SALOMON BROTHERS FUND INC /DE/, N-2, 2000-03-23

SALOMON BROTHERS FUND INC /DE/
N-2, 2000-03-23

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<PAGE>

As filed with the Securities and Exchange Commission on March 23, 2000
Securities Act File No. 33-_______
Investment Company Act File No. 811-2733
================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM N-2

[X] REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No.
[ ] Post-Effective Amendment No.

[X] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[X] Amendment No. 15

THE SALOMON BROTHERS FUND INC
(Exact name of registrant as specified in its charter)

------------------------

7 World Trade Center
38th Floor
New York, New York 10048
(Address of principal executive offices)

(212) 783-5984
(Registrant's telephone number, including area code)

------------------------

Robert A. Vegliante, Esq.
Assistant Secretary
THE SALOMON BROTHERS FUND INC
7 World Trade Center
38th Floor
New York, New York 10048
(Name and address of agent for service)

------------------------

WITH COPIES TO:
SARAH E. COGAN, ESQ.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017-3954

------------------------

Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of this Registration Statement.

------------------------

If any securities being registered on this form will be offered on a
delayed or continuous basis in reliance on Rule 415 under the Securities Act of
1933, other than securities offered in connection with a dividend reinvestment
plan, check the following box. [ ]

If it is proposed that this filing will become effective when declared
effective pursuant to Section 8(c), check the following box. [ ]

If appropriate, check the following box:

[ ] This amendment designates a new effective date for a previously filed
registration statement.

[ ] This Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act and the Securities Act
registration statement number of the earlier effective registration statement
for the same offering is .

CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF SECURITIES BEING OFFERING PRICE AGGREGATE REGISTRATION
BEING REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE FEE
<S> <C> <C> <C> <C>
Capital Stock, par value $1.00 per share..... 11,826,108 $19.00 $224,696,052 $59,319.76
</TABLE>

(1) As calculated pursuant to Rule 457(c) under the Securities Act of 1933, as
amended. Based on the average of the high and low sales prices reported on
the New York Stock Exchange on March 17, 2000.

------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

<PAGE>

================================================================================

THE SALOMON BROTHERS FUND INC
FORM N-2
CROSS REFERENCE SHEET
PARTS A AND B OF PROSPECTUS

<TABLE>
<CAPTION>
ITEM NO. CAPTION LOCATION IN PROSPECTUS
- -------- ------------------------------------ -------------------------------------------------
<S> <C> <C>
PART A -- Information Required in a Prospectus

1. Outside Front Cover Front Cover Page

2. Cover Pages; Other Offering Information Front Cover Page

3. Fee Table and Synopsis Prospectus Summary; Fee Table

4. Financial Highlights Financial Highlights

5. Plan of Distribution Front Cover Page; Prospectus Summary; The Offer

6. Selling Shareholders Not Applicable

7. Use of Proceeds Use of Proceeds

8. General Description of the Registrant Front Cover Page; Prospectus Summary; the Fund;
Investment Objectives and Policies; Risk Factors
and Special Considerations; Capital Stock; Net
Asset Value

9. Management Management; Portfolio Transactions; Custodian,
Transfer Agent and Dividend Paying Agent

10. Capital Stock, Long-Term Debt and Other Securities The Offer; Capital Stock; Dividends and
Distributions; Net Asset Value; Taxation

11. Defaults and Arrears on Senior Securities Not Applicable

12. Legal Proceedings Not Applicable

13. Table of Contents of the Statement of Additional Table of Contents of the Statement of Additional
Information Information

PART B -- Information required in a Statement of Additional Information

14. Cover Page Front Cover Page

15. Table of Contents Front Cover Page

16. General Information and History General Information

17. Investment Objectives and Policies Investment Objectives and Policies; Investment
Restrictions

18. Management Management

19. Control Persons and Principal Holders of Securities Capital Stock

20. Investment Advisory and Other Services Management
</TABLE>

<PAGE>

22. Tax Status Taxation

23. Financial Statements Financial Statements
</TABLE>

PART C -- Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.

<PAGE>

PROSPECTUS

THE SALOMON BROTHERS FUND INC
9,460,886 SHARES OF CAPITAL STOCK
ISSUABLE UPON EXERCISE OF RIGHTS
TO SUBSCRIBE FOR SHARES

-------------------

The Salomon Brothers Fund Inc (the "Fund") is issuing to its shareholders
rights to purchase additional shares. You will receive one right for each share
of capital stock you own on the record date, which is May 15, 2000. You need ten
rights to purchase one share at the subscription price per share. The Fund will
not issue fractional shares upon the exercise of less than ten rights. If you
exercise all your rights you will be entitled to subscribe for additional shares
not acquired by other shareholders. The Fund may increase the number of shares
subject to subscription by up to 25%, or 2,365,222 shares, for an aggregate
total of 11,826,108 shares. The rights are not transferable; you may not
purchase or sell them and they will not trade on the New York Stock Exchange
(the "NYSE") or any other exchange. The shares to be issued pursuant to the
rights will trade on the NYSE under the symbol "SBF."

The subscription price per share will be 95% of the lower of:

(1) the volume-weighted average of the sales prices of a share on the NYSE
on the expiration date of the offer and on the previous four business
days, and

(2) the net asset value per share as of the close of business on the
expiration date of the offer.

In no event will the subscription price per share be lower than 87.5% of
the net asset value per share as of the close of business on the expiration date
of the offer.

This floor price will take effect if shares of the Fund are trading at a
discount to net asset value greater than 7.9%

You will not know the actual subscription price at the time you exercise
your rights. Once you subscribe for shares and the Fund receives payment or a
guarantee of payment, you will not be able to change your decision.

THE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON JUNE 19, 2000,
UNLESS EXTENDED TO NOT LATER THAN JUNE 26, 2000.

The Fund is a closed-end, diversified management investment company. Its
primary investment objectives are growth and conservation of capital. Income
receives secondary consideration. The Fund invests primarily in common stock of
companies in industries the investment manager believes have the potential to
grow at a faster rate than the economy as a whole and that appear to have
above-average earnings growth potential. See "Risk Factors and Special
Considerations" beginning on page __ of this prospectus for a more comprehensive
discussion of risks you may incur when making an investment in the Fund. There
can be no assurance that the Fund will achieve its investment objectives.

-------------------

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED
IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
ESTIMATED ESTIMATED
SUBSCRIPTION ESTIMATED PROCEEDS TO
PRICE (1) SALES LOAD THE FUND (2)(3)
-------------- ------------ -----------------
<S> <C> <C> <C>
Per Share.......................... None
Total Maximum (4).................. None
</TABLE>

<PAGE>

(FOOTNOTES ON THE FOLLOWING PAGE)

This prospectus sets forth concisely the information about the Fund that a
prospective investor should know before investing and should be retained for
future reference. A statement of additional information dated __________ __,
2000 containing additional information about the Fund has been filed with the
Commission and legally forms a part of this prospectus. The table of contents of
the statement of additional information appears on page ___ of this prospectus.
You may obtain a copy of the statement of additional information without charge
by contacting _______________________________, the Fund's information agent for
the offer.

If you have questions or need further information about the offer, please
call the information agent collect at (___) ___-____ (for banks and brokers) and
toll free at (___) ___-____(for all others).

The date of this prospectus is ____________, 2000

<PAGE>

(FOOTNOTES FROM THE PREVIOUS PAGE)

(1) Estimated on the basis of 95% of the volume-weighted average of the sales
prices of a share on the NYSE on ______ __, 2000 and on the previous four
business days. Actual amounts may vary due to rounding.

(2) Before deduction of offering expenses incurred by the Fund, estimated at
$__________.

(3) Funds received by check prior to the final due date of this offer will be
deposited into a segregated interest-bearing account pending allocation and
distribution of shares. Interest on subscription moneys will be paid to the
Fund regardless of whether shares are issued by the Fund.

(4) Assumes all rights are exercised at the estimated subscription price. The
Fund may increase the number of shares subject to subscription by up to 25%
of the shares offered. If the Fund increases the number of shares subject
to subscription by 25%, the aggregate maximum estimated subscription price
and estimated proceeds will be $________ and $________ , respectively.

------------------------

<PAGE>

PROSPECTUS SUMMARY

You should read the entire prospectus, including the statement of
additional information which legally forms part of this prospectus, before you
decide whether to exercise your rights. In particular, you should read carefully
the risks of investing in the shares discussed under "Risk Factors and Special
Considerations."

BENEFITS OF THE OFFER

The board of directors has determined that increasing the Fund's assets
through a rights offering may provide the following benefits:

increased ability to take advantage of investment opportunities without
being required to sell current portfolio positions that the Fund wishes
to retain in part due to the capital gains embedded in these positions

additional investment flexibility

lower expense ratios

lower expected capital gains distributions per share. This will occur
because the increase in the number of shares issued and outstanding
means that any capital gain distributed to shareholders will be spread
over a larger number of shares, and therefore the per share amount of
capital gain distributed will decrease. This benefit only applies with
respect to capital gain in positions held by the Fund at the time of
the offering, or realized earlier in the year 2000.

improved liquidity of the trading market for shares on the NYSE

opportunity to purchase additional shares at a price below current
market price

There can be no assurance that the offer will provide any of the benefits
listed above

The Fund may choose to make additional rights offerings in the future for a
number of shares and on terms which may or may not be similar to this offer.

IMPORTANT TERMS OF THE OFFER

<TABLE>
<S> <C>
Total number of shares available for primary subscription: ....... 9,460,886

Total number of shares available to cover over-subscription
requests: ........................................................ 2,365,222

Number of rights you will receive for each outstanding share
you own on the record date: ...................................... One right for every one share

Number of shares you may purchase with your rights at the
subscription price per share: .................................... One share for every ten rights

Subscription price: .............................................. 95% of the lower of (1) the volume-weighted average
of the sales prices per share on the NYSE on the
expiration date and on the preceding four business
days and (2) the net asset value per share on the
expiration date. In no event will the subscription price
per share be lower than 87.5% of the net asset value
per share as of the close of business on the expiration
date of the offer. This floor price will take effect if
shares of the Fund are trading at a discount to net
asset value greater than 7.9%.
</TABLE>

<PAGE>

HOW TO EXERCISE RIGHTS

To exercise your rights, please follow the following instructions:

If you do not own your shares through a broker, bank or other nominee,
you should have received a subscription certificate. The subscription
certificate elicits the necessary information to enable you to
exercise your rights. Please complete and sign the subscription
certificate. Mail it in the envelope provided or deliver the completed
and signed subscription certificate with payment in full to
________________, the subscription agent for the offer, at the address
indicated on the subscription certificate. Your completed and signed
subscription certificate and payment must be received by the
expiration date, which is June 19, 2000 (unless extended). You should
calculate the total payment on the basis of an estimated subscription
price of $____ per share. If you do not own your shares through a
broker, bank or other nominee and have not received a subscription
certificate, please contact ________________________, the information
agent for the offer, collect at (___) ___-____ (for banks and brokers)
and toll free at (___) ___-____ (for all others).

If you own your shares through a broker or other nominee, please
contact your broker, banker or trust company. It can arrange to
exercise rights on your behalf and to guarantee payment and delivery
of a properly completed and executed subscription certificate pursuant
to a notice of guaranteed delivery by the close of business on the
expiration date. A fee may be charged for this service. The notice of
guaranteed delivery must be received on or before the expiration date,
which is June 19, 2000 (unless extended).

IMPORTANT DATES TO REMEMBER

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

<TABLE>
<CAPTION>
Event Date
- ---------------------------------------------------------- -----------------------------
<S> <C>
Record date............................................... May 22, 2000
Subscription period....................................... May 22, 2000 to June 19, 2000
Payment for shares or notice of guaranteed delivery due... June 19, 2000
Expiration and pricing date............................... June 19, 2000
Payment for guarantees of delivery due.................... June 26, 2000
Confirmation to participants.............................. July 3, 2000
Final payment for shares.................................. July 17, 2000
</TABLE>

OVER-SUBSCRIPTION PRIVILEGE

If you exercise all your rights, you may subscribe for shares which were
not subscribed for by other shareholders. If sufficient shares are not available
to honor all requests for over-subscriptions, the Fund may increase the number
of shares available for subscription by up to 25%, or 2,365,222 shares, in order
to satisfy these over-subscription requests. Available shares will be allocated
ratably among those who over-subscribe based on the number of rights originally
issued to them.

RIGHTS MAY NOT BE PURCHASED OR SOLD

You may not purchase or sell the rights and they will not trade on any
exchange. If you do not exercise your rights before the conclusion of the rights
offer, your rights will expire without value.

RESTRICTIONS ON FOREIGN SHAREHOLDERS

The Fund will not mail subscription certificates to shareholders whose
record addresses are outside the United States. _____________ will hold the
rights to which subscription certificates relate for foreign shareholder
accounts until instructions are received to exercise the rights. If no
instructions are received prior to the expiration date, these rights will
expire.

<PAGE>

FURTHER INFORMATION

If you have any questions or inquiries relating to the offer, please
contact the information agent at:

[LOGO]

-------------------------
New York, New York _____
Banks and Brokers Call Collect: (212) ___-____
All Others Call Toll Free: (800) ___-____

OFFERING FEES AND EXPENSES

Salomon Smith Barney, Inc. will act as a financial advisor to the Fund for
the offer. The Fund will pay Salomon Smith Barney, Inc. a fee for its financial
advisory services equal to 0.375% of the subscription price for each share
issued. The Fund will also pay __________, as information agent, a fee of
$_____________ and _________, as subscription agent, a fee of ________.

USE OF PROCEEDS

We estimate the net proceeds of the offer to be approximately
$_____________. If the Fund increases the number of shares subject to
subscription by up to 25% in order to satisfy over-subscription requests, the
additional net proceeds will be approximately $______________.

Salomon Brothers Asset Management Inc, the Fund's investment manager,
anticipates that it will take up to one month for the Fund to invest these
proceeds in accordance with its investment objective and policies under current
market conditions.

INFORMATION REGARDING THE FUND

The Fund is a Maryland corporation, organized on January 18, 1977 as a
wholly-owned subsidiary of The Lehman Corporation, a Delaware corporation, which
commenced business operations on September 24, 1929. On April 30, 1977, a merger
of the two corporations was consummated and the Maryland corporation succeeded
to the business and affairs of the Delaware corporation. The Fund is a
diversified, closed-end management investment company registered under the
Investment Company Act of 1940 (the "1940 Act"). Its primary investment
objectives are growth and conservation of capital. The Fund invests primarily in
common stock of companies in industries the investment manager believes have the
potential to grow at a faster rate than the economy as a whole and that appear
to have above-average earnings growth potential.

There can be no assurance that the Fund will achieve its investment
objectives. The shares are listed and traded on the New York Stock Exchange
under the symbol "SBF." As of March 31, 2000, the net assets were approximately
$[____] billion.

INVESTMENT MANAGER; CUSTODIAN AND TRANSFER AGENT

Salomon Brothers Asset Management Inc ("SaBAM") acts as investment manager
to the Fund. SaBAM is responsible on a day-to-day basis for the management of
the Fund's portfolio in accordance with the Fund's investment objectives and
policies and for making decisions to buy, sell, or hold particular securities
and is responsible for day-to-day administration of the Fund.

PNC Bank, N.A. is the custodian for the Fund.

The Bank of New York is the transfer agent and dividend paying agent for
the Fund.

MANAGEMENT FEES

<PAGE>

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

RISK FACTORS AND SPECIAL CONSIDERATIONS

You should consider the following factors, as well as the other information
in this Prospectus, before making an investment in the Fund under this offer.

You Will Incur Immediate Dilution in this Offer

If you do not exercise all your rights, after the offer you will own a
smaller proportional interest in the Fund. In addition, whether or not you
exercise your rights, the net asset value per share of your shares will be
reduced as a result of the offer because:

the shares offered will be sold at less than their then current net
asset value

you will indirectly bear the expenses of the offer

the number of shares outstanding after the offer will have increased
proportionately more than the increase in the size of the net assets

You May Lose Money by Investing in the Fund

An investment in the Fund is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.

Among the principal risks of investing in the Fund is market risk, which is
the risk that the value of your investment may fluctuate as stock markets
fluctuate.

As an investment company that holds common stocks, the Fund's portfolio is
subject to the possibility that common stock prices will decline over short or
even extended periods. The Fund may remain substantially fully invested during
periods when stock prices generally rise and also during periods when they
generally decline. Risks are inherent in investment in equities, and Fund
shareholders should be able to tolerate significant fluctuations in the value of
their investment in the Fund. The Fund is intended to be a long-term investment
vehicle and is not designed to provide investors with a means of speculating on
short-term stock market movements. Investors should not consider the Fund a
complete investment program.

