EXHIBIT 99.B5(b)
XXXXXXXX-XXXXXXXXX FUND, INC.
SUBADVISORY AGREEMENT
Agreement made as of this 10th day of June, 1991 by and among Prudential
Mutual Fund Management Inc., a Delaware corporation (PMF or the Manager),
Xxxxxxxx-Xxxxxxxxx Capital Management, a California limited partnership (the
Subadviser), and Xxxxxxxx-Xxxxxxxxx Fund, Inc., a Maryland corporation (the
Fund).
WHEREAS, the Manager has entered into a Management Agreement, dated June
10, 1991 (the Management Agreement), with the Fund, a diversified open-end
management investment company registered under the Investment Company Act of
1940, as amended (the 1940 Act), pursuant to which PMF will act as Manager of
the Fund.
WHEREAS, PMF desires to retain the Subadviser to provide investment
advisory services to the Fund in connection with the management of the Fund and
the Subadviser is willing to render such investment advisory services.
NOW, THEREFORE, the Parties agree as follows:
1. (a) Subject to the supervision of the Manager and of the Board of
Directors of the Fund, the Subadviser shall manage the investment operations of
the Fund and the composition of the Fund's portfolio, including the purchase,
retention and disposition thereof, in accordance with the Fund's investment
objectives, policies and restrictions as stated in the Prospectus (such
Prospectus and Statement of Additional Information as currently in effect and
as amended or supplemented from time to time, being herein called the
"Prospectus"), and subject to the following understandings:
(i) The Subadviser shall provide supervision of the Fund's
investments and determine from time to time what investments and securities will
be purchased, retained, sold or loaned by the Fund, and what portion of the
assets will be invested or held uninvested as cash.
(ii) In the performance of its duties and obligations under this
Agreement, the Subadviser shall act in conformity with the Charter, By-laws and
Prospectus of the Fund and with the instructions and directions of the Manager
and of the Board of Directors of the Fund and shall conform
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to and comply with the requirements of the 1940 Act, the Internal Revenue Code
of 1986, as amended, and all other applicable federal and state laws and
regulations.
(iii) The Subadviser shall determine the securities to be purchased or
sold by the Fund and shall place orders with or through such persons, brokers or
dealers (including but not limited to Prudential Securities Incorporated) as may
be necessary or desirable to carry out the policy with respect to brokerage as
set forth in the Fund's Registration Statement and Prospectus or as the Board of
Directors may direct from time to time. In providing the Fund with investment
supervision, it is recognized that the Subadviser will give primary
consideration to securing the most favorable price and efficient execution.
Within the framework of this policy, the Subadviser may consider the financial
responsibility, research and investment information and other research services
and products provided by brokers or dealers who may effect or be a party to any
such transaction or other transactions to which the Subadviser's other clients
may be a party. It is understood that Prudential Securities Incorporated may be
used as principal broker for securities transactions but that no formula has
been adopted for allocation of the Fund's investment transaction business. It
is also understood that it is desirable for the Fund that the Subadviser have
access to supplemental investment and market research services and products and
security and economic analysis provided by brokers who may execute brokerage
transactions at a higher cost to the Fund than may result when allocating
brokerage to other brokers on the basis of seeking the most favorable price and
efficient execution. Therefore, the Subadviser is authorized to place orders
for the purchase and sale of securities for the Fund with such brokers, subject
to review by the Fund's Board of Directors from time to time with respect to the
extent and continuation of this practice. It is understood that the
information, services and products provided by such brokers may be useful to the
Subadviser in connection with the Subadviser's services to other clients.
On occasions when the Subadviser deems the purchase or sale of a security
to be in the best interest of the Fund as well as other clients of the
Subadviser, the Subadviser, to the extent permitted by applicable laws and
regulations, may, but shall be under no obligation to, aggregate the securities
to be sold or purchased in order to obtain the most favorable price or lower
brokerage commissions and efficient execution. In such event, allocation of the
securities so
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purchased or sold, as well as the expenses incurred in the transaction, shall be
made by the Subadviser in the manner the Subadviser considers to be the most
equitable and consistent with its fiduciary obligations to the Fund and to such
other clients.
