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 811-2733
THE SALOMON BROTHERS 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: December 31
Date of reporting period: June 30, 2004
ITEM 1. REPORT TO STOCKHOLDERS.
The SEMI-ANNUAL Report to Stockholders is filed herewith.
SEMI-ANNUAL REPORT
June 30, 2004
THE SALOMON BROTHERS
- --------------------------------------------------------------------------------
FUND INC
WHAT'S INSIDE
Letter from the Chairman................................................. 1
Major Portfolio Changes.................................................. 5
Schedule of Investments.................................................. 6
Statement of Assets and Liabilities...................................... 11
Statement of Operations.................................................. 12
Statements of Changes in Net Assets...................................... 13
Notes to Financial Statements............................................ 14
Financial Highlights..................................................... 18
Dividend Reinvestment Plan............................................... 19
Additional Shareholder Information....................................... 25
LETTER FROM THE CHAIRMAN [Picture
R. Jay Gerken]
R. Jay Gerken, CFA
Chairman, President
DEAR SHAREHOLDER, and Chief Executive Officer
The first half of 2004 saw unusually calm securities markets in the U.S. The
stock market traded in a narrow range throughout the year. The number of days
the S&P 500 Index moved more than plus or minus 1% was the lowest since 1995.
The positive news of strong corporate earnings growth was offset by a decline in
the price-to-earnings multiple of the market as a whole. Concerns about a
second- half economic slowdown, the efforts by the Chinese to slow their
economy, and the Middle East violence have all been weighing on the stock
market.
The U.S. markets rallied in June. Economic numbers continued to be quite good,
but they were spotty rather than consistently strong. Auto sales fell to a 15.4
million rate after the better-than-expected 17.2 million rate in May. Consumer
confidence rose to 101.5 from the 95.6 level in May. Jobless claims were
essentially unchanged from May levels. Oil prices fell from over $38 per barrel
to about $35.50 per barrel by month-end.
A lessening in the acceleration of U.S. economic growth eased concerns of a 50
basis-point /i/ increase in interest rates by the Federal Reserve. On June 30,
2004, rates were indeed increased by 25 basis points (equivalent to one-quarter
of 1 percent). Real (inflation-adjusted) U.S. interest rates are currently a
negative 75 basis points versus an historical average of positive 300 basis
points. This has led the portfolio manager to take a negative stance on
interest-rate- sensitive stocks, especially financial and retail companies.
FUND PERFORMANCE
Despite positive performance, The Salomon Brothers Fund Inc, underperformed both
its benchmark, the unmanaged S&P 500 Index /ii/ and its Lipper core closed-end
funds category average during the six months ended June 30, 2004. The fund
returned 2.25%, based on its New York Stock Exchange ("NYSE") market price and
2.79% based on its net asset value ("NAV") /iii/ per share. The S&P 500 Index
returned 3.44% and the fund's Lipper core funds category average was 3.34% over
the same time frame. /iv/ Please note that Lipper performance returns are based
on each fund's NAV.
During this six-month period, the fund distributed dividends to shareholders
totaling $0.05 per share. The performance table on the following page shows the
fund's annualized distribution yield as well as its six-month total return based
on its NAV and market price as of June 30, 2004. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. THE FUND'S YIELDS WILL VARY.
- --------------------------------------------------------------------------------
The Salomon Brothers Fund Inc 1
MANAGER OVERVIEW
FUND PERFORMANCE
AS OF JUNE 30, 2004
Annualized Six-Month
Distribution Total
Price Per Share Yield Return
$14.38 (NAV) 0.70% 2.79%
$12.25 (NYSE) 0.82% 2.25%
ALL FIGURES REPRESENT PAST PERFORMANCE AND ARE NOT A GUARANTEE OF
FUTURE RESULTS. THE FUND'S YIELDS WILL VARY.
Total returns are based on changes in NAV or market price,
respectively. Total returns assume the reinvestment of all dividends
and/or capital gains distributions, if any, in additional shares.
Annualized distribution yield is the fund's current quarterly income
dividend rate, annualized, and then divided by the NAV or the market
price noted in this report. The annualized distribution yield
assumes a current quarterly income dividend rate of $0.025. These
yields are as of June 30, 2004 and are subject to change.
PERFORMANCE REVIEW
The fund's underperformance relative to its benchmark can be attributed to weak
stock selection in the information technology and consumer discretionary
sectors. However, the fund's performance was helped by select positions in the
consumer staples, telecommunication services and industrial sectors. In terms of
individual holdings, the fund's largest detractors from performance included
positions in VIACOM INC., an entertainment company with operations in cable
networks, television, radio, outdoor, entertainment and video, ALCOA INC., a
producer of primary aluminum, fabricated aluminum and alumina, and ELECTRONIC
DATA SYSTEMS CORP., a provider of information technology and business process
outsourcing services. The fund's largest contributors to performance were
overweight holdings in AT&T WIRELESS SERVICES INC., a provider of wireless voice
and data services and products, ELAN CORP., PLC, a neuroscience-based
biotechnology company, and THE BOEING CO., an aerospace company.
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 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.
In November 2003, Citigroup Asset Management disclosed an investigation by the
Securities and Exchange Commission ("SEC") and the U.S. Attorney relating to
Citigroup Asset Management's entry into the transfer agency business during
1997-1999. On July 20, 2004, Citigroup disclosed that it had been notified by
the Staff of the SEC that the Staff is considering recommending a civil
injunctive action and/or an administrative proceeding against certain advisory
and transfer agent entities affiliated with Citigroup relating to the creation
and operation of its internal transfer agent unit to serve primarily the Smith
Barney family of mutual funds. This internal transfer agent did not provide
services to the fund. Citigroup is cooperating with the SEC and will seek to
resolve this matter in discussion with the SECStaff. Although there can be no
assurance, Citigroup does not believe that this matter will have a material
adverse effect on the fund.
- --------------------------------------------------------------------------------
2 2004 Semi-Annual Report
MANAGER OVERVIEW (continued)
LOOKING FOR ADDITIONAL INFORMATION?
The fund is traded under the symbol "SBF" and its closing market price is
available in most newspapers under the NYSE listings. The daily NAV is available
online under symbol XSBFX. Barron's and The Wall Street Journal's Monday
editions carry closed-end fund tables that will provide additional information.
In addition, the fund issues a quarterly press release that can be found on most
major financial web sites as well as www.sbam.com.
In a continuing effort to provide information concerning the fund, shareholders
may call 1-888-777-0102 or 1-800-SALOMON (toll free), Monday through Friday from
8:00 a.m. to 6:00 p.m. Eastern Time, for the fund's current NAV, market price
and other information.
Thank you for your investment in The Salomon Brothers Fund Inc. We appreciate
your confidence in our stewardship of your assets and we look forward to helping
you achieve your financial goals.
Sincerely,
/S/ R. Jay Gerken
R. Jay Gerken, CFA
Chairman, President and Chief Executive Officer
July 20, 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 June 30, 2004 and are subject to
change and may not be representative of the portfolio manager's current or
future investments. The fund's top ten holdings as of this date were: General
Electric Co. (3.79%), Microsoft Corporation (3.72%), Pfizer Inc. (3.13%), Exxon
Mobil Corporation (2.91%), Bank of America Corp. (2.72%), Boeing Co. (2.34%),
American International Group, Inc. (2.28%), Pepsico Inc. (2.26%), Procter and
Gamble Co. (2.14%), and Wells Fargo & Co. (1.95%). Please refer to pages 6
through 10 for a list and percentage breakdown of the fund's holdings.
The mention of sector breakdowns is for informational purposes only and should
not be construed as a recommendation to purchase or sell any securities. The
information provided regarding such sectors is not a sufficient basis upon which
to make an investment decision. Investors seeking financial advice regarding the
appropriateness of investing in any securities or investment strategies
discussed should consult their financial professional. Portfolio holdings are
subject to change at any time and may not be representative of the portfolio
manager's current or future investments. The fund's top five sector holdings as
of June 30, 2004 were: Financials (19.00%); Information Technology (15.80%);
Industrials (14.90%); Healthcare (14.10%); Consumer Discretionary (9.90%). The
fund's portfolio composition is subject to change at any time.
RISKS: Investments in small capitalization companies may involve a higher degree
of risk and volatility than investments in larger, more established companies.
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. 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.
All index performance reflects no deduction for fees, expenses or taxes. Please
note that an investor cannot invest directly in an index.
i A basis point is one one-hundredth (1/100 or 0.01) of one percent.
ii The S&P 500 Index is a market capitalization-weighted index of 500 widely
held common stocks.
iii NAV is a price that reflects the value of the fund's underlying portfolio
plus other assets, less the fund's liabilities. However, the price at which
an investor may buy or sell shares of the fund is at the fund's market
price as determined by supply of and demand for the fund's common shares,
which may be more or less than the fund's NAV.
iv Lipper, Inc. is a major independent mutual-fund tracking organization.
Returns are based on the six-month period ended June 30, 2004, calculated
among the 18 funds in the fund's Lipper category including the reinvestment
of dividends and capital gains, if any.