There Are No Fixed Limitations Regarding Portfolio Turnover

Frequency of portfolio turnover is not a limiting factor if the Fund
considers it advantageous to purchase or sell securities. The Fund anticipates
that its annual portfolio turnover rate will not exceed 100%. For the year ended
December 31, 1999, the Fund's portfolio turnover rate was 73%. A higher rate of
portfolio turnover involves correspondingly greater aggregate payments for
brokerage commissions than a lower rate, which expenses must be borne by the
Fund and its shareholders, while a lower rate of portfolio turnover involves
correspondingly lower aggregate payments and shareholder expenses.

The Fund's Shares Have Traded and May Continue to Trade at a Discount to Net
Asset Value

Shares of closed-end management investment companies frequently trade at a
discount from their net asset value (the market price per share is less than the
value per share of the net assets). This characteristic is a risk separate and
distinct from the risk that the Fund's net asset value will decrease as a result
of its investment activities and may be greater for investors expecting to sell
their shares relatively soon after completion of this offering. Historically,
the stock has sold sometimes above and sometimes below net asset value. The Fund
cannot predict whether its shares will trade at, above or below net asset value
in the future.

The Fund's Investments in Foreign Securities May Subject You to Increased Risk

The Fund may invest up to 25% of its assets in foreign securities. Many
foreign securities may be less liquid and their prices more volatile than
securities of comparable U.S. companies. Other risks of investing in foreign
securities include less governmental supervision and regulations with respect to
the issuance of such securities as compared to in the U.S., less available
information concerning foreign issuers than U.S. issuers and higher brokerage
commissions and longer transaction settlement periods as compared to the U.S. In
addition, with respect to some foreign countries there is the possibility of
nationalization, expropriation or confiscatory taxation. Income earned in a
foreign nation may be subject to taxation (including withholding taxes on
interest and dividends), or other taxes may be imposed with respect to
investments in foreign securities.

<PAGE>

FEE TABLE

The following table sets forth certain fees and expenses of the Fund.

<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load (as a percentage of the subscription price per share)..........0 %
Dividend Reinvestment and Cash Purchase Plan Fees *
ANNUAL EXPENSES (as a percentage of net assets attributable to capital stock)...
Management Fees(1)....................................................... 0.51%
Other expenses(2).........................................................0.05%
TOTAL ANNUAL EXPENSES(2)........................................................0.56%
</TABLE>

<TABLE>
<CAPTION>
1 3 5 10
EXAMPLE YEAR YEARS YEARS YEARS
- ------------------------------------------------ -------- --------- --------- ---------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment assuming a 5% annual return(3) $6 $18 $31 $70
</TABLE>

* Participants in the Fund's Automatic Dividend Reinvestment Plan and Cash
Payment Plan only pay transaction-based charges. Actual costs will vary for
each participant depending on the nature and number of transactions made.
For a description of the charges payable by participants, see "Dividends
and Distributions -- Cost to Participants."

(1) The investment manager's compensation is based upon a base fee which ranges
from 0.45-0.65%, depending on the fund's daily net assets, which is then
subject to an increase or decrease based upon the performance of the Fund
in relation to the Standard & Poor's 500 Index of Composite Stocks. See
"Prospectus Summary -- Investment Manager and Custodian." The amount shown
is based upon the net assets of the Fund after giving effect to the offer.

(2) Based upon estimated amounts for the current fiscal year and on the net
assets of the Fund after giving effect to the anticipated net proceeds of
the offer, including proceeds from the issuance of up to 25% of the shares
under the over-subscription privilege. This figure does not include
expenses of the Fund incurred in connection with the offer, estimated at
$_________. Total expenses for the fiscal year ended December 31, 1999 were
0.56% of average net assets.

(3) The example reflects the expenses of the Fund incurred in connection with
the offer and assumes that all of the rights are exercised and that all
dividends and distributions are reinvested.

WE HAVE PREPARED THE FOREGOING TABLE AND EXAMPLE TO ASSIST YOU IN
UNDERSTANDING THE VARIOUS COSTS AND EXPENSES THAT YOU BEAR, DIRECTLY OR
INDIRECTLY, BUT YOU SHOULD NOT CONSIDER IT AS A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATE OF RETURN. THE ACTUAL EXPENSES OF THE FUND MAY BE GREATER OR
LESS THAN THOSE SHOWN. For more complete descriptions of certain of the Fund's
costs and expenses, see "Management" in this prospectus and in the statement of
additional information.

<PAGE>

FINANCIAL HIGHLIGHTS

The following table describes selected financial data for a share of
capital stock outstanding throughout each year presented. The per share
operating performance and ratios/supplemental data for each of the years, have
been derived from financial statements audited by PricewaterhouseCoopers LLP,
the Fund's independent accountants, whose report is included in the financial
statements which are incorporated by reference into the statement of additional
information. The following information should be read in conjunction with the
financial statements and notes, which legally forms a part of the prospectus
and which is available upon request.

PER SHARE OPERATING PERFORMANCE
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR

<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
-------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year ................................... $ 18.76 $ 18.51 $ 17.26 $ 15.43 $ 12.88
Net Investment Income .............................................. .18 .26 .27 .33 .35
Net Gains (Losses) on Securities (both realized and
unrealized) (1) .................................................... 4.08 3.45 3.93 3.93 4.04
Total from Investment Operations ..................................... 4.26 3.71 4.20 4.26 4.39
Less Dividends and Distributions:
Dividends From Net Investment Income ............................... (.17) (.27) (.27) (.34) (.35)
Distributions From Net Realized Gain on Investments ................ (3.63) 3.19 (2.68) (2.09) (1.49)
------- ------- ------- ------- -------
Total Dividends and Distributions .................................... (3.80) (3.46) (2.95) (2.43) (1.84)
Increase in Net Asset Value due to Shares Issued on
Reinvestment of Dividends .......................................... .02 -- -- -- --
------- ------- ------- ------- -------
Net Asset Value, End of Year ......................................... $ 19.24 $ 18.76 $ 18.51 $ 17.26 $ 15.43
Market Price, End of Year ............................................ $ 20.38 $ 18.19 $ 17.69 $ 16.00 $ 13.38
Total Investment Return Based on Market Price per Share
Excluding Broker Commissions ....................................... +34.6% +22.6% +29.5% +38.7% +43.3%

<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90(2)
-------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year ................................... $ 14.88 $ 15.16 $ 15.66 $ 13.33 $ 15.58
Net Investment Income ............................................ .33 .34 .40 .45 .46
Net Gains (Losses) on Securities (both realized and unrealized) .. (.605) 1.44 .10 3.49 (1.51)
Total from Investment Operations ..................................... (.275) 1.78 .50 3.94 (1.05)
Less Dividends and Distributions:
Dividends From Net Investment Income ............................. (.335) (.34) (.40) (.47) (.49)
Distributions from Net Realized Gain on Investments .............. (1.39) (1.72) (.60) (1.14) (.71)
------- ------- ------- ------- -------
Total Dividends and Distributions .................................... (1.725) (2.06) (1.00) (1.61) (1.20)
Net Asset Value, End of Year ......................................... $ 12.88 $ 14.88 $ 15.16 $ 15.66 $ 13.33
Market Price, End of Year ............................................ $ 10.63 $ 12.75 $ 13.75 $ 13.88 $ 11.00
Total Investment Return Based on Market Price per Share
Excluding Broker Commissions ..................................... -3.7% +7.9% +6.4% +42.5% -6.4%
</TABLE>

<PAGE>

RATIOS/SUPPLEMENTAL DATA

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Assets, End of Year (Millions)..................... $1,820 $1,686 $1,545 $1,441 $1,291
Ratio of Expenses to Average Net Assets................ .56% .52% .53% .51% .41%
Ratio of Net Investment Income to Average Net Assets... .90% 1.39% 1.46% 1.96% 2.42%
Portfolio Turnover Rate................................ 73% 68% 49% 52% 82%

<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90(2)
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Assets, End of Year (Millions)..................... $ 1,087 $1,176 $1,109 $1,115 $906
Ratio of Expenses to Average Net Assets................ .49% .41% .43% .43% .46%
Ratio of Net Investment Income to Average Net Assets... 2.33% 2.19% 2.62% 3.01% 3.21%
Portfolio Turnover Rate................................ 69% 80% 42% 14% 15%
</TABLE>

- ----------------
(1) Includes $.015 and $.02 attributable to the increase in net asset value
from shares repurchased at a discount for the years ended 1996 and 1995,
respectively.

(2) Since May 1, 1990, the Fund has been managed by SaBAM. Prior thereto, the
Lehman Management Co. division of Shearson Lehman Brothers Inc. served as
the Fund's investment manager.

<PAGE>

THE OFFER

BENEFITS OF THE OFFER

The board of directors of the Fund has determined that increasing its
assets through a rights offering is in your best interest.

In consultation with SaBAM, the board determined that the rights offering
may provide the following benefits:

increased ability to take advantage of investment opportunities without
being required to sell current portfolio positions that it wishes to retain
in part due to the capital gains embedded in these positions

additional investment flexibility

lower expense ratios

lower expected capital gains distributions per share. This will occur
because the increase in the number of shares issued and outstanding means
that any capital gain distributed to shareholders will be spread over a
larger number of shares, and therefore the per share amount of capital gain
distributed will decrease. This benefit only applies with respect to
capital gain in positions held by the Fund at the time of the offering, or
realized earlier in the year 2000.

improved liquidity of the trading market for shares on the NYSE

opportunity to purchase additional shares at a price below current market
price

Prior to reaching this conclusion, the board, in consultation with SaBAM
and Salomon Smith Barney, Inc., reviewed the structure, timing and terms of the
offer, and its dilutive effect on both shareholders who exercise their rights
and those who don't. After careful consideration, the board unanimously voted to
approve the offer.

There can be no assurance that the offer will provide any of the benefits
listed above.

The Fund may choose to make additional rights offerings from time to time
for a number of shares and on terms which may or may not be similar to the
offer.

TERMS OF THE OFFER

The Fund is issuing to its shareholders rights to purchase additional
shares. You will receive one right for each share you own on the record date,
which is May 22, 2000. You need ten rights to purchase one share at the
subscription price per share. The Fund will not issue fractional shares upon the
exercise of less than ten rights. You may exercise your rights to acquire shares
at any time during the subscription period, which begins on May 22, 2000 and
ends at 5:00 p.m., New York City time, on June 19, 2000, unless extended by the
Fund to 5:00 p.m., New York City time, on a date which will be no later than
June 26, 2000. The right of a shareholder of record to acquire one share for
every ten rights during the subscription period at the subscription price is
called the "primary subscription."

Rights are evidenced by subscription certificates. The Fund will send
subscription certificates to all persons whose names appear on the list of
shareholders of the Fund on May 22, 2000, the record date of the offer.

If you exercise all your rights, you may subscribe for additional shares.
Shares available for purchase pursuant to this over-subscription privilege are
subject to allotment and increase. The over-subscription privilege is more fully
described below. For purposes of determining the maximum number of shares you
may acquire pursuant to the offer, if your shares are held of record by Cede, as
nominee for The Depository Trust Company, or by any other depository or nominee,
you will be deemed to be the holder of the rights that are issued to Cede or
such other depository or nominee on your behalf.

Since the Fund will not issue fractional shares, if you receive or have
remaining fewer than ten rights, you will be unable to purchase shares upon the
exercise of such rights and no cash will be paid to you in lieu of such rights.
You may, however, subscribe for shares pursuant to the over-subscription
privilege provided you have exercised all your rights. Once you subscribe for
shares and the Fund receives payment or a guarantee of payment, you will not be
able to change your decision.

<PAGE>

IMPORTANT DATES TO REMEMBER

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

<TABLE>
<CAPTION>
Event Date
- --------------------------------------------------------------- -----------------------------
<S> <C>
Record date.................................................... May 22, 2000
Subscription period............................................ May 22, 2000 to June 19, 2000
Payment for shares or notice of guaranteed delivery due........ June 19, 2000
Expiration and pricing date.................................... June 19, 2000
Payment for guarantees of delivery due......................... June 26, 2000
Confirmation to participants................................... July 3, 2000
Final payment for shares....................................... July 17, 2000
</TABLE>

OVER-SUBSCRIPTION PRIVILEGE

If shares remain available for purchase after all shareholders have had a
chance to exercise their rights pursuant to the primary subscription, the Fund
will offer such shares to shareholders who have exercised all their rights and
who desire to acquire additional shares. You may subscribe for those additional
shares pursuant to the over-subscription privilege only if you exercise all your
rights pursuant to the primary subscription. If you exercise all your rights and
wish to subscribe for additional shares, please indicate on the subscription
certificate the number of additional shares desired through the
over-subscription privilege.

If sufficient shares remain from unexercised rights, all over-subscriptions
may be honored in full. If sufficient shares are not available to honor all
over-subscription requests, the Fund may issue up to an additional 2,365,222
shares, representing 25% of the shares available pursuant to the primary
subscription, to satisfy over-subscription requests. Whether or not the Fund
issues these additional shares, if there are not enough shares available to
honor all over-subscriptions, the available shares will be allocated among you
and all the other shareholders who subscribe for additional shares pursuant to
the over-subscription privilege in proportion to the number of rights issued to
you and such shareholders. The allocation process may involve a series of
allocations in order to assure that the total number of shares available for
over-subscriptions is distributed on a pro rata basis.

The Fund will not sell any shares that are not subscribed for under the
primary subscription or the over-subscription privilege.

SUBSCRIPTION PRICE

You may purchase one share for every ten rights at the subscription price.
The subscription price is 95% of the lower of:

(1) the volume-weighted average of the sales prices of a share on the
NYSE on the expiration date of the offer (June 19, 2000, unless extended)
and on the four preceding business days; and

(2) the net asset value per share as of the close of business on the
expiration date of the offer (June 19, 2000, unless extended).

In no event will the subscription price per share be lower than 87.5% of
the net asset value per share as of the close of business on the expiration date
of the offer. This floor price will take effect if shares of the Fund are
trading at a discount to net asset value greater than 7.9%.

For example, if the volume-weighted average of the sales prices on the NYSE
on June 19, 2000 and on the four preceding business days of a share of the
Fund's capital stock is $[ ], and the net asset value as of the close of
business on the pricing date is $[ ], the subscription price will be $[ ]
(95% of $[ ]). If, however, the volume-weighted average of the sales prices of
a share on that exchange on June 19, 2000 and on the four preceding business
days is $[ ], and the net asset value as of the close of business on June 19,
2000 is $[ ], the subscription price will be $[ ] (95% of $[ ]). However,
if 95% of the volume-weighted average of sales prices on the NYSE on June 19,
2000 and on the four preceding business days is less than 87.5% of the net asset
value per share as of the close of business on the expiration date of the offer,
the subscription price will be $[ ] (87.5% of the net asset value per share as
of the close of business on the expiration date).

The Fund announced the offer on ___________ __, 2000. The last reported
net asset value per share of common stock at the close of business on
___________ __, 2000 and ___________ __, 2000 was $_____ and $_____,
respectively, and the last

<PAGE>

reported sales price of a share on the NYSE on those dates was $_____ and
$_____, respectively. The Fund paid a dividend per share of $0.963, $0.0426 and
$2.7961, respectively, in May, 1999, August, 1999 and December, 1999.

RIGHTS MAY NOT BE PURCHASED OR SOLD

The rights are non-transferable. You may not purchase or sell them. The
rights will not trade on the NYSE or any other exchange. The shares to be issued
under the rights, however, will trade on the NYSE under the symbol "SBF". If you
do not exercise your rights before the conclusion of the rights offer, your
rights will expire without value.

EXPIRATION OF THE OFFER AND RIGHTS

The offer will expire at 5:00 p.m., New York City time, on June 19, 2000
unless the Fund extends it until 5:00 p.m., New York City time, to a date not
later than June 26, 2000. Rights will expire at that time and thereafter you
will no longer be able to exercise them. Since the expiration date for exercise
of the rights and the pricing date of the shares subscribed will be the same
date, you will not know the purchase price when you decide to acquire shares.

If the Fund decides to extend the offer, it will make an announcement to
that effect as promptly as practicable. The Fund may elect to extend the offer,
for example, if it determines that shareholders require extra time to exercise
their rights in a timely fashion. The Fund will not, unless otherwise required
by law, have any obligation to publish, advertise or otherwise communicate any
such announcement other than by making a release to the Dow Jones News Service
or such other means of announcement as the Fund deems appropriate.

SUBSCRIPTION AGENT

The subscription agent, ____________________, will receive for its
administrative, processing, invoicing and other services as subscription agent,
a fee estimated to be approximately $[______] plus reimbursement for its
out-of-pocket expenses related to the offer. If you have any questions regarding
subscription certificates, please contact _______________________, the
information agent for the offer, at (___) ___-____. You must send completed
subscription certificates together with payment of the estimated subscription
price to ____________________ by one of the methods described below.

