77-Q
XXXX XXXXX PARTNERS VARIABLE INCOME TRUST
SUBADVISORY AGREEMENT
This SUBADVISORY AGREEMENT (Agreement) is made
this 27th day of April, 2007, by and between Xxxx
Xxxxx Partners Fund Advisor, LLC, a Delaware limited
liability company (the Manager), and Western Asset
Management Company, a California corporation (the
Subadviser).
WHEREAS, the Manager has been retained by Xxxx
Xxxxx Partners Variable Income Trust (the Trust), a
Maryland business trust registered as a management
investment company under the Investment Company Act
of 1940, as amended (the 0000 Xxx) to provide
investment advisory, management, and administrative
services to the Trust with respect to certain series
of the Trust; and
WHEREAS, the Manager wishes to engage the
Subadviser to provide certain investment advisory
services to the Trust with respect to the series of
the Trust designated in Schedule A annexed hereto
(the Fund) and Subadviser is willing to furnish such
services on the terms and conditions hereinafter set
forth;
NOW THEREFORE, in consideration of the
promises and mutual covenants herein contained, it
is agreed as follows:
1. In accordance with and subject to the
Management Agreement between the Trust and the
Manager with respect to the Fund (the Management
Agreement), the Manager hereby appoints the
Subadviser to act as Subadviser with respect to the
Fund for the period and on the terms set forth in
this Agreement. The Subadviser accepts such
appointment and agrees to render the services herein
set forth, for the compensation herein provided.
2. The Manager shall cause the Subadviser
to be kept fully informed at all times with regard
to the securities owned by the Fund, its funds
available, or to become available, for investment,
and generally as to the condition of the Funds
affairs. The Manager shall furnish the Subadviser
with such other documents and information with
regard to the Funds affairs as the Subadviser may
from time to time reasonably request.
3. (a) Subject to the supervision of the
Trusts Board of Trustees (the Board) and the
Manager, the Subadviser shall regularly provide the
Fund with respect to such portion of the Funds
assets as shall be allocated to the Subadviser by
the Manager from time to time (the Allocated Assets)
with investment research, advice, management and
supervision and shall furnish a continuous
investment program for the Allocated Assets
consistent with the Funds investment objectives,
policies and restrictions, as stated in the Funds
current Prospectus and Statement of Additional
Information. The Subadviser shall, with respect to
the Allocated Assets, determine from time to time
what securities and other investments will be
purchased (including, as permitted in accordance
with this paragraph, swap agreements, options and
futures), retained, sold or exchanged by the Fund
and what portion of the Allocated Assets will be
held in the various securities and other investments
in which the Fund invests, and shall implement those
decisions (including the execution of investment
documentation), all subject to the provisions of the
Trusts Declaration of Trust and By-Laws
(collectively, the Governing Documents), the 1940
Act, and the applicable rules and regulations
promulgated thereunder by the Securities and
Exchange Commission (the SEC) and interpretive
guidance issued thereunder by the SEC staff and any
other applicable federal and state law, as well as
the investment objectives, policies and restrictions
of the Fund referred to above, and any other
specific policies adopted by the Board and disclosed
to the Subadviser. The Subadviser is authorized as
the agent of the Trust to give instructions with
respect to the Allocated Assets to the custodian of
the Fund as to deliveries of securities and other
investments and payments of cash for the account of
the Fund. Subject to applicable provisions of the
1940 Act, the investment program to be provided
hereunder may entail the investment of all or
substantially all of the assets of the Fund in one
or more investment companies. The Subadviser will
place orders pursuant to its investment
determinations for the Fund either directly with the
issuer or with any broker or dealer, foreign
currency dealer, futures commission merchant or
others selected by it. In connection with the
selection of such brokers or dealers and the placing
of such orders, subject to applicable law, brokers
or dealers may be selected who also provide
brokerage and research services (as those terms are
defined in Section 28(e) of the Securities Exchange
Act of 1934, as amended (the Exchange Act)) to the
Fund and/or the other accounts over which the
Subadviser or its affiliates exercise investment
discretion. The Subadviser is authorized to pay a
broker or dealer who provides such brokerage and
research services a commission for executing a
portfolio transaction for the Fund which is in
excess of the amount of commission another broker or
dealer would have charged for effecting that
transaction if the Subadviser determines in good
faith that such amount of commission is reasonable
in relation to the value of the brokerage and
research services provided by such broker or dealer.