- --------------------------------------------------------------------------------
The Salomon Brothers Fund Inc 3
Important Message to Shareholders
Any shareholders who are holding old certificates of The Lehman Corporation, the
Fund's former name, should exchange those certificates, free of charge, for new
ones bearing The Salomon Brothers Fund Inc name. The New York Stock Exchange has
informed us that the old certificates may create settlement problems in the
future if you decide to sell your shares. Please note that while you are not
required to exchange the certificates, we recommend that you do so. Shareholders
who wish to exchange their certificates should send them via registered mail
with a letter requesting exchange for new certificates to:
The Bank of New York
Receive and Deliver Department-11W
Church Street Station
P.O. Box 11002
New York, New York 10286-1002
Take Advantage of the Fund's
Dividend Reinvestment Plan!
Many of our shareholders that seek to build on their holdings in the Fund have
taken advantage of the Automatic Dividend Reinvestment and Cash Payment Plan
("Plan"). Under the terms of the Plan, shareholders may arrange to reinvest
their dividends automatically in additional shares. The Plan provides that when
the Fund's shares are traded at a discount to net asset value, dividends and
distributions will be initially payable in the form of shares purchased by The
Bank of New York, the Plan Agent, in the open market. To the extent that the
discount converts to a premium during the purchase period or when the
permissible purchase period ends, the balance will be paid in newly issued
shares of the Fund. Additional details about the Plan begin on page 19 of this
report.
Shareholders of the Fund can call 1-888-777-0102, toll free, or email
shareowner-svcs@bankofny.com, to obtain portfolio breakdown and performance
information. For information concerning your Fund stock account, please call The
Bank of New York at 1-800-432-8224 or email stock@ bankofny.com.
- --------------------------------------------------------------------------------
4 2004 Semi-Annual Report
MAJOR PORTFOLIO CHANGES (unaudited) FOR THE THREE MONTHS ENDED JUNE 30, 2004
Additions 1 Shares
- --------------------------------------------------------------------------------
ADC Telecommunications, Inc. 1,454,500
- --------------------------------------------------------------------------------
American Express Co. 70,900
- --------------------------------------------------------------------------------
The Boeing Co. 85,000
- --------------------------------------------------------------------------------
Cisco Systems, Inc. 450,400
- --------------------------------------------------------------------------------
Fisher Scientific International Inc. 243,000(2)
- --------------------------------------------------------------------------------
Guidant Corp. 55,300
- --------------------------------------------------------------------------------
Intel Corp. 380,200
- --------------------------------------------------------------------------------
International Business Machines Corp. 159,600
- --------------------------------------------------------------------------------
Microsoft Corp. 402,500
- --------------------------------------------------------------------------------
Nortel Networks Corp. 2,299,600
- --------------------------------------------------------------------------------
OSI Pharmaceuticals, Inc. 136,600(2)
- --------------------------------------------------------------------------------
Raytheon Co. 424,200(2)
- --------------------------------------------------------------------------------
Sepracor, Inc. 209,500(2)
- --------------------------------------------------------------------------------
Wachovia Corp. 81,900
- --------------------------------------------------------------------------------
Wyeth 326,500(2)
- --------------------------------------------------------------------------------
Reductions Shares
- --------------------------------------------------------------------------------
Altria Group, Inc. 79,000
- --------------------------------------------------------------------------------
Canadian National Railway Co. 282,750(3)
- --------------------------------------------------------------------------------
Comcast Corp., Special Class A Shares 126,100
- --------------------------------------------------------------------------------
Costco Wholesale Corp. 172,500
- --------------------------------------------------------------------------------
Eaton Corp. 221,200(3)
- --------------------------------------------------------------------------------
Guidant Corp. 27,200
- --------------------------------------------------------------------------------
The Home Depot, Inc. 302,400(3)
- --------------------------------------------------------------------------------
Infineon Technologies AG, ADR 1,332,000(3)
- --------------------------------------------------------------------------------
Intel Corp. 489,700
- --------------------------------------------------------------------------------
Istar Financial Inc. 102,600(3)
- --------------------------------------------------------------------------------
Johnson & Johnson 204,000(3)
- --------------------------------------------------------------------------------
J.P. Morgan Chase & Co. 87,400
- --------------------------------------------------------------------------------
McDonald's Corp. 231,700
- --------------------------------------------------------------------------------
Microchip Technology Inc. 256,700
- --------------------------------------------------------------------------------
Millennium Chemicals Inc. 567,500(3)
- --------------------------------------------------------------------------------
Motorola, Inc. 855,300(3)
- --------------------------------------------------------------------------------
Pfizer, Inc. 179,600
- --------------------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd., ADR 116,600
- --------------------------------------------------------------------------------
1 Exclusive of changes resulting entirely from stock dividends and stock splits.
2 New addition.
3 Elimination.
- --------------------------------------------------------------------------------
The Salomon Brothers Fund Inc 5
SCHEDULE OF INVESTMENTS (unaudited) June 30, 2004
SHARES SECURITY VALUE
- ----------------------------------------------------------------------------------------------------------------
COMMON STOCK -- 98.4%
CONSUMER DISCRETIONARY -- 9.9%
Hotels, Restaurants & Leisure -- 0.8%
406,400 McDonald's Corp. $10,566,400
- ----------------------------------------------------------------------------------------------------------------
Household Durables -- 1.0%
630,800 Newell Rubbermaid Inc. 14,823,800
- ----------------------------------------------------------------------------------------------------------------
Internet & Catalog Retail -- 1.1%
541,000 InterActive Corp. (a) (b) 16,305,740
- ----------------------------------------------------------------------------------------------------------------
Leisure Equipment & Products -- 0.7%
552,900 Mattel, Inc. (b) 10,090,425
- ----------------------------------------------------------------------------------------------------------------
Media -- 4.1%
Comcast Corp.:
466,700 Class A Shares (a) 13,081,601
135,900 Special Class A Shares (a) 3,752,199
1,190,185 Liberty Media Corp., Class A Shares (a) 10,699,763
59,509 Liberty Media International, Inc. (b) 2,207,784
342,300 The News Corp. Ltd., ADR 11,254,824
477,700 Viacom Inc., Class B Shares 17,063,444
- ----------------------------------------------------------------------------------------------------------------
58,059,615
- ----------------------------------------------------------------------------------------------------------------
Multi-Line Retail -- 0.7%
255,900 Costco Wholesale Corp. (a) 10,509,813
- ----------------------------------------------------------------------------------------------------------------
Specialty Retail -- 1.5%
416,900 Best Buy Co., Inc. 21,153,506
- ----------------------------------------------------------------------------------------------------------------
TOTAL CONSUMER DISCRETIONARY 141,509,299
- ----------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES -- 9.0%
Beverages -- 2.3%
601,100 PepsiCo, Inc. 32,387,268
- ----------------------------------------------------------------------------------------------------------------
Food Products -- 1.1%
374,900 Kellogg Co. 15,689,565
- ----------------------------------------------------------------------------------------------------------------
Household Products -- 4.0%
404,300 Kimberly-Clark Corp. 26,635,284
563,200 The Procter & Gamble Co. 30,660,608
- ----------------------------------------------------------------------------------------------------------------
57,295,892
- ----------------------------------------------------------------------------------------------------------------
Personal Products -- 1.1%
319,100 The Estee Lauder Cos, Inc., Class A Shares 15,565,698
- ----------------------------------------------------------------------------------------------------------------
Tobacco -- 0.5%
159,800 Altria Group, Inc. 7,997,990
- ----------------------------------------------------------------------------------------------------------------
TOTAL CONSUMER STAPLES 128,936,413
- ----------------------------------------------------------------------------------------------------------------
ENERGY -- 7.6%
Energy -- 0.2%
400 Gas Properties (100% owned) (c) 280,872
Royalty Interest (c) 2,115,252
- ----------------------------------------------------------------------------------------------------------------
2,396,124
- ----------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
- ----------------------------------------------------------------------------------------------------------------
6 2004 Semi-Annual Report
SCHEDULE OF INVESTMENTS (unaudited)(continued) June 30, 2004
SHARES SECURITY VALUE
- ----------------------------------------------------------------------------------------------------------------
Energy Equipment & Services -- 1.8%
518,300 ENSCO International Inc. $ 15,082,530
392,900 GlobalSantaFe Corp. 10,411,850
- ----------------------------------------------------------------------------------------------------------------
25,494,380
- ----------------------------------------------------------------------------------------------------------------
Oil & Gas -- 5.6%
132,600 ChevronTexaco Corp. 12,478,986
