<PAGE>
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 30, 1996
REGISTRATION NO. 2-63023
811-2884
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-1A
<TABLE>
<S> <C>
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [x]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 20 [x]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [x]
Amendment No. 20 [x]
</TABLE>
------------------------
SALOMON BROTHERS OPPORTUNITY FUND INC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
------------------------
<TABLE>
<S> <C>
7 WORLD TRADE CENTER,
NEW YORK, NEW YORK, 10048
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (800) 725-6666
------------------------
LAWRENCE H. KAPLAN, ESQ.
SALOMON BROTHERS ASSET MANAGEMENT INC
7 WORLD TRADE CENTER
NEW YORK, NEW YORK, 10048
(NAME AND ADDRESS OF AGENT FOR SERVICE)
------------------------
COPY TO:
SARAH E. COGAN, ESQ.
SIMPSON THACHER & BARTLETT
425 LEXINGTON AVENUE
NEW YORK, NEW YORK, 10017
------------------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after
this Post-Effective Amendment becomes effective.
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b)
[x] on December 30, 1996 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485.
------------------------
THE REGISTRANT HAS PREVIOUSLY FILED A DECLARATION OF INDEFINITE
REGISTRATION OF ITS SHARES PURSUANT TO RULE 24f-2 UNDER THE INVESTMENT COMPANY
ACT OF 1940, AS AMENDED. REGISTRANT'S RULE 24f-2 NOTICE FOR THE FISCAL YEAR
ENDED AUGUST 31, 1996 WAS FILED ON OCTOBER 28, 1996.
________________________________________________________________________________
<PAGE>
<PAGE>
SALOMON BROTHERS OPPORTUNITY FUND INC
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(A)
UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
PART A PROSPECTUS CAPTION
- -------- ---------------------------------------------------------------
<S> <C> <C>
Item 1. Cover Page................................ Cover Page
Item 2. Synopsis.................................. Summary, The Fund's Expenses
Item 3. Condensed Financial Information........... Financial Highlights; The Fund's Performance
Item 4. General Description Registrant............ Summary; Investment Objectives; Investment Policies; Limiting
Investment Risks
Item 5. Management of the Fund.................... Financial Highlights; Management; Purchase of Shares
Item 6. Capital Stock and Other Securities........ Dividends, Distributions and Income Taxes; Account Services;
Capital Stock
Item 7. Purchase of Securities Being Offered...... Determination of Net Asset Value; Purchase of Shares;
Shareholder Services
Item 8. Redemption or Repurchase.................. Redemption of Shares; Determination of Net Asset Value
Item 9. Pending Legal Proceedings................. Not Applicable
</TABLE>
<TABLE>
<CAPTION>
PART B STATEMENT OF ADDITIONAL INFORMATION CAPTION
- -------- ---------------------------------------------------------------
<S> <C> <C>
Item 10. Cover Page................................ Cover Page
Item 11. Table of Contents......................... Table of Contents
Item 12. General Information and History........... General Information
Item 13. Investment Objectives and Policies........ Investment Policies; Limiting Investment Risks
Item 14. Management of the Registrant.............. Management
Item 15. Control Persons and Principal Holders of
Securities.............................. Management; Capital Stock (Part A)
Item 16. Investment Advisory and Other Services.... Shareholder Services; Custodian and Transfer Agent; Independent
Accountants
Item 17. Brokerage Allocation and Other
Practices............................... Portfolio Transactions
Item 18. Capital Stock and Other Securities........ Capital Stock (Part A)
Item 19. Purchase, Redemption and Pricing of
Securities Being Offered................ Purchase of Shares (Part A); Redemption of Shares (Part A);
Determination of Net Asset Value; Shareholder Services
Item 20. Tax Status................................ Federal Income Taxes
Item 21. Underwriters.............................. Management
Item 22. Calculation of Performance Data........... Performance Data
Item 23. Financial Statements...................... Financial Statements
</TABLE>
ii
<PAGE>
<PAGE>
SALOMON BROTHERS
OPPORTUNITY FUND INC
PROSPECTUS
DECEMBER 30, 1996
- --------------------------------------------------------------------------------
SALOMON BROTHERS ASSET MANAGEMENT INC
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
SALOMON BROTHERS OPPORTUNITY FUND INC
A No-Load Mutual Fund
7 World Trade Center, New York, New York 10048
(800) 725-6666 or (212) 783-1301
Salomon Brothers Opportunity Fund Inc (the 'Fund') is an open-end, no-load,
non-diversified investment company. The Fund seeks to achieve above average
long-term capital appreciation through investments principally in common stocks,
or securities convertible into or exchangeable for common stocks, which are
believed to be undervalued. Current income is a secondary objective. The Fund
may employ the speculative investment techniques of leveraging and investing in
restricted securities and other securities of limited marketability. There can
be no assurance that the Fund will achieve its investment objectives.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund and should be read and retained for
future reference. A Statement of Additional Information dated December 30, 1996,
containing additional information about the Fund (the 'Statement of Additional
Information'), has been filed with the Securities and Exchange Commission (the
'SEC') and is incorporated herein by reference. It is available without charge
and can be obtained by writing the Fund at the address, or by calling the toll-
free telephone number, listed above.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Summary 2
The Fund's Expenses 3
Financial Highlights 4
The Fund's Performance 4
Investment Objectives 6
Investment Policies 6
Limiting Investment Risks 9
Management 10
Determination of Net Asset Value 11
Purchase of Shares 11
Redemption of Shares 13
Dividends, Distributions and Income
Taxes 15
Shareholder Services 17
Exchange Privilege 17
Account Services 18
Capital Stock 18
</TABLE>
SALOMON BROTHERS ASSET MANAGEMENT INC -- INVESTMENT MANAGER
SALOMON BROTHERS INC -- DISTRIBUTOR
DECEMBER 30, 1996
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
<PAGE>
SUMMARY
THE FUND
Salomon Brothers Opportunity Fund Inc, formerly Lehman Opportunity Fund, Inc.
(the 'Fund'), an open-end, no-load, non-diversified investment company, was
incorporated in Maryland on October 13, 1978.
INVESTMENT OBJECTIVES
The Fund's primary objective is to achieve above average long-term capital
appreciation. Current income is a secondary objective. There can be no assurance
that the Fund will achieve its investment objectives.
INVESTMENT MANAGER
Salomon Brothers Asset Management Inc ('SBAM') is the Fund's investment manager.
SBAM also serves as investment adviser to other investment companies and
numerous individuals and institutions. The Fund pays SBAM an annual management
fee of 1% of the Fund's average daily net assets.
PURCHASE OF SHARES
Shares may be purchased at net asset value without a sales charge: (i) through
First Data Investor Services Group, Inc., a subsidiary of First Data Corporation
('FDISG'), the Fund's transfer agent; (ii) from a selected dealer. The minimum
initial investment is $1,000 and subsequent investments require a minimum of
$100. However, for Individual Retirement Accounts and Self-Employed Retirement
Plans (formerly, Keogh Plans), the minimum initial investment is $250. In
addition, an account can be established with a minimum of $50 if such account
will be receiving periodic regular investments through the Automatic Investment
Plan. See 'Purchase of Shares' and 'Shareholder Services.'
SALE OF SHARES
The Fund redeems shares at net asset value. The Fund does not charge a
redemption fee. See 'Redemption of Shares.'
DIVIDENDS
The Fund intends to distribute annually substantially all of its net investment
income and capital gains, which will be reinvested in additional shares of the
Fund unless a shareholder requests otherwise. See 'Dividends, Distributions and
Income Taxes.'
RISK FACTORS
Prospective investors should consider certain risks associated with an
investment in the Fund. The Fund may employ the speculative investment
techniques of leveraging and investing in restricted securities and other
securities of limited marketability. Such techniques may subject the Fund to
certain risks. Among other factors to be considered by an investor are the
Fund's classification as a non-diversified investment company under the
Investment Company Act of 1940, as amended (the '1940 Act') and the Fund's
ability to invest in foreign securities. See 'Investment Policies.' The Fund
should not be viewed as a complete investment program.
2
<PAGE>
<PAGE>
THE FUND'S EXPENSES
The following expense table is provided to assist investors in understanding the
various costs and expenses that an investor will incur either directly or
indirectly as a shareholder of the Fund, based upon the Fund's actual operating
expenses for its most recent fiscal year, calculated as a percentage of average
daily net assets. These are the only fund related expenses that an investor
bears, provided that under certain circumstances, certain broker/dealers may
impose additional transaction fees on the purchase and/or sale of Fund shares.
See 'Purchase of Shares.'
Annual Fund Operating Expenses
(as a % of average daily net assets)
Management fees 1.00%
Other expenses .18%
----
Total Fund Operating Expenses 1.18%
'Management fees' in the above table represents investment advisory fees paid by
the Fund to SBAM. Pursuant to a Sub-Administration Agreement, SBAM remits a
portion of its management fee (equal to .08% of the Fund's average daily net
assets) to Investors Bank & Trust Company ('Investors Bank') for certain
administrative services which Investors Bank provides to the Fund. See
'Management.'
'Other expenses' in the above table includes fees for shareholder services,
custodial fees, legal and accounting fees, printing costs and registration fees.
The following table illustrates the projected dollar amount of total cumulative
expenses that would be incurred over various periods with respect to a
hypothetical investment in the Fund. These amounts are based upon payment by the
Fund of operating expenses at the levels set forth in the preceding example and
are also based upon the following assumptions:
EXAMPLE: A shareholder would pay the following expenses on a $1,000 investment,
assuming: (1) 5% annual return; and (2) redemption at the end of each time
period:
After 1 year $ 12
After 3 year $ 37
After 5 year $ 65
After 10 years $143
THIS EXAMPLE SHOULD NOT BE CONSIDERED AS REPRESENTATIVE OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Moreover,
while this example assumes a 5% annual return, the Fund's performance will vary
and may result in a return greater or less than 5%.
3
<PAGE>
<PAGE>
FINANCIAL HIGHLIGHTS
The following condensed financial information on selected per share data and
ratios for each of the ten years in the period ended August 31, 1996, has been
audited by Price Waterhouse LLP, independent accountants, whose reports thereon
were unqualified. This information should be read in conjunction with the
financial statements and notes thereto which appear in the Statement of
Additional Information.
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31
----------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990`D' 1989 1988 1987
------ ------ ------ ------ ------ ------ ------------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value, beginning
of year................... $35.75 $31.47 $31.91 $27.64 $25.16 $21.06 $28.37 $23.39 $29.53 $27.87
------ ------ ------ ------ ------ ------ ------------ ------ ------ ------
Net investment income..... 0.60 0.45 0.42 0.57 0.36 0.54 0.60 0.81* 0.56 0.54
Net gains (or losses) on
securities (both realized
and unrealized)........... 3.38 5.68 1.48 4.85 2.79 4.205 (6.20) 6.29 (3.00) 4.49
------ ------ ------ ------ ------ ------ ------------ ------ ------ ------
Total from investment
operations................ 3.98 6.13 1.90 5.42 3.15 4.745 (5.60) 7.10 (2.44) 5.03
------ ------ ------ ------ ------ ------ ------------ ------ ------ ------
Less dividends and
distributions: Dividends
from net investment
income.................... (0.48) (0.37) (0.64) (0.345) (0.50) (0.63) (0.82) (0.54) (0.755) (0.585)
Distributions from net
realized gain on
investments............... (1.36) (1.48) (1.70) (0.805) (0.17) (0.015) (0.89) (1.58) (2.945) (2.785)
------ ------ ------ ------ ------ ------ ------------ ------ ------ ------
Total dividends and
distributions............. (1.84) (1.85) (2.34) (1.15) (0.67) (0.645) (1.71) (2.12) (3.70) (3.37)
------ ------ ------ ------ ------ ------ ------------ ------ ------ ------
Net asset value, end of
year...................... $37.89 $35.75 $31.47 $31.91 $27.64 $25.16 $21.06 $28.37 $23.39 $29.53
------ ------ ------ ------ ------ ------ ------------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------------ ------ ------ ------
Total investment return
based on net asset value
per share................. +11.4% +21.1% +6.4% +20.2% +12.9% +23.2% - 20.6% +32.9% - 6.1% +21.2%
Ratios/Supplemental Data:
Net assets, end of year
(thousands)............... $141,984 $131,237 $118,755 $116,607 $101,679 $102,916 $90,049 $119,250 $92,608 $113,579
Ratio of expenses to
average net assets........ 1.18% 1.18% 1.22% 1.23% 1.25% 1.30% 1.26% 1.19% 1.20% 1.16%
Ratio of net investment
income to average net
assets................... . 1.59% 1.39% 1.29% 1.86% 1.28% 2.31% 2.38% 3.20% 2.29% 1.92%
Portfolio turnover rate... 5% 8% 13% 10% 11% 11% 13% 15% 29% 25%
Average broker commission
rate...................... $0.0591 N/A N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
- ------------
* Includes $.27 per share of special dividends received in connection with
corporate actions on certain portfolio companies.
`D' Since May 1, 1990, the Fund has been managed by SBAM. Prior thereto, the
Lehman Management Company division of Shearson Lehman Brothers Inc. served
as the Fund's investment manager.
THE FUND'S PERFORMANCE
TOTAL RETURN
From time to time, the Fund may advertise its 'average annual total return' over
various periods of time. Such total return figures show the average annual
percentage change in value of an investment in the Fund from the beginning date
of the measuring period to the end of the measuring period. These figures
reflect changes in the price of the Fund's shares and
4
<PAGE>
<PAGE>
assume that any income dividends and/or capital gains distributions made by the
Fund during the period were reinvested in shares of the Fund. Figures will be
given for the most current one, five and ten-year periods and may be given for
other periods as well, such as on a year-by-year basis. When considering average
total return figures for periods longer than one year, it is important to note
that the Fund's annual total return for any one year in the period might have
been greater or less than the average for the entire period. Aggregate total
return figures may also be used for various periods, representing the cumulative
change in value of an investment in the Fund for the specified period (again
reflecting changes in Fund share prices and assuming reinvestment of dividends
and distributions). Aggregate total returns may be shown by means of schedules,
charts, or graphs, and may indicate subtotals of the various components of total
return (i.e., change in value of initial investment, income dividends, and
capital gains distributions).
The Fund's average annual total return was as follows for the fiscal periods
ending August 31:
1 year + 11.37%
5 years + 14.25%
10 years + 11.15%
Furthermore, in reports or other communications to shareholders or in
advertising material, the Fund may compare its performance with that of other
mutual funds as listed in the rankings prepared by Lipper Analytical Services,
Inc. or similar independent services which monitor the performance of mutual
funds, financial indices such as the Standard & Poor's 500 Index or other
industry or financial publications, including, but not limited to, Barron's,
Business Week, CDA Investment Technologies, Inc., Changing Times, Forbes,
Fortune, Institutional Investor, Investors Daily, Money, Morningstar Mutual Fund
Values, The New York Times, USA Today and The Wall Street Journal. It is
important to note that the total return figures set forth above and in the table
below are based on historical earnings and are not intended to indicate future
performance. The Statement of Additional Information further describes the
method used to determine the Fund's performance. The Fund's Annual Report for
the fiscal year ended August 31, 1996, containing performance information is
available without charge and can be obtained by writing the Fund at the address,
or by calling the Fund at the toll-free telephone number, printed on the front
cover.
Investment results for each of the Fund's fiscal years since inception and its
cumulative investment results are shown in the table below.
5
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
ANNUAL CUMULATIVE
--------------------------------- ---------------------------------
SALOMON BROTHERS SALOMON BROTHERS
OPPORTUNITY FUND INC OPPORTUNITY FUND INC
--------------------------------- ---------------------------------
CAPITAL GAINS TOTAL CAPITAL GAINS TOTAL
YEAR ENDED AUGUST 31 REINVESTED RETURN`D' REINVESTED RETURN`D'
- ----------------------------------- ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
1979*......................... +12.0% +12.0% + 12.0% + 12.0%
1980.......................... +20.8 +23.9 + 35.3 + 38.8
1981.......................... + 4.4 + 7.4 + 41.2 + 49.1
1982.......................... - 5.3 - 2.0 + 33.7 + 46.1
1983.......................... +61.0 +66.4 +115.3 +143.1
1984.......................... +10.2 +12.5 +137.3 +173.5
1985.......................... +25.2 +27.8 +197.2 +249.4
1986.......................... +24.5 +26.9 +270.0 +343.4
1987.......................... +18.6 +21.2 +338.9 +437.8
1988.......................... - 9.1 - 6.1 +299.0 +404.5
1989.......................... +29.9 +32.9 +418.3 +570.5
1990.......................... - 23.1 - 20.6 +298.6 +432.4
1991.......................... +19.6 +23.2 +376.7 +555.9
1992.......................... +10.6 +12.9 +427.2 +640.5
1993.......................... +18.7 +20.2 +525.8 +790.1
1994.......................... + 4.3 + 6.4 +552.7 +847.1
1995.......................... +19.6 +21.1 +680.6 +1046.9
1996.......................... +10.0 +11.4 +758.3 +1176.6
</TABLE>
* From commencement of Fund's operations on February 28, 1979.
`D' Income dividends and capital gain distributions reinvested.
The above performance results do not take into account income taxes payable by
shareholders on income dividends and capital gain distributions. During the
above periods, stock prices fluctuated and the investment results should not be
considered as a representation of future results based upon an investment made
in the Fund today.
INVESTMENT OBJECTIVES
The primary investment objective of the Fund is to achieve above average
long-term capital appreciation. The Fund invests principally in common stocks,
or securities convertible into or exchangeable for common stocks, believed by
the investment manager to be undervalued. Current income is a secondary
objective. There can be no assurance that the Fund will achieve its investment
objectives.
INVESTMENT POLICIES
In seeking long-term capital appreciation, the Fund may invest in securities of
companies whose share prices are believed to reflect inadequately the underlying
value of the assets or potential earning power of the company. Although the Fund
may receive current income from dividends, interest and other sources, income is
a secondary consideration to seeking capital appreciation. The Fund seeks to
obtain results above those of relevant published indicators. In analyzing
potential and existing investments, SBAM considers, among other factors:
1. The effect of changes in management, policies, corporate control or
capitalization on the company's earnings or on the market price of its shares;
6
<PAGE>
<PAGE>
2. The effect on earnings, or on the market's evaluation of the company's
future, of changes in technology, marketing or production, the development of
new products or services or in the demand for existing products or services;
3. The effect of recent and anticipated capital expenditures; and
4. The effect of social, economic, political, legal and international
developments.
In pursuit of its objectives, the Fund may invest in securities of seasoned
issuers or in securities of newly established companies. Portfolio securities
may have extended public markets or may have limited marketability and be
subject, therefore, to wide fluctuations in market value.
The Fund's portfolio manager currently pursues a strategy of retaining
unrealized long-term capital gains. The portfolio manager believes that it is
preferable not to dispose of securities that have sizeable gains in order to
invest the proceeds in securities that may have more uncertain long-term
potential. As a result of this strategy, the Fund currently has a substantial
amount of net unrealized appreciation. At August 31, 1996, the amount of such
net unrealized appreciation was $75,441,226, representing approximately 53% of
the Fund's net assets. There can be no assurance that the Fund will continue to
retain this level of net unrealized appreciation, and in the event the Fund
disposes of securities in its portfolio and recognizes sizeable gains, the Fund
will in all likelihood distribute such gains to shareholders who will be taxed
on such amounts. See 'Dividends, Distributions and Income Taxes.'
The Fund intends to invest primarily in common stocks, or securities convertible
into or exchangeable for common stocks, such as convertible preferred stocks or
convertible debentures. When management deems it appropriate, for temporary
defensive purposes due to economic or market conditions, the Fund may also
invest without limitation in fixed-income securities or hold assets in cash or
cash equivalents, such as U.S. Government obligations, investment grade debt
securities and other money market instruments. Investment grade debt securities
are debt securities rated BBB or better by Standard & Poor's Corporation ('S&P')
or Baa or better by Moody's Investors Service, Inc. ('Moody's'), or if unrated,
securities deemed by SBAM to be of comparable quality. Debt securities rated BBB
by S&P are regarded by S&P as having an adequate capacity to pay interest and
repay principal, while debt securities rated Baa by Moody's are regarded by
Moody's as medium grade obligations and as having speculative characteristics.
Investments in such fixed-income securities may also be made for the purpose of
capital appreciation, as in the case of purchases of bonds traded at a
substantial discount.
The Fund may invest up to 5% of its net assets in debt securities rated below
investment grade by S&P and Moody's, with no minimum rating required, or
comparable unrated securities. For additional information on these 'high-yield'
debt securities, which involve a high degree of risk, see 'Investment Policies'
in the Statement of Additional Information.
The Fund may purchase securities for which there is a limited trading market or
which are subject to restrictions on resale to the public. To the extent that
the Fund's portfolio may include securities of limited marketability, the price
obtainable for such securities could be affected adversely if the Fund were
forced to sell under inexpedient circumstances, e.g., to satisfy sizable
redemptions. Furthermore, where the Fund has a substantial position in
securities with limited trading markets, the activities of the Fund itself, as
well as those of other investors, could have an adverse effect upon the
liquidity and marketability of such securities and the Fund might not be able to
dispose of its holdings at then current market prices. 'Limited marketability'
may exist if the Fund has a substantial position in securities that trade in a
limited market, or if the securities are
7
<PAGE>
<PAGE>
'restricted,' and are therefore not readily marketable without registration
under the Securities Act of 1933, as amended (the '1933 Act'). See 'Limiting
Investment Risks' below. Investments in securities which are 'restricted' may
involve added expenses to the Fund should the Fund be required to bear
registration costs with respect to such securities and could involve delays in
disposing of such securities which might have an adverse effect upon the price
and timing of sales of such securities and the liquidity of the Fund with
respect to redemptions. Restricted securities and securities for which there is
a limited trading market may be significantly more difficult to value due to the
unavailability of reliable market quotations for such securities, and investment
in such securities may have an adverse impact on net asset value. The Fund will
not invest more than 10% of the value of its total assets in illiquid
securities, such as 'restricted securities' and securities that are not readily
marketable.
The Fund is classified under the 1940 Act as a non-diversified investment
company, which means that the Fund is not limited by the 1940 Act with regard to
the percentage of its assets that may be invested in the obligations of any
single issuer, subject to the diversification requirements of subchapter M of
the Internal Revenue Code of 1986, as amended (the 'Code'). To the extent the
Fund invests a relatively high percentage of its assets in the securities of a
smaller number of issuers, the Fund may be more susceptible to any single
economic, political or regulatory occurrence than a more widely diversified fund
and may be subject to greater risk of loss with regard to its portfolio
securities.
The Fund may invest in foreign securities or American Depositary Receipts which
are publicly traded in the United States and may invest up to 5% of its net
assets in foreign securities not publicly traded in the United States. Investors
should recognize that investing in the securities of foreign issuers involves
special considerations which are not typically associated with investing in the
securities of U.S. issuers. Investment in securities of foreign issuers may
involve risks arising from non-U.S. accounting, auditing and financial reporting
standards, from restrictions on foreign investment and repatriation of capital,
from differences between U.S. and foreign securities markets, including less
volume, price volatility in and illiquidity of certain foreign securities
markets, different trading and settlement practices and less government
supervision and regulation, from economic, social and political conditions, and,
as with domestic multinational corporations, from fluctuating exchange rates.
