SUBADVISORY AGREEMENT
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 Trust II
(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. 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 a 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 a 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 a 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 a 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 a 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 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 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. As 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 a 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, 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 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 a 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
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
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 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.
XXXX XXXXX PARTNERS TRUST II
By: _______________________________
Name:
Title:
ANNEX I
Not applicable.
SCHEDULE A
Xxxx Xxxxx Partners Short Duration Municipal 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.
1
6
