INVESTMENT MANAGEMENT AGREEMENT
THE SALOMON BROTHERS FUND INC
Seven Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
INVESTMENT MANAGEMENT AGREEMENT as of the 28th day of
November, 1997 between THE SALOMON BROTHERS FUND INC, a Maryland corporation
(hereinafter called the "Corporation"), and SALOMON BROTHERS ASSET MANAGEMENT
INC, a Delaware corporation (hereinafter called "SBAM").
1. The Corporation hereby employs SBAM and SBAM hereby accepts
the employment by the Corporation for the period and on the terms and conditions
hereinafter set forth in this management agreement entered into by the
Corporation with SBAM pursuant to the powers granted to the Corporation in its
Articles of Incorporation.
2. Subject to the Board of Directors of the Corporation, SBAM
shall manage the investment operations of the Corporation, and shall provide
management and other services specified in this agreement and especially shall
make purchases and sales of portfolio securities on behalf of the Corporation in
accordance with the best judgment of SBAM and within the investment objectives
and restrictions set forth in the Corporation's Articles of Incorporation,
By-Laws and Registration Statement, the Investment Company Act of 1940, as
amended, the provisions of the Internal Revenue Code with respect to regulated
investment companies, and when requested by such Board of Directors, supply the
reasons and considerations that prompted SBAM's decisions.
3. SBAM shall at its expense provide the Corporation with
office facilities, including space, furniture and equipment and all personnel
reasonably necessary for the operation of the Corporation. Other than as herein
specifically indicated, SBAM shall not be responsible for any expenses of the
Corporation. Specifically SBAM shall not be responsible, except to the extent of
the reasonable compensation of employees of the Corporation whose services may
be involved, for the Corporation's legal and auditing expenses; fees and
expenses of its Board of Directors, Executive of special committees; taxes and
governmental fees and any membership dues; fees of custodian, transfer agent and
registrar, if any; expense of preparing share certificates and other expenses of
issue, sale, underwriting, distribution or repurchase of the Corporation's
shares; expense of registering or qualifying securities for sale; expense of
preparing and distributing reports, notices and dividends to shareholders; cost
of stockholders' and other meetings; or fees in connection with the listing of
its shares on any stock exchange. Should SBAM determine that services which
would ordinarily be rendered by the employees of the Corporation at its office
can be better rendered by some other agency, SBAM shall bear the costs of
employing that agency.
4. It is understood that SBAM shall from time to time employ
or associate with itself such persons as it believes to be particularly fitted
to assist it in the execution of this agreement, the compensation of such
persons to be paid by SBAM. No obligation may be incurred on behalf of the
Corporation in any such respect. During the continuance of this agreement, SBAM
shall provide persons satisfactory to the Board of Directors of the Corporation
2
to serve as officers and employees of the Corporation. These may be a chairman
of the board, chairman of the executive committee, president, one or more
vice-presidents, a secretary, a treasurer, and such additional officers and
employees as may reasonably be necessary for the conduct of the Corporation's
business and SBAM agrees to pay the compensation of all such persons.
5. In consideration of the foregoing, the Corporation will pay
SBAM quarterly, promptly after the last day of each March, June, September and
December, a fee consisting of a base fee as computed below (the "Base Fee") plus
a performance adjustment. The Base Fee shall be calculated as follows:
BASE FEE (AVERAGE DAILY NET ASSETS) QUARTERLY FEE RATE
----------------------------------- ------------------
First $350 million................................................................ .1620000%
Next $150 million................................................................. .1375 %
Next $250 million................................................................. .13125%
Next $250 million................................................................. .125 %
Over $1 billion................................................................... .1125 %
The Base Fee shall be calculated using the daily net assets
averaged over the most recent calendar quarter. For each percentage point by
which the investment performance of the Corporation exceeds or is exceeded by
the investment record of the S&P 500 Index of Composite Stocks (the "S&P 500
Index") over the one year period ending on the last day of each calendar quarter
(except as described in the next paragraph), the Base Fee will be adjusted
upward or downward by the product of (i) 1/4 of .01% multiplied by (ii) the
Corporation's average daily net assets for the one year period ending on the
last day of the calendar quarter. If the amount by which the Corporation
outperforms or underperforms the S&P 500 Index is not a whole percentage point,
a pro rata adjustment shall be made. However, there will be no performance
adjustment unless the investment performance of the Corporation exceeds or is
exceeded by the investment record of the S&P 500 Index by at least one
percentage point over the same period. The maximum quarterly adjustment is 1/4
of .1%, which would occur if the Corporation's performance exceeds or is
exceeded by the S&P 500 Index by ten or more percentage points.