Additionally, certain amounts of the Fund's income may be subject to withholding
taxes in the foreign countries in which it invests.
Borrowing
The Fund may borrow money from banks for either investment or temporary
purposes. Borrowing money for investment purposes is a practice known as
'leveraging.' Borrowings (excluding temporary borrowings) may be secured by up
to 33 1/3% of the value of the Fund's total assets. Temporary borrowings in an
additional amount of up to 5% of the Fund's total assets may be made, for
example, to meet redemption requests at a time when disposition of portfolio
securities is deemed undesirable. Notwithstanding the foregoing, the Fund may
not purchase securities on margin, except for short-term credits necessary for
the clearance of transactions. In addition, the Fund may not make short sales of
its securities, except for 'short sales against the box.' See 'Limiting
Investment Risks.'
Borrowing can increase the opportunity for capital appreciation when security
prices rise and increase the risk of loss when prices decline. Interest costs of
borrowing are an
8
<PAGE>
<PAGE>
expense that otherwise would not be incurred and this could reduce the net
investment income of the Fund. While borrowing creates an opportunity for
increased return, it creates special risks. For example, borrowing may
exaggerate changes in the net asset value of the Fund's shares and in the return
on the Fund's portfolio. Although the principal of any borrowing will be fixed,
the Fund's assets may change in value during the time the borrowing is
outstanding. The Fund may be required to liquidate portfolio securities at a
time when it would be disadvantageous to do so in order to make payments with
respect to any borrowing, which could affect the investment manager's strategy
and the ability of the Fund to comply with certain provisions of the Code in
order to provide 'passthrough' tax treatment to shareholders. Furthermore, if a
Fund were to engage in borrowing, an increase in interest rates could reduce the
value of the Fund's shares by increasing the Fund's interest expense.
The foregoing investment policies (other than the policies of the Fund with
respect to the borrowing of money and investing in restricted securities) are
not fundamental policies and may be changed by vote of the Fund's Board of
Directors without the approval of shareholders.
Lending of Portfolio Securities
From time to time, the Fund may lend portfolio securities to selected member
firms of the New York Stock Exchange ('NYSE'). Such loans will not exceed 10% of
the Fund's total assets, taken at value. Loans of portfolio securities by the
Fund will be collateralized by cash which will be maintained at all times in an
amount equal to at least 100% of the market value of the securities lent. The
risk of lending portfolio securities, as with other extensions of credit,
consists of possible delay in recovery of the securities or possible loss of
rights in the collateral should the borrower fail financially.
LIMITING INVESTMENT RISKS
The Fund may not:
(1) Invest: (i) more than 25% of the value of its total assets in the securities
of any single issuer (other than the United States Government or its agencies or
instrumentalities) or in the securities of issuers in any one industry; or (ii)
as to 50% of the value of its total assets, invest more than 5% of the value of
its total assets in the securities of any one issuer (other than the United
States Government or its agencies or instrumentalities) or acquire more than 10%
of the outstanding voting securities of any one issuer;
(2) Borrow money or pledge its assets, except as described under 'Investment
Policies -- Borrowing' above;
(3) Purchase securities on margin (except for such short-term credits as are
necessary for the clearance of transactions) or make short sales of securities
(except for sales 'against the box,' i.e., when a security identical to the one
owned by the Fund or which the Fund has the right to acquire without payment of
additional consideration, is borrowed and sold short in order to defer a gain or
loss for federal income tax purposes);
(4) Underwrite securities, except in instances where the Fund has acquired
portfolio securities which it may not be free to sell publicly without
registration under the 1933 Act ('restricted securities'); in such
registrations, the Fund may technically be deemed an 'underwriter' for purposes
of that Act. It is the Fund's present intention not to acquire restricted
securities unless the Fund also receives contractual registration rights. In any
event, no more than 10% of the value of the Fund's total assets may be invested
in illiquid securities;
(5) Make loans of cash or other assets provided that: (i) this restriction shall
not prevent the Fund from buying a portion of an issue of bonds, debentures or
other obligations which are publicly distributed, or from investing up to an
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aggregate of 10% (including investments in other types of restricted securities)
of the value of its total assets in portions of issues of bonds, debentures or
other obligations of a type privately placed with financial institutions; and
(ii) this restriction shall not prohibit the Board of Directors of the Fund from
authorizing the lending of portfolio securities to selected members of the NYSE
on a demand basis and fully collateralized by cash so long as such loans do not
exceed 10% of the Fund's total assets;
(6) Purchase more than 3% of the stock of another investment company, or
purchase stock of other investment companies equal to more than 5% of the Fund's
net assets in the case of any one other investment company and 10% of such net
assets in the case of all other investment companies in the aggregate. Any such
purchase will be made only in the open market where no profit to a sponsor or
dealer results from the purchase, except for the customary broker's commission.
This restriction shall not apply to investment company securities received or
acquired by the Fund pursuant to a merger or plan of reorganization. (The return
on such investments will be reduced by the operating expenses, including
management fees, of such investment company, and will be further reduced by the
Fund's expenses; that is, there will be a layering of certain fees and
expenses); or
(7) Invest more than 10% of the value of the Fund's total assets in securities
of unseasoned issuers, including their predecessors, which have been in
operation for less than three years.
The foregoing investment restrictions and those described in the Statement of
Additional Information are fundamental policies of the Fund which may be changed
only when permitted by law and approved by the holders of a majority of the
outstanding voting securities of the Fund, as defined in the 1940 Act.
MANAGEMENT
Since May 1, 1990, the Fund has retained SBAM, a wholly-owned subsidiary of
Salomon Brothers Holding Company Inc, which is in turn wholly-owned by Salomon
Inc ('SI'), as its investment manager under an investment management contract.
SBAM was incorporated in 1987 and together with affiliates in London, Frankfurt
and Hong Kong, provides a broad range of fixed-income and equity investment
advisory services to various individuals and institutional clients located
throughout the world, and serves as investment adviser to various investment
companies. In providing such investment advisory services, SBAM has access to
SI's more than 250 economists, mortgage, bond, sovereign and equity analysts. As
of October 31, 1996, SBAM and its worldwide investment advisory affiliates
managed approximately $17.8 billion. SBAM's business offices are located at 7
World Trade Center, New York, New York 10048.
Irving Brilliant is primarily responsible for day-to-day management of the
Fund's portfolio. Mr. Brilliant has been the Fund's President and portfolio
manager since 1979. Since 1990, he has been a Director of Salomon Brothers and
an employee of SBAM, and prior to 1990 he was a Senior Vice President of the
Lehman Management Co. Division of Shearson Lehman Brothers Inc.
Subject to policy established by the Board of Directors of the Fund, which has
overall responsibility for the business affairs of the Fund, SBAM manages the
operations of the Fund pursuant to a management contract (the 'Management
Contract') with the Fund. SBAM also furnishes office space and certain
facilities required for the performance by SBAM of certain additional services
provided to the Fund pursuant to the Management Contract, including compliance
with rules and regulations promulgated by the SEC, supervision of Fund
operations and certain administrative and clerical services, and pays the
compensation of the
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officers, employees and directors of the Fund who are affiliated with SBAM. The
management fee paid to SBAM for the fiscal year ended August 31, 1996
represented 1% of the Fund's average daily net assets during that year. This fee
is higher than the management fees paid by most other investment companies.
Except for the expenses paid by SBAM that are described herein, the Fund bears
all costs of its operations.
Pursuant to a Sub-Administration Agreement between SBAM and Investors Bank,
Investors Bank performs certain administrative services in connection with the
operation of the Fund. The services provided by Investors Bank under the
applicable administration agreements include certain accounting, clerical and
bookkeeping services, Blue Sky compliance, corporate secretarial services and
assistance in the preparation and filing of tax returns and reports to
shareholders and the SEC. As compensation for its services and at no additional
cost to the Fund, SBAM pays Investors Bank a fee each month at an annual rate of
.08% of the average daily value of the Fund's net assets.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and subject to seeking the most favorable price and
execution available, SBAM may consider sales of shares of the Fund as a factor
in the selection of brokers to execute portfolio transactions for the Fund. The
Fund may use Salomon Brothers, an indirect wholly-owned subsidiary of SI, to
execute portfolio transactions when SBAM believes that the broker's charge for
the transaction does not exceed the usual and customary levels charged by other
brokers in connection with comparable transactions involving similar securities.
See 'Portfolio Transactions' in the Statement of Additional Information.
Expenses
The Fund's expenses include taxes, interest, fees and salaries of the directors
and officers who are not directors, officers or employees of the Fund's service
contractors, SEC registration fees, state securities qualification fees, costs
of preparing and printing prospectuses for regulatory purposes and for
distribution to existing shareholders, advisory and administration fees, charges
of the custodian, transfer agent and dividend disbursing agent, certain
insurance premiums, outside auditing and legal expenses, costs of shareholder
reports and shareholder meetings and any extraordinary expenses. The Fund also
pays for brokerage fees and commissions (if any) in connection with the purchase
and sale of portfolio securities.
DETERMINATION OF NET ASSET VALUE
The Fund's net asset value per share for the purpose of pricing purchase and
redemption orders is determined at the close of regular business of the NYSE on
each day the Fund is open for business. The Fund is open for business on each
day the NYSE is open for trading, i.e., Monday through Friday with the exception
of New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day, and the preceding Friday or
subsequent Monday when one of those holidays falls on a Saturday or Sunday,
respectively. The net asset value per share is computed by dividing the value of
the net assets of the Fund (i.e., the value of the assets less the liabilities)
by the total number of Fund shares outstanding. In calculating net asset value,
all portfolio securities will be valued at market value when there is a reliable
market quotation available for the securities and otherwise as the Board of
Directors of the Fund in good faith deems appropriate.
PURCHASE OF SHARES
Shares of the Fund may be purchased through First Data Investor Services Group,
Inc. ('FDISG') (formerly, The Shareholder Services
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Group, Inc.), through Salomon Brothers, the Fund's distributor, or from selected
dealers. Purchases of shares made through a selected dealer should be made in
accordance with the procedures prescribed by such selected dealer. The Fund
reserves the right to reject any purchase order in whole or in part.
Shares may be purchased initially by completing
a Purchase Application and mailing it, together with your check payable to
Salomon Brothers Funds, to: Salomon Brothers Opportunity Fund Inc, c/o First
Data Investor Services Group, Inc., P.O. Box 5127, Westborough, Massachusetts
01581-5127. In addition, an account can be established with a minimum of $50 if
the account will be receiving periodic, regular investments through programs
such as the Automatic Investment Plan. See 'Shareholder Services.'
The minimum initial investment in Fund shares is $1,000 and subsequent
investments may be made in amounts of $100 or more. However, for IRAs and
Self-Employed Retirement Plans (formerly, Keogh Plans), the minimum initial
investment is $250. Subsequent investments may be made at any time through a
selected dealer or by mailing a check to FDISG at the address set forth above,
along with the detachable stub from the Statement of Account (or a letter
providing the account number). Shareholders should be sure to write the Fund's
account number on the check. Initial purchases of Fund shares may not be made by
third party check. If an investor's purchase check is not collected, the
purchase will be cancelled and FDISG will charge a fee of $10 to the
shareholder's account. FDISG does not intend to resubmit such checks for
collection.
Subsequent investments may also be made by wiring federal funds to FDISG. Prior
notification by telephone is not required. The investor should instruct the
wiring bank to transmit the specified amount in federal funds to:
Boston Safe Deposit and Trust Company
Boston, Massachusetts
ABA No. 011-001-234
Account #142743
Attn: Salomon Brothers Opportunity Fund
Name of Account:
Account # (As assigned):
Shareholders should note that their bank may charge a fee in connection with
transferring money by bank wire.
To ensure prompt credit to their accounts, investors or their dealers should
call (800) 446-1013 with a reference number for the wire. If wires are received
after 4:00 p.m. New York time, or during a bank holiday, purchases will be
confirmed at the price determined on the next business day.
Orders for the purchase of Fund shares received by selected dealers by the close
of regular trading on the NYSE on any day that the Fund calculates its net asset
value and either transmitted to Salomon Brothers by the close of its business
day (normally 5:00 p.m., New York time) or transmitted by dealers to FDISG,
through the facilities of the National Securities Clearing Corporation ('NSCC')
by 7:00 p.m., New York time, on that day will be priced according to the net
asset value determined on that day. Otherwise, the orders will be priced as of
the time the net asset value is next determined. It is the dealers'
responsibility to ensure that orders are transmitted so as to be received by
Salomon Brothers or FDISG through the facilities of NSCC prior to the close of
its business day. Any loss resulting from a dealer's failure to submit an order
within the prescribed time frame will be borne by that dealer.
Funds transmitted by a wire system other than the Federal Reserve Wire System
generally take one business day to be converted into federal funds. In those
cases in which an investor pays for shares by a check drawn on a member bank of
the Federal Reserve System, federal funds generally will become available on the
business
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day after the check is deposited. Checks drawn on banks which are not members of
the Federal Reserve System or foreign banks may take substantially longer to be
converted into federal funds.
Although most shareholders elect not to receive stock certificates, certificates
for full shares can be obtained on specific written request at no cost to the
shareholder. No certificates are issued for fractional shares.
Investors who purchase and redeem Fund shares through broker-dealers, banks and
other institutions may be subject to fees imposed by those entities with respect
to the services they provide. Orders placed by an investor directly with FDISG
or Salomon Brothers will not be subject to such fees.
REDEMPTION OF SHARES
Shareholders may redeem all or any part of their shareholdings on any business
day at the applicable net asset value determined after the receipt of proper
redemption instructions. The Fund does not charge a redemption fee. The value of
shares upon redemption may be more or less than the investor's cost.
The Fund reserves the right, upon not less than 30 days' written notice, to
redeem the shares in an account which has a value of less than $1,000. However,
any shareholder affected by the exercise of this right will be allowed to make
additional investments prior to the date fixed for redemption to avoid
liquidation of the account.
Payment of redemption proceeds may be made in securities in accordance with
applicable law. Payment of the redemption price will be made within seven days
after receipt of the redemption instructions in good order, but the Fund may
suspend the right of redemption during any period when: (a) trading on the NYSE
is restricted or the NYSE is closed, other than customary weekend and holiday
closings; (b) the SEC has by order permitted such suspension; or (c) an
emergency exists, as defined by rules of the SEC, making disposal of portfolio
securities or determination of the value of net assets of the Fund not
reasonably practicable.
For the shareholder's convenience, the Fund has established different redemption
procedures. No redemption requests will be processed until the Fund has received
a completed Purchase Application, and no redemption of shares purchased by check
will be permitted until all checks in payment for the purchase of the shares to
be redeemed have been collected, which may take up to 15 days or more.
REDEMPTIONS BY MAIL FOR FDISG ACCOUNTS
Shares may be redeemed by mail by submitting the following documents:
(1) Written instructions from registered owner(s), signed exactly as shares are
registered;
(2) All certificates, if any, to be redeemed;
(3) If shares to be redeemed have a net asset value of $50,000 or more, a letter
or a stock power signed by the registered owner(s) with the signature(s)
guaranteed by an acceptable guarantor. A guarantee of each shareholder's
signature is required for all redemptions, regardless of the amount involved,
when: (i) proceeds are to be paid to someone other than the registered owner(s)
of the shares redeemed; (ii) are to be wired to a bank; or (iii) are to be sent
to an address other than the shareholder's address of record. The Transfer Agent
has adopted standards and procedures pursuant to which signature-guarantees in
proper form generally will be accepted from domestic banks, brokers, dealers,
credit unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations, as well as from
participants in the New York Stock Exchange Medallion Signature Program, the
Securities Transfer Agents Medallion Program ('STAMP') and the Stock Exchanges
Medallion Program. Shareholders with any
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questions regarding signature-guarantees should call the telephone numbers
listed on the cover; and
(4) In the case of shares of record held in the name of a corporation, trust,
fiduciary or partnership, the redemption agent requires evidence of authority to
sign and a stock power with signature(s) guaranteed.
TO EXPEDITE PROCESSING OF REDEMPTIONS BY MAIL, SHAREHOLDERS SHOULD SUBMIT
REDEMPTION REQUESTS AND ALL RELATED DOCUMENTS DIRECTLY TO: FIRST DATA INVESTOR
SERVICES GROUP, INC., P.O. BOX 5127, WESTBOROUGH, MASSACHUSETTS 01581-5127.
Checks for redemption proceeds will be mailed within seven days of redemption.
Unless other instructions are given in proper form, a check for proceeds of
redemption will be sent to the shareholder's address of record if the
shareholder does not have a brokerage account.
Repurchases through Selected Dealers
In addition, Salomon Brothers will accept orders from dealers with which it has
sales agreements for the repurchase of shares held by investors. Repurchase
orders received by the dealer prior to the close of regular trading on the NYSE
on any business day and transmitted to Salomon Brothers prior to the close of
its business day (normally 5:00 p.m., New York time) are effective that day.
Otherwise, the shares will be repurchased at the net asset value next
determined. It is the responsibility of the dealer to transmit orders on a
timely basis. The dealer may charge the investor a fee for executing the order.
This repurchase arrangement is discretionary and may be withdrawn or modified at
any time.
Telephone Redemption Privilege
Shareholders having direct accounts with FDISG may redeem shares by means of the
Telephone Redemption Privilege. The Application for Telephone Redemption
Privilege must be completed by the shareholder with the signature(s) guaranteed
in the manner described above under 'Redemptions by Mail' prior to initiating a
telephone redemption.
Shareholders cannot apply the Telephone Redemption Privilege to shares held in
certificate form or for accounts requiring additional supporting documentation
for redemptions such as trust, corporate, estate and guardian accounts.
Proceeds from the telephone redemption will be forwarded to the shareholder by
check unless the shareholder has requested redemption by wire in the manner
described below under 'Redemption by Wire.' The check will be made payable to
the registered shareholder(s) and sent to the address of record on file with
FDISG.
The Fund reserves the right to refuse a telephone redemption if it is believed
advisable to do so. Procedures for redeeming Fund shares by telephone may be
modified at any time by the Fund. Neither the Fund nor FDISG will be liable for
following redemption instructions received by telephone, which are reasonably
believed to be genuine, and the shareholder will bear the risk of loss in the
event of unauthorized or fraudulent telephone instructions. The Fund and FDISG
will employ reasonable procedures to confirm that instructions communicated by
telephone are genuine. The Fund and/or FDISG may be liable for any losses due to
fraudulent instructions if they do not follow such procedures. When requesting a
redemption by telephone, shareholders should have available the correct account
registration and account number or tax identification number.
Redemption by Wire
If redemption by wire has been elected on the Purchase Application, shares may
be redeemed, in the amount of $500 or more, on any business day upon request
made by tele-
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phone or letter. No signature guarantee is required on such a redemption
request. To elect this service subsequent to opening an account, call SBAM or
FDISG for further information.
You may either:
Telephone the redemption request to FDISG by calling (800) 446-1013; or
Mail the request to FDISG at the following address:
Salomon Brothers Opportunity Fund
c/o FDISG
P.O. Box 5127
Westborough, MA 01581-5127
Proceeds of wire redemptions of $500 or more will be wired to the shareholder's
bank indicated in the Purchase Application or by letter which has been properly
guaranteed. Checks for redemption proceeds of less than $500 will be mailed to
the shareholder's address of record.
Shareholders should note that their bank may charge a fee in connection with
transferring money by bank wire.
Redemptions in Kind
If the Board of Directors shall determine that it is in the best interests of
the shareholders of the Fund, the Fund may pay the redemption price, in whole or
in part, by a distribution in kind from the portfolio of the Fund, in lieu of
cash, taking such securities at their values employed for determining such
redemption price, and selecting the securities in such manner as the Board of
Directors may deem fair and equitable. However, the Fund has made an election
pursuant to Rule 18f-1 under the 1940 Act requiring that all redemptions be
effected in cash to each redeeming shareholder, during any period of 90 days, up
to the lesser of $250,000 or 1% of the net assets of the Fund. A shareholder who
receives a distribution in kind may incur a brokerage commission upon a later
disposition of such securities. The Fund does not intend to make a practice of
redeeming shares in kind.
DIVIDENDS, DISTRIBUTIONS AND INCOME TAXES
The Fund complied during the fiscal year ended August 31, 1996 and intends to
continue to comply in the future with the provisions of subchapter M of the Code
applicable to regulated investment companies so that, among other things, as to
any fiscal year in respect of which it distributes at least 90% of its net
investment income (i.e., its 'investment company taxable income' as such term is
defined in the Code, determined without regard to the deduction for dividends
paid), the Fund will not be subject to federal income tax on its net investment
income and net capital gains (i.e., the excess of the Fund's net realized
long-term capital gains over net realized short-term capital losses) distributed
to shareholders. Each year the Fund will notify shareholders of the tax status
of dividends and distributions from the Fund. Dividends and distributions also
may be subject to state and local taxes. If in any year the Fund fails to
qualify as a regulated investment company, the Fund will be taxable as a
corporation for federal, state and local income tax purposes and will be subject
to certain additional distribution requirements upon requalification.
The Fund intends to distribute to shareholders annually substantially all of its
net investment income and net capital gains. Investors should consider the tax
consequences of buying shares of the Fund prior to the record date of a
distribution because such distributions will generally be taxable even though
the net asset value of shares of the Fund is reduced by the distribution. In
particular, as discussed under 'Investment Policies,' the Fund currently has a
substantial amount of net unrealized appreciation which could result in large
capital gain distributions.
The Fund is subject to a nondeductible 4% excise tax, calculated as a percentage
of certain undistributed amounts of ordinary income and net realized capital
gains. To the
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extent possible, the Fund intends to make sufficient distributions as are
necessary to avoid the imposition of this excise tax.
If a shareholder elects to receive dividends and/or distributions in cash and
the check cannot be delivered to a shareholder due to an invalid address or
otherwise remains uncashed by the shareholder for a period of six months, the
Fund reserves the right to reinvest the dividend and/or distribution in a
shareholder's account at the then-current net asset value and to convert the
shareholder's election to automatic reinvestment in shares of the Fund from
which the distributions were made.