This determination may be viewed in terms of either
that particular transaction or the overall
responsibilities which the Subadviser and its
affiliates have with respect to accounts over which
they exercise investment discretion. The Board may
adopt policies and procedures that modify and
restrict the Subadvisers authority regarding the
execution of the Funds portfolio transactions
provided herein. The Subadviser shall exercise
voting rights, rights to consent to corporate action
and any other rights pertaining to the Allocated
Assets subject to such direction as the Board may
provide, and shall perform such other functions of
investment management and supervision as may be
directed by the Board. The Subadviser may execute
on behalf of the Fund certain agreements,
instruments and documents in connection with the
services performed by it under this Agreement.
These may include, without limitation, brokerage
agreements, clearing agreements, account
documentation, futures and options agreements, swap
agreements, other investment related agreements, and
any other agreements, documents or instruments the
Subadviser believes are appropriate or desirable in
performing its duties under this Agreement.
(b) The Fund hereby authorizes any entity or
person associated with the Subadviser which is a
member of a national securities exchange to effect
any transaction on the exchange for the account of
the Fund which is permitted by Section 11(a) of the
Exchange Act and Rule 11a2-2(T) thereunder, and the
Fund hereby consents to the retention of
compensation for such transactions in accordance
with Rule 11a2-2(T)(a)(2)(iv). Notwithstanding the
foregoing, the Subadviser agrees that it will not
deal with itself, or with members of the Board or
any principal underwriter of the Fund, as principals
or agents in making purchases or sales of securities
or other property for the account of the Fund, nor
will it purchase any securities from an underwriting
or selling group in which the Subadviser or its
affiliates is participating, or arrange for
purchases and sales of securities between the Fund
and another account advised by the Subadviser or its
affiliates, except in each case as permitted by the
1940 Act and in accordance with such policies and
procedures as may be adopted by the Fund from time
to time, and will comply with all other provisions
of the Governing Documents and the Funds then-
current Prospectus and Statement of Additional
Information relative to the Subadviser and its
directors and officers.
4. The Subadviser may delegate to any other
one or more companies that the Subadviser controls,
is controlled by, or is under common control with,
or to specified employees of any such companies,
certain of the Subadvisers duties under this
Agreement, provided in each case the Subadviser will
supervise the activities of each such entity or
employees thereof, that such delegation will not
relieve the Subadviser of any of its duties or
obligations under this Agreement and provided
further that any such arrangements are entered into
in accordance with all applicable requirements of
the 1940 Act.
5. The Subadviser agrees that it will keep
records relating to its services hereunder in
accordance with all applicable laws, and in
compliance with the requirements of Rule 31a-3 under
the 1940 Act, the Subadviser hereby agrees that any
records that it maintains for the Fund are the
property of the Fund, and further agrees to
surrender promptly to the Fund any of such records
upon the Funds request. The Subadviser further
agrees to arrange for the preservation of the
records required to be maintained by Rule 31a-1
under the 1940 Act for the periods prescribed by
Rule 31a-2 under the 1940 Act.
6. (a) The Subadviser, at its expense,
shall supply the Board, the officers of the Trust,
and the Manager with all information and reports
reasonably required by them and reasonably available
to the Subadviser relating to the services provided
by the Subadviser hereunder.