No performance adjustment will be paid until the end of the
first quarter in which this agreement has been in effect for one year (the
"First Adjustment Date"). The advisory fee payable during this period will be
the Base Fee calculated as described above, subject to an adjustment for the one
year period ending on that date. On the First Adjustment Date, 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 over the one year period
ending on that date, the Base Fee will be adjusted upward or downward by the
product of (i) .01% multiplied by (ii) the average daily net assets of the Fund
for the one year period ending on the First Adjustment Date. If the amount by
which the Corporation outperforms or underperforms the S&P 500 Index is not a
whole percentage point, a pro rata adjustment shall be made. Thereafter,
performance adjustments will be made quarterly based on a rolling one year
period (i.e., the most recent four quarters). If the new fee arrangement becomes
effective on a date which is not the beginning of a calendar quarter, the
management fee will be prorated with the Fund paying SBAM the current
3
management fee for the number of days in the quarter prior to effectiveness of
the new fee arrangement and the new Base Fee for the number of days in the
quarter following such effectiveness.
The investment performance of the Corporation, for a period of
one year, shall mean the sum of (i) the change in the Corporation's net asset
value per share during such period, (ii) the value of cash distributions per
share accumulated to the end of such period and (iii) the value of capital gains
taxes per share paid or payable on undistributed realized long-term capital
gains accumulated to the end of such period; expressed as a percentage of the
Corporation's net asset value per share at the beginning of such period. For
this purpose, the value of distributions per share of realized capital gains, of
dividends per share paid from investment income and of capital gains taxes per
share paid or payable on undistributed realized long-term capital gains shall be
treated as reinvested in shares of the Corporation at the net asset value per
share in effect at the close of business on the record date for the payment of
such distributions and dividends and the date on which provision is made for
such taxes, after giving effect to such distributions, dividends and taxes.
However, notwithstanding the foregoing, the investment performance of the
Corporation shall not include, and there shall be excluded from the change in
the net asset value per share for such period, and the value of the
Corporation's cash distributions per share accumulated to the end of such period
shall be adjusted for, any increase or decrease in the investment performance of
the Corporation resulting from the issuance, sale or repurchase of any shares of
the capital stock or any other securities of the Corporation.
The investment record of the S&P 500 Index, for a period of
one year, shall mean the sum of (i) the change in the level of the index during
such period and (ii) the value, computed consistently with the index, of cash
distributions made by companies whose securities comprise the index accumulated
to the end of such period; expressed as a percentage of the index level at the
beginning of such period. For this purpose, cash distributions on the securities
which comprise the index shall be treated as reinvested in the index at least as
frequently as the end of each calendar quarter following the payment of the
dividend.
If the fee payable to the Investment Manager pursuant to this
agreement begins to accrue on a date prior to the end of any quarter or if this
agreement terminates before the end of any quarter, compensation for the period
from such date to the end of such quarter or from the end of the last quarter
ending prior to such termination to the date of termination shall be prorated
and shall be payable promptly at the end of such quarter or after the date of
termination, as the case may be.
6. Upon the expiration or sooner termination of this agreement
and/or in the event of a breach of this agreement by the Corporation, the
Corporation covenants that it will at the request of SBAM to be evidenced by
written notice to the Corporation, forthwith change its corporate name so as to
eliminate all reference to "Salomon Brothers" and will not thereafter transact
any business in a corporate name using the words "Salomon Brothers" in any form
or combination whatsoever, or otherwise use the words "Salomon Brothers" or any
other reference to "Salomon Brothers" and for the purpose of requiring such
discontinuance the judgment of SBAM (or, if SBAM shall no longer be in
existence, Salomon Inc) as to whether this agreement
4
has been breached by the Corporation shall be final and conclusive. The exercise
of its right to require such discontinuance of use of name shall not deprive
SBAM, or any affiliate thereof which has "Salomon Brothers" in its name, of, but
shall be in addition to, any other rights or remedies to which it may be
entitled in law or equity by reason of any such breach of this agreement by the
Corporation; nor shall the omission of SBAM to request such discontinuance in
any case in which it shall be so deemed a waiver of its right to require such
discontinuance at any time thereafter, for the same or any subsequent breach. It
is agreed that the damage to SBAM, or any affiliate thereof which has "Salomon
Brothers" in its name, through any failure of the Corporation after demand to
discontinue the use of the name of "Salomon Brothers" would be irreparable and
impossible of ascertainment in terms of money, and the Corporation consents that
in any such case an injunction may issue against it restraining it from the
further use of such name.
