SUBADVISORY AGREEMENT
This SUBADVISORY AGREEMENT ("Agreement") is made this 1st
day of August, 2006, by and between Western Asset Management
Company, a corporation organized under the laws of California
(the "Subadviser") and Western Asset Management Company Limited,
a corporation organized under the laws of England and Wales
("WAML").
WHEREAS, the Subadviser has been retained by Xxxx Xxxxx
Partners Fund Advisor, LLC to provide investment advisory,
management, and administrative services to Salomon Brothers
Variable Rate Strategic Fund Inc. (the "Fund"), a registered
management investment company under the Investment Company Act of
1940, as amended (the "1940 Act"); and
WHEREAS, the Subadviser wishes to engage WAML to provide
certain investment advisory services to the Fund, and WAML 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 WAML to act as a
subadviser with respect to the Fund for the period and on the
terms set forth in this Agreement. WAML accepts such appointment
and agrees to render the services herein set forth, for the
compensation herein provided.
2. The Subadviser shall cause WAML 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 Fund's
affairs. The Subadviser shall furnish WAML with such other
documents and information with regard to the Fund's affairs as
WAML may from time to time reasonably request.
3. (a) Subject to the supervision of the Fund's Board of
Directors (the "Board"), Xxxx Xxxxx Partners Fund Advisor, LLC
and the Subadviser, WAML shall regularly provide the Fund with
respect to such portion of the Fund's assets as shall be
allocated to WAML 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 Fund's investment
objectives, policies and restrictions, as stated in the Fund's
current Prospectus and Statement of Additional Information. WAML
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 Fund's Articles of Incorporation 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 WAML. WAML is authorized as the agent of the Fund 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. WAML 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 WAML or its
affiliates exercise investment discretion. WAML 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 WAML 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 WAML
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 WAML's authority regarding
the execution of the Fund's portfolio transactions provided
herein. WAML 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.
(b) The Fund hereby authorizes any entity or person
associated with WAML 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, WAML 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 WAML or its affiliates is participating, or arrange for
purchases and sales of securities between the Fund and another
account advised by WAML 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 Fund's then-current Prospectus and Statement of
Additional Information relative to WAML and its directors and
officers.
4. WAML may delegate to any other one or more companies
that WAML controls, is controlled by, or is under common control
with, or to specified employees of any such companies, certain of
WAML's duties under this Agreement, provided in each case WAML
will supervise the activities of each such entity or employees
thereof, that such delegation will not relieve WAML 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. WAML 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, WAML 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
Fund's request. WAML 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) WAML, at its expense, shall supply the Board, the
officers of the Fund, Xxxx Xxxxx Partners Fund Advisor, LLC and
the Subadviser with all information and reports reasonably
required by them and reasonably available to WAML relating to the
services provided by WAML hereunder.
(b) WAML 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, WAML shall not be responsible for
the Fund's 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 Fund's 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 Fund's shares and
servicing shareholder accounts; expenses of registering and
qualifying the Fund's 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 Fund's 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 Fund's 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 Fund's Board
members and officers with respect thereto.
7. No member of the Board, officer or employee of the Fund
shall receive from the 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 WAML or any
affiliated company of WAML, 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 WAML's or any affiliated company's staff.
8. As compensation for the services performed by WAML,
including the services of any consultants retained by WAML, the
Subadviser shall pay WAML 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 WAML 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. WAML 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 WAML against any liability to the
Subadviser, Xxxx Xxxxx Partners Fund Advisor, LLC or the Fund to
which WAML 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 "WAML" shall include any affiliates of WAML performing
services for the Fund contemplated hereby and the partners,
shareholders, directors, officers and employees of WAML and such
affiliates.
10. Nothing in this Agreement shall limit or restrict the
right of any director, officer, or employee of WAML who may also
be a Board member, officer, or employee of 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 WAML 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 WAML is considered at or about the same time,
transactions in such securities will be allocated among the
accounts in a manner deemed equitable by WAML. Such transactions
may be combined, in accordance with applicable laws and
regulations, and consistent with WAML's policies and procedures
as presented to the Board from time to time.
11. For the purposes of this Agreement, the Fund's "net
assets" shall be determined as provided in the Fund's 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 Fund's name on
Schedule A annexed hereto, provided that it shall have been
approved by the Fund's 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 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 WAML,
or by WAML 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 WAML. This Agreement shall
terminate automatically in the event of its assignment by WAML
and shall not be assignable by the Subadviser without the consent
of WAML.
14. WAML 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 Fund.
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 Fund's 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.
ANNEX I
This Annex I forms a part of the Subadvisory Agreement dated
as of August 1, 2006 by and between Western Asset Management
Company, a California corporation, and Western Asset Management
Company Limited ("WAML"), an entity authorized and regulated in
the United Kingdom by the Financial Services Authority (the
"FSA").
1. WAML represents, warrants and covenants that it is
authorized and regulated by the FSA.
2. WAML has classified the Fund as an Intermediate Customer
as defined by the FSA Rules.
SCHEDULE A
Salomon Brothers Variable Rate Strategic Fund Inc.
Date:
August 1, 2006
Fee:
The sub-advisory fee will be the following percentage of the
Fund's Allocated Assets: 0.30%