937,800 Exxon Mobil Corp. 41,647,698
271,500 TotalFinaElf S.A., ADR 26,085,720
- ----------------------------------------------------------------------------------------------------------------
80,212,404
- ----------------------------------------------------------------------------------------------------------------
TOTAL ENERGY 108,102,908
- ----------------------------------------------------------------------------------------------------------------
FINANCIALS -- 19.0%
Banks -- 9.8%
460,272 Bank of America Corp. 38,948,217
356,000 The Bank of New York Co., Inc. 10,494,880
384,500 Bank One Corp. 19,609,500
190,300 Comerica Inc. 10,443,664
212,800 Fifth Third Bancorp. 11,444,384
384,300 U.S. Bancorp. 10,591,308
233,200 Wachovia Corp. 10,377,400
487,100 Wells Fargo & Co. 27,876,733
- ----------------------------------------------------------------------------------------------------------------
139,786,086
- ----------------------------------------------------------------------------------------------------------------
Diversified Financials -- 5.4%
352,000 American Express Co. 18,085,760
124,100 Freddie Mac 7,855,530
198,100 The Goldman Sachs Group, Inc. 18,653,096
239,800 J.P. Morgan Chase & Co. 9,297,046
401,500 MBNA Corp. 10,354,685
233,800 Merrill Lynch & Co., Inc. 12,620,524
- ----------------------------------------------------------------------------------------------------------------
76,866,641
- ----------------------------------------------------------------------------------------------------------------
Insurance -- 3.8%
458,100 American International Group, Inc. 32,653,368
129 Berkshire Hathaway Inc., Class A Shares (a) 11,474,550
159,700 The Chubb Corp. (b) 10,888,346
- ----------------------------------------------------------------------------------------------------------------
55,016,264
- ----------------------------------------------------------------------------------------------------------------
TOTAL FINANCIALS 271,668,991
- ----------------------------------------------------------------------------------------------------------------
HEALTHCARE -- 14.1%
Biotechnology -- 1.8%
293,636 Amgen Inc. (a) 16,023,716
136,600 OSI Pharmaceuticals, Inc. (a)(b) 9,622,104
- ----------------------------------------------------------------------------------------------------------------
25,645,820
- ----------------------------------------------------------------------------------------------------------------
Healthcare Equipment & Supplies -- 2.1%
243,000 Fisher Scientific International Inc. (b) 14,033,250
292,200 Guidant Corp. 16,328,136
- ----------------------------------------------------------------------------------------------------------------
30,361,386
- ----------------------------------------------------------------------------------------------------------------
Healthcare Providers & Services -- 1.0%
161,100 Anthem, Inc. (a)(b) 14,428,116
- ----------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
- ----------------------------------------------------------------------------------------------------------------
The Salomon Brothers Fund Inc 7
SCHEDULE OF INVESTMENTS (unaudited)(continued) June 30, 2004
SHARES SECURITY VALUE
- ----------------------------------------------------------------------------------------------------------------
Pharmaceuticals -- 9.2%
463,100 GlaxoSmithKline PLC, ADR (b) $ 19,200,126
1,305,900 Pfizer Inc. 44,766,252
932,800 Schering-Plough Corp. 17,238,144
209,500 Sepracor, Inc. (b) 11,082,550
395,900 Teva Pharmaceutical Industries Ltd., ADR (b) 26,640,111
326,500 Wyeth 11,806,240
130,733,423
- ----------------------------------------------------------------------------------------------------------------
TOTAL HEALTHCARE 201,168,745
- ----------------------------------------------------------------------------------------------------------------
INDUSTRIALS -- 14.9%
Aerospace & Defense -- 4.2%
655,800 The Boeing Co. 33,504,822
232,500 Lockheed Martin Corp. 12,108,600
424,200 Raytheon Co. 15,173,634
- ----------------------------------------------------------------------------------------------------------------
60,787,056
- ----------------------------------------------------------------------------------------------------------------
Building Products -- 1.1%
409,200 American Standard Cos., Inc. (a) 16,494,852
- ----------------------------------------------------------------------------------------------------------------
Commercial Services & Supplies -- 2.5%
214,500 Avery Dennison Corp. (b) 13,730,145
426,700 Paychex, Inc. 14,456,596
230,700 Waste Management, Inc. 7,070,955
- ----------------------------------------------------------------------------------------------------------------
35,257,696
- ----------------------------------------------------------------------------------------------------------------
Industrial Conglomerates -- 6.4%
1,675,400 General Electric Co. 54,282,960
460,200 Honeywell International Inc. 16,857,126
621,100 Tyco International Ltd. 20,583,254
- ----------------------------------------------------------------------------------------------------------------
91,723,340
- ----------------------------------------------------------------------------------------------------------------
Machinery -- 0.7%
246,400 Navistar International Corp. (a)(b) 9,550,464
- ----------------------------------------------------------------------------------------------------------------
TOTAL INDUSTRIALS 213,813,408
- ----------------------------------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 15.8%
Communications Equipment -- 4.5%
6,378,900 ADC Telecommunications, Inc. (a) 18,116,076
925,000 Cisco Systems, Inc. (a) 21,922,500
4,914,500 Nortel Networks Corp. (a) 24,523,355
- ----------------------------------------------------------------------------------------------------------------
64,561,931
- ----------------------------------------------------------------------------------------------------------------
Computers & Peripherals -- 4.2%
586,000 Dell Inc. (a) 20,990,520
770,900 Hewlett-Packard Co. 16,265,990
272,300 International Business Machines Corp. 24,003,245
- ----------------------------------------------------------------------------------------------------------------
61,259,755
- ----------------------------------------------------------------------------------------------------------------
Semiconductor Equipment & Products -- 1.9%
848,000 Intel Corp. 23,404,800
108,800 Microchip Technology Inc. 3,431,552
- ----------------------------------------------------------------------------------------------------------------
26,836,352
- ----------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
- ----------------------------------------------------------------------------------------------------------------
8 2004 Semi-Annual Report
SCHEDULE OF INVESTMENTS (unaudited)(continued) June 30, 2004
SHARES SECURITY VALUE
- ----------------------------------------------------------------------------------------------------------------
Software -- 5.2%
656,700 BMC Software, Inc. (a)(b) $ 12,148,950
1,864,600 Microsoft Corp. 53,252,976
742,000 Oracle Corp. (a) 8,852,060
- ----------------------------------------------------------------------------------------------------------------
74,253,986
- ----------------------------------------------------------------------------------------------------------------
TOTAL INFORMATION TECHNOLOGY 226,912,024
- ----------------------------------------------------------------------------------------------------------------
MATERIALS -- 4.0%
Containers & Packaging -- 0.6%
400,200 Smurfit-Stone Container Corp. (a)(b) 7,983,990
- ----------------------------------------------------------------------------------------------------------------
Metals & Mining -- 2.1%
616,400 Alcoa Inc. 20,359,692
480,000 Barrick Gold Corp. 9,480,000
- ----------------------------------------------------------------------------------------------------------------
29,839,692
- ----------------------------------------------------------------------------------------------------------------
Paper & Forest Products -- 1.3%
424,500 International Paper Co. 18,975,150
- ----------------------------------------------------------------------------------------------------------------
TOTAL MATERIALS 56,798,832
- ----------------------------------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES -- 1.4%
Wireless Telecommunication Services -- 1.4%
1,398,900 AT&T Wireless Services Inc. (a) 20,032,248
- ----------------------------------------------------------------------------------------------------------------
UTILITIES -- 2.7%
Electric Utilities -- 0.8%
313,700 FirstEnergy Corp. (b) 11,735,517
- ----------------------------------------------------------------------------------------------------------------
Gas Utilities -- 1.0%
1,764,900 El Paso Corp. (b) 13,907,412
- ----------------------------------------------------------------------------------------------------------------
Multi-Utilities -- 0.9%
619,500 NiSource Inc. 12,774,090
- ----------------------------------------------------------------------------------------------------------------
TOTAL UTILITIES 38,417,019
- ----------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost -- $1,136,386,403) 1,407,359,887
- ----------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
- ----------------------------------------------------------------------------------------------------------------
The Salomon Brothers Fund Inc 9
SCHEDULE OF INVESTMENTS (unaudited)(continued) June 30, 2004
FACE
AMOUNT SECURITY VALUE
- ----------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 1.6%
$23,394,000 Bank of America Corp. dated 6/30/04, 1.040% due 7/1/04;
Proceeds at maturity -- $23,394,910; (Fully collateralized by
various U.S. Treasury obligations, 0.000% to 5.750%
due 11/12/04 to 6/1/17; Market value -- $23,861,968)
(Cost -- $23,394,000) $ 23,394,000
- ----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0%
(Cost -- $1,159,780,403) $1,430,753,887
- ----------------------------------------------------------------------------------------------------------------
LOAN SECURITIES COLLATERAL
85,487,100 State Street Navigator Securities Lending Trust Prime Portfolio
(Cost -- $85,487,100) $ 85,487,100
- ----------------------------------------------------------------------------------------------------------------
(a) Non-income producing security.
(b) All or a portion of this security is on loan (See Note 4).
(c) Fair value determined pursuant to procedures established by the Board of
Directors.
