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Legg Mason Partners Capital Fund, Inc. – ‘N-14AE’ on 7/21/06

On:  Friday, 7/21/06, at 11:50am ET   ·   Accession #:  1193125-6-150758   ·   File #:  333-135933

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 7/21/06  Legg Mason Partners Cap Fd, Inc.  N-14AE                12:22M                                    RR Donnelley/FA
          → Legg Mason Partners Capital Fund, Inc.
          → Legg Mason Partners Mid Cap Fund ⇒ Class A (SMDAX) — Class B (SMDBX) — Class C (SMDZX) — Class O (SMDOX)

Document/Exhibit                   Description                      Pages   Size 

 1: N-14AE      Salomon Brothers Capital Funds Inc.                 HTML   1.28M 
 2: EX-99.11    Opinion and Consent of Venable LLP                  HTML     17K 
 3: EX-99.12    Form of Opinion of Dechert LLP Supporting the Tax   HTML     17K 
                          Matters and Consequences                               
 4: EX-99.14A   Consent of Independent Registered Public            HTML      8K 
                          Accounting Firm                                        
 5: EX-99.14B   Consent of Independent Registered Public            HTML      8K 
                          Accounting Firm                                        
 6: EX-99.16    Power of Attorney                                   HTML     12K 
 7: EX-99.17A   Form of Proxy Card                                  HTML     14K 
 8: EX-99.17B   Statement of Additional Information of Salomon      HTML   1.94M 
                          Brothers Capital Fund Inc.                             
 9: EX-99.17C   Annual Report of Salomon Brothers Capital Fund Inc  HTML   2.34M 
10: EX-99.17D   Annual Report of Salomon Brothers Capital Fund      HTML   2.55M 
                          Inc.                                                   
11: EX-99.17E   Prospectus and Statement of Additional Information  HTML   4.68M 
                          of Salomon Brothers                                    
12: EX-99.17F   Annual Report of Salomon Brothers Mid Cap Fund      HTML   1.50M 

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 21, 2006.

SECURITIES ACT FILE NO. 333-            

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM N-14

REGISTRATION STATEMENT

SALOMON BROTHERS CAPITAL FUND INC

(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

125 BROAD STREET, NEW YORK, NY 10004

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

1-800-446-1013

(REGISTRANT’S AREA CODE AND TELEPHONE NUMBER)

R. JAY GERKEN

LEGG MASON & CO., LLC

399 PARK AVENUE, 4^TH FLOOR

NEW YORK, NY 10022

(NAME AND ADDRESS OF AGENT FOR SERVICE)

WITH COPIES TO:

APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:    Registrant proposes that the Registration Statement become effective August 20, 2006 pursuant to Rule 488 under the Securities Act of 1933, as amended.

TITLE OF SECURITIES BEING REGISTERED:

Class A, Class B, Class C, Class O and Class Y shares of the Registrant

The Registrant has registered an indefinite amount of securities under the Securities Act of 1933, as amended, pursuant to Section 24(f) under the Investment Company Act of 1940, as amended; accordingly, no fee is payable herewith because of reliance upon Section 24(f).

SALOMON FUNDS TRUST

125 Broad Street

New York, New York 10004

Special Meeting of Shareholders to be held on October 4, 2006

August 17, 2006

Dear Shareholder:

You are being asked to vote on one or more proposed transactions related to certain Salomon Brothers funds you own.

The Board of Trustees of each of the funds identified as “your fund” on the reverse side of this letter has called a special meeting of shareholders (“Meeting”) for your fund to be held on October 4, 2006, at the offices of Bingham McCutchen LLP, 399 Park Avenue, 19th Floor, New York, NY 10022, at 2:00 p.m. Eastern Time, in order to vote on the proposed transaction regarding your fund(s). Each transaction involves a proposal to reorganize a fund into a corresponding surviving fund (a “Reorganization”). The attached Proxy Statement/Prospectus only asks for your approval of the proposed Reorganization for your fund. After careful consideration, the Board(s) of the respective fund(s) recommends that you vote “FOR” each proposed Reorganization.

A chart summarizing the proposals to reorganize the funds is included on the reverse side of this letter, and detailed information about each of the proposals is contained in the enclosed Proxy Statement/Prospectus.