Dividends and capital gain distributions are reinvested automatically in
additional shares of the Fund at the net asset value next determined after the
record date and such shares are automatically credited to a shareholder's
account, unless FDISG or an SBAM Representative is informed by notice that a
shareholder wishes to receive such dividends or distributions in cash. The
shareholder may change such distribution option at any time by notification to
FDISG prior to the record date of any such dividend or distribution. See
'Purchase of Shares.' Shareholders receiving distributions in the form of shares
will be treated as receiving a distribution in an amount equal to the fair
market value, determined as of the payment date, of the shares received. For
federal income tax purposes, distributions of net investment income and net
short-term capital gains will be taxable to shareholders at ordinary income
rates. Distributions of net capital gains designated by the Fund as capital gain
dividends will be taxable as long-term capital gains, whether they are invested
in additional shares of the Fund or received in cash and regardless of the
length of time the shareholder has owned his shares. However, such capital gain
dividends will not qualify for the dividends received deduction. In general, the
maximum Federal income tax rate imposed on an individual with respect to capital
gains is 28%, whereas the maximum Federal income tax rate imposed on individuals
with respect to ordinary income currently is 39.6%. With respect to corporate
taxpayers, long-term capital gains are currently taxed at the same Federal
income tax rates as ordinary income and short-term capital gains. It is expected
that all or a portion of the Fund's distributions from net investment income
will be eligible for the 70% dividends received deduction available to
corporations.
Generally, shareholders will be taxable on dividends or distributions in the
year of receipt. However, if the Fund declares a dividend or distribution in
October, November or December to shareholders of record on a specified date in
such a month which is paid during the following January, it will be taxable to
shareholders in the year the dividend or distribution is declared.
The redemption, sale or exchange of shares of the Fund for shares of another is
a taxable event and may result in a gain or loss. Gain or loss, if any,
recognized on the sale or other disposition of Fund shares will be taxed as
capital gain or loss if the shares are capital assets in the shareholder's
hands. Such gain or loss will be treated as a capital gain or loss if the shares
are capital assets in the shareholder's hands, and will be long-term if the
shareholder has held such shares for more than one year. If a shareholder sells
or otherwise disposes of shares of a Fund before holding them for more than six
months, any loss on the sale or other disposition of such shares shall be
treated as a long-term capital loss to the extent of any capital gain dividends
received by the shareholder with respect to such shares. A loss realized on a
sale or exchange of shares may be disallowed if other shares are acquired within
a 61-day period beginning 30 days before and ending 30 days after the date that
the shares are disposed of.
The Fund may be required to withhold federal income tax at a rate of 31%
('backup withholding') from dividends and redemption proceeds paid to
non-corporate shareholders. This tax
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may be withheld from dividends if: (i) the payee fails to furnish the Fund with
the payee's correct taxpayer identification number (e.g., an individual's social
security number); (ii) the Internal Revenue Service ('IRS') notifies the Fund
that the payee has failed to report properly certain interest and dividend
income to the IRS and to respond to notices to that effect; or (iii) when
required to do so, the payeee fails to certify that he or she is not subject to
backup withholding. Redemption proceeds may be subject to withholding under the
circumstances described in (i) above.
Backup withholding is not an additional tax and any amount withheld may be
credited against the shareholder's federal income tax liability.
The foregoing is intended to be general information to shareholders and
potential investors in the Fund and does not constitute tax advice.
Shareholders and potential investors are urged to consult their own tax advisers
regarding federal, state, local and, if applicable, foreign tax consequences of
an investment in the Fund.
SHAREHOLDER SERVICES
The Fund offers the following shareholder services. See the Statement of
Additional Information for further details about these services or call or write
the Fund.
AUTOMATIC INVESTMENT PLAN
An investor who opens an account and wishes to make subsequent, periodic
investments in the Fund by electronic funds transfer from a bank account may
establish an Automatic Investment Plan on the account. The bank at which the
bank account is maintained must be a member of the Automated Clearing House
(ACH). The investor specifies the frequency with which the investments occur
(monthly, every alternate month, quarterly, etc.) with the exception that no
more than one investment will be processed each month. On or about the tenth of
the month, the Fund will debit the bank account in the specified amount (minimum
of $25 per draft) and the proceeds will be invested at the applicable offering
price determined on the date of the debit. In the event of a full exchange, this
plan will follow into the new Fund unless otherwise specified.
EXCHANGE PRIVILEGE
Until March 1, 1997, shareholders of the Fund may exchange all or part of their
Fund shares for Class O shares of Salomon Brothers New York Municipal Money
Market Fund and Salomon Brothers Capital Fund. As of March 1, 1997, this
exchange privilege will terminate and shareholders will no longer have the
ability to exchange their shares. The exchange privilege is available to
shareholders residing in any state in which the shares of the Fund being
acquired may be legally sold. Exchanges of shares may be made at any time and
without payment of any exchange fee. The following is a description of the
investment objectives of the funds available for exchange:
Salomon Brothers New York Municipal Money Market Fund. A money market fund that
invests primarily in high-quality, short-term obligations issued by or on behalf
of the State of New York or by its instrumentalities or political subdivisions
with the goal of providing as high a level of current income exempt from regular
federal, New York State and New York City personal income taxes as is consistent
with liquidity and the stability of principal. Income may not be exempt from
certain state or local taxes.
Salomon Brothers Capital Fund. A fund which seeks capital appreciation through
investments in securities, primarily common stocks, which are believed to have
above-average appreciation possibilities and which also may involve
above-average risk.
The exchange of shares of one fund for shares of another fund is treated for
federal income tax purposes as a sale of the shares given in
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exchange by the shareholder, and an exchanging shareholder may, therefore,
realize a taxable gain or loss. See 'Dividends, Distributions and Taxes' above.
Shareholders exercising the exchange privilege with any of the funds listed
above should review the prospectus of that fund carefully prior to making an
exchange. Further information regarding the exchange privilege is contained in
the Statement of Additional Information. To obtain the prospectuses of these
funds, shareholders should contact SBAM at the address or phone number listed on
the cover.
The Fund reserves the right to reject any exchange or to modify or restrict the
exchange privilege at any time prior to its termination on March 1, 1997.
Automatic Withdrawal Plan. With an Automatic Withdrawal Plan, a shareholder may
establish a plan for redemptions to be made automatically monthly or quarterly
in amounts not less than $50 with payments sent directly to the shareholder or
to another designated person. A Withdrawal Plan may be opened with an account
having a total value of at least $7,500.
Self-Employed Retirement Plans. A prototype defined contribution retirement plan
is available for self-employed individuals who wish to contribute out of earned
income on behalf of themselves and each of their employees to purchase shares of
the Fund.
Individual Retirement Accounts. A prototype individual retirement account
('IRA') is generally available for all working individuals who receive
compensation (which for self-employed individuals includes earned income) for
services rendered, and for all individuals who receive alimony or separate
maintenance payments pursuant to a divorce or separation instrument.
Shareholders should consult with a financial adviser regarding an IRA.
ACCOUNT SERVICES
Shareholders are kept informed through annual and semi-annual reports showing
current investments and other financial data for the Fund. Annual reports
include audited financial statements. Shareholders will receive a Statement of
Account following each share transaction. Shareholders can write or call the
Fund at the address and telephone number on the first page of this Prospectus
with any questions relating to their investment in Fund shares.
CAPITAL STOCK
The authorized capital stock of the Fund consists of 15,000,000 shares having a
par value of $.01 per share. All shares are of the same class, with like rights
and privileges. Each share is entitled to one vote and participates equally in
Fund dividends and distributions and in its net assets on liquidation. Each
shareholder is entitled to cast, at all meetings of shareholders, such number of
votes as is equal to the number of full and fractional shares held by such
shareholder. Except when Directors are required to be elected under the 1940
Act, there will not be a regularly scheduled Annual Meeting of Stockholders. The
shares are fully paid and non-assessable when issued and have no preference,
pre-emptive, conversion or exchange rights. There are no options or other
special rights outstanding relating to any such shares.
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BOARD OF DIRECTORS
IRVING BRILLIANT
President of Salomon Brothers Opportunity Fund Inc
BENITO GAGUINE
Attorney at Law
ROSALIND KOCHMAN
Administrator and Counsel,
Kochman Eye Surgical Facility
IRVING SONNENSCHEIN
Partner in the law firm of Sonnenschein,
Sherman & Deutsch
OFFICERS
IRVING BRILLIANT
President
LAWRENCE H. KAPLAN
Executive Vice President and
General Counsel
TANA E. TSELEPIS
Secretary
JENNIFER G. MUZZEY
Assistant Secretary
ALAN M. MANDEL
Treasurer
JANET S. TOLCHIN
Assistant Treasurer
19
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TELEPHONES
(212) 783-1301
(800) 725-6666
DISTRIBUTOR
Salomon Brothers Inc
7 World Trade Center
New York, New York 10048
INVESTMENT MANAGER
Salomon Brothers Asset Management Inc
7 World Trade Center
New York, New York 10048
CUSTODIAN
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
First Data Investor Services Group, Inc.
P.O. Box 5127
Westborough, Massachusetts 01581-5127
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
New York, New York 10036
LEGAL COUNSEL
Simpson Thacher & Bartlett
New York, New York 10017
No dealer, salesman or other person has been authorized to give any information
or to make any representations, other than those contained in this Prospectus,
in connection with the offer contained in this Prospectus, and, if given or
made, such other information or representations must not be relied upon as
having been authorized by the Fund, the distributor or the investment manager.
This Prospectus does not constitute an offering in any state in which such
offering may not lawfully be made.
20
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SALOMON BROTHERS OPPORTUNITY FUND INC
A NO-LOAD MUTUAL FUND
7 WORLD TRADE CENTER, NEW YORK, NEW YORK 10048
TELEPHONES: (212) 783-1301 (NEW YORK STATE);
OR (800) 725-6666
------------------------
STATEMENT OF ADDITIONAL INFORMATION
------------------------
Salomon Brothers Opportunity Fund Inc (the 'Fund') is an open-end, no-load,
non-diversified investment company. The Fund seeks to achieve above-average
long-term capital appreciation through investments principally in common stocks,
or securities convertible into or exchangeable for common stocks, which are
believed to be undervalued. Current income is a secondary objective. The Fund
may employ the speculative investment techniques of leveraging and investing in
restricted securities and other securities of limited marketability. There can
be no assurance that the Fund's objectives will be achieved.
This Statement of Additional Information (the 'SAI') is not a prospectus
and is only authorized for distribution when preceded or accompanied by the
Fund's current Prospectus dated December 30, 1996 (the 'Prospectus'). This SAI
supplements and should be read in conjunction with the Prospectus, a copy of
which may be obtained without charge by writing the Fund at the address, or by
calling the telephone number, listed above.
December 30, 1996
<PAGE>
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Policies.............................. 3
Limiting Investment Risks........................ 5
Management....................................... 6
Portfolio Transactions........................... 8
Determination of Net Asset Value................. 9
Performance Data................................. 10
Federal Income Taxes............................. 10
<CAPTION>
PAGE
----
<S> <C>
Shareholder Services............................. 11
Custodian and Transfer Agent..................... 13
Independent Accountants.......................... 13
Financial Statements............................. 14
Report of Independent Accountants................ 23
</TABLE>
2
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INVESTMENT POLICIES
The following information supplements the discussion of the investment
policies of the Fund found under 'Investment Policies' in the Prospectus.
LOANS OF PORTFOLIO SECURITIES
The Fund's Board of Directors may authorize the lending of portfolio
securities to selected member firms of the New York Stock Exchange. The
procedure for the lending of securities will include the following features and
conditions. The borrower of the securities will deposit cash with the Fund in an
amount equal to a minimum of 100% of the market value of the securities lent.
The Fund will invest the collateral in short-term debt securities or cash
equivalents and earn the interest thereon. A negotiated portion of the income so
earned may be paid as a fee to the broker or other person who arranged the loan.
If the deposit drops below the required minimum at any time, the borrower will
be called upon to post additional cash, so as to mark to market on a daily
basis. If the additional cash is not provided, the loan will be immediately due
and the Fund may use the collateral or its own cash to replace the securities by
purchase in the open market, charging any loss to the borrower. These will be
'demand' loans and may be terminated by the Fund at any time. The Fund will
receive any dividends and interest paid on the loaned securities, and the loans
will be structured to assure that the Fund will be able to exercise its voting
rights on the securities. Such loans will be authorized only to the extent that
such activity would not cause any adverse tax consequences to the Fund or its
shareholders and only in accordance with applicable rules and regulations.
Neither the brokers nor the borrowers may be affiliated, directly or indirectly,
with the Fund. Lending of portfolio securities is subject to the restrictions
set forth in paragraph (4) under 'Limiting Investment Risks' in the Prospectus.
The Fund did not lend any of its portfolio securities during the fiscal year
ended August 31, 1996.
PUT AND CALL OPTIONS
The Fund may purchase and write put and call options on securities and
securities indices provided such options are traded on a national securities
exchange and provided further that the value of options held and the value of
positions underlying options written do not exceed 10% of the Fund's total
assets. A put option gives the holder the right to sell to the writer, and a
call option gives the holder the right to buy from the writer, the number of
shares of the underlying security covered by the option at a stated exercise
price on or before a stated expiration date. Puts and calls, with respect to a
limited number of securities, currently may be purchased or written through the
facilities of certain national securities exchanges. In addition, each of such
exchanges provides a secondary market for 'closing' options positions. It will
be the policy of the Fund to write call options only if the Fund either: (i)
owns and will hold over the term of the option the underlying securities against
which the option is written (or securities convertible into the underlying
securities without additional consideration) or: (ii) owns or will hold a call
on the same underlying security or securities. When a put option is written by
the Fund, the Fund will create and maintain a segregated account consisting of
cash, U.S. government securities or high grade debt securities equal to the
option price.
The primary risk to the Fund as the writer of a covered call option is
that, unless a closing transaction is executed, the Fund must retain its
underlying cover position even if price movement would otherwise have caused the
Fund to dispose of that position, and must forgo opportunities for gain in
excess of the option premium which may result from favorable changes in the
value of the underlying cover position.
The primary risk to the Fund as the writer of a put option is that, unless
a closing transaction is executed, the Fund may be required to purchase the
underlying security or securities at a price above the market price at the time
of such purchase. When a put option is collateralized through the maintenance of
a segregated account, the contents of such account are not available to the Fund
for the general pursuit of the Fund's investment objectives. The Fund will write
put options only when it is believed that the acquisition of the underlying
security or securities would be in accordance with the Fund's investment
objectives.
3
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The Fund may enter into closing purchase transactions in the secondary
markets in options maintained by the various exchanges. In such a transaction,
the Fund would buy an option similar to the one it had previously written. The
resulting transaction would have the effect of canceling the Fund's preexisting
obligation on the option written by it. The Fund has no assurance, however, that
a liquid secondary market will exist on any given day with respect to options on
a particular security. Therefore, there is no assurance that the Fund will be
able to enter into a closing transaction at any particular time.
In executing any closing purchase transaction, the Fund will incur the
expense of the premium (plus transaction costs) in order to effect the
transaction.
The Fund may purchase put or call options for speculative purposes in
pursuit of its objective of capital appreciation or, in the case of a put, to
hedge against an adverse price change in a portfolio position.
The primary risk in purchasing (as opposed to writing) an option is the
potential loss of investment (i.e., the premium for the option) in a relatively
short period of time if the underlying securities increase, in the case of a
put, or decrease, in the case of a call, in value. In such instances, the option
would not be exercised by the Fund and would become worthless at its expiration
date. If a secondary market for the option exists, the Fund may utilize closing
sale transactions analogous to the closing purchase transactions described above
with respect to the writing of options.
The Fund did not purchase or write any put or call options during the
fiscal year ended August 31, 1996, and has no present intention to do so. See
'Federal Income Taxes -- Taxation of the Fund' for discussion of tax
considerations.
INVESTMENTS IN FOREIGN SECURITIES
Investments in securities of foreign issuers may involve risks not
typically associated with investments in securities of U.S. issuers. The value
of any foreign securities held, and of any related income received, will be
affected by fluctuations in currency rates, exchange control regulations and, as
with domestic multinational corporations, from fluctuating interest rates. Most
foreign securities markets have substantially less trading volume and are
generally not as highly regulated and supervised as U.S. securities markets.
Securities of some foreign companies are less liquid and more volatile than
securities of comparable U.S. companies and are subject to different accounting,
auditing and financial reporting standards. In addition, there may be less
publicly-available information about a foreign issuer than about a U.S. issuer.
Political and economic conditions such as seizure or nationalization of assets,
establishment of exchange controls, expropriation or confiscatory taxation,
political changes, government regulation, social instability or diplomatic
developments could adversely affect the economy of a particular country and,
thus, the Fund's investments in that country. In the event of default on a
foreign security, it may be more difficult for the Fund to obtain or enforce a
judgment against the issuer of such obligation. Additionally, certain amounts of
the Fund's income may be subject to withholding taxes in the country in which it
invests. The Fund may not invest more than 5% of its net assets in securities of
foreign issuers which are not publicly traded in the United States.
LOW-RATED SECURITIES
The Fund may invest up to 5% of its net assets in debt securities rated
below investment grade by Moody's Investors Service, Inc. ('Moody's') or
Standard & Poor's Rating Group ('S&P'), with no minimum rating required, and
comparable unrated securities. Such securities are generally referred to as
'high-yield' or 'junk' bonds, and involve a high degree of risk. An economic
recession could disrupt the market for such securities and adversely affect
their value and the ability of issuers to repay principal and pay interest
thereon.
While the market values of high-yield securities may tend to react less to
fluctuations in interest rate levels than the market values of higher-rated
securities, the market values of certain of these securities also tend to be
more sensitive to individual corporation developments and changes in economic
conditions, and thus will fluctuate over time. In addition, high-yield
securities generally present a higher degree of credit risk. Issuers of these
securities are often highly leveraged and may not have more traditional methods
of financing available to them so that their ability to service their debt
4
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<PAGE>
obligations during an economic downturn or during sustained periods of rising
interest rates may be impaired. The risk of loss due to default by such issuers
is significantly greater because high-yield securities generally are unsecured
and frequently are subordinated to the prior payment of senior indebtedness. The
Fund may also incur additional expenses to the extent that it is required to
seek recovery upon a default in the payment of principal or interest on its
portfolio holdings. The existence of limited markets for these securities may
diminish the Fund's ability to obtain accurate market quotations for purposes of
valuing such securities and calculating its net asset value as well as impair
the Fund's ability to dispose of such securities.
The ratings of Moody's and S&P generally represent the opinions of those
organizations as to the quality of the securities that they rate. Such ratings,
however, are relative and subjective, are not absolute standards of quality, are
subject to change and do not evaluate the market risk of the securities.
Although Salomon Brothers Asset Management Inc ('SBAM') uses these ratings as a
criterion for the selection of securities for the Fund, SBAM also relies on its
independent analysis to evaluate potential investments for the Fund.
PORTFOLIO TURNOVER
Flexibility of investment and emphasis on capital appreciation may involve
a greater portfolio turnover rate than that of investment companies whose
objective, for example, is production of income or maintenance of a balanced
investment position. The rate of portfolio turnover cannot be predicted with
assurance and may vary from year to year. See the table under 'Financial
Highlights' on page 4 of the Prospectus for the portfolio turnover rates of the
Fund.
LIMITING INVESTMENT RISKS
In addition to the restrictions described under 'Limiting Investment Risks'
in the Prospectus, the Fund may not:
(1) Invest in companies for the purpose of exercising control of
management;
(2) Purchase or sell real estate, interests in real estate, interests
in real estate investment trusts or commodities or commodity contracts;
however, the Fund may purchase interests in real estate investment trusts
or other companies which invest in or own real estate if the securities of
such trusts or companies are registered under the Securities Act of 1933,
as amended and are readily marketable and may purchase the securities of
companies engaged in businesses which may involve commodities or
commodities futures contracts; or
(3) Write or purchase puts or calls on securities or securities
indices except as described under 'Investment Policies -- Put and Call
Options.'
The investment restrictions described above and in the Prospectus are
fundamental policies of the Fund and may be changed only when permitted by law
and approved by the holders of a majority of the Fund's outstanding voting
securities which, as defined by the Investment Company Act of 1940, as amended
(the '1940 Act'), means the lesser of: (i) 67% of the voting securities
represented at a meeting at which more than 50% of the outstanding voting
securities are represented; or (ii) more than 50% of the outstanding voting
securities of the Fund.
The percentage limitations contained in the investment restrictions
described above and in the Prospectus and the description of the Fund's
investment policies are all applied solely at the time of any proposed
transaction on the basis of values or amounts determined at that time. If a
percentage restriction on investment or utilization of assets in a fundamental
policy or restriction is adhered to at the time an investment is made, a later
change in percentage ownership of a security or kind of security resulting from
changing market values or a similar type of event will not be considered a
violation of such restriction.
5
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MANAGEMENT
DIRECTORS AND OFFICERS
The principal occupations of the directors and executive officers of the
Fund for the past five years are listed below. The address of each, unless
otherwise indicated, is 7 World Trade Center, New York, New York 10048. With the
exception of Mr. Brilliant, each of the Fund's officers are also officers of
each of the other investment companies for which SBAM, the Fund's investment
manager, acts as investment adviser. 'Interested directors' of the Fund (as
defined in the 1940 Act) are indicated by asterisk.
*IRVING BRILLIANT, Age 78, President and Director -- Director of Salomon
Brothers Inc ('Salomon Brothers'), Portfolio Manager for SBAM since May 1990.
BENITO GAGUINE, Age 84, Director -- 1233 20th St., N.W. Suite 505,
Washington, D.C. 20036. Attorney at Law.
ROSALIND A. KOCHMAN, Age 58, Director -- 1301 Avenue J, Brooklyn, New York
11230. Administrator and Counsel, Kochman Eye Surgical Facility.
IRVING SONNENSCHEIN, Age 76, Director -- 10 Columbus Circle, New York, New
York 10019. Partner in the law firm of Sonnenschein, Sherman & Deutsch.
LAWRENCE H. KAPLAN, Age 39, Executive Vice President and General
Counsel -- Vice President and Chief Counsel of SBAM and a Vice President of
Salomon Brothers since May 1995. Prior to May 1995, he was Senior Vice
President, Director and General Counsel of Kidder Peabody Asset Management, Inc.
and a Senior Vice President of Kidder, Peabody & Co. Incorporated since November
1990.
ALAN M. MANDEL, Age 39, Treasurer -- Vice President of SBAM since January
1, 1995; Chief Financial Officer of Hyperion Capital Management from October
1991 to December 1994.
TANA E. TSELEPIS, Age 61, Secretary -- Vice President and Senior
Administrator of Salomon Brothers and Assistant Secretary of SBAM since October
1989; formerly, Vice President and Senior Administrator at First Boston Asset
Management Corporation.
JANET S. TOLCHIN, Age 38, Assistant Treasurer -- Employee of SBAM since May
1990.
JENNIFER G. MUZZEY, Age 37, Assistant Secretary -- Employee of SBAM since
June 1994; formerly, Assistant Vice President of SunAmerica Asset Management
Corporation prior to June 1994.
Directors of the Fund not affiliated with SBAM receive from the Fund a $500
fee for each meeting of the Board of Directors attended and are reimbursed for
out-of-pocket expenses relating to attendance at such meetings. The Directors
receive no per annum fee for their services as Directors. Directors who are
affiliated with SBAM do not receive compensation from the Fund but are
reimbursed for out-of-pocket expenses relating to attendance at such meetings.
As of December 2, 1996 directors and officers of the Fund as a group
beneficially owned 1,115,815 shares of the Fund's Common Stock outstanding, or
approximately 30.5%, of the outstanding shares of the Fund.
