PRUDENTIAL SECTOR FUNDS, INC.
PRUDENTIAL UTILITY FUND
SUBADVISORY AGREEMENT
Agreement made as of this 2nd day of May, 1988, and amended and restated
as of January 1, 2000, between Prudential Investments Fund Management LLC, a
New York limited liability company and successor to 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
May 2, 1988 (the "Management Agreement"), with Prudential Utility Fund, a
series of Prudential Sector Funds, Inc., formerly known as Prudential-Bache
Utility Fund, Inc. (the "Fund"), a Maryland corporation 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, 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
Articles of Incorporation, 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 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 to be
purchased or sold by the Fund and will place orders with or through
such persons, brokers, or dealers (including but not limited to
Prudential Securities Incorporated) 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 services 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 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 services 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 or futures
contracts to be sold or purchased in order to obtain the most
favorable price or lower brokerage commission and efficient
execution. In such event, allocation of the securities 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
Directors such periodic and special reports as the Directors may
reasonably request.
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(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 it 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 obtain 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.
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 at the annual rate of .30 of 1%
of the Fund's average daily net assets up to $250 million, .238 of 1% of
average daily net assets between $250 million and $750 million, .203 of
1% of average daily net assets between $750 million and $1.5 billion,
.170 of 1% of average daily net assets between $1.5 billion and
$2 billion, .140 of 1% of average daily net assets between $2 billion
and $4 billion, .122 of 1% of average daily net assets between $4
billion and $6 billion and .105 of 1% of average daily net assets over
$6 billion for furnishing the services described in paragraph 1 hereof.
4. The Subadviser shall not be liable for any error of judgement 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 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
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.
7. During the term of this Agreement, the Manager agrees to furnish the
Subadviser at its principal office all prospectuses, proxy statements,
reports to stockholders, sales literature or other material prepared for
distribution to 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, fascimile transmission equipment or hand delivery.
8. This Agreement may be amended by mutual consent, but the consent of
the Fund may 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
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Executive Vice President
THE PRUDENTIAL INVESTMENT CORPORATION
By /s/ Xxxx X. Xxxxxxxxxx, Xx.
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President
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