Abbreviation used in this schedule:
-----------------------------------
ADR - American Depositary Receipt
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10 2004 Semi-Annual Report
STATEMENT OF ASSETS AND LIABILITIES (unaudited) June 30, 2004
ASSETS:
Investments, at value (Cost -- $1,159,780,403) $1,430,753,887
Loaned securities collateral, at value (Cost -- $85,487,100) (Note 4) 85,487,100
Cash 804
Receivable for securities sold 5,053,364
Dividends and interest receivable 2,225,345
- --------------------------------------------------------------------------------------------------
Total Assets 1,523,520,500
- --------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for loaned securities collateral (Note 4) 85,487,100
Payable for securities purchased 3,584,542
Management fee payable 1,863,565
Accrued expenses 388,995
- --------------------------------------------------------------------------------------------------
Total Liabilities 91,324,202
- --------------------------------------------------------------------------------------------------
Total Net Assets $1,432,196,298
- --------------------------------------------------------------------------------------------------
NET ASSETS:
Par value of capital shares $ 99,573,334
Capital paid in excess of par value 1,157,569,876
Undistributed net investment income 2,351,981
Accumulated net realized loss from investment transactions (98,272,377)
Net unrealized appreciation of investments 270,973,484
- --------------------------------------------------------------------------------------------------
Total Net Assets $1,432,196,298
- --------------------------------------------------------------------------------------------------
Shares Outstanding ($1.00 par value, 125,000,000 shares authorized) 99,573,334
- --------------------------------------------------------------------------------------------------
Net Asset Value, per share $14.38
- --------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
The Salomon Brothers Fund Inc 11
STATEMENT OF OPERATIONS (unaudited) FOR THE SIX MONTHS ENDED June 30, 2004
INVESTMENT INCOME:
Dividends $ 10,930,927
Oil royalties 380,916
Interest 174,475
Less: Foreign withholding tax (155,175)
- --------------------------------------------------------------------------------------------------
Total Investment Income 11,331,143
- --------------------------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 3,821,782
Shareholder communications 153,923
Transfer agency services 134,008
Audit and legal 61,330
Directors' fees 48,384
Custody 31,220
Stock certificates and listing fees 29,902
Insurance 7,602
Other 30,817
- --------------------------------------------------------------------------------------------------
Total Expenses 4,318,968
- --------------------------------------------------------------------------------------------------
Net Investment Income 7,012,175
- --------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net Realized Gain From Investment Transactions (excluding short-term investments):
Proceeds from sales 360,533,707
Cost of securities sold 289,804,671
- --------------------------------------------------------------------------------------------------
Net Realized Gain 70,729,036
- --------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of period 310,542,692
End of period 270,973,484
- --------------------------------------------------------------------------------------------------
Decrease in Net Unrealized Appreciation (39,569,208)
- --------------------------------------------------------------------------------------------------
Net Gain on Investments 31,159,828
- --------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 38,172,003
- --------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12 2004 Semi-Annual Report
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended June 30, 2004 (unaudited)
and the Year Ended December 31, 2003
2004 2003
- -----------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 7,012,175 $ 13,450,176
Net realized gain (loss) 70,729,036 (43,696,511)
Increase (decrease) in net unrealized appreciation (39,569,208) 371,016,577
- -----------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 38,172,003 340,770,242
- -----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (4,989,520) (12,897,805)
- -----------------------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From Distributions to Shareholders (4,989,520) (12,897,805)
- -----------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Repurchase of capital stock (4,614,535) (6,238,506)
- -----------------------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From Fund Share Transactions (4,614,535) (6,238,506)
- -----------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets 28,567,948 321,633,931
NET ASSETS:
Beginning of period 1,403,628,350 1,081,994,419
- -----------------------------------------------------------------------------------------------------------------------------
End of period* $1,432,196,298 $1,403,628,350
- -----------------------------------------------------------------------------------------------------------------------------
* Includes undistributed net investment income of: $2,351,981 $329,326
- -----------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
The Salomon Brothers Fund Inc 13
NOTES TO FINANCIAL STATEMENTS (unaudited)
1. Organization and Significant Accounting Policies
The Salomon Brothers Fund Inc ("Fund"), is registered as a diversified,
closed-end, management investment company under the Investment Company Act of
1940, as amended. The Fund's primary investment objectives are growth and
conservation of capital. Income receives secondary consideration. Following is a
summary of significant accounting policies consistently followed by the Fund in
the preparation of its financial statements. The policies are in conformity with
U.S. generally accepted accounting principles ("GAAP"). The preparation of
financial statements in accordance with GAAPrequires management to make
estimates and assumptions that affect the reported amounts and disclosure in the
financial statements. Actual amounts could differ from those estimates.
(A) SECURITIES VALUATION. Portfolio securities listed or traded on national
securities exchanges, or reported by the NASDAQ national market system, are
valued at the last sale price, or if there have been no sales on that day, at
the mean of the current bid and asked price which represents the current value
of the security. Over-the-counter securities are valued at the mean of the
current bid and asked price. If no quotations are readily available (as may be
the case for securities of limited marketability), or if "restricted" securities
are being valued, such portfolio securities and other assets are valued at fair
value determined pursuant to procedures established by the Board of Directors.
Short-term securities with less than 60 days remaining to maturity when acquired
by the Fund are valued at amortized cost which approximates market value.
(B) FOREIGN CURRENCY TRANSLATION. The accounting records of the Fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S. dollars
at the prevailing rates of exchange each day. Purchases and sales of securities,
income receipts and expense payments are translated into U.S. dollars at the
prevailing exchange rate on the respective dates of the transactions. Net
realized gains and losses on foreign currency transactions represent net gains
and losses from sales and maturities of forward currency contracts, disposition
of foreign currencies, currency gains and losses realized between the trade and
settlement dates on securities transactions and the difference between the
amount of net investment income accrued and the U.S. dollar amount actually
received. The effect of changes in foreign currency exchange rates on
investments in securities are not segregated in the Statement of Operations from
the effects of changes in market prices of those securities, but are included
with the net realized and unrealized gain or loss on investments.
(C) FEDERAL INCOME TAXES. The Fund has complied and intends to continue to
comply with the requirements of the Internal Revenue Code of 1986, as amended,
applicable to regulated investment companies, and to distribute substantially
all of its taxable income to its shareholders. Therefore, no Federal income or
excise tax provision is required. The character of income and gains to be
distributed is determined in accordance with income tax regulations which may
differ from GAAP.
(D) REPURCHASE AGREEMENTS. When entering into repurchase agreements, it is the
Fund's policy that a custodian takes possession of the underlying collateral
securities, the value of which at least equals the principal amount of the
repurchase transaction, including accrued interest. To the extent that any
repurchase transaction exceeds one business day, the value of the collateral is
marked-to-market to ensure the adequacy of the collateral. If the seller
defaults and the value of the collateral declines or if bankruptcy proceedings
are commenced with respect to the seller of the security, realization of the
collateral by the Fund may be delayed or limited.
- --------------------------------------------------------------------------------
14 2004 Semi-Annual Report
NOTES TO FINANCIAL STATEMENTS (unaudited)(continued)
(E) OTHER. Securities transactions are recorded as of the trade date. Realized
gains and losses on sales of securities are calculated on the identified cost
basis. Dividend income and dividends payable are recorded on the ex-dividend
date. Interest is recognized as interest income when earned. Original issue
discount, market discount and premium on securities purchased is accreted or
amortized on an effective yield basis over the life of the security.
2. Management Fee and Other Transactions with Affiliates
Salomon Brothers Asset Management Inc ("SBAM"), an indirect wholly-owned
subsidiary of Citigroup Inc., ("Citigroup") acts as investment manager to the
Fund. SBAM is responsible on a day-to-day basis for the management of the Fund's
portfolio in accordance with the Fund's investment objectives and policies and
for making decisions to buy, sell, or hold particular securities and is
responsible for day-to-day administration of the Fund.
The investment manager has delegated certain administrative responsibilities to
Smith Barney Fund Management LLC ("SBFM"), another indirect wholly-owned
subsidiary of Citigroup, pursuant to a Sub-Administration Agreement between the
investment manager and SBFM.
The Fund pays SBAM a base management fee subject to an increase or decrease
depending on the extent, if any, to which the investment performance of the Fund
exceeds or is exceeded by the investment record of the S&P 500 Index. The base
fee is paid quarterly based on the following annual rates:
Average Daily Net Assets Annual Fee Rate
- ------------------------------------------------------------------------------
First $350 million 0.650%
Next $150 million 0.550
Next $250 million 0.525
Next $250 million 0.500
Over $1 billion 0.450
- ------------------------------------------------------------------------------
The performance adjustment is paid quarterly based on a rolling one year period.
A performance adjustment will only be made after the investment performance of
the Fund exceeds or is exceeded by the investment record of the S&P 500 Index by
at least one percentage point. For each percentage point by which the investment
performance of the Fund exceeds or is exceeded by the investment record of the
S&P 500 Index, the base fee will be adjusted upward or downward by 0.01%
(annualized). The maximum annual adjustment is 0.10% which would occur if the
Fund's performance exceeds or is exceeded by the S&P 500 Index by ten or more
percentage points. For this purpose, the performance fee calculation is based on
the total return value of the S&P 500 Index versus the Fund's total return
calculated based on net asset value and assuming all distributions are
reinvested at net asset value on the record date of the distribution. For the
rolling one year period ended March 31, 2003, the S&P 500 Index exceeded the
Fund's performance by 0.37%. For the rolling one year periods ended June 30,
2003, September 30, 2003 and December 31, 2003, the Fund's performance exceeded
the S&P 500 Index by 1.05%, 1.48% and 3.26%, respectively. This resulted in a
total increase of the base management fee of $169,685. For the rolling one year
period endedMarch 31, 2004, the Fund's performance exceeded the S&P 500 Index by
2.16%. For the rolling one year period ended June 30, 2004, the S&P 500 Index
exceeded the Fund's performance by 0.89%. This resulted in a total increase of
the base management fee of $70,022.