By First Class Mail: By Overnight, Certified or Express Mail:

[Address] [Address}

By Hand:

[Address}

By Facsimile (Telecopy):

For Notice Of Guaranteed Delivery Only

(___)___-____ [fax] with the original Subscription Certificate to be sent
by method (1) above.

Confirm facsimile by telephone at (___)___-____ [phone].

The Fund will accept only subscription certificates actually received on a
timely basis. DELIVERY TO AN ADDRESS OTHER THAN THOSE SET FORTH ABOVE DOES NOT
CONSTITUTE GOOD DELIVERY.

<PAGE>

HOW TO EXERCISE RIGHTS

Rights will be evidenced by subscription certificates. Except as described
below under "Restrictions on Foreign Shareholders," the Fund will mail
subscription certificates directly to you if your shares are registered in your
name or, if you own your shares through a broker, depository or nominee, to Cede
or such other depository or nominee. You may exercise your rights by either:

completing and signing a subscription certificate and mailing it in the
envelope provided, together with payment for the shares to the subscription
agent

contacting your broker, banker or trust company, which can guarantee
payment and delivery of a properly completed and executed subscription
certificate before June 19, 2000. A fee may be charged for this service.

Fractional shares will not be issued. Therefore, if you receive, or have
remaining, fewer than ten rights, you will not be able to purchase any shares
upon the exercise of rights. You will not be entitled to cash for less than ten
rights. You may, however, subscribe for additional shares pursuant to the
over-subscription privilege provided you have exercised all your rights pursuant
to the primary subscription.

The subscription agent must have received at its office indicated above
completed subscription certificates or notices of guaranteed delivery prior to
5:00 p.m., New York City time, on June 19, 2000.

If You Do Not Own Your Shares Through a Broker or Other Nominee. As a
record holder, you can choose between two options set forth under "Payment for
Shares" below. If time is of the essence, option (2) will permit delivery of the
completed subscription certificate and payment after June 19, 2000.

If You Own Your Shares Through a Broker or Other Nominee. You must contact
that broker or nominee to exercise your rights. In that case, the nominee will
complete the subscription certificate on your behalf and arrange for proper
payment by one of the methods set forth under "Payment for Shares".

If You Are a Nominee. If you hold shares for the account of others, you
should notify the beneficial owners of such shares as soon as possible to obtain
instructions. If the beneficial owner so instructs, you should complete the
subscription certificate and submit it to the subscription agent with proper
payment.

RESTRICTIONS ON FOREIGN SHAREHOLDERS

The Fund will not mail subscription certificates to shareholders whose
record addresses are outside the United States. For these purposes, the United
States includes its territories and possessions and the District of Columbia.
The rights to which those subscription certificates relate will be held by ___
________________ for foreign shareholders' accounts until instructions are
received to exercise the rights. If no instructions are received prior to June
19, 2000, such rights will expire.

INFORMATION AGENT

If you have any questions or inquiries relating to the offer, please
contact the information agent at:

[--------------------------]

[ADDRESS]

You may also contact your broker or nominee for information with respect to
the offer.

The Fund will pay the information agent for its services in connection with
the offer a fee estimated to be approximately $[_____] plus reimbursement for
its out-of-pocket expenses.

<PAGE>

PAYMENT FOR SHARES

You may choose between the following methods of payment to exercise your
rights:

(1) You can send the completed subscription certificate together with
payment for shares to the subscription agent. You should calculate the total
payment on the basis of an estimated subscription price of $____ per share. To
be accepted, your payment accompanied by a properly executed and completed
subscription certificate must be received by the subscription agent prior to
5:00 p.m., New York City time, on June 19, 2000.

If you pay using this method, please make sure that your payment:

is made in United States dollars by money order or check drawn on a
bank located in the United States

is made to "The Salomon Brothers Fund Inc"

accompanies an executed subscription certificate.

(2) Alternatively, you may contact your broker, bank or trust company and
request that it sends on your behalf a notice of guaranteed delivery by
facsimile or otherwise to the subscription agent. The subscription agent will
accept all notices of guaranteed delivery received from brokers, banks, trust
companies or NYSE members prior to 5:00 p.m., New York City time, on June 19,
2000. The notice must guarantee delivery to the subscription agent of (a)
payment of the full subscription price for the shares subscribed for pursuant to
the primary subscription and any additional shares subscribed for pursuant to
the over-subscription privilege, and (b) a properly completed and executed
subscription certificate. The subscription agent will not honor a notice of
guaranteed delivery if a properly completed and executed subscription
certificate, together with payment, is not received by the close of business on
June 26, 2000.

No later than July 3, 2000, the subscription agent will send a confirmation
to each shareholder or, if the shareholder's shares are held by Cede or any
other depository or nominee, to Cede or such depository or nominee. This
confirmation will show:

the number of shares you acquired pursuant to the primary
subscription;

the number of shares, if any, you acquired pursuant to the
over-subscription privilege;

the per share and total purchase price for the shares; and

any additional amount that you must pay to the Fund or any excess to
be refunded by the Fund to you.

You will not receive any other evidence of title unless you have requested
a stock certificate at the time of exercise of the rights. You must ensure that
the subscription agent receives any additional payment required from you before
July 17, 2000. The subscription agent will mail any excess payment owed to you
within a reasonable time after the expiration date. The Fund will not pay
interest on any excess payment. All your payments to the Fund must be in U.S.
Dollars by money order or check drawn on a bank located in the United States of
America and payable to The Salomon Brothers Fund Inc.

The subscription agent will deposit all checks received by it prior to the
final due date into a segregated interest-bearing account pending distribution
of the shares. Interest will accrue to the benefit of the Fund regardless of
whether shares are issued or not by the Fund.

Issuance and delivery of evidence of title for the shares purchased are
subject to collection of checks and actual payment pursuant to any notice of
guaranteed delivery.

YOU WILL HAVE NO RIGHT TO RESCIND YOUR SUBSCRIPTION AFTER RECEIPT OF YOUR
PAYMENT FOR SHARES BY THE SUBSCRIPTION AGENT.

If you subscribe for shares and do not pay any additional amounts due, the
Fund may:

(1) sell these shares to other shareholders;

(2) sell you only the number of shares your payment covers; and/or

<PAGE>

(3) exercise any and all other rights or remedies to which it may be
entitled to collect the additional amount due, including enforcing any
guaranty of payment.

You may choose the method of delivery of subscription certificates and
payment of the subscription price from those indicated above. Whichever method
you choose, you will make delivery and payment at your own risk. If you use
mail, subscription certificates and payment should be sent by registered mail
and properly insured, with return receipt requested. Please allow a sufficient
number of days to ensure delivery to the Fund and clearance of payment prior to
5:00 p.m., New York City time, on the last applicable payment date. Because
uncertified personal checks may take at least five business days to clear, you
are strongly urged to pay, or arrange for payment, by means of certified or
cashier's check or money order.

The Fund will determine all questions concerning the timeliness, validity,
form and eligibility of any exercise of rights. The Fund's determinations will
be final and binding. The Fund may waive any defect or irregularity, or permit a
defect or irregularity to be corrected within such time as it may determine. The
Fund may also reject the purported exercise of any right. Subscriptions will not
be deemed to have been received or accepted until all irregularities have been
waived or cured within such time as the Fund determines. The Fund will not be
under any duty to give notification of any defect or irregularity related to the
submission of subscription certificates. The Fund will not incur any liability
for failure to give any such notification.

DELIVERY OF STOCK CERTIFICATES

The Fund will issue certificates for shares acquired through subscription
only upon request made at the time of exercise of the rights. If a request is
made, stock certificates will be mailed promptly after July 3, 2000 and after
payment for the shares subscribed for has cleared. If you are a participant in
the Fund's dividend reinvestment and cash purchase plan, your shares will be
credited to your account in the plan. The Fund will not issue certificates for
subscription shares credited to plan accounts. If your shares are held of record
by Cede or by any other depository or nominee on your behalf or your
broker-dealer's behalf, the shares that you acquire will be credited to the
account of Cede or such other depository or nominee.

OFFERING FEES AND EXPENSES

Salomon Smith Barney, Inc. will act as a financial advisor to the Fund for
the offer pursuant to a financial advisory agreement with the Fund. The Fund
will pay Salomon Smith Barney, Inc., an affiliate of the Fund and SaBAM, a fee
for its financial advisory services equal to 0.375% of the subscription price
for each share issued. The Fund will also pay __________, as information agent,
a fee for their soliciting efforts equal to [$__________]

Other offering expenses incurred by the Fund are estimated at $[_______].

FEDERAL INCOME TAX CONSEQUENCES

For United States federal income tax purposes, neither the receipt nor the
exercise of the rights will result in taxable income to you. Moreover, you will
not realize a loss if you do not exercise the rights. The holding period for a
share acquired upon exercise of a right begins with the date of exercise. The
basis for determining gain or loss upon the sale of a share acquired upon the
exercise of a right will be equal to the sum of:

the subscription price per share,

any servicing fee charged to you by your broker, bank or trust
company, and

the basis, if any, in the rights that you exercised.

A gain or loss recognized upon a sale of a share acquired upon the exercise
of a right will be a capital gain or loss assuming the share is held as a
capital asset at the time of sale. This gain or loss will be a long-term capital
gain or loss if the share has been held at the time of sale for more than one
year.

As noted above, your basis in shares issued under the offer includes your
basis in the rights underlying those shares. The basis of the rights will be
zero unless you elect to allocate your basis of previously owned shares to the
rights issued in the offer. This allocation is based upon the relative fair
market value of such shares and the rights as of the date of distribution of the
rights. Thus, if you make such an election, the basis in the shares you
originally owned will be reduced by an amount equal to the basis you allocated
to the rights. This election must be made in a statement attached to your
federal income tax return for the year in which the offer occurs.

<PAGE>

If you do not exercise the rights, however, you will not be able to
recognize a loss or to allocate a portion of your basis in the shares to the
unexercised rights.

The foregoing is a general summary of the material United States federal
income tax consequences of the receipt and exercise of rights. The discussion is
based upon applicable provisions of the U.S. Internal Revenue Code of 1986, U.S.
Treasury regulations and other authorities currently in effect, and does not
cover state, local or foreign taxes. The Code and regulations are subject to
change by legislative or administrative action. You should consult your tax
advisors regarding specific questions as to federal, state, local or foreign
taxes. You should also review the discussion of certain tax considerations
affecting yourself and the Fund set forth under "Taxation."

TAX-ADVANTAGED ACCOUNTS

The rules and regulations governing benefit plans are complex and include
penalties for noncompliance. If you hold your shares through an employee benefit
plan that is subject to the Employee Retirement Income Security Act of 1974,
including corporate savings and 401(k) plans, Keogh Plans of self-employed
individuals and Individual Retirement Accounts, please consult counsel and tax
advisors for such plan regarding the consequences under ERISA and the Code of an
exercise of the rights.

INVESTMENT ADVISORY FEES

SaBAM will benefit from the offer because the investment advisory fee is
based on the net assets of the Fund. Assuming all rights are exercised at the
estimated subscription price, including up to an additional 25% of the shares
which may be issued to satisfy over-subscriptions, the annual compensation to be
received by SaBAM, excluding any performance adjustment, would be increased by
approximately $_________. Actual compensation paid may vary depending on the
number of shares purchased and investment return. One of the Fund's directors
who voted to authorize the offer is an "interested person" of the Fund within
the meaning of the 1940 Act because of his position as a director and an officer
of SaBAM. This director could benefit indirectly from the offer because of his
affiliation. The other nine directors are not "interested persons" of the Fund.

DIVIDENDS

The Fund does not expect to pay dividends or other distributions with
respect to the shares acquired pursuant to rights until August 2000. The Fund
expects to make a dividend payment in June 2000, which will include a capital
gains distribution. This distribution will not be payable in respect of the
shares issued upon exercise of the rights because the record date for the
dividend payment will precede the issuance date for the rights.

USE OF PROCEEDS

Assuming the Fund sells all shares offered pursuant to the primary
subscription at the estimated subscription price, the net proceeds of the offer
are estimated to be $______________, after payment of the financial advisory
fees, the soliciting fees and the other estimated offering expenses. The Fund
will pay these expenses, which will reduce the net asset value per share. If the
Fund increases the number of shares subject to the offer by 25%, or 2,365,222
shares, in order to satisfy over-subscription requests, the additional net
proceeds will be approximately $_____________. SaBAM expects that, under current
market conditions, the Fund will invest substantially all of the net proceeds of
the offer in accordance with its investment objectives and policies
approximately within [one month] from the date of receipt. Pending such
investment, the proceeds will be invested in certain short-term debt
instruments.

THE FUND

<PAGE>

RISK FACTORS AND SPECIAL CONSIDERATIONS

Please consider carefully the matters set forth below. You should read the
entire prospectus and the statement of additional information before you decide
whether to exercise your rights.

YOU WILL INCUR IMMEDIATE DILUTION IN THIS OFFER

If you do not exercise all your rights, when the offer is over you will own
a smaller proportional interest in the Fund. In addition, whether or not you
exercise your rights, the per share net asset value of your shares will be
diluted (reduced) immediately as a result of the offer because:

* the shares offered will be sold at less than their then current net
asset value

* you will indirectly bear the expenses of the offer

* the number of shares outstanding after the offer will have increased
proportionately more than the increase in the size of the net assets.

This dilution may be substantial and will increase if the share price
declines in relation to the net asset value as shown by the following examples:

Scenario 1: Shares trade above per share net asset value (premium)(1)

<TABLE>
<S> <C>
Share Price.......................................................... $ ____
NAV.................................................................. $ ____
Subscription Price (95.0% of NAV).................................... $ ____
Reduction in NAV ($) (2)............................................. $ ____
Reduction in NAV (%)................................................. ____ %
</TABLE>

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

<TABLE>
<S> <C>
Share Price................................................................... $ ____
NAV........................................................................... $ ____
5-day volume-weighted average share price (3)................................. $ ____
Subscription Price (95.0% of 5-day volume-weighted average share price) (4)... $ ____
Reduction in NAV ($) (2)...................................................... $ ____
Reduction in NAV (%).......................................................... ____ %
</TABLE>

Scenario 3: Floor Price is triggered, as shares trade below per share net
asset value and formula subscription price is below 87.5% of net asset
value (1)

<TABLE>
<S> <C>
Share Price.................................................................. $ ____
NAV.......................................................................... $ ____
95% of 5-day volume-weighted average share price............................. $ ____
95% of 5-day volume-weighted average share price as percentage of NAV........ ____%
Subscription Price (87.5% of NAV) (4)........................................ $
Reduction in NAV ($) (2)..................................................... $ ____
Reduction in NAV (%)......................................................... ____%
</TABLE>

- --------------
(1) Examples assume full primary and over-subscription privilege exercised.
Actual amounts may vary due to rounding.
(2) Assumes $1,400,000 in estimated offering expenses.

<PAGE>

(3) The expiration date and the four preceding business days.

(4) In no event will the subscription price per share be lower than 87.5% of
the net asset value per share as of the close of business on the expiration
date of the offer.

YOU MAY LOSE MONEY BY INVESTING IN THE FUND

An investment in the Fund is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.

Among the principal risks of investing in the Fund is market risk, which is
the risk that the value of your investment may fluctuate as stock markets
fluctuate.

THERE ARE NO FIXED LIMITATIONS REGARDING PORTFOLIO TURNOVER

THE FUND'S SHARES HAVE TRADED AND MAY CONTINUE TO TRADE AT A DISCOUNT TO
NET ASSET VALUE

Shares of closed-end management investment companies frequently trade at a
discount from their net asset value (the market price per share is less than the
value per share of the net assets). This characteristic is a risk separate and
distinct from the risk that the Fund's net asset value will decrease as a result
of its investment activities and may be greater for investors expecting to sell
their shares relatively soon after completion of this offering. For those
investors, realization of a gain or loss on their investments is likely to be
more dependent upon the existence of a premium or discount than upon portfolio
performance. Historically the stock has sold sometimes above and sometimes below
net asset value See "Capital Stock." The Fund cannot predict whether its shares
will trade at, above or below net asset value in the future.

THE FUND'S INVESTMENTS IN FOREIGN SECURITIES MAY SUBJECT YOU TO INCREASED RISK

The Fund may invest up to 25% of its assets in foreign securities. Many
foreign securities may be less liquid and their prices more volatile than
securities of comparable U.S. companies. The issuance of foreign securities and
the activities of brokers are generally subject to less governmental supervision
and regulation than U.S. securities and brokers, and commissions on foreign
securities are generally higher than negotiated commissions in the United
States. In addition, there may, in certain instances, be delays in the
settlement of transactions effected in foreign markets. Certain countries
restrict foreign investments in their securities markets. These restrictions may
limit or preclude investment in certain countries or in certain industries or
market sectors, or may increase the cost of investing in securities of
particular companies.

