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SALOMON BROTHERS
OPPORTUNITY FUND INC
PROSPECTUS
DECEMBER 29, 1997
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SALOMON BROTHERS ASSET MANAGEMENT INC
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SALOMON BROTHERS OPPORTUNITY FUND INC
A No-Load Mutual Fund
7 World Trade Center, New York, New York 10048
(800) SALOMON
(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 29, 1997,
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
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
Account Services 17
Capital Stock 17
SALOMON BROTHERS ASSET MANAGEMENT INC -- INVESTMENT MANAGER
SALOMON BROTHERS INC -- DISTRIBUTOR
DECEMBER 29, 1997
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.
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SUMMARY
THE FUND
Salomon Brothers 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 through
First Data Investor Services Group, Inc., a subsidiary of First Data Corporation
('FDISG'), the Fund's transfer agent, Salomon Brothers Inc ('Salomon Brothers'),
the Fund's distributor or 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
regular periodic 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 net capital gain, 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.
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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 .16%
Total Fund Operating Expenses 1.16%
'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 .06% 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 example 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 table
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 years $ 37
After 5 years $ 64
After 10 years $141
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%.
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FINANCIAL HIGHLIGHTS
The following information on selected per share data and ratios for each of the
ten years in the period ended August 31, 1997, 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,
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1997 1996 1995 1994 1993 1992 1991 1990'D' 1989 1988
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value,
beginning of year... $37.89 $35.75 $31.47 $31.91 $27.64 $25.16 $21.06 $28.37 $23.39 $29.53
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net investment
income.............. 0.43 0.60 0.45 0.42 0.57 0.36 0.54 0.60 0.81* 0.56
Net gains (or
losses) on
securities (both
realized and
unrealized)......... 14.46 3.38 5.68 1.48 4.85 2.79 4.205 (6.20) 6.29 (3.00)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from
investment
operations.......... 14.89 3.98 6.13 1.90 5.42 3.15 4.745 (5.60) 7.10 (2.44)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less dividends and
distributions:
Dividends from net
investment income... (0.62) (0.48) (0.37) (0.64) (0.345) (0.50) (0.63) (0.82) (0.54) (0.755)
Distributions from
net realized gain on
investments......... (1.52) (1.36) (1.48) (1.70) (0.805) (0.17) (0.015) (0.89) (1.58) (2.945)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total dividends and
distributions....... (2.14) (1.84) (1.85) (2.34) (1.15) (0.67) (0.645) (1.71) (2.12) (3.70)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end
of year............. $50.64 $37.89 $35.75 $31.47 $31.91 $27.64 $25.16 $21.06 $28.37 $23.39
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Total investment
return based on net
asset value per
share............... +40.5% +11.4% +21.1% +6.4% +20.2% +12.9% +23.2% -20.6% +32.9% -6.1%
Ratios/Supplemental
Data: Net assets,
end of year
(thousands)....... $188,496 $141,984 $131,237 $118,755 $116,607 $101,679 $102,916 $90,049 $119,250 $92,608
Ratio of expenses to
average net
assets.............. 1.16% 1.18% 1.18% 1.22% 1.23% 1.25% 1.30% 1.26% 1.19% 1.20%
Ratio of net
investment income to
average net
assets.............. .95% 1.59% 1.39% 1.29% 1.86% 1.28% 2.31% 2.38% 3.20% 2.29%
Portfolio turnover
rate................ 4% 5% 8% 13% 10% 11% 11% 13% 15% 29%
Average broker
commission rate..... $0.0571 $0.0591 N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
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* 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 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
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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 +40.49%
5 years +19.36%
10 years +12.80%
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, 1997 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.
<TABLE>
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ANNUAL CUMULATIVE
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SALOMON BROTHERS SALOMON BROTHERS
OPPORTUNITY FUND INC OPPORTUNITY FUND INC
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CAPITAL GAINS TOTAL CAPITAL GAINS TOTAL
YEAR ENDED AUGUST 31, REINVESTED RETURN'D' REINVESTED RETURN'D'
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<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
1997.......................... +38.5 +40.5 +1088.7 +1693.5
</TABLE>
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* From commencement of Fund's operations on February 28, 1979.
'D' Assumes the reinvestment of income dividends and capital gain
distributions.
