ADVISORY AGREEMENT
AGREEMENT made this 25 day of November 2008, by and between
Xxxx Xxxxx Fund Adviser, Inc. ("Manager"), a Maryland
corporation, and Western Asset Management Company Limited ("WAML
Japan"), a corporation organized under the laws of Japan, each
of which is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended.
WHEREAS, the Manager is the manager of certain of the
series of Western Asset Funds, Inc. (the "Corporation"), an
open-end, management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Manager wishes to retain WAML Japan to provide
certain investment advisory services in connection with the
Manager's management of Western Asset Core Plus Bond Portfolio
("Fund"), a series of the Corporation; and
WHEREAS, WAML 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. Appointment. The Manager hereby appoints WAML Japan
as investment adviser for the Fund for the period and on the
terms set forth in this Agreement. WAML Japan accepts such
appointment and agrees to furnish the services herein set forth
for the compensation herein provided.
2. Delivery of Documents. The Manager has furnished
WAML Japan with copies of each of the following:
(a) The Corporation's Articles of Incorporation 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 Corporation's By-Laws and all amendments thereto
(such By-Laws, as presently in effect and as they shall from
time to time be amended, are herein called the "By-Laws");
(c) Resolutions of the Corporation's Board of Directors
(the "Directors") authorizing the appointment of the Manager as
the manager and WAML Japan as investment adviser and approving
the Investment Management Agreement between the Manager and the
Corporation with respect to the Fund dated December 31, 2001
(the "Management Agreement") and this Agreement;
(d) The Corporation's most recently filed Post-Effective
Amendment to its Registration Statement on Form N-1A under the
Securities Act of 1933, as amended, and the 1940 Act, including
all exhibits thereto, relating to shares of common stock of the
Fund, par value $.001 per share;
(e) The Fund's most recent prospectus (such prospectus, as
presently in effect, and all amendments and supplements thereto
are herein called the "Prospectus"); and
(f) The Fund's most recent statement of additional
information (such statement of additional information, as
presently in effect, and all amendments and supplements thereto
are herein called the "Statement of Additional Information").
The Manager will furnish WAML Japan from time to time with
copies of all amendments of or supplements to the foregoing.
3. Investment Advisory Services. (a) Subject to the
supervision of the Directors and the Manager, WAML Japan shall
as requested by the Manager regularly provide the Fund with
investment research, advice, management and supervision and
shall furnish a continuous investment program for the Fund
consistent with the Fund's investment objectives, policies, and
restrictions as stated in the Fund's current Prospectus and
Statement of Additional Information. WAML Japan shall as
requested by the Manager determine from time to time what
securities or other property will be purchased, retained or sold
by the Fund, and shall implement those decisions, all subject to
the provisions of the Corporation's Articles of Incorporation
and By-Laws, 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 objectives,
policies, and restrictions of the Fund, as each of the foregoing
may be amended from time to time. WAML Japan will as requested
by the Manager place orders pursuant to its investment
determinations for the Fund either directly with the issuer or
with any broker, dealer or futures commission merchant
(collectively, a "broker"). In the selection of brokers and the
placing of orders for the purchase and sale of portfolio
investments for the Fund, WAML Japan shall seek to obtain for
the Fund the most favorable price and execution available,
except to the extent it may be permitted to pay higher brokerage
commissions for brokerage and research services as described
below. In using its best efforts to obtain for the Fund the
most favorable price and execution available, WAML Japan,
bearing in mind the Fund's best interests at all times, shall
consider all factors it deems relevant, including, by way of
illustration, price, the size of the transaction, the nature of
the market for the security, the amount of the commission, the
timing of the transaction taking into consideration market
prices and trends, the reputation, experience and financial
stability of the broker involved and the quality of service
rendered by the broker in other transactions. Subject to such
policies as the Directors may determine and communicate to WAML
Japan in writing, WAML Japan shall not be deemed to have acted
unlawfully or to have breached any duty created by this
Agreement or otherwise solely by reason of its having caused the
Fund to pay a broker that provides brokerage and research
services to WAML Japan or any affiliated person of WAML Japan an
amount of commission for effecting a portfolio investment
transaction in excess of the amount of commission another broker
would have charged for effecting that transaction, if WAML Japan
determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and
research services provided by such broker, viewed in terms of
either that particular transaction or WAML Japan's overall
responsibilities with respect to the Fund and to other clients
of WAML Japan and any affiliated person of WAML Japan as to
which WAML Japan or any affiliated person of WAML Japan
exercises investment discretion. WAML Japan shall also perform
such other functions of management and supervision as may be
requested by the Manager and agreed to by WAML Japan.