The Reorganizations are part of a larger set of initiatives that Legg Mason has recently undertaken following its acquisition of Citigroup Asset Management in 2005. These initiatives are designed to integrate and streamline many of the company’s mutual fund offerings, including the legacy Citigroup Asset Management funds in an effort to focus on those funds that Legg Mason believes offer the best prospects for long-term viability and attractive long-term performance. These funds consist of the Legg Mason Partners funds (formerly known as Smith Barney funds), the Salomon Brothers funds and the CitiFunds. The other initiatives, which are not included in the attached materials, include proposals to reorganize the legacy Citigroup Asset Management funds, to change investment strategies and restrictions of certain funds, and changes to the funds’ fee structures and forms of organization. Certain of these initiatives will require shareholder approval. The Boards of the affected funds recently have approved these initiatives and if the initiatives apply to your fund, they will be presented for your consideration and approval in separate sets of proxy materials that will be sent to you during the next few months. Legg Mason believes that these initiatives also will create a stronger and more cohesive family of funds.

Your vote is very important to us regardless of the number of shares you own. Whether or not you plan to attend the Meeting in person, please read the Proxy Statement/Prospectus and cast your vote promptly. To cast your vote, simply complete, sign, and return the Proxy Card in the enclosed postage-paid envelope or follow the instructions on the proxy card for voting by touch-tone telephone or on the internet.

It is important that your vote be received no later than the time of the Meeting.

Sincerely,

R. Jay Gerken

President and Chief Executive Officer

Salomon Funds Trust

2

SALOMON FUNDS TRUST

IMPORTANT NEWS FOR SHAREHOLDERS

The enclosed combined Proxy Statement/Prospectus describes a proposal to reorganize your fund into a compatible fund. While we encourage you to read the full text of the enclosed combined Proxy Statement/Prospectus, here is a brief overview of the proposed fund reorganizations. The information in this overview applies generally to all of the funds, except where more specific information about a fund is included. Please refer to the more complete information contained elsewhere in the combined Proxy Statement/Prospectus about the reorganizations.

COMMON QUESTIONS ABOUT THE PROPOSED REORGANIZATIONS

Q. WHY IS A SHAREHOLDER MEETING BEING HELD?

A. The Board of your fund has approved a reorganization, subject to shareholder approval, under which your fund would be combined with another Legg Mason-affiliated fund that has investment objectives and policies similar to your fund. If shareholders of your fund approve the reorganization, you would become a shareholder of the corresponding surviving fund in the chart below.

Q. HOW WILL A REORGANIZATION AFFECT ME?

A. If the reorganization of your fund is approved, your fund’s assets and liabilities will be combined with the assets and liabilities of the surviving fund and you will become a shareholder of the surviving fund. You will receive shares of the surviving fund having an aggregate net asset value equal to the aggregate net asset value of the shares of your fund that you own on the date of the reorganization.

Q. WHY ARE THE REORGANIZATIONS BEING RECOMMENDED?

A. As you may be aware, on December 1, 2005, Legg Mason acquired substantially all the asset management businesses of Citigroup Asset Management. Since that time, Legg Mason has undertaken a broad set of initiatives, including a comprehensive review of its various products, with the goal of integrating and streamlining the legacy Citigroup Asset Management funds in an effort to focus on these funds that we believe offer the best prospects for superior long-term growth and attractive long-term performance.

Q. ARE MY FUND’S INVESTMENT OBJECTIVES AND POLICIES SIMILAR TO THOSE OF ITS SURVIVING FUND?

A. Legg Mason has recommended the surviving fund in each reorganization based on, among other factors its evaluation of the compatibility of your fund’s investment objectives and policies with those of its surviving fund. There are, however, certain differences in investment objectives, principal investment policies and strategies, and principal risks between your fund(s) and the surviving fund(s). Please see “Comparison of Investment Objectives, Strategies and Principal Risks of Investing in the Funds” in the Proxy Statement/Prospectus.

The following chart provides a brief summary of some of the more significant of these differences, as considered by your fund’s board:

Q. HOW WILL THE REORGANIZATIONS AFFECT FUND FEES AND EXPENSES?

A. The chart below illustrates the effect of the reorganizations on your fund’s fees and expenses:

In certain reorganizations, management has agreed to impose an expense cap that will limit the effect of the expense increases for a period of time.

The expense caps will remain in effect for one year from the date of the next annual prospectus update of the surviving fund following the reorganization.

Please see “Comparison of Fees and Expenses” in the Proxy Statement/Prospectus for a detailed breakdown of the fees and expenses paid by your fund in comparison with those paid by the surviving fund.

Q. WILL I HAVE TO PAY ANY SALES LOAD, CHARGE OR OTHER COMMISSION IN CONNECTION WITH A REORGANIZATION?

A. No. No sales load, deferred sales charge, commission, redemption fee, or other transactional fee will be charged as a result of the reorganizations. You will receive shares of the surviving fund having an aggregate net asset value equal to the aggregate net asset value of the shares of your fund that you own on the date of the reorganization.

