INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
Western Asset Trust, Inc.
Intermediate Duration Portfolio
Short Duration Portfolio
AGREEMENT made this 10th day of February, 1994, by and between WESTERN
ASSET TRUST, INC. ("Fund"), a Maryland corporation and WESTERN ASSET MANAGEMENT
COMPANY ("Western Asset"), a California corporation registered as an investment
adviser under the Investment Advisers Act of 1940.
WHEREAS, the Fund is an open-end, diversified, management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), consisting initially of nine series of shares, two of which are
known as the Intermediate Duration Portfolio and the Short Duration Portfolio
(collectively, the "Portfolios") and
WHEREAS, the Fund wishes to retain Western Asset to provide the
Portfolios certain investment advisory and administrative services, and
WHEREAS, Western Asset 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 between the parties hereto as follows:
1. Appointment. The Fund hereby appoints Western Asset as investment
adviser for the Portfolios for the period and on the terms set forth in this
Agreement. Western Asset accepts such appointment and agrees to furnish the
services herein set forth for the compensation herein provided.
2. Delivery of Documents. The Fund has furnished Western Asset with
copies properly certified or authenticated of each of the following:
(a) The Fund's Articles of Incorporation, as filed with the
Maryland Department of Assessment and Taxation on May 16, 1990
and all amendments thereto (such Articles of Incorporation, as
presently in effect and as they shall from time to time be
amended, are herein called the "Articles");
(b) The Fund's By-Laws and all amendments thereto (such By-Laws,
as presently in effect and they shall from time to time be
amended, are herein called the "By-Laws");
(c) Resolutions of the Fund's Board of Directors authorizing the
appointment of Western Asset as investment adviser and
approving this Agreement;
(d) The Fund's Notification of Registration on Form N-8A under the
1940 Act as filed with the Securities and Exchange Commission
on May 16, 1990 and all amendments thereto;
(e) The Fund's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended, and the 1940 Act (File No.
811-06110) as filed with the Securities and Exchange
Commission on May 16, 1990, including all exhibits thereto,
relating to shares of the Fund's common stock of par value
$0.001 per share (herein called "Shares") and all amendments
thereto; and
(f) The most recent prospectus or prospectuses for the Portfolios
(such document as presently in effect and all amendments and
supplements thereto is herein called the "Prospectus");
(g) The most recent statement of additional information or
statements of additional information (such document as
presently in effect and all amendments and supplements thereto
is herein called the "Statement of Additional Information").
The Fund will furnish Western Asset from time to time with copies,
properly certified or authenticated, of all amendments of or supplements to the
foregoing.
3. (a). Investment Advisory Services. Subject to the supervision of the
Fund's Board of Directors, Western Asset shall regularly provide the Portfolios
with investment research, advice, management and supervision and shall furnish a
continuous investment program for each Portfolio's portfolio of securities
consistent with each Portfolio's respective investment objective, policies, and
limitations as stated in the minutes of the Fund's Directors. Western Asset
shall determine from time to time what securities shall be purchased, retained
or sold by the Portfolios, and shall implement those decisions, all subject to
the provisions of the Fund's Articles and ByLaws, the 1940 Act, the applicable
rules and regulations of the Securities and Exchange Commission, and other
applicable federal and state law, as well as the investment objective, policies
and limitations of the Portfolios. Western Asset will place orders pursuant to
its investment determinations for each Portfolio either directly with the issuer
or with any broker or dealer. In placing orders with brokers and dealers,
Western Asset will attempt to obtain the best net price and the most favorable
execution of its orders; however, Western Asset may, in its
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discretion, purchase and sell portfolio securities from and to brokers and
dealers who provide Western Asset with research, analysis, advice and similar
services, and Western Asset may pay to these brokers, in return for research and
analysis, a higher commission than may be charged by other brokers. In no
instance will portfolio securities be purchased from or sold to Western Asset or
any affiliated person thereof except in accordance with the rules, regulations
or orders promulgated by the Securities and Exchange Commission pursuant to the
1940 Act. Western Asset shall also provide advice and recommendations with
respect to other aspects of the business and affairs of the Fund, and shall
perform such other functions of management and supervision as may be requested
by the Fund and agreed to by Western Asset.
4. Administrative Services.
(a) Subject always to the control of the Board of
Directors of the Fund and to such policies as the
Board may determine, Western Asset agrees, at its
expense, (1) to furnish the management and
administrative services necessary for the operation
of each Portfolio and handling its shareholder
relations, including overseeing bookkeeping and
accounting services and the calculation and
publication of each Portfolio's net asset value,
providing office space, equipment and facilities,
data processing, internal auditing and clerical
services (excluding determination of net asset
value); preparing reports to each Portfolio's
shareholders and tax returns; reports to and filings
with governmental bodies; and conducting relations on
behalf of each Portfolio with custodians,
depositories, transfer agents, registrars and
dividend disbursing and reinvestment plan agents,
accountants, attorneys, underwriters, insurers and
banks, and (ii) to furnish all necessary management
facilities, including salaries of personnel, required
for it to execute its duties faithfully.
