INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
Western Asset Trust, Inc.
Corporate Securities Portfolio
Mortgage Securities Portfolio
AGREEMENT made this 30th day of June, 1992, by and between WESTERN
ASSET TRUST, INC. ("Fund"), a Maryland corporation and WESTERN ASSET MANAGEMENT
COMPANY ("Western Asset"), a California corporation registered as an investment
adviser under the Investment Advisers Act of 1940.
WHEREAS, the Fund is an open-end, diversified, management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), consisting initially of seven series of shares, two of which are
known as the Corporate Securities Portfolio and the Mortgage Securities
Portfolio (collectively, the "Portfolios") and
WHEREAS, the Fund wishes to retain Western Asset to provide the
Portfolios certain investment advisory and administrative services, and
WHEREAS, Western Asset 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 between the parties hereto as follows:
1. Appointment. The Fund hereby appoints Western Asset as investment
adviser for the Portfolios for the period and on the terms set forth in this
Agreement. Western Asset accepts such appointment and agrees to furnish the
services herein set forth for the compensation herein provided.
2. Delivery of Documents. The Fund has furnished Western Asset with
copies properly certified or authenticated of each of the following:
(a) The Fund's Articles of Incorporation, as filed with the
Maryland Department of Assessment and Taxation on May 16, 1990
and all amendments thereto (such Articles of Incorporation, as
presently in effect and as they shall from time to time be
amended, are herein called the "Articles");
(b) The Fund's By-Laws and all amendments thereto (such By-Laws,
as presently in effect and they shall from time to time be
amended, are herein called the "By-Laws");
(c) Resolutions of the Fund's Board of Directors authorizing the
appointment of Western Asset as investment adviser and
approving this Agreement;
(d) The Fund's Notification of Registration on Form N-8A under the
1940 Act as filed with the Securities and Exchange Commission
on May 16, 1990 and all amendments thereto;
(e) The Fund's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended, and the 1940 Act (File No.
811-06110) as filed with the Securities and Exchange
Commission on May 16, 1990, including all exhibits thereto,
relating to shares of the Fund's common stock of par value
$0.001 per share (herein called "Shares") and all amendments
thereto; and
(f) The most recent prospectus or prospectuses for the Portfolios
(such document as presently in effect and all amendments and
supplements thereto is herein called the "Prospectus");
(g) The most recent statement of additional information or
statements of additional information (such document as
presently in effect and all amendments and supplements thereto
is herein called the "Statement of Additional Information").
The Fund will furnish Western Asset from time to time with copies,
properly certified or authenticated, of all amendments of or supplements to the
foregoing.
3. (a). Investment Advisory Services. Subject to the supervision of the
Fund's Board of Directors, Western Asset shall regularly provide each Portfolio
with investment research, advice, management and supervision and shall furnish a
continuous investment program for each Portfolio's portfolio of securities
consistent with each Portfolio's respective investment objective, policies, and
limitations as stated in the minutes of the Fund's Directors. Western Asset
shall determine from time to time what securities shall be purchased, retained
or sold by the Portfolios, and shall implement those decisions, all subject to
the provisions of the Fund's Articles and ByLaws, the 1940 Act, the applicable
rules and regulations of the Securities and Exchange Commission, and other
applicable federal and state law, as well as the investment objective, policies
and limitations of the Portfolios. Western Asset will place orders pursuant to
its investment determinations for each Portfolio either directly with the issuer
or with any broker or dealer. In placing orders with brokers and dealers,
Western Asset will attempt to obtain the best net price and the most favorable
execution of its orders; however, Western Asset may, in its discretion, purchase
and sell
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portfolio securities from and to brokers and dealers who provide Western Asset
with research, analysis, advice and similar services, and Western Asset may pay
to these brokers, in return for research and analysis, a higher commission than
may be charged by other brokers. In no instance will portfolio securities be
purchased from or sold to Western Asset, WLO Global Management or any affiliated
person thereof except in accordance with the rules, regulations or orders
promulgated by the Securities and Exchange Commission pursuant to the 1940 Act.
Western Asset shall also provide advice and recommendations with respect to
other aspects of the business and affairs of the Fund, and shall perform such
other functions of management and supervision as may be requested by the Fund
and agreed to by Western Asset.
4. Administrative Services. (a) Subject always to the control of the
Board of Directors of the Fund and to such policies as the Board may determine,
Western Asset agrees, at its expense, (1) to furnish the management and
administrative services necessary for the operation of each Portfolio and
handling its shareholder relations, including overseeing bookkeeping and
accounting services and the calculation and publication of each Portfolio's net
asset value, providing office space, equipment and facilities, data processing,
internal auditing and clerical services (excluding determination of net asset
value); preparing reports to each Portfolio's shareholders and tax returns;
reports to and filings with governmental bodies; and conducting relations on
behalf of each Portfolio with custodians, depositories, transfer agents,
registrars and dividend disbursing and reinvestment plan agents, accountants,
attorneys, underwriters, insurers and banks, and (ii) to furnish all necessary
management facilities, including salaries of personnel, required for it to
execute its duties faithfully.
