SUBADVISORY AGREEMENT
Exhibit (d)(20)
This SUBADVISORY AGREEMENT (“Agreement”) is made this 3rd day of November, 2008, by and
between Western Asset Management Company, a corporation organized under the laws of California (the
“Subadviser”) and Western Asset Management Company Ltd., a corporation organized under the laws of
Japan (“Western Japan”).
WHEREAS, the Subadviser has been retained by Xxxx Xxxxx Partners Fund Advisor, LLC to provide
investment advisory, management, and administrative services to Xxxx Xxxxx Partners Income Trust
(the “Trust”), a Maryland business trust registered as a 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 the series of the Trust
designated in Schedule A annexed hereto (the “Fund”); and
WHEREAS, the Subadviser wishes to engage Western Japan to provide certain investment advisory
services to the Fund, and Western Japan 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 Subadvisory Agreement between the Subadviser and Xxxx
Xxxxx Partners Fund Advisor, LLC with respect to the Fund (the “Subadvisory Agreement”), the
Subadviser hereby appoints Western Japan to act as a subadviser with respect to the Fund for the
period and on the terms set forth in this Agreement. Western Japan accepts such appointment and
agrees to render the services herein set forth, for the compensation herein provided.
2. The Subadviser shall cause Western Japan 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 Subadviser shall furnish Western Japan
with such other documents and information with regard to the Fund’s affairs as Western Japan may
from time to time reasonably request.
3. (a) Subject to the supervision of the Trust’s Board of Trustees (the “Board”), Xxxx Xxxxx
Partners Fund Advisor, LLC and the Subadviser, Western Japan shall regularly provide the Fund with
respect to such portion of the Fund’s assets as shall be allocated to Western Japan by the
Subadviser 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. Western Japan 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 Western Japan. Western Japan 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. Western Japan 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 Western Japan or its affiliates exercise
investment discretion. Western Japan 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 Western Japan 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 Western Japan 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 Western Japan’s authority regarding the execution of the Fund’s
portfolio transactions provided herein. Western Japan 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. Western Japan 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 Western Japan believes are
appropriate or desirable in performing its duties under this Agreement.
(b) The Fund hereby authorizes any entity or person associated with Western Japan 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, Western Japan 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
Western Japan or its affiliates is participating, or arrange for purchases and sales of securities
between the Fund and another account advised by Western Japan 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 Western Japan and its directors and officers.
4. Western Japan may delegate to any other one or more companies that Western Japan controls,
is controlled by, or is under common control with, or to specified employees of any such companies,
certain of Western Japan’s duties under this Agreement, provided in each case Western Japan will
supervise the activities of each such entity or employees thereof, that such delegation will not
relieve Western Japan 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. Western Japan 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
xxx
- 0 -
0000 Xxx, Xxxxxxx Xxxxx 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. Western Japan 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) Western Japan, at its expense, shall supply the Board, the officers of the Trust, Xxxx
Xxxxx Partners Fund Advisor, LLC and the Subadviser with all information and reports reasonably
required by them and reasonably available to Western Japan relating to the services provided by
Western Japan hereunder.
(b) Western Japan 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, Western Japan 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.
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 Western Japan or any affiliated
company of Western Japan, 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
Western Japan’s or any affiliated company’s staff.
8. As compensation for the services performed by Western Japan, including the services of any
consultants retained by Western Japan, the Subadviser shall pay Western Japan out of the
subadvisory 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 Western Japan 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
- 3 -
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. Western Japan 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 Western Japan against any liability to the Subadviser, Xxxx Xxxxx Partners Fund Advisor,
LLC or the Fund to which Western Japan 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 “Western
Japan” shall include any affiliates of Western Japan performing services for the Trust or the Fund
contemplated hereby and the partners, shareholders, directors, officers and employees of Western
Japan and such affiliates.
10. Nothing in this Agreement shall limit or restrict the right of any director, officer, or
employee of Western Japan 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 Western Japan 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 Western Japan is considered at or about the
same time, transactions in such securities will be allocated among the accounts in a manner deemed
equitable by Western Japan. Such transactions may be combined, in accordance with applicable laws
and regulations, and consistent with Western Japan’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 Trust’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 until the second anniversary of the date of effectiveness. 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 Western Japan, or by Western Japan upon not less
than 90 days’ written notice to the Fund and the Subadviser, and will be terminated upon the mutual
written consent of the Subadviser and Western Japan. This Agreement shall terminate automatically in
the event
- 4 -
of its assignment by Western Japan and shall not be assignable by the Subadviser without
the consent of Western Japan.
14. Western Japan agrees that for any claim by it against the Fund in connection with this
Agreement or the services rendered under the 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]
- 5 -
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their
officers thereunto duly authorized.
| WESTERN ASSET MANAGEMENT COMPANY |
||||
| By: | /s/ W. Xxxxxxx Xxxxxxx, Xx. | |||
| Name: | W. Xxxxxxx Xxxxxxx, Xx. | |||
| Title: | Manager, US Legal and Corporate Affairs | |||
| WESTERN ASSET MANAGEMENT COMPANY LTD. |
||||
| By: | /s/ Xxxxxx X. Xxxxxxxx | |||
| Name: | Xxxxxx X. Xxxxxxxx | |||
| Title: | Manager, International Legal and Compliance | |||
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 Western Asset Management Company Ltd.
| XXXX XXXXX PARTNERS INCOME TRUST |
||||
| By: | /s/ R. Xxx Xxxxxx | |||
| Name: | R. Xxx Xxxxxx | |||
| Title: | Chairman, President and Chief Executive Officer | |||
Xxxx Xxxxx Partners Variable Diversified Strategic Income Fund Signature Page
- 6 -
ANNEX I
This Annex I forms a part of the Subadvisory Agreement dated as of November 3, 2008, by and
between Western Asset Management Company, a California corporation, and Western Asset Management
Company Ltd. (“Western Japan”), an entity authorized and regulated in Japan by the Japanese
Securities and Exchange Surveillance Commission (SESC).
1. Western Japan shall not offer any special benefit to the Subadviser in connection with
performance of this Agreement, and the Subadviser shall not request any special benefit from
Western Japan.
2. Section 9 of this Agreement shall not be deemed to limit Western Japan’s obligations under the
Japanese Financial Instruments and Exchange Law to perform its duties to its customers faithfully
and with the care of a prudent manager.
3. The Subadviser shall be liable for any damages or losses suffered by Western Japan due to the
Subadviser’s willful misconduct or gross negligence or the Subadviser’s failure to perform its
duties hereunder.
SCHEDULE A
Xxxx Xxxxx Partners Variable Diversified Strategic Income Fund Date: November 3, 2008
Fee:
The sub-advisory fee will be the following percentage of the Fund’s Allocated Assets: 0.30%
