Ex-5.(b)
Subadvisory Agreement
PRUDENTIAL-BACHE MUNICIPAL BOND FUND
SUBADVISORY AGREEMENT
Agreement made as of this 1st day of March, l988 between Prudential Mutual
Fund Management Inc., a Delaware Corporation ("PMF" or the "Manager"), and The
Prudential Investment Corporation, a New Jersey Corporation (the "Subadviser").
WHEREAS, the Manager has entered into a Management Agreement, dated March
1, l988 (the "Management Agreement"), with Prudential-Bache Municipal Bond Fund
(the "Fund"), a Massachusetts business trust and a diversified open-end
management investment company registered under the Investment Company Act of
1940 (the "1940 Act"), pursuant to which PMF will act as Manager of the Fund.
WHEREAS, the shares of beneficial interest of the Fund are divided into
separate series, each of which is established pursuant to a written instrument
executed by the Trustees of the Fund, and the Trustees may from time to time
terminate such series or establish and terminate additional series; and
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 Trustees of
the Fund, the Subadviser shall manage the investment operations of each
series of the Fund and the composition of the portfolio of each series,
including the purchase, retention and disposition thereof, in accordance
with the investment objectives, policies and restrictions of each such
series 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 each series'
investments and determine from time to time what investments and
securities will be purchased, retained, sold or loaned by each series of
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 Trustees of the Fund 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.
(iii) The Subadviser shall determine the securities and futures
contracts to be purchased or sold by each series of the Fund and will
place orders with or through such persons, brokers, dealers or futures
commission merchants (including but not limited to Prudential-Bache
Securities Inc.) to carry out the policy with respect to brokerage as set
forth in the Fund's Registration Statement and Prospectus or as the
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-Bache Securities Inc. 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 each series of he Fund with such
brokers or futures commission merchants, subject to review by the Fund's
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 (and
each series 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
each series of the Fund) and to such other clients.
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(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 Trustees such periodic
and Special reports as the Trustees 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 directors,
officers and employees who may be elected as Trustees 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 3la-l 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 3la-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.
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 reimburse the Subadviser for reasonable costs and
expenses incurred by the Subadviser determined in a manner acceptable to
the Manager in furnishing the services described in paragraph 1 hereof.
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.
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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 with respect to each series in
conformity with the requirements of the 1940 Act; provided, however, that
this Agreement may be terminated with respect to any series by the Fund at
any time, without the payment of any penalty, by the Trustees 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
each series 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 MUTUAL FUND MANAGEMENT, INC.
By /s/ Xxxxxxx X. Xxxxxx
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THE PRUDENTIAL INVESTMENT CORPORATION
By /s/ Xxxxx Xxxx
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