ADVISORY AGREEMENT
AGREEMENT made this 25 day of November 2008, by and between
Xxxx Xxxxx Fund Adviser, Inc. ("Manager"), a Maryland
corporation, and Western Asset Management Company Pte. Limited
("WAML Singapore"), a corporation organized under the laws of
Singapore, 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 Western Asset Funds, 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 WAML Singapore to
provide certain investment advisory services in connection with
the Manager's management of Western Asset Non-U.S. Opportunity
Bond Portfolio ("Fund"), a series of the Corporation; and
WHEREAS, WAML Singapore 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 WAML
Singapore as investment adviser for the Fund for the period and
on the terms set forth in this Agreement. WAML Singapore
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
WAML Singapore 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 WAML Singapore as investment adviser and
approving the Investment Management Agreement between the
Manager and the Corporation with respect to the Fund dated
December 31, 2001 (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 WAML Singapore 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, WAML Singapore
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. WAML Singapore 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. WAML Singapore 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, WAML Singapore 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, WAML Singapore,
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 WAML
Singapore in writing, WAML Singapore 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 WAML Singapore or any affiliated person of WAML
Singapore 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 WAML Singapore 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
WAML Singapore's overall responsibilities with respect to the
Fund and to other clients of WAML Singapore and any affiliated
person of WAML Singapore as to which WAML Singapore or any
affiliated person of WAML Singapore exercises investment
discretion. WAML Singapore shall also perform such other
functions of management and supervision as may be requested by
the Manager and agreed to by WAML Singapore.
(b) WAML Singapore 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 WAML Singapore (or with any affiliated
person of WAML Singapore) 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. WAML Singapore's services
hereunder are not deemed to be exclusive, and WAML Singapore
shall be free to render similar services to others. It is
understood that persons employed by WAML Singapore 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 WAML Singapore or any
affiliate of WAML Singapore 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, WAML Singapore
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. WAML Singapore 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, WAML
Singapore 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 WAML Singapore
will render to the Manager and the Fund under this Agreement,
the Manager will pay WAML Singapore a fee, computed monthly and
paid monthly, equal to the product of (i) the Baseline Amount
for the current calendar month and (ii) the average of the
Subadviser Fraction for the current calendar month and the
Subadviser Fraction for the preceding calendar month. The
Baseline Amount for a given calendar month shall be the total
amount paid to the Manager by the Corporation pursuant to the
Management Agreement in respect of such calendar month. The
Subadviser Fraction for a given calendar month shall be a
fraction, the numerator of which is the net assets of the Fund
managed by WAML Singapore, and the denominator of which is the
net assets of the Fund, in each case computed as of the time of
the regular close of business of the New York Stock Exchange on
the last Business Day of such calendar month, or such other time
as may be determined by the Board of Directors of the
Corporation. A Business Day shall be any day on which the New
York Stock Exchange is open. Fees due to WAML Singapore
hereunder shall be paid promptly to WAML Singapore 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 Baseline Amount
for that portion of the month during which the contract was
still in effect and the Subadviser Fraction as of the time of
the regular close of business of the New York Stock Exchange on
the date of termination (or, if the date of termination is not a
Business Day, the Business Day immediately preceding the date of
termination).
8. Limitation of Liability. In the absence of willful
misfeasance, bad faith or gross negligence on the part of WAML
Singapore, or reckless disregard of its obligations and duties
hereunder, WAML Singapore 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 WAML Singapore, 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 WAML Singapore, 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 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, WAML
Singapore 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
WAML Singapore, and WAML Singapore 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 WAML Singapore.
13. Non-Exclusive Right. In the event this Agreement
is terminated or upon written notice from WAML Singapore 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.
14. 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.
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.
Attest: XXXX XXXXX FUND ADVISER, INC.
By: _______________ By: _______________________________________
Name: _______________
Title: _______________
Attest: WESTERN ASSET MANAGEMENT COMPANY
PTE LIMITED
By: _______________ By:
______________________________________
Name: _______________
Title: _______________
The foregoing is accepted by:
Attest: WESTERN ASSET FUNDS, INC.
By: _______________ By:
______________________________________
Name: _______________
Title: _______________
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