At December 2, 1996, to the knowledge of management, the following persons
owned beneficially more than 5% of the Fund's outstanding shares. Benito
Gaguine, a Director of the Fund, and his son, Bruce Gaguine, together with
family trusts were the beneficial owners of approximately 453,694 or
approximately 12.4%, of the outstanding shares of the Fund. In addition, Irving
Brilliant, a Director of the Fund as well as the Fund's President, and his wife,
Benise Brilliant, by virtue of their positions as trustees of family trusts,
were the beneficial owners of approximately 310,916 shares or 8.5%, of the
outstanding shares of the Fund and Rosalind Kochman, a Director of the Fund, and
her husband Dr. Marvin Kochman, together were the beneficial owners of
approximately 351,205 shares or 9.6% of the outstanding shares of the Fund.
The following table provides information concerning the compensation paid
during the fiscal year ended August 31, 1996 to each director of the Fund. The
Fund does not provide any pension or retirement benefits to directors. In
addition, the Fund paid no remuneration during fiscal year ended
6
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August 31, 1996 to officers of the Fund including Mr. Brilliant, who as
employees of SBAM are 'interested persons,' as defined in the 1940 Act.
<TABLE>
<CAPTION>
AGGREGATE TOTAL COMPENSATION
COMPENSATION FROM OTHER FUNDS TOTAL
NAME OF PERSON, POSITION FROM THE FUND ADVISED BY SBAM COMPENSATION (A)
- -------------------------------------------------------- ------------- ------------------ ----------------
<S> <C> <C> <C>
Benito Gaguine $ 2,000 $0 $2,000(1)
Director
Rosalind A. Kochman $ 1,500 $0 $1,500(1)
Director
Irving Sonnenschein $ 1,500 $0 $1,500(1)
Director
</TABLE>
- ------------
(A) The numbers in parentheses indicate the applicable number of investment
company directorships held by that director.
INVESTMENT MANAGER
The Fund retains SBAM to act as its investment manager. SBAM is a
wholly-owned subsidiary of Salomon Brothers Holding Company Inc, which is in
turn a wholly-owned subsidiary of Salomon Inc. SBAM serves as the investment
manager to various individuals, institutions and other investment companies.
The management contract ('Management Contract') between SBAM and the Fund
provides that SBAM shall manage the operations of the Fund, subject to the
policies established by the Board of Directors of the Fund. The Management
Contract was last approved by the Board of Directors of the Fund, including a
majority of the Directors who are not 'interested persons,' as defined in the
1940 Act, on October 18, 1996. Pursuant to the Management Contract, SBAM manages
the Fund's investment portfolio, directs purchases and sales of the Fund's
portfolio securities and reports thereon to the Fund's officers and directors
regularly. SBAM also furnishes office space and certain facilities required for
conducting the business of the Fund and pays the compensation of the Fund's
officers, employees and directors affiliated with SBAM. The Fund bears all other
costs of its operations, including the compensation of its directors not
affiliated with SBAM.
As compensation for services performed under the Management Contract, the
Fund pays SBAM a management fee each month, at an annual rate of 1% ( 1/12 of 1%
per month) of the Fund's average daily net assets, which fee does not decrease
as the Fund's assets increase. The fee is at a higher rate than the management
fees charged by SBAM to the other investment companies it manages. Management
fees paid by the Fund to SBAM for the fiscal years ended August 31, 1996, 1995
and 1994 amounted to $1,406,443, $1,168,976 and $1,161,529, respectively.
The Management Contract provides that it will continue automatically for
periods of one year provided that such continuance is specifically approved
annually: (a) by the vote of a majority of the Fund's outstanding voting
securities or by the Fund's Board of Directors; and (b) by the vote of a
majority of the Fund's directors who are not parties to the Management Contract
or 'interested persons,' as defined in the 1940 Act, of any such party. The
Management Contract may be terminated on 30 days' written notice by either
party. The Management Contract will terminate automatically in the event of its
assignment, as defined in the 1940 Act.
Investment decisions for the Fund are made independently from those of
other funds or accounts managed by SBAM. Such other funds or accounts may also
invest in the same securities as the Fund. If those funds or accounts are
prepared to invest in, or desire to dispose of, the same security at the same
time as the Fund, however, transactions in such securities will be made insofar
as feasible, for the respective funds and accounts in a manner deemed equitable
to all. In some cases, this procedure may adversely affect the size of the
position obtained for or disposed of by the Fund or the price paid or received
by the Fund. In addition, because of different investment objectives, a
particular security may be purchased for one or more funds or accounts when one
or more funds or accounts are selling the same security.
7
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Rule 17j-1 under the 1940 Act requires all registered investment companies
and their investment advisers and principal underwriters to adopt written codes
of ethics and institute procedures designed to prevent 'access persons' (as
defined in Rule 17j-1) from engaging in any fraudulent, deceptive or
manipulative trading practices. The Fund's Board of Directors has adopted a Code
of Ethics (the 'Fund Code') that incorporates personal trading polices and
procedures applicable to access persons of the Fund, which includes officers,
directors and other specified persons who may make, participate in or otherwise
obtain information concerning the purchase or sale of securities by the Fund. In
addition, the Fund Code attaches and incorporates personal trading policies and
procedures applicable to access persons of SBAM, as the investment adviser to
the Fund, which policies serve as SBAM's code of ethics (the 'Adviser Code').
The Fund Code and the Adviser Code have been designed to address potential
conflict of interests that can arise in connection with the personal trading
activities of investment company and investment advisory personnel.
Pursuant to the Fund Code and the Adviser Code, access persons are
generally permitted to engage in personal securities transactions, provided that
a transaction does not involve securities that are being purchased or sold, are
being considered for purchase or sale, or are being recommended for purchase or
sale by or for the Fund. In addition, the Adviser Code contains specified
prohibitions and blackout periods for certain categories of securities and
transactions, including a prohibition on short-term trading and purchasing
securities during an initial public offering. The Adviser Code, with certain
exceptions, also requires that access persons obtain preclearance to engage in
personal securities transactions. Finally, the Fund Code and the Adviser Code
require access persons to report all personal securities transactions
periodically.
DISTRIBUTOR
Shares of the Fund are offered on a continuous basis and without a sales
charge through Salomon Brothers Inc ('Salomon Brothers') as distributor pursuant
to a Distributor Contract between Salomon Brothers and the Fund. Salomon
Brothers receives no remuneration for its services as distributor and is not
obligated to sell any specific amount of Fund shares. The Distribution Contract
was last approved by the Fund's Board of Directors, including a majority of the
Directors who are not 'interested persons,' as defined in the 1940 Act, on
October 18, 1996.
PORTFOLIO TRANSACTIONS
The Fund's general policy in selecting brokers and dealers is to obtain the
best results taking into account factors such as the general execution and
operational facilities of the broker or dealer, the type and size of the
transaction involved, the creditworthiness of the broker or dealer, the
stability of the broker or dealer, execution and settlement capabilities, time
required to negotiate and execute the trade, research services and SBAM's
arrangements related thereto (as described below) overall performance, the
dealer's risk in positioning the securities involved, and the broker's
commissions and dealer's spread or mark-up. While SBAM generally seeks the best
price in placing its orders, the Fund may not necessarily be paying the lowest
price available.
Notwithstanding the above, in compliance with Section 28(e) of the
Securities Exchange Act of 1934, SBAM may select brokers who charge a commission
in excess of that charged by other brokers, if SBAM determines in good faith
that the commission to be charged is reasonable in relation to the brokerage and
research services provided to SBAM by such brokers. Research services generally
consist of research or oral advice from brokers and dealers regarding particular
companies, industries or general economic conditions. SBAM may also have
arrangements with brokers pursuant to which such brokers provide research
services to SBAM in exchange for a certain volume of brokerage transactions to
be executed by such broker. While the payment of higher commissions increases
the Fund's costs, SBAM does not believe that the research significantly reduces
its expenses as the Fund's investment manager.
Research services furnished to SBAM by brokers who effect securities
transactions for the Fund may be used by SBAM in providing investment advice to
the other investment companies and accounts which it manages. Similarly,
research services furnished to SBAM by brokers who effect securities
8
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transactions for other investment companies and accounts which SBAM manages may
be used by SBAM in servicing the Fund. Not all of these research services are
used by SBAM in managing any particular account, including the Fund.
Over-the-counter purchases and sales are transacted directly with principal
market makers except in those cases in which better prices and executions may be
obtained elsewhere.
Under the 1940 Act, persons affiliated with a Fund are prohibited from
dealing with it as a principal in the purchase and sale of securities unless an
exemptive order allowing such transactions is obtained from the Securities and
Exchange Commission (the 'SEC'). However, a Fund may purchase securities from
underwriting syndicates of which the investment manager or any of its affiliates
(including Salomon Brothers) is a member under certain conditions, in accordance
with Rule 10f-3 under the 1940 Act.
Affiliated persons of a Fund, or affiliated persons of such persons, may
from time to time be selected to execute portfolio transacions for such Fund.
Subject to the considerations discussed above and in accordance with procedures
adopted by the Board of Directors, in order for such an affiliated person to be
permitted to effect any portfolio transactions for a Fund, the commissions, fees
or other remuneration received by such affiliated person must be reasonable and
fair compared to the commissions, fees or other remuneration received by other
brokers in connection with comparable transactions. This standard would allow
such an affiliated person to receive no more than the remuneration which would
be expected to be received by an unaffiliated broker in a commensurate
arm's-length transaction.
Aggregate brokerage commissions paid by the Fund for the fiscal years ended
August 31, 1996, 1995 and 1994 were $31,165, $34,563, and $52,382, respectively.
During the fiscal years ended August 31, 1996, l995 and 1994, the Fund paid
$120, $2,000 and $906 respectively, in commissions to Salomon Brothers, an
affiliated broker-dealer. Commissions paid to Salomon Brothers for the fiscal
year ended August 31, 1996 represent less than 1% of the total brokerage
commissions paid by the Fund for such fiscal year and Salomon Brothers executed
less than 2% of the aggregate dollar amount of Fund transactions.
Irving Brilliant, who is an employee of SBAM, and President and portfolio
manager of the Fund, is primarily responsible for the allocation of brokerage
transactions.
DETERMINATION OF NET ASSET VALUE
The Fund's net asset value per share for the purpose of pricing purchase
and redemption orders is determined at the close of regular trading of the New
York Stock Exchange (the 'NYSE') on each day the NYSE is open for business. The
net asset value per share is computed by dividing the value of the net assets of
the Fund (i.e., the value of the assets less the liabilities) by the total
number of Fund shares outstanding. In calculating net asset value, portfolio
securities listed or traded on national securities exchanges, or reported by the
NASDAQ reporting 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. Other 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 as the Board of Directors in good faith deems
appropriate to reflect the fair value thereof.
Securities that are primarily traded on foreign exchanges generally are
valued at the preceding closing values of such securities on their respective
exchanges, except that when an occurrence subsequent to the time a value was so
established is likely to have changed such value, then the fair value of those
securities will be determined by consideration of other factors by or under the
direction of the Board of Directors or its delegates. In valuing assets, prices
denominated in foreign countries are converted to U.S. dollar equivalents at the
current exchange rate. Securities may be valued by independent pricing services
which use prices provided by market-makers or estimates of market values
obtained from yield data relating to instruments or securities with similar
characteristics. Short-term obligations with maturities of 60 days or less are
valued at amortized cost, which constitutes fair value as determined by the
Board of Directors.
9
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PERFORMANCE DATA
From time to time, the Fund may quote its average annual total return or
aggregate total return in advertisements or in reports and other communications
to shareholders.
AVERAGE ANNUAL TOTAL RETURN
The Fund's 'average annual total return' figures described and shown in the
Prospectus are computed according to a formula prescribed by the SEC. The
formula can be expressed as follows:
P(1+T) to the power of n = ERV
<TABLE>
<S> <C> <C>
Where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = Ending Redeemable Value of a hypothetical $1,000 investment made at the beginning of the
1-, 5-, or 10-year periods at the end of the 1, 5, or 10 year periods (or fractional
portion thereof), assuming reinvestment of all dividends and distributions.
</TABLE>
AGGREGATE TOTAL RETURN
The Fund's 'aggregate total return' figures, as described in the
Prospectus, represent the cumulative change in the value of an investment in
Fund shares for the specified period and are computed by the following formula:
<TABLE>
<S> <C>
ERV-P
AGGREGATE TOTAL RETURN = P
</TABLE>
<TABLE>
<S> <C> <C>
Where: P = a hypothetical initial payment of $10,000.
ERV = Ending Redeemable Value of a hypothetical $10,000 investment made at the beginning of a 1-,
5-, or 10-year period at the end of such period (or fractional portion thereof), assuming
reinvestment of all dividends and distributions.
</TABLE>
FEDERAL INCOME TAXES
The following is a summary of selected federal income tax considerations
that may affect the Fund and its shareholders. This summary is not intended as a
substitute for individual tax advice and investors are urged to consult their
own tax advisors as to the federal, state and local tax consequences to them of
an investment in the Fund.
TAXATION OF THE FUND
The Fund has qualified for the fiscal year ended August 31, 1996 and
intends to continue to qualify as a regulated investment company under
subchapter M of the Internal Revenue Code of 1986, as amended (the 'Code'). As a
regulated investment company, the Fund will not be subject to federal income tax
on its net investment income (i.e., its investment company taxable income, as
that term is defined in the Code, determined without regard to the deduction for
dividends paid) and net capital gains (the excess of long-term capital gains
over short-term capital losses), if any, that it distributes to its
shareholders, provided that it distributes 90% of its net investment income and
net capital gains for the taxable year. All investment company taxable income
and net capital gains distributed by the Fund will be reinvested automatically
in additional shares of the Fund at net asset value, unless the shareholder
elects to receive dividends and distributions in cash.
Qualification as a regulated investment company under Subchapter M of the
Code requires, among other things, that the Fund: (a) derive at least 90% of its
gross income from dividends, interest, payments with respect to securities loans
and gains from the sale or other disposition of stock or securities, foreign
currencies or other income (including gains from options, futures or forward
contracts) derived with respect to its business of investing in such stock,
securities or currencies; (b) derive less than 30% of its gross income from the
sale or other disposition of any of the following held for less than three
months: stock, securities, options, futures, certain forward contracts, or
foreign
10
<PAGE>
<PAGE>
currency transactions (or any options, futures or forward contracts on foreign
currencies) but only if such currencies are not directly related to the Fund's
principal business of investing in stock or securities; and (c) diversify its
holdings so that, at the end of each fiscal quarter: (i) at least 50% of the
market value of the Fund's assets is represented by cash, cash items, U.S.
Government securities, securities of other regulated investment companies and
other securities with such other securities limited, in respect of any one
issuer, to an amount not greater than 5% of the value of the Fund's assets and
10% of the outstanding voting securities of such issuer; and (ii) not more than
25% of the value of its assets is invested in the securities of any one issuer
(other than U.S. Government securities or the securities of other regulated
investment companies).
TAX STATUS OF THE FUND'S INVESTMENTS
Gain or loss on the sale or other disposition of Fund investments will
generally be long-term capital gain or loss if the Fund has held the security
for more than one year. Gain or loss on the sale of a security held for less
than one year will generally be short-term capital gain or loss. If the Fund
acquires a debt security at a discount, any gain upon the sale or redemption of
the security, to the extent it reflects accrued market discount, will in certain
circumstances be taxed as ordinary income, rather than capital gain.
Foreign countries may impose withholding and other taxes on dividends and
interest paid to the Fund with respect to investments in foreign securities.
However, certain foreign countries have entered into tax treaties with the U.S.
to reduce or eliminate such taxes.
TAXATION OF SHAREHOLDERS
Dividends of net investment income will be taxable to shareholders as
ordinary income for federal income tax purposes. Dividends received by corporate
shareholders will only qualify for the dividends received deduction to the
extent the Fund designates the amount distributed as a dividend and the amount
so designated does not exceed the aggregate amount of dividends received by the
Fund from domestic corporations for the taxable year. The dividends received
deduction for corporate shareholders may be further reduced if the shares with
respect to which dividends are received are treated as debt-financed (generally
acquired with borrowed funds) or are deemed to have been held for less than 46
days. The amount of any dividends eligible for the corporate dividends received
deduction, if any, will be designated by the Fund in a written notice within 60
days of the close of the Fund's taxable year.
Distributions of net capital gains will be taxable to shareholders at
capital gains rates, whether paid in cash or reinvested in additional shares and
regardless of the length of time the investor has held his or her shares in the
Fund. If a shareholder redeems or exchanges shares of the Fund before he or she
has held them for more than six months, any loss on such redemption or exchange
will be treated as long-term capital loss to the extent of any long-term capital
gain distributions received by the shareholder as designated in a written notice
from the Fund.
SHAREHOLDER SERVICES
Exchange Privilege. Until March 1, 1997, Shareholders may exchange all or
part of their Fund shares for Class O shares of Salomon Brothers New York
Municipal Money Market Fund and Salomon Brothers Capital Fund, as indicated in
the Prospectus by contacting First Data Investor Services Group, Inc. ('FDISG'),
a subsidiary of First Data Corporation ('FDC'). FDISG's address is P.O. Box
5127, Westborough, MA 01581-5127.
The exchange privilege enables shareholders in any of these funds to
acquire shares in a fund with different investment objectives when they believe
that a shift between funds is an appropriate investment decision. This privilege
is available to shareholders residing in any state in which the fund shares
being acquired may legally be sold. Prior to any exchange, the shareholder
should obtain and review a copy of the current prospectus of each fund into
which an exchange is to be made. Such prospectuses may be obtained from SBAM.
11
<PAGE>
<PAGE>
Exercise of the exchange privilege is treated as a sale and repurchase for
federal income tax purposes, and, depending on the circumstances, a short or
long-term capital gain or loss may be realized.
Upon receipt of proper instructions and all necessary supporting documents,
shares submitted for exchange are redeemed at the then-current net asset value
and the proceeds immediately invested in shares of the fund being acquired at a
price equal to the then current net asset value of such shares plus any
applicable sales charge.
All accounts involved in an exchange must have the same registration. If a
new account is to be established, the dollar amount to be exchanged must be at
least as much as the minimum initial investment of the fund whose shares are
being purchased. Any new account established by exchange will automatically be
registered in the same way as the account from which shares are exchanged and
will carry the same dividend option.
The exchange privilege may be modified at any time prior to its termination
on March 1, 1997. The privilege is not designed for investors trying to catch
short-term savings in market prices by making frequent exchanges. The Fund
reserves the right to impose a limit on the number of exchanges a shareholder
may make. Call or write the Fund for further details.
AS OF MARCH 1, 1997, THE EXCHANGE PRIVILEGE WILL TERMINATE AND SHAREHOLDERS
WILL NO LONGER HAVE THE ABILITY TO EXCHANGE THEIR SHARES.
Automatic Withdrawal Plan. An Automatic Withdrawal Plan ('Withdrawal Plan')
may be opened with shares having a total value of at least $7,500. All dividends
and distributions on the shares held under the Withdrawal Plan are automatically
reinvested at net asset value in full and fractional shares. Withdrawal payments
are made by FDISG, as agent, from the proceeds of the redemption of such number
of shares as may be necessary to make each periodic payment. As such redemptions
involve the use of capital, over a period of time they may exhaust the share
balance of an account held under a Withdrawal Plan. Use of a Withdrawal Plan
cannot assure realization of investment objectives, including capital growth or
protection against loss in declining markets. A Withdrawal Plan can be
terminated at any time by the investor, the Fund or FDISG upon written notice.
The Withdrawal Plan will not be carried over on exchanges between Funds. A
new Withdrawal Plan application is required to establish the Withdrawal Plan in
the new Fund. Shareholders should call (800) 446-1013 for more information.
Self-Employed Retirement Plans. The Fund offers a prototype retirement plan
for self-employed individuals ('SERP'). Under the SERP, self-employed
individuals may contribute out of earned income to purchase Fund shares and/or
shares of certain other mutual funds managed by SBAM.
Investors Bank & Trust Company ('Investors Bank') has agreed to serve as
custodian and furnish the services provided for in the SERP and the related
Custody Agreement. Individuals adopting a SERP will be charged an application
fee as well as certain additional annual fees, which are separate from those
paid by the Fund to Investors Bank for its services as Fund custodian.
For information required for adopting a SERP, including information on
fees, the form of SERP and Custody Agreement is available from the Fund. Because
application of particular tax provisions will vary depending on each
individual's situation, consultation with a financial adviser regarding a SERP
is recommended.
Individual Retirement Accounts. A prototype individual retirement account
('IRA'), which has been approved as to form by the Internal Revenue Service
('IRS'), is available for all working individuals who receive compensation in
the tax year for services rendered and who have not attained age 70 1/2 before
the close of the tax year. In addition, individuals who have received certain
distributions from qualified plans or other IRAs may be eligible to make
rollover contributions to an IRA. Also, individuals covered by an
employer-sponsored simplified employee pension are eligible to establish an IRA.
Finally, divorced or legally separated spouses may make IRA contributions out of
taxable alimony payments. Contributions to an IRA made available by the Fund may
be invested in Fund shares and/or in shares of certain other mutual funds
managed by SBAM.
12
<PAGE>
<PAGE>
Investors Bank has agreed to serve as custodian of the IRA and furnish the
services provided for in the Custodial Agreement. Each IRA will be charged an
application fee as well as certain additional annual fees, which are separate
from those paid to Investors Bank for its services as Fund custodian. In
accordance with IRS regulations, an individual may revoke an IRA within seven
calendar days after it is established.
Information required for adopting an IRA, including information on fees,
the form of Custodial Agreement and related materials, including disclosure
materials, is available from the Fund. Consultation with a financial adviser
regarding an IRA is recommended.
CUSTODIAN AND TRANSFER AGENT
Investors Bank serves as the Fund's custodian. Investors Bank, among other
things, maintains a custody account or 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. The custodian does not determine the investment policies of the Fund, nor
decide which securities the Fund will buy or sell. Investors Bank's address is
89 South Street, Boston, MA 02111.
FDISG serves as the Fund's transfer agent. FDISG registers and processes
transfers of the Fund's stock, processes purchase and redemption orders, acts as
the Fund's dividend disbursing agent and maintains records and handles
correspondence with respect to shareholder accounts pursuant to a Transfer
Agency Agreement. FDISG's address is P.O. Box 5127, Westborough, MA 01581-5127.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP serves as the Fund's independent accountants. Price
Waterhouse LLP provides audit services, tax return preparation and assistance
and consultation in connection with the review of filings with the SEC. The
financial highlights included in the Prospectus and the financial statements and
financial highlights included in this Statement of Additional Information have
been included in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of that firm as experts in auditing and
accounting. Price Waterhouse LLP's address is 1177 Avenue of the Americas, New
York, New York 10036.
COUNSEL
Simpson Thacher & Bartlett (a partnership which includes professional
corporations) serves as Fund counsel and is located at 425 Lexington Avenue, New
York, New York 10017.