Foreign companies are not generally subject to uniform accounting,
auditing, and financial reporting standards or to other regulatory requirements
comparable to those applicable to U.S. companies. Thus, there may be less
available information concerning non-U.S. issuers of securities held by the Fund
than is available concerning U.S. companies. In addition, with respect to some
foreign countries there is the possibility of nationalization, expropriation or
confiscatory taxation. Income earned in a foreign nation may be subject to
taxation (including withholding taxes on interest and dividends), or other taxes
may be imposed with respect to investments in foreign securities. Other risks
associated with investments in foreign securities include limitations on the
removal of securities, property or other assets of the Fund, difficulties in
pursuing legal remedies and obtaining judgments in foreign courts, political or
social instability, and diplomatic developments that could adversely affect the
Fund's investments in companies located in foreign countries.

<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

For a more detailed discussion of the investment objective and policies, see
"Investment Objective and Policies" in the Statement of Additional Information.

GENERAL

The primary investment objectives of the Fund are growth and conservation
of capital. Income receives secondary consideration. To attain these objectives
it is not the policy of the Fund to restrict itself as to the types of
securities (such as bonds, preferred or common stocks) in which it invests or as
to the proportion of the value of its assets that may be invested in any type of
securities. Normally, the assets of the Fund will be invested in common stocks
or securities convertible into common stocks of companies in industries the
investment manager believes have the potential to grow at a faster rate than the
economy as a whole and that appear to have above-average earnings growth
potential. However, subject to the limitations set forth below, the Fund may,
without limit, invest its assets in non-convertible bonds, debentures, notes or
other evidences of indebtedness whether for the short or long term or hold a
portion of its assets in cash, government securities or other types of
securities, whenever the Fund's management deems such investments advisable.
These policies may not be changed unless authorized by the vote of stockholders
of the Fund.

At December 31, 1999, the portfolio of investments was composed as follows
(as a percentage of Total Investments):

<TABLE>
<S> <C>
Common Stocks...................................................... 90.4%
Convertible Preferred Stock........................................ 1.9%
Corporate Obligations.............................................. 2.9%
Repurchase Agreements.............................................. 3.9%
Purchased Options.................................................. 0.9%
</TABLE>

As of December 31, 1999, the assets were invested in the following
industries and financial instruments:

<TABLE>
<CAPTION>
INDUSTRY % OF NET ASSETS
--------------------------------------------- ---------------
<S> <C>
Basic Industries 4.6%
Capital Goods 2.2%
Communication Services 10.1%
Consumer Cyclicals 6.3%
Consumer Non-cyclicals 8.3%
Energy 6.7%
Financial Services 12.7%
Health Care 9.6%
Technology 28.2%
Utilities and REIT's 0.7%
Transportation 1.0%
----
Subtotal for Long-term Domestic Investments 90.4%
</TABLE>

The ten largest holdings at December 31, 1999 (as a percentage of net
assets) were:

<TABLE>
<CAPTION>
POSITION % OF TOTAL INVESTMENTS
------------------------------------ ----------------------
<S> <C>
1) Microsoft Corporation 5.3%
2) Cisco Systems, Inc. 3.7%
3) Costco Wholesale Corporation 2.8%
4) MCI WorldCom, Inc. 2.7%
5) Corning Inc. 2.5%
6) The Bank of New York Co., Inc. 2.5%
7) Federated Department Stores, Inc. 2.3%
8) GTE Corp. 2.2%
9) News Corp. Ltd. ADR 1.9%
10) Bell Atlantic Corp. 1.9%
</TABLE>

<PAGE>

INVESTMENT POLICIES

The Fund retains flexibility in the management of its portfolio without
restrictions as to the proportion of assets which may be invested in any classes
of securities. The Fund anticipates, however, that its portfolio will consist
primarily of equity securities.

Since there may be periods, including those of unusual market conditions,
during which the Fund's management may deem it advisable to invest varying
portions of the Fund's fixed assets in income securities or to hold substantial
amounts of cash or its equivalent, the Fund retains the flexibility to do so.

The Fund purchases and sells securities as considered advisable by
management. The Fund usually holds securities for the long term, but may sell
portfolio securities whenever the Fund's management deems such sales to be
advisable, regardless of how long the Fund has owned such securities.

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

The Fund may invest in readily marketable securities, securities with
limited marketability or non-marketable securities. Although the Fund's
portfolio usually will consist of equity securities listed on the New York and
other stock exchanges, issues traded in the over-the-counter market may also be
purchased and held to the extent deemed advisable by the Fund's management.

The Fund may also purchase the securities of non-U.S. issuers. These
securities may be denominated and traded in foreign currencies, and may be
traded in the US or on international stock exchanges.

OTHER INVESTMENT TECHNIQUES

The Fund uses several derivative strategies to hedge market risks (such as
broad or specific market increments, interest rates and currency exchange rates)
and cash flows and to seek to increase the Fund's income or gain, including the
purchase of calls, puts and collars. The Fund owns "in the money" calls on the
Standard & Poor's 500 Index of Composite Stocks ("S&P 500 Index"), funded by a
combination of cash, high yield bonds and convertible bonds ("in the money"
means the value of the underlying instrument or stock index exceeds, in the
case of a call option, or is less than, in the case of a put option, the
exercise price of the option). This strategy keeps the Fund fully invested,
while giving it the flexibility to easily manage the volatile cash flows that
occur when the Fund pays its capital gains distributions. "In the money" call
options on the S&P 500 Index fall less than the market does when the value of
the S&P 500 Index nears or falls below the strike price of the option.
Therefore this strategy should make the Fund less volatile than the S&P 500
Index in the event of a severe market decline. The Fund also owns puts on the
S&P 500 Index. This strategy will protect against a decline in the Fund's
return in the event of a market decline. The Fund writes covered calls in
order to increase its returns. Both of these strategies should make the Fund
less volatile than the S&P 500 in the event of a market decline.

The Fund may purchase put and call options and write covered put and call
options on stocks and stock indices listed on domestic and foreign securities
exchanges in order to hedge against movements in the equity markets or to
increase income or gain to the Fund. In addition, the Fund may purchase options
on stocks that are traded over-the-counter. Options on stock indices are similar
to options on specific securities. However, because options on stock indices do
not involve the delivery of an underlying security, the option represents the
holder's right to obtain from the writer cash in an amount equal to a fixed
multiple of the amount by which the exercise price exceeds (in the case of a
put) or is less than (in the case of a call) the closing value of the underlying
stock index on the exercise date. Stock index options are subject to position
and exercise limits and other regulations imposed by the exchange on which they
are traded.

<PAGE>

The Fund may enter into repurchase agreements for cash management purposes.
A repurchase agreement is a transaction in which the seller of a security
commits itself at the time of the sale to repurchase that security from the
buyer at a mutually agreed upon time and price. The Fund will enter into
repurchase agreements only with dealers, domestic banks or recognized financial
institutions which, in the opinion of SaBAM based on guidelines established by
the Fund's Board of Directors, are deemed creditworthy. SaBAM will monitor the
value of the securities underlying the repurchase agreement at the time the
transaction is entered into and at all times during the term of the repurchase
agreement to ensure that the value of the securities always exceeds the
repurchase price. In the event of default by the seller under the repurchase
agreement, the Fund may incur losses and experience time delays in connection
with the disposition of the underlying securities. To the extent that, in the
meantime, the value of the securities that the Fund has purchased has decreased,
the Fund could experience a loss.

FUNDAMENTAL POLICIES

The Fund may invest such percentage of its assets in the securities of one
issuer as the Fund's management deems advisable; provided, however, that at no
time shall the Fund have less than 75% of the value of its assets invested in
cash, cash items, U.S. government securities, securities of other investment
companies and other securities limited in respect of any one issuer to not more
than 5% of the value of the assets of the Fund and to not more than 10% of such
issuer's outstanding voting securities.

The Fund may not issue bonds, debentures or senior equity securities.

The Fund may not borrow money on a long-term basis for the purpose of
creating leverage on its capital stock. The Fund may borrow money when deemed
advisable for temporary corporate purposes; provided, however, that the amount
of such borrowings plus the amount of all of its other outstanding borrowings
does not exceed 25% of the value of the total net assets of the Fund.

The Fund may participate in underwritings to the extent permitted by
Section 12(c) of the Investment Company Act of 1940 ("1940 Act"), if and when,
in the opinion of its Board of Directors, such underwritings are advantageous to
the Fund. In certain instances when the Fund may acquire securities under
circumstances where it would be necessary to register such securities under the
Securities Act of 1933 before they could be reoffered or sold to the public
("restricted securities") the Fund may be deemed a statutory underwriter for
purposes of that Act. No more than 15% of the value of the total assets of the
Fund will be invested in illiquid assets.

The Fund's policy is not to concentrate investments in any one industry.
The Fund may not make an additional investment in any industry if such
investment would result in its having more than 25% of the value of its total
assets at such time in investments in such industry.

The Fund may purchase or otherwise acquire and sell or otherwise dispose of
real estate in its own name or in the name of any majority-owned subsidiary
whenever, in the judgment of its Board of Directors, it is deemed advantageous
to the Fund; provided, however, in the case of purchases, the cost of such real
estate plus the value of all other real estate owned at the time and all other
illiquid assets will not exceed 15% of the value of the total assets of the
Fund.

The Fund may purchase and sell commodities and commodity contracts (which
include, for purposes of this paragraph, futures contracts, including futures
contracts on interest rates, stock indices and currencies, options on futures
contracts, forward currency contracts and options on currencies) whenever it is
deemed advisable by its Board of Directors; provided, however, that it may not
purchase any commodities or enter into any commodity contracts if the cost of
such commodities or commodity contracts plus the value of all other commodities
or commodity contracts and borrowings exceeds 25% of the value of the total
assets of the Fund.

<PAGE>

The Fund may make loans (1) when such loans are a part of or incidental to
other transactions in which the Fund may engage, (2) to subsidiaries, (3)
against full collateral and (4) otherwise as deemed advisable; provided,
however, that the Fund shall not make any such other loans if immediately
thereafter the aggregate of all loans made pursuant to this clause (4) at the
time outstanding shall exceed 10% of the value of its total assets; it being
understood that the purchase of an issue of bonds, debentures or other
securities, whether or not upon original issue, is not to be considered the
making of a loan, provided that such bonds, debentures or other securities are
liquid securities.

It is not the policy of the Fund to invest its assets for the purpose of
purchasing control of companies except when and if in the judgment of its Board
of Directors such investment is deemed advisable in order to protect the value
of the investment, subject to the limitations set forth above.

The Fund may purchase the securities of other closed-end investment
companies to the extent permitted by Section 12(d)(1) of the 1940 Act, provided
that no such purchase shall be made if immediately thereafter more than 15% of
the value of the assets of the Fund would be invested in such companies. The
Fund may also consummate mergers with other investment companies to the extent
permitted by Section 12(d)(1) of the 1940 Act whenever the opportunities arise
on terms that are favorable to the Fund in the opinion of its Board of
Directors.

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

<PAGE>

MANAGEMENT

SALOMON BROTHERS ASSET MANAGEMENT INC

Salomon Brothers Asset Management Inc ("SaBAM") acts as investment manager
and administrator to the Fund. SaBAM is an indirect wholly-owned subsidiary of
Citigroup, Inc. SaBAM is responsible on a day-to-day basis for the management of
the Fund portfolio in accordance with the Fund's investment objectives and
policies, for making decisions to buy, sell, or hold particular securities, and
for day-to-day administration of the Fund. The agreement with SaBAM was most
recently approved by shareholders at a meeting held on January 15, 1998. SaBAM
is an indirect wholly-owned subsidiary of Citigroup, Inc. Citigroup businesses
produce a broad range of financial services--asset management, banking and
consumer finance, credit and charge cards, insurance, investments, investment
banking and trading--and use diverse channels to make them available to consumer
and corporate customers around the world.

SaBAM has delegated certain administrative responsibilities to SSB Citi
Fund Management LLC ("SSBC"), an affiliate of SaBAM, pursuant to a
sub-administration agreement between SaBAM and SSBC.

Certain officers and a director of the Fund are also officers and directors
of the investment manager.

The Fund pays SaBAM a base fee subject to an increase or decrease depending
on the extent, if any, to which the investment performance of the Fund exceeds
or is exceeded by the investment record of the Standard & Poor's 500 Index
Composite Stocks ("S&P 500 Index"). The base fee is paid quarterly based on the
following annual rates:

<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS ANNUAL FEE RATE
-------------------------------------- ---------------
<S> <C>
First $350 million.................... .650%
Next $150 million..................... .550%
Next $250 million..................... .525%
Next $250 million..................... .500%
Over $1 billion....................... .450%
</TABLE>

The performance adjustment is paid quarterly based on a rolling one year
period. A performance adjustment will only be made after the investment
performance of the Fund exceeds or is exceeded by the investment record S&P 500
Index by at least one percentage point. For each percentage point which the
investment performance of the Fund exceeds or is exceeded by the investment
record of the S&P 500 Index, the base fee will be adjusted upward or downward by
.01% (annualized). The maximum annual adjustment is .10% which occurs if the
Fund's performance exceeds or is exceeded by the S&P 500 Index of ten or more
percentage points. For this purpose, the performance fee calculation is based on
the total return value of the S&P 500 Index versus the Fund return calculated
based on net asset value and assuming all distributions are reinvested at net
asset value on the record date of the distribution.

For the fiscal years ended December 31, 1999, 1998 and 1997, SaBAM was paid
for advisory services rendered to the Fund $9,170,935, $7,647,618, and
$6,858,516, respectively. These amounts reflect a total decrease of the base
management fee of $28,228, $1,084,003 and $756,750, respectively, due to the
performance adjustment.

SaBAM, a Delaware corporation, is a registered investment adviser under the
Investment Advisers Act of 1940. As of December 31, 1999, SaBAM had
approximately ____ employees and had global assets under management of
approximately $28.7 billion in multiple product services, including equities,
fixed income, derivatives and balanced portfolios. SaBAM has been engaged in the
investment advisory business in the United States for 11 years. The principal
business address of SaBAM is 7 World Trade Center, New York, New York 10048.

DIRECTORS AND OFFICERS

The business and affairs of the Fund are managed under the direction of its
board of directors, and day to day operations are conducted through or under the
direction of its officers. For information regarding the directors and officers,
see "Management--Directors and Officers" in the statement of additional
information.

<PAGE>

PORTFOLIO MANAGEMENT

Michael Kagan is primarily responsible for the management of the Fund's
assets. Mr. Kagan joined SaBAM in December 1994. He served as co-manager for the
Fund from October 1995 through September 1998, and has served as the lead
manager for the Fund since October 1998.

EXPENSES

SaBAM is obligated to pay expenses associated with providing the services
contemplated by the agreements to which it is party, including compensation of
and office space for their officers and employees connected with investment
management and administration of the Fund.

The Fund pays all other expenses incurred in its operation including, among
other things:

legal and auditing expenses

costs of printing proxies, stock certificates and shareholder reports

fees of the custodian, the transfer agent and registrar

Securities and Exchange Commission fees

fees and expenses of the board of directors and its committees

accounting and pricing costs

stock exchange fees

taxes and governmental fees and any membership dues

expenses of registering or qualifying the shares for sale in various
states

costs of shareholders meetings and other meetings

PORTFOLIO TRANSACTIONS

SaBAM will select the brokers or dealers that will execute the purchases
and sales of portfolio securities for the Fund. In connection with the selection
of brokers and dealers, the primary objective is to seek to obtain the execution
of each investment transaction at a price and commission which provides the most
favorable total cost or proceeds reasonably obtainable under the circumstances.

The Fund pays brokerage commissions to affiliates. Brokerage commissions of
$219,858 were paid to Salomon Smith Barney Inc. for investment transactions
executed on behalf of the Fund during the year ended December 31, 1999. For a
more detailed discussion of the Fund's brokerage allocation practice, see the
statement of additional information under "Portfolio Transactions."

DIVIDENDS AND DISTRIBUTIONS

It is the Fund's present policy to distribute at least semi-annually to
shareholders substantially all of its net investment income and net short-term
capital gains. The board intends to distribute annually any net capital gains
(the excess of net long-term capital gains over net short-term capital losses).
See "Taxation."

<PAGE>

AUTOMATIC DIVIDEND REINVESTMENT PLAN

Pursuant to the Fund's Automatic Dividend Reinvestment Plan ("DR Plan"),
shareholders whose shares are registered in their own names will have all
dividends and distributions, net of any U.S. withholding tax, automatically
reinvested in additional shares, unless those shareholders elect to receive
cash. The DR Plan is administered by The Bank of New York, agent for
shareholders of the Fund ("Agent"). Shareholders whose shares are held in the
name of a broker or nominee, may elect to have all dividends and distributions
reinvested automatically by the broker or nominee, unless the service is not
provided by the broker or nominee, or unless the shareholder elects to receive
distributions in cash.

