SUBADVISORY AGREEMENT
This SUBADVISORY AGREEMENT ("Agreement") is made this
24th day of January, 2012, by and between Xxxx Xxxxx Partners
Fund Advisor, LLC, a Delaware limited liability company (the
"Manager"), and Permal Asset Management Inc., a Delaware
corporation (the "Subadviser").
WHEREAS, the Manager has been retained by Permal Hedge
Strategies Fund (the "Fund"), a registered management
investment company under the Investment Company Act of 1940,
as amended (the "1940 Act") to provide investment advisory,
management, and administrative services to the Fund; and
WHEREAS, the Manager wishes to engage the Subadviser to
provide certain investment advisory services to the Fund, and
the Subadviser 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
Management Agreement between the Fund and the Manager (the
"Management Agreement"), the Manager hereby appoints the
Subadviser to act as Subadviser with respect to the Fund for
the period and on the terms set forth in this Agreement. The
Subadviser accepts such appointment and agrees to render the
services herein set forth, for the compensation herein
provided.
2. The Manager shall cause the Subadviser 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. Manager shall furnish the
Subadviser with such other documents and information with
regard to the Fund's affairs as the Subadviser may from time
to time reasonably request.
3. (a) Subject to the supervision
of the Fund's Board of Trustees (the "Board") and the Manager,
Subadviser shall regularly provide the Fund with respect to
such portion of the Fund's assets as shall be allocated to the
Subadviser by the Manager 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
Prospectus and Statement of Additional Information. The
Subadviser 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 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 the Subadviser. The Subadviser 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. The
Subadviser 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 the
Subadviser or its affiliates exercise investment discretion.
The Subadviser 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 the
Subadviser 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 the Subadviser 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 the Subadviser's authority regarding the execution of
the Fund's portfolio transactions provided herein. The
Subadviser 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 the Subadviser 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, the
Subadviser 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 the Subadviser or its affiliates is
participating, or arrange for purchases and sales of
securities between the Fund and another account advised by the
Subadviser 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 Prospectus and Statement of
Additional Information relative to the Subadviser and its
directors and officers.
4. The Subadviser may delegate to any other
one or more companies that the Subadviser controls, is
controlled by, or is under common control with, or to
specified employees of any such companies, certain of the
Subadviser's duties under this Agreement, provided in each
case the Subadviser will supervise the activities of each such
entity or employees thereof, that such delegation will not
relieve the Subadviser 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. The Subadviser 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, the Subadviser 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. The
Subadviser 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) The Subadviser, at its
expense, shall supply the Board, the officers of the Fund, and
the Manager with all information and reports reasonably
required by them and reasonably available to the Subadviser
relating to the services provided by the Subadviser hereunder.
(b) The Subadviser 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, the
Subadviser 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, tax reporting services 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 the Subadviser or any affiliated company of the
Subadviser, 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
the Subadviser's or any affiliated company's staff.
8. As compensation for the services performed
by the Subadviser, including the services of any consultants
retained by the Subadviser, the Manager shall pay the
Subadviser out of the management 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
monthly 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 the Subadviser 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 monthly managed 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 monthly managed
assets as the number of business days in such period bears to
the number of business days in such month. The average monthly
managed 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. The Subadviser 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 the Subadviser
against any liability to the Manager or the Fund to which the
Subadviser 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 "Subadviser" shall include any affiliates of the
Subadviser performing services for the Fund contemplated
hereby and the partners, shareholders, directors, officers and
employees of the Subadviser and such affiliates.
10. Nothing in this Agreement shall limit or
restrict the right of any director, officer, or employee of
the Subadviser 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 the Subadviser 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 the Subadviser is considered at or about the same
time, transactions in such securities will be allocated among
the accounts in a manner deemed equitable by the Subadviser.
Such transactions may be combined, in accordance with
applicable laws and regulations, and consistent with the
Subadviser'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 its total assets minus its
liabilities 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 December
31, 2013. 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 the Subadviser, or by the Subadviser upon
not less than 90 days' written notice to the Fund and the
Manager, and will be terminated upon the mutual written
consent of the Manager and the Subadviser. This Agreement
shall terminate automatically in the event of its assignment.
14. 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.
15. 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.
16. 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.
XXXX XXXXX PARTNERS FUND ADVISOR, LLC
By
Name:
Title:
PERMAL ASSET MANAGEMENT INC.
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 the
Subadviser.
PERMAL HEDGE STRATEGIES FUND
By:
Name:
Title:
ANNEX I
Not applicable.
SCHEDULE A
Permal Hedge Strategies Fund
Date:
January 24, 2012
Fee:
The following percentage of the Fund's managed assets: 1.00%