There were no brokerage commissions paid to Citigroup Global Markets Inc.
("CGM"), another indirect wholly-owned subsidiary of Citigroup, and its
affiliates for investment transactions executed on behalf of the Fund dur ing
the six months ended June 30, 2004.
Certain officers and/or Directors of the Fund are also officers and/or directors
of the investment manager.
- --------------------------------------------------------------------------------
The Salomon Brothers Fund Inc 15
NOTES TO FINANCIAL STATEMENTS (unaudited)(continued)
3. Investments
During the six months ended June 30, 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 $342,646,764
- --------------------------------------------------------------------------------
Sales 360,533,707
- --------------------------------------------------------------------------------
At June 30, 2004, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were substantially as follows:
- --------------------------------------------------------------------------------
Gross unrealized appreciation $282,124,008
Gross unrealized depreciation (11,150,524)
- --------------------------------------------------------------------------------
Net unrealized appreciation $270,973,484
- --------------------------------------------------------------------------------
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. 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 June 30, 2004, the Fund loaned securities having a market value of
$84,338,589. The Fund received cash collateral amounting to $85,487,100 which
was invested in the State Street Navigator Securities Lending Trust Prime
Portfolio. Income earned by the Fund from securities lending for the six months
ended June 30, 2004 was $98,497.
5. Capital Shares
On July 17, 2002, the Fund's Board of Directors approved a share repurchase
plan. The Fund was authorized to repurchase up to one million shares. On July
25, 2002, the Fund commenced this share repurchase plan. Since the inception of
the repurchase plan, the Fund repurchased 1,000,000 shares with a total cost of
$9,266,557 at the weighted average discount of 14.61% per share. The Fund
completed the authorized amount on April 7, 2004. For the period January 1, 2004
to April 7, 2004, the Fund repurchased 19,600 shares with a total cost of
$240,770.
On March 19, 2003, the Fund's Board of Directors approved a subsequent share
repurchase plan authorizing a repurchase of up to an additional one million
shares. On April 7, 2004, the Fund commenced this share plan. For the period
April 7, 2004 to June 30, 2004, the Fund repurchased 364,700 shares with a total
cost of $4,373,765 at the weighted average discount of 14.96% per share.
- --------------------------------------------------------------------------------
16 2004 Semi-Annual Report
NOTES TO FINANCIAL STATEMENTS (unaudited)(continued)
6. Additional Information
Citigroup has been notified by the Staff of the Securities and Exchange
Commission ("SEC") that the Staff is considering recommending a civil injunctive
action and/or an administrative proceeding against Citigroup Asset Management
("CAM"), including its applicable investment advisory companies and Citicorp
Trust Bank ("CTB"), an internal transfer agent, relating to the creation and
operation of the internal transfer agent unit to serve certain CAM-managed
funds. CTB did not provide services to the Fund. This notification arises out of
a previously disclosed investigation by the SEC and the U.S. Attorney and
relates to CTB's entry in 1999 into the transfer agency business, CAM's
retention of, and agreements with an unaffiliated sub-transfer agent, the
adequacy of the disclosures made to the fund boards that approved the transfer
agency arrangements, (including CAM's failure to disclose a related revenue
guarantee agreement benefiting CAM and its affiliates), and CAM's operation of
and compensation for the transfer agency business. The revenue guarantee
described above was terminated in 1999 and CAM will be paying the applicable
funds, primarily through fee waivers, a total of approximately $17 million (plus
interest) that is the amount of the revenue received by Citigroup relating to
the revenue guarantee. The Fund did not implement the contractual arrangement
described above and therefore will not receive any portion of the payment.
Citigroup is cooperating fully in the investigation and will seek to resolve the
matter in discussions with the SEC Staff. Although there can be no assurance,
Citigroup does not believe that this matter will have a material adverse effect
on the Fund.
- --------------------------------------------------------------------------------
The Salomon Brothers Fund Inc 17
FINANCIAL HIGHLIGHTS
For a share of capital stock outstanding throughout each year ended December 31,
unless otherwise noted:
2004(1) 2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $14.04 $10.75 $14.07 $16.27 $19.24 $18.76
- ---------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.07 0.13 0.11 0.11 0.14 0.18
Net realized and unrealized gain (loss) 0.31 3.28 (3.26) (1.87) (0.46) 4.08
- ---------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.38 3.41 (3.15) (1.76) (0.32) 4.26
- ---------------------------------------------------------------------------------------------------------------------------------
Gain From Repurchase of Treasury Stock 0.01 0.01 0.01 -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.05) (0.13) (0.11) (0.11) (0.13) (0.17)
Net realized gains -- -- (0.07) (0.33) (2.41) (3.63)
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.05) (0.13) (0.18) (0.44) (2.54) (3.80)
- ---------------------------------------------------------------------------------------------------------------------------------
Increase in Net Asset Value
Due to Shares Issued on
Reinvestment of Dividends -- -- -- -- -- 0.02
- ---------------------------------------------------------------------------------------------------------------------------------
Decrease in Net Asset Value
Due to Shares Issued
Through Rights Offering -- -- -- -- (0.10) --
- ---------------------------------------------------------------------------------------------------------------------------------
Rights Offering Costs -- -- -- -- (0.01) --
- ---------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $14.38 $14.04 $10.75 $14.07 $16.27 $19.24
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return, Based on Market Price 2.25%++ 33.5% (25.4)% (21.2)% (8.0)%* 34.6%
- ---------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (millions) $1,432 $1,404 $1,082 $1,420 $1,642 $1,820
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.61%+ 0.64% 0.62% 0.62% 0.65% 0.56%
Net investment income 0.99+ 1.12 0.86 0.76 0.71 0.90
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 25% 62% 47% 61% 76% 73%
- ---------------------------------------------------------------------------------------------------------------------------------
Market Price, End of Period $12.250 $12.030 $9.120 $12.420 $16.250 $20.375
- ---------------------------------------------------------------------------------------------------------------------------------
(1) For the six months ended June 30, 2004 (unaudited).
* Total market value return taking into consideration the Rights Offering
would have been (7.7)%.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
18 2004 Semi-Annual Report
AUTOMATIC DIVIDEND REINVESTMENT AND CASH PAYMENT PLANS (unaudited)
Salomon Brothers Fund: Helping Investors Grow Their Wealth Since 1929
You've already harnessed the wealth-building power of The Salomon Brothers Fund
Inc ("SBF"). Now harness two more wealth-building strategies: the power of
compounding through the Dividend Reinvestment Plan and the convenience of the
Cash Payment Plan - available only to investors of SBF. We've included brief
descriptions of these two Plans, and a section on the most frequently asked
questions.
Dividend Reinvestment Plan (DR Plan)
Money from dividends and distributions can lie idle for months at a time, and
making smaller investments in the stock market can be expensive and difficult.
With the DR Plan, dividends and distributions from SBF are promptly invested for
you in additional shares of SBF. All paper work is done for you automatically by
the Agent for the DR Plan, and you will receive statements from the Agent to
keep in your personal records.
The DR Plan is flexible, and offers investors three different reinvestment
options. Depending on which option you choose, you may automatically reinvest:
1. All dividends and capital gains (long-term and short-term) in
additional shares of SBF
2. All capital gains (long-term and short-term) in additional shares of
SBF and receive dividends in cash
3. All dividends in additional shares of SBF and receive capital gains
(long-term and short-term) in cash.
To make it easy for you to sign up for the DR Plan or to change your option if
you already participate in the Plan, we've included an easy and convenient
mail-in form in the back of this report. Remember to indicate which option you
are selecting; otherwise the Agent will consider you to have chosen option (1)
and reinvest all dividends and capital gains (long-term and short-term) in
additional shares of SBF.
Cash Payment Plan: Buying Additional Shares Directly from/through SBF
The Cash Payment Plan allows investors in SBF to purchase additional shares of
SBF conveniently and inexpensively, without committing large dollar amounts or
paying big brokerage commissions. You can make additional investments for as
little as $25.00 on either a regular basis or when you have extra money to
invest. You also can vary the amount you invest each time, as long as it is at
least $25.00, and there is no maximum limit to the amount you can invest under
the Cash Payment Plan.
The Agent will purchase additional shares of SBF for your account on the next
"Investment Date" following receipt of your optional cash payment. Each Friday
is considered an "Investment Date," or the closest business day prior to it if
Friday is a holiday. Shares purchased under the Cash Payment Plan are held by
the Agent as uncertificated shares, unless separate specific instructions to
issue certificates are received. Only whole shares can be issued as
certificates, fractional shares cannot be issued in certificate form. Dividends
and distributions on those shares held by the Agent will be automatically
reinvested.
- --------------------------------------------------------------------------------
The Salomon Brothers Fund Inc 19
AUTOMATIC DIVIDEND REINVESTMENT AND CASH PAYMENT PLANS (unaudited)(continued)
Certificate Of Deposit
If you wish, you may also deposit with the Agent stock certificates representing
ownership of capital stock in SBF which you now hold. The Agent will combine
these shares with shares issued or purchased through the DR Plan or Cash Payment
Plan. The actual certificates forwarded by you will be cancelled.
Cost to You
Except as specifically noted, you will not bear any of the costs of
administering the Plan. When the Agent purchases shares of SBF on the open
market, the cost of reinvesting your dividends and distributions or purchasing
additional shares through these Plans is less than the usual brokerage
commissions on smaller or odd lot transactions because the Agent combines the
purchase of shares for all participants and passes the savings in commissions on
to you. You pay your proportionate share of the commissions paid on all open
market purchases. Of course, dividends and distributions remain taxable even if
they are automatically reinvested.
To help you learn more about the DR Plan and Cash Payment Plan, we are including
the answers to some of the most frequently asked questions about these plans.
Who can participate in these Plans?
As a shareholder of SBF, you can participate in both the DR Plan and the Cash
Payment Plan.
How does the Dividend Reinvestment Plan work?
If you are a participant in the Plan, you will receive either newly issued
shares or shares that are purchased on the New York Stock Exchange in the open
market, depending on the relationship between the market price per share of SBF
and the net asset value per share of SBF, as described in terms and conditions
of the DR Plan.
The number of common stock shares you receive is determined in the following
way: If the market price of the common stock is equal to or higher than the net
asset value ("NAV") per share at the time of valuation, you will be issued
shares for the equivalent of either the most recently determined NAV per share
or 95% of the market price, whichever is greater. If, on valuation date, the NAV
per share is greater than the market price per share, shares will be purchased
in the open market at market price per share.
However, if the dividend or distribution is not large enough to buy a full
share, the Agent will credit your account with a fractional share, which will be
computed four decimal places. These fractional shares will earn dividends and
distributions for you just the way that full shares do.
How do I enroll in the Dividend Reinvestment Plan?
If you hold your certificates yourself, you probably are already enrolled in the
DR Plan. Reinvestment begins with the first dividend after you purchase your
shares. However, if your shares are held in the name of a broker or nominee, you
should contact your broker or nominee about your ability to participate in the
DR Plan. If your broker or nominee does not provide the automatic reinvestment
service, you may need to take your shares out of "street name" and register them
in your own name to guarantee your participation. Otherwise, dividends and
distributions will be paid in cash by your broker or nominee.
- --------------------------------------------------------------------------------
20 2004 Semi-Annual Report
AUTOMATIC DIVIDEND REINVESTMENT AND CASH PAYMENT PLANS (unaudited)(continued)
Can I withdraw from the Dividend Reinvestment Plan or change my reinvestment
option?
Yes. You can withdraw from the DR Plan or change your reinvestment option by
calling the Agent at this toll-free telephone number: 1-800-432-8224.
If you withdraw from the DR Plan and then wish to re-enroll, simply complete the
enclosed Authorization Card and mail it to the address given below. You can also
re-enroll by calling the toll-free number for the Agent. Your participation in
the DR Plan will begin with the next dividend or distribution payable after the
Agent receives your authorization, as long as it is received before the record
date for the dividend or distribution. If your authorization arrives after the
record date, your participation will begin with the following dividend or
distribution.
The Bank of New York
Investor Relations Department
P.O. Box 11002
New York, NY 10286-1002
Tel: 1-800-432-8224
Important Notes to This Section:
The Fund and the Agent may amend or terminate the DR Plan and Cash Payment Plan.
The Agent will mail to participants notice at least 30 days prior to the
effective date of any amendment.
The Agent may utilize BNY Brokerage Inc., an affiliate of the Agent, for the
trading activity relating to the DR Plan and Cash Payment Plan on behalf of the
participants. BNY Brokerage Inc. receives a commission in connection with these
transactions. Remember your detailed account statement will include a tear-off
portion that you should utilize for all transaction processing.
If your shares are held in the name of a broker or nominee, you should contact
your broker or nominee for more information about your ability to participate in
the DR Plan. If the broker or nominee does not provide an automatic reinvestment
service, it may be necessary for you to have shares taken out of the "street
name" and registered in your own name to guarantee your participation.
Otherwise, dividends and distributions will be paid in cash by your broker or
nominee.
How are shares purchased for the Cash Payment Plan?
All cash payment shares will be purchased on the open market at the prevailing
market price and in accordance with the Terms and Conditions of Authorization
for Amended and Reinvested Dividend Reinvestment and Cash Payment Plans (Terms
and Conditions).
Who is the "Agent" and what are its responsibilities?
The Bank of New York acts as the Agent for the SBF. The Agent is responsible for
doing the paperwork for shareholders, including providing account statements.
The Agent also is responsible for forwarding proxy material to you, including a
proxy form and return envelope, covering all shares owned by a participant to be
voted and returned to the Fund or its proxy agent.
- --------------------------------------------------------------------------------
The Salomon Brothers Fund Inc 21
AUTOMATIC DIVIDEND REINVESTMENT AND CASH PAYMENT PLANS (unaudited)(continued)
The Agent will hold the shares it has purchased for your account unless you
request otherwise. This convenient feature provides added protection against
loss, theft or accidental destruction of certificates. If you request it, the
Agent will issue certificates for full shares held in your account. However, if
a certificate is lost, the replacement cost is currently 2% of the value of the
shares at the time of loss.
You may also ask the Agent to hold all of your shares of SBF. The Agent will
combine these shares with shares acquired through the DR Plan or Cash Payment
Plan. The actual certificates forwarded by you will be cancelled and replaced
with a book-entry in the Agent's records.
Is there any tax advantage to participate in the Dividend Reinvestment Plan?
No. Even if you do not receive cash when you participate in the DR Plan, you
will be taxed on an amount equal to cash received by the agent on your behalf
pursuant to the DR Plan. If you have any further questions about the tax
implications of the Plan, you should consult your tax adviser.
- --------------------------------------------------------------------------------
22 2004 Semi-Annual Report
Terms and Conditions of Authorization for Amended and Restated Automatic
Dividend Reinvestment and Cash Payment Plans
1. (a) The Bank of New York (the "Agent") will act as agent for each
participant in the Amended and Restated Dividend Reinvestment Plan
(the "DR Plan") of Salomon Brothers Fund Inc (the "Corporation").
(b) Participants in the DRPlan will have three options, as follows: (i) a
participant may have all net investment income dividends ("dividends")
and capital gain distributions (short-term and long-term)
("distributions") automatically reinvested; (ii) a participant may
have all dividends paid in cash and all distributions automatically
reinvested; or (iii) a participant may have all dividends
automatically reinvested and all distributions paid in cash.
Participants will be deemed to have elected option (i) unless
notification is received by the Agent that the participant elects
option (ii) or option (iii). Participants may change elections by
notifying the Agent and a change in election will be effective with
respect to a dividend or distribution if the Agent is contacted prior
to the record date; otherwise it will be effective with the following
dividend or distribution.
(c) Unless the Corporation declares a dividend or distribution which may
be paid to shareholders only in the form of cash, the Agent will apply
all dividends and distributions which are to be reinvested on behalf
of a participant in the manner set forth below.
2. (a) If, on the determination date, the market price per share plus
estimated brokerage commissions equals or exceeds the net asset value
per share on that date (such condition, a "market premium"), the Agent
shall receive the dividend or distribution in newly issued shares of
the Corporation on behalf of shareholders. If, on the determination
date, the net asset value per share exceeds the market price per share
plus estimated brokerage commissions on that date (such condition, a
"market discount"), the Agent will purchase shares in the open market.
The determination date will be the fourth New York Stock Exchange
trading day (a New York Stock Exchange trading day being referred to
herein as a "Trading Day") preceding the payment date for the dividend
or distribution. For purposes herein, "market price" shall mean the
average of the highest and lowest prices at which the Corporation's
stock sells on the New York Stock Exchange on the particular date, or
if there is no sale on that date, the average of the closing bid and
asked quotations.
(b) Purchases by the Agent shall be made in accordance with the conditions
set forth in Item 4 below and may be made on any securities exchange
where such shares are traded, in the over-the-counter market, or in
negotiated transactions, and may be on such terms as to price,
delivery, and otherwise as the Agent may determine. Such purchases
shall be made as soon as practicable commencing on the Trading Day
following the determination date and ending no later than 30 days
after the dividend or distribution date except where temporary
curtailment or suspension of purchase is necessary to comply with
applicable provisions of federal securities laws; provided, however,
that such purchases shall, in any event, terminate on the earlier of
(i) 60 days after the dividend or distribution payment date and (ii)
the Trading Day prior to the "ex-dividend date" next succeeding the
dividend or distribution payment date.
(c) If (i) the Agent is unable to invest the full dividend or distribution
amount in open market purchases during the purchase period provided
for in paragraph (b) above or (ii) a market discount shifts to a
market premium during the purchase period, the Agent will cease making
open market purchases and will receive the uninvested portion of the
dividend or distribution amount in newly issued shares (x) in the case
of (i) above, at the close of business on the date the Agent is
required to terminate making open-market purchases as specified in
paragraph (b) above or (y) in the case of (ii) above at the close of
business on the date such shift occurs; but in no event prior to the
payment date for the dividend or distribution.