Q. WHAT IF I REDEEM OR EXCHANGE MY SHARES BEFORE THE CLOSING OF THE REORGANIZATION?

A. Redemptions or exchanges of fund shares which occur before the closing of the reorganization will be processed according to your fund’s policies and procedures in effect at the time of the redemption or exchange.

Q. WILL MY SHAREHOLDER PRIVILEGES CHANGE AS A RESULT OF THE REORGANIZATION?

A. Generally, no. In most instances, shareholders will receive the same class of shares of the surviving fund as they currently hold. There is one exception, however:

In addition, Class O shareholders of Salomon Brothers Mid Cap Fund will receive Class O shares of Salomon Brothers Capital Fund Inc, which will be redesignated as Class Y shares.

Please see “Comparison of Sales Loads, Distribution and Shareholder Servicing Arrangements and Purchase, Redemption and Exchange Policies and Procedures” and “Appendix B—Purchases, Redemptions and Exchanges of Fund Shares—Other Shareholder Information” in the Proxy Statement/Prospectus for a description of the differences among fund classes.

As part of the comprehensive review undertaken by Legg Mason, the Boards of your fund(s) have approved changes to the share class pricing structure that are expected to become effective prior to the date of the reorganizations and, therefore, will be applicable to the surviving funds after the reorganizations. You will see information about those changes in a supplement to your fund’s prospectus to be distributed later this year. Please see also “Comparison of Sales Loads, Distribution and Shareholder Servicing Arrangements and Purchase, Redemption and Exchange Policies and Procedures” in the Proxy Statement/Prospectus for more information.

Q. WILL I HAVE TO PAY ANY TAXES AS A RESULT OF THE REORGANIZATIONS?

A. Each reorganization is intended to qualify as a tax-free transaction for Federal income tax purposes. Assuming the reorganization of your fund qualifies for such treatment, you will not recognize a gain or loss for Federal income tax purposes as a result of the reorganization. As a condition to the closing of the reorganization, your fund will receive an opinion of counsel to the effect that the reorganization will qualify for such treatment. Opinions of counsel are not binding on the Internal Revenue Service or the courts. You should talk to your tax advisor about any state, local and other tax consequences of your fund’s reorganization.

Q. WHAT HAPPENS IF SHAREHOLDERS OF ONE FUND APPROVE THEIR REORGANIZATION, WHILE SHAREHOLDERS OF THE OTHER FUND DO NOT?

A. None of the proposed reorganizations is contingent upon the approval of the other reorganization including those reorganizations that contemplate the reorganization of more than one fund into a surviving fund. Thus, if shareholders of your fund approve the reorganization of your fund, your fund will be reorganized into the surviving fund even if shareholders of the other funds do not approve their reorganizations.

Q. WHO WILL PAY FOR THE REORGANIZATIONS?

A. Legg Mason and the funds will share the costs of the Reorganizations involving the Legg Mason Partners and Salomon Brothers funds. Please see “Proxy Solicitation” in the Proxy Statement/Prospectus for a description of the costs to be borne by Legg Mason and those to be borne by the funds.

Q. WILL I BE RECEIVING ANY OTHER PROXY MATERIALS OR OTHER MATERIALS FROM MY FUND?

A. Yes. Legg Mason has developed a broader set of initiatives designed to integrate and streamline the legacy Citigroup Asset Management funds. The other initiatives, which are not included in the attached materials, include proposals to reorganize other legacy Citigroup Asset Management funds as well as a number of other governance- and investment-related matters. Certain of these initiatives will require shareholder approval. The Boards of the affected funds recently have approved these initiatives and if the initiatives apply to your fund, they will be presented for your consideration and approval in separate sets of proxy materials that will be sent to you during the next few months. For a discussion of certain of these proposals, see “Effect of Proposed ‘Shell’ Reorganizations of the Funds,” “Fundamental Investment Restrictions” and “Form of Organization” in the Proxy Statement/Prospectus.

Q. ARE THERE ANY PROPOSED CHANGES TO THE SURVIVING FUNDS THAT I SHOULD KNOW ABOUT?

A. Yes. As part of the initiatives referred to in the previous question, shareholders of the surviving funds will be asked to approve certain proposals, including electing Board members and approving certain other governance- and investment-related proposals. If these proposals are approved by shareholders of the surviving funds, it is currently anticipated that they would take effect no later than the completion date of the proposed reorganization of your fund into its surviving fund.

Q. HOW DOES MY BOARD RECOMMEND THAT I VOTE?

A. Your fund’s Board, including all of the independent Board members, unanimously recommends that you vote FOR the reorganizations of your fund.