7. The Board of Directors of the Corporation may include
officers and/or directors of SBAM, Salomon Brothers Inc, Salomon Inc or any of
their affiliates and its officers may be, in whole or in part, officers and/or
directors of SBAM, Salomon Brothers Inc, Salomon Inc or any of their affiliates.
SBAM, Salomon Brothers Inc, Salomon Inc or any of their affiliates may,
nevertheless, deal freely with the Corporation as bankers or otherwise, and no
contract or transaction shall be invalidated or in any way affected by those
facts, even though the vote of director or directors or the action of the
officer or officers who are officers or directors of SBAM, Salomon Brothers Inc,
Salomon Inc or any of their affiliates shall have been necessary to obligate the
Corporation in such contract or transaction; and neither SBAM nor Salomon
Brothers Inc nor Salomon Inc nor any of their affiliates nor any officer or
director thereof shall be liable to the Corporation or to any stockholder or
creditor thereof or to any other person by reason of such contract or
transaction or for any loss resulting therefrom or for any profit derived
therefrom, provided that such contract or transaction shall, at the time at
which it was entered into, have been a reasonable one to have been entered into
and shall have been on terms that at that time were fair. Nothing contained in
this Article 7, however, shall validate, authorize or apply to any act
prohibited by the Investment Company Act of 1940, as amended, or shall protect
any director or officer of the Corporation or any officer or director of SBAM,
Salomon Brothers Inc, Salomon Inc or any of their affiliates against any
liability to the Corporation or to its security holders to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office or under this agreement.
8. This agreement, unless sooner terminated as provided in
this agreement, shall remain in effect for twelve months from the date hereof
and thereafter shall continue automatically for a period of one year so long as
such continuance is specifically approved annually by the Board of Directors of
the Corporation or by vote of a majority of the outstanding voting securities of
the Corporation and, in either case, by the vote of a majority of directors who
are not parties to this agreement or interested persons of any such party cast
in person at a meeting called for the purpose of voting on such approval;
provided, however, that this agreement may be terminated at any time, without
the payment of any penalty, by the Board of Directors of the Corporation or by
vote of a majority of the outstanding voting securities of the
5
Corporation on sixty days' written notice to SBAM or by SBAM on sixty days'
written notice to the Corporation.
9. The services of SBAM to the Corporation hereunder are not
to be deemed exclusive, and SBAM shall continue to be free to act as investment
adviser to others.
10. This agreement may be amended by mutual consent, but this
agreement as amended must be approved by the Board of Directors of the
Corporation (by vote including a majority of directors who are not parties to
such agreement or interested persons of any such party), or by vote of a
majority of the outstanding voting securities of the Corporation given at any
meeting of the stockholders, the notice of which shall have stated the proposed
amendment to be one of the objects of the meeting, and otherwise as may be
required by the Investment Company Act of 1940, as amended, provided that the
compensation payable to SBAM pursuant to Article 5 hereof may not be increased
except by a vote of a majority of the outstanding voting securities of the
Corporation.
11. This agreement shall bind and inure to the benefit of any
corporation or association with which or into which the Corporation shall be
consolidated or merged or any corporation or association acquiring substantially
all of the assets of the Corporation.
12. This agreement shall terminate automatically in the event
of its assignment.
IN WITNESS WHEREOF, the parties hereto have executed this
agreement as of the day and year first above written.
Very truly yours,
THE SALOMON BROTHERS FUND INC
By: /s/ Xxxxxxx Xxxxxx
_________________________________
Xxxxxxx Xxxxxx
ACCEPTED:
SALOMON BROTHERS ASSET MANAGEMENT INC
By: /s/ Xxxxxxx Xxxxxx
_________________________________
Xxxxxxx Xxxxxx
