SUBADVISORY AGREEMENT
This SUBADVISORY AGREEMENT (Agreement) is made this 30th day of
November, 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 Western Asset High Income Fund II 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 Funds affairs. The Subadviser shall
furnish WAML with such other documents and information with regard to
the Funds affairs as WAML may from time to time reasonably request.
3. (a) Subject to the supervision of the Funds 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 Funds investment objectives, policies and restrictions, as stated
in the Funds 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
Funds 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 WAMLs authority regarding the execution of
the Funds 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 WAMLs 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 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 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? 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 WAMLs 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
Funds 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.
[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: _______________________________
Name:
Title:
WESTERN ASSET MANAGEMENT COMPANY
LIMITED
By: _______________________________
Name:
Title:
The foregoing is acknowledged:
The undersigned officer of the Fund has executed this Agreement
not individually but in his/her capacity as an officer of the Fund.
The Fund does not hereby undertake, on behalf of the Fund or
otherwise, any obligation to Western Asset Management Company Limited.
WESTERN ASSET HIGH INCOME FUND II INC.
By: _______________________________
Name:
Title:
ANNEX I
This Annex I forms a part of the Subadvisory Agreement dated as of
November 30, 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
Western Asset High Income Fund II Inc.
Date:
November 30, 2006
Fee:
The sub-advisory fee will be the following percentage of Allocated
Assets: 0.30%
