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 Municipal
Funds(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
iswilling 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
alltimes 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, theSubadviser agrees that
it will not deal with itself, or with members of the Board or any principal
underwriter of the Fund, asprincipals 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 accountadvised 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 shallbe 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 comprisingthe 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
securitiestransactions 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 ofits 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 herebyand 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
Agreementheld 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 MUNICIPAL FUNDS
By: _______________________________
Name:
Title:
ANNEX I
Not applicable.
SCHEDULE A
Massachusetts Money Market Portfolio
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.
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