Q. WHAT HAPPENS IF A REORGANIZATION IS NOT APPROVED?

A. If the shareholders of your fund do not approve the reorganization, then you will remain a shareholder of your fund.

Q. I AM AN INVESTOR WHO HOLDS A SMALL NUMBER OF SHARES. WHY SHOULD I VOTE?

A. Your vote can make a difference. If many shareholders just like you fail to vote their proxies, your fund may not receive enough votes to go forward with the shareholder meeting, and additional costs will be incurred to solicit additional proxies.

Q. WHEN IS THE REORGANIZATION OF MY FUND EXPECTED TO HAPPEN?

If shareholders approve the reorganization of your fund, the reorganization of your fund is expected to occur on or about                     ,             .

Q. HOW CAN I VOTE?

A. In addition to voting by mail by returning the enclosed proxy card, you may also vote by either touch-tone telephone or online via the Internet, as follows:

Q. WHO GETS TO VOTE?

A. If you owned shares of your fund at the close of business on August 10, 2006, you are entitled to vote those shares, even if you are no longer a shareholder of the fund.

Q. WHO DO I CALL IF I HAVE QUESTIONS?

A. If you need more information or have any questions on how to cast your vote, please call Computershare Fund Services, your fund’s proxy solicitor, at 1-866-402-1719.

Your vote is important. Please vote promptly to avoid the additional expense of another solicitation.

SALOMON FUNDS TRUST

Salomon Brothers Mid Cap Fund Salomon Brothers California Tax Free Bond Fund

125 Broad Street

New York, New York 10004

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS To Be Held on October 4, 2006

Please take notice that a Special Meeting of Shareholders (the “Meeting”) of each of the above-referenced Funds (each an “Acquired Fund”), will be held at the offices of Bingham McCutchen LLP, 399 Park Avenue, 19th Floor, New York, New York 10022, on October 4, 2006, at 2 p.m., Eastern time, for the following purposes:

; and

The appointed proxies will vote in their discretion on any other business as may properly come before the Meeting or any adjournments or postponements thereof.

Holders of record of shares of each Acquired Fund at the close of business on August 10, 2006 are entitled to vote at the Meeting and at any adjournments or postponements thereof.

YOUR VOTE ON THIS MATTER IS IMPORTANT. PLEASE VOTE PROMPTLY BY SIGNING AND DATING THE ENCLOSED PROXY CARD AND RETURNING IT IN THE ACCOMPANYING POSTAGE-PAID RETURN ENVELOPE OR BY FOLLOWING THE ENCLOSED INSTRUCTIONS TO VOTE BY TELEPHONE OR OVER THE INTERNET.

By Order of the Board of Trustees,

Robert I. Frenkel

Secretary

August 17, 2006

“Smith Barney” and “Salomon Brothers” are service marks of Citigroup, licensed for use by Legg Mason as the names of funds and investment advisers. Legg Mason and its affiliates, as well as the Funds’ investment manager, are not affiliated with Citigroup.

The information in this Proxy Statement/Prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This Proxy Statement /Prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED JULY         , 2006

PROXY STATEMENT/PROSPECTUS

AUGUST 17, 2006

PROXY STATEMENT FOR:

SALOMON FUNDS TRUST

Salomon Brothers Mid Cap Fund

Salomon Brothers California Tax Free Bond Fund

(collectively, the “Acquired Funds”)

125 Broad Street

New York, New York 10004

1-800-446-1013

PROSPECTUS FOR:

SALOMON BROTHERS CAPITAL FUND INC

LEGG MASON PARTNERS CALIFORNIA MUNICIPALS FUND, INC.

(collectively, the “Acquiring Funds” and

with the Acquired Funds, the “Funds”)

125 Broad Street

New York, New York 10004

1-800-446-1013 (Salomon Brothers Capital Fund Inc)

1-800-451-2010 (Legg Mason Partners California Municipals Fund, Inc.)