(iv) The Subadviser shall maintain all books and records with respect
to the Fund's portfolio transactions required by subparagraphs (b) (5), (6),
(7), (9), (10) and (11) and paragraph (f) of Rule 31a-1 under the 1940 Act and
shall render to the Fund's Board of Directors such periodic and special reports
as the Board may reasonably request.
(v) The Subadviser shall provide the Fund's Custodian on each
business day with information relating to all transactions concerning the Fund's
assets and shall provide the Manager with such information upon request of the
Manager.
(vi) The investment management services provided by the Subadviser
hereunder are not to be deemed exclusive, and the Subadviser shall be free to
render similar services to others.
(b) The Subadviser shall authorize and permit any of its officers who are
officers of the Fund to serve in the capacities in which they are elected.
Services to be furnished by the Subadviser under this Agreement may be furnished
through the medium of any of such officers or employees.
(c) The Subadviser shall keep the Fund's books and records required to be
maintained by the Subadviser pursuant to paragraph 1(a) hereof and shall timely
furnish to the Manager all information relating to the Subadviser's services
hereunder needed by the Manager to keep the other books and records of the Fund
required by Rule 31a-1 under the 1940 Act. The Subadviser agrees that all
records which it maintains for the Fund are the property of the Fund and the
Subadviser shall surrender promptly to the Fund any of such records upon the
Fund's request, provided however that the Subadviser may retain a copy of such
records. The Subadviser further agrees to preserve for the periods prescribed
by Rule 31a-2 of the Securities and Exchange Commission (the Commission) under
the 1940 Act any such records as are required to be maintained by it pursuant to
paragraph 1(a) hereof.
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2. The Manager shall continue to have responsibility for all services to
be provided to the Fund pursuant to the Management Agreement and shall oversee
and review the Subadviser's performance of its duties under this Agreement.
3. The Manager shall pay the Subadviser, as compensation for the services
provided and the expenses assumed pursuant to this Subadvisory Agreement, a fee
at an annual rate of .75 of 1% of the Fund's average daily net assets.
4. In the event the expenses of the Fund for any fiscal year (including
the fees payable to the Manager but excluding interest, taxes, brokerage
commissions, distribution fees and litigation and indemnification expenses and
other extraordinary expenses not incurred in the ordinary course of the Fund's
business) exceed the lowest applicable annual expense limitation established and
enforced pursuant to the statute or regulation of any jurisdiction in which
shares of the Fund are then qualified for offer and sale, the compensation due
the Subadviser shall be reduced by 60% of the amount of such excess. Any such
reduction in the fee payable to the Subadviser shall be made monthly and shall
be subject to readjustment during the year.
5. The Subadviser shall not be liable for any error of judgment or for
any loss suffered by the Fund or the Manager in connection with the matters to
which this Agreement relates, except a loss resulting from willful misfeasance,
bad faith or gross negligence on the Subadvisers' part in the performance of
its duties or from its reckless disregard of its obligations and duties under
this Agreement. The Fund shall indemnify the Subadviser and hold it harmless
from and against all damages, liabilities, costs and expenses (including
reasonable attorneys' fees and amounts reasonably paid in settlement) incurred
by the Subadviser in or by reason of any pending, threatened or completed
action, suit, investigation or other proceeding (including an action or suit by
or in the right of the Fund or its security holders) arising out of or otherwise
based upon any action actually or allegedly taken or omitted to be taken by the
Subadviser in connection with the performance of any of its duties or
obligations under this Agreement or otherwise as an investment adviser of the
Fund. Determinations of whether and the extent to which the Subadviser is
entitled to indemnification hereunder shall be made by reasonable and fair
means, including (a) a final decision on the merits by a court or other body
before whom the action, suit or other proceeding was brought that the Subadviser
was or was not liable by reason of willful
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misfeasance, bad faith, gross negligence, reckless disregard of its duties or
breach of its fiduciary duty or (b) in the absence of such a decision, a
reasonable determination, based upon a review of the facts, that the Subadviser
was or was not liable by reason of such misconduct by (i) the vote of a majority
of a quorum of the directors of the Fund who are neither "interested persons" of
the Fund (as defined in Section 2(a)(19) of the 0000 Xxx) nor parties to the
action, suit or other proceeding or (ii) an independent legal counsel in a
written opinion.
