UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-2884
Salomon Brothers Opportunity Fund Inc
(Exact name of registrant as specified in charter)
125 Broad Street, New York, NY 10004
(Address of principal executive offices) (Zip code)
Robert I. Frenkel, Esq.
Salomon Brothers Asset Management Inc
300 First Stamford Place
Stamford, CT 06902
(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 725-6666
Date of fiscal year end: August 31
Date of reporting period: February 29, 2004
ITEM 1. REPORT TO STOCKHOLDERS.
The Semi-Annual Report to Stockholders is filed herewith.
S A L O M O N B R O T H E R S O P P O R T U N I T Y F U N D I N C
Letter from the Chairman
Dear Shareholder,
We encourage you to read this semi-annual report for the Salomon Brothers
Opportunity Fund Inc in full. A detailed summary of the fund's performance can
be found in the appropriate sections that follow. We hope you find this report
to be useful and informative.
Sincerely,
/s/Irving G. Brilliant
Irving G. Brilliant
Chairman
March 11, 2004
S A L O M O N B R O T H E R S O P P O R T U N I T Y F U N D I N C
Manager Overview
MARKET OVERVIEW
The six-month period ended February 29, 2004 was a strong one for most equity
markets. After uncertainty leading up to the war in Iraq in February and March
2003, stock markets embarked on a sustained rise that remained intact through
the beginning of 2004.
The economy also showed general signs of improvement. The problems associated
with the collapse of the late 1990s "bubble" -- namely, too much debt and too
much capacity in certain industries -- appear to have been overcome. U.S.
businesses began to increase their level of capital spending after a severe
contraction in 2001 and 2002. So far, the acceleration in growth has not ignited
any pickup in inflation. New federal tax legislation also provided a significant
near-term tax cut for customers, businesses and investors while key interest
rates continued to hover near record lows. These factors, among others,
contributed to a very broad based stock market rally.
Performance Review
Within this environment, the fund performed as follows. For the six months ended
February 29, 2004, the fund returned 13.58%. The fund underperformed its
unmanaged benchmark, the S&P 500 Index, /i/ which returned 14.59% for the same
period. The fund also underperformed its Lipper multi-cap value funds category
average, which returned 16.65% for the same period. /1/ The fund's cash position
during a time in which the S&P 500 Index advanced, its underweighting of the
telecommunications services sector, and lack of exposure to the utilities
industry contributed to its underperformance relative to the S&P 500 Index.
PERFORMANCE SNAPSHOT
AS OF FEBRUARY 29, 2004
(unaudited)
6 Months
Salomon Brothers Opportunity Fund Inc. 13.58%
S&P 500 Index 14.59%
Lipper Multi-Cap Value Funds Category Average /1/ 16.65%
The performance shown represents past performance. Past performance is no
guarantee of future results and current performance may be higher or lower than
the performance shown above. Principal value and investment returns will
fluctuate and investors' shares, when redeemed, may be worth more or less than
their original cost.
The fund's return assumes the reinvestment of income dividends and capital gains
distributions at net asset value and the deduction of all fund expenses. Returns
have not been adjusted to include deduction of taxes that a shareholder would
pay on fund distributions.
All index performance reflects no deduction for fees, expenses or taxes. The S&P
500 Index is a market capitalization-weighted index of 500 widely held common
stocks. Please note that an investor cannot invest directly in an index.
1 Lipper, Inc. is a major independent mutual-fund tracking organization. Returns
are based on the six-month period ended February 29, 2004, calculated among
the 503 funds in the fund's Lipper category including the reinvestment of
dividends and capital gains, if any, and excluding sales charges.
S A L O M O N B R O T H E R S O P P O R T U N I T Y F U N D I N C
Information About Your Fund
In recent months several issues in the mutual fund industry have come under the
scrutiny of federal and state regulators. The fund's Adviser and some of its
affiliates have received requests for information from various government
regulators regarding market timing, late trading, fees and other mutual fund
issues in connection with various investigations. The regulators appear to be
examining, among other things, the fund's response to market timing and
shareholder exchange activity, including compliance with prospectus disclosure
related to these subjects. The fund has been informed that the Adviser and its
affiliates are responding to those information requests, but are not in a
position to predict the outcome of these requests and investigations.