This combined Proxy Statement and Prospectus (the “Proxy Statement/Prospectus”) is being furnished in connection with the solicitation of proxies by the Board of Trustees (the “Board”) of the Acquired Funds for a Special Meeting of Shareholders of each of the Acquired Funds (the “Meeting”). The Meeting will be held on October 4, 2006 at 2 p.m., Eastern time, at the offices of Bingham McCutchen LLP, 399 Park Avenue, 19th Floor, New York, New York 10022. At the Meeting, shareholders of each Acquired Fund will be asked to consider and act upon the following:

; and

Each Reorganization Agreement contemplates the transfer of all of the assets and the assumption of all of the liabilities of an Acquired Fund in exchange for shares of the corresponding Acquiring Fund having an aggregate net asset value equal to the aggregate net asset value of the Acquired Fund. Each Acquired Fund would then distribute to its shareholders the portion of the shares of the corresponding Acquiring Fund to which each such shareholder is entitled, with each shareholder receiving shares of the corresponding Acquiring Fund having an aggregate net asset value equal to the aggregate net asset value of the shares of the Acquired Fund held by that shareholder as of the close of business on the day of the closing of the Reorganization. Thereafter, each Acquired Fund would be terminated.

You are being asked to approve a Reorganization Agreement pursuant to which a Reorganization would be accomplished. Because shareholders of the Acquired Funds are being asked to approve a transaction that will result in their holding shares of the corresponding Acquiring Funds, this Proxy Statement also serves as a Prospectus for the Acquiring Funds.

If a Reorganization Agreement is approved, the shareholders of the Acquired Fund will exchange their shares for shares of the Acquiring Fund according to the following chart:

If a Reorganization Agreement is approved, each shareholder of each class of an Acquired Fund will receive shares of the corresponding class of the Acquiring Fund in the Reorganization, except as follows:

Following the Reorganization of Salomon Brothers Mid Cap Fund into Salomon Brothers Capital Fund Inc, Class O shares of Salomon Brothers Capital Fund Inc will be redesignated as Class Y shares.

No sales charge will be imposed on Class A shares of either Acquiring Fund received by the Acquired Fund’s shareholders. After a Reorganization, any deferred sales charge that applied to a shareholder’s Class A (if applicable), Class B or Class C shares of the Acquired Fund at the time of a Reorganization will continue to apply for the remainder of the applicable holding period at the time of the Reorganization. In calculating any applicable deferred sales charge, the period during which a shareholder held the Class B or Class C shares (and the holding periods applicable to certain purchases of Class A shares) of the Acquired Fund will be included in the holding period of the Acquiring Fund’s shares received as a result of the Reorganizations. For more information about the classes of shares offered by the Acquired and Acquiring Funds, see “Comparison of Sales Loads, Distribution and Shareholder Servicing Arrangements and Purchase, Redemption and Exchange Policies and Procedures” below and “Purchases, Redemptions and Exchanges of Fund Shares—Other Shareholder Information” in Appendix B.

The Reorganizations are being structured as tax-free reorganizations for Federal income tax purposes. See “Information about the Proposed Reorganizations—Federal Income Tax Consequences” below. Shareholders should consult their tax advisors to determine the actual impact of the Reorganizations in light of their individual tax circumstances.

ii

Each Fund is an open-end management investment company or a series of an open-end management investment company. The investment objectives and principal investment strategies of each Acquired Fund are comparable to those of the corresponding Acquiring Fund. However, there may be certain differences in investment objectives, policies, strategies and principal risks. Please see “Comparison of Investment Objectives, Strategies and Principal Risks of Investing in the Funds” in this Proxy Statement/Prospectus.

This Proxy Statement/Prospectus, which you should retain for future reference, sets forth concisely the information about the Acquiring Funds that a prospective investor should know before investing. A Statement of Additional Information (the “Reorganization SAI”), dated August 17, 2006, relating to this Proxy Statement/Prospectus and the Reorganizations has been filed with the Securities and Exchange Commission (the “SEC”) and is incorporated by reference into this Proxy Statement/Prospectus. A copy of the Reorganization SAI is available upon request and without charge by writing to the Funds at the address listed above or calling Shareholder Services at 1-800-446-1013.

For more information regarding the Funds, see the current prospectuses and statements of additional information of the Funds (the “Fund SAIs”), dated as listed in Appendix L, which were filed with the SEC; the Acquired Fund Prospectuses and each Fund SAI are incorporated into this Proxy Statement/Prospectus by reference.

The most recent annual report and the semi-annual report next succeeding such annual report, if any, for each Fund, which highlight certain important information such as investment performance and expense and financial information and which have been filed with the SEC, are incorporated herein by reference. The annual report for the year ended December 31, 2004 of Salomon Brothers Capital Fund Inc is also incorporated by reference. You may receive a copy of the prospectus, SAI, annual report and semi-annual report for each Fund by contacting Shareholder Services at 1-800-451-2010 (Legg Mason Partners funds) or 1-800-446-1013 (Salomon Brothers funds), by writing to the Funds at the address listed above, or by visiting the Funds’ website at www.leggmason.com/InvestorServices.