Shareholders may choose from three different reinvestment options under the
DR Plan.

(1) shareholders may have all of their net investment income dividends and
capital gain distributions (short-term and long-term) automatically reinvested.

(2) shareholders may have all of their net investment income dividends paid
in cash and all of their capital gain distributions (short-term and long-term)
automatically reinvested; or

(3) shareholders may have their net investment income dividends
automatically reinvested and their capital gain distributions (short-term and
long-term) paid in cash.

A shareholder will be deemed to have chosen option (1) unless the Agent is
notified of a change in election.

If the Fund declares a dividend or distribution and such distribution is to
be reinvested under the DR Plan, participants under the DR Plan will receive the
dividend or distribution either in newly-issued shares of the Fund or in shares
of the Fund purchased on the New York Stock Exchange or otherwise on the open
market, depending on the relationship between the market price per share of the
Fund and the net asset value per share of the Fund. Whenever the market price
per share plus estimated brokerage commissions equals or exceeds the net asset
value per share, the Agent shall receive the dividend or distribution in newly
issued shares of the Fund on the shareholders' behalf. If, however, on such date
the net asset value per share exceeds the market price per share plus estimated
brokerage commissions, the Agent will purchase shares in the open market. Any
newly-issued shares will be valued at the time specified in the DR Plan, either
at the market price per share of the Fund or at the greater of (a) the net asset
value per share of the Fund and (b) 95% of the market price per share of the
Fund, depending on the relationship between market price and net asset value at
that time. If a dividend or distribution is not large enough to buy a full
share, the Agent will credit a shareholder with a fractional share, computed to
four decimal places, which will earn additional dividends and distributions as
full shares do.

CASH PAYMENT PLAN

Under the Cash Payment Plan, a shareholder has the option to send a check
or money order of at least $25.00 to the Agent which will be used to buy more
shares of the Fund. A shareholder may make these payments regularly or from time
to time, as they choose. A shareholder may also vary the amount of each optional
payment as long as it is at least $25.00. Optional cash payments received by the
Agent will be applied by the Agent to the purchase of additional shares of the
Fund on the Investment Date next following receipt. The "Investment Dates" will
be each Friday (or closest business day prior thereto, if a holiday). All cash
payment shares will be purchased on the open market at prevailing market prices.
There is no maximum amount of investment under the Cash Payment Plan.

Shares purchased under the Cash Payment Plan will be held as uncertificated
shares, unless separate specific instructions to issue certificates are
received. Fractional shares cannot be issued in certificate form, and dividends
and distributions on those shares held by the Agent will be automatically
reinvested.

CERTIFICATE OF DEPOSIT

Shareholders may deposit with the Agent stock certificates representing
ownership of capital stock in the Fund. The Agent will combine the shares
represented thereby with the shares issued or purchased through the DR Plan or
Cash Payment Plan. The actual certificates forwarded will be canceled.

COST TO PARTICIPANTS

<PAGE>

Except as specifically noted, shareholders will not bear any of the costs
of administering the DR Plan or the Cash Payment Plan. A shareholder will pay
their proportionate share of the commissions paid on all open-market purchases.
Dividends and distributions, even though automatically reinvested, continue to
be taxable.

The automatic reinvestment of dividends and capital gains distributions
does not relieve participants of any income tax which may be payable on such
dividends or distributions.

The Fund and the Agent may amend or terminate the Plan. The Agent will mail
to participants notice at least 30 days prior to the effective date of any
amendment.

Any inquiries concerning the Plans should be directed to the Agent at:

The Bank of New York
Investor Relations Department
P.O. Box 11258
New York, New York 10286-1258
1-800-432-8224

TAXATION

General. The following information is meant to be a summary. Please see the
statement of additional information for additional information. You should rely
on your own tax advisor for advice about the particular federal, state and local
tax consequences to you of investing in the Fund.

Although the Fund intends to operate so that it will not have to pay
federal income or excise tax, if it does have to pay tax, this would adversely
affect investment performance.

The Fund will distribute substantially all of its income and gains to
shareholders every year, and you will be taxed on distributions you receive,
regardless of whether they are paid in cash or are reinvested in shares. If the
Fund declares a dividend in October, November or December but pays it in
January, you may be taxed on the dividend as if you received it in the previous
year.

The Fund will send you a tax report each year. The report will tell you
which dividends and redemptions must be treated as taxable ordinary income and
which, if any, are long-term capital gain. If the Fund designates a dividend as
a capital gain distribution, you will pay tax on that dividend at the long-term
capital gains tax rate, no matter how long you have held your shares.

If you hold your shares in a tax-deferred retirement account, such as an
IRA, you generally will not have to pay tax on dividends until they are
distributed from the account. These accounts are subject to complex tax rules,
and you should consult your tax adviser about investment through a tax-deferred
account.

You will generally have a capital gain or loss if you sell your shares. The
amount of the gain or loss and the rate of tax will depend primarily upon how
much you paid for the shares, how much you sell them for, and how long you held
them.

The Fund may be required to withhold U.S. federal income tax at the rate of
31% of all taxable distributions payable to you if you fail to provide your
correct taxpayer identification number or to make required certifications, or if
you have been notified by the IRS that you are subject to backup withholding.
Backup withholding is not an additional tax. Any amounts withheld may be
credited against your U.S. federal income tax liability.

Foreign Shareholders. If you are a nonresident alien individual, a foreign
trust or estate, a foreign corporation, or a foreign partnership under U.S.
laws, you will be subject to U.S. withholding tax at the rate of 30% (or
applicable lower treaty rate) except where such distributions are effectively
connected with a trade or business carried on by you in the United States.

Under certain circumstances more fully described in the statement of
additional information, distributions of net capital gains to you and gains from
sales of shares by you may not be subject to U.S. income tax.

If the income from the Fund is effectively connected with a trade or
business carried on by you, distributions of net investment income and net
long-term capital gains, and any gains realized upon the sale or redemption of
shares, will be subject to U.S. income tax at the graduated rates applicable to
U.S. citizens or domestic corporations.

<PAGE>

If you are entitled to claim the benefits of an applicable tax treaty, the
tax consequences to you may be different from those described herein. You are
advised to consult your own tax adviser with respect to the particular tax
consequences to you of an investment in the Fund.

Other Taxation. Income received by the Fund from sources within foreign
countries may be subject to withholding and other taxes imposed by such
countries. Tax conventions between certain countries and the United States may
reduce or eliminate such taxes. It is impossible to determine the effective rate
of foreign tax in advance since the amount of assets to be invested in various
countries is not known.

Distributions also may be subject to additional state, local and foreign
taxes depending on your particular situation. You are advised to consult your
own tax adviser with respect to the particular tax consequences to you of an
investment in the Fund and of the possible impact of proposed changes in
applicable tax laws.

NET ASSET VALUE

The net asset value per share is determined as of the close of business on
the NYSE on the last business day of each week and at month-end, by dividing the
value of the Fund's net assets (the value of its assets less its liabilities,
exclusive of capital stock and surplus) by the total number of shares of capital
stock outstanding. Portfolio securities listed or traded on national securities
exchanges, or reported by the NASDAQ national market system, are valued at the
last sale price, or if there have been no sales on that day, at the mean of the
current bid and ask price which represents the current value of the security.
Over-the-counter securities are valued at the mean of the current bid and ask
price. If no quotations are readily available (as may be the case for securities
of limited marketability), or if "restricted" securities are being valued, such
portfolio securities and other assets are valued at fair value determined
pursuant to procedures established by the Board of Directors. Short-term
securities with less than 60 days remaining to maturity when acquired by the
Fund are valued at amortized cost which approximates market value.

CAPITAL STOCK

The authorized capital stock of the Fund consists of 125,000,000 shares of
capital stock, $1.00 par value. Shares, when issued, will be fully paid and
nonassessable. All shares are equal as to dividends, assets and voting
privileges and have no conversion, preemptive or other subscription rights. In
the event of liquidation, each share of capital stock is entitled to its
proportion of the Fund's assets after payment of debts and expenses. As a holder
of shares of capital stock, you are entitled to one vote per share and do not
have cumulative voting rights.

Set forth below is information with respect to the capital stock as of
[May 15], 2000:

<TABLE>
<CAPTION>
AMOUNT HELD BY FUND
AMOUNT AUTHORIZED FOR ITS OWN ACCOUNT AMOUNT OUTSTANDING
- ----------------------------- --------------------------- ------------------------
<S> <C> <C>
125,000,000 Shares [0] Shares [94,608,863] Shares
</TABLE>

The number of shares outstanding as of [May 15], 2000, adjusted to give
effect to the issuance of all the shares pursuant to the offer, including 25% of
the shares available for issuance pursuant to the over-subscription privilege,
would be 106,457,070.

The outstanding shares are listed and traded on the NYSE. The average
weekly trading volume of the common stock on the NYSE during the year ended
December 31, 1999 was 68,559 shares. The following table sets forth for the
quarters indicated the high and low sales prices on the NYSE per share of common
stock and the net asset value and the premium or discount from net asset value
at which the common stock was trading, expressed as a percentage of net asset
value, at each of the high and low sales prices provided.

<PAGE>

<TABLE>
<CAPTION>
PREMIUM/DISCOUNT AS % OF
MARKET PRICE (1) NET ASSET VALUE NAV (2)
--------------------- ---------------------- ----------------------
QUARTER ENDED HIGH LOW HIGH LOW HIGH LOW
-------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
March 31, 1998.................... 19 3/16 16 3/8 20.56 17.57 +1.02 (10.02)
June 30, 1998..................... 18 13/16 17 1/2 20.85 19.88 (8.92) (13.07)
September 30, 1998................ 18 3/4 14 3/4 21.42 17.49 (5.59) (13.39)
December 31, 1998................. 19 13/16 14 15/16 20.95 17.36 (0.55) (12.15)
March 31, 1999.................... 18 1/2 17 1/8 19.70 18.59 (3.00) (9.16)
June 30, 1999..................... 19 13/16 17 15/16 20.76 19.60 (1.61) (10.71)
September 30,1999................. 20 11/16 18 9/16 22.14 19.03 (0.24) (11.08)
December 31, 1999................. 21 1/2 18 1/4 21.57 18.54 5.91 (2.59)
Through _______ __, 2000.......... -- -- ----- ----- ---- ----
</TABLE>

- ------------------
(1) As reported by the NYSE.
(2) Based on the Fund's computations.

The Fund presently has provisions in its Articles of Incorporation and
Bylaws (together, the "Charter Documents") that are intended to limit (i) the
ability of other entities or persons to acquire control of the Fund, (ii) the
Fund's freedom to engage in certain transactions and (iii) the ability of the
Fund's Directors or stockholders to amend the Charter Documents or effect
changes in the Fund's management. These provisions of the Charter Documents may
be regarded as "anti-takeover" provisions. Under the Fund's Articles of
Incorporation, the affirmative vote of the holders of two-thirds of the shares
entitled to be cast is required to authorize any of the following actions: (i) a
merger or consolidation of the corporation (in which the corporation is not the
surviving corporation) with (a) an open-end investment company or (b) a
closed-end investment company unless such closed-end investment company's
Articles of Incorporation require a two-thirds or greater vote of each class of
such company's stock entitled to be cast to approve the types of transactions
discussed in this paragraph; (ii) the dissolution of the corporation; (iii) the
sale of all or substantially all of the assets of the corporation to any person
(as such term is defined in the 1940 Act); or (iv) any amendment to the Articles
of Incorporation which makes any class of the corporation's stock a redeemable
security (as such term is defined in the 1940 Act) or reduces the two-thirds
vote required to authorize the actions listed in this paragraph.

The provisions of the Charter Documents described above could have the
effect of depriving the owners of shares of the Fund of opportunities to sell
their shares at a premium over prevailing market prices by discouraging a third
party from seeking to obtain control of the Fund in a tender offer or similar
transaction. The overall effect of these provisions is to render more difficult
the accomplishment of a merger or the assumption of control by a principal
stockholder. The Board of Directors of the Fund has considered the foregoing
anti-takeover provisions and concluded that they are in the best interests of
the Fund and its stockholders.

CUSTODIAN, TRANSFER AGENT AND DIVIDEND PAYING AGENT

The custodian for the Fund is PNC Bank, N.A., located at Airport Business
Center, International Court 2, 200 Stevens Drive, Lester, Pennsylvania 19133.

The transfer agent and dividend paying agent for the Fund is The Bank of
New York, located at _________________.

LEGAL MATTERS

With respect to matters of United States law, the validity of the shares
offered hereby will be passed on for the Fund by Simpson Thacher & Bartlett, New
York, New York. Counsel for the Fund may rely, as to matters of Maryland law, on
Piper Marbury Rudnick & Wolfe LLP Baltimore, Maryland.

EXPERTS

The financial statements and financial highlights of the Fund as of
December 31, 1999 have been incorporated by reference into the statement of
additional information in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting. PricewaterhouseCoopers LLP is located at 1177 Avenue
of the Americas, New York, New York 10036.

<PAGE>

FURTHER INFORMATION

Further information concerning these securities and their issuer may be
found in the Registration Statement of which this prospectus constitutes a part
on file with the Securities and Exchange Commission. The Commission maintains a
World Wide Web site on the Internet at http://www.sec.gov. that contains the
prospectus, material incorporated by reference and other information regarding
registrants, such as the Fund, that file electronically with the Commission. The
Registration Statement may also be inspected without charge at the Commission's
office in Washington, D.C., and copies of all or any part thereof may be
obtained from such office after payment of the fees prescribed by the
Commission.

The Fund is subject to the informational requirements of the Securities
Exchange Act of 1934 and the 1940 Act, and in accordance therewith files reports
and other information with the Commission. Such reports and other information
can be inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, NW, Washington, D.C. 20549 and the Commission's
regional offices at Seven World Trade Center, New York, New York 10048. Copies
of such materials can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, NW, Washington, D.C. 20549 at prescribed rates.
Such reports and other information concerning the Fund also may be inspected at
the offices of the NYSE and are available on the Commission's World Wide Web
site on the Internet at http://www.sec.gov.

<PAGE>

TABLE OF CONTENTS

STATEMENT OF ADDITIONAL INFORMATION

<TABLE>
<CAPTION>
Page
----
<S> <C>
General Information............................................................

Investment Policies............................................................

Investment Restrictions........................................................

Management.....................................................................

Portfolio Transactions.........................................................

Taxation.......................................................................

Capital Stock..................................................................

Financial Statements...........................................................
</TABLE>

<PAGE>

================================================================================

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR THAT
THE FUND HAS REFERRED YOU TO. THE FUND HAS NOT AUTHORIZED ANYONE TO PROVIDE YOU
WITH INFORMATION THAT IS DIFFERENT. THIS PROSPECTUS IS NOT AN OFFER TO SELL
THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY
STATE WHERE THE OFFER, SOLICITATION OR SALE IS NOT PERMITTED. YOU SHOULD NOT
ASSUME THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE FUND SINCE
SUCH DATE.

------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary............................................................
Fee Table.....................................................................
Financial Highlights..........................................................
The Offer.....................................................................
Use of Proceeds...............................................................
The Fund......................................................................
Risk Factors and Special Considerations.......................................
Investment Objectives and Policies............................................
Management....................................................................
Portfolio Transactions........................................................
Dividends and Distributions...................................................
Taxation......................................................................
Net Asset Value...............................................................
Capital Stock.................................................................
Custodian, Transfer Agent and Dividend Paying Agent, Registrar................
Legal Matters.................................................................
Experts.......................................................................
Further Information...........................................................
</TABLE>

9,460,886 SHARES

THE SALOMON BROTHERS FUND INC

CAPITAL STOCK
($1.00 PAR VALUE)

------------------------

PROSPECTUS

------------------------

================================================================================

<PAGE>

THE SALOMON BROTHERS FUND INC

------------------------

STATEMENT OF ADDITIONAL INFORMATION

The Salomon Brothers Fund Inc. is a closed-end, diversified management
investment company. Its primary investment objectives are growth and
conservation of capital. Income receives secondary consideration. The Fund
invests primarily in common stock of companies with strong positions in
industries with the potential to grow faster than the economy as a whole. The
Fund seeks and holds, generally for the long term, the common stock of
well-managed, favorably situated companies we expect will produced above-average
earnings and dividend growth over time.

This statement of additional information is not a prospectus, but you
should read it in conjunction with the prospectus for the Fund dated ______,
2000. This statement of additional information does not include all information
that you should consider before purchasing shares, and you should obtain and
read the prospectus prior to purchasing shares. You may obtain a copy of the
prospectus without charge, by calling (800) , extension , and
from outside the United States, by calling (212) . This statement
of additional information incorporates by reference the entire prospectus.

------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
GENERAL INFORMATION..........................................................

INVESTMENT POLICIES..........................................................