As always, thank you for your confidence in our stewardship of your assets. We
look forward to helping you continue to meet your financial goals.
Sincerely,
/s/ George J. Williamson
George J. Williamson
Investment Officer
March 11, 2004
The information provided is not intended to be a forecast of future events, a
guarantee of future results or investment advice. Views expressed may differ
from those of the firm as a whole.
Portfolio holdings and breakdowns are as of February 29, 2004 and are subject to
change. Please refer to pages 4 through 7 for a list and percentage breakdown of
the fund's holdings.
RISKS: Investments in small- and medium-capitalization companies may involve a
higher degree of risk and volatility than investments in larger, more
established companies. The fund may invest in high yield and foreign securities,
including those in emerging markets, which involve risks beyond those inherent
in higher-rated and domestic investments. High yield bonds involve greater
credit and liquidity risks than investment grade bonds. Investing in foreign
securities is subject to certain risks not associated with domestic investing,
such as currency fluctuations and changes in political and economic conditions.
These risks are magnified in emerging or developing markets. The fund may use
derivatives, such as options and futures, which can be illiquid, may
disproportionately increase losses, and have a potentially large impact on fund
performance.
All index performance reflects no deduction for fees, expenses or taxes. Please
note that an investor cannot invest directly in an index.
i The S&P 500 Index is a market capitalization-weighted index of 500 widely held
common stocks.
S A L O M O N B R O T H E R S O P P O R T U N I T Y F U N D I N C
Schedule of Investments (unaudited)
February 29, 2004
SHARES SECURITY+ VALUE
- --------------------------------------------------------------------------------
Common Stock -- 87.9%
Consumer Discretionary -- 8.4%
FOOD SERVICES -- 0.4%
96,000 FHC Corp. (a)(b)........................................ $ 600,000
----------
HOTELS, RESTAURANTS & LEISURE -- 0.1%
7,700 Fairmount Hotels & Resorts, Inc......................... 197,351
----------
HOUSEHOLD DURABLES -- 7.3%
337,810 Koninklijke (Royal) Philips Electronics N.V., ADR....... 10,276,180
Liberty Homes, Inc.:
15,950 Class A Shares ....................................... 120,024
23,850 Class B Shares ....................................... 174,105
----------
10,570,309
----------
MEDIA -- 0.6%
10,600 News Corp. Ltd., ADR.................................... 346,938
31,200 Time Warner Inc. (a) ................................... 538,200
----------
885,138
----------
Total Consumer Discretionary............................ 12,252,798
----------
Energy -- 11.8%
ENERGY EQUIPMENT & SERVICES -- 0.4%
23,400 Diamond Offshore Drilling, Inc.......................... 585,234
----------
OIL & GAS -- 11.4%
5,788 Encana Corp............................................. 251,489
61,500 Murphy Oil Corp. ....................................... 3,857,895
249,400 Royal Dutch Petroleum Co., ADR ......................... 12,367,745
----------
16,477,129
----------
Total Energy............................................ 17,062,363
----------
Financials -- 41.6%
BANKS -- 14.7%
468,376 The Bank of New York Co., Inc........................... 15,456,408
129,600 Popular, Inc............................................ 5,806,080
----------
21,262,488
----------
DIVERSIFIED FINANCIALS -- 2.0%
48,000 Freddie Mac............................................. 2,972,160
----------
SEE NOTES TO FINANCIAL STATEMENTS.