In addition, you can copy and review this Proxy Statement/Prospectus and the complete filing on Form N-14 containing the Proxy Statement/Prospectus and any of the above-referenced documents at the SEC’s Public Reference Room in Washington, DC. You may obtain information about the operation of the Public Reference Room by calling the SEC at (202) 551-8090. Reports and other information about each Fund are available on the EDGAR Database on the SEC’s Internet site at www.sec.gov. You may also obtain copies of this information, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov, or by writing the SEC’s Public Reference Room, 100 F Street, N.E., Washington, DC 20549.

A copy of the form of Reorganization Agreement pertaining to each Reorganization accompanies this Proxy Statement/Prospectus as Appendix A.

The information contained herein concerning the Acquired Funds has been provided by, and is included herein in reliance upon, the Acquired Funds. The information contained herein concerning the Acquiring Funds has been provided by, and is included herein in reliance upon, the Acquiring Funds.

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES NOR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

iii

TABLE OF CONTENTS

SUMMARY

This summary is qualified in its entirety by reference to the additional information contained elsewhere in this Proxy Statement/Prospectus and each Reorganization Agreement, the form of which is attached to this Proxy Statement/Prospectus as Appendix A.

Proposed Reorganizations

At meetings held in June and July 2006, the Board of each Acquired Fund and the Board of each Acquiring Fund, including all of the Board members who are not “interested persons” of the Acquired Funds and the Acquiring Funds under the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Board Members”), unanimously approved the relevant Reorganization Agreement. Each Reorganization Agreement provides for:

Each Reorganization Agreement is subject to approval by the shareholders of the applicable Acquired Fund. The Reorganizations, if approved by shareholders, are scheduled to be effective as of the close of business on [                    ], or on such other date as the parties may agree (the “Closing Date”). As a result of the Reorganizations, each shareholder of an Acquired Fund will become the owner of the number of full and fractional shares of the corresponding Acquiring Fund having an aggregate net asset value equal to the aggregate net asset value of the shareholder’s Acquired Fund shares as of the close of business on the Closing Date. Shareholders of Class A shares, Class B shares, Class C shares and Class O shares of each Acquired Fund, as applicable, will receive the same class of shares of the applicable Acquiring Fund, except that Class O shareholders of Salomon Brothers California Tax Free Bond Fund will receive Class Y shares of Legg Mason Partners California Municipals Fund, Inc. in its Reorganization. Following the Reorganization of Salomon Brothers Mid Cap Fund into Salomon Brothers Capital Fund Inc, Class O shares of Salomon Brothers Capital Fund Inc will be designated as Class Y shares. See “Information about the Proposed Reorganizations” below. For more information about the classes of shares offered by the Acquired and Acquiring Funds, see “Comparison of Sales Loads, Distribution and Shareholder Servicing Arrangements and Purchase, Redemption and Exchange Policies and Procedures” below and “Purchases, Redemptions and Exchanges of Fund Shares—Other Shareholder Information” in Appendix B.

For the reasons set forth below in “Information about the Proposed Reorganizations—Reasons for the Reorganizations and Board Considerations,” the Board of each Acquired Fund, including all of the Independent Board Members, has concluded that the Reorganization of such Acquired Fund would be in the best interests of the Acquired Fund and that the interests of the Acquired Fund’s existing shareholders would not be diluted as a result of the Reorganization. The Board, therefore, has unanimously submitted the Reorganization Agreements to the shareholders of the Acquired Funds and recommends that shareholders of each Acquired Fund vote “FOR” the Reorganization Agreement effecting the Reorganization for that Fund. The Board of each Acquiring Fund has approved the Reorganization on behalf of the corresponding Acquiring Fund.

For each Acquired Fund, approval of the relevant Reorganization Agreement will require, if a quorum is present at the Meeting, the affirmative vote of a majority of the outstanding voting securities of the Acquired Fund, as defined in the 1940 Act. A “majority of the outstanding voting securities” is defined in the 1940 Act as the lesser of (a) 67% or more of the voting securities present at the Meeting, if the holders of more than 50% of the outstanding voting securities of the Acquired Fund are present at the Meeting or represented by proxy, or (b) more than 50% of the outstanding voting securities of the Acquired Fund. See “Voting Information” below.

Prior to completion of a Reorganization, each Fund will have received from Dechert LLP a legal opinion to the effect that the relevant Reorganization will qualify as a tax-free reorganization for Federal income tax purposes. Accordingly, no

gain or loss should be recognized by an Acquired Fund or its shareholders as a result of the Reorganization of such Acquired Fund, and the aggregate tax basis of the Acquiring Fund shares received by each Acquired Fund shareholder will be the same

2

as the aggregate tax basis of the shareholder’s Acquired Fund shares. For more information about the Federal income tax consequences of the Reorganizations, see “Information about the Proposed Reorganizations—Federal Income Tax Consequences” below.