(b) The Subadviser shall bear all expenses,
and shall furnish all necessary services, facilities
and personnel, in connection with its
responsibilities under this Agreement. Other than as
herein specifically indicated, the Subadviser shall
not be responsible for the Funds expenses,
including, without limitation, advisory fees;
distribution fees; interest; taxes; governmental
fees; voluntary assessments and other expenses
incurred in connection with membership in investment
company organizations; organization costs of the
Fund; the cost (including brokerage commissions,
transaction fees or charges, if any) in connection
with the purchase or sale of the Funds securities
and other investments and any losses in connection
therewith; fees and expenses of custodians, transfer
agents, registrars, independent pricing vendors or
other agents; legal expenses; loan commitment fees;
expenses relating to share certificates; expenses
relating to the issuing and redemption or repurchase
of the Funds shares and servicing shareholder
accounts; expenses of registering and qualifying the
Funds shares for sale under applicable federal and
state law; expenses of preparing, setting in print,
printing and distributing prospectuses and
statements of additional information and any
supplements thereto, reports, proxy statements,
notices and dividends to the Funds shareholders;
costs of stationery; website costs; costs of
meetings of the Board or any committee thereof,
meetings of shareholders and other meetings of the
Fund; Board fees; audit fees; travel expenses of
officers, members of the Board and employees of the
Fund, if any; and the Funds pro rata portion of
premiums on any fidelity bond and other insurance
covering the Fund and its officers, Board members
and employees; litigation expenses and any non-
recurring or extraordinary expenses as may arise,
including, without limitation, those relating to
actions, suits or proceedings to which the Fund is a
party and the legal obligation which the Fund may
have to indemnify the Funds Board members and
officers with respect thereto.
7. No member of the Board, officer or
employee of the Trust or Fund shall receive from the
Trust or Fund any salary or other compensation as
such member of the Board, officer or employee while
he is at the same time a director, officer, or
employee of the Subadviser or any affiliated company
of the Subadviser, except as the Board may decide.
This paragraph shall not apply to Board members,
executive committee members, consultants and other
persons who are not regular members of the
Subadvisers or any affiliated companys staff.
8. As compensation for the services
performed by the Subadviser, including the services
of any consultants retained by the Subadviser, the
Manager shall pay the Subadviser out of the
management fee it receives with respect to the Fund,
and only to the extent thereof, as promptly as
possible after the last day of each month, a fee,
computed daily at an annual rate set forth on
Schedule A annexed hereto. The first payment of the
fee shall be made as promptly as possible at the end
of the month succeeding the effective date of this
Agreement, and shall constitute a full payment of
the fee due the Subadviser for all services prior to
that date. If this Agreement is terminated as of any
date not the last day of a month, such fee shall be
paid as promptly as possible after such date of
termination, shall be based on the average daily net
assets of the Fund or, if less, the portion thereof
comprising the Allocated Assets in that period from
the beginning of such month to such date of
termination, and shall be that proportion of such
average daily net assets as the number of business
days in such period bears to the number of business
days in such month. The average daily net assets of
the Fund or the portion thereof comprising the
Allocated Assets shall in all cases be based only on
business days and be computed as of the time of the
regular close of business of the New York Stock
Exchange, or such other time as may be determined by
the Board.
9. The Subadviser assumes no responsibility
under this Agreement other than to render the
services called for hereunder, in good faith, and
shall not be liable for any error of judgment or
mistake of law, or for any loss arising out of any
investment or for any act or omission in the
execution of securities transactions for the Fund,
provided that nothing in this Agreement shall
protect the Subadviser against any liability to the
Manager or the Fund to which the Subadviser would
otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the
performance of its duties or by reason of its
reckless disregard of its obligations and duties
hereunder. As used in this Section 9, the term
Subadviser shall include any affiliates of the
Subadviser performing services for the Trust or the
Fund contemplated hereby and the partners,
shareholders, directors, officers and employees of
the Subadviser and such affiliates.
10. Nothing in this Agreement shall limit or
restrict the right of any director, officer, or
employee of the Subadviser who may also be a Board
member, officer, or employee of the Trust or the
Fund, to engage in any other business or to devote
his time and attention in part to the management or
other aspects of any other business, whether of a
similar nature or a dissimilar nature, nor to limit
or restrict the right of the Subadviser to engage in
any other business or to render services of any
kind, including investment advisory and management
services, to any other fund, firm, individual or
association. If the purchase or sale of securities
consistent with the investment policies of the Fund
or one or more other accounts of the Subadviser is
considered at or about the same time, transactions
in such securities will be allocated among the
accounts in a manner deemed equitable by the
Subadviser. Such transactions may be combined, in
accordance with applicable laws and regulations, and
consistent with the Subadvisers policies and
procedures as presented to the Board from time to
time.