Piper & Marbury L.L.P. of Baltimore, Maryland has issued an opinion
regarding the valid issuance of shares being offered for sale pursuant to the
Fund's Prospectus.
13
<PAGE>
<PAGE>
SALOMON BROTHERS OPPORTUNITY FUND INC
STATEMENT OF NET ASSETS
AUGUST 31, 1996
COMMON STOCKS -- 85.0% OF NET ASSETS
<TABLE>
<CAPTION>
VALUE
SHARES COST (NOTE 1a)
- ---------- ----------- ------------
<S> <C> <C> <C>
BANKS -- 13.5%
484,488 Bank of New York.................................................... $ 2,721,411 $ 13,505,103
12,500 Bankers Trust NY.................................................... 559,920 971,875
46,000 BanPonce............................................................ 701,900 1,196,000
4,200 Boatmen's Bancshares................................................ 18,168 223,650
53,120 First Chicago NBD................................................... 570,621 2,264,240
20,000 First Hawaiian...................................................... 517,800 590,000
3,400 KeyCorp............................................................. 18,589 136,425
5,500 Mercantile Bancorporation........................................... 45,630 268,813
----------- ------------
5,154,039 19,156,106
----------- ------------
BASIC INDUSTRY -- 7.0%
5,000 ASARCO.............................................................. 157,800 129,375
27,000 Amcast Industrial................................................... 490,974 479,250
5,000 Champion International.............................................. 200,300 215,000
19,000 Crown Crafts........................................................ 224,965 163,875
9,500 International Shipholding........................................... 162,883 180,500
13,000 Mississippi Chemical................................................ 271,014 292,500
85,500 Monsanto............................................................ 1,050,826 2,746,688
18,000 NL Industries....................................................... 199,350 198,000
11,077 Newmont Mining...................................................... 289,765 585,696
14,000 Rayonier............................................................ 404,730 554,750
4,000 Stone Container..................................................... 70,240 55,500
68,000 TRC Companies*...................................................... 472,184 263,500
40,100 Tecumseh Products, Class A.......................................... 1,106,775 2,105,250
41,000 Tecumseh Products, Class B.......................................... 1,721,035 2,009,000
----------- ------------
6,822,841 9,978,884
----------- ------------
BIOTECHNOLOGY & DRUGS -- 1.6%
20,000 Genzyme*............................................................ 277,571 477,500
30,800 Medeva -- ADR....................................................... 301,498 473,550
5,000 Merck............................................................... 164,800 328,125
25,375 Pharmacia & Upjohn.................................................. 507,498 1,065,750
----------- ------------
1,251,367 2,344,925
----------- ------------
CONSTRUCTION -- 1.2%
26,700 Ameron.............................................................. 526,254 967,875
34,250 Liberty Homes, Class A.............................................. 435,000 411,000
24,750 Liberty Homes, Class B.............................................. 325,688 327,938
----------- ------------
1,286,942 1,706,813
----------- ------------
</TABLE>
14
<PAGE>
<PAGE>
SALOMON BROTHERS OPPORTUNITY FUND INC
STATEMENT OF NET ASSETS -- (CONTINUED)
AUGUST 31, 1996
COMMON STOCKS (CONTINUED)
<TABLE>
<CAPTION>
VALUE
SHARES COST (NOTE 1a)
- ---------- ----------- ------------
<S> <C> <C> <C>
CONSUMER GOODS -- 4.3%
44,500 Alexander & Baldwin................................................. $ 254,479 $ 1,134,750
4,729 Ames Department Stores, Warrants, Series C*......................... 4,729 9,754
27,300 Archer-Daniels-Midland.............................................. 399,000 484,575
16,400 El Chico Restaurants*............................................... 51,250 127,100
6,000 McKesson............................................................ 191,250 255,750
100,000 Philips Electronics N.V............................................. 1,281,995 3,387,500
31,500 Waban*.............................................................. 332,240 669,375
----------- ------------
2,514,943 6,068,804
----------- ------------
ENERGY -- 8.4%
14,000 Gilbert Associates, Class A......................................... 157,790 154,000
31,000 Global Industrial Technologies*..................................... 284,013 596,750
28,000 Murphy Oil.......................................................... 859,865 1,225,000
67,000 Royal Dutch Petroleum, 5 Guilder.................................... 1,664,599 10,008,125
----------- ------------
2,966,267 11,983,875
----------- ------------
FINANCE -- 11.0%
36,000 Federal Home Loan Mortgage.......................................... 472,360 3,181,500
61,800 Leucadia National................................................... 165,751 1,405,950
125,000 Loews............................................................... 3,152,184 9,343,750
30,000 New Germany Fund.................................................... 281,167 397,500
48,000 Pioneer Group....................................................... 167,500 1,254,000
----------- ------------
4,238,962 15,582,700
----------- ------------
HEALTH CARE -- 1.4%
5,250 Bergen Brunswig, Class A............................................ 96,675 146,344
19,000 Foundation Health*.................................................. 360,890 570,000
8,095 Horizon/CMS Healthcare*............................................. 123,392 101,188
23,000 Humana*............................................................. 188,255 431,250
22,878 Wellpoint Health Networks*.......................................... 1,007,246 709,218
----------- ------------
1,776,458 1,958,000
----------- ------------
INSURANCE-LIFE, ACCIDENT & HEALTH -- 5.3%
7,500 American International Group........................................ 440,675 712,500
12,000 Aon................................................................. 293,390 606,000
7,000 Delphi Financial Group, Class A*.................................... 136,500 210,000
37,125 Fremont General..................................................... 571,663 1,007,016
5,900 Kansas City Life Insurance.......................................... 293,813 318,969
3,000 Protective Life..................................................... 68,216 105,750
10,000 Provident Companies................................................. 180,500 370,000
46,000 UNUM................................................................ 644,644 2,921,000
45,000 USLIFE.............................................................. 614,841 1,316,250
----------- ------------
3,244,242 7,567,485
----------- ------------
</TABLE>
15
<PAGE>
<PAGE>
SALOMON BROTHERS OPPORTUNITY FUND INC
STATEMENT OF NET ASSETS -- (CONTINUED)
AUGUST 31, 1996
COMMON STOCKS (CONTINUED)
<TABLE>
<CAPTION>
VALUE
SHARES COST (NOTE 1a)
- ---------- ----------- ------------
<S> <C> <C> <C>
INSURANCE-PROPERTY & CASUALTY -- 18.7%
39,600 Allmerica Property & Casualty Companies............................. $ 696,152 $ 1,118,700
33,000 CNA Financial*...................................................... 1,051,403 3,316,500
328,000 Chubb............................................................... 2,802,937 14,555,000
40,000 Merchants Group..................................................... 600,000 755,000
22,000 Old Republic International.......................................... 353,680 489,500
110,375 Orion Capital....................................................... 1,613,469 5,546,340
15,500 Trenwick Group...................................................... 433,063 825,375
----------- ------------
7,550,704 26,606,415
----------- ------------
REAL ESTATE -- 1.9%
39,900 Forest City Enterprises, Class A.................................... 845,723 1,725,675
20,700 Forest City Enterprises, Class B, Conv.............................. 364,301 905,625
----------- ------------
1,210,024 2,631,300
----------- ------------
TECHNOLOGY -- 2.0%
8,500 Apple Computer...................................................... 319,750 206,125
2,000 First Data.......................................................... 152,120 156,000
15,000 Intel............................................................... 137,313 1,197,188
5,000 International Business Machines..................................... 275,485 571,875
20,000 National Semiconductor*............................................. 313,700 367,500
13,802 Silicon Graphics*................................................... 280,170 320,897
----------- ------------
1,478,538 2,819,585
----------- ------------
TELECOMMUNICATIONS/MEDIA -- 0.3%
12,000 Heritage Media, Class A*............................................ 113,859 240,000
5,800 Time Warner......................................................... 123,185 193,575
----------- ------------
237,044 433,575
----------- ------------
TRANSPORTATION -- 8.4%
39,600 AMR*................................................................ 1,828,141 3,247,200
130,000 APL................................................................. 1,338,789 3,071,250
52,000 Airborne Freight.................................................... 515,758 1,228,500
33,000 Canadian Pacific.................................................... 528,285 742,500
42,000 General Dynamics.................................................... 928,543 2,693,250
9,000 Lockheed Martin..................................................... 308,520 757,125
6,000 OMI*................................................................ 29,060 48,000
5,100 Overseas Shipholding Group.......................................... 71,224 95,625
----------- ------------
5,548,320 11,883,450
----------- ------------
TOTAL COMMON STOCKS................................................. $45,280,691 $120,721,917
----------- ------------
----------- ------------
</TABLE>
16
<PAGE>
<PAGE>
SALOMON BROTHERS OPPORTUNITY FUND INC
STATEMENT OF NET ASSETS -- (CONTINUED)
AUGUST 31, 1996
COMMON STOCKS (CONTINUED)
CORPORATE SHORT-TERM NOTES -- 14.8%
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1a)
- ---------- ------------
<S> <C> <C> <C>
$3,609,000 American Express Credit, 5.26%, due 09/03/96...................................... $ 3,611,639
5,193,000 Exxon Asset Management, 5.27%, due 09/05/96....................................... 5,195,283
6,245,000 Ford Motor Credit, 5.30%, due 09/06/96............................................ 6,246,841
5,935,000 General Electric Capital, 5.28%, due 09/04/96..................................... 5,938,485
------------
TOTAL CORPORATE SHORT-TERM NOTES.................................................. 20,992,248
------------
CASH AND RECEIVABLES -- 0.3%.......................................... $ 480,380
LIABILITIES -- (0.1)%................................................. (210,380) 270,000
--------- ------------
NET ASSETS -- 100% -- equivalent to $37.89 offering and
redemption price per share on 3,747,743 shares of
$.01 par value capital stock outstanding;
15,000,000 shares authorized...................................................... $141,984,165
------------
------------
NET ASSETS CONSIST OF:
Capital stock..................................................................... $ 37,477
Additional paid-in capital........................................................ 60,062,694
Undistributed net investment income............................................... 1,432,827
Undistributed net realized gain................................................... 5,009,941
Net unrealized appreciation....................................................... 75,441,226
------------
NET ASSETS........................................................................ $141,984,165
------------
------------
</TABLE>
*Non-income producing security.
See accompanying notes to financial statements.
17
<PAGE>
<PAGE>
SALOMON BROTHERS OPPORTUNITY FUND INC
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
INCOME
Dividends (net of foreign withholding taxes of $84,832)........................................... $ 2,870,091
Interest.......................................................................................... 1,008,923
-----------
3,879,014
EXPENSES
Management fee....................................................................... $1,406,443
Shareholder services................................................................. 51,915
Audit and tax return preparation fees................................................ 48,150
Legal................................................................................ 37,905
Custodian............................................................................ 39,142
Printing............................................................................. 23,030
Registration and filing fees......................................................... 18,460
Directors' fees and expenses......................................................... 5,650
Other................................................................................ 23,680
----------
1,654,375
Credits earned from custodian on cash balances....................................... (1,852) 1,652,523
---------- -----------
Net investment income............................................................................. 2,226,491
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments.................................................................. 5,924,655
Increase in net unrealized appreciation........................................................... 6,598,349
-----------
Net realized gain and increase in net unrealized appreciation..................................... 12,523,004
-----------
Net increase in net assets resulting from operations.............................................. $14,749,495
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
18
<PAGE>
<PAGE>
SALOMON BROTHERS OPPORTUNITY FUND INC
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
AUGUST 31, AUGUST 31,
1996 1995
------------ ------------
<S> <C> <C>
OPERATIONS
Net investment income............................................................ $ 2,226,491 $ 1,635,190
Net realized gain on investments................................................. 5,924,655 5,072,992
Increase in net unrealized appreciation.......................................... 6,598,349 16,116,974
------------ ------------
Net increase in net assets resulting from operations............................. 14,749,495 22,825,156
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income............................................................ (1,749,572) (1,345,523)
Net realized gain on investments................................................. (4,957,121) (5,382,092)
------------ ------------
(6,706,693) (6,727,615)
------------ ------------
CAPITAL SHARE TRANSACTIONS
Proceeds from sales of 541,164 and 669,713 shares, respectively.................. 20,104,930 21,215,202
Net asset value of 157,728 and 203,063 shares, respectively, issued in
reinvestment of net investment income and net realized gain distributions...... 5,716,069 5,720,292
Payment for redemption of 621,760 and 975,251 shares, respectively............... (23,116,339) (30,551,387)
------------ ------------
Change in net assets resulting from capital share transactions, representing net
increase of 77,132 and net decrease of 102,475 shares, respectively............ 2,704,660 (3,615,893)
------------ ------------
Total increase in net assets..................................................... 10,747,462 12,481,648
NET ASSETS
Beginning of year................................................................ 131,236,703 118,755,055
------------ ------------
End of year (includes undistributed net investment income of $1,432,827 and
$955,908, respectively)........................................................ $141,984,165 $131,236,703
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to financial statements.
19
<PAGE>
<PAGE>
SALOMON BROTHERS OPPORTUNITY FUND INC
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered as a non-diversified, open-end management investment
company under the Investment Company Act of 1940, as amended. The Fund's primary
objective is to achieve above-average long-term capital appreciation. Current
income is a secondary objective. The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of its
financial statements. The policies are in conformity with generally accepted
accounting principles ('GAAP'). The preparation of financial statements in
accordance with GAAP requires management to make estimates of certain reported
amounts in the financial statements. Actual amounts could differ from those
estimates.
(a) Securities Valuation. Portfolio securities listed or traded on national
securities exchanges, or reported on 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), such portfolio securities are valued
at a fair value determined pursuant to procedures established by the Board of
Directors. Corporate short-term notes with maturities of 60 days or less at date
of purchase are valued at cost plus interest earned, which approximates market
value.
(b) Federal Income Taxes. The Fund has complied and intends to continue to
comply with the requirements of the Internal Revenue Code of 1986, as amended,
applicable to regulated investment companies, and to distribute all of its
taxable income to its shareholders. Therefore, no Federal income tax or excise
tax provision is required.
(c) Dividends and Distributions. The Fund declares and pays dividends from
net investment income and distributions from net realized gains, if any,
annually. Dividends and distributions to shareholders are recorded on the
ex-dividend date. The amount of dividends and distributions from net investment
income and net realized gains are determined in accordance with federal income
tax regulations, which may differ from GAAP. These differences are due primarily
to deferral of wash sale and post-October losses. Permanent book/tax differences
are reclassified within the capital accounts based on their federal income tax
basis treatment; temporary differences do not require reclassifications.
Dividends and distributions which exceed net investment income and net realized
gains for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income and distributions in excess of net
realized capital gains.
(d) Other. Securities transactions are recorded as of the trade date.
Dividend income and dividends payable are recorded on the ex-dividend date.
Interest income is recognized when earned. Noncash dividend income is recorded
based on market or fair value of property received. Gains or losses on sales of
securities are calculated for financial accounting and Federal income tax
purposes on the identified cost basis.
2. CAPITAL STOCK
Payable for Fund shares redeemed at August 31, 1996 amounted to $37,543.
3. MANAGEMENT FEE AND OTHER TRANSACTIONS
The Fund retains Salomon Brothers Asset Management Inc ('SBAM'), an
indirect wholly-owned subsidiary of Salomon Inc ('Salomon'), to act as
investment manager of the Fund subject to supervision by the Board of Directors
of the Fund. SBAM furnishes the Fund with office space and pays the compensation
of its officers. The management fee for these services is payable monthly at an
annual rate of 1% of average daily net assets. The management fee payable at
August 31, 1996 was $120,388.
If in any fiscal year the total expenses of the Fund, excluding taxes,
interest, brokerage and extraordinary expenses, but including the management
fee, exceed the most stringent expense limitation
20
<PAGE>
<PAGE>
SALOMON BROTHERS OPPORTUNITY FUND INC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
imposed by state securities regulations applicable to the Fund, SBAM will pay or
reimburse the Fund for the excess. Currently, this limitation on an annual basis
is 2.5% of the first $30 million of average daily net assets, 2.0% of the next
$70 million of average daily net assets and 1.5% of average daily net assets in
excess of $100 million. For the year ended August 31, 1996, there was no such
reimbursement.
Brokerage commissions of $120 were paid to Salomon Brothers Inc, the Fund's
distributor and an indirect wholly-owned subsidiary of Salomon, for transactions
executed on behalf of the Fund during the year ended August 31, 1996.
During the year ended August 31, 1996, the Fund received dividend income of
$2,848 from Salomon. At August 31, 1996, the Fund did not hold shares of
Salomon.
Investors Bank & Trust Company ('IBT') serves as custodian for the Fund.
Prior to May 1, 1996, Boston Safe Deposit and Trust Company ('Boston Safe') was
the Fund's custodian. During the year ended August 31, 1996, custodian fees paid
to IBT and Boston Safe were reduced by $102 and $1,750, respectively, relating
to credits earned on cash balances held by each custodian.
4. PORTFOLIO ACTIVITY
The cost of securities purchased and proceeds from securities sold
(excluding corporate short-term notes) during the year ended August 31, 1996
aggregated $6,306,737 and $16,585,337, respectively.
Cost of securities held (excluding corporate short-term notes) on August
31, 1996 for Federal income tax purposes was $45,476,718. As of August 31, 1996,
gross unrealized appreciation and depreciation, based on cost for Federal income
tax purposes, amounted to $76,054,718 and $809,519, respectively, resulting in
net unrealized appreciation of $75,245,199.
21
<PAGE>
<PAGE>
SALOMON BROTHERS OPPORTUNITY FUND INC
FINANCIAL HIGHLIGHTS
Selected data per share of capital stock outstanding throughout each year:
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
--------------------------------------------------
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of year................... $35.75 $31.47 $31.91 $27.64 $25.16
------ ------ ------ ------ ------
Net investment income................................ .60 .45 .42 .57 .36
Net gains (or losses) on securities (both realized
and unrealized).................................... 3.38 5.68 1.48 4.85 2.79
------ ------ ------ ------ ------
Total from investment operations................ 3.98 6.13 1.90 5.42 3.15
------ ------ ------ ------ ------
Less dividends and distributions:
Dividends from net investment income................. (.48) (.37) (.64) (.345) (.50)
Distributions from net realized gain on
investments........................................ (1.36) (1.48) (1.70) (.805) (.17)
------ ------ ------ ------ ------
Total dividends and distributions............... (1.84) (1.85) (2.34) (1.15) (.67)
------ ------ ------ ------ ------
Net asset value, end of year.............................. $37.89 $35.75 $31.47 $31.91 $27.64
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Total investment return based on net asset value per
share................................................... +11.4% +21.1% +6.4% +20.2% +12.9%
Ratios/Supplemental data:
Net assets, end of year (thousands).................. $141,984 $131,237 $118,755 $116,607 $101,679
Ratio of expenses to average net assets.............. 1.18% 1.18% 1.22% 1.23% 1.25%
Ratio of net investment income to average net
assets............................................. 1.59% 1.39% 1.29% 1.86% 1.28%
Portfolio turnover rate................................... 5% 8% 13% 10% 11%
Average broker commission rate............................ $0.0591 -- -- -- --
</TABLE>
See accompanying notes to financial statements.
22
<PAGE>
<PAGE>
SALOMON BROTHERS OPPORTUNITY FUND INC
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
SALOMON BROTHERS OPPORTUNITY FUND INC
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Salomon Brothers Opportunity Fund Inc (the 'Fund') at August 31, 1996, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended and the financial highlights
for each of the five years in the period then ended, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as 'financial statements') are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at August 31, 1996 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PRICE WATERHOUSE LLP
New York, New York
October 11, 1996
23
<PAGE>
<PAGE>
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
Financial Statements included in Part A:
Financial Highlights for the ten years ended August 31, 1996
Financial Statements included in Part B:
Statement of Net Assets at August 31, 1996
Statement of Operations for the year ended August 31, 1996
Statement of Changes in Net Assets for the years ended August 31,
1996 and August 31, 1995
Notes to Financial Statements
Financial Highlights for the five years ended August 31, 1996
Report of Independent Accountants
(b) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- ------------------------------------------------------------------------------------------------------
<S> <C>
1(a) -- Articles of Incorporation of Registrant (filed as Exhibit 1 of the Registration Statement on Form
N-8B-1 (File Nos. 2-63023 and 811-2884) and incorporated herein by reference).
(b) -- Amendment to Articles of Incorporation of Registrant (filed as Exhibit 1(a) to Amendment No. 1 to
the Registration Statement on Form N-8B-1 (File Nos. 2-63023 and 811-2884) and incorporated herein
by reference).
(c) -- Amendment to Articles of Incorporation of Registrant (filed as Exhibit 1(b) to Registration
Statement on Form N-8B-1 (File Nos. 2-63023 and 811-2884) and incorporated herein by reference).
(d) -- Amendment to Articles of Incorporation of Registrant (filed as Exhibit 1(d) to Post-Effective
Amendment No. 11 to the Registration Statement on Form N-1A (File Nos. 2-63023 and 811-2884) and
incorporated herein by reference).
(e) -- Amendment to Articles of Incorporation of Registrant (filed as Exhibit 1(e) to Post-Effective
Amendment No. 13 to the Registration Statement on Form N-1A (File Nos. 2-63023 and 811-2884) and
incorporated herein by reference).
2 -- By-Laws of Registrant, as amended, December 16, 1988 (filed as Exhibit (2) to Post-Effective
Amendment No. 10 to the Registration Statement on Form N-1A (File Nos. 2-63023 and 811-2884) and
incorporated herein by reference).
3 -- None.
4 -- Specimen Stock Certificate (filed as Exhibit 4 to Amendment No. 1 to the Registration Statement on
Form N-8B-1 (File Nos. 2-63023 and 811-2884) and incorporated herein by reference).
5 -- Management Contract between Registrant and Salomon Brothers Asset Management Inc (filed as Exhibit
5 to Post-Effective Amendment No. 13 to the Registration Statement on Form N-2A (File Nos. 2-63023
and 811-2884) and incorporated herein by reference).
6(a) -- Distribution Contract between Registrant and Salomon Brothers Inc dated May 1, 1990 (filed as
Exhibit 6 to Post-Effective Amendment No. 13 to the Registration Statement on Form N-1A (File Nos.
2-63023 and 811-2884) and incorporated herein by reference).
(b) -- Dealer Contract between Salomon Brothers Inc and Shearson Lehman Brothers Inc. (filed as Exhibit
6(b) to Post-Effective Amendment No. 7 to the Registration Statement on Form N-1A (File Nos. 2-63023
and 811-2884) and incorporated herein by reference).
7 -- None.
8 -- Custodian Agreement between Registrant and Investors Bank & Trust Company, dated April 23, 1996, is
filed herein.
9(a) -- Transfer Agency Agreement between Registrant and Boston Safe Deposit and Trust Company, dated May
3, 1985 (filed as Exhibit 9 to Post-Effective Amendment No. 7 to the Registration Statement on Form
N-1A (File Nos. 2-63023 and 811-2884) and incorporated herein by reference).