PAGE 4
S A L O M O N B R O T H E R S O P P O R T U N I T Y F U N D I N C
Schedule of Investments (unaudited) (continued)
February 29, 2004
SHARES SECURITY+ VALUE
- --------------------------------------------------------------------------------
INSURANCE -- 15.2%
185,500 The Chubb Corp.......................................... $13,166,790
106,086 CNA Financial Corp. (a)................................. 2,917,365
50,900 Leucadia National Corp.................................. 2,646,800
9,700 Loews Corp.............................................. 584,813
40,000 Merchants Group, Inc.................................... 989,400
72,100 Old Republic International Corp......................... 1,701,560
-----------
22,006,728
-----------
REAL ESTATE -- 9.7%
Forest City Enterprises, Inc.:
166,050 Class A Shares........................................ 8,842,163
95,150 Class B Shares, Convertible (c)....................... 5,090,525
5,800 Harbor Global Co. Ltd................................... 62,350
-----------
13,995,038
-----------
Total Financials........................................ 60,236,414
-----------
Healthcare -- 6.2%
HEALTHCARE PROVIDERS & SERVICES -- 3.8%
11,500 Health Net, Inc. (a).................................... 317,400
26,000 Humana, Inc. (a)........................................ 569,920
42,354 WellPoint Health Networks Inc. (a)...................... 4,606,845
-----------
5,494,165
-----------
PHARMACEUTICALS -- 2.4%
23,100 Johnson & Johnson....................................... 1,245,321
60,864 Pfizer, Inc............................................. 2,230,665
-----------
3,475,986
-----------
Total Healthcare........................................ 8,970,151
-----------
Industrials -- 12.6%
AEROSPACE & DEFENSE -- 4.6%
67,300 General Dynamics Corp................................... 6,199,676
11,500 Lockheed Martin Corp.................................... 532,220
-----------
6,731,896
-----------
AIR FREIGHT & COURIERS -- 0.4%
70,300 ABX Air, Inc. (a)....................................... 516,705
-----------
AIRLINES -- 0.6%
57,000 AMR Corp. (a)........................................... 866,400
-----------
COMMERCIAL SERVICES & SUPPLIES -- 1.8%
6,700 National Processing Inc. (a)............................ 132,660
8,934 Sabre Holdings Corp..................................... 202,712
113,050 TRC Cos. Inc. (a)....................................... 2,328,830
-----------
2,664,202
-----------
SEE NOTES TO FINANCIAL STATEMENTS.
PAGE 5
S A L O M O N B R O T H E R S O P P O R T U N I T Y F U N D I N C
Schedule of Investments (unaudited) (continued)
February 29, 2004
SHARES SECURITY+ VALUE
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 2.4%
Tecumseh Products Co.:
38,500 Class A Shares........................................ $ 1,733,655
39,200 Class B Shares........................................ 1,711,080
-----------
3,444,735
-----------
INDUSTRIAL CONGLOMERATES -- 1.3%
48,200 General Electric Co..................................... 1,567,464
9,103 Tyco International Ltd.................................. 260,073
-----------
1,827,537
-----------
MARINE -- 1.5%
34,000 Alexander & Baldwin, Inc................................ 1,154,300
7,700 CP Ships Ltd............................................ 140,370
22,700 Overseas Shipholding Group, Inc......................... 814,930
-----------
2,109,600
-----------
Total Industrials....................................... 18,161,075
-----------
Information Technology -- 2.3%
COMPUTERS & PERIPHERALS -- 1.3%
20,000 Hewlett Packard Co...................................... 454,200
14,400 International Business Machines Corp.................... 1,389,600
-----------
1,843,800
-----------
SEMICONDUCTOR EQUIPMENT & PRODUCTS -- 0.3%
11,500 National Semiconductor Corp. (a)........................ 452,640
-----------
SOFTWARE -- 0.7%
38,500 Microsoft Corp. ........................................ 1,020,250
-----------
Total Information Technology............................ 3,316,690
-----------
Materials -- 4.8%
CHEMICALS -- 0.5%
6,250 Kronos Worldwide Inc.................................... 201,563
12,221 Monsanto Co............................................. 403,782
12,500 NL Industries, Inc...................................... 187,875
-----------
793,220
-----------
CONSTRUCTION MATERIALS -- 2.4%
47,600 Ameron International Corp............................... 1,841,644
40,300 Lafarge North America, Inc.............................. 1,659,554
-----------
3,501,198
-----------
SEE NOTES TO FINANCIAL STATEMENTS.