(d) In the event that all or part of a dividend or distribution amount is
to be to paid in newly issued shares, such shares will be issued to
participants in accordance with the following formula: (i) if, on the
valuation date, the net asset value per share is less than or equal to
the market price per share, then the newly issued shares shall be
valued at net asset value per share on the valuation date; provided,
however, that if the net asset value per share is less than 95% of the
market price per share on the valuation date, then such shares will be
issued at 95% of the market price and (ii) if, on the valuation date,
the net asset value per share is greater than the market price per
share, the newly issued shares will be valued at the market price per
share on the valuation date. The valuation date shall be the dividend
or distribution payment date except that with respect to shares issued
pursuant to paragraph (c) above, the valuation date shall be the date
such shares are issued. If a date that would otherwise be a valuation
date is not a Trading Day, the valuation date shall be the next
preceding Trading Day.
3. Under the Cash Payment Plan (together with the DR Plan, the "Plans"), cash
payments of at least $25.00 made from time to time by the participant and
received by the Agent will be applied by the Agent in the purchase of
additional shares of capital stock of the Corporation on the Investment
Date next following receipt. The "Investment Date" will be each Friday (or
closest business day prior thereto if a holiday). All cash payment shares
will be purchased by the Agent on the open market at prevailing market
prices and in accordance with the conditions set forth in Item 4 below.
Participants have an unconditional right to obtain the return of any cash
payments up to 48 hours prior to such Investment Date. Checks must be drawn
on United States banks and denominated in U.S. dollars only. Third party
checks will not be accepted. There is no maximum amount of investment under
the Cash Payment Plan. The Agent reserves the right to sell additional
shares from the participant's account to satisfy any returned checks.
4. In making cash purchases for the participant's account, the Agent will
combine the participant's funds with those of the other participants. The
price at which the Agent shall be deemed to have acquired shares shall be
the average price (including brokerage commissions) of all shares purchased
by it in connection with a particular dividend or distribution under the DR
Plan or in connection with a particular investment under the Cash Payment
Plan, as the case may be.
- --------------------------------------------------------------------------------
THE SALOMON BROTHERS FUND INC
AUTHORIZATION TO PARTICIPATE IN THE DIVIDEND
REINVESTMENT PLAN FOR SHAREOWNERS OF
THE SALOMON BROTHERS FUND INC
COMMON SHARES
I wish to participate in the Dividend Reinvestment Plan. I appoint The Bank
of New York (the Agent) and authorize THE SALOMON BROTHERS FUND INC to pay to
the Agent for my account all net investment income dividends and capital gain
distributions (short-term and long-term) payable to me on the Common Shares that
are now or may hereafter be registered in my name.
I authorize the Agent to apply all such dividends and distributions in the
following manner, subject to the terms and conditions of the Plan set forth in
the brochure describing the Plan.
/ /(1) All net investment income dividends and capital gain distributions
(short-term and long-term) payable to me shall be automatically
reinvested
/ / (2) All net investment income dividends payable to me shall be paid in
cash and all capital gain distributions (short-term and long-term)
payable to me shall be automatically reinvested
/ / (3) All net investment income dividends payable to me shall be reinvested
and all capital gain distributions (short-term and long-term) shall be
paid in cash
(Choose one of the above.)
I understand that if I do not choose one of the above, I will be deemed to
have chosen option (1).
I understand that the appointment of The Bank of New York as the Agent is
subject to the terms and conditions of the Plan set forth in the brochure
describing the Plan.
In addition, please invest the enclosed optional cash payment in the amount
of $____________ as directed by the terms and conditions of the Plan.
(Please sign on the reverse side of this card.)
- --------------------------------------------------------------------------------
The Salomon Brothers Fund Inc 23
It is understood that (i) the Agent may hold the shares of all participants
together in its name or in the name of its nominee, (ii) the Agent may
utilize BNY Brokerage Inc., an affiliate of the Agent, for all trading
activity relating to the DR Plan and Cash Payment Plan on behalf of
participants and that BNY Brokerage Inc. receives a commission in
connection with such transactions, (iii) that government regulations may
require the temporary curtailment or suspension of purchase of shares under
the Plans and accordingly, the Agent shall not be accountable for its
inability to make purchases at such times and (iv) that the Agent shall
have no responsibility as to the market value of the shares acquired for
the participant's account.
The Agent will confirm the purchases so made as soon as practicable after
the purchases are made.
5. No certificate with respect to reinvested dividends and distributions will
be issued to a participant unless he or she so requests. No certificate for
a fractional share will be issued.
6. Participants shall not bear any of the costs of administering the Plan.
Each account will bear its proportionate share of brokerage commissions
paid on open market purchases.
7. It is understood that the investment of dividends and distributions does
not relieve the participant of any taxes which may be payable on such
dividends and distributions. The Agent will report annually to each
participant the amount of dividends and distributions credited to his
account during the year.
8. (a) The Agent will forward all proxy materials, including a form of proxy
and return envelope, covering all shares owned by a participant to be
voted and returned by the participant to the Corporation or its proxy
agent.
(b) A participant may terminate his or her account under the DR Plan or
change his or her election pursuant to paragraph 1(b), at any time by
notifying the Agent prior to the next dividend or distribution record
date. Participation shall be terminated by written notice similarly
received of the death, or adjudicated incompetency of a participant.
(c) In the event written notice of termination, death or adjudicated
incompetency is received by the Agent after a dividend or distribution
record date, but prior to the determination by the Agent of the number
of shares to be issued to or purchased for the participant following
such dividend or distribution record date, participation in the DR
Plan shall be terminated immediately following such determination.
Upon termination by reason of notice of death, or adjudicated
incompetency, no newly issued shares shall be credited to the
participant's account and no purchase of shares shall be made for the
participant's account. The participant's shares and any cash dividends
or distributions paid thereon shall be retained by the Agent subject
to the Terms and Conditions until such time as such participant's
legal representatives shall have been appointed and shall have
furnished proof sufficient to the Agent of his right to receive such
shares and such dividends or distributions. Upon termination by the
participant, the Agent will send the participant a certificate of the
full shares in his or her account and a check in an amount equal to
the then current market price of any fractional share or, the Agent,
upon receipt of instructions from the participant, will sell the
participant's full and fractional shares as soon as practicable
following termination and send to the participant a check representing
the proceeds, less brokerage commissions and any applicable taxes. If
a participant disposes of all shares registered in his or her name on
the books of the Corporation, the Agent will at its discretion,
continue to reinvest dividends and distributions on the shares in the
participant's DR Plan account until otherwise notified by the
participant.
9. The Agent may terminate either Plan by notice in writing remitted to all
participants. In such event the Agent will send the participant a
certificate for the full shares in his or her account and cash for any
fractional shares at the then current market price as indicated in Item 8.
10. The Agent shall not be liable hereunder for any act done in good faith, or
for any good faith omissions to act, including, without limitation, any
claims of liability (1) arising out of any such act or omission to act
which occurs prior to the termination of participation pursuant to Item 8
above and (2) with respect to the prices at which shares are purchased or
sold for the participant's account and the times such purchases or sales
are made.
11. The participant agrees to notify the Agent promptly in writing of any
change of address. Notices to the participant may be given by letter
addressed to the participant at his last address of record with the Agent.
12. These Terms and Conditions may be amended or supplemented by the Agent at
any time or times by mailing appropriate notice at least 30 days prior to
the effective date thereof to the participant at his last address of
record. The amendment or supplement shall conclusively be deemed to be
accepted by the participant unless prior to effective date thereof the
Agent receives written notice of the termination of the participant's
account. Any such amendment may include the appointment by the Agent in its
place and stead a successor agent under these Terms and Conditions provided
such successor is a bank or trust company organized under the laws of the
United States or any state thereof. The Corporation is authorized to pay to
such successor agent for the account of each participant in the Plan all
dividends and distributions payable on shares of the Corporation's capital
stock held by the Agent for the participant or by the participant himself
or herself, the shares to be applied by such successor agent as provided in
these Terms and Conditions.
13. You may effect "book-to-book" transfers, which involve transferring shares
from an existing participant account in the Plan to a new participant
account by providing the Bank with a written request in accordance with the
terms and conditions of the Plan. All participants in the current account
must sign the request and their signatures must be guaranteed by a bank,
broker or financial institution that is a member of a signature Guarantee
Medallion Program. The new participant account will automatically be coded
for full dividend reinvestment unless otherwise instructed.
14. The Terms and Conditions of this authorization shall be governed by the
laws of the State of New York.
Any inquiries regarding the Plans should be directed to the Agent at:
THE BANK OF NEW YORK
Investor Relations Department
P.O. Box 11002
New York, New York 10286-1002
1-800-432-8224
If you desire to participate in The Salomon Brothers Fund Inc Dividend
Reinvestment Plan as described in the brochure, please sign and return this card
to:
THE BANK OF NEW YORK
P.O. Box 1958
Newark, NJ 07101-9774
Att: Dividend Reinvestment Department
DATED:_____________________, 20____
PLEASE SIGN, DATE AND RETURN
USING THE ENCLOSED ENVELOPE
-------------------------------
Signature
-------------------------------
Signature (if held jointly)
Please sign exactly as your name(s)appear hereon.