(b) Western Asset will maintain, or oversee the
maintenance of, all books and records with respect to
the portfolio securities transactions of each
Portfolio in accordance with all applicable federal
and state laws and regulations, and will furnish the
Fund's Board of Directors with such daily, periodic
and special reports as they may request. In
compliance with the requirements of Rule 31a-3 under
the Investment Company Act of 1940, Western Asset
hereby agrees that any records which 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 Fund's request. Western Asset
further agrees to arrange for the preservation of the
records required to be maintained by Rule 31a-1 under
the Investment
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Company Act of 1940 for the periods prescribed by
Rule 31a-2 under said Act.
(c) Western Asset shall act as liaison with the Fund's
independent public accountants and shall provide
account analyses, fiscal year summaries, and other
audit related schedules. Western Asset shall take all
reasonable action in the performance of its
obligations under this Agreement to assure that the
necessary information is made available to such
accountants for the expression of their opinion, as
such may be required by the Fund from time to time.
(d) Western Asset, at its own expense, shall provide a
system whereby information is supplied to
shareholders concerning their accounts and the
operation of the Fund. Western Aset shall also
provide, at its own expense, a system whereby orders
for purchases and redemption of each Portfolio's
shares which are received by the Fund or its
distributor, Xxxx Xxxxx Xxxx Xxxxxx, Incorporated,
are promptly processed and transmitted to the Fund's
transfer agent. Western Asset may delegate some or
all of the functions specified in this subparagraph
to Xxxx Xxxxx Xxxx Xxxxxx, Incorporated or another
appropriate person.
5. General.
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(a) Western Asset will furnish the Fund with office
facilities, including space, furniture and equipment
and all personnel reasonably necessary for the
operation of the Fund.
(b) Western Asset shall authorize and permit any of its
directors, officers and employees, who may be elected
as directors or officers of the Fund, to serve in the
capacities in which they are elected, and shall bear
their salary or other compensation and expenses, if
any.
(c) In the performance of its duties under this
Agreement, Western Asset will comply with the
provisions of the Articles of Incorporation and
By-Laws of the Fund and the stated investment
objectives, policies and restrictions of each
Portfolio, and will use its best efforts to safeguard
and promote the welfare of the Fund, and to comply
with other policies which the Board may from time to
time determine.
6. Services Not Exclusive. Western Asset's services
hereunder are not deemed to be exclusive, and Western
Asset shall be free to render similar services to
others. It is understood that persons employed by
Western Asset to assist in the performance of its
duties hereunder
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might not devote their full time to such service.
Nothing herein shall be deemed to limit or restrict
the right of Western Asset or any affiliate of
Western Asset to engage in and devote time and
attention to other businesses or to render services
of whatever kind or nature.
7. Expenses. During the term of this Agreement, Western
Asset will pay all expenses incurred by it in
connection with its services under this Agreement.
Other than as herein specifically indicated, Western
Asset shall not be responsible for the Fund's
expenses. Specifically, Western Asset will not be
responsible, except to the extent of the reasonable
compensation of employees of the Fund whose services
may be used by Western Asset hereunder, for any of
the following expenses of the Fund, which expenses
shall be borne by the Fund: organizational expenses;
legal expenses; interest; taxes; governmental fees;
fees, voluntary assessments and other expenses
incurred in connection with membership in investment
company organizations; the cost (including brokerage
commissions or charges, if any) of securities
purchased or sold by the Fund and any losses incurred
in connection therewith; distribution fees, if any;
fees of custodians, subcustodians, transfer agents,
registrars or other agents for all services to the
Fund; expenses relating to the redemption or
repurchase of the Fund's shares; expenses of
registering and qualifying Fund shares for sale under
applicable federal and state law and maintaining such
registrations and qualifications; expenses of
preparing, setting in print, printing and
distributing prospectuses, proxy statements, reports,
notices, stock certificates and dividends to Fund
shareholders; costs of stationery; costs of
stockholders' and other meetings of the Fund;
compensation of officers and directors who are not
affiliated persons of Western Asset; fees and
expenses of independent auditors; traveling expenses
of directors of the Fund, if any; expenses for
fidelity bonds and other insurance covering the Fund
and its officers and directors; costs of
indemnification; and any extraordinary expenses.