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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;
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 gain and avoiding the tax impact on Fund
shareholders of realizing such gain. This strategy reflects the belief of the
portfolio manager that the Fund's portfolio continues to have long-term growth
potential. As a result of the strategy of retaining unrealized long-term capital
gain, the Fund currently has a substantial amount of net unrealized
appreciation. At August 31, 1997, the amount of such net unrealized appreciation
was $124,120,921, representing approximately 66% of the Fund's net assets. In
light of the reductions in the U.S. long-term capital gain rates, however, the
Fund's portfolio manager may take advantage of selling opportunities if he
believes there are attractive reinvestment opportunities. 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
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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 '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 associ-
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ated 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 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 amount 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. 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. If the Fund is
experiencing a delay in recovering the securities lent and, in the meantime, the
value of such securities has decreased, the Fund could experience a loss.
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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
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.
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MANAGEMENT
The Fund retains SBAM, a wholly-owned subsidiary of Salomon Brothers Holding
Company Inc, which is wholly-owned by Salomon Smith Barney Holdings Inc.
('SSBHI') which is, in turn, wholly-owned by Travelers Group Inc. ('Travelers'),
as its investment manager under an investment management contract. SBAM was
incorporated in 1987 and together with SBAM affiliates in London, Frankfurt,
Tokyo 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. As of October 31, 1997, SBAM and such affiliates managed
approximately $26.6 billion of assets. Michael S. Hyland serves as President of
SBAM. SBAM's business offices are located at 7 World Trade Center, New York,
New York 10048.
Irving G. 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, an
indirect wholly-owned subsidiary of SSBHI.
Subject to policies 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 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, 1997 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.
Salomon Brothers, located at 7 World Trade Center, New York, New York 10048,
serves as the Fund's distributor. Salomon Brothers is a wholly-owned subsidiary
of Salomon Brothers Holding Company Inc. It is also one of the largest
securities dealers in the world and a registered broker-dealer. Salomon
Brothers, along with other broker-dealer subsidiaries of Travelers, makes
markets in securities and provides a broad range of underwriting, research, and
financial advisory services to governments, international corporations, and
institutional investors. Salomon Brothers and other affiliated broker-dealers
from time to time may receive fees from the Fund in connection with the
execution of portfolio transactions on behalf of the Fund. See 'Purchase of
Shares' and 'Redemption of Shares -- Repurchases through Selected Dealers.'
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 administrator is not involved in the investment
decisions made with respect to the Fund. The services provided by Investors Bank
under the Sub-Administration Agreement include certain accounting, clerical and
bookkeeping services,
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Blue Sky reports, 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 .06% 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 or other affiliated brokers 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, Martin Luther King 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'), Salomon Brothers 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.
The minimum initial investment in Fund shares is $1,000 and subsequent
investments may be made in amounts of $100 or more. However, for
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IRAs 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 the account will be receiving regular periodic investments
through programs such as the Automatic Investment Plan. See 'Shareholder
Services.'
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 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.
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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 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
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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 telephone 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
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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, 1997 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 gain (i.e., the excess of the Fund's net realized
long-term capital gain over net realized short-term capital loss) 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 gain. Investors should consider the tax
consequences of buying shares of the Fund prior to the record date of a
distribution because such distribution 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 capital gain net income.
To the 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
15
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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 (which term includes net short-term capital gain) will be taxable to
shareholders at ordinary income rates ('ordinary income dividends'). 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. Distributions of net capital gain designated by the Fund as
'capital gain dividends' will be taxable as long-term capital gain 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 the
case of individual shareholders long-term capital gain attributable to
securities held by the Fund longer than one year, but not longer than 18 months,
are taxed at a maximum rate of 28% and long-term gain attributable to securities
held by the Fund longer than 18 months are taxed at a maximum rate of 20%. Not
later than 60 days after the close of its taxable year, the Fund will provide
its shareholders with a written notice designating the amounts of any ordinary
income dividends or capital gain dividends as well as the portions of its
capital gain dividends that are eligible for the 28% and 20% rates. With respect
to corporate taxpayers, long-term capital gain is currently taxed at the same
Federal income tax rates as ordinary income and short-term capital gain.
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 of shares of the Fund is a taxable event and may result in a gain
or loss. Gain or loss, if any, recognized on the redemption 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. If a shareholder redeems or otherwise
disposes of shares of a Fund before holding them for more than six months, any
loss on the redemption 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 redemption
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 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 payee 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.
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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.