THIS IS NOT A PROXY
- --------------------------------------------------------------------------------
24 2004 Semi-Annual Report
ADDITIONAL SHAREHOLDER INFORMATION (unaudited)
RESULT OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of The Salomon Brothers Fund Inc was held on
April 20, 2004, for the purpose of considering and voting upon the election of
Directors and one shareholder proposal. The following table provides information
concerning the matters voted upon at the Meeting:
1. ELECTION OF DIRECTORS
Shares Shares
Nominees Voted For Withheld
- --------------------------------------------------------------------------------
Andrew L. Breech 69,794,468 4,036,578
Carol L. Colman 67,208,636 5,622,410
William R. Dill 68,655,956 4,175,090
R. Jay Gerken 67,207,278 5,623,768
William R. Hutchinson 67,225,192 5,605,854
Louis P. Mattis 68,726,263 4,104,783
Thomas F. Schlafly 68,694,648 4,136,398
- --------------------------------------------------------------------------------
2. SHAREHOLDER PROPOSAL TO REQUEST THAT THE BOARD OF DIRECTORS CONSIDER
LIQUIDATING THE FUND
Shares Shares Shares
Voted For Against Abstained
- --------------------------------------------------------------------------------
8,999,480 29,005,309 34,826,257
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Salomon Brothers Fund Inc 25
BOARD OF DIRECTORS
Andrew L. Breech
Carol L. Colman
William R. Dill
R. Jay Gerken, CFA, Chairman
William R. Hutchinson
Louis P. Mattis
Thomas F. Schlafly
ADDITIONAL INFORMATION (unaudited)
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the Fund may purchase at market prices from time to
time shares of its common stock in the open market.
Beginning August 31, 2004, information on how the Fund voted proxies relating to
portfolio securities during the 12 month period ended June 30, 2004 will be
available (1) without charge, upon request, by calling 1-800-446-1013 and (2) on
the SEC's website at www.sec.gov.
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.
This report is transmitted to the shareholders of The Salomon Brothers 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.
- --------------------------------------------------------------------------------
26 2004 Semi-Annual Report
OFFICERS
R. Jay Gerken, CFA President and Chief Executive Officer
Andrew B. Shoup Senior Vice President and
Chief Administrative Officer
Frances M. Guggino Chief Financial Officer and Treasurer
Michael A. Kagan Executive Vice President
Kevin Caliendo Executive Vice President
Andrew Beagley Chief Compliance Officer*
Joseph T. Volpe Controller
Robert I. Frenkel Secretary and Chief Legal Officer
- --------
* As of July 26, 2004.
SERVICE PROVIDERS
Salomon Brothers Asset Management Inc Investment Manager
399 Park Avenue
New York, New York 10022
The Bank of New York Transfer Agent
101 Barclay Street
New York, New York 10007
State Street Bank and Trust Company Custodian
225 Franklin Street
Boston, Massachusetts 02110
Simpson Thacher & Bartlett LLP Legal Counsel
425 Lexington Avenue
New York, New York 10017-3909
PricewaterhouseCoopers LLP Independent Registered Public
1177 Avenue of the Americas Accounting Firm
New York, New York 10036
- --------------------------------------------------------------------------------
The Salomon Brothers Fund Inc 27
(This page intentionally left blank.)
- --------
SALOMON
- --------
BROTHERS
- --------
Asset Management
399 Park Avenue
New York, New York 10022
1-800-Salomon SBF
www.sbam.com Listed
NYSE
SBFSEMI 6/04
04-7055
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.
The Board of Directors of the Fund has delegated the authority to
develop policies and procedures relating to proxy voting to the
Manager. The Manager is part of Citigroup Asset Management ("CAM"), a
group of investment adviser affiliates of Citigroup, Inc.
("Citigroup"). Along with the other investment advisers that comprise
CAM, the Manager has adopted a set of proxy voting policies and
procedures (the "Policies") to ensure that the Manager votes proxies
relating to equity securities in the best interest of clients.
In voting proxies, the Manager is guided by general fiduciary
principles and seeks to act prudently and solely in the best interest
of clients. The Manager attempts to consider all factors that could
affect the value of the investment and will vote proxies in the manner
that it believes will be consistent with efforts to maximize
shareholder values. The Manager may utilize an external service
provider to provide it with information and/or a recommendation with
regard to proxy votes. However, such recommendations do not relieve the
Manager of its responsibility for the proxy vote.
In the case of a proxy issue for which there is a stated position in
the Policies, CAM generally votes in accordance with such stated
position. In the case of a proxy issue for which there is a list of
factors set forth in the Policies that CAM considers in voting on such
issue, CAM votes on a case-by-case basis in accordance with the general
principles set forth above and considering such enumerated factors. In
the case of a proxy issue for which there is no stated position or list
of factors that CAM considers in voting on such issue, CAM votes on a
case-by-case basis in accordance with the general principles set forth
above. Issues for which there is a stated position set forth in the
Policies or for which there is a list of factors set forth in the
Policies that CAM considers in voting on such issues fall into a
variety of categories, including election of directors, ratification of
auditors, proxy and tender offer defenses, capital structure issues,
executive and director
compensation, mergers and corporate restructurings, and social and
environmental issues. The stated position on an issue set forth in the
Policies can always be superseded, subject to the duty to act solely in
the best interest of the beneficial owners of accounts, by the
investment management professionals responsible for the account whose
shares are being voted. Issues applicable to a particular industry may
cause CAM to abandon a policy that would have otherwise applied to
issuers generally. As a result of the independent investment advisory
services provided by distinct CAM business units, there may be
occasions when different business units or different portfolio managers
within the same business unit vote differently on the same issue.
In furtherance of the Manager's goal to vote proxies in the best
interest of clients, the Manager follows procedures designed to
identify and address material conflicts that may arise between the
Manager's interests and those of its clients before voting proxies on
behalf of such clients. To seek to identify conflicts of interest, CAM
periodically notifies CAM employees (including employees of the
Manager) in writing that they are under an obligation (i) to be aware
of the potential for conflicts of interest with respect to voting
proxies on behalf of client accounts both as a result of their personal
relationships and due to special circumstances that may arise during
the conduct of CAM's and the Manager's business, and (ii) to bring
conflicts of interest of which they become aware to the attention of
compliance personnel. The Manager also maintains and considers a list
of significant relationships that could present a conflict of interest
for the Manager in voting proxies. The Manager is also sensitive to the
fact that a significant, publicized relationship between an issuer and
a non-CAM affiliate might appear to the public to influence the manner
in which the Manager decides to vote a proxy with respect to such
issuer. Absent special circumstances or a significant, publicized
non-CAM affiliate relationship that CAM or the Manager for prudential
reasons treats as a potential conflict of interest because such
relationship might appear to the public to influence the manner in
which the Manager decides to vote a proxy, the Manager generally takes
the position that non-CAM relationships between Citigroup and an issuer
(e.g. investment banking or banking) do not present a conflict of
interest for the Manager in voting proxies with respect to such issuer.
Such position is based on the fact that the Manager is operated as an
independent business unit from other Citigroup business units as well
as on the existence of information barriers between the Manager and
certain other Citigroup business units.
CAM maintains a Proxy Voting Committee, of which the Manager personnel
are members, to review and address conflicts of interest brought to its
attention by compliance personnel. A proxy issue that will be voted in
accordance with a stated position on an issue or in accordance with the
recommendation of an independent third party is not brought to the
attention of the Proxy Voting Committee for a conflict of interest
review because the Manager's position is that to the extent a conflict
of interest issue exists, it is resolved by voting in accordance with a
pre-determined policy or in accordance with the recommendation of an
independent third party. With respect to a conflict of interest brought
to its attention, the Proxy Voting Committee first determines whether
such conflict of interest is material. A conflict of interest is
considered material to the extent that it is determined that such
conflict is likely to influence, or appear to influence, the Manager's
decision-making in voting proxies. If it is determined by the
Proxy Voting Committee that a conflict of interest is not material, the
Manager may vote proxies notwithstanding the existence of the conflict.
If it is determined by the Proxy Voting Committee that a conflict of
interest is material, the Proxy Voting Committee is responsible for
determining an appropriate method to resolve such conflict of interest
before the proxy affected by the conflict of interest is voted. Such
determination is based on the particular facts and circumstances,
including the importance of the proxy issue and the nature of the
conflict of interest. Methods of resolving a material conflict of
interest may include, but are not limited to, disclosing the conflict
to clients and obtaining their consent before voting, or suggesting to
clients that they engage another party to vote the proxy on their
behalf.
ITEM 8. [RESERVED]
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 10. 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 11. 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.
THE SALOMON BROTHERS FUND INC
By: /s/ R. Jay Gerken
R. Jay Gerken
Chief Executive Officer of
THE SALOMON BROTHERS FUND INC
Date: September 9, 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
THE SALOMON BROTHERS FUND INC
Date: September 9, 2004
By: /s/ FRANCES M. GUGGINO
FRANCES M. GUGGINO
Chief Financial Officer of
THE SALOMON BROTHERS FUND INC
Date: September 9, 2004