11. For the purposes of this Agreement, the
Funds net assets shall be determined as provided in
the Funds then-current Prospectus and Statement of
Additional Information and the terms assignment,
interested person, and majority of the outstanding
voting securities shall have the meanings given to
them by Section 2(a) of the 1940 Act, subject to
such exemptions as may be granted by the SEC by any
rule, regulation or order.
12. This Agreement will become effective
with respect to the Fund on the date set forth
opposite the Funds name on Schedule A annexed
hereto, provided that it shall have been approved by
the Trusts Board and, if so required by the 1940
Act, by shareholders of the Fund in accordance with
the requirements of the 1940 Act and, unless sooner
terminated as provided herein, will continue in
effect through November 30, 2007. Thereafter, if
not terminated, this Agreement shall continue in
effect with respect to the Fund, so long as such
continuance is specifically approved at least
annually (i) by the Board or (ii) by a vote of a
majority of the outstanding voting securities of the
Fund, provided that in either event the continuance
is also approved by a majority of the Board members
who are not interested persons of any party to this
Agreement, by vote cast in person at a meeting
called for the purpose of voting on such approval.
13. This Agreement is terminable with
respect to the Fund without penalty by the Board or
by vote of a majority of the outstanding voting
securities of the Fund, in each case on not more
than 60 days nor less than 30 days written notice to
the Subadviser, or by the Subadviser upon not less
than 90 days written notice to the Fund and the
Manager, and will be terminated upon the mutual
written consent of the Manager and the Subadviser.
This Agreement shall terminate automatically in the
event of its assignment by the Subadviser and shall
not be assignable by the Manager without the consent
of the Subadviser.
14. The Subadviser agrees that for any claim
by it against the Fund in connection with this
Agreement or the services rendered under this
Agreement, it shall look only to assets of the Fund
for satisfaction and that it shall have no claim
against the assets of any other portfolios of the
Trust.
15. No provision of this Agreement may be
changed, waived, discharged or terminated orally,
but only by an instrument in writing signed by the
party against which enforcement of the change,
waiver, discharge or termination is sought, and no
material amendment of the Agreement shall be
effective until approved, if so required by the 1940
Act, by vote of the holders of a majority of the
Funds outstanding voting securities.
16. This Agreement, and any supplemental
terms contained on Annex I hereto, if applicable,
embodies the entire agreement and understanding
between the parties hereto, and supersedes all prior
agreements and understandings relating to the
subject matter hereof. Should any part of this
Agreement be held or made invalid by a court
decision, statute, rule or otherwise, the remainder
of this Agreement shall not be affected thereby.
This Agreement shall be binding on and shall inure
to the benefit of the parties hereto and their
respective successors.
17. This Agreement shall be construed and
the provisions thereof interpreted under and in
accordance with the laws of the State of New York.
[signature page to follow]
IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be executed by their
officers thereunto duly authorized.
XXXX XXXXX
PARTNERS FUND
ADVISOR, LLC
By:
__________
________________
_____
Name:
Title:
WESTERN ASSET
MANAGEMENT
COMPANY
By:
__________
________________
_____
Name:
Title:
The foregoing is acknowledged:
The undersigned officer of the Trust has
executed this Agreement not individually but in
his/her capacity as an officer of the Trust. The
Trust does not hereby undertake, on behalf of the
Fund or otherwise, any obligation to the Subadviser.
XXXX XXXXX
PARTNERS
VARIABLE INCOME
TRUST
By:
__________
________________
_____
Name:
Title:
ANNEX I
Not applicable.
SCHEDULE A
Xxxx Xxxxx Partners Variable Adjustable Rate Income
Portfolio
Date:
April 27, 2007
Fee:
The sub-advisory fee will be 70% of the management
fee paid to Xxxx Xxxxx Partners Fund Advisor, LLC,
net of expense waivers and reimbursements.
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