</TABLE>
C-1
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- ------------------------------------------------------------------------------------------------------
<S> <C>
10 -- Opinion of Counsel as to the Legality of Securities Being Registered is incorporated by reference
by reference to Rule 24f-2 Notice as filed with the SEC on October 28, 1996.
11 -- Consent of Price Waterhouse LLP, independent accountants is filed herein.
12 -- None.
13(a) -- Subscription Agreement between Registrant and Irving Brilliant (filed as Exhibit 13(a) to
Post-Effective Amendment No. 6 to the Registration Statement on Form N-1A (File Nos. 2-63023 and
811-2884) and incorporated herein by reference).
(b) -- Subscription Agreement between Registrant and William H. David, dated February 8, 1979 (filed as
Exhibit 13(b) to Post-Effective Amendment No. 6 to the Registration Statement on Form N-1A (File
Nos. 2063023 and 811-2884) and incorporated herein by reference).
14(a) -- Prototype Profit Sharing and Money Purchase Pension Plan for Self-Employed Individuals (filed as
Exhibit 14(a) to Post-Effective Amendment No. 7 to the Registration Statement on Form N-1A (File
Nos. 2-63023 and 811-2884) and incorporated herein by reference).
(b) -- Prototype Individual Retirement Account Plan (filed as Exhibit 14(b) to Post-Effective Amendment
No. 7 to the Registration Statement on Form N-1A (File Nos. 2-63023 and 811-2884) and incorporated
herein by reference).
15 -- None.
16(a) -- Performance Data (filed as Exhibit 16 to Post-Effective Amendment No. 10 to the Registration
Statement on Form N-1A (File Nos. 2-63023 and 811-2884) and incorporated by reference herein.)
(b) -- Powers of Attorney (filed as Exhibit 16(b) to Post-Effective Amendment No. 19 to the Registration
Statement on Form N-1A (File Nos. 2-63023 and 811-2884) and incorporated herein by reference).
17 -- Financial Data Schedule is filed herein.
</TABLE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
2,104 holders of record at December 2, 1996.
ITEM 27. INDEMNIFICATION.
Reference is made to Article VIII of Registrant's Articles of
Incorporation, Article V of Registrant's By-Laws and paragraph 4 of the
Distribution Agreement.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the 'Securities Act') may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant understands that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant 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 and will be governed by the final adjudication of such issue.
The Registrant is named on a Lexington Insurance Company Mutual Fund
Professional Liability Insurance Policy which covers all present and future
directors and officers of Registrant against loss arising from any civil claim
or claims by reason of any actual or alleged error, misstatement, misleading
statement, negligent act or omission, or neglect or breach of duty committed
while acting as directors or
C-2
<PAGE>
<PAGE>
officers of the Registrant. The policy covers 100% of the excess of $250,000 up
to $5 million of any losses including legal and other expenses in connection
with any claim.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Investment Adviser -- Salomon Brothers Asset Management Inc
Salomon Brothers Asset Management Inc ('SBAM'), a wholly-owned subsidiary
of Salomon Brothers Holding Company Inc, which is in turn wholly-owned by
Salomon Inc, is an investment adviser registered under the Investment Advisers
Act of 1940, as amended (the 'Advisers Act') and renders investment advice to a
wide variety of individual, institutional and investment company clients.
The list required by this Item 28 of officers and directors of SBAM,
together with information as to any other business, profession, vocation or
employment of a substantial nature engaged in by such officers and directors
during the past two years, is incorporated by reference to Schedules A and D of
FORM ADV filed by SBAM pursuant to the Advisers Act (SEC File No. 801-32046).
Past information as to any other business vocation or employment of a
substantial nature engaged in by such officers and directors can be located in
Schedules A and D of past filings of FORM ADV (SEC File No. was 801-10642).
ITEM 29. PRINCIPAL UNDERWRITER
(a) Salomon Brothers Inc ('Salomon Brothers') currently acts as distributor
for, in addition to the Fund, Salomon Brothers Capital Fund Inc, Salomon
Brothers Investors Fund Inc, Salomon Brothers Series Funds Inc and Salomon
Brothers Institutional Series Funds Inc.
(b) The information required by this Item 29 with respect to each director,
officer or partner of Salomon Brothers is incorporated by reference to Schedule
A of Form BD filed by Salomon Brothers pursuant to the Securities Exchange Act
of 1934 (SEC File No. 3-26920).
(c) Not Applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
(1) Salomon Brothers Asset Management Inc
7 World Trade Center
New York, New York 10048
(2) Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
(3) First Data Investor Services Group, Inc.
P.O. Box 5127
Westborough, Massachusetts 01581-5127
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
(a) Not applicable.
(b) Not applicable.
(c) The Registrant hereby undertakes to furnish each person to whom a
Prospectus is delivered with a copy of the Registrant's latest Annual Report to
shareholders upon request and without charge.
C-3
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, the Registrant certifies that it
meets all of the requirements for effectiveness of this Post-Effective Amendment
to the Registration Statement pursuant to Rule 485(b) under the Securities Act
of 1933, as amended, and has duly caused this Post-Effective Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, and State of New York, on the 30th
day of December, 1996.
SALOMON BROTHERS OPPORTUNITY FUND INC
(Registrant)
By: /s/ Irving Brilliant
.................................
IRVING BRILLIANT
PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Post-Effective Amendment to the Registration Statement has been signed
below by the following persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
/s/ Irving Brilliant President and Director (Principal Executive December 30, 1996
......................................... Officer)
IRVING BRILLIANT
/s/ Alan M. Mandel Treasurer (Principal Financial Officer) December 30, 1996
.........................................
ALAN M. MANDEL
* Director December 30, 1996
.........................................
BENITO GAGUINE
* Director December 30, 1996
.........................................
ROSALIND A. KOCHMAN
* Director December 30, 1996
.........................................
IRVING SONNENSCHEIN
/s/ Alan M. Mandel
*By: .....................................
ALAN M. MANDEL AS
ATTORNEY-IN-FACT
DECEMBER 30, 1996
</TABLE>
<PAGE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -------------------------------------------------------------------------------------------------
<C> <S> <C>
8 Custodian Agreement between Registrant and Investors Bank & Trust Company.
11 Consent of Price Waterhouse LLP, Independent Accountants.
17 Financial Data Schedule.
</TABLE>
<PAGE>
<PAGE>
CUSTODIAN AGREEMENT
between
SALOMON BROTHERS OPPORTUNITY FUND INC.
and
INVESTORS BANK & TRUST COMPANY
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Bank Appointed Custodian................................................................... 1
2. Definitions................................................................................ 1
2.1 Authorized Person............................................................ 1
2.2 Security..................................................................... 1
2.3 Portfolio Security............................................................ 1
2.4 Officers' Certificate......................................................... 2
2.5 Book-Entry System............................................................. 2
2.6 Depository.................................................................... 2
2.7 Proper Instructions........................................................... 2
3. Separate Accounts........................................................................... 2
4. Certification as to Authorized Persons...................................................... 3
5. Custody of Cash............................................................................. 3
5.1 Purchase of Securities........................................................ 3
5.2 Redemptions................................................................... 3
5.3 Distributions and Expenses of Fund............................................ 3
5.4 Payment in Respect of Securities.............................................. 4
5.5 Repayment of Loans............................................................ 4
5.6 Repayment of Cash............................................................. 4
5.7 Foreign Exchange Transactions................................................. 4
5.8 Other Authorized Payments..................................................... 4
5.9 Termination................................................................... 4
6. Securities.................................................................................. 4
6.1 Segregation and Registration.................................................. 4
6.2 Voting and Proxies............................................................ 5
6.3 Book-Entry System............................................................. 5
6.4 Use of a Depository........................................................... 6
6.5 Use of Book-Entry System for Commercial Paper................................. 7
6.6 Use of Immobilization Programs................................................ 8
6.7 Eurodollar CDs................................................................ 8
6.8 Options and Futures Transactions.............................................. 9
(a) Puts and Calls Traded on Securities Exchanges,
NASDAQ or Over-the-Counter........................................... 9
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<S> <C>
(b) Puts, Calls, and Futures Traded
on Commodities Exchanges............................................ 9
6.9 Segregated Account........................................................... 9
6.10 Interest Bearing Call or Time Deposits....................................... 11
6.11 Transfer of Securities....................................................... 11
7. Redemptions................................................................................ 13
8. Merger, Dissolution, etc. of Fund.......................................................... 13
9. Actions of Bank Without Prior Authorization................................................ 13
10. Collections and Defaults................................................................... 14
11. Maintenance of Records and Accounting Services............................................. 15
12. Concerning the Bank........................................................................ 15
12.1 Performance of Duties and Standard of Care................................... 15
12.2 Agents and sub-custodians with Respect to Property of the Fund Held in the
United States............................................................. 16
12.3 Duties of the Bank with Respect to Property
Held Outside of the United States......................................... 17
12.4 Insurance.................................................................... 21
12.5 Fees and Expenses of Bank.................................................... 21
12.6 Advances by Bank............................................................. 21
13. Termination................................................................................. 21
14. Confidentiality............................................................................. 22
15. Notices..................................................................................... 23
16. Amendments.................................................................................. 23
17. Parties..................................................................................... 23
18. Governing Law............................................................................... 23
19. Counterparts................................................................................ 23
</TABLE>
<PAGE>
<PAGE>
CUSTODIAN AGREEMENT
AGREEMENT made as of this [ ] day of [ ], 1996, between SALOMON BROTHERS
OPPORTUNITY FUND INC, a Maryland corporation (the "Fund") and INVESTORS BANK &
TRUST COMPANY (the "Bank").
The Fund, an open-end management investment company, desires to place and
maintain all of its portfolio securities and cash in the custody of the Bank.
The Bank has at least the minimum qualifications required by Section 17(f)(1) of
the Investment Company Act of 1940, as amended, (the "1940 Act") to act as
custodian of the portfolio securities and cash of the Fund, and has indicated
its willingness to so act, subject to the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto agree as follows:
1. Bank Appointed Custodian. The Fund hereby appoints the Bank as custodian
of its portfolio securities and cash delivered to the Bank as hereinafter
described and the Bank agrees to act as such upon the terms and conditions
hereinafter set forth.
2. Definitions. Whenever used herein, the terms listed below will have the
following meaning:
2.1 Authorized Person. Authorized Person will mean any of the persons
duly authorized to give Proper Instructions or otherwise act on behalf of the
Fund by appropriate resolution of its Board of Directors (the "Board"), and set
forth in a certificate as required by Section 4 hereof.
2.2 Security. The term security as used herein will have the same
meaning as when such term is used in the Securities Act of 1933, as amended,
including, without limitation, any note, stock, treasury stock, bond, debenture,
evidence of indebtedness, certificate of interest or participation in any profit
sharing agreement, collateral-trust certificate, preorganization certificate or
subscription, transferable share, investment contract, voting-trust certificate,
certificate of deposit for a security, fractional undivided interest in oil,
gas, or other mineral rights, any put, call, straddle, option, or privilege on
any security, certificate of deposit, or group or index of securities (including
any interest therein or based on the value thereof), or any put, call, straddle,
option, or privilege entered into on a national securities exchange relating to
a foreign currency, or, in general, any interest or instrument commonly known as
a "security", or any certificate of interest or participation in, temporary or
interim certificate for, receipt for, guarantee of, or warrant or right to
subscribe to, or option contract to purchase or sell any of the foregoing, and
futures, forward contracts and options thereon.
2.3 Portfolio Security. Portfolio Security will mean any security
owned by the Fund.
<PAGE>
<PAGE>
2.4 Officers' Certificate. Officers' Certificate will mean, unless
otherwise indicated, any request, direction, instruction, or certification in
writing signed by any two Authorized Persons of the Fund.
2.5 Book-Entry System. Book-Entry System shall mean the Federal
Reserve-Treasury Department Book Entry System for United States government,
instrumentality and agency securities operated by the Federal Reserve Bank, its
successor or successors and its nominee or nominees.
2.6 Depository. Depository shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and Exchange
Commission ("SEC") under Section 17A of the Securities Exchange Act of 1934
("Exchange Act"), its successor or successors and its nominee or nominees. The
term "Depository" shall further mean and include any other person authorized to
act as a depository under the 1940 Act, its successor or successors and its
nominee or nominees, specifically identified in a certified copy of a resolution
of the Board.
2.7 Proper Instructions. Proper Instructions shall mean (i)
instructions regarding the purchase or sale of Portfolio Securities, and
payments and deliveries in connection therewith, given by an Authorized Person
as shall have been designated in an Officers' Certificate, such instructions to
be given in such form and manner as the Bank and the Fund shall agree upon from
time to time, and (ii) instructions (which may be continuing instructions)
regarding other matters signed or initialed by such one or more persons from
time to time designated in an Officers' Certificate as having been authorized by
the Board. Oral instructions will be considered Proper Instructions if the Bank
reasonably believes them to have been given by a person authorized to give such
instructions with respect to the transaction involved. The Fund shall cause all
oral instructions to be promptly confirmed in writing. The Bank shall act upon
and comply with any subsequent Proper Instruction which modifies a prior
instruction and the sole obligation of the Bank with respect to any follow-up or
confirmatory instruction shall be to make reasonable efforts to detect any
discrepancy between the original instruction and such confirmation and to report
such discrepancy to the Fund. The Fund shall be responsible, at the Fund's
expense, for taking any action, including any reprocessing, necessary to correct
any such discrepancy or error, and to the extent such action requires the Bank
to act the Fund shall give the Bank specific Proper Instructions as to the
action required. Upon receipt of an Officers' Certificate as to the
authorization by the Board accompanied by a detailed description of procedures
approved by the Fund, Proper Instructions may include communication effected
directly between electro-mechanical or electronic devices provided that the
Board and the Bank are satisfied that such procedures afford adequate safeguards
for the Fund's assets.
3. Separate Accounts. If the Fund has more than one series or portfolio,
the Bank will segregate the assets of each series or portfolio to which this
Agreement relates into a separate account for each such series or portfolio
containing the assets of such series or portfolio (and all investment earnings
thereon).
<PAGE>
<PAGE>
4. Certification as to Authorized Persons. The Secretary or Assistant
Secretary of the Fund will at all times maintain on file with the Bank his or
her certification to the Bank, in such form as may be acceptable to the Bank, of
the names and signatures of the Authorized Persons, it being understood that
upon the occurrence of any change in the information set forth in the most
recent certification on file (including without limitation any person named in
the most recent certification who is no longer an Authorized Person as
designated therein), the Secretary or Assistant Secretary of the Fund, will sign
a new or amended certification setting forth the change and the new, additional
or omitted names or signatures. The Bank will be entitled to rely and act upon
any Officers' Certificate given to it by the Fund which has been signed by
Authorized Persons named in the most recent certification.
5. Custody of Cash. As custodian for the Fund, the Bank will open and
maintain a separate account or accounts in the name of each portfolio or in the
name of the Bank, as Custodian of each portfolio, and will deposit to the
account of the Fund all of the cash of the Fund, except for cash held by a
sub-custodian appointed pursuant to Section 12.2 hereof, including borrowed
funds, delivered to the Bank, subject only to draft or order by the Bank acting
pursuant to the terms of this Agreement. Upon receipt by the Bank of Proper
Instructions (which may be continuing instructions) or in the case of payments
for redemptions and repurchases of outstanding shares of common stock of the
Fund, notification from the Fund's transfer agent as provided in Section 7,
requesting such payment, designating the payee or the account or accounts to
which the Bank will release funds for deposit, and stating that it is for a
purpose permitted under the terms of this Section 5, specifying the applicable
subsection, the Bank will make payments of cash held for the accounts of the
Fund, insofar as funds are available for that purpose, only as permitted in
subsections 5.1-5.9 below.
5.1 Purchase of Securities. Upon the purchase of securities for the
Fund, against contemporaneous receipt of such securities by the Bank or, against
delivery of such securities to the Bank in accordance with generally accepted
settlement practices and customs in the jurisdiction or market in which the
transaction occurs, registered in the name of the Fund or in the name of, or
properly endorsed and in form for transfer to, the Bank, or a nominee of the
Bank, or receipt for the account of the Bank pursuant to the provisions of
Section 6 below, each such payment to be made at the purchase price shown on a
broker's confirmation (or transaction report in the case of Book Entry Paper) of
purchase of the securities received by the Bank before such payment is made, as
confirmed in the Proper Instructions received by the Bank before such payment is
made.
5.2 Redemptions. In such amount as may be necessary for the repurchase
or redemption of common shares of the Fund offered for repurchase or redemption
in accordance with Section 7 of this Agreement.
5.3 Distributions and Expenses of Fund. For the payment on the
account of the Fund of dividends or other distributions to shareholders as may
from time to time be
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declared by the Board, interest, taxes, management or supervisory fees,
distribution fees, fees of the Bank for its services hereunder and reimbursement
of the expenses and liabilities of the Bank as provided hereunder, fees of any
transfer agent, fees for legal, accounting, and auditing services, or other
operating expenses of the Fund.
5.4 Payment in Respect of Securities. For payments in connection with
the conversion, exchange or surrender of Portfolio Securities or securities
subscribed to by the Fund held by or to be delivered to the Bank.
5.5 Repayment of Loans. To repay loans of money made to the Fund,
but, in the case of final payment, only upon redelivery to the Bank of any
Portfolio Securities pledged or hypothecated therefor and upon surrender of
documents evidencing the loan;
5.6 Repayment of Cash. To repay the cash delivered to the Fund for
the purpose of collateralizing the obligation to return to the Fund certificates
borrowed from the Fund representing Portfolio Securities, but only upon
redelivery to the Bank of such borrowed certificates.
5.7 Foreign Exchange Transactions. For payments in connection with
foreign exchange contracts or options to purchase and sell foreign currencies
for spot and future delivery which may be entered into by the Bank on behalf of
the Fund upon the receipt of Proper Instructions, such Proper Instructions to
specify the currency broker or banking institution (which may be the Bank, or
any other sub-custodian or agent hereunder, acting as principal) with which the
contract or option is made, and the Bank shall have no duty with respect to the
selection of such currency brokers or banking institutions with which the Fund
deals or for their failure to comply with the terms of any contract or option.
5.8 Other Authorized Payments. For other authorized transactions of
the Fund, or other obligations of the Fund incurred for proper Fund purposes;
provided that before making any such payment the Bank will also receive a
certified copy of a resolution of the Board signed by an Authorized Person
(other than the Person certifying such resolution) and certified by its
Secretary or Assistant Secretary, naming the person or persons to whom such
payment is to be made, and either describing the transaction for which payment
is to be made and declaring it to be an authorized transaction of the Fund, or
specifying the amount of the obligation for which payment is to be made, setting
forth the purpose for which such obligation was incurred and declaring such
purpose to be a proper corporate purpose.
5.9 Termination. Upon the termination of this Agreement as
hereinafter set forth pursuant to Section 8 and Section 13 of this Agreement.
6. Securities.
6.1 Segregation and Registration. Except as otherwise provided
herein, and except for securities to be delivered to any sub-custodian appointed
pursuant to Section
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12.2 hereof, the Bank as custodian, will receive and hold pursuant to the
provisions hereof, in a separate account or accounts and physically segregated
at all times from those of other persons, any and all Portfolio Securities which
may now or hereafter be delivered to it by or for the account of the Fund. All
such Portfolio Securities will be held or disposed of by the Bank for, and
subject at all times to, the instructions of the Fund pursuant to the terms of
this Agreement. Subject to the specific provisions herein relating to Portfolio
Securities that are not physically held by the Bank, the Bank will register all
Portfolio Securities (unless otherwise directed by Proper Instructions or an
Officers' Certificate), in the name of a registered nominee of the Bank as
defined in the Internal Revenue Code and any Regulations of the Treasury
Department issued thereunder, and will execute and deliver all such certificates
in connection therewith as may be required by such laws or regulations or under
the laws of any state.
The Fund will from time to time furnish to the Bank appropriate
instruments to enable it to hold or deliver in proper form for transfer, or to
register in the name of its registered nominee, any Portfolio Securities which
may from time to time be registered in the name of the Fund.
6.2 Voting and Proxies. Neither the Bank nor any nominee of the Bank
will vote any of the Portfolio Securities held hereunder, except in accordance
with Proper Instructions or an Officers' Certificate. The Bank will execute and
deliver, or cause to be executed and delivered, to the Fund all notices, proxies
and proxy soliciting materials with respect to such Securities, such proxies to
be executed by the registered holder of such Securities (if registered otherwise
than in the name of the Fund), but without indicating the manner in which such
proxies are to be voted.
6.3 Book-Entry System. Provided (i) the Bank has received a certified
copy of a resolution of the Board specifically approving deposits of Fund assets
in the Book-Entry System, and (ii) for any subsequent changes to such
arrangements following such approval, the Board has reviewed and approved the
arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval:
(a) The Bank may keep Portfolio Securities in the Book-Entry
System provided that such Portfolio Securities are represented in an account
("Account") of the Bank (or its agent) in such System which shall not include
any assets of the Bank (or such agent) other than assets held as a fiduciary,
custodian, or otherwise for customers;
(b) The records of the Bank (and any such agent) with respect to
the Fund's participation in the Book-Entry System through the Bank (or any such
agent) will identify by book entry Portfolio Securities belonging to the Fund
which are included with other securities deposited in the Account and shall at
all times during the regular business hours of the Bank (or such agent) be open
for inspection by duly authorized officers, employees or agents of the Fund.
Where securities are transferred to the Fund's account, the Bank shall also, by
book entry or otherwise, identify as belonging to the Fund a quantity of
securities in fungible bulk of securities (i) registered in the name of the Bank
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or its nominee, or (ii) shown on the Bank's account on the books of the Federal
Reserve Bank;
(c) The Bank (or its agent) shall pay for securities purchased
for the account of the Fund or shall pay cash collateral against the return of
Portfolio Securities loaned by the Fund upon (i) receipt of advice from the
Book-Entry System that such Securities have been transferred to the Account, and
(ii) the making of an entry on the records of the Bank (or its agent) to reflect
such payment and transfer for the account of the Fund. The Bank (or its agent)
shall transfer securities sold or loaned for the account of the Fund upon (i)
receipt of advice from the Book-Entry System that payment for securities sold or
payment of the initial cash collateral against the delivery of securities loaned
by the Fund has been transferred to the Account; and (ii) the making of an entry
on the records of the Bank (or its agent) to reflect such transfer and payment
for the account of the Fund. Copies of all advices from the Book-Entry System of
transfers of securities for the account of the Fund shall identify the Fund, be
maintained for the Fund by the Bank and shall be provided to the Fund at its
request. The Bank shall send the Fund a confirmation, as defined by Rule 17f-4
of the 1940 Act, of any transfers to or from the account of the Fund;
(d) The Bank will promptly provide the Fund with any report
obtained by the Bank or its agent on the Book-Entry System's accounting system,
internal accounting control and procedures for safeguarding securities deposited
in the Book-Entry System;
(e) The Bank shall be liable to the Fund for any loss or damage
to the Fund resulting from use of the Book-Entry System by reason of any
negligence, willful misfeasance or bad faith of the Bank or any of its agents or
of any of its or their employees or from any negligence by the Bank or any such
agent of its duty to use its best efforts to enforce such rights as it may have
against the Book-Entry System; at the election of the Fund, it shall be entitled
to be subrogated for the Bank in any claim against the Book-Entry System or any
other person which the Bank or its agent may have as a consequence of any such
loss or damage if and to the extent that the Fund has not been made whole for
any loss or damage.