(b) Western Asset will maintain, or oversee the maintenance of, all
books and records with respect to the portfolio securities transactions of each
Portfolio in accordance with all applicable federal and state laws and
regulations, and will furnish the Fund's Board of Directors with such daily,
periodic and special reports as they may request. In compliance with the
requirements of Rule 31a-3 under the Investment Company Act of 1940, Western
Asset hereby agrees that any records which 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 Asset further agrees to arrange
for the preservation of the records required to be maintained by Rule 31a-1
under the Investment Company Act of 1940 for the periods prescribed by Rule
31a-2 under said Act.
(c) Western Asset shall act as liaison with the Fund's independent
public accountants and shall provide account analyses, fiscal year summaries,
and other audit related
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schedules. Western Asset shall take all reasonable action in the performance of
its obligations under this Agreement to assure that the necessary information is
made available to such accountants for the expression of their opinion, as such
may be required by the Fund from time to time.
(d) Western Asset, at its own expense, shall provide a system whereby
information is supplied to shareholders concerning their accounts and the
operation of the Fund. Western Aset shall also provide, at its own expense, a
system whereby orders for purchases and redemption of each Portfolio's shares
which are received by the Fund or its distributor, Xxxx Xxxxx Xxxx Xxxxxx,
Incorporated, are promptly processed and transmitted to the Fund's transfer
agent. Western Asset may delegate some or all of the functions specified in this
subparagraph to Xxxx Xxxxx Xxxx Xxxxxx, Incorporated or another appropriate
person.
5. General. (a) Western Asset will furnish the Fund with office
facilities, including space, furniture and equipment and all personnel
reasonably necessary for the operation of the Fund.
(b) Western Asset shall authorize and permit any of its directors,
officers and employees, who may be elected as directors or officers of the Fund,
to serve in the capacities in which they are elected, and shall bear their
salary or other compensation and expenses, if any.
(c) In the performance of its duties under this Agreement, Western
Asset will comply with the provisions of the Articles of Incorporation and
By-Laws of the Fund and the stated investment objectives, policies and
restrictions of each Portfolio, and will use its best efforts to safeguard and
promote the welfare of the Fund, and to comply with other policies which the
Board may from time to time determine.
6. Services Not Exclusive. Western Asset's services hereunder are not
deemed to be exclusive, and Western Asset shall be free to render similar
services to others. It is understood that persons employed by Western Asset to
assist in the performance of its duties hereunder might not devote their full
time to such service. Nothing herein shall be deemed to limit or restrict the
right of Western Asset or any affiliate of Western Asset to engage in and devote
time and attention to other businesses or to render services of whatever kind or
nature.
7. Expenses. During the term of this Agreement, Western Asset will pay
all expenses incurred by it in connection with its services under this
Agreement. Other than as herein specifically indicated, Western Asset shall not
be responsible for the Fund's expenses. Specifically, Western Asset will not be
responsible, except to the extent of the reasonable compensation of employees of
the Fund whose services may be used by Western Asset
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hereunder, for any of the following expenses of the Fund, which expenses shall
be borne by the Fund: organizational expenses; legal expenses; interest; taxes;
governmental fees; fees, voluntary assessments and other expenses incurred in
connection with membership in investment company organizations; the cost
(including brokerage commissions or charges, if any) of securities purchased or
sold by the Fund and any losses incurred in connection therewith; distribution
fees, if any; fees of custodians, subcustodians, transfer agents, registrars or
other agents for all services to the Fund; expenses relating to the redemption
or repurchase of the Fund's shares; expenses of registering and qualifying Fund
shares for sale under applicable federal and state law and maintaining such
registrations and qualifications; expenses of preparing, setting in print,
printing and distributing prospectuses, proxy statements, reports, notices,
stock certificates and dividends to Fund shareholders; costs of stationery;
costs of stockholders' and other meetings of the Fund; compensation of officers
and directors who are not affiliated persons of Western Asset; fees and expenses
of independent auditors; traveling expenses of directors of the Fund, if any;
expenses for fidelity bonds and other insurance covering the Fund and its
officers and directors; costs of indemnification; and any extraordinary
expenses.
