SUBADVISORY AGREEMENT
This SUBADVISORY AGREEMENT ("Agreement") is made this 22nd day of
December, 2006, by and between Xxxx Xxxxx Partners Fund Advisor, LLC,
a Delaware limited liability company (the "Manager"), and Western
Asset Management Company, a California corporation (the "Subadviser").
WHEREAS, the Manager has been retained by Institutional Portfolio (the
"Trust"), 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
Trust with respect to certain series of the Trust; and
WHEREAS, the Manager wishes to engage the Subadviser to provide
certain investment advisory services to the Trust with respect to the
series of the Trust designated in Schedule A annexed hereto (the
"Fund") and 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 Trust and the Manager with respect to the Fund (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. The 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 Trust's Board of Trustees
(the "Board") and the Manager, the 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 current 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 Trust'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 Trust 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 Funds 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.
The Subadviser may execute on behalf of the Fund certain agreements,
instruments and documents in connection with the services performed by
it under this Agreement. These may include, without limitation,
brokerage agreements, clearing agreements, account documentation,
futures and options agreements, swap agreements, other investment
related agreements, and any other agreements, documents or instruments
the Subadviser believes are appropriate or desirable in performing its
duties under this Agreement.
(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 then-current 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 Trust, 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 or other agents; legal
expenses; loan commitment fees; expenses relating to certificates
evidencing beneficial interests; expenses relating to the issuing and
redemption or repurchase of the Fund's beneficial interests and
servicing investor accounts; expenses of registering and qualifying
the Fund's beneficial interests 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
distributions to investors; costs of stationery; website costs; costs
of meetings of the Board or any committee thereof, meetings of
investors 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 Trust or Fund
shall receive from the Trust or 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. The Manager shall not pay the Subadviser any fee hereunder. The
Subadviser acknowledges and agrees that the Fund is an integral part
of separately managed account programs, and that the Subadviser will
be compensated directly or indirectly by separately managed account
sponsors for services rendered hereunder. The Subadviser acknowledges
and agrees that such compensation is sufficient consideration
hereunder.
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 Trust or the Fund contemplated hereby and the partners, investors,
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 Trust or 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 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 Trust's Board
and, if so required by the 1940 Act, by the investors in the Fund in
accordance with the requirements of the 1940 Act and, unless sooner
terminated as provided herein, will continue in effect for an initial
two year term. 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 by the Subadviser and
shall not be assignable by the Manager without the consent of the
Subadviser.
14. The Subadviser agrees that for any claim by it against the Fund
in connection with this Agreement or the services rendered under this
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 Trust.
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.
XXXX XXXXX PARTNERS FUND ADVISOR, LLC
By: _______________________________
Name:
Title:
WESTERN ASSET MANAGEMENT COMPANY
By: _______________________________
Name:
Title:
The foregoing is acknowledged:
The undersigned officer of the Trust has executed this Agreement not
individually but in his/her capacity as an officer of the Trust. The
Trust does not hereby undertake, on behalf of the Fund or otherwise,
any obligation to the Subadviser.
INSTITUTIONAL PORTFOLIO
By: _______________________________
Name:
Title:
ANNEX I
Not applicable.
SCHEDULE A
SMASh Series C Portfolio Date:
DCDOCS/672611.2
DCDOCS/672611.2