(b) WAML Japan will as requested by the Manager oversee
the maintenance of all books and records with respect to the
investment transactions of the Fund in accordance with all
applicable federal and state laws and regulations, and will
furnish the Directors with such periodic and special reports as
the Directors or the Manager reasonably may request.
(c) The Corporation hereby agrees that any entity or
person associated with WAML Japan (or with any affiliated person
of WAML Japan) which is a member of a national securities
exchange is authorized to effect any transaction on such
exchange for the account of the Fund which is permitted by
Section 11(a) of the Securities Exchange Act of 1934, as
amended, and Rule 11a2-2(T) thereunder, and the Corporation
hereby consents to the retention of compensation for such
transactions in accordance with Rule 11a2-2(T)(a)(2)(iv) or
otherwise.
4. Services Not Exclusive. WAML Japan's services
hereunder are not deemed to be exclusive, and WAML Japan shall
be free to render similar services to others. It is understood
that persons employed by WAML Japan to assist in the performance
of its duties hereunder might not devote their full time to such
service. Nothing herein contained shall be deemed to limit or
restrict the right of WAML Japan or any affiliate of WAML Japan
to engage in and devote time and attention to other businesses
or to render services of whatever kind or nature.
5. Books and Records. In compliance with the
requirements of Rule 31a-3 under the 1940 Act, WAML Japan hereby
agrees that all books and records which it maintains for the
Fund are property of the Fund and further agrees to surrender
promptly to the Fund or its agents any of such records upon the
Fund's request. WAML Japan further agrees to preserve for the
periods prescribed by Rule 31a-2 under the 1940 Act any such
records required to be maintained by Rule 31a-1 under the 1940
Act.
6. Expenses. During the term of this Agreement, WAML
Japan will pay all expenses incurred by it in connection with
its activities under this Agreement other than the cost of
securities and other property (including brokerage commissions,
if any) purchased for the Fund.
7. Compensation. For the services which WAML Japan
will render to the Manager and the Fund under this Agreement,
the Manager will pay WAML Japan a fee, computed monthly and paid
monthly, equal to the product of (i) the Baseline Amount for the
current calendar month and (ii) the average of the Subadviser
Fraction for the current calendar month and the Subadviser
Fraction for the preceding calendar month. The Baseline Amount
for a given calendar month shall be the total amount paid to the
Manager by the Corporation pursuant to the Management Agreement
in respect of such calendar month. The Subadviser Fraction for
a given calendar month shall be a fraction, the numerator of
which is the net assets of the Fund managed by WAML Japan, and
the denominator of which is the net assets of the Fund, in each
case computed as of the time of the regular close of business of
the New York Stock Exchange on the last Business Day of such
calendar month, or such other time as may be determined by the
Board of Directors of the Corporation. A Business Day shall be
any day on which the New York Stock Exchange is open. Fees due
to WAML Japan hereunder shall be paid promptly to WAML Japan by
the Manager following its receipt of fees from the Fund. If
this Agreement is terminated as of any date not the last day of
a calendar month, a final fee shall be paid promptly after the
date of termination and shall be based on the Baseline Amount
for that portion of the month during which the contract was
still in effect and the Subadviser Fraction as of the time of
the regular close of business of the New York Stock Exchange on
the date of termination (or, if the date of termination is not a
Business Day, the Business Day immediately preceding the date of
termination).
8. Limitation of Liability. In the absence of willful
misfeasance, bad faith or gross negligence on the part of WAML
Japan, or reckless disregard of its obligations and duties
hereunder, WAML Japan shall not be subject to any liability to
the Manager, the Fund or any shareholder of the Fund, for any
act or omission in the course of, or connected with, rendering
services hereunder.