If any person who is a director, officer or employee of the
Subadviser is or becomes a director, officer or employee of the Fund and acts as
such in any business of the Fund pursuant to this Agreement, then such director,
officer or employee of the Subadviser shall be deemed to be acting in such
capacity solely for the Fund, and not as a director, officer or employee of the
Subadviser or under the control or direction of the Subadviser, although paid by
the Subadviser.
6. This Agreement shall continue in effect for a period of more than two
years from the date hereof only so long as such continuance is specifically
approved at least annually in conformity with the requirements of the 1940 Act;
provided, however, that this Agreement may be terminated by the Fund at any
time, without the payment of any penalty, by the Board of Directors of the Fund
or by vote of a majority of the outstanding voting securities (as defined in the
0000 Xxx) of the Fund, or by the Manager or the Subadviser at any time, without
the payment of any penalty, on not more than 60 days' nor less than 30 days'
written notice to the other party. This Agreement shall terminate automatically
in the event of its assignment (as defined in the 0000 Xxx) or upon the
termination of the Management Agreement.
7. Nothing in this Agreement shall limit or restrict the right of any of
the Subadviser's partners, officers or employees who may also be a director,
officer or employee of the Fund to engage in any other business or to devote his
or her time and attention in part to the management or other aspects of any
business, whether of a similar or a dissimilar nature, nor limit or restrict the
Subadviser's right to engage in any other business or to render services of any
kind to any other corporation, firm, individual or association.
8. During the term of this Agreement, the Manager agrees to furnish to
Subadviser at its principal office all prospectuses, proxy statements, reports
to stockholders, sales literature or other material prepared for distribution to
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stockholders of the Fund or the public, which refer to the Subadviser in any
way, prior to use thereof and not to use material if the Subadviser reasonably
objects in writing five business days (or such other time as may be mutually
agreed) after receipt thereof. Sales literature may be furnished to the
Subadviser hereunder by first-class or overnight mail, facsimile transmission
equipment or hand delivery.
9. During the term of this Agreement the Subadviser shall notify the
Manager of any change in the membership of the Subadviser's partnership within a
reasonable time after such change.
10. The Subadviser agrees that the Fund may, so long as this Agreement
remains in effect, use "Xxxxxxxx-Xxxxxxxxx" as part of its name. The Manager
hereby acknowledges that the name "Xxxxxxxx-Xxxxxxxxx" is a property right of
the Subadviser. The Subadviser, Xxxxxx X. Xxxxxxxx or Xxxx X. Xxxxxxxxx may,
upon termination of this Agreement, require the Fund to refrain from using the
name "Xxxxxxxx-Xxxxxxxxx" in any form or combination in its name or in its
business, and the Fund shall, as soon as practicable following its receipt of
any such request from the Subadviser, Xxxxxx X. Xxxxxxxx or Xxxx X. Xxxxxxxxx,
so refrain from using such name.
11. This Agreement may be amended by mutual consent, but the consent of
the Fund must be obtained in conformity with the requirements of the 1940 Act.
12. This Agreement shall be governed by the laws of the State of New York.
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IN WITNESS WHEREOF, the Parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
PRUDENTIAL MUTUAL FUND MANAGEMENT, INC.
By /s/ Xxxxxx X. Xxxxx
--------------------------------
Xxxxxx X. Xxxxx
Executive Vice President
XXXXXXXX-XXXXXXXXX CAPITAL MANAGEMENT
By /s/ Xxxxxx X. Xxxxxxxx
--------------------------------
Xxxxxx X. Xxxxxxxx
Chairman and Chief Investment Officer
XXXXXXXX-XXXXXXXXX FUND, INC.
By /s/ Xxxx X. Xxxxxxxxx
-------------------------------
Xxxx X. Xxxxxxxxx
President
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