INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 31st day of August, 1990, by and between WESTERN
ASSET TRUST, INC. ("Fund"), a Maryland corporation and WESTERN ASSET MANAGEMENT
COMPANY ("Western"), a California corporation registered as an investment
adviser under the Investment Advisers Act of 1940.
WHEREAS, the Fund is an open-end, diversified, management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), consisting initially of four series of shares, called the Limited
Duration Portfolio, the Full Range Duration Portfolio, the Long Duration
Portfolio and the Money Market Portfolio (collectively, the "Portfolios") and
WHEREAS, the Fund wishes to retain Western to provide the Portfolios
with certain investment advisory services, 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 between the parties hereto as follows:
1. Appointment. The Fund hereby appoints Western as investment adviser
for each Portfolio 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 Fund has furnished Western with copies
properly certified or authenticated of each of the following:
(a) The Fund's Articles of Incorporation, as filed with the
Maryland Department of Assessment and Taxation on May 16, 1990
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 Fund's By-Laws and all amendments thereto (such By-Laws,
as presently in effect and they shall from time to time be
amended, are herein called the "ByLaws");
(c) Resolutions of the Fund's Board of Directors authorizing the
appointment of Western as investment adviser and approving
this Agreement;
(d) The Fund's Notification of Registration on Form N-8A under the
1940 Act as filed with the Securities and Exchange Commission
on May 16, 1990 and all amendments
2
thereto;
(e) The Fund's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended, and the 1940 Act (File No.
811-06110) as filed with the Securities and Exchange
Commission on May 16, 1990, including all exhibits thereto,
relating to shares of the Fund's common stock of par value
$0.001 per share (herein called "Shares") and all amendments
thereto; and
(f) The Fund's most recent prospectus (such document as presently
in effect and all amendments and supplements thereto is herein
called the "Prospectus");
(g) The Fund's most recent statement of additional information
(such document as presently in effect and all amendments and
supplements thereto is herein called the "Statement of
Additional Information").
The Fund will furnish Western from time to time with copies, properly
certified or authenticated, of all amendments of or supplements to the
foregoing.
3. (a). Investment Advisory Services. Subject to the supervision of the
Fund's Board of Directors, Western shall regularly provide each Portfolio with
investment research,
3
advice, management and supervision and shall furnish a continuous investment
program for each Portfolio's portfolio of securities consistent with that
Portfolio's investment objective, policies, and limitations as stated in the
minutes of the Fund's Directors, including the formulation, from time to time,
of lists of specific approved investments for each Portfolio. Western shall
determine from time to time what securities shall be purchased, retained or sold
by each Portfolio, and shall implement those decisions, all subject to the
provisions of the Fund's Articles 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 objective, policies
and limitations of each Portfolio. Western will place orders pursuant to its
investment determinations for each Portfolio either directly with the issuer or
with any broker or dealer. In placing orders with brokers and dealers, Western
will attempt to obtain the best net price and the most favorable execution of
its orders; however, Western may, in its discretion, purchase and sell portfolio
securities from and to brokers and dealers who provide any Portfolio with
research, analysis, advice and similar services, and Western may pay to these
brokers, in return for research and analysis, a higher commission than may be
charged by other brokers. In no instance will portfolio securities be purchased
from or sold to Western or any affiliated person thereof except in accordance
with the rules, regulations or orders promulgated by the Securities and Exchange
Commission
4
pursuant to the 1940 Act. Western shall also provide advice and recommendations
with respect to other aspects of the business and affairs of the Fund, and shall
perform such other functions of management and supervision as may be requested
by the Fund and agreed to by Western.
(b) Western will maintain, or oversee the maintenance of, all books and
records with respect to the portfolio securities transactions of each Portfolio
in accordance with all applicable federal and state laws and regulations, and
will furnish the Fund's Board of Directors with such daily, periodic and special
reports as either may request.
(c) Western will furnish the Fund with office facilities, including
space, furniture and equipment and all personnel reasonably necessary for the
operation of the Fund.
(d) Western shall authorize and permit any of its directors, officers
and employees, who may be elected as directors or officers of the Fund, to serve
in the capacities in which they are elected, and shall bear their salary or
other compensation and expenses, if any.
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
5
employed by Western to assist in the performance of its duties hereunder might
not devote their full time to such service. Nothing herein 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 records which it maintains
for the Fund are property of the Fund and further agrees to surrender promptly
to the Fund any 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 services under this Agreement.
Other than as herein specifically indicated, Western shall not be responsible
for the Fund's expenses. Specifically, Western will not be responsible, except
to the extent of the reasonable compensation of employees of the Fund whose
services may be used by Western hereunder, for any of the following expenses of
the Fund, which expenses shall be borne by the Fund: organizational expenses;
legal expenses; interest; taxes; governmental fees; fees, voluntary assessments
and other
6
expenses incurred in connection with membership in investment company
organization; the cost (including brokerage commissions or charges, if any) of
securities purchased or sold by the Fund and any losses incurred in connection
therewith; distribution fees, if any; fees of custodians, subcustodians,
transfer agents, registrars or other agents for all services to the Fund;
expenses relating to the redemption or repurchase of the Fund's shares; expenses
of registering and qualifying Fund shares for sale under applicable federal and
state law and maintaining such registrations and qualifications; expenses of
preparing, setting in print, printing and distributing prospectuses, proxy
statements, reports, notices, stock certificates and dividends to Fund
shareholders; costs of stationery; costs of stockholders' and other meetings of
the Fund; compensation of officers and directors who are not affiliated persons
of Western; fees and expenses of independent auditors; traveling expenses of
directors of the Fund, if any; expenses for fidelity bonds and other insurance
covering the Fund and its officers and directors; costs of indemnification; and
any extraordinary expenses.