6.4 Use of a Depository. Provided (i) the Bank has received a
certified copy of a resolution of the Board specifically approving deposits in
DTC or other such Depository and (ii) for any subsequent changes to such
arrangements following such approval, the Board has reviewed and approved the
arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval:
(a) The Bank may use a Depository to hold, receive, exchange,
release, lend, deliver and otherwise deal with Portfolio Securities including
stock dividends, rights and other items of like nature, and to receive and remit
to the Bank on behalf of the Fund all income and other payments thereon and to
take all steps necessary and proper in connection with the collection thereof;
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(b) Registration of Portfolio Securities may be made in the name
of any nominee or nominees used by such Depository;
(c) Payment for securities purchased and sold may be made through
the clearing medium employed by such Depository for transactions of participants
acting through it. Upon any purchase of Portfolio Securities, payment will be
made only upon delivery of the securities to or for the account of the Fund and
the Fund shall pay cash collateral against the return of Portfolio Securities
loaned by the Fund only upon delivery of the Securities to or for the account of
the Fund; and upon any sale of Portfolio Securities, delivery of the Securities
will be made only against payment thereof or, in the event Portfolio Securities
are loaned, delivery of Securities will be made only against receipt of the
initial cash collateral to or for the account of the Fund; and
(d) The Bank shall be liable to the Fund for any loss or damage
to the Fund resulting from use of a Depository by reason of any negligence,
willful misfeasance or bad faith of the Bank or its employees or from any
negligence by the Bank of its duty to use its best efforts to enforce such
rights as it may have against a Depository; at the election of the Fund, it
shall be entitled to be subrogated for the Bank in any claim against such
depository or any other person which the Bank or its agent may have as a
consequence of any such loss or damage if and to the extent that the Fund has
not been made whole for any loss or damage. In this connection, the Bank shall
use its best efforts to ensure that:
(i) The Depository obtains replacement of any certificated
Portfolio Security deposited with it in the event such Security is lost,
destroyed, wrongfully taken or otherwise not available to be returned to the
Bank upon its request;
(ii) Any proxy materials received by a Depository with respect to
Portfolio Securities deposited with such Depository are forwarded immediately to
the Bank for prompt transmittal to the Fund;
(iii) Such Depository immediately forwards to the Bank
confirmation of any purchase or sale of Portfolio Securities and of the
appropriate book entry made by such Depository to the Fund's account;
(iv) Such Depository prepares and delivers to the Bank such
records with respect to the performance of the Bank's obligations and duties
hereunder as may be necessary for the Fund to comply with the recordkeeping
requirements of Section 31(a) of the 1940 Act and Rule 31(a) thereunder; and
(v) Such Depository delivers to the Bank and the Fund all
internal accounting control reports, whether or not audited by an independent
public accountant, as well as such other reports as the Fund may reasonably
request in order to verify the Portfolio Securities held by such Depository.
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6.5 Use of Book-Entry System for Commercial Paper. Provided (i) the
Bank has received a certified copy of a resolution of the Board specifically
approving participation in a system maintained by the Bank for the holding of
commercial paper in book-entry form ("Book-Entry Paper") and (ii) for each year
following such approval the Board has received and approved the arrangements,
upon receipt of Proper Instructions and upon receipt of confirmation from an
Issuer (as defined below) that the Fund has purchased such Issuer's Book-entry
Paper, the Bank shall issue and hold in book-entry form, on behalf of the Fund,
commercial paper issued by issuers with whom the Bank has entered into a
book-entry agreement (the "Issuers"). In maintaining its Book-entry Paper
System, the Bank agrees that:
(a) the Bank will maintain all Book-Entry Paper held by the Fund
in an account of the Bank that includes only assets held by it for customers;
(b) the records of the Bank with respect to the Fund's purchase
of Book-entry Paper through the Bank will identify, by book-entry, Commercial
Paper belonging to the Fund which is included in the Book-entry Paper System and
shall at all times during the regular business hours of the Bank be open for
inspection by duly authorized officers, employees or agents of the Fund;
(c) the Bank shall pay for Book-Entry Paper purchased for the
account of the Fund upon contemporaneous (i) receipt of advice from the Issuer
that such sale of Book-Entry Paper has been effected, and (ii) the making of an
entry on the records of the Bank to reflect such payment and transfer for the
account of the Fund;
(d) the Bank shall cancel such Book-Entry Paper obligation upon
the maturity thereof upon contemporaneous (i) receipt of advice that payment for
such Book-Entry Paper has been transferred to the Fund, and (ii) the making of
an entry on the records of the Bank to reflect such payment for the account of
the Fund;
(e) the Bank shall transmit to the Fund a transaction journal
confirming each transaction in Book-Entry Paper for the account of the Fund on
the next business day following the transaction; and
(f) the Bank will send to the Fund such reports on its system of
internal accounting control with respect to the Book-Entry Paper System as the
Fund may reasonably request from time to time.
6.6 Use of Immobilization Programs. Provided (i) the Bank has
received a certified copy of a resolution of the Board specifically approving
the maintenance of Portfolio Securities in an immobilization program operated by
a bank which meets the requirements of Section 26(a)(1) of the 1940 Act, and
(ii) for each year following such approval the Board has reviewed and approved
the arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval, the Bank shall enter into
such immobilization program with such bank acting as a sub-custodian hereunder.
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6.7 Eurodollar CDs. Any Portfolio Securities which are Eurodollar CDs
may be physically held by the European branch of the U.S. banking institution
that is the issuer of such Eurodollar CD (a "European Branch"), provided that
such Securities are identified on the books of the Bank as belonging to the Fund
and that the books of the Bank identify the European Branch holding such
Securities. Notwithstanding any other provision of this Agreement to the
contrary, except as stated in the first sentence of this subsection 6.7, the
Bank shall be under no other duty with respect to such Eurodollar CDs belonging
to the Fund, and shall have no liability to the Fund or its shareholders with
respect to the actions, inactions, whether negligent or otherwise of such
European Branch in connection with such Eurodollar CDs, except for any loss or
damage to the Fund resulting from the Bank's own negligence, willful misfeasance
or bad faith in the performance of its duties hereunder.
6.8 Options and Futures Transactions.
(a) Puts and Calls Traded on Securities Exchanges, NASDAQ or
Over-the-Counter.
1. The Bank shall take action as to put options ("puts") and call
options ("calls") purchased or sold (written) by the Fund regarding escrow or
other arrangements (i) in accordance with the provisions of any agreement
entered into upon receipt of Proper Instructions between the Bank, any
broker-dealer registered under the Exchange Act and a member of the National
Association of Securities Dealers, Inc. (the "NASD"), and, if necessary, the
Fund relating to the compliance with the rules of the Options Clearing
Corporation and of any registered national securities exchange, or of any
similar organization or organizations.
2. Unless another agreement requires it to do so, the Bank shall
be under no duty or obligation to see that the Fund has deposited or is
maintaining adequate margin, if required, with any broker in connection with any
option, nor shall the Bank be under duty or obligation to present such option to
the broker for exercise unless it receives Proper Instructions from the Fund.
The Bank shall have no responsibility for the legality of any put or call
purchased or sold on behalf of the Fund, the propriety of any such purchase or
sale, or the adequacy of any collateral delivered to a broker in connection with
an option or deposited to or withdrawn from a Segregated Account (as defined in
subsection 6.9 below). The Bank specifically, but not by way of limitation,
shall not be under any duty or obligation to: (i) periodically check or notify
the Fund that the amount of such collateral held by a broker or held in a
Segregated Account is sufficient to protect such broker of the Fund against any
loss; (ii) effect the return of any collateral delivered to a broker; or (iii)
advise the Fund that any option it holds, has or is about to expire. Such duties
or obligations shall be the sole responsibility of the Fund.
(b) Puts, Calls and Futures Traded on Commodities Exchanges
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1. The Bank shall take action as to puts, calls and futures
contracts ("Futures") purchased or sold by the Fund in accordance with the
provisions of any agreement among the Fund, the Bank and a Futures Commission
Merchant registered under the Commodity Exchange Act, relating to compliance
with the rules of the Commodity Futures Trading Commission and/or any Contract
Market, or any similar organization or organizations, regarding account deposits
in connection with transactions by the Fund.
2. The responsibilities and liabilities of the Bank as to
futures, puts and calls traded on commodities exchanges, any Futures Commission
Merchant account and the Segregated Account shall be limited as set forth in
subparagraph (a)(2) of this Section 6.8 as if such subparagraph referred to
Futures Commission Merchants rather than brokers, and Futures and puts and calls
thereon instead of options.
6.9 Segregated Account. The Bank shall upon receipt of Proper
Instructions establish and maintain a Segregated Account or Accounts for and on
behalf of the Fund, into which Account or Accounts may be transferred upon
receipt of Proper Instructions cash and/or Portfolio Securities:
(a) in accordance with the provisions of any agreement among the
Fund, the Bank and a broker-dealer registered under the Exchange Act and a
member of the NASD or any Futures Commission Merchant registered under the
Commodity Exchange Act, relating to compliance with the rules of the Options
Clearing Corporation and of any registered national securities exchange or the
Commodity Futures Trading Commission or any registered Contract Market, or of
any similar organizations regarding escrow or other arrangements in connection
with transactions by the Fund;
(b) for the purpose of segregating cash or securities in
connection with options purchased or written by the Fund or commodity futures
purchased or written by the Fund;
(c) for the deposit of liquid assets, such as cash, U.S.
Government securities or other high grade debt obligations, having a market
value (marked to market on a daily basis) at all times equal to not less than
the aggregate purchase price due on the settlement dates of all the Fund's then
outstanding forward commitment or "when-issued" agreements relating to the
purchase of Portfolio Securities and all the Fund's then outstanding commitments
under reverse repurchase agreements entered into with broker-dealer firms;
(d) for the deposit of any Portfolio Securities which the
Fund has agreed to sell on a forward commitment basis, all in accordance
with Investment Company Act Release No. 10666;
(e) for the purposes of compliance by the Fund with the
procedures required by Investment Company Act Release No. 10666, or any
subsequent release or
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releases of the Securities and Exchange Commission relating to the maintenance
of Segregated Accounts by registered investment companies;
(f) for other proper corporate purposes, but only, in the case of
this clause (f), upon receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Board, or of the Executive Committee
signed by an officer of the Fund and certified by the Secretary or an Assistant
Secretary, setting forth the purpose or purposes of such Segregated Account and
declaring such purposes to be proper corporate purposes.
(g) Assets may be withdrawn from the Segregated Account
pursuant to Proper Instructions only
(i) in accordance with the provisions of any agreements
referenced in (a) above;
(ii) for sale or delivery to meet the Fund's obligations under
outstanding firm commitment or when-issued agreements for the purchase of
Portfolio Securities and under reverse repurchase agreements;
(iii) for exchange for other liquid assets of equal or greater
value deposited in the Segregated Account;
(iv) to the extent that the Fund's outstanding forward commitment
or when-issued agreements for the purchase of portfolio securities or reverse
repurchase agreements are sold to other parties or the Fund's obligations
thereunder are met from assets of the Fund other than those in the Segregated
Account; or
(v) for delivery upon settlement of a forward commitment
agreement for the sale of Portfolio Securities.
6.10 Interest Bearing Call or Time Deposits. The Bank shall, upon
receipt of Proper Instructions relating to the purchase by the Fund of
interest-bearing fixed-term and call deposits, transfer cash, by wire or
otherwise, in such amounts and to such bank or banks as shall be indicated in
such Proper Instructions. The Bank shall include in its records with respect to
the assets of the Fund appropriate notation as to the amount of each such
deposit, the banking institution with which such deposit is made (the "Deposit
Bank"), and shall retain such forms of advice or receipt evidencing the deposit,
if any, as may be forwarded to the Bank by the Deposit Bank. Such deposits shall
be deemed Portfolio Securities of the Fund and the responsibility of the Bank
therefore shall be the same as and no greater than the Bank's responsibility in
respect of other Portfolio Securities of the Fund.
6.11 Transfer of Securities. The Bank will transfer, exchange,
deliver or release Portfolio Securities held by it hereunder, insofar as such
Securities are available for such purpose, provided that before making any
transfer,
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exchange, delivery or release under this Section the Bank will receive
Proper Instructions requesting such transfer, exchange or delivery stating that
it is for a purpose permitted under the terms of this Section 6.11, specifying
the applicable subsection, or describing the purpose of the transaction with
sufficient particularity to permit the Bank to ascertain the applicable
subsection, only
(a) upon sales of Portfolio Securities for the account of the
Fund, against contemporaneous receipt by the Bank of payment therefor in full,
or, against payment to the Bank in accordance with generally accepted settlement
practices and customs in the jurisdiction or market in which the transaction
occurs, each such payment to be in the amount of the sale price shown in a
broker's confirmation of sale of the Portfolio Securities received by the Bank
before such payment is made, as confirmed in the Proper Instructions received by
the Bank before such payment is made;
(b) in exchange for or upon conversion into other securities
alone or other securities and cash pursuant to any plan of merger,
consolidation, reorganization, share split-up, change in par value,
recapitalization or readjustment or otherwise, upon exercise of subscription,
purchase or sale or other similar rights represented by such Portfolio
Securities, or for the purpose of tendering shares in the event of a tender
offer therefor, provided however that in the event of an offer of exchange,
tender offer, or other exercise of rights requiring the physical tender or
delivery of Portfolio Securities, the Bank shall have no liability for failure
to so tender in a timely manner unless such Proper Instructions are received by
the Bank at least two business days prior to the date required for tender, and
unless the Bank (or its agent or sub-custodian hereunder) has actual possession
of such Security at least two business days prior to the date of tender;
(c) upon conversion of Portfolio Securities pursuant to their
terms into other securities;
(d) for the purpose of redeeming in kind shares of the Fund upon
authorization from the Fund;
(e) in the case of option contracts owned by the Fund, for
presentation to the endorsing broker;
(f) when such Portfolio Securities are called, redeemed or
retired or otherwise become payable;
(g) for the purpose of effectuating the pledge of Portfolio
Securities held by the Bank in order to collateralize loans made to the Fund by
any bank, including the Bank; provided, however, that such Portfolio Securities
will be released only upon payment to the Bank for the account of the Fund of
the moneys borrowed, except that in cases where additional collateral is
required to secure a borrowing already made, and such fact is made to appear in
the Proper Instructions, further Portfolio Securities may be released for that
purpose without any such payment. In the event that any such pledged Portfolio
Securities are held by the Bank, they will be so held for the account of the
lender, and after notice to the Fund from the lender in accordance with the
normal
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procedures of the lender, that an event of deficiency or default on the loan has
occurred, the Bank may deliver such pledged Portfolio Securities to or for the
account of the lender;
(h) for the purpose of releasing certificates representing
Portfolio Securities, against contemporaneous receipt by the Bank of the fair
market value of such security, as set forth in the Proper Instructions received
by the Bank before such payment is made;
(i) for the purpose of delivering securities lent by the Fund to
a bank or broker dealer, but only against receipt in accordance with street
delivery custom except as otherwise provided herein, of adequate collateral as
agreed upon from time to time by the Fund and the Bank, and upon receipt of
payment in connection with any repurchase agreement relating to such securities
entered into by the Fund;
(j) for other authorized transactions of the Fund or for other
proper corporate purposes; provided that before making such transfer, the Bank
will also receive a certified copy of resolutions of the Board, signed by an
authorized officer of the Fund (other than the officer certifying such
resolution) and certified by its Secretary or Assistant Secretary, specifying
the Portfolio Securities to be delivered, setting forth the transaction in or
purpose for which such delivery is to be made, declaring such transaction to be
an authorized transaction of the Fund or such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of such securities
shall be made; and
(k) upon termination of this Agreement as hereinafter set forth
pursuant to Section 8 and Section 14 of this Agreement.
As to any deliveries made by the Bank pursuant to subsections (a), (b),
(c), (e), (f), (g), (h) and (i) securities or cash receivable in exchange
therefor shall be delivered to the Bank.
7. Redemptions. In the case of payment of assets of the Fund held by the
Bank in connection with redemptions and repurchases by the Fund of outstanding
common shares, the Bank will rely on notification by the Fund's transfer agent
of receipt of a request for redemption and certificates, if issued, in proper
form for redemption before such payment is made. Payment shall be made in
accordance with the Articles and By-laws of the Fund, from assets available for
said purpose.
8. Merger, Dissolution, etc. of Fund. In the case of the following
transactions, not in the ordinary course of business, namely, the merger of the
Fund into or the consolidation of the Fund with another investment company, the
sale by the Fund of all, or substantially all, of its assets to another
investment company, or the liquidation or dissolution of the Fund and
distribution of its assets, the Bank will deliver the Portfolio Securities held
by it under this Agreement and disburse cash only upon the order of the Fund set
forth in an Officers' Certificate, accompanied by a certified copy of a
resolution of the Board authorizing any of the foregoing transactions. Upon
completion of such
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delivery and disbursement and the payment of the fees, disbursements and
expenses of the Bank, this Agreement will terminate.
9. Actions of Bank Without Prior Authorization. Notwithstanding
anything herein to the contrary, unless and until the Bank receives an Officers'
Certificate to the contrary, it will without prior authorization or instruction
of the Fund or the transfer agent:
(a) Endorse for collection and collect on behalf of and in the
name of the Fund all checks, drafts, or other negotiable or transferable
instruments or other orders for the payment of money received by it for the
account of the Fund and hold for the account of the Fund all income, dividends,
interest and other payments or distribution of cash with respect to the
Portfolio Securities held thereunder;
(b) Present for payment all coupons and other income items held
by it for the account of the Fund which call for payment upon presentation and
hold the cash received by it upon such payment for the account of the Fund;
(c) Receive and hold for the account of the Fund all securities
received as a distribution on Portfolio Securities as a result of a stock
dividend, share split-up, reorganization, recapitalization, merger,
consolidation, readjustment, distribution of rights and similar securities
issued with respect to any Portfolio Securities held by it hereunder.
Execute as agent on behalf of the Fund all necessary ownership and other
certificates and affidavits required by the Internal Revenue Code or the
regulations of the Treasury Department issued thereunder, or by the laws of any
state, now or hereafter in effect, inserting the Fund's name on such
certificates as the owner of the securities covered thereby, to the extent it
may lawfully do so and as may be required to obtain payment in respect thereof.
The Bank will execute and deliver such certificates in connection with Portfolio
Securities delivered to it or by it under this Agreement as may be required
under the provisions of the Internal Revenue Code and any Regulations of the
Treasury Department issued thereunder, or under the laws of any State;
(d) Present for payment all Portfolio Securities which are
called, redeemed, retired or otherwise become payable, and hold cash received by
it upon payment for the account of the Fund; and
(e) Exchange interim receipts or temporary securities for
definitive securities.
10. Collections and Defaults. The Bank will use all reasonable efforts
to collect any funds which may to its knowledge become collectible arising from
Portfolio Securities, including dividends, interest and other income, and to
transmit to the Fund notice actually received by it of any call for redemption,
offer of exchange, right of subscription, reorganization or other proceedings
affecting such Securities. If Portfolio
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Securities upon which such income is payable are in default or payment is
refused after due demand or presentation, the Bank will notify the Fund in
writing of any default or refusal to pay within two business days from the day
on which it receives knowledge of such default or refusal. In addition, the Bank
will send the Fund a written report once each month showing any income on any
Portfolio Security held by it which is more than ten days overdue on the date of
such report and which has not previously been reported.
11. Maintenance of Records and Accounting Services. The Bank will
maintain records with respect to transactions for which the Bank is responsible
pursuant to the terms and conditions of this Agreement, and in compliance with
the applicable rules and regulations of the 1940 Act and will furnish the Fund
daily with a statement of condition of the Fund. The Bank will furnish to the
Fund at the end of every month, and at the close of each quarter of the Fund's
fiscal year, a list of the Portfolio Securities and the aggregate amount of cash
held by it for the Fund. The books and records of the Bank pertaining to its
actions under this Agreement and reports by the Bank or its independent
accountants concerning its accounting system, procedures for safeguarding
securities and internal accounting controls will be open to inspection and audit
at reasonable times by officers of or auditors employed by the Fund and
employees of the SEC and will be preserved by the Bank in the manner and in
accordance with the applicable rules and regulations under the 1940 Act. All
records maintained by the Bank in connection with the performance of its duties
under this Agreement will remain the property of the Fund, will be surrendered
promptly on request and in the event of termination of this agreement will be
delivered to the Fund or the successor custodian.
The Bank shall keep the books of account and render statements or copies
from time to time as reasonably requested by the Treasurer or any executive
officer of the Fund.
The Bank shall assist generally in the preparation of reports to
shareholders and others, audits of accounts, and other ministerial matters of
like nature.
12. Concerning the Bank.
12.1 Performance of Duties and Standard of Care.
In performing its duties hereunder and any other duties listed on any Schedule
hereto, if any, the Bank will be entitled to receive and act upon the advice of
independent counsel of its own selection, which may be counsel for the Fund, and
will be without liability for any action taken or thing done or omitted to be
done in accordance with this Agreement in good faith in conformity with such
advice. In the performance of its duties hereunder, the Bank will be protected
and not be liable, and will be indemnified and held harmless for any action
taken or omitted to be taken by it in good faith reliance upon the terms of this
Agreement, any Officers' Certificate, Proper Instructions, resolution of the
Board, telegram, notice, request, certificate or other instrument reasonably
believed by the Bank to be genuine and for any other loss to the Fund except in
the case of its negligence, willful misfeasance or bad faith in the performance
of its duties. In order that the indemnification provision contained in this
Section 13.1 shall apply, it is understood that
<PAGE>
<PAGE>
the Fund shall be fully and promptly advised of all pertinent facts concerning
the situation and that the Fund shall have the option to defend the Bank against
any claim which may be the subject of this indemnification. The Bank shall in no
case confess any claim or make any compromise in any case in which the Fund will
be asked to indemnify the Bank except with the Fund's consent. It is further
understood that the indemnification provision contained in this Section 13.1
does not apply with respect to the acts and omissions of a Selected Foreign
Sub-Custodian constituting negligence or willful misconduct in the conduct of
its responsibilities under the terms of a Foreign Sub-Custodian Agreement.
