Exhibit 5(b)(iv)
ADVISORY AGREEMENT
AGREEMENT made this 26th day of May, 1998, by and between LM
Institutional Advisors, Inc. ("Manager"), a Maryland corporation, and Western
Asset Management Company ("Western"), a California corporation, 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 LM
Institutional Fund Advisors I, 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 Western to provide certain
investment advisory services in connection with the Manager's management of
Western Asset Core Plus Portfolio ("Fund"), a series of the Corporation; and
WHEREAS, Western 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 Western as investment
adviser for the Fund for the period and on the terms set forth in this
Agreement. Western 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 Western 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
Western as investment adviser and approving the Investment Management Agreement
between the Manager and the Corporation with respect to the Fund dated May 26,
1998 (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 Western 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, Western 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. Western 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. Western 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, Western 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, Western, 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 Western in
writing, Western 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 Western or any affiliated person of Western 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
Western 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 Western's
overall responsibilities with respect to the Fund and to other clients of
Western and any affiliated person of Western as to which Western or any
affiliated person of Western exercises investment discretion. Western shall also
perform such other functions of management and supervision as may be requested
by the Manager and agreed to by Western.
(b) Western 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 Western (or with any affiliated person of Western) 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. Western's services hereunder are not deemed
to be exclusive, and Western shall be free to render similar services to others.
It is understood that persons employed by
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Western 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 Western or any affiliate of Western 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, Western 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.
Western 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, Western 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 Western will render to the
Manager and the Fund under this Agreement, the Manager will pay Western a fee,
computed daily and paid monthly, at an annual rate of 0.40% of the average daily
net assets of the Fund. The average daily net assets of the Fund 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 of Directors of the Corporation. Fees due to
Western hereunder shall be paid promptly to Western 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 percentage of days of the
month during which the contract was still in effect.
8. Limitation of Liability. In the absence of willful misfeasance, bad
faith or gross negligence on the part of Western, or reckless disregard of its
obligations and duties hereunder, Western 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 Western, 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 Western, 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
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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, Western 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 Western, and Western 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
Western.
13. 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.
14. Non-Exclusive Right. In the event this Agreement is terminated or
upon written notice from Western 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.
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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.
LM INSTITUTIONAL ADVISORS, INC.
Attest:
By: _______________________________ By: __________________________________
WESTERN ASSET MANAGEMENT COMPANY
Attest:
By: _______________________________ By: __________________________________
The foregoing is accepted by:
LM INSTITUTIONAL FUND ADVISORS I, INC.
Attest:
By: _______________________________ By: __________________________________
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