Some of the portfolio assets of an Acquired Fund may be sold in connection with the Reorganization. The actual tax impact of such sales will depend on the difference between the price at which such portfolio assets are sold and the Acquired Fund’s basis in such assets. Any capital gains recognized in these sales on a net basis, after the application of any available capital loss carryforwards, will be distributed to the Acquired Fund shareholders as capital gain dividends (to the extent of net realized long-term capital gains distributed) and/or ordinary dividends (to the extent of net realized short-term capital gains distributed) during or with respect to the year of sale, and such distributions will be taxable to shareholders. It is possible that the Reorganization of Salomon Brothers Mid Cap Fund into Salomon Brothers Capital Fund Inc could result in substantial turnover to Salomon Brothers Mid Cap Fund’s portfolio and distribution of substantial long-term capital gains to Salomon Brothers Mid Cap Fund shareholders.

Certain Defined Terms Used in this Proxy Statement and Prospectus

The Acquired Funds are organized as series of Massachusetts business trusts (the “Massachusetts Funds”) and the Acquiring Funds are organized as Maryland corporations (the “Maryland Corporations”). For ease of reference and clarity of presentation, shares of common stock of the Maryland Corporations and beneficial interests of the Massachusetts Funds are hereinafter referred to as “shares,” and holders of shares are hereinafter referred to as “shareholders”; the Boards of Trustees overseeing the Massachusetts Funds and the Boards of Directors overseeing the Maryland Corporations are each referred to herein as a “Board” and collectively as the “Boards”; the Declarations of Trusts governing the Massachusetts Funds and the Articles of Incorporation governing the Maryland Corporations, each as amended and supplemented, are referred to herein as a “declaration of trust”; the term “termination” refers to the termination and redemption for purposes of a portfolio of a Maryland corporation and for the purposes of a series of a Massachusetts business trust refers to the liquidation of the assets and the distribution of the remaining trust property to the shareholders in accordance with their respective rights.

Comparison of Investment Objectives and Principal Investment Strategies

This section will help you compare the investment objectives and principal investment strategies of the Acquired Funds and the Acquiring Funds. Please be aware that this is only a brief discussion. More detailed comparisons of the Acquired Funds and the Acquiring Funds, including risks, appear later in this Proxy Statement/Prospectus, and a chart providing a side-by-side comparison of the Funds and their investment objectives, principal investment strategies and management can be found in Appendix C. These discussions include any material differences in the Funds’ “fundamental” investment policies, meaning those that can be changed only by shareholder vote, and any material differences in the Funds’ “non-fundamental investment policies, meaning those that can be changed by a Fund’s board without a shareholder vote. In each case, the investment objectives, investment policies and restrictions and principal investment strategies of the Acquiring Fund will apply following the Reorganization of the Acquired Fund. More information can be found in each Fund’s prospectus and Fund SAI.

Salomon Brothers Mid Cap Fund (Acquired Fund) and Salomon Brothers Capital Fund Inc (Acquiring Fund)

The investment objectives of both Funds are comparable. Both Funds seek capital appreciation. Salomon Brothers Capital Fund Inc has an explicit focus on securities that the manager believes have above-average capital appreciation potential.

There are certain differences between the investment policies of the Funds. These differences include the market capitalization of the companies in which they invest, their ability to invest in debt securities and their policies regarding diversification.

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The Funds have the same portfolio managers who focus on individual companies, rather than broader market forces, when selecting securities for the Funds. With respect to the Salomon Brothers Capital Fund Inc, the managers emphasize individual security selection while diversifying the Fund’s investments across industries, which may help to reduce risk. The managers seek to identify those companies which offer the greatest potential for capital appreciation through careful fundamental analysis of each company and its financial characteristics. In selecting individual companies for investment, the managers of the Salomon Brothers Capital Fund Inc look for the following:

With respect to the Salomon Brothers Mid Cap Fund, the managers emphasize medium-sized U.S. companies with good prospects for revenue and earnings growth that meet the managers’ valuation criteria. In selecting investments, the managers look for issuers that are among the leaders in their industry. The managers generally use a “bottom-up” approach when selecting securities for the Fund. This means that the managers look primarily at individual companies against the context of broader market forces. The Funds have the same portfolio managers.