PAGE 6
S A L O M O N B R O T H E R S O P P O R T U N I T Y F U N D I N C
Schedule of Investments (unaudited) (continued)
February 29, 2004
SHARES SECURITY+ VALUE
- --------------------------------------------------------------------------------
METALS & MINING -- 0.2%
7,777 Newmont Mining Corp..................................... $ 337,911
-----------
PAPER & FOREST PRODUCTS -- 1.7%
55,760 Rayonier Inc............................................ 2,401,026
-----------
Total Materials......................................... 7,033,355
-----------
Telecommunications -- 0.2%
DIVERSIFIED TELECOMMUNICATIONS SERVICES -- 0.2%
5,800 Verizon Communications, Inc............................. 222,314
-----------
Total Common Stock (Cost -- $30,597,420)................ 127,255,160
-----------
FACE
AMOUNT
- ---------
Corporate Bonds -- 0.2%
ELECTRIC/GAS -- 0.2%
$ 300,000 Pacific Gas & Electric Co., Series 93-G,
6.250% due 3/1/04
(Cost -- $300,000)................................. 300,000
-----------
Total Long-Term Investments (Cost -- $30,897,420)..... 127,555,160
-----------
Corporate Short-Term Notes -- 11.9%
3,992,000 EOG Resources, 1.080% due 3/1/04...................... 3,992,000
4,803,000 Parker Hannifin Corp., 1.010% due 3/9/04.............. 4,801,922
3,601,000 Praxair Inc., 1.050% due 3/8/04....................... 3,600,265
4,796,000 Volkswagen of America, 1.020% due 3/5/04.............. 4,795,456
------------
Total Corporate Short-Term Notes (Cost -- $17,189,643) 17,189,643
------------
Total Investments -- 100.0% (Cost -- $48,087,063*).... $144,744,803
------------
- ------------------
+ Reduced by redemptions-in-kind (Note 6).
(a) Non-income producing security.
(b) Security is valued in accordance with fair valuation procedures.
(c) Convertible into Forest City Enterprises Inc., Class A Shares.
* Aggregate cost for Federal income tax purposes is substantially the same.
Abbreviation used in this schedule:
-----------------------------------
ADR -- American Depositary Receipt
SEE NOTES TO FINANCIAL STATEMENTS.
PAGE 7
S A L O M O N B R O T H E R S O P P O R T U N I T Y F U N D I N C
Statement of Assets and Liabilities (unaudited)
February 29, 2004
ASSETS:
Investments, at value (cost -- $30,897,420)..................... $ 127,555,160
Corporate short-term notes, at amortized cost................... 17,189,643
Cash............................................................ 310
Dividends and interest receivable............................... 97,722
------------
TOTAL ASSETS.................................................... 144,842,835
------------
LIABILITIES:
Payable for securities purchased................................ 452,600
Payable for Fund shares reacquired.............................. 75,780
Management fee payable.......................................... 59,061
Accrued expenses................................................ 25,621
------------
TOTAL LIABILITIES............................................... 613,062
------------
TOTAL NET ASSETS.................................................. $144,229,773
============
NET ASSETS:
Par value of capital shares ($0.01 par value,
15,000,000 shares authorized;
3,286,669 shares outstanding)................................. $ 32,867
Capital paid in excess of par value............................. 44,180,799
Undistributed net investment income............................. 419,749
Accumulated net realized gain from investment transactions...... 2,938,618
Net unrealized appreciation of investments...................... 96,657,740
------------
TOTAL NET ASSETS.................................................. $144,229,773
============
NET ASSET VALUE, PER SHARE ($144,229,773 / 3,286,669 shares
outstanding).............................................. $43.88
======
SEE NOTES TO FINANCIAL STATEMENTS.
PAGE 8
S A L O M O N B R O T H E R S O P P O R T U N I T Y F U N D I N C
Statement of Operations (unaudited)
For the Six Months Ended February 29, 2004
INVESTMENT INCOME:
Dividends ....................................................... $ 1,300,247
Interest (Note 4)................................................ 150,910
Less: Foreign withholding tax.................................... (7,543)
-----------
TOTAL INVESTMENT INCOME.......................................... 1,443,614
-----------
EXPENSES:
Management fee (Note 2).......................................... 538,627
Legal fees....................................................... 50,299
Audit and tax services........................................... 25,000
Blue sky......................................................... 15,370
Transfer agency services......................................... 14,151
Shareholder communications....................................... 11,977
Directors' fees.................................................. 11,041
Custody.......................................................... 4,975
Other............................................................ 328
-----------
TOTAL EXPENSES................................................... 671,768
-----------
NET INVESTMENT INCOME.............................................. 771,846
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FOREIGN CURRENCIES (NOTES 3 AND 6):
Realized Gain From:
Investment transactions ....................................... 3,086,715
Foreign currency transactions.................................. 9
-----------
NET REALIZED GAIN................................................ 3,086,724
-----------
Change in Net Unrealized Appreciation of Investments:
Beginning of period............................................ 82,337,594
End of period.................................................. 96,657,740
-----------
INCREASE IN NET UNREALIZED APPRECIATION.......................... 14,320,146
-----------
NET GAIN ON INVESTMENTS AND FOREIGN CURRENCIES..................... 17,406,870
-----------
INCREASE IN NET ASSETS FROM OPERATIONS............................. $18,178,716
===========
SEE NOTES TO FINANCIAL STATEMENTS.
PAGE 9
S A L O M O N B R O T H E R S O P P O R T U N I T Y F U N D I N C
Statements of Changes in Net Assets
For the Six Months Ended February 29, 2004 (unaudited)
and the Year Ended August 31, 2003
2004 2003
- --------------------------------------------------------------------------------
OPERATIONS:
Net investment income......................... $ 771,846 $ 1,166,689
Net realized gain............................. 3,086,724 9,181,489
Increase (decrease) in net unrealized
appreciation ............................... 14,320,146 (7,710,223)
------------ ------------
INCREASE IN NET ASSETS FROM OPERATIONS........ 18,178,716 2,637,955
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income......................... (1,200,206) (701,596)
Net realized gains............................ (8,285,776) (4,812,573)
------------ -------------
DECREASE IN NET ASSETS FROM
DISTRIBUTIONS TO SHAREHOLDERS............... (9,485,982) (5,514,169)
------------ -------------
FUND SHARE TRANSACTIONS (NOTES 5 AND 6):
Net proceeds from sale of shares.............. 401,412 1,310,952
Net asset value of shares issued for
reinvestment of dividends................... 4,479,096 3,492,308
Cost of shares reacquired..................... (14,997,547) (16,547,404)
------------ ------------
DECREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS..................... (10,117,039) (11,744,144)
----------- ------------
DECREASE IN NET ASSETS.......................... (1,424,305) (14,620,358)
NET ASSETS:
Beginning of period........................... 145,654,078 160,274,436
------------ ------------
END OF PERIOD*................................ $144,229,773 $145,654,078
============ ============
* Includes undistributed net investment
income of: ................................. $419,749 $848,100
============ ============
SEE NOTES TO FINANCIAL STATEMENTS.
PAGE 10
S A L O M O N B R O T H E R S O P P O R T U N I T Y F U N D I N C
Notes to Financial Statements (unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
Salomon Brothers Opportunity Fund Inc ("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 accounting principles generally
accepted in the United States of America ("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 for which
market quotations are available are valued at the official closing price. If
there is no official closing price, the securities are valued at the last sale
price or, if there have been no sales that day, at the mean of the current bid
and asked prices which represents the current value of the security.
Over-the-counter securities are valued at the mean of the current bid and asked
prices. If no quotations are readily available (as may be the case for
securities of limited marketability), or if "restricted" securities are being
valued, such portfolio securities and other assets are valued at fair value
determined pursuant to procedures established by the Board of Directors.
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 currencies 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 securities with less than 60 days remaining
to maturity when acquired by the Fund are valued at amortized cost, which
approximates market value.
(B) FEDERAL INCOME TAXES. The Fund has complied and intends to continue to
comply with the provisions of the Internal Revenue Code of 1986, as amended,
applicable to regulated investment companies, and to distribute substantially
all of its taxable income and capital gains, if any, 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. 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
PAGE 11
S A L O M O N B R O T H E R S O P P O R T U N I T Y F U N D I N C
Notes to Financial Statements (unaudited) (continued)
excess of net investment income and distributions in excess of net realized
capital gains. To the extent they exceed net investment income and net realized
capital gains for tax purposes, they are reported as tax return of capital.
(D) YEAR END TAX RECLASSIFICATIONS. The character of income and gains to be
distributed are determined in accordance with income tax regulations which may
differ from GAAP.
(E) 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. MANAGEMENT FEE AND OTHER TRANSACTIONS
The Fund retains Salomon Brothers Asset Management Inc ("SBAM"), an indirect
wholly-owned subsidiary of Citigroup Inc. ("Citigroup"), to act as investment
manager of the Fund, subject to the supervision by the Board of Directors of the
Fund. The management fee is payable monthly at an annual rate of 0.75% of the
Fund's average daily net assets. Prior to October 1, 2003 the Fund paid SBAM a
management fee at an annual rate of 1.00% of the Fund's average daily net
assets. SBAM has delegated certain administrative responsibilities to Smith
Barney Fund Management LLC ("SBFM"), another indirect wholly-owned subsidiary of
Citigroup, pursuant to a Sub-Administration Agreement between SBAM and SBFM.
SBFM has also entered into an agreement with State Street Bank &Trust ("SSB&T")
for the performance of certain Fund administrative functions. SBAM pays SBFM a
fee calculated daily and paid monthly, at an annual rate of 0.05% of the Fund's
average daily net assets and SBFM pays SSB&T out of this fee.
Citigroup Global Markets Inc., another indirect wholly-owned subsidiary of
Citigroup and an affiliate of SBAM, acts as the Fund's distributor.
Certain officers and/or directors of the Fund are also officers and/or directors
of SBAM.
The Fund has a concentration of several shareholders who may be a related party,
holding a significant percentage of shares outstanding. Investment activities of
these shareholders could have a material impact on the Fund.
3. PORTFOLIO ACTIVITY
During the six months ended February 29, 2004, the aggregate cost of purchases
and proceeds from sales of investments (including maturities of long-term
investments, but excluding short-term investments) were as follows:
Purchases $3,020,267
==========
Sales $ --
==========
PAGE 12
S A L O M O N B R O T H E R S O P P O R T U N I T Y F U N D I N C
Notes to Financial Statements (unaudited) (continued)
At February 29, 2004, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
Gross unrealized appreciation ................................ $97,198,577
Gross unrealized depreciation ................................ (540,837)
-----------
Net unrealized appreciation .................................. $96,657,740
===========
4. LENDING OF PORTFOLIO SECURITIES
The Fund has an agreement with its custodian whereby the custodian may lend
securities owned by the Fund to brokers, dealers and other financial
organizations, and receives a lenders fee. Fees earned by the Fund on securities
lending are recorded in interest income. Loans of securities by the Fund are
collateralized by cash, U.S. government securities or high quality money market
instruments that are maintained at all times in an amount at least equal to the
current market value of the loaned securities, plus a margin which may vary
depending on the type of securities loaned. The Fund maintains exposure for the
risk of any losses in the investment of amounts received as collateral.
At February 29, 2004, the Fund did not have any securities on loan.
Income earned by the Fund from securities lending for the six months ended
February 29, 2004 was $1,870.
5. SHARES OF CAPITAL STOCK
At February 29, 2004, the Fund had 15,000,000 shares of capital stock authorized
with a par value of $0.01 per share. Transactions in shares of the Fund were as
follows:
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 2004 AUGUST 31, 2003
--------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
------- -------- ------- ------------
Shares sold................... 9,368 $ 401,412 34,685 $ 1,310,952
Shares issued on reinvestment. 108,322 4,479,096 92,610 3,492,308
Shares reacquired............. (354,177) (14,997,547) (432,592) (16,547,404)
------- ------------ ------- ------------
Net Decrease................. (236,487) $(10,117,039) (305,297) $(11,744,144)
======= ============ ======= ============
6. REDEMPTIONS-IN-KIND
The Fund had redemptions-in-kind with total proceeds in the amount of
$4,713,683. The net realized gains on these redemptions-in-kind amounted to
$3,086,732, which will not be realized for tax purposes.