INVESTMENT RESTRICTIONS......................................................

MANAGEMENT...................................................................

PORTFOLIO TRANSACTIONS.......................................................

TAXATION.....................................................................

CAPITAL STOCK................................................................

FINANCIAL STATEMENTS.........................................................
</TABLE>
------------------------

The prospectus and this statement of additional information omit certain of
the information contained in the registration statement filed with the
Securities and Exchange Commission, Washington, D.C. You may obtain the
registration statement from the Securities and Exchange Commission upon payment
of the fee prescribed, or inspect it at the Securities and Exchange Commission's
office at no charge.

------------------------

This statement of additional information is dated ___________, 2000

<PAGE>

INVESTMENT POLICIES

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

The Fund may also purchase the securities of non-U.S. issuers. These
securities may be denominated and traded in foreign currencies, and may be
traded in the US or on international stock exchanges.

OTHER INVESTMENT TECHNIQUES

The Fund uses several derivative strategies to hedge market risks (such as
broad or specific market increments, interest rates and currency exchange rates)
and cash flows and to seek to increase the Fund's income or gain, including the
purchase of calls, puts and collars. The Fund owns "in the money" calls on the
S&P 500 Index, funded by a combination of cash, high yield bonds and convertible
bonds ("in the money" means the value of the underlying instrument or stock
index exceeds, in the case of a call option, or is less than, in the case of a
put option, the exercise price of the option). This strategy keeps the Fund
fully invested, while giving it the flexibility to easily manage the volatile
cash flows that occur when the Fund pays its capital gains distributions.
"In the money" call options on the S&P 500 Index fall less than the market does
when the value of the S&P 500 Index nears or falls below the strike price of the
option. Therefore this strategy should make the Fund less volatile than the
S&P 500 Index in the event of a severe market decline. The Fund also owns puts
on the S&P 500 Index. This strategy will protect against a decline in the Fund's
return in the event of a market decline. The Fund writes covered calls in order
to increase its returns. The Fund purchases collars in order to protect against
near term risk in its equity positions. Both of these strategies should make the
Fund less volatile than the S&P 500 in the event of a market decline.

<PAGE>

Options. In order to hedge against adverse market shifts or to increase
income or gain, the Fund may purchase put and call options or write "covered"
put and call options on stock indices, interest rates and currencies. In
addition, in order to hedge against adverse market shifts or to increase its
income, the Fund may purchase put and call options and write "covered" put and
call options on stocks, stock indices and currencies. The Fund may utilize
options on currencies in order to hedge against currency exchange rate risks.
A call option is "covered" if, so long as the Fund is obligated as the writer of
the option, it will own: (i) the underlying investment subject to the option;
(ii) securities convertible or exchangeable without the payment of any
consideration into the securities subject to the option; or (iii) a call
option on the relevant security or currency with an exercise price no higher
than the exercise price on the call option written. A put option is "covered"
if, to support its obligation to purchase the underlying investment if a put
option that the Fund writes is exercised, the Fund will either (a) deposit with
its custodian in a segregated account cash, cash equivalents, U.S. government
securities or other high grade liquid debt obligations having a value at least
equal to the exercise price of the underlying investment or (b) continue to own
an equivalent number of puts of the same "series" (that is, puts on the same
underlying investment having the same exercise prices and expiration dates as
those written by the Fund), or an equivalent number of puts of the same "class"
(that is, puts on the same underlying investment) with exercise prices greater
than those that it has written (or, if the exercise prices of the puts it holds
are less than the exercise prices of those it has written, it will deposit the
difference with its custodian in a segregated account). Parties to options
transactions must make certain payments and/or set aside certain amounts of
assets in connection with each transaction.

In all cases except for certain options on interest rate futures contracts,
by writing a call, the Fund will limit its opportunity to profit from an
increase in the market value of the underlying investment above the exercise
price of the option for as long as the Fund's obligation as writer of the option
continues. By writing a put, the Fund will limit its opportunity to profit from
a decrease in the market value of the underlying investment below the exercise
price of the option for as long as the Fund's obligation as writer of the option
continues. Upon the exercise of a put option written by the Fund, the Fund may
suffer an economic loss equal to the difference between the price at which the
Fund is required to purchase the underlying investment and its market value at
the time of the option exercise, less the premium received for writing the
option. Upon the exercise of a call option written by the Fund, the Fund may
suffer an economic loss equal to an amount not less than the excess of the
investment's market value at the time of the option exercise over the Fund's
acquisition cost of the investment, less the sum of the premium received for
writing the option and the positive difference, if any, between the call price
paid to the Fund and the Fund's acquisition cost of the investment.

In all cases except for certain options on interest rate futures contracts,
in purchasing a put option, the Fund will seek to benefit from a decline in the
market price of the underlying investment, while in purchasing a call option,
the Fund will seek to benefit from an increase in the market price of the
underlying investment. If an option purchased is not sold or exercised when it
has remaining value, or if the market price of the underlying investment remains
equal to or greater than the exercise price, in the case of a put, or remains
equal to or below the exercise price, in the case of a call, during the life of
the option, the Fund will lose its investment in the option. For the purchase of
an option to be profitable, the market price of the underlying investment must
decline sufficiently below the exercise price, in the case of a put, and must
increase sufficiently above the exercise price, in the case of a call, to cover
the premium and transaction costs.

In the case of certain options on interest rate futures contracts, the Fund
may purchase a put option in anticipation of a rise in interest rates, and
purchase a call option in anticipation of a fall in interest rates. By writing a
covered call option on interest rate futures contracts, the Fund will limit its
opportunity to profit from a fall in interest rates. By writing a covered put
option on interest rate futures contracts, the Fund will limit its opportunity
to profit from a rise in interest rates.

The Fund may choose to exercise the options it holds, permit them to expire
or terminate them prior to their expiration by entering into closing
transactions. The Fund may enter into a closing purchase transaction in which
the Fund purchases an option having the same terms as the option it had written
or a closing sale transaction in which the Fund sells an option having the same
terms as the option it had purchased. A covered option writer unable to effect a
closing purchase transaction will not be able to sell the underlying security
until the option expires or the underlying security is delivered upon exercise,
with the result that the writer will be subject to the risk of market decline in
the underlying security during such period. Should the Fund choose to exercise
an option, the Fund will purchase in the open market the securities, commodities
or commodity futures contracts underlying the exercised option.

<PAGE>

Exchange-listed options on securities and currencies, with certain
exceptions, generally settle by physical delivery of the underlying security or
currency, although in the future, cash settlement may become available.
Frequently, rather than taking or making delivery of the underlying instrument
through the process of exercising the option, listed options are closed by
entering into offsetting purchase or sale transactions that do not result in
ownership of the new option. Index options are cash settled for the net amount,
if any, by which the option is "in-the-money" (that is, the amount by which the
value of the underlying instrument exceeds, in the case of a call option, or is
less than, in the case of a put option, the exercise price of the option) at the
time the option is exercised.

Put options and call options typically have similar structural
characteristics and operational mechanics regardless of the underlying
instrument on which they are purchased or sold. Thus, the following general
discussion relates to each of the particular types of options discussed in
greater detail below. In addition, many derivatives involving options require
segregation of Fund assets in special accounts.

A put option gives the purchaser of the option, upon payment of a premium,
the right to sell, and the writer of the obligation to buy, the underlying
security, index, currency or other instrument at the exercise price. The Fund's
purchase of a put option on a security, for example, might be designed to
protect its holdings in the underlying instrument (or, in some cases, a similar
instrument) against a substantial decline in the market value of such instrument
by giving the Fund the right to sell the instrument at the option exercise
price. A call option, upon payment of a premium, gives the purchaser of the
option the right to buy, and the seller the obligation to sell, the underlying
instrument at the exercise price. The Fund's purchase of a call option on a
security, financial futures contract, index, currency or other instrument might
be intended to protect the Fund against an increase in the price of the
underlying instrument that it intends to purchase in the future by fixing the
price at which it may purchase the instrument. An "American" style put or call
option may be exercised at any time during the option period, whereas a
"European" style put or call option may be exercised only upon expiration or
during a fixed period prior to expiration.

Interest Rate and Equity Swaps and Related Transactions. The Fund may
purchase or sell interest rate and equity caps, floors and collars. The Fund may
enter into these transactions in order to hedge against either a decline in
value of the securities included in the Fund's portfolio, or against an increase
in the price of the securities which it plans to purchase, or in order to
preserve or maintain a return or spread on a particular investment or portion of
its portfolio or to achieve a particular return on cash balances, or in order to
increase income or gain. Interest rate and equity swaps involve the exchange by
the Fund with another party of their respective commitments to make or receive
payments based on a notional principal amount. The purchase of an interest rate
or equity cap entitles the purchaser, to the extent that a specified index
exceeds a predetermined level, to receive payments on a contractually-based
principal amount from the party selling the interest rate or equity cap. The
purchase of an interest rate or equity floor entitles the purchaser, to the
extent that a specified index falls below a predetermined rate, to receive
payments on a contractually-based principal amount from the party selling the
interest rate or equity floor. A collar is a combination of a cap and a floor
which preserve a certain return within a predetermined range of values.

The Fund may enter into interest rate and equity swaps, caps, floors and
collars on either an asset-based or liability-based basis, depending on whether
it is hedging its assets or its liabilities, and will usually enter into
interest rate and equity swaps on a net basis (i.e., the two payment streams are
netted out), with the Fund receiving or paying, as the case may be, only the net
amount of the two payments. The net amount of the excess, if any, of the Fund's
obligations over its entitlements with respect to each interest rate or equity
swap will be accrued on a daily basis, and an amount of liquid assets having an
aggregate net asset value at least equal to the accrued excess will be
maintained in a segregated account by the Fund's custodian in accordance with
procedures established by the Board of Directors. If the Fund enters into an
interest rate or equity swap on other than a net basis, the Fund will maintain a
segregated account in the full amount accrued on a daily basis of the Fund's
obligations with respect to the swap. The Fund will only enter into interest
rate and equity swap, cap, floor or collar transactions with counterparties the
investment manager deems to be creditworthy. The investment manager will monitor
the creditworthiness of counterparties to its interest rate and equity swap,
cap, floor and collar transactions on an ongoing basis. If there is a default by
the other party to such a transaction, the Fund will have contractual remedies
pursuant to the agreements related to the transaction. The swap market has grown
substantially in recent years with a large number of banks and investment
banking firms acting both as principals and agents utilizing standardized swap
documentation. The investment manager has determined that, as a result, the swap
market is liquid. Caps, floors and collars are more recent innovations for which
standardized documentation has not yet been developed and, accordingly, they are
less liquid than swaps. To the extent the Fund sells caps, floors and collars it
will maintain in a segregated account cash and/or, cash equivalents or other
liquid high grade debt securities having an aggregate net asset value at least
equal to the full amount, accrued on a daily basis, of the Fund's obligations
with respect to the caps, floors or collars. The use of interest rate and equity
swaps is a highly specialized activity which involves investment techniques and
risks different from those associated with ordinary portfolio securities
transactions. If the investment manager is incorrect in its

<PAGE>

forecasts of market values, interest rates and other applicable factors, the
investment performance of the Fund would diminish compared with what it would
have been if these investment techniques were not utilized. Moreover, even if
the investment manager is correct in its forecasts, there is a risk that the
swap position may correlate imperfectly with the price of the asset or liability
being hedged.

INVESTMENT RESTRICTIONS

The Fund is subject to the following restrictions that may not be changed
without the approval of at least a majority of its outstanding voting
securities, as defined in the 1940 Act. The 1940 Act defines a "majority" as the
lesser of (1) 67% of the shares represented at a meeting of which more than 50%
of the outstanding shares are present in person or represented by proxy, or (2)
more than 50% of the outstanding shares.

If a percentage restriction on investment or use of assets set forth above
is adhered to at the time a transaction is effected, later changes in
percentages resulting from changing values will not be considered a violation.

Under the 1940 Act, the Fund may neither invest more than 5% of its total
assets in the securities of any one investment company, nor acquire more than 3%
of the outstanding voting securities of any such investment company. In
addition, the Fund may not invest more than 10% of its total assets in
securities issued by all investment companies. As a shareholder in any
investment company, the Fund will bear its ratable share of that investment
company's expenses, and would remain subject to payment of the advisory,
sub-advisory and administrative fees with respect to assets so invested.

The Fund may invest such percentage of its assets in the securities of one
issuer as the Fund's management deem advisable; provided, however, that at no
time shall the Fund have less than 75% of the value of its assets invested in
cash, cash items, U.S. government securities, securities of other investment
companies and other securities limited in respect of any one issuer to not more
than 5% of the value of the assets of the Fund and to not more than 10% of such
issuer's outstanding voting securities.

The Fund may not issue bonds, debentures or senior equity securities.

<PAGE>

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

<PAGE>

MANAGEMENT

DIRECTORS AND OFFICERS

The names of the directors and principal officers of the Fund are set forth
below, together with their positions and their principal occupations during the
past five years.

The officers manage day to day operations. The officers are directly
responsible to the board of directors. The directors set broad policies and
choose the officers.

<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITION WITH THE FUND PRINCIPAL OCCUPATIONS FOR THE PAST FIVE YEARS
<S> <C> <C>
Heath B. McLendon* (66)........... Chairman of the Board Managing Director, Salomon Smith Barney, Inc.;
and President President and Director, SSBC Fund Management Inc. and
Travelers Investment Advisers, Inc. Prior to July 1993,
Senior Executive Vice President of Shearson Lehman
Brothers Inc., and Vice Chairman of Shearson Asset
Management

Charles F. Barber (83)............ Director Consultant; formerly Chairman of the Board, ASARCO
Incorporated

Andrew L. Breech (47)............. Director President, Dealer Operating Control Service, Inc.

Carol L. Colman (54).............. Director Consultant, Colman Consulting

William R. Dill (69).............. Director Consultant; formerly President, Boston Architectural
Center; formerly President, Anna Maria College; President
Emeritus, Babson College

Clifford M. Kirtland, Jr (76)..... Director Member of the Advisory Committee, Noro-Moseley
Partners; formerly Director, Oxford Industries, Inc., Shaw
Industries, Inc., Graphic Industries, Inc. and CSX Corp.;
formerly Chairman and President, Cox Communications

Robert W. Lawless (63)............ Director President and Chief Executive Officer, University of
Tulsa; formerly President and Chief Executive Officer,
Texas Tech University and Texas Tech University Health
Sciences Center

Louis P. Mattis (58).............. Director Consultant; formerly Chairman and President, Sterling
Winthrop, Inc.

Thomas F. Schlafly (51)........... Director Of counsel to Blackwell Sanders Peper Martin LLP
(attorneys); President, The Saint Louis Brewery, Inc.

Lewis E. Daidone (40)............. Executive Vice Managing Director, Salomon Smith Barney, Inc.; Senior Vice
President & Treasurer President and Director, SSBC Fund Management Inc. and Travelers
Investment Advisers, Inc.

Michael A. Kagan (38)............. Executive Vice Director, Salomon Brothers Asset Management Inc
President

Martin L. Roberts (66)............ Vice President Vice President, Salomon Brothers Asset Management Inc

Christina T. Sydor (46)........... Secretary Managing Director, Salomon Smith Barney, Inc.; General Counsel,
SSBC Fund Management Inc. and Travelers Investment
Advisers, Inc.
</TABLE>

* Mr. McLendon is an interested person of the Fund by virtue of his position
as an officer of affiliates of SaBAM.

The Fund pays each of its directors who is not a director, officer or
employee of SaBAM or any affiliate thereof an annual fee of ______________. In
addition, the Fund reimburses those directors for travel and out-of-pocket
expenses incurred in connection with meetings. The aggregate remuneration paid
to all such unaffiliated directors by the Fund during the fiscal year ended
December 31, 1999 was $_____.

<PAGE>

The following table shows certain compensation information for the
directors for the fiscal year ended December 31, 1999. None of the executive
officers or directors who are also officers or directors of SaBAM received any
compensation from the Fund for such period. The Fund has no bonus, profit
sharing, pension or retirement plans.
<TABLE>
<CAPTION>
TOTAL
PENSION OR ESTIMATED COMPENSATION
AGGREGATE RETIREMENT BENEFITS ANNUAL BENEFITS FROM FUND AND
COMPENSATION ACCRUED AS PART OF UPON FUND COMPLEX
NAME OF DIRECTOR FROM FUND FUND EXPENSES RETIREMENT PAID TO DIRECTORS
- --------------------------------------- -------------- --------------------- ----------------- -------------------
<S> <C> <C>
Charles F. Barber...................... $11,250 $0 $0 $135,100
Andrew L. Breech....................... $10,500 $0 $0 $ 26,750
Carol L. Colman........................ $11,250 $0 $0 $ 54,100
William R. Dill........................ $10,500 $0 $0 $ 26,750
Clifford M. Kirtland, Jr............... $11,250 $0 $0 $ 28,250
Robert W. Lawless...................... $11,250 $0 $0 $ 29,000
Louis P. Mattis........................ $10,500 $0 $0 $ 26,000
Thomas F. Schlafly..................... $11,250 $0 $0 $ 28,250
</TABLE>

The Articles of Incorporation and Bylaws of the Fund provide that it will
indemnify its directors and officers against liabilities and expenses incurred
in connection with litigation in which they may be involved because of their
positions with the Fund to the fullest extent permitted by Maryland law. In
addition, the Articles of Incorporation provide that the directors and officers
will not be liable to the shareholders for money damages, except in limited
instances. However, nothing in the Articles of Incorporation or the Bylaws
protects or indemnifies a director, officer, employee or agent against any
liability to which such person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of such person's office.