Salomon Brothers California Tax Free Bond Fund (Acquired Fund) and Legg Mason Partners California Municipals Fund, Inc. (Acquiring Fund)

The Funds have different investment objectives. Legg Mason Partners California Municipals Fund, Inc. seeks to provide a high level of current income exempt from federal income taxes and California state personal income taxes as is consistent with prudent investment management and the preservation of capital, while the Salomon Brothers California Tax Free Bond Fund seeks to maximize total return consistent with the preservation of capital.

While the investment objectives of the Funds differ, both Funds have similar principal investment policies. Both Funds invest at least 80% of their assets in California investment grade municipal obligations, the income from which is exempt from regular federal income taxes and California state personal income taxes. However, the Funds differ with respect to the extent they may invest in California municipal obligations that pay interest subject to the Federal alternative minimum tax (“AMT”). Salomon Brothers California Tax Free Bond Fund invests at least 80% of its assets in California municipal securities that pay interest exempt from AMT, while Legg Mason Partners California Municipals Fund, Inc. may invest without limit in municipal securities that pay interest subject to the AMT.

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The Funds also have similar, although not identical, average portfolio maturities. Legg Mason Partners California Municipals Fund, Inc. primarily focuses on holding intermediate and long-term municipal securities that have remaining maturities at the time of purchase from 3 to more than 30 years. The Salomon Brothers California Tax Free Bond Fund may invest in bonds of any maturity, although the Fund’s dollar-weighted average maturity is normally expected to be between 10 and 30 years. Both Funds are non-diversified under the 1940 Act and may use derivative contracts.

Legg Mason Partners California Municipals Fund, Inc.’s manager selects securities primarily by identifying undervalued sectors and individual securities, while also selecting securities it believes will benefit from changes in market conditions. In selecting individual securities, the manager:

Salomon Brothers California Tax Free Bond Fund’s manager looks for both income and potential for gain when selecting securities for the Fund.

The Fund is managed by employing a combination of qualitative and quantitative analysis. The manager decides which securities to purchase by first developing an interest rate forecast and analysis of general economic conditions for the United States as a whole, with a particular focus on California. Then the manager compares specific sectors to identify broad segments of the municipal market poised to benefit in this environment. The manager also closely studies the yields and other characteristics of specific issues to identify attractive opportunities. The manager seeks to add value by investing in a range of municipal bonds, representing different market sectors, structures and maturities. The manager uses this same approach when deciding which securities to sell. Securities are sold when the Fund needs cash to meet redemptions, or when the manager believes that better opportunities exist or that the security no longer fits within the manager’s overall strategies for achieving the Fund’s investment objective.

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Comparison of Fees and Expenses

The tables below (1) compare the estimated fees and expenses of each class of each Fund, as of March 31, 2006, and (2) show the estimated fees and expenses of each class of each combined Fund, on a pro forma basis, as if the Reorganizations occurred on March 31, 2006.

FEE TABLES AND EXPENSE EXAMPLES:

Salomon Brothers Mid Cap Fund (Acquired Fund)

Salomon Brothers Capital Fund Inc (Acquiring Fund)

The estimated expenses of Salomon Brothers Mid Cap Fund (Acquired Fund) and Salomon Brothers Capital Fund Inc (Acquiring Fund) as of March 31, 2006 and pro forma expenses following the proposed Reorganization are set forth below.

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The following examples help you compare the costs of investing in each of the Funds with the costs of investing in other mutual funds. The examples assume that you invest $10,000 for the periods shown, that your investment has a 5% return each year, that you reinvest all distributions and dividends, and that the Funds’ operating expenses (before voluntary fee waivers and/or expense reimbursements, if any) remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

ASSUMING THE INVESTOR REDEEMS HIS OR HER SHARES:

ASSUMING THE INVESTOR DOES NOT REDEEM HIS OR HER SHARES:

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Salomon Brothers California Tax Free Bond Fund (Acquired Fund)

Legg Mason Partners California Municipals Fund, Inc. (Acquiring Fund)

The estimated expenses of Salomon Brothers California Tax Free Bond Fund (Acquired Fund) and Legg Mason Partners California Municipals Fund, Inc. (Acquiring Fund) as of March 31, 2006 and pro forma expenses following the proposed Reorganization are set forth below.

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The following examples help you compare the costs of investing in each of the Funds with the costs of investing in other mutual funds. The examples assume that you invest $10,000 for the periods shown, that your investment has a 5% return each year, that you reinvest all distributions and dividends, and that the Funds’ operating expenses (before voluntary fee waivers and/or expense reimbursements, if any) remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

ASSUMING THE INVESTOR REDEEMS HIS OR HER SHARES:

ASSUMING THE INVESTOR DOES NOT REDEEM HIS OR HER SHARES: