Item 77Q1
Xxxx Xxxxx Partners Variable Diversified
Strategic Income Portfolio
SUBADVISORY AGREEMENT
This SUBADVISORY AGREEMENT (Agreement) is
made this 3rd day of November, 2008, by and
between Western Asset Management Company, a
corporation organized under the laws of
California (the Subadviser) and Western Asset
Management Company Ltd., a corporation organized
under the laws of Japan (Western Japan).
WHEREAS, the Subadviser has been retained
by Xxxx Xxxxx Partners Fund Advisor, LLC to
provide investment advisory, management, and
administrative services to 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 the series of the Trust designated in
Schedule A annexed hereto (the Fund); and
WHEREAS, the Subadviser wishes to engage
Western Japan to provide certain investment
advisory services to the Fund, and Western Japan
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
Subadvisory Agreement between the Subadviser and
Xxxx Xxxxx Partners Fund Advisor, LLC with
respect to the Fund (the Subadvisory
Agreement), the Subadviser hereby appoints
Western Japan to act as a subadviser with
respect to the Fund for the period and on the
terms set forth in this Agreement. Western Japan
accepts such appointment and agrees to render
the services herein set forth, for the
compensation herein provided.
2. The Subadviser shall cause Western
Japan 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 Subadviser shall furnish
Western Japan with such other documents and
information with regard to the Funds affairs as
Western Japan may from time to time reasonably
request.
3. (a) Subject to the supervision of the
Trusts Board of Trustees (the Board), Xxxx
Xxxxx Partners Fund Advisor, LLC and the
Subadviser, Western Japan shall regularly
provide the Fund with respect to such portion of
the Funds assets as shall be allocated to
Western Japan by the Subadviser 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. Western Japan 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
Western Japan. Western Japan 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. Western Japan 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 Western Japan or its affiliates
exercise investment discretion. Western Japan 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
Western Japan 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 Western Japan 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 Western Japans authority
regarding the execution of the Funds portfolio
transactions provided herein. Western Japan
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. Western Japan 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 Western Japan believes are
appropriate or desirable in performing its
duties under this Agreement.
(b) The Fund hereby authorizes any
entity or person associated with Western Japan
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, Western Japan 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 Western Japan or its affiliates is
participating, or arrange for purchases and
sales of securities between the Fund and another
account advised by Western Japan 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 Western
Japan and its directors and officers.
4. Western Japan may delegate to any
other one or more companies that Western Japan
controls, is controlled by, or is under common
control with, or to specified employees of any
such companies, certain of Western Japans
duties under this Agreement, provided in each
case Western Japan will supervise the activities
of each such entity or employees thereof, that
such delegation will not relieve Western Japan
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. Western Japan 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, Western Japan 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. Western Japan
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) Western Japan, at its expense,
shall supply the Board, the officers of the
Trust, Xxxx Xxxxx Partners Fund Advisor, LLC and
the Subadviser with all information and reports
reasonably required by them and reasonably
available to Western Japan relating to the
services provided by Western Japan hereunder.
(b) Western Japan 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, Western Japan 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 Western
Japan or any affiliated company of Western
Japan, 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
Western Japans or any affiliated companys
staff.
8. As compensation for the services
performed by Western Japan, including the
services of any consultants retained by Western
Japan, the Subadviser shall pay Western Japan
out of the subadvisory 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 Western Japan 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. Western Japan 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 Western Japan
against any liability to the Subadviser, Xxxx
Xxxxx Partners Fund Advisor, LLC or the Fund to
which Western Japan 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 Western Japan shall
include any affiliates of Western Japan
performing services for the Trust or the Fund
contemplated hereby and the partners,
shareholders, directors, officers and employees
of Western Japan and such affiliates.
10. Nothing in this Agreement shall limit
or restrict the right of any director, officer,
or employee of Western Japan 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 Western Japan 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 Western Japan is considered at or
about the same time, transactions in such
securities will be allocated among the accounts
in a manner deemed equitable by Western Japan.
Such transactions may be combined, in accordance
with applicable laws and regulations, and
consistent with Western Japans 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 the shareholders of
the Fund in accordance with the requirements of
the 1940 Act and, unless sooner terminated as
provided herein, will continue in effect until
the second anniversary of the date of
effectiveness. 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 Western Japan, or by Western
Japan upon not less than 90 days written notice
to the Fund and the Subadviser, and will be
terminated upon the mutual written consent of
the Subadviser and Western Japan. This Agreement
shall terminate automatically in the event of
its assignment by Western Japan and shall not be
assignable by the Subadviser without the consent
of Western Japan.
14. Western Japan agrees that for any
claim by it against the Fund in connection with
this Agreement or the services rendered under
the 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.
WESTERN ASSET
MANAGEMENT
COMPANY
By: /s/ W.
Xxxxxxx Xxxxxxx,
Xx.
Name: W.
Xxxxxxx Xxxxxxx,
Xx.
Title:
Manager, US Legal
and Corporate
Affairs
WESTERN ASSET
MANAGEMENT
COMPANY LTD.
By: /s/ Xxxxxx
X. Xxxxxxxx
Name:
Xxxxxx X. Xxxxxxxx
Title: :
Manager,
International Legal
and Compliance
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 Western
Asset Management Company Ltd.
XXXX XXXXX
PARTNERS
VARIABLE INCOME
TRUST
By: /s/ R. Xxx
Xxxxxx
Name: R.
Xxx Xxxxxx
Title:
Chairman, President
and Chief Executive
Officer
Xxxx Xxxxx Partners Variable Diversified Strategic Income
Portfolio Signature Page
ANNEX I
This Annex I forms a part of the
Subadvisory Agreement dated as of November 3,
2008, by and between Western Asset Management
Company, a California corporation, and Western
Asset Management Company Ltd. (Western
Japan), an entity authorized and regulated in
Japan by the Japanese Securities and Exchange
Surveillance Commission (SESC).
1. Western Japan shall not offer any special
benefit to the Subadviser in connection with
performance of this Agreement, and the
Subadviser shall not request any special
benefit from Western Japan.
2. Section 9 of this Agreement shall not be
deemed to limit Western Japan's obligations
under the Japanese Financial Instruments and
Exchange Law to perform its duties to its
customers faithfully and with the care of a
prudent manager.
3. The Subadviser shall be liable for any
damages or losses suffered by Western Japan
due to the Subadvisers willful misconduct or
gross negligence or the Subadvisers failure
to perform its duties hereunder.
SCHEDULE A
Xxxx Xxxxx Partners Variable Diversified
Strategic Income Portfolio Date: November
3, 2008
Fee:
The sub-advisory fee will be the following
percentage of the Funds Allocated Assets:
0.30
