PRUDENTIAL TAX-MANAGED FUNDS
PRUDENTIAL TAX-MANAGED EQUITY FUND
SUBADVISORY AGREEMENT
Agreement made as of this 2nd day of March, 2001 between Prudential
Investments Fund Management LLC (PIFM or the Manager) and The Prudential
Investment Corporation (the Subadviser or PIC).
WHEREAS, the Manager has entered into a Management Agreement, dated
March 2, 2001 (the Management Agreement), with Prudential Tax-Managed Funds
(the Fund), a Delaware business trust and an open-end management investment
company registered under the Investment Company Act of 0000 (xxx 0000 Xxx),
pursuant to which PIFM acts as Manager of the Fund; and
WHEREAS, PIFM desires to retain the Subadviser to provide investment
advisory services to the Fund on behalf of its series, Prudential Tax-Managed
Equity Fund (individually and collectively, with the Fund, referred to herein as
the Fund) and to manage such portion of the Fund as the Manager shall from time
to time direct, and the Subadviser is willing to render such investment advisory
services; and
WHEREAS, this Agreement was approved by the Fund's shareholders at a
meeting held on March 1, 2001 and is intended to supersede the agreement dated
December 8, 1998, and amended and restated as of January 1, 2000, between PIFM
and the Subadviser;
NOW, THEREFORE, the Parties agree as follows:
1. (a) Subject to the supervision of the Manager and the Board of Trustees
of the Fund, the Subadviser shall manage such portion of the investment
operations of the Fund as the Manager shall direct and shall manage the
composition of the Fund's portfolio(s), 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 such portion
of the Fund's investments as the Manager shall direct and shall
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
Declaration of Trust, By-Laws and Prospectus of the Fund and with
the instructions and directions of the Manager and of the Board of
Trustees of the Fund, cooperate with the Manager's (or its
designee's) personnel responsible for monitoring the Fund's
compliance and will conform to and comply with the requirements of
the 1940 Act, the Internal Revenue Code of 1986 and all other
applicable federal and state laws and regulations. In connection
therewith, the Subadviser shall, among
other things, prepare and file such reports as are, or may in the
future be, required by the Securities and Exchange Commission.
(iii) The Subadviser shall determine the securities and
futures contracts to be purchased or sold by such portion of the
Fund, and will place orders with or through such persons, brokers,
dealers or futures commission merchants (including but not limited
to Prudential Securities Incorporated or any broker or dealer
affiliated with the Subadviser) to carry out the policy with
respect to brokerage as set forth in the Fund's Prospectus or as
the Board of Trustees 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
services provided by brokers, dealers or futures commission
merchants 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 or
any broker or dealer affiliated with the Subadviser 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 and security and economic analysis
provided by brokers or futures commission merchants 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 and futures contracts for the Fund with such brokers
or futures commission merchants, subject to review by the Fund's
Board of Trustees from time to time with respect to the extent and
continuation of this practice. It is understood that the services
provided by such brokers or futures commission merchants 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 or futures contract 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 or
futures contracts 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 or futures
contracts so purchased or sold, as well as the expenses incurred in
the transaction, will 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
Directors may reasonably request. The Subadviser shall make
reasonably available its employees and officers for consultation
with any of the Trustees or officers or
employees of the Fund with respect to any matter discussed herein,
including, without limitation, the valuation of the Fund's
securities.
(v) The Subadviser shall provide the Fund's Custodian on each
business day with information relating to all transactions
concerning the portion of the Fund's assets it manages, 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.
Conversely, the Subadviser and Manager understand and agree that if
the Manager manages the Fund in a "manager-of-managers" style, the
Manager will, among other things, (i) continually evaluate the
performance of the Subadviser through quantitative and qualitative
analysis and consultations with the Subadviser, (ii) periodically
make recommendations to the Fund's Board as to whether the contract
with the Subadviser should be renewed, modified, or terminated and
(iii) periodically report to the Fund's Board regarding the results
of its evaluation and monitoring functions. The Subadviser
recognizes that its services may be terminated or modified pursuant
to this process.
(b) The Subadviser 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. Services
to be furnished by the Subadviser under this Agreement may be furnished
through the medium of any of such directors, 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 will 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 Commission under the 1940 Act any such records as are
required to be maintained by it pursuant to paragraph 1(a) hereof.
(d) The Subadviser agrees to maintain adequate compliance procedures to
ensure its compliance with the 1940 Act, the Investment Advisers Act of
1940 and other applicable state and federal regulations.
(e) The Subadviser shall furnish to the Manager copies of all records
prepared in connection with (i) the performance of this Agreement and
(ii) the maintenance of compliance procedures pursuant to paragraph 1(d)
hereof as the Manager may reasonably request.
2. The Manager shall continue to have responsibility for all services
to be provided to the Fund pursuant to the Management Agreement and, as
more particularly discussed above, shall oversee and review the
Subadviser's performance of its duties under this Agreement.
3. For the services provided and the expenses assumed pursuant to this
Agreement, the Manager shall pay the Subadviser as full compensation
therefor, a fee equal to the percentage of the Fund's average daily net
assets of the portion of the Fund managed by the Subadviser as described
in the attached Schedule A.
4. 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 Subadviser's
part in the performance of its duties or from its reckless disregard of
its obligations and duties under this Agreement.
5. 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.
6. Nothing in this Agreement shall limit or restrict the right of any
of the Subadviser's directors, officers or employees who may also be a
Trustee, 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.
7. During the term of this Agreement, the Manager agrees to furnish the
Subadviser at its principal office all prospectuses, proxy statements,
reports to shareholders, sales literature or other material prepared for
distribution to shareholders 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.
8. 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.
9. This Agreement shall be governed by the laws of the State of New
York.
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 INVESTMENTS FUND MANAGEMENT LLC
BY: /s/ Xxxxxx X. Xxxxx
-------------------
Xxxxxx X. Xxxxx
Executive Vice President
THE PRUDENTIAL INVESTMENT CORPORATION
BY: /s/ Xxxx X. Xxxxxxxxxx
----------------------
Xxxx X. Xxxxxxxxxx
President
SCHEDULE A
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Prudential Index Series Fund 0.150%
Prudential Stock Index Fund
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Prudential Sector Funds, Inc.
Prudential Financial Services Fund - Enhanced Index Segment 0.375%
Prudential Health Sciences Fund - Enhanced Index Segment 0.375%
Prudential Technology Fund - Enhanced Index Segment 0.375%
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Prudential Tax-Managed Funds
Prudential Tax-Managed Equity Fund 0.325% to $500 mil.
0.285% over $500 mil.
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Prudential Tax-Managed Small-Cap Fund, Inc. 0.390%
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The Prudential Investment Portfolios, Inc.
Prudential Active Balanced Fund 0.325% to $ 1bil.
0.285% over $1bil.
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