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 numbers 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,
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such number of votes as is equal to the number of full and fractional shares
held by such shareholder. Except as required 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 G. BRILLIANT
President of Salomon Brothers Opportunity Fund Inc
B. ALEXANDER GAGUINE
Fund-raising and electoral campaign consultant
ROSALIND KOCHMAN
Administrator and Counsel,
Brooklyn Eye Surgery Center
IRVING SONNENSCHEIN
Partner in the law firm of Sonnenschein,
Sherman & Deutsch
OFFICERS
IRVING G. BRILLIANT
President
NOEL B. DAUGHERTY
Secretary
JENNIFER G. MUZZEY
Assistant Secretary
ALAN M. MANDEL
Treasurer
JANET S. TOLCHIN
Assistant Treasurer
<PAGE>
<PAGE>
FOR CUSTOMER SERVICE
(800) 446-1013
FOR BROKER/DEALER INQUIRIES
(800) SALOMON
(800) 725-6666
(212) 783-1301
Dial 11 for a representative
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
200 Clarendon Street
Boston, Massachusetts 02116
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
1177 Avenue of the Americas
New York, New York 10036
LEGAL COUNSEL
Simpson Thacher & Bartlett
425 Lexington Avenue
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.
- ---------------------------------------------------
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) SALOMON
TELEPHONES: (800) 725-6666
OR (212) 783-1301 (NEW YORK STATE)
------------------------
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 will achieve its investment objectives.
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 29, 1997 (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 numbers, listed above.
December 29, 1997
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Policies.............................. 3
Limiting Investment Risks........................ 5
Management....................................... 6
Portfolio Transactions........................... 9
Determination of Net Asset Value................. 10
Performance Data................................. 10
Federal Income Taxes............................. 11
<CAPTION>
PAGE
----
<S> <C>
Shareholder Services............................. 12
Custodian and Transfer Agent..................... 13
Independent Accountants.......................... 13
Counsel.......................................... 13
Financial Statements............................. 14
Report of Independent Accountants................ 23
</TABLE>
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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, 1997.
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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<PAGE>
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, 1997, 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, 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
<PAGE>
<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 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 policy or restriction.
5
<PAGE>
<PAGE>
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.
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITION(S) HELD PRINCIPAL OCCUPATION(S) PAST 5 YEARS
- --------------------------------- ----------------------- --------------------------------------------------
<S> <C> <C>
*Irving Brilliant ............... President and Director Director of Salomon Brothers Inc ('Salomon
Age: 79 Brothers'), Director and Portfolio Manager for
SBAM since May 1990.
B. Alexander Gaguine ............ Director Fund-raising and electoral campaign consultant.
834 Walnut Avenue
Santa Cruz, CA 95060
Age: 47
Rosalind A. Kochman ............. Director Administrator and Counsel, Brooklyn Eye Surgery
1301 Avenue J Center.
Brooklyn, New York 11230
Age: 60
Irving Sonnenschein ............. Director Partner in the law firm of Sonnenschein, Sherman &
10 Columbus Circle Deutsch.
New York, New York 10019
Age: 77
Alan M. Mandel .................. Treasurer Director of SBAM and Salomon Brothers since
Age: 40 January 1, 1995; Chief Financial Officer of
Hyperion Capital Management from October 1991 to
December 1994.
Noel B. Daugherty ............... Secretary Employee of SBAM since November 1996. From August
Age: 32 1993 to October 1996, an employee of Chancellor
LGT Asset Management. From October 1989 to
August 1993, an employee of The Dreyfus
Corporation.
Janet S. Tolchin ................ Assistant Treasurer Employee of SBAM since May 1990.
Age: 39
Jennifer G. Muzzey .............. Assistant Secretary Employee of SBAM since June 1994; formerly,
Age: 38 Assistant Vice President of SunAmerica Asset
Management Corp. prior to June 1994.
</TABLE>
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, 1997, directors and officers of the Fund as a group
owned beneficially approximately 1,020,929 shares or approximately 27.6% of
the Fund's outstanding shares.
As of December 2, 1997, to the knowledge of management, the following
persons owned of record or beneficially 5% or more of the Fund's outstanding
shares. Irving Brilliant, a director of the Fund and the Fund's President,
directly and as a trustee of trusts for the benefit of his family and trusts for
the benefit of the Gaguine family (see below), was the record and beneficial
owner of approximately 477,994 shares or approximately 13% of the Fund's
outstanding shares. Mr. Brilliant's wife Benice also serves as a trustee of the
foregoing trusts for the benefit of the Brilliant family and in that capacity,
was the record and beneficial owner of approximately 332,415 shares or
approximately 9% of the Fund's outstanding shares. Mrs. Brilliant disclaims
beneficial ownership of shares owned of record directly by Mr. Brilliant. Mrs.
