LMP Adjustable Rate Income fund
Sub-Item 77Q
This SUBADVISORY AGREEMENT ("Agreement") is made this 1st
day of August, 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 Xxxx Xxxxx
Partners Adjustable Rate Income 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 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:
0.Xx accordance with and subject to the Management
Agreement between the Fund 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. 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, 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 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 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 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 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.
0.Xx 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.
0.Xx 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 daily 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 daily net 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 daily net assets as the number of business days
in such period bears to the number of business days in such month.
The average daily net 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
determined as provided in the Fund's then-current Prospectus and Statement
of Additional Information 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 November 30, 2007. 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 Fund.
00.Xx 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 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.
XXXX XXXXX PARTNERS ADJUSTABLE RATE INCOME FUND
By: _______________________________
Name:
Title:
ANNEX I
Not applicable.
SCHEDULE A
Xxxx Xxxxx Partners Adjustable Rate Income Fund
Date:
August 1, 2006
Fee:
The sub-advisory fee will be 70% of the management fee paid
to Xxxx Xxxxx Partners Fund Advisor, LLC, net of expense waivers
and reimbursements.