PAGE 13
S A L O M O N B R O T H E R S O P P O R T U N I T Y F U N D I N C
Notes to Financial Statements (unaudited) (continued)
7. ADDITIONAL INFORMATION
The Fund has received the following information from Citigroup Asset Management
("CAM"), the Citigroup business unit which includes the Fund's Investment
Manager and other investment advisory companies, all of which are indirect,
wholly-owned subsidiaries of Citigroup. CAM is reviewing its entry, through an
affiliate, into the transfer agent business in the period 1997-1999. As CAM
currently understands the facts, at the time CAM decided to enter the transfer
agent business, CAM sub-contracted for a period of five years certain of the
transfer agency services to a third party and also concluded a revenue guarantee
agreement with this sub-contractor providing that the sub-contractor would
guarantee certain benefits to CAM or its affiliates (the "Revenue Guarantee
Agreement"). In connection with the subsequent purchase of the sub-contractor's
business by an affiliate of the current sub-transfer agent (PFPC Inc.) used by
CAM on many of the funds it manages, this Revenue Guarantee Agreement was
amended eliminating those benefits in exchange for arrangements that included a
one-time payment from the sub-contractor.
The Boards of CAM-managed funds (the "Boards") were not informed of the Revenue
Guarantee Agreement with the sub-contractor at the time the Boards considered
and approved the transfer agent arrangements. Nor were the Boards informed of
the subsequent amendment to the Revenue Guarantee Agreement when that occurred.
CAM has begun to take corrective actions. CAM will pay to the applicable funds
approximately $17 million (plus interest) that CAM and its affiliates received
from the Revenue Guarantee Agreement and its amendment. CAM also plans an
independent review to verify that the transfer agency fees charged by CAM were
fairly priced as compared to competitive alternatives. CAM is instituting new
procedures and making changes designed to ensure no similar arrangements are
entered into in the future.
CAM has briefed the SEC, the New York State Attorney General and other
regulators with respect to this matter, as well as the U.S. Attorney who is
investigating the matter. CAM is cooperating with governmental authorities on
this matter, the ultimate outcome of which is not yet determinable.
The Fund's transfer agent is PFPC Inc., which is not affiliated with CAM.
PAGE 14
S A L O M O N B R O T H E R S O P P O R T U N I T Y F U N D I N C
Financial Highlights
For a share of capital stock outstanding throughout each year ended August 31,
unless otherwise noted:
2004(1) 2003 2002 2001 2000 1999
- ----------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD .... $41.34 $41.86 $48.72 $55.98 $49.69 $47.36
------ ------ ------ ------ ------ ------
INCOME (LOSS) FROM OPERATIONS:
Net investment income................. 0.25 0.33 0.28 0.69 0.82 0.76
Net realized and unrealized gain (loss) 5.19 0.61 (3.74) (2.23) 8.79 6.98
------ ------ ------ ------ ------ ------
Total Income (Loss) From Operations ..... 5.44 0.94 (3.46) (1.54) 9.61 7.74
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS FROM:
Net investment income................. (0.37) (0.19) (0.64) (0.76) (0.80) (0.47)
Net realized gains.................... (2.53) (1.27) (2.76) (4.96) (2.52) (4.94)
------ ------ ------ ------ ------ ------
Total Distributions ..................... (2.90) (1.46) (3.40) (5.72) (3.32) (5.41)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD........... $43.88 $41.34 $41.86 $48.72 $55.98 $49.69
====== ====== ====== ====== ====== ======
TOTAL RETURN............................. 13.6%++ 2.6% (7.7)% (3.2)% 20.4% 16.5%
NET ASSETS, END OF PERIOD (MILLIONS) .... $144 $146 $160 $185 $212 $189
RATIOS TO AVERAGE NET ASSETS:
Expenses............................... 0.94%+ 1.12% 1.11% 1.10% 1.11% 1.14%
Net investment income.................. 1.08+ 0.82 0.64 1.30 1.65 1.55
PORTFOLIO TURNOVER RATE.................. 0% 5% 1% 1% 3% 3%
<FN>
- --------------------------------------------------------------------------------
(1) For the six months ended February 29, 2004 (unaudited).