Brilliant shares the same address as Mr. Brilliant. B. Alexander Gaguine, also
a director of the Fund, directly and as a trustee of trusts for the benefit of
the Gaguine family (the 'Gaguine Trusts'), was the record and beneficial
owner of approximately 441,659 shares or approximately 12% of the Fund's
outstanding shares. In addition, Benito Gaguine, father of B. Alexander and a
former director of the Fund, directly and as a trustee of the Gaguine Trusts
was the record and beneficial owner of approximately 367,233 shares or
approximately 10% of the Fund's outstanding shares. Frances Gaguine, the mother
of B. Alexander and wife of Benito, as a trustee of the Gaguine Trusts, owned of
record and beneficially approximately 363,244 shares or approximately 10% of the
Fund's outstanding shares. Frances Gaguine disclaims beneficial ownership of
shares owned of record directly by Benito Gaguine. The address for Benito and
Frances Gaguine is 8100 Connecticut Avenue, Chevy Chase, Maryland. John
Gaguine, a brother of B. Alexander whose address is 10117 Silver Street,
Juneau, Alaska, directly and as a trustee of the Gaguine Trusts, owned
beneficially approximately 461,943 shares or approximately 13% of the Fund's
outstanding shares. Of such shares, John Gaguine owned of record approximately
460,167 shares or approximately 12% of the Fund's outstanding shares. In
addition, John Gaguine's spouse owned of record and beneficially approximately
490 shares of which he disclaims beneficial ownership. Rosalind Kochman, a
director of the Fund, owned of record and beneficially approximately 55,796
shares or approximately 1% of the Fund's outstanding shares. Dr, Marvin Kochman,
husband of Rosalind Kochman, owned of record and beneficially approximately
260,937 or approximately 7% of the Fund's outstanding shares. Mr. and
Mrs. Kochman each disclaim beneficial ownership of the shares owned of record
directly by the other.
6
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<PAGE>
The following table provides information concerning the compensation paid
during the fiscal year ended August 31, 1997 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 the fiscal year ended August 31,
1997 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(B) $ 1,000 $0 $1,000
Director
B. Alexander Gaguine(C) $ 0 $0 $ 0(1)
Director
Rosalind A. Kochman $ 2,000 $0 $2,000(1)
Director
Irving Sonnenschein $ 2,000 $0 $2,000(1)
Director
</TABLE>
- ------------
(A) The numbers in parentheses indicate the applicable number of investment
company directorships held by that director.
(B) Benito Gaguine, father of B. Alexander Gaguine, resigned as a Director
of the Fund on October 8, 1997.
(C) B. Alexander Gaguine was elected a Director of the Fund on October 13,
1997.
INVESTMENT MANAGER
The Fund retains SBAM to act as its investment manager. SBAM serves as the
investment manager to various individuals, institutions and other investment
companies. On November 28, 1997, Salomon Inc ('Salomon'), the ultimate parent
company of SBAM and Salomon Brothers Inc ('Salomon Brothers'), the Fund's
distributor, merged with and into Smith Barney Holdings Inc., a subsidiary of
Travelers Group Inc. ('Travelers'), to form a new company called Salomon Smith
Barney Holdings Inc. (the 'Transaction'). Upon consummation of the Transaction,
Travelers became the ultimate parent of SBAM and Salomon Brothers, which
continue to serve as the investment adviser and distributor, respectively, to
the Fund. Travelers is a diversified financial services company engaged in
investment services, asset management, consumer finance and life and property
casualty insurance services.
Under certain interpretations, the Transaction might be deemed to have
created an 'assignment,' as defined in the 1940 Act, of: (i) the management
contract with SBAM; and (ii) the distribution agreement with Salomon Brothers,
which, if so interpreted, would have resulted in the termination of such
contract and agreement. Accordingly, the Board approved a new management
contract and new distribution agreement for the Fund which are substantially the
same as the existing contract and agreement and which became effective on
November 28, 1997. The new management agreement will be presented to
stockholders for approval at the Annual Meeting of Stockholders scheduled to
be held on January 14, 1998.
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. 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.
7
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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, 1997, 1996
and 1995 amounted to $1,654,512, $1,406,443 and $1,168,976, 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 60 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.
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
conflicts of interest 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 as distributor pursuant to a distribution
agreement 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.
8
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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
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 transactions 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, 1997, 1996 and 1995 were $27,659, $31,165 and $34,563, respectively.
During the fiscal years ended August 31, 1997, 1996 and 1995, the Fund paid $0,
$120 and $2,000, respectively, in commissions to Salomon Brothers, an affiliated
broker-dealer. Commissions paid to Salomon Brothers for the fiscal year ended
August 31, 1997 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 G. Brilliant, the Fund's President and portfolio manager, is
primarily responsible for the allocation of brokerage transactions.
9
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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 may 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 approximates market value as determined by the
Board of Directors.
