant may be given by letter addressed to
the participant at his last address of record with the Agent.
12. These Terms and Conditions may be amended or supplemented by the Agent at
any time or times by mailing appropriate notice at least 30 days prior to
the effective date thereof to the participant at his last address of
record. The amendment or supplement shall conclusively be deemed to be
accepted by the participant unless prior to effective date thereof the
Agent receives written notice of the termination of the participant's
account. Any such amendment may include the appointment by the Agent in
its place and stead a successor agent under these Terms and Conditions
provided such successor is a bank or trust company organized under the
laws of the United States or any state thereof. The Corporation is
authorized to pay to such successor agent for the account of each
participant in the Plan all dividends and distributions payable on shares
of the Corporation's capital stock held by the Agent for the participant
or by the participant himself or herself, the shares to be applied by such
successor agent as provided in these Terms and Conditions.
13. You may effect "book-to-book" transfers, which involve transferring shares
from an existing participant account in the Plan to a new participant
account by providing the Bank with a written request in accordance with
the terms and conditions of the Plan. All participants in the current
account must sign the request and their signatures must be guaranteed by a
bank, broker or financial institution that is a member of a signature
Guarantee Medallion Program. The new participant account will
automatically be coded for full dividend reinvestment unless otherwise
instructed.
14. The Terms and Conditions of this authorization shall be governed by the
laws of the State of New York.
Any inquiries regarding the Plans should be directed to the Agent at:
THE BANK OF NEW YORK
Investor Relations Department
P.O. Box 11258
New York, New York 10286-1258
1-800-432-8224
- --------------------------------------------------------------------------------
The Salomon Brothers Fund Inc 31
<PAGE>
Board of Directors
Charles F. Barber Consultant; formerly Chairman, ASARCO Inc.
Member of the Audit Committee
Andrew L. Breech President, Dealer Operating Control Service, Inc.
Member of the Proxy Committee
Carol L. Colman Consultant, Coleman Consulting
Member of the Audit Committee
William R. Dill Consultant; formerly President, Boston Architectural
Center; formerly President, Anna Maria College
Member of the Nominating Committee
Heath B. McLendon Chairman and President, Managing Director, Salomon
Smith Barney, Inc.; President and Director, SSB Citi
Fund Management LLC and Travelers Investment Adviser,
Inc.
Clifford M. Kirtland, Jr. Member of the Advisory Committee, Nero Moseley
Partners; formerly Director, Oxford Industries,
Inc., Shaw Industries, Inc. Graphic Industries, Inc.
and CSX Corp.; formerly Chairman and President, Cox
Communications, Inc.
Member of the Proxy Committee
Robert W. Lawless President and Chief Executive Officer, University of
Tulsa; formerly President and Chief Executive
Officer, Texas Tech University and Texas Tech
University Health Sciences Center
Member of the Proxy Committee
Louis P. Mattis Consultant; formerly Chairman and President,
Sterling Winthrop Inc.
Member of the Nominating Committee
Thomas F. Schlafly Of counsel to Blackwell Sanders Peper Martin LLP
(Law Firm); President, The Saint Louis Brewery, Inc.
Member of the Audit and Nominating Committees
- --------------------------------------------------------------------------------
32 1999 Annual Report to Shareholders
<PAGE>
Officers
Heath B. McLendon Chairman and President
Lewis E. Daidone Executive Vice President & Treasurer
Michael A. Kagan Executive Vice President
Martin L. Roberts Vice President
Anthony Pace Controller
Christina T. Sydor Secretary
Janet S. Tolchin Assistant Treasurer
Robert A. Vegliante Assistant Secretary
Service Providers
Salomon Brothers Asset Management Inc. Investment Manager
7 World Trade Center
New York, New York 10048
The Bank of New York Transfer and Dividend Disbursing Agent
101 Barclay Street
New York, New York 10286
PNC Bank Custodian
8800 Tinicum B'lvd.
Suite 200
Philadelphia, Pennsylvania 19153
Simpson Thacher & Bartlett Legal Counsel
425 Lexington Avenue
New York, New York 10017
PricewaterhouseCoopers LLP Independent Accountants
1177 Avenue of the Americas
New York, New York 10036
- --------------------------------------------------------------------------------
The Salomon Brothers Fund Inc 33
<PAGE>
SEVEN WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
1-800-SALOMON
WWW.SBAM.COM
SBFANN 12/99
[LOGO]
