SUBADVISORY AGREEMENT
Xxxx Xxxxx Maryland Tax-Free Income Trust
This SUBADVISORY AGREEMENT
(?Agreement?) is made as of the 16th day of
November, 2012 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 Tax-Free Income Fund (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 a 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 as the Xxxx Xxxxx Maryland Tax-
Free Income Trust (the ?Fund?), and the 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 Investment Advisory and Management
Agreement between the Fund and the Manager (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, 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
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 Trust Instrument 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 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.
7. No 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.
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, 0.02% of the
portion of the Fund's average daily net assets
allocated to the Subadviser for the management of
cash and other short-term instruments, net of expense
waivers and reimbursements. Such fee shall be paid to
the Subadviser by the Manager out of the fee it
receives from the Fund. 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 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
prorated by the ratio that the number of business
days in such period bears to the number of business
days in such month. The 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 its total
assets minus its liabilities 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 as of the 16th day
of November, 2012, 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, 2014.
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.
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
B
y
:
N
a
m
e
:
T
i
t
l
e
:
D
a
t
e
:
WESTERN
ASSET
MANAGEMEN
T COMPANY
B
y
:
N
a
m
e
:
T
i
t
l
e
:
D
a
t
e
:
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
Tax-Free Income
Fund
B
y
:
N
a
m
e
:
R
..
J
a
y
G
e
r
k
e
n
T
i
t
l
e
:
C
h
a
i
r
m
a
n
,
P
r
e
s
i
d
e
n
t
a
n
d
C
h
i
e
f
E
x
e
c
u
t
i
v
e
O
f
f
i
c
e
r
ANNEX I
Not applicable.
13