8. Compensation. (a) For the services which Western Asset will render
to the Fund under this Agreement, the Corporate Securities Portfolio will pay
Western Asset a fee, computed daily and paid monthly, at an annual rate equal to
0.175% of that Portfolio's average daily net assets, and the Mortgage Securities
Portfolio will pay Western Asset a fee, computed daily and paid monthly, at an
annual rate equal to 0.175% of that Portfolio's average daily net assets. Fees
with regard to the Fund shall be paid promptly following the end of each
calendar month. In the event that the Adviser's right to such fee commences on a
date other than the first day of the month, the fee for such month shall be
based on the average daily net assets of each Portfolio in that period from the
date of commencement to that last day of the month. If this Agreement is
terminated with respect to any Portfolio as of any date not the last day of a
calendar month, a final fee with regard to that Portfolio shall be paid promptly
after the date of termination and shall be based only on the average daily net
assets of the Portfolio in that period from the beginning of such month to such
date of termination. The average daily net assets of a Portfolio shall in all
cases be based on calendar days and be computed as of such time and in such
manner as may be determined by the Board of Directors of the Fund.
(b) No director, officer or employee of the Fund shall receive from the
Fund any salary or other compensation as such director, officer or employee
while he is at the same time a director, officer or employee of Western Asset,
WLO Global
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Management or any affiliated company of Western Asset or WLO Global Management.
9. Limitation of Liability. Western Asset will not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund or any
Portfolio in connection with the performance of this Agreement, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or from
reckless disregard by it of its obligations or duties under this Agreement.
10. With the approval of the Fund's Board of Directors, Western Asset
may contract with another party to provide to the Portfolios some or all of the
administrative services described in this Agreement. The Fund acknowledges that
Western Asset may make payments from the fees paid to it under this Agreement,
from past profits or from any other source available to it to other persons,
including but not limited to Xxxx Xxxxx Fund Adviser, Inc. and Xxxx Xxxxx Xxxx
Xxxxxx, Incorporated, for shareholder, administrative, advisory, recordkeeping
and distribution services provided by such persons in connection with the Fund's
shares.
11. Definitions. As used in this Agreement, 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 Securities and Exchange Commission by any
rule, regulation or order.
12. Duration and Termination. This Agreement will become effective with
respect to a Portfolio on the date first written above, provided that it shall
have been approved by the Fund's Board of Directors and by the shareholders of
that Portfolio in accordance with the requirements of the 1940 Act and, unless
sooner terminated as provided herein, will continue in effect for two years from
the above written date. Thereafter, if not terminated, this Agreement shall
continue in effect with respect to each Portfolio for successive annual periods
ending on the same date of each year, provided that such continuance is
specifically approved at least annually (i) by the Fund's Board of Directors or
(ii) by a vote of a majority of the outstanding voting securities of the
Portfolio (as defined in the 1940 Act), provided that in either event the
continuance is also approved by a majority of the Fund's Directors who are not
interested persons (as defined in the 0000 Xxx) of any party to this Agreement,
by vote cast in person at a meeting called for the purpose of voting on such
approval.
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This Agreement is terminable with respect to a Portfolio without
penalty by the Fund's Board of Directors, by vote of a majority of the
outstanding voting securities (as defined in the 0000 Xxx) of that Portfolio, or
by Western Asset, on not less than 60 days' notice to the other party and will
be terminated upon the mutual written consent of Western Asset and the Fund.
This Agreement will also automatically and immediately terminate in the event of
its assignment.
In the event this Agreement is terminated by either party or upon
written notice from Western Asset at any time, the Fund hereby agrees that it
will eliminate from its corporate name any reference to the name of "Western
Asset." The Fund shall have the non-exclusive use of the name "Western Asset" in
whole or in part only so long as this Agreement is effective or until such
notice is given.
13. Further Actions. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
14. Amendments. 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 this Agreement shall be
effective with respect to a Portfolio until approved by vote of the holders of a
majority of the outstanding voting securities of that Portfolio.
15. Miscellaneous. This Agreement embodies the entire agreement and
understanding between the parties hereto, and supersedes all prior agreements
and understandings relating to the subject matter hereof. The captions in this
Agreement are included for convenience of reference only and in no way define or
delimit any of the provisions hereof or otherwise affect their construction or
effect. 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 and shall inure to the
benefit of the parties hereto and their respective successors, to the extent
permitted by law, and shall be governed by Maryland law.
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IN WITNESS WHEREOF, the parties hereto have causes this Agreement to be
executed by their officers designated below on the day and year first above
written.
[seal] WESTERN ASSET TRUST, INC.
Attest:
By: /s/ Xxxxx X. Xxxxxx By: /s/ W. Xxxxxx Xxxxxxxxxx
[seal] WESTERN ASSET MANAGEMENT COMPANY
Witness:
By: /s/ Xxxxx X. Xxxxxx By: /s/ W. Xxxxxx Xxxxxxxxxx
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