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 Oregon
Municipals 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:
1. In 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.
2
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, 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
3
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.
4
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.
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 OREGON
MUNICIPALS FUND
By: __________________________________
Name:
Title:
6
ANNEX I
Not applicable.
SCHEDULE A
Xxxx Xxxxx Partners Oregon Municipals 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.