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
</FN>
PAGE 15
S A L O M O N B R O T H E R S O P P O R T U N I T Y F U N D I N C
Directors Salomon Brothers Opportunity Fund Inc
IRVING G. BRILLIANT 125 Broad Street
10th Floor, MF-2
B. ALEXANDER GAGUINE New York, New York 10004
1-888-777-0102, toll free
ROSALIND A. KOCHMAN
IRVING SONNENSCHEIN
INVESTMENT MANAGER
Salomon Brothers Asset Management Inc
399 Park Avenue
Officers New York, New York 10022
IRVING G. BRILLIANT DISTRIBUTOR
Chairman Citigroup Global Markets Inc
388 Greenwich Street
R. JAY GERKEN, CFA New York, New York 10013
Executive Vice President
CUSTODIAN
ANDREW B. SHOUP State Street Bank and Trust Company
Senior Vice President and 225 Franklin Street
Chief Administrative Officer Boston, Massachusetts 02110
GEORGE J. WILLIAMSON TRANSFER AGENT
Investment Officer PFPC Inc.
P.O. Box 9764
ANDREW BEAGLEY Providence, Rhode Island 02940-9764
Chief Anti-Money Laundering
Compliance Officer LEGAL COUNSEL
Simpson Thacher & Bartlett LLP
FRANCES M. GUGGINO 425 Lexington Avenue
Controller New York, New York 10017-3909
ROBERT I. FRENKEL INDEPENDENT AUDITORS
Secretary and PricewaterhouseCoopers LLP
Chief Legal Officer 1177 Avenue of the Americas
New York, New York 10036
- --------------------------------------------------------------------------------
This report is transmitted to the shareholders of Salomon Brothers Opportunity
Fund Inc for their information. This is not a prospectus, circular or
representation intended for use in the purchase of shares of the Fund or any
securities mentioned in this report.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, by telephoning the Fund (toll-free) at 1-800-446-1013 and by
visiting the SEC's web site at www.sec.gov.
PAGE 16
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PFPC Inc.
P.O. Box 9764
Providence, Rhode Island 02940-9764
Salomon Brothers
Opportunity Fund Inc
Semi-Annual Report
FEBRUARY 29, 2004
[LOGO]
OPSEMI 2/04
04-6444
ITEM 2. CODE OF ETHICS.
Not Applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not Applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial
officer have concluded that the registrant's disclosure controls and
procedures (as defined in Rule 30a- 3(c) under the Investment
Company Act of 1940, as amended (the "1940 Act")) are effective as
of a date within 90 days of the filing date of this report that
includes the disclosure required by this paragraph, based on their
evaluation of the disclosure controls and procedures required by
Rule 30a-3(b) under the 1940 Act and 15d-15(b) under the Securities
Exchange Act of 1934.
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act)
that occurred during the registrant's last fiscal half-year (the
registrant's second fiscal half-year in the case of an annual
report) that have materially affected, or are likely to materially
affect the registrant's internal control over financial reporting.
ITEM 10. EXHIBITS.
(a) Not applicable.
(b) Attached hereto.
Exhibit 99.CERT Certifications pursuant to section 302 of the
Sarbanes-Oxley Act of 2002
Exhibit 99.906CERT Certifications pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this Report
to be signed on its behalf by the undersigned, there unto duly authorized.
Salomon Brothers Opportunity Fund Inc
By: /s/ R. Jay Gerken
R. Jay Gerken
Chief Executive Officer of
Salomon Brothers Opportunity Fund Inc
Date: April 27, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ R. Jay Gerken
R. Jay Gerken
Chief Executive Officer of
Salomon Brothers Opportunity Fund Inc
Date: April 27, 2004
By: /s/ Andrew B. Shoup
Andrew B. Shoup
Chief Administrative Officer of
Salomon Brothers Opportunity Fund Inc
Date: April 27, 2004