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>
10
<PAGE>
<PAGE>
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, 1997 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 gain (the excess of net realized long-term
capital gain over net realized short-term capital loss), if any, that it
distributes to its shareholders, provided that it distributes at least 90% of
its net investment income for the taxable year. All net investment income and
net capital gain 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 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 and (b) 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 ('ordinary income dividends') will be
taxable to shareholders as ordinary income for federal income tax purposes.
Ordinary income dividends received by corporate shareholders will be eligible
for the dividends received deduction to the extent of qualifying dividends
received by the Fund from domestic corporations for the taxable year. A dividend
received by the Fund will not be treated as a qualifying dividend (1) if it has
been received with respect to any share of stock that has been held by the Fund
for less than 46 days during the 90 day period beginning on the date
11
<PAGE>
<PAGE>
which is 45 days before the date on which such share becomes ex-dividend with
respect to such dividend; (2) to the extent that the Fund is under an obligation
to make related payments with respect to positions in substantially similar or
related property; or (3) to the extent the stock on which the dividend is paid
is treated as debt-financed. Moreover, the dividends received deduction may be
disallowed or reduced if the corporate shareholder fails to satisfy the
foregoing requirements with respect to its shares of the Fund. 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 gain that are properly designated by the Fund
('capital gain dividends') will be taxable to shareholders as long-term capital
gain regardless of the length of time the investor has held shares in the Fund.
In the case of individual shareholders, long-term capital gain attributable
to securities held by the Fund longer than one year, but not longer than 18
months are taxed at a maximum rate of 28% and long-term gain attributable to
securities held by the Fund longer than 18 months, are taxed at a maximum rate
of 20%. Not later than 60 days after the close of its taxable year, the Fund
will provide its stockholders with a written notice designating the amounts of
any ordinary income dividends or capital gain dividends as well as the portions
of its capital gain dividends that are eligible for the 28% and 20% rates. If
a shareholder redeems or otherwise disposes of shares of the Fund before
holding them for more than six months, any loss on such redemption or
disposition will be treated as long-term capital loss to the extent of any
capital gain dividends received by the shareholder as designated in a written
notice from the Fund.
SHAREHOLDER SERVICES
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 First Data Investor Services Group, Inc. ('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.
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
12
<PAGE>
<PAGE>
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
200 Clarendon Street, Boston, MA 02116.
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' 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, 1997
COMMON STOCKS -- 90.0% OF NET ASSETS
<TABLE>
<CAPTION>
VALUE
SHARES COST (NOTE 1a)
- ---------- ----------- ------------
<C> <S> <C> <C>
BANKS -- 15.3%
479,488 Bank of New York.................................................... $ 2,693,118 $ 21,397,152
10,000 Bankers Trust NY.................................................... 426,645 1,037,500
50,120 First Chicago NBD................................................... 527,790 3,596,110
5,500 Mercantile Bancorporation........................................... 45,630 379,156
55,000 Popular............................................................. 1,039,445 2,378,750
----------- ------------
4,732,628 28,788,668
----------- ------------
BASIC INDUSTRY -- 7.0%
5,000 ASARCO.............................................................. 157,800 153,750
24,900 Amcast Industrial................................................... 452,423 603,825
5,000 Champion International.............................................. 200,300 295,938
7,000 Citation*........................................................... 70,288 122,500
9,700 Cone Mills*......................................................... 77,270 76,388
6,200 Crown Crafts........................................................ 60,022 78,275
11,000 Deltic Timber....................................................... 167,179 325,188
19,400 Dravo*.............................................................. 206,527 224,313
3,750 Guilford Mills...................................................... 59,213 81,563
5,000 Intercargo.......................................................... 46,500 66,875
9,500 International Shipholding........................................... 162,883 156,156
21,000 Mississippi Chemical................................................ 445,494 455,438
85,500 Monsanto............................................................ 1,050,826 3,756,656
10,000 MotivePower Industries*............................................. 62,125 216,250
18,000 NL Industries*...................................................... 199,350 238,500
8,000 National Processing................................................. 86,293 81,500
11,077 Newmont Mining...................................................... 289,765 468,696
20,000 Rayonier............................................................ 656,903 976,250
4,000 Stone Container..................................................... 70,240 69,000
87,500 TRC Companies*...................................................... 565,847 339,063
34,100 Tecumseh Products, Class A.......................................... 930,235 1,926,650
47,000 Tecumseh Products, Class B.......................................... 2,049,576 2,538,000
----------- ------------
8,067,059 13,250,774
----------- ------------
BIOTECHNOLOGY & DRUGS -- 0.9%
20,000 Genzyme*............................................................ 274,285 562,500
30,800 Medeva -- ADR....................................................... 301,498 440,825
21,375 Pharmacia & Upjohn.................................................. 422,973 728,086