7. Compensation. (a) For the services which Western will render to the
Fund under this Agreement, each of the Limited Duration, Full Range Duration and
Long Duration Portfolios will pay Western a fee, computed daily and paid
monthly, at an annual rate equal to 0.40 percent of that Portfolio's average
daily net assets, and the Money Market Portfolio will pay Western a fee,
7
computed daily and paid monthly, at an annual rate equal to 0.30 percent of that
Portfolio's average daily net assets. Fees with regard to the Fund shall be paid
promptly following the end of each calendar month. In the event that the
Adviser's right to such fee commences on a date other than the first day of the
month, the fee for such month shall be based on the average daily net assets of
each Portfolio in that period from the date of commencement to that last day of
the month. If this Agreement is terminated with respect to any Portfolio as of
any date not the last day of a calendar month, a final fee with regard to that
Portfolio shall be paid promptly after the date of termination and shall be
based only on the average daily net assets of the Portfolio in that period from
the beginning of such month to such date of termination. The average daily net
assets of a Portfolio shall in all cases be based on calendar days and be
computed as of such time and in such manner as may be determined by the Board of
Directors of the Fund.
(b) No director, officer or employee of the Fund shall receive from the
Fund any salary or other compensation as such director, officer or employee
while he is at the same time a director, officer or employee of Western or any
affiliated company of Western.
8. Limitation of Liability. Western will not be liable for any error of
judgment or mistake of law or for any loss suffered
8
by the Fund or any Portfolio in connection with the performance of this
Agreement, except a loss resulting from a breach of fiduciary duty with respect
to the receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or from reckless disregard by it of its obligations or duties under this
Agreement.
9. The Fund acknowledges that Western may make payments from the fees
paid to it under this Agreement, from past profits or from any other source
available to it to other persons, including but not limited to Xxxx Xxxxx Fund
Adviser, Inc. and Xxxx Xxxxx Xxxx Xxxxxx, Incorporated, for shareholder,
administrative, advisory, recordkeeping and distribution services provided by
such persons in connection with the Fund's shares.
10. Definitions. As used in 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 Securities and Exchange Commission by any
rule, regulation or order.
11. Duration and Termination. This Agreement will become effective with
respect to each Portfolio on the date first written above, provided that it
shall have been approved by the
9
Fund's Board of Directors and by the shareholders of that Portfolio in
accordance with the requirements of the 1940 Act and, unless sooner terminated
as provided herein, will continue in effect for two years from the above written
date. Thereafter, if not terminated, this Agreement shall continue in effect
with respect to each Portfolio for successive annual periods ending on the same
date of each year, provided that such continuance is specifically approved at
least annually (i) by the Fund's Board of Directors or (ii) by a vote of a
majority of the outstanding voting securities of the Portfolio (as defined in
the 1940 Act), provided that in either event the continuance is also approved by
a majority of the Fund's Directors who are not interested persons (as defined in
the 0000 Xxx) of any party to this Agreement, by vote cast in person at a
meeting called for the purpose of voting on such approval.
This Agreement is terminable with respect to any Portfolio or in its
entirety without penalty by the Fund's Board of Directors, by vote of a majority
of the outstanding voting securities of each affected Portfolio (as defined in
the 1940 Act), or by Western, on not less than 60 days' notice to the other
party and will be terminated upon the mutual written consent of Western and the
Fund. This Agreement will also automatically and immediately terminate in the
event of its assignment.
10
In the event this Agreement is terminated by either party or upon
written notice from Western at any time, the Fund hereby agrees that it will
eliminate from its corporate name any reference to the name of "Western Asset."
The Fund shall have the non-exclusive use of the name "Western Asset" in whole
or in part only so long as this Agreement is effective or until such notice is
given.
12. Further Actions. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
13. Amendments. 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 this Agreement shall be
effective until approved by vote of the holders of a majority of the outstanding
voting securities of the Fund or each Portfolio to which such amendment relates,
as the case may be.
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
11
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, to the extent
permitted by law, and shall be governed by Maryland law.
IN WITNESS WHEREOF, the parties hereto have causes this Agreement to be
executed by their officers designated below on the day and year first above
written.
[seal] WESTERN ASSET TRUST, INC.
Attest:
By: /s/ Xxxxx X. Xxxxx By: /s/Xxxx X. Xxxxx
[seal] WESTERN ASSET MANAGEMENT COMPANY
Witness:
By: /s/ Xxxxx X. Xxxxx By: /s/ W. Xxxxxx Xxxxxxxxxx
12