ADVISORY ARRANGEMENTS

SaBAM is the investment manager pursuant to an agreement with the Fund
dated as of May 1, 1994 (as amended April 29, 1997) (the "Investment Management
Agreement") which was most recently approved by the Fund's shareholders on
January 15, 1998. SaBAM is responsible on a day-to-day basis for the management
of the Fund portfolios in accordance with the Fund's investment objectives and
policies, for making decisions to buy, sell, or hold particular securities, and
for day-to-day administration of the Fund. SaBAM has delegated certain
adminstrative responsibilities to SSB Citi Fund Management LLC ("SSBC"), an
affiliate of SaBAM, pursuant to a sub-administration agreement between SaBAM and
SSBC.

<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS ANNUAL FEE RATE
---------------------------------- -------------------------
<S> <C>
First $350 million................ .650%
Next $150 million................. .550%
Next $250 million................. .525%
Next $250 million................. .500%
Over $1 billion................... .450%
</TABLE>

For the fiscal years ended December 31, 1999, 1998 and 1997, SaBAM was paid
for advisory services rendered to the Fund $9,170.935, $7,647,618, and
$6,858,516, respectively. These amounts reflect a total decrease of the base
management fee of $28,228, $1,084,003 and $756,750, respectively, due to the
performance adjustment.

<PAGE>

Unless earlier terminated as described below, the Investment Management
Agreement remains in effect if approved annually (a) by the board of directors
or by the holders of a majority of the outstanding voting securities (as defined
in the Investment Company Act) and (b) by a majority of the directors who are
not parties to the Investment Management Agreement or "interested persons" (as
defined in the 1940 Act) of any such party. The Investment Management Agreement
terminates on its assignment by any party and may be terminated without penalty
on 60 days' written notice at the option of the board of directors or by the
vote of the majority of the holders of the shares, or upon 60 days' written
notice, by SaBAM.

The services of SaBAM are not intended to be exclusive, and nothing in the
Investment Management Agreement prevents SaBAM or its affiliates from providing
similar services to other investment companies and other clients (whether or not
such clients' investment objectives and policies are similar to those of the
Fund) or from engaging in other activities.

CUSTODIAN

PNC Bank, N.A. ("PNC"), located at Airport Business Center, International
Court 2, 200 Stevens Drive, Lester, Pennsylvania 19133, acts as custodian under
a Custodian Agreement dated ________ __, ____. As custodian, PNC, among other
things, maintains custody accounts in the name of the Fund, receives and
delivers all assets for the Fund upon purchase and upon sale or maturity,
collects and receives all income and other payments and distributions on account
of the assets of the Fund and makes disbursements on behalf of the Fund. For its
services, PNC receives a monthly fee based upon the daily average market value
of securities held in custody for the Fund. PNC also receives securities
transaction charges, including out-of-pocket expenses.

PORTFOLIO TRANSACTIONS

Decisions to buy and sell securities are made by SaBAM, subject to the
overall review of the board of directors. Portfolio securities transactions are
placed on behalf of the Fund by persons authorized by SaBAM. SaBAM manages other
investment companies and accounts that invest in fixed-income securities.
Although investment decisions for the Fund are made independently from those of
these other accounts, SaBAM may make investments of the type the Fund makes on
behalf of these other accounts. When the Fund and one or more other accounts is
prepared to invest in, or desires to dispose of, the same security, SaBAM will
allocate available investments or opportunities for each in a manner believed by
SaBAM to be equitable to each. In some cases, this procedure may adversely
affect the price paid or received by the Fund or the size of the position it
obtains or disposes of. The Fund may utilize Salomon Smith Barney Inc. and other
affiliates of SaBAM in connection with the purchase or sale of securities in
accordance with rules or exemptive orders adopted by the Securities and Exchange
Commission when SaBAM believes that the charge for the transaction does not
exceed usual and customary levels.

Transactions on U.S. and some foreign stock exchanges involve the payment
of negotiated brokerage commissions, which may vary among different brokers. The
cost of securities purchased from underwriters includes an underwriter's
commission or concession, and the prices at which securities are purchased from
and sold to dealers in the over-the-counter markets include a dealer's mark-up
or mark-down, which normally is not disclosed. Fixed-income securities are
generally traded on a "net" basis with dealers acting as principal for their own
accounts without a stated commission, although the price of the security will
likely include a profit to the dealer.

In selecting brokers or dealers to execute portfolio transactions on behalf
of the Fund, SaBAM will seek the best overall terms available. In addition,
unless otherwise directed by the board of directors, the Investment Management
Agreement authorizes SaBAM, in selecting brokers or dealers to execute a
particular transaction and in evaluating the best overall terms available, to
consider the brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934) and cause the Fund to pay
a broker-dealer which furnishes such services a higher commission than that
which might be charged by another broker-dealer for effecting the same
transaction, provided that such commission is deemed reasonable in terms of
either that particular transaction or the overall responsibilities of SaBAM to
the Fund. The fees payable under the Investment Management Agreement are not
reduced as a result of SaBAM's receiving such brokerage and research services.

Currently, it is the Fund's policy that SaBAM may at times pay higher
commissions than might otherwise be obtainable in recognition of brokerage
services felt necessary for the achievement of best available price and most
favorable execution of certain securities transactions. SaBAM will only pay such
higher commissions if it believes this to be in the best interest of the Fund.
Some brokers or dealers who may receive such higher commissions in recognition
of brokerage services

<PAGE>

related to execution of securities transactions are also providers of research
information to SaBAM and/or the Fund. Subject to the primary objective set forth
above, SaBAM has informed the Fund that it may pay higher commission rates
specifically for the purpose of obtaining research services. The Fund will not
pay to any affiliate of SaBAM a higher commission rate specifically for the
purpose of obtaining research services.

The Fund paid total brokerage commissions of $2,221,464, $2,369,816 and
$2,037,664, respectively, in fiscal years ended December 31, 1999, 1998 and
1997.

The Fund paid Salomon Smith Barney Inc. brokerage commissions of $219,858
in fiscal year ended December 31, 1999. In fiscal year ended December 31, 1998,
the Fund paid brokerage commissions of $12,912 and $66,780, respectively, to
Salomon Brothers Inc and Salomon Smith Barney Inc., prior to the merger of the
two companies in that year and $60,156 to Salomon Smith Barney Inc. subsequent
to the merger. In fiscal year ended December 31, 1997, the Fund paid brokerage
commissions of $150,330 and $67,458, respectively, to Salomon Brothers Inc and
Smith Barney Inc.

The brokerage commissions paid to Salomon Smith Barney Inc. in fiscal year
ended December 31, 1999 represented 9.9% of total brokerage commissions paid by
the Fund in such year.

8.3% of the Fund's aggregate dollar amount of transactions in fiscal year
ended December 31, 1999 were effected through Salomon Smith Barney Inc.

TAXATION

The following is a summary of the material United States federal income tax
considerations, regarding the purchase, ownership and disposition of shares. You
are urged to consult your own tax adviser with respect to the specific federal,
state, local and foreign tax consequences of investing in the Fund. The summary
is based on the laws in effect on the date of this statement of additional
information, which are subject to change.

UNITED STATES FEDERAL INCOME TAXES

The Fund and its Investments. The Fund has qualified and continues to
qualify and elect to be treated as a regulated investment company for each
taxable year under the Code. To so qualify, the Fund must, among other things:

derive at least 90% of its gross income in each taxable year from:

dividends

interest

payments with respect to securities loans

gains from the sale or other disposition of stock or securities
or foreign currencies

other income (including, but not limited to, gains from options,
futures or forward contracts) derived with respect to its
business of investing in such stock, securities or currencies,
and

diversify its holdings so that, at the end of each quarter of the
taxable year:

at least 50% of the market value of the assets is represented by
cash, securities of other regulated investment companies, United
States government securities and other securities, with such
other securities limited, in respect of any one issuer, to an
amount not greater than 5% of the Fund's assets and not greater
than 10% of the outstanding voting securities of such issuer, and

not more than 25% of the value of its assets is invested in the
securities (other than United States government securities or
securities of other regulated investment companies) of any one
issuer or any two or more issuers that the Fund controls and are
determined to be engaged in the same or similar trades or
businesses or related trades or businesses.

As a regulated investment company, the Fund is not subject to United States
federal income tax on its net investment income (i.e., its investment company
taxable income as that term is defined in the Code without regard to the
deduction for

<PAGE>

dividends paid) and its net capital gains (i.e., the excess of its net long term
capital gain over its net short-term capital loss), if any, that it distributes
to its shareholders, provided that an amount equal to at least 90% of the sum of
its net investment income is distributed, but is subject to tax at regular
corporate rates on any taxable income or gains that it does not distribute.

The Code imposes a 4% nondeductible excise tax on the Fund to the extent it
does not distribute by the end of any calendar year at least 98% of its ordinary
income for that year and 98% of its capital gain net income for the one-year
period ending, as a general rule, on October 31 of that year plus 100% of the
ordinary income and capital gain net income from prior years. For this purpose,
however, any income or gain retained by the Fund that is subject to corporate
income tax will be considered to have been distributed by year-end. The Fund
anticipates that it will pay such dividends and will make such distributions as
are necessary in order to avoid the application of this tax.

If, in any taxable year, the Fund fails to qualify as a regulated
investment company under the Code, the Fund would be taxed in the same manner as
an ordinary corporation and distributions to you would not be deductible by the
Fund in computing its taxable income. In addition, in the event of a failure to
qualify, the Fund's distributions, to the extent derived from current or
accumulated earnings and profits, would constitute dividends (eligible for the
corporate dividends-received deduction) which are taxable to you as ordinary
income, even though those distributions might otherwise (at least in part) have
been treated as long-term capital gains when received by you. If the Fund fails
to qualify as a regulated investment company in any year, it must pay out its
earnings and profits accumulated in that year in order to qualify again as a
regulated investment company. In addition, if the Fund failed to qualify as a
regulated investment company for a period greater than one taxable year, it may
be required to recognize any net built-in gains (the excess of the aggregate
gains, including items of income, over aggregate losses that would have been
realized if it had been liquidated) in order to qualify as a regulated
investment company in a subsequent year.

If the Fund retains for investment an amount equal to all or a portion of
its net capital gain, it will be subject to a corporate tax (currently at a rate
of 35%) on the amount retained. In that event, the Fund expects to designate
such retained amounts as undistributed capital gains in a notice to you and you
(a) will be required to include in income for United States federal income tax
purposes, as long-term capital gains, your proportionate share of the
undistributed amount, (b) will be entitled to credit your proportionate share of
the 35% tax paid by the Fund on the undistributed amount against your United
States federal income tax liabilities, if any, and to claim refunds to the
extent your credits exceed your liabilities, if any, and (c) will be entitled to
increase your tax basis, for United States federal income tax purposes, in your
shares by an amount equal to 65% of the amount of undistributed capital gains
included in your income.

Any dividend declared by the Fund in October, November or December of any
calendar year and payable to shareholders of record on a specified date in such
a month shall be deemed to have been received by each shareholder on December 31
of such calendar year and to have been paid by the Fund not later than such
December 31, provided that such dividend is actually paid by the Fund during
January of the following calendar year.

Dividends and Distributions. If you are a U.S. shareholder, dividends of
net investment income, which term includes net realized short-term capital gain,
are taxable to you as ordinary income, whether paid in cash or in shares.
Distributions of net capital gain, if any, that the Fund designates as capital
gains dividends are taxable as long-term capital gain, whether paid in cash or
in shares and regardless of how long you have held shares. Dividends and
distributions paid by the Fund (except for the portion thereof, if any,
attributable to qualifying dividends on stock of U.S. corporations received by
the Fund) will not qualify for the deduction for dividends received by
corporations. Distributions in excess of the Fund's current and accumulated
earnings and profits will, as to you, be treated as a tax-free return of
capital, to the extent of your basis in your shares, and as a capital gain
thereafter (if you hold your shares as capital assets).

If you receive dividends or distributions in the form of additional shares
pursuant to the Dividend Reinvestment and Cash Purchase Plan you should be
treated for United States federal income tax purposes as receiving a
distribution in the amount equal to the amount of money that shareholders
receiving cash dividends or distributions will receive, and should have a cost
basis in the shares received equal to such amount.

If you are considering buying shares just prior to a dividend or capital
gain distribution you should be aware that, although the price of shares just
purchased at that time may reflect the amount of the forthcoming distribution,
such dividend or distribution may nevertheless be taxable to you.

Sales of Shares. Upon the sale or exchange of your shares, you will realize
a taxable gain or loss equal to the difference between the amount realized and
the basis in your shares. Such gain or loss will be treated as capital gain or
loss, if

<PAGE>

the shares are capital assets in your hands, and will be long-term capital gain
or loss if the shares are held for more than one year. Any loss realized on a
sale or exchange will be disallowed to the extent the shares disposed of are
replaced, including replacement through the reinvesting of dividends and capital
gains distributions in the Fund under the Dividend Reinvestment and Cash
Purchase Plan, within a 61-day period beginning 30 days before and ending 30
days after the disposition of the shares. In such a case, the basis of the
shares acquired will be increased to reflect the disallowed loss. Any loss
realized by you on the sale of a share held by you for six months or less will
be treated for United States federal income tax purposes as a long-term capital
loss to the extent of any distributions or deemed distributions of net capital
gain received by you with respect to such share.

Backup Withholding. If you fail to provide the Fund with your correct
taxpayer identification number or to make required certifications, or have been
notified by the Internal Revenue Service that you are subject to backup
withholding, the Fund may be required to withhold, for United States federal
income tax purposes, 31% of the dividends and distributions payable. Corporate
shareholders and certain other shareholders are or may be exempt from backup
withholding. Backup withholding is not an additional tax and any amount withheld
may be credited against your United States federal income tax liabilities. If
you are a foreign investor additional tax withholding requirements which apply
are discussed below.

Foreign Shareholders. If you are a foreign investor (such as a nonresident
alien individual, a foreign trust or estate, a foreign corporation or a foreign
partnership) under U.S. laws, taxation depends, in part, on whether your income
from the Fund is "effectively connected" with a United States trade or business
carried on by you.

If you are a non-resident alien and your income from the Fund is not
effectively connected with a United States trade or business carried on by you,
distributions of net investment income will be subject to a 30% (or lower treaty
rate) United States withholding tax. If you are a non-resident alien
distributions of net capital gain, amounts retained by the Fund which are
designated as undistributed capital gains, and gains realized upon the sale of
shares of the Fund generally will not be subject to United States tax unless you
are physically present in the United States for more than 182 days during the
taxable year and certain other conditions are met. However, a determination by
the Fund not to distribute long-term capital gains will cause the Fund to incur
a U.S. federal tax liability with respect to retained long-term capital gains,
thereby reducing the amount of cash held by the Fund that is available for
investment, and you may not be able to claim a credit or deduction with respect
to such taxes.

In general, if you are a resident alien or if dividends or distributions
from the Fund are effectively connected with a United States trade or business
carried on by you, then dividends of net investment income, distributions of net
capital gain, amounts retained by the Fund that are designated as undistributed
capital gains and any gains realized upon the sale of shares will be subject to
United States income tax at the rates applicable to United States citizens or
domestic corporations. If you are a corporation, and your income from the Fund
is effectively connected with a United States trade or business, you may also be
subject to the 30% (or lower treaty rate) branch profits tax. If you are
entitled to claim the benefits of an applicable tax treaty the tax consequences
to you may be different from those described in this section. You may be
required to provide appropriate documentation to establish your entitlement to
the benefits of such a treaty. You are advised to consult your own tax adviser
with respect to (a) whether your income from the Fund is or is not effectively
connected with a United States trade or business carried on by you, (b) whether
you may claim the benefits of an applicable tax treaty, and (c) any other tax
consequences to you of an investment in the Fund.

Notices. You will be notified annually by the Fund as to the United States
federal income tax status of the dividends, distributions and deemed
distributions made by the Fund to you. Furthermore, you will also receive, if
appropriate, various written notices after the close of the Fund's taxable year
regarding the United States federal income tax status of certain dividends,
distributions and deemed distributions that were paid (or that are treated as
having been paid) by the Fund to you during the preceding taxable year.