The Bank will be under no duty or obligation to inquire into and will
not be liable for:
(a) the validity of the issue of any Portfolio Securities purchased by
or for the Fund, the legality of the purchases thereof or the propriety of the
price incurred therefor;
(b) the legality of any sale of any Portfolio Securities by or for the
Fund or the propriety of the amount for which the same are sold;
(c) the legality of an issue or sale of any common shares of the Fund or
the sufficiency of the amount to be received therefor;
(d) the legality of the repurchase of any common shares of the Fund or
the propriety of the amount to be paid therefor;
(e) the legality of the declaration of any dividend by the Fund or the
legality of the distribution of any Portfolio Securities as payment in kind of
such dividend; and
(f) any property or moneys of the Fund unless and until received by it,
and any such property or moneys delivered or paid by it pursuant to the terms
hereof.
Moreover, the Bank will not be under any duty or obligation to ascertain
whether any Portfolio Securities at any time delivered to or held by it for the
account of the Fund are such as may properly be held by the Fund under the
provisions of its Articles, By-laws, any federal or state statutes or any rule
or regulation of any governmental agency.
Notwithstanding anything in this Agreement to the contrary, in no event
shall the Bank be liable hereunder or to any third party for any losses or
damages of any kind resulting from acts of God, earthquakes, fires, floods,
storms or other disturbances of nature, epidemics, strikes, riots,
nationalization, expropriation, currency restrictions, acts of war, civil war or
terrorism, insurrection, nuclear fusion, fission or radiation, the interruption,
loss or malfunction of utilities, transportation, or computers (hardware or
software) and computer facilities, the unavailability of energy sources and
other similar happenings or events except as results from the Bank's own
negligence;
12.2 Agents and Subcustodians with Respect to Property of the Fund
Held in the United States. The Bank may employ agents in the performance of its
duties
<PAGE>
<PAGE>
hereunder and shall be responsible for the acts and omissions of such agents and
sub-custodians as if performed by the Bank hereunder.
Upon receipt of Proper Instructions, the Bank may employ sub-custodians,
provided that any such sub-custodian meets at least the minimum qualifications
required by Section 17(f)(1) of the 1940 Act to act as a custodian of the Fund's
assets with respect to property of the Fund held in the United States. The Bank
shall have no liability to the Fund or any other person by reason of any act or
omission of any such sub-custodian and the Fund shall indemnify the Bank and
hold it harmless from and against any and all actions, suits and claims, arising
directly or indirectly out of the performance of any sub-custodian. Upon request
of the Bank, the Fund shall assume the entire defense of any action, suit, or
claim subject to the foregoing indemnity. The Fund shall pay all fees and
expenses of any sub-custodian.
12.3 Duties of the Bank with Respect to Property of the Fund Held
Outside of the United States.
(a) Appointment of Foreign Sub-Custodians. The Fund hereby
authorizes and instructs the Bank to employ as sub-custodians for the Fund's
Portfolio Securities and other assets maintained outside the United States the
foreign banking institutions and foreign securities depositories designated on
the Schedule attached hereto (each, a "Selected Foreign Sub-Custodian"). Upon
receipt of Proper Instructions, together with a certified resolution of the
Fund's Board of Directors, the Bank and the Fund may agree to designate
additional foreign banking institutions and foreign securities depositories to
act as Selected Foreign Sub-Custodians hereunder provided that any such
institution shall constitute an "eligible foreign custodian" within the meaning
of Rule 17f-5 under the 1940 Act. Upon receipt of Proper Instructions, the Fund
may instruct the Bank to cease the employment of any one or more such Selected
Foreign Sub-Custodians for maintaining custody of the Fund's assets, and the
Bank shall so cease to employ such sub-custodian as soon as alternate custodial
arrangements have been implemented.
(b) Foreign Securities Depositories. The Bank may authorize one
or more of the Selected Foreign Sub-Custodians to use the facilities of one or
more foreign central securities depositories or clearing agencies provided that
any such organization shall constitute an "eligible foreign custodian". Where
the Fund's securities are deposited in a securities depository, the Selected
Foreign Sub-Custodian shall identify as belonging to such Selected Foreign
Sub-Custodian as agent for the customer a quantity of securities in a fungible
bulk of securities shown in such sub-custodian's account on the books of such
securities depository. Notwithstanding the foregoing, except as may otherwise be
agreed upon in writing by the Bank and the Fund, the Fund authorizes the deposit
in Euro-clear, the securities clearance and depository facilities operated by
Morgan Guaranty Trust Company of New York in Brussels, Belgium, of Foreign
Portfolio Securities eligible for deposit therein and to utilize such
securities depository in connection with settlements of purchases and sales of
securities and deliveries and returns of securities, until notified to the
contrary pursuant to subparagraph (a) hereunder.
<PAGE>
<PAGE>
(c) Segregation of Securities. The Bank shall identify on its
books as belonging to the Fund the Foreign Portfolio Securities held by each
Selected Foreign Sub-Custodian. Each agreement pursuant to which the Bank
employs a foreign banking institution shall require that such institution
establish a custody account for the Bank and hold in that account, Foreign
Portfolio Securities and other assets of the Fund, and, in the event that such
institution deposits Foreign Portfolio Securities in a foreign securities
depository, that it shall identify on its books as belonging to the Bank the
securities so deposited. Each Selected Foreign Sub-Custodian shall hold
securities of the Fund which are not held in a securities depository physically
segregated at all times from those of such Selected Foreign Sub-Custodian and
shall identify as belonging to such Selected Foreign Sub-Custodian as agent for
the customer.
(d) Agreements with Foreign Banking Institutions. Each of the
agreements pursuant to which a foreign banking institution holds assets of the
Fund (each, a "Foreign Sub-Custodian Agreement") shall be substantially in the
form previously made available to the Fund and shall provide provisions
conforming to paragraph (a)(i)(iii) of Rule 17f-5 under the 1940 Act (or any
successor provision of like import) that: (a) the Fund's assets will not be
subject to any right, charge, security interest, lien or claim of any kind in
favor of the foreign banking institution or its creditors or agent, except a
claim of payment for their safe custody or administration (including, without
limitation, any fees or taxes payable upon transfers or reregistration of
securities); (b) beneficial ownership of the Fund's assets will be freely
transferable without the payment of money or value other than for custody or
administration (including, without limitation, any fees or taxes payable upon
transfers or reregistration of securities); (c) adequate records will be
maintained identifying the assets as belonging to Bank; (d) officers of or
auditors employed by, or other representatives of the Bank, including to the
extent permitted under applicable law, the independent public accountants for
the Fund, will be given access to the books and records of the foreign banking
institution relating to its actions under its agreement with the Bank; and (e)
assets of the Fund held by the Selected Foreign Sub-Custodian will be subject
only to the instructions of the Bank or its agents. The Bank represents that as
of the date of this Agreement to the best of its knowledge, after due inquiry,
each of the sub-custodians and securities depositories listed on the Schedule
attached hereto is an "eligible foreign custodian" or an overseas branch of a
"Qualified U. S. Bank", each as defined by Rule 17f-5 under the Act. The Bank
agrees that it shall not amend any sub-custodial agreement in a manner which
would cause the Fund to be in violation of Rule 17f-5 under the Act and agrees
to give the Fund 30 days prior written notice of any amendment which materially
affects the Fund's rights.
(e) Access of Independent Accountants of the Fund. Upon request
of the Fund, the Bank will use its best efforts to arrange for the independent
accountants of the Fund to be afforded access to the books and records of any
foreign banking institution employed as a Selected Foreign Sub-Custodian insofar
as such books and records relate to the performance of such foreign banking
institution under its Foreign Sub-Custodian Agreement.
<PAGE>
<PAGE>
(f) Reports by Bank. The Bank will supply to the Fund periodic
statements as the Fund shall reasonably request in respect of the securities and
other assets of the Fund held by Selected Foreign Sub-Custodians, including but
not limited to an identification of entities having possession of the Foreign
Portfolio Securities and other assets of the Fund and shall furnish to the Fund
such notices of transfers of securities, deposits or other assets to or from the
Fund's account by any Selected Foreign Sub-Custodian as the Fund shall request.
(g) Transactions in Foreign Custody Account. Transactions with
respect to the assets of the Fund held by a Selected Foreign Sub-Custodian shall
be effected pursuant to Proper Instructions from the Fund to the Bank and shall
be effected in accordance with the applicable Foreign Sub-Custodian Agreement.
If at any time any Foreign Portfolio Securities shall be registered in the name
of the nominee of the Selected Foreign Sub-Custodian, the Fund agrees to hold
any such nominee harmless from any liability by reason of the registration of
such securities in the name of such nominee.
Notwithstanding any provision of this Agreement to the contrary,
settlement and payment for Foreign Portfolio Securities received for the account
of the Fund and delivery of Foreign Portfolio Securities maintained for the
account of the Fund may be effected in accordance with the customary established
securities trading or securities processing practices and procedures in the
jurisdiction or market in which the transaction occurs, including, without
limitation, delivering securities to the purchaser thereof or to a dealer
therefor (or an agent for such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities from such purchaser
or dealer.
In connection with any action to be taken with respect to the Foreign
Portfolio Securities held hereunder, including, without limitation, the exercise
of any voting rights, subscription rights, redemption rights, exchange rights,
conversion rights or tender rights, or any other action in connection with any
other right, interest or privilege with respect to such Securities
(collectively, the "Rights"), the Bank shall promptly transmit to the Fund such
information in connection therewith as is made available to the Bank by the
Foreign Sub-Custodian, and shall promptly forward to the applicable Foreign
Sub-Custodian any instructions, forms or certifications with respect to such
Rights, and any instructions relating to the actions to be taken in connection
therewith, as the Bank shall receive from the Fund pursuant to Proper
Instructions. Notwithstanding the foregoing, the Bank shall have no further duty
or obligation with respect to such Rights, including, without limitation, the
determination of whether the Fund is entitled to participate in such Rights
under applicable U.S. and foreign laws, or the determination of whether any
action proposed to be taken with respect to such Rights by the Fund or by the
applicable Foreign Sub-Custodian will comply with all applicable terms and
conditions of any such Rights or any applicable laws or regulations, or market
practices within the market in which such action is to be taken or omitted.
(h) Liability of Selected Foreign Sub-Custodians. Each Foreign
Sub-Custodian Agreement with a foreign banking institution shall require the
institution to
<PAGE>
<PAGE>
exercise reasonable care in the performance of its duties and to indemnify, and
hold harmless, the Bank and each Fund from and against certain losses,
damages, costs, expenses, liabilities or claims arising out of or in
connection with the institution's performance of such obligations, all as set
forth in the applicable Foreign Sub-Custodian Agreement. The Fund acknowledges
that the Bank, as a participant in Euro-clear, is subject to the Terms and
Conditions Governing the Euro-Clear System, a copy of which has been made
available to the Fund. The Fund acknowledges that pursuant to such Terms and
Conditions, Morgan Guaranty Brussels shall have the sole right to exercise or
assert any and all rights or claims in respect of actions or omissions of, or
the bankruptcy or insolvency of, any other depository, clearance system or
custodian utilized by Euro-clear in connection with the Fund's securities and
other assets.
(i) Liability of Bank. It is understood by both parties that the
use of any such sub-custodian will not effect any of the Bank's responsibilities
to the Fund under this Agreement and that the Custodian shall be liable for the
acts and omissions of each sub-custodian constituting negligence or willful
misconduct in the conduct of its responsibilities under the terms of the
Sub-custodian agreement. The Bank shall not be liable for any loss, damage,
cost, expense, liability or claim resulting from nationalization, expropriation,
currency restrictions, or acts of war or terrorism, political risk (including,
but not limited to, exchange control restrictions, confiscation, insurrection,
civil strife or armed hostilities) other losses due to Acts of God, nuclear
incident or any loss where the Selected Foreign Sub-Custodian has otherwise
exercised reasonable care.
The Bank shall advise the Fund promptly if it learns that any foreign
agent or sub-custodian no longer constitutes an "eligible foreign custodian" and
of any failure by any Selected Foreign Sub-Custodian to observe any "material
term" of its appointment within the meaning of Rule 17f-5 under the 1940 Act.
(j) Monitoring Responsibilities. The Bank shall furnish annually
to the Fund, information concerning the Selected Foreign Sub-Custodians employed
hereunder for use by the Fund in evaluating such Selected Foreign Sub-Custodians
to addition, the Bank will promptly inform the Fund in the event that the Bank
is notified by a Selected Foreign Sub-Custodian that there appears to be a
substantial likelihood that its shareholders' equity will decline below $200
million (U.S. dollars or the equivalent thereof) or that its shareholders'
equity has declined below $200 million (in each case computed in accordance with
generally accepted U.S. accounting principles) or any other capital adequacy
test applicable to it by exemptive order, or if the Bank has actual knowledge of
any material loss of the assets of the Fund held by a Foreign Sub-Custodian.
In the event that any Selected Foreign Sub-Custodian fails to perform
any of its obligations under the terms of its appointment, the Bank shall use
its best efforts to cause such foreign sub-custodian to perform such obligations
and shall notify the Fund as promptly as practicable of any failure of a
sub-custodian to perform its obligations in any material respect. At the written
request of the Fund, the Custodian shall use its best
<PAGE>
<PAGE>
efforts to assert and collect any claim for liability for any loss or damage
incurred by the Fund arising out of the failure of any such sub-custodian to
perform such obligations. At the election of the Fund, it shall have the right
to enforce, to the extent permitted by the sub-custodian agreement and
applicable law, the Custodian's rights against any such sub-custodian for loss
or damage caused by the Fund by such sub-custodian. At the written request of
the Fund, the Custodian will terminate any sub-custodian in accordance with the
termination provisions under the applicable sub-custodian agreement. The
Custodian will not amend any sub-custodian agreement in any way which materially
adversely affects the custody of the Fund's assets, except upon the prior
approval of the Fund.
(k) Tax Law. The Bank shall have no responsibility or liability
for any obligations now or hereafter imposed on the Fund or the Bank as
custodian of the Fund by the tax laws of any jurisdiction, and it shall be the
responsibility of the Fund to notify the Bank of the obligations imposed on the
Fund or the Bank as the custodian of the Fund by the tax law of any non-U.S.
jurisdiction, including responsibility for withholding and other taxes,
assessments or other governmental charges, certifications and governmental
reporting. The sole responsibility of the Bank with regard to such tax law shall
be to use reasonable efforts to assist the Fund with respect to any claim for
exemption or refund under the tax law of jurisdictions for which the Fund has
provided such information.
12.4 Insurance. The Bank shall use the same care with respect to the
safekeeping of Portfolio Securities and cash of the Fund held by it as it uses
in respect of its own similar property but it need not maintain any special
insurance for the benefit of the Fund.
12.5. Fees and Expenses of Bank. The Fund will pay or reimburse the
Bank from time to time for any transfer taxes payable upon transfer of Portfolio
Securities made hereunder, and for all necessary proper disbursements, expenses
and charges made or incurred by the Bank in the performance of this Agreement
(including any duties listed on any Schedule hereto, if any) including any
indemnities for any loss, liabilities or expense to the Bank as provided above.
For the services rendered by the Bank hereunder, the Fund will pay to the Bank
such compensation or fees at such rate and at such times as shall be agreed upon
in writing by the parties from time to time. The Bank will also be entitled to
reimbursement by the Fund for all reasonable expenses incurred in conjunction
with termination of this Agreement by the Fund.
12.6 Advances by Bank. The Bank may, in its sole discretion, advance
funds on behalf of the Fund to make any payment permitted by this Agreement upon
receipt of any proper authorization required by this Agreement for such payments
by the Fund. Should such a payment or payments, with advanced funds, result in
an overdraft (due to insufficiencies of the Fund's account with the Bank, or for
any other reason) this Agreement deems any such overdraft or related
indebtedness, a loan made by the Bank to the Fund payable on demand and bearing
interest at the current rate charged by the Bank for such loans unless the Fund
shall provide the Bank with agreed upon compensating balances. The Fund agrees
that the Bank shall have a continuing lien and security interest to the extent
of any overdraft or indebtedness, in and to any property at any time held by
<PAGE>
<PAGE>
it for the Fund's benefit or in which the Fund has an interest and which is then
in the Bank's possession or control (or in the possession or control of any
third party acting on the Bank's behalf). The Fund authorizes the Bank, in its
sole discretion, at any time to charge any overdraft or indebtedness, together
with interest due thereon against any balance of account standing to the credit
of the Fund on the Bank's books.
13. Termination.
(a) This Agreement may be terminated at any time without penalty
upon sixty days written notice delivered by either party to the other by means
of registered mail, and upon the expiration of such sixty days this Agreement
will terminate; provided, however, that the effective date of such termination
may be postponed to a date not more than ninety days from the date of delivery
of such notice (i) by the Bank in order to prepare for the transfer by the Bank
of all of the assets of the Fund held hereunder, and (ii) by the Fund in order
to give the Fund an opportunity to make suitable arrangements for a successor
custodian. At any time after the termination of this Agreement, the Fund will,
at its request, have access to the records of the Bank relating to the
performance of its duties as custodian.
(b) In the event of the termination of this Agreement, the Bank
will immediately upon receipt or transmittal, as the case may be, of notice of
termination, commence and prosecute diligently to completion the transfer of all
cash and the delivery of all Portfolio Securities duly endorsed and all records
maintained under Section 11 to the successor custodian when appointed by the
Fund. The obligation of the Bank to deliver and transfer over the assets of the
Fund held by it directly to such successor custodian will commence as soon as
such successor is appointed and will continue until completed as aforesaid. If
the Fund does not select a successor custodian within ninety (90) days from the
date of delivery of notice of termination the Bank may, subject to the
provisions of subsection 13(c), deliver the Portfolio Securities and cash of the
Fund held by the Bank to a bank or trust company of its own selection which
meets the requirements of Section 17(f)(1) of the 1940 Act and has a reported
capital, surplus and undivided profits aggregating not less than $2,000,000, to
be held as the property of the Fund under terms similar to those on which they
were held by the Bank, whereupon such bank or trust company so selected by the
Bank will become the successor custodian of such assets of the Fund with the
same effect as though selected by the Board.
(c) Prior to the expiration of ninety (90) days after notice of
termination has been given, the Fund may furnish the Bank with an order of the
Fund advising that a successor custodian cannot be found willing and able to act
upon reasonable and customary terms and that there has been submitted to the
shareholders of the Fund the question of whether the Fund will be liquidated or
will function without a custodian for the assets of the Fund held by the Bank.
In that event the Bank will deliver the Portfolio Securities and cash of the
Fund held by it, subject as aforesaid, in accordance with one of such
alternatives which may be approved by the requisite vote of shareholders, upon
receipt by the Bank of a copy of the minutes of the meeting of shareholders at
which
<PAGE>
<PAGE>
action was taken, certified by the Fund's Secretary and an opinion of
counsel to the Fund in form and content satisfactory to the Bank.
14. Confidentiality. Both parties hereto agree than any non-public
information obtained hereunder concerning the other party is confidential and
may not be disclosed to any other person without the consent of the other party,
except as may be required by applicable law or at the request of a governmental
agency. The parties further agree that a breach of this provision would
irreparably damage the other party and accordingly agree that each of them is
entitled, without bond or other security, to an injunction or injunctions to
prevent breaches of this provision.
15. Notices. Any notice or other instrument in writing authorized or
required by this Agreement to be given to either party hereto will be
sufficiently given if addressed to such party and mailed or delivered to it at
its office at the address set forth below; namely:
(a) In the case of notices sent to the Fund to:
Salomon Brothers Opportunity Fund Inc.
c/o Salomon Brothers
7 World Trade Center
NY, NY 10048
Attention: Alan Mandel
(b) In the case of notices sent to the Bank to:
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
Attention: Hank Joyce
or at such other place as such party may from time to time designate in
writing.
16. Amendments. This Agreement may not be altered or amended, except by
an instrument in writing, executed by both parties, and in the case of the Fund,
such alteration or amendment will be authorized and approved by its Board.
17. Parties. This Agreement will be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that this Agreement will not be assignable by the Fund
without the written consent of the Bank or by the Bank without the written
consent of the Fund, authorized and approved by its Board; and provided further
that termination proceedings pursuant to Section 13 hereof will not be deemed to
be an assignment within the meaning of this provision.
18. Governing Law. This Agreement and all performance hereunder will be
governed by the laws of the Commonwealth of Massachusetts.
<PAGE>
<PAGE>
19. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first written above.
SALOMON BROTHERS
OPPORTUNITY FUND INC.
By: /s/ TANA E. TSELEPIS
.........................
Name: Tana E. Tselepis
Title: Secretary
ATTEST: /s/ Jennifer G. Muzzey
............................
INVESTORS BANK & TRUST COMPANY
By: /s/ HENRY M. JOYCE
.........................
Name: Henry M. Joyce
Title: Director
ATTEST: /s/ Tim Murphy
............................
DATE: 4/23/96
...............................
<PAGE>
<PAGE>
Consent of Independent Accountants
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 20 to the registration
statement on Form N-1A (the 'Registration Statement') of our report dated
October 11, 1996, relating to the financial statements and financial highlights
of The Salomon Brothers Opportunity Fund Inc., which appears in such Statement
of Additional Information, and to the incorporation by reference of our report
into the Prospectus which constitutes part of this Registration Statement. We
also consent to the references to us under the heading 'Independent Accountants'
in such Statement of Additional Information and to the reference to us under the
heading 'Financial Highlights' in such Prospectus.
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
December 24, 1996
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Salomon Brothers Opportunity Fund Inc's
form N-SAR filed for the fiscal year ended August 31, 1996
and is qualified in its entirety by reference to
such Form.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 66,272,939
<INVESTMENTS-AT-VALUE> 141,714,165
<RECEIVABLES> 479,892
<ASSETS-OTHER> 488
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 142,194,545
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 210,380
<TOTAL-LIABILITIES> 210,380
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 60,100,171
<SHARES-COMMON-STOCK> 3,747,743
<SHARES-COMMON-PRIOR> 3,670,611
<ACCUMULATED-NII-CURRENT> 1,432,827
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 5,009,941
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 75,441,226
<NET-ASSETS> 141,984,165
<DIVIDEND-INCOME> 2,870,091
<INTEREST-INCOME> 1,008,923
<OTHER-INCOME> 0
<EXPENSES-NET> 1,652,523
<NET-INVESTMENT-INCOME> 2,226,491
<REALIZED-GAINS-CURRENT> 5,924,655
<APPREC-INCREASE-CURRENT> 6,598,349
<NET-CHANGE-FROM-OPS> 14,749,495
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,749,572
<DISTRIBUTIONS-OF-GAINS> 4,957,121
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 541,164
<NUMBER-OF-SHARES-REDEEMED> 621,760
<SHARES-REINVESTED> 157,728
<NET-CHANGE-IN-ASSETS> 10,747,462
<ACCUMULATED-NII-PRIOR> 955,908
<ACCUMULATED-GAINS-PRIOR> 4,042,407
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,406,443
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,652,523
<AVERAGE-NET-ASSETS> 140,252,449
<PER-SHARE-NAV-BEGIN> 35.75
<PER-SHARE-NII> 0.60
<PER-SHARE-GAIN-APPREC> 3.38
<PER-SHARE-DIVIDEND> 0.48
<PER-SHARE-DISTRIBUTIONS> 1.36
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 37.89
<EXPENSE-RATIO> 1.18
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
<PAGE>