8. Compensation.
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(a) For the services which Western Asset will render to
the Fund under this Agreement, the Intermediate
Duration Portfolio will pay Western Asset a fee,
computed daily and paid monthly, at an annual rate
equal to 0.40% of that Portfolio's average daily net
assets, and the Short Duration Portfolio will pay
Western Asset a fee, computed daily and paid monthly,
at an annual rate equal to 0.30% of that Portfolio's
average daily net assets. Fees with regard to the
Fund shall be paid promptly following the end of each
calendar month. In the event that the Adviser's right
to such fee commences on a date other than the first
day of the month, the fee for such month shall be
based on
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the average daily net assets of each Portfolio in
that period from the date of commencement to that
last day of the month. If this Agreement is
terminated with respect to any Portfolio as of any
date not the last day of a calendar month, a final
fee with regard to that Portfolio shall be paid
promptly after the date of termination and shall be
based only on the average daily net assets of the
Portfolio in that period from the beginning of such
month to such date of termination. The average daily
net assets of a Portfolio shall in all cases be based
on calendar days and be computed as of such time and
in such manner as may be determined by the Board of
Directors of the Fund.
(b) No director, officer or employee of the Fund shall
receive from the Fund any salary or other
compensation as such director, officer or employee
while he is at the same time a director, officer or
employee of Western Asset or any affiliated company
of Western Asset.
9. Limitation of Liability. Western Asset will not be
liable for any error of judgment or mistake of law or
for any loss suffered by the Fund or any Portfolio in
connection with the performance of this Agreement,
except a loss resulting from a breach of fiduciary
duty with respect to the receipt of compensation for
services or a loss resulting from willful
misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from
reckless disregard by it of its obligations or duties
under this Agreement.
10. With the approval of the Fund's Board of Directors,
Western Asset may contract with another party to
provide to the Portfolios some or all of the
administrative services described in this Agreement.
The Fund acknowledges that Western Asset may make
payments from the fees paid to it under this
Agreement, from past profits or from any other source
available to it to other persons, including but not
limited to Xxxx Xxxxx Fund Adviser, Inc. and Xxxx
Xxxxx Xxxx Xxxxxx, Incorporated, for shareholder,
administrative, advisory, recordkeeping and
distribution services provided by such persons in
connection with the Fund's shares.
11. Definitions. As used in this Agreement, 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 Securities and Exchange Commission by any rule,
regulation or order.
12. Duration and Termination. This Agreement will become
effective with respect to a Portfolio on the date
first written above, provided that it
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shall have been approved by the Fund's Board of
Directors and by the shareholders of that Portfolio
in accordance with the requirements of the 1940 Act
and, unless sooner terminated as provided herein,
will continue in effect for two years from the above
written date. Thereafter, if not terminated, this
Agreement shall continue in effect with respect to
each Portfolio for successive annual periods ending
on the same date of each year, provided that such
continuance is specifically approved at least
annually (i) by the Fund's Board of Directors or (ii)
by a vote of a majority of the outstanding voting
securities of the Portfolio (as defined in the 1940
Act), provided that in either event the continuance
is also approved by a majority of the Fund's
Directors who are not interested persons (as defined
in the 0000 Xxx) of any party to this Agreement, by
vote cast in person at a meeting called for the
purpose of voting on such approval.
This Agreement is terminable with respect to a
Portfolio without penalty by the Fund's Board of
Directors, by vote of a majority of the outstanding
voting securities (as defined in the 0000 Xxx) of
that Portfolio, or by Western Asset, on not less than
60 days' notice to the other party and will be
terminated upon the mutual written consent of Western
Asset and the Fund. This Agreement will also
automatically and immediately terminate in the event
of its assignment.
In the event this Agreement is terminated by either
party or upon written notice from Western Asset at
any time, the Fund hereby agrees that it will
eliminate from its corporate name any reference to
the name of "Western Asset." The Fund shall have the
non-exclusive use of the name "Western Asset" in
whole or in part only so long as this Agreement is
effective or until such notice is given.
13. Further Actions. Each party agrees to perform such
further acts and execute such further documents as
are necessary to effectuate the purposes hereof.
14. Amendments. 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 this Agreement shall be effective with
respect to a Portfolio until approved by vote of the
holders of a majority of the outstanding voting
securities of that Portfolio.
15. Miscellaneous. This Agreement embodies the entire
agreement and understanding between the parties
hereto, and supersedes all prior agreements and
understandings relating to the subject matter hereof.
The captions in this Agreement are included for
convenience of
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reference only and in no way define or delimit any of
the provisions hereof or otherwise affect their
construction or effect. 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 and shall inure to the
benefit of the parties hereto and their respective
successors, to the extent permitted by law, and shall
be governed by Maryland law.
IN WITNESS WHEREOF, the parties hereto have causes this Agreement to be
executed by their officers designated below on the day and year first above
written.
[seal] WESTERN ASSET TRUST, INC.
Attest:
By: /s/ Xxxxxxxx By: /s/ Xxxxx X. Xxxxxx
[seal] WESTERN ASSET MANAGEMENT COMPANY
Witness:
By: /s/ Xxxxxxxx By: /s/ W. Xxxxxx Xxxxxxxxxx