Other Taxation. Distributions also may be subject to additional state,
local and foreign taxes depending on your particular situation.

<PAGE>

FUND INVESTMENTS

Options, Futures and Forward Contracts. The Fund's transactions in options,
futures and forward contracts, constructive sales and short sales will be
subject to special provisions of the Code that, among other things, may affect
the character of gains and losses realized by the Fund (i.e., it may affect
whether gains or losses are ordinary or capital), accelerate recognition of
income and defer losses. These rules could therefore affect the character,
amount and timing of distributions to you. These provisions also (a) will
require the Fund to mark-to-market certain types of the positions in its
portfolio (i.e., treat them as if they were closed out) and (b) may cause the
Fund to recognize income without receiving cash to pay dividends or make
distributions in amounts necessary to satisfy the distribution requirements for
avoiding income and excise taxes. The Fund will monitor its transactions, will
make the appropriate tax elections and will make the appropriate entries in its
books and records when it acquires any option, futures contract or hedged
investment in order to mitigate the effect of these rules and prevent its
disqualification as a regulated investment company.

Section 988 Gains or Losses. Gains or losses attributable to fluctuations
in exchange rates which occur between the time the Fund accrues income or other
receivables or accrues expenses or other liabilities denominated in a foreign
currency and the time the Fund actually collects such receivables or pays such
liabilities generally are treated as ordinary income or ordinary loss.
Similarly, on disposition of some investments, including debt securities and
certain forward contracts denominated in a foreign currency, gains or losses
attributable to fluctuations in the value of the foreign currency between the
acquisition and disposition of the position also are treated as ordinary gain or
loss. These gains and losses, referred to under the Code as "section 988" gains
or losses, increase or decrease the amount of the Fund's investment company
taxable income available to be distributed to you as ordinary income. If section
988 losses exceed other investment company taxable income during a taxable year,
the Fund would not be able to make any ordinary dividend distributions, or
distributions made before the losses were realized would be recharacterized as a
return of capital to you, rather than as an ordinary dividend, reducing the
basis in your shares.

THE FOREGOING IS ONLY A SUMMARY OF CERTAIN MATERIAL TAX CONSEQUENCES
AFFECTING THE FUND AND YOURSELF. YOU ARE ADVISED TO CONSULT YOUR OWN TAX ADVISER
WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO YOU OF AN INVESTMENT IN THE
FUND.

CAPITAL STOCK

The authorized capital stock of the Fund is 125,000,000 shares of capital
stock, $1.00 par value. The Fund has no present intention of offering additional
shares other than pursuant to the offer, except that additional shares may be
issued under the Dividend Reinvestment Plan and Cash Purchase Plan. Other
offerings of shares, if made, will require approval of the board of directors.
Any additional offering will be subject to the requirement of the 1940 Act that
shares not be sold at a price below the then current net asset value (exclusive
of underwriting discounts and commissions) except in connection with an offering
to existing shareholders or with the consent of the holders of a majority of the
outstanding voting securities, as such term is defined under the 1940 Act.

BENEFICIAL OWNERSHIP

The Fund does not know of any persons who may be deemed beneficial owners
of 5% or more of the shares because they possessed or shared voting or
investment power with respect to them. The officers and directors of the Fund,
in the aggregate, own less than 1% of the outstanding shares.

FINANCIAL STATEMENTS

The financial statements and financial highlights included in the annual
report of the Fund for the fiscal year ended December 31, 1999, which has
previously been provided to you, is incorporated herein by reference into the
statement of additional information. The Fund will furnish, without charge, a
copy of this report upon request to ___________ at Salomon Brothers Asset
Management, _________________.

<PAGE>

PART C

OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

1. Financial Statements

Contained in Part A:

(a) Financial Highlights

Incorporated in Part B by reference to Registrant's December 31, 1999
annual report:

(1) Statement of Investments as of December 31, 1999

(2) Statement of Assets and Liabilities as of December 31, 1999

(3) Statement of Operations for the year ended December 31, 1999

(4) Statements of Changes in Net Assets for the years ended
December 31, 1999 and December 31, 1998

(5) Notes to Financial Statements

2. Exhibits

(a) Articles of Incorporation of the Registrant, as amended*

(b) By-Laws of the Registrant*

(d) (1) Specimen Certificate for Shares of Capital Stock of the
Registrant**

(2) Form of Subscription Certificate***

(3) Form of Notice of Guaranteed Delivery***

(4) Form of Beneficial Listing***

(5) Subscription Agent Agreement between the Registrant and
____________________ dated _____***

(e) (1) Automatic Dividend Reinvestment Plan****

(2) Cash Payment Plan****

(f) Not Applicable

(g) (1) Investment Management Agreement between the Registrant and
Salomon Brothers Asset Management Inc dated May 1, 1994 (as
amended April 29, 1997).***

(2) Sub-administration Agreement between Salomon Brothers Asset
Management Inc and SSB Citi Fund Management LLC***

- ---------------------
* Previously filed and incorporated by reference from Amendment No. 14 to
the Registration Statement on Form N-2 (File No. 811-2733) as filed with
the Securities and Exchange Commission on April 29, 1992.

** Incorporated by reference from Amendment No. 13 to the Registration
Statement on Form N-2 (File No. 811-2733) previously filed with the
Securities and Exchange Commission.

*** To be filed by Amendment.

**** Previously filed and incorporated by reference from the December 31, 1999
annual report as filed with the Securities and Exchange Commission on
March 2, 2000.

II-1

<PAGE>

(h) (1) Form of Financial Advisory Agreement between the Registrant
and Salomon Smith Barney, Inc.***

(2) Form of Information Agency Agreement***

(i) Not Applicable

(j) Custody Agreement between the Registrant and PNC Bank, N.A., dated
__________.***

(k) [Not Applicable]

(l) (1) Opinion of Simpson Thacher & Bartlett***

(2) Opinion of Piper Marbury Rudnick & Wolfe LLP***

(m) Not Applicable

(n) Consent of PricewaterhouseCoopers LLP

(o) Not Applicable

(p) Not Applicable

(q) Not Applicable

ITEM 25. MARKETING ARRANGEMENTS

Not Applicable

ITEM 26. OTHER EXPENSES OF ISSUANCE, DISTRIBUTION AND ORGANIZATION

<TABLE>
<S> <C>
Registration Fee...................................................... $
New York Stock Exchange listing fees..................................
NASD fees.............................................................
Printing (other than stock certificates)..............................
Fees and Expenses of qualification under state securities laws
(including fees of counsel).......................................
Financial Advisor's fees and expenses.................................
Accounting fees and expenses..........................................
Information Agent's fees and expenses.................................
Subscription Agent's fees and expenses................................
Postage...............................................................
Miscellaneous expenses................................................
Total............................................................... $
</TABLE>

ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

Registrant is not controlled by or under common control with any person and
has no subsidiaries.

ITEM 28. NUMBER OF HOLDERS OF SECURITIES

22,885 as of March 22, 2000.

ITEM 29. INDEMNIFICATION

Section 2-418 of the Corporation Law of the State of Maryland gives
Registrant the power to indemnify the directors and officers. Section 2-418
provides in pertinent part:

(b) (1) A corporation may indemnify any director made a party to any
proceeding by reason of service in that capacity unless it is established that:

II-2

<PAGE>

(I) The act or omission of the director was material to the cause of
action adjudicated in the proceeding; and

(1) Was committed in bad faith; or

(2) Was the result of active and deliberate dishonesty; or

(II) The director actually received an improper personal benefit in
money, property or services; or

(III) In the case of any criminal proceeding, the director had
reasonable cause to believe that the act or omission was
unlawful.

(2)(I) Indemnification may be against judgments, penalties, fines,
settlements, and reasonable expenses actually incurred by the director in
connection with the proceeding.

(II) However, if the proceeding was one by or in the right of the
corporation, indemnification may not be made in respect of any proceeding in
which the director shall have been adjudged to be liable to the corporation.

(3) (I) The termination of any proceeding by judgment, order, or
settlement does not create a presumption that the director did not meet
the requisite standard of conduct set forth in this subsection.

(II) The termination of any proceeding by conviction, or a plea of nolo
contendere or its equivalent, or an entry of an order of probation prior
to judgment, creates a rebuttable presumption that the director did not
meet that standard of conduct.

(c) A director may not be indemnified under subsection (b) of this section
in respect of any proceeding charging improper personal benefit to the director,
whether or not involving action in the director's official capacity, in which
the director was adjudged to be liable on the basis that personal benefit was
improperly received.

(d) Unless limited by the charter:

(1) A director who has been successful, on the merits or otherwise, in the
defense of any proceeding referred to in subsection (b) of this section shall be
indemnified against reasonable expenses incurred by the director in connection
with the proceeding.

(2) A court of appropriate jurisdiction, upon application of a director
and such notice as the court shall require, may order indemnification in the
following circumstances:

(i) If it determines a director is entitled to reimbursement under
paragraph (1) of this subsection, the court shall order indemnification,
in which case the director shall be entitled to recover the expenses in
securing such reimbursement; or

(ii) If it determines that the director is fairly and reasonably entitled
to indemnification in view of all the relevant circumstances, whether or
not the director has met the standards of conduct set forth in subsection
(b) of this section or has been adjudged liable under the circumstances
described in subsection (c) of this section, the court may order such
indemnification as the court shall deem proper. However, indemnification
with respect to any proceeding by or in the right of the corporation or in
which liability shall have been adjudged in the circumstances described in
subsection (c) shall be limited to expenses.

(3) A court of appropriate jurisdiction may be the same court in which the
proceeding involving the director's liability took place.

(k) (1) A corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee, or agent of the corporation,
or who, while a director, officer, employee, or agent of the corporation, is or
was serving at the request of the corporation as a director, officer, partner,
trustee, employee, or agent of another foreign or domestic corporation,
partnership, joint venture, trust, other enterprise, or employee benefit plan
against any liability asserted against and incurred by such person in any such
capacity or arising out of such person's position, whether or not the
corporation would have the power to indemnify against liability under the
provisions of this section.

II-3

<PAGE>

(2) A corporation may provide similar protection, including a trust fund,
letter of credit, or surety bond, not inconsistent with this section.

(3) The insurance or similar protection may be provided by a subsidiary or
an affiliate of the corporation.

In addition, the eleventh and twelfth articles of the Fund's Articles of
Incorporation provide that:

ELEVENTH: The corporation shall indemnify (a) its directors and
officers, whether serving the corporation or at its request any other
entity, to the fullest extent required or permitted by the laws of the
State of Maryland now or hereafter in force and the Investment Company Act
of 1940, including the advance of expenses under the procedures required,
and to the fullest extent permitted, by law and (b) other employees and
agents to such extent as shall be authorized by the Board of Directors or
provided by the Corporation's by-laws or by contract and permitted by law.
The foregoing rights of indemnification shall not be exclusive of any
other rights to which those seeking indemnification may be entitled. The
Board of Directors may take such action as is necessary to carry out these
indemnification provisions and is expressly empowered to adopt, approve
and amend from time to time such by-laws, resolutions or contracts
implementing such provisions or such further indemnification arrangements
as may be permitted by law. No amendment of these Articles or repeal of
any of its provisions shall limit or eliminate the right to
indemnification provided hereunder with respect to acts or omissions
occurring prior to such amendment or repeal.

TWELFTH: To the fullest extent permitted by Maryland statutory or
decisional law, as amended or interpreted, no director or officer of the
Corporation shall be personally liable to the Corporation or its
stockholders for money damages, except to the extent such exemption from
liability or limitation thereof is not permitted by the Investment Company
Act of 1940. No amendment of these Articles or repeal of any of its
provisions shall limit or eliminate the benefits provided to directors and
officers under this provision with respect to any act or omission which
occurred prior to such amendment or repeal.

The Fund's By-laws provide that the Fund shall indemnify its directors and
officers against judgments, penalties, fines, excise taxes, settlements and
reasonable expenses to the fullest extent authorized and in the manner
permitted, by applicable federal and state law and the Fund's Articles of
Incorporation.

The Fund has purchased insurance insuring its officers and directors
against certain liabilities incurred in their capacities as such, and insuring
the Fund against any payments which it is obligated to make to such persons
under the foregoing indemnification provisions.

Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Fund pursuant to the provisions described under Item 29 above, or otherwise,
the Fund has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Fund of expenses incurred or paid by a director, officer or controlling
person of the Fund in the successful defense of any action, suit or proceeding)
is asserted against the Fund by such director, officer or controlling person in
connection with the securities being registered, the Fund will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.

ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT MANAGER

Registrant is fulfilling the requirements of this Item 30 to provide a
list of the officers and directors of its investment manager together with
information as to any other business, profession, vocation or employment of a
substantial nature engaged in by that entity or those of its officers and
directors during the past two years, by incorporating by reference the
information contained in the Form ADV filed with the SEC pursuant to the
Investment Advisers Act of 1940 by Salomon Brothers Asset Management Inc. (SEC
File No. )

II-4

<PAGE>

ITEM 31. LOCATION OF ACCOUNTS AND RECORDS

The Salomon Brothers Fund Inc
c/o Salomon Brothers Asset
Management Inc
New York, NY 10022
(Registrant's Articles of Incorporation and By-Laws)

Salomon Brothers Asset Management Inc
(with respect to its services as investment manager)

PNC Bank, N.A.
Lester, PA 19133
(with respect to its services as Custodian for the Fund's assets)

ITEM 32. MANAGEMENT SERVICES

Other than the Investment Management Agreement filed as Exhibit (9) and
described in the prospectus contained in Part A, the Registrant is not a party
to any management-related service contract.

ITEM 33. UNDERTAKINGS

(a) The Fund undertakes to suspend offering of the shares covered hereby
until it amends its prospectus contained herein if (1) subsequent to the
effective date of this Registration Statement, its net asset value per share
declines more than 10 percent from its net asset value per share as of the
effective date of this Registration Statement, or (2) its net asset value
increases to an amount greater than its net proceeds as stated in the prospectus
contained herein.

(b) The Registrant hereby undertakes to send by, first class mail or other
means designed to ensure equally prompt delivery, within two business days of
receipt of a written or oral request, any Statement of Additional Information.

II-5

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement on Form N-2 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, and the State of New York on the 23
day of March, 2000.

THE SALOMON BROTHERS FUND INC

By: /s/ Heath B. McLendon
--------------------------------
Heath B. McLendon
Chairman of the
Board and President

POWER OF ATTORNEY
-----------------

The undersigned directors of The Salomon Brothers Fund Inc (the "Fund") hereby
appoint Heath B. McLendon, Robert A. Vegliante, Esq. and Lewis E. Daidone, or
any one of them, as attorney-in-fact and agent, in all capacities, to execute,
and to file any of the documents referred to below relating to a Registration
Statement under the Securities Act of 1933 and/or the Investment Company Act of
1940, including any and all amendments thereto, all exhibits and any and all
documents required to be filed with respect thereto with any regulatory
authority. Each of the undersigned grants to each of said attorneys full
authority to do every act necessary to be done in order to effectuate the same
as fully, to all intents and purposes, as he could do if personally present,
thereby ratifying all that said attorneys-in-fact and agents may lawfully do or
cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933 and The Investment
Company Act of 1940, this Registration Statement has been signed by the
following persons in the capacities indicated and on the dates listed below:

/s/ Heath B. McLendon Chairman of the Board and President March 16, 2000
- -----------------------------------------
Heath B. McLendon

/s/ Charles F. Barber Director March 16, 2000
- -----------------------------------------
Charles F. Barber

/s/ Andrew L. Breech Director March 16, 2000
- -----------------------------------------
Andrew L. Breech

/s/ Carol L. Colman Director March 16, 2000
- -----------------------------------------
Carol L. Colman

/s/ William R. Dill Director March 16, 2000
- -----------------------------------------
William R. Dill

/s/ Clifford M. Kirtland Director March 16, 2000
- -----------------------------------------
Clifford M. Kirtland

/s/ Robert W. Lawless Director March 16, 2000
- -----------------------------------------
Robert W. Lawless

/s/ Louis P. Mattis Director March 16, 2000
- -----------------------------------------
Louis P. Mattis

/s/ Thomas F. Schafly Director March 16, 2000
- -----------------------------------------
Thomas F. Schafly

II-6

</TABLE>

<PAGE>

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in this Registration
Statement on Form N-2 of our report dated February 16, 2000, relating to the
financial statements and financial highlights which appears in the December 31,
1999 Annual Report to Shareholders of The Salomon Brothers Fund Inc, which are
also incorporated by reference into the Registration Statement. We also consent
to the references to us under the headings "Financial Highlights" and "Experts"
in such Registration Statement.

PricewaterhouseCoopers LLP
New York, NY
March 23, 2000