----------- ------------
998,756 1,731,411
----------- ------------
CONSTRUCTION -- 1.1%
26,700 Ameron.............................................................. 526,254 1,560,281
34,050 Liberty Homes, Class A.............................................. 433,000 334,116
24,750 Liberty Homes, Class B.............................................. 325,688 252,141
----------- ------------
1,284,942 2,146,538
----------- ------------
</TABLE>
14
<PAGE>
<PAGE>
SALOMON BROTHERS OPPORTUNITY FUND INC
STATEMENT OF NET ASSETS -- (CONTINUED)
AUGUST 31, 1997
COMMON STOCKS (CONTINUED)
<TABLE>
<CAPTION>
VALUE
SHARES COST (NOTE 1a)
- ---------- ----------- ------------
<C> <S> <C> <C>
CONSUMER GOODS -- 5.4%
35,500 Alexander & Baldwin................................................. $ 169,490 $ 958,500
4,729 Ames Dept Stores, Warrants, Series C, expires 01/31/99*............. 4,729 75,664
10,000 Angeion............................................................. 44,150 51,875
18,165 Archer-Daniels-Midland.............................................. 248,084 392,818
31,500 BJ's Wholesale Club*................................................ 257,773 909,563
19,000 El Chico Restaurants*............................................... 69,419 191,188
31,500 Homebase............................................................ 74,468 248,063
7,200 IBP................................................................. 170,582 165,150
100,000 Philips Electronics N.V............................................. 1,281,995 7,162,500
----------- ------------
2,320,690 10,155,321
----------- ------------
ENERGY -- 8.0%
28,000 Murphy Oil.......................................................... 773,903 1,503,250
268,000 Royal Dutch Petroleum, 5 Guilder.................................... 1,664,599 13,601,000
----------- ------------
2,438,502 15,104,250
----------- ------------
FINANCE -- 11.9%
45,810 American General.................................................... 558,501 2,207,461
120,000 Federal Home Loan Mortgage.......................................... 318,200 3,907,500
60,300 Leucadia National................................................... 234,997 1,922,063
120,500 Loews............................................................... 2,843,477 12,283,469
5,481 NationsBank......................................................... 18,168 325,434
17,093 New Germany Fund.................................................... 155,734 243,575
48,000 Pioneer Group....................................................... 167,500 1,560,000
----------- ------------
4,296,577 22,449,502
----------- ------------
HEALTH CARE -- 1.3%
7,700 Foundation Health Systems, Class A*................................. 110,903 244,956
8,095 Horizon/CMS Healthcare*............................................. 123,392 166,453
37,000 Humana*............................................................. 456,345 871,813
22,077 Wellpoint Health Networks*.......................................... 872,533 1,200,437
----------- ------------
1,563,173 2,483,659
----------- ------------
INSURANCE-LIFE, ACCIDENT & HEALTH -- 4.9%
11,250 American International Group........................................ 440,675 1,061,719
16,800 AmerUs Life Holdings................................................ 318,552 483,000
14,000 Aon................................................................. 225,692 713,125
8,568 Delphi Financial Group, Class A..................................... 136,500 375,386
37,125 Fremont General..................................................... 571,663 1,480,359
5,900 Kansas City Life Insurance.......................................... 293,813 480,850
14,000 Provident Companies................................................. 395,740 911,750
88,000 UNUM................................................................ 540,274 3,630,000
----------- ------------
2,922,909 9,136,189
----------- ------------
</TABLE>
15
<PAGE>
<PAGE>
SALOMON BROTHERS OPPORTUNITY FUND INC
STATEMENT OF NET ASSETS -- (CONTINUED)
AUGUST 31, 1997
COMMON STOCKS (CONTINUED)
<TABLE>
<CAPTION>
VALUE
SHARES COST (NOTE 1a)
- ---------- ----------- ------------
<C> <S> <C> <C>
INSURANCE-PROPERTY & CASUALTY -- 20.5%
15,840 Allmerica Financial................................................. $ 691,020 $ 655,380
36,000 CNA Financial*...................................................... 1,354,958 4,083,750
328,000 Chubb............................................................... 2,802,937 21,935,000
40,000 Merchants Group..................................................... 600,000 705,000
30,000 Old Republic International.......................................... 604,723 1,078,125
220,750 Orion Capital....................................................... 1,613,477 9,381,875
8,000 Reliance Group Holdings............................................. 65,480 98,000
18,500 Trenwick Group...................................................... 304,863 672,938
----------- ------------
8,037,458 38,610,068
----------- ------------
REAL ESTATE -- 2.7%
63,850 Forest City Enterprises, Class A.................................... 1,007,463 3,435,928
31,050 Forest City Enterprises, Class B, Conv.............................. 364,301 1,666,997
----------- ------------
1,371,764 5,102,925
----------- ------------
TECHNOLOGY -- 2.1%
8,500 Apple Computer*..................................................... 319,750 184,875
4,000 First Data.......................................................... 152,120 164,250
31,000 Global Industrial Technologies...................................... 284,013 587,063
10,000 Inso*............................................................... 314,250 138,750
24,000 Intel............................................................... 99,250 2,211,000
10,000 National Semiconductor*............................................. 166,850 342,500
10,802 Silicon Graphics*................................................... 259,836 296,380
----------- ------------
1,596,069 3,924,818
----------- ------------
TELECOMMUNICATIONS/MEDIA -- 0.4%
20,738 News Corporation -- ADR............................................. 155,595 313,655
4,000 Salient 3 Communications, Class A................................... 44,800 60,250
5,800 Time Warner......................................................... 123,185 298,700
----------- ------------
323,580 672,605
----------- ------------
TRANSPORTATION -- 8.5%
39,600 AMR*................................................................ 1,828,141 3,989,700