9. Definitions. As used in this Agreement, the terms
"assignment," "interested person," "affiliated 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 and interpretations as may be granted by the
Securities and Exchange Commission by any rule, regulation or
order; the term "specifically approve at least annually" shall
be construed in a manner consistent with the 1940 Act and the
rules and regulations thereunder; and the term "brokerage and
research services" shall have the meaning given in the
Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder.
10. Term. This Agreement shall become effective upon
its execution, and shall remain in full force and effect
continuously thereafter (unless terminated automatically as set
forth in Section 12) until terminated as follows:
a. The Corporation may at any time terminate this
Agreement by not more than 60 days' written notice
delivered or mailed by registered mail, postage prepaid, to
the Manager and WAML Japan, or
b. If (i) the Directors or the shareholders of the
Fund by vote of a majority of the outstanding voting
securities of the Fund, and (ii) a majority of the
Directors who are not interested persons of the
Corporation, the Manager or WAML Japan, by vote cast in
person at a meeting called for the purpose of voting on
such approval, do not specifically approve at least
annually the continuance of this Agreement, then this
Agreement shall automatically terminate at the close of
business on the second anniversary of its execution, or
upon the expiration of one year from the effective date of
the last such continuance, whichever is later; provided,
however, that if the continuance of this Agreement is
submitted to the shareholders of the Fund for their
approval and such shareholders fail to approve such
continuance of this Agreement as provided herein, WAML
Japan may continue to serve hereunder in a manner
consistent with the 1940 Act and the rules and regulations
thereunder, or
c. The Manager may at any time terminate this
Agreement by not less than 60 days' written notice
delivered or mailed by registered mail, postage prepaid, to
WAML Japan, and WAML Japan may at any time terminate this
Agreement by not less than 60 days' written notice
delivered or mailed by registered mail, postage prepaid, to
the Manager.
Action by the Corporation under paragraph (a) of this
Section 10 may be taken either (i) by vote of a majority of the
Directors, or (ii) by the vote of a majority of the outstanding
voting securities of the Fund.
11. Further Actions. Each party agrees to perform such
further acts and execute such further documents as are necessary
to effectuate the purposes hereof.
12. No Assignment; Amendments. This Agreement shall
terminate automatically in the event of its assignment or in the
event that the Management Agreement shall have terminated for
any reason. Any termination of this Agreement pursuant to
Section 10 shall be without the payment of any penalty. This
Agreement shall not be amended unless such amendment is approved
by the vote of a majority of the outstanding voting securities
of the Fund (provided that such shareholder approval is required
by the 1940 Act and the rules and regulations thereunder, giving
effect to any interpretations of the Securities and Exchange
Commission and its staff) and by the vote, cast in person at a
meeting called for the purpose of voting on such approval, of a
majority of the Directors who are not interested persons of the
Corporation, the Manager or WAML Japan.
13. Non-Exclusive Right. In the event this Agreement
is terminated or upon written notice from WAML Japan at any
time, the Corporation hereby agrees that it will eliminate from
the Fund's name any reference to the name of "Western." The
Corporation, on behalf of the Fund, shall have the non-exclusive
use of the name "Western" in whole or in part only so long as
this Agreement is effective or until such notice is given.
14. 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 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.
15. Japanese Law. WAML Japan is regulated by the Japanese
Securities and Exchange Surveillance Commission, a commission
established by the Japanese Financial Services Agency, and is
subject to applicable local laws and regulation.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their officers designated below on
the day and year first above written.
Attest: XXXX XXXXX FUND ADVISER, INC.
By: _______________ By: _______________________________________
Name: _______________
Title: _______________
Attest: WESTERN ASSET MANAGEMENT COMPANY
LIMITED
By: _______________ By:
______________________________________
Name: _______________
Title: _______________
The foregoing is accepted by:
Attest: WESTERN ASSET FUNDS, INC.
By: _______________ By:
______________________________________
Name: _______________
Title: _______________
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