114,000 APL................................................................. 1,009,244 3,648,000
52,000 Airborne Freight.................................................... 515,758 2,561,000
33,000 Canadian Pacific.................................................... 528,285 963,188
42,000 General Dynamics.................................................... 928,543 3,344,250
9,000 Lockheed Martin..................................................... 308,520 933,188
23,100 Overseas Shipholding Group.......................................... 369,929 567,394
----------- ------------
5,488,420 16,006,720
----------- ------------
TOTAL COMMON STOCKS................................................. $45,442,527 $169,563,448
----------- ------------
----------- ------------
</TABLE>
16
<PAGE>
<PAGE>
SALOMON BROTHERS OPPORTUNITY FUND INC
STATEMENT OF NET ASSETS -- (CONTINUED)
AUGUST 31, 1997
COMMON STOCKS (CONTINUED)
CORPORATE SHORT-TERM NOTES -- 10.1%
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1a)
- ---------- ------------
<C> <S> <C> <C>
$6,285,000 American Express Credit, 5.50%, due 09/02/97...................................... $ 6,289,805
6,343,000 Chevron Oil Finance, 5.52%, due 09/03/97.......................................... 6,346,894
6,419,000 Ford Motor Credit, 5.57%, due 09/04/97............................................ 6,421,983
------------
19,058,682
TOTAL CORPORATE SHORT-TERM NOTES.................................................. ------------
CASH, RECEIVABLES AND OTHER ASSETS -- 0.1%............................ $ 139,559
LIABILITIES -- (0.2%)................................................. (265,887) (126,328)
--------- ------------
NET ASSETS -- 100.0% -- equivalent to $50.64, offering and
redemption price per share on 3,722,380 shares of
$.01 par value capital stock outstanding;
15,000,000 shares authorized.................................................... $188,495,802
------------
------------
NET ASSETS CONSIST OF:
Capital stock..................................................................... $ 37,224
Additional paid-in capital........................................................ 59,086,552
Undistributed net investment income............................................... 729,573
Undistributed net realized gain................................................... 4,521,532
Net unrealized appreciation on investments........................................ 124,120,921
------------
NET ASSETS........................................................................ $188,495,802
------------
------------
</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, 1997
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
INCOME
Dividends (net of foreign withholding taxes of $61,091)........................................... $ 2,526,225
Interest.......................................................................................... 967,639
-----------
3,493,864
EXPENSES
Management fee....................................................................... $1,654,512
Custodian............................................................................ 57,950
Shareholder services................................................................. 52,525
Legal................................................................................ 44,400
Audit and tax return preparation fees................................................ 44,325
Printing............................................................................. 34,500
Registration and filing fees......................................................... 13,400
Directors' fees and expenses......................................................... 5,000
Other................................................................................ 18,000 1,924,612
---------- -----------
Net investment income............................................................................. 1,569,252
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments.................................................................. 5,082,896
Increase in net unrealized appreciation on investments............................................ 48,679,695
-----------
Net realized gain and increase in net unrealized appreciation on investments...................... 53,762,591
-----------
Net increase in net assets resulting from operations.............................................. $55,331,843
-----------
-----------
</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,
1997 1996
------------ ------------
<S> <C> <C>
OPERATIONS
Net investment income............................................................ $ 1,569,252 $ 2,226,491
Net realized gain on investments................................................. 5,082,896 5,924,655
Increase in net unrealized appreciation on investments........................... 48,679,695 6,598,349
------------ ------------
Net increase in net assets resulting from operations............................. 55,331,843 14,749,495
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income............................................................ (2,272,506) (1,749,572)
Net realized gain on investments................................................. (5,571,305) (4,957,121)
------------ ------------
(7,843,811) (6,706,693)
------------ ------------
CAPITAL SHARE TRANSACTIONS
Proceeds from sales of 187,581 and 541,164 shares, respectively.................. 8,167,100 20,104,930
Net asset value of 149,980 and 157,728 shares, respectively, issued in
reinvestment of net investment income and net realized gain distributions...... 6,282,472 5,716,069
Payment for redemption of 362,924 and 621,760 shares, respectively............... (15,425,967) (23,116,339)
------------ ------------
Change in net assets resulting from capital share transactions, representing net
decrease of 25,363 and net increase of 77,132 shares, respectively............. (976,395) 2,704,660
------------ ------------
Total increase in net assets..................................................... 46,511,637 10,747,462
NET ASSETS
Beginning of year................................................................ 141,984,165 131,236,703
------------ ------------
End of year (includes undistributed net investment income of $729,573 and
$1,432,827, respectively)...................................................... $188,495,802 $141,984,165
------------ ------------
------------ ------------
</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, 1997 amounted to $37,239.
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, 1997 was $162,261.
20
<PAGE>
<PAGE>
SALOMON BROTHERS OPPORTUNITY FUND INC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. PORTFOLIO ACTIVITY
The cost of securities purchased and proceeds from securities sold
(excluding corporate short-term notes) during the year ended August 31, 1997
aggregated $5,917,882 and $10,724,423, respectively.
Cost of securities held (excluding corporate short-term notes) on August
31, 1997 for Federal income tax purposes was $45,464,824. As of August 31, 1997,
gross unrealized appreciation and depreciation, based on cost for Federal income
tax purposes, amounted to $124,866,978 and $768,354, respectively, resulting in
net unrealized appreciation of $124,098,624.
5. EVENTS SUBSEQUENT TO AUGUST 31, 1997
On September 24, 1997, Travelers Group ('Travelers') and Salomon Inc
('Salomon'), the ultimate parent company of SBAM, announced their agreement (the
'Transaction') to merge Salomon with and into Smith Barney Holdings Inc., a
subsidiary of Travelers, to form a new company expected to be called Salomon
Smith Barney Holdings Inc. Travelers is a diversified financial services company
engaged in investment services, asset management, consumer finance and life and
property casualty insurance services.
The Transaction is expected to be completed by the end of November 1997,
subject to a number of conditions, including the receipt of U.S. and foreign
regulatory approvals and the approval of Salomon stockholders. Upon consummation
of the Transaction, Travelers will become the ultimate parent of SBAM, which
will continue to serve as investment adviser to the Fund.
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,
---------------------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of year.................. $37.89 $35.75 $31.47 $31.91 $ 27.64
------ ------ ------ ------ -------
Net investment income............................... 0.43 0.60 0.45 0.42 0.57
Net gains (or losses) on securities (both realized
and unrealized)................................... 14.46 3.38 5.68 1.48 4.85
------ ------ ------ ------ -------
Total from investment operations............... 14.89 3.98 6.13 1.90 5.42
------ ------ ------ ------ -------
Less dividends and distributions:
Dividends from net investment income................ (0.62) (0.48) (0.37) (0.64) (0.345)
Distributions from net realized gain on
investments....................................... (1.52) (1.36) (1.48) (1.70) (0.805)
------ ------ ------ ------ -------
Total dividends and distributions.............. (2.14) (1.84) (1.85) (2.34) (1.15)
------ ------ ------ ------ -------
Net asset value, end of year............................. $50.64 $37.89 $35.75 $31.47 $ 31.91
------ ------ ------ ------ -------
------ ------ ------ ------ -------
Total investment return based on net asset value per
share.................................................. +40.5% +11.4% +21.1% +6.4% +20.2%
Ratios/Supplemental Data:
Net assets, end of year (thousands)................. $188,496 $141,984 $131,237 $118,755 $116,607
Ratio of expenses to average net assets............. 1.16% 1.18% 1.18% 1.22% 1.23%
Ratio of net investment income to average net
assets............................................ .95% 1.59% 1.39% 1.29% 1.86%
Portfolio turnover rate.................................. 4% 5% 8% 13% 10%
Average broker commission rate........................... $0.0571 $0.0591 N/A N/A N/A
</TABLE>
See accompanying notes to financial statements.
22
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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, 1997, 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, 1997 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PRICE WATERHOUSE LLP
New York, New York
October 10, 1997
23
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