PRUDENTIAL SECTOR FUNDS, INC.
PRUDENTIAL FINANCIAL SERVICES FUND
MANAGEMENT AGREEMENT
Agreement made this 17th day of May, 1999, between Prudential Sector
Funds, Inc. (the Company), a Maryland corporation, on behalf of its series
Prudential Financial Services Fund (the Fund) and Prudential Investments Fund
Management LLC, a New York limited liability company (the Manager).
W I T N E S S E T H
WHEREAS, the Company is an open-end, management investment company
registered under the Investment Company Act of 1940, as amended (the 1940 Act);
and
WHEREAS, the Company desires to retain the Manager to render or contract to
obtain as hereinafter provided investment advisory services to the Fund and the
Fund also desires to avail itself of the facilities available to the Manager
with respect to the administration of its day to day corporate affairs, and the
Manager is willing to render such investment advisory and administrative
services;
NOW, THEREFORE, the parties agree as follows:
1. The Company hereby appoints the Manager to act as manager of the Fund
and administrator of its business affairs for the period and on the terms set
forth in this Agreement. The Manager accepts such appointment and agrees to
render the services herein described, for the compensation herein provided. The
Manager is authorized to enter into an agreement with The Prudential Investment
Corporation (PIC) pursuant to which PIC (the Subadviser) shall furnish to the
Fund the investment advisory services
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in connection with the management of the Fund (the Subadvisory Agreement). The
Manager will continue to have responsibility for all investment advisory
services furnished pursuant to the Subadvisory Agreement.
2. Subject to the supervision of the Board of Directors of the Company,
the Manager shall administer the Fund's business affairs and, in connection
therewith, shall furnish the Fund with office facilities and with clerical,
bookkeeping and recordkeeping services at such office facilities and, subject to
Section 1 hereof and the Subadvisory Agreement, the Manager 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 objective, policies and restrictions as stated in the
Prospectus (hereinafter defined) and subject to the following understandings:
(a) The Manager shall provide supervision of the Fund's investments
and determine from time to time what investments or 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.
(b) The Manager, in the performance of its duties and obligations
under this Agreement, shall act in conformity with the Articles of
Incorporation and By-Laws of the Company and the Prospectus (hereinafter
defined) of the Fund and with the instructions and directions of the
Board of Directors of the Company and will conform to and comply with the
requirements of the 1940 Act and all other applicable federal and state
laws and regulations.
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(c) The Manager shall determine the securities and futures contracts
to be purchased or sold by the Fund and will place orders pursuant to its
determinations with or through such persons, brokers, dealers or futures
commission merchants (including but not limited to Prudential Securities
Incorporated) in conformity with the policy with respect to brokerage as
set forth in the Company's Registration Statement and the Fund's
Prospectus (hereinafter defined) or as the Board of Directors may direct
from time to time. In providing the Fund with investment supervision, it
is recognized that the Manager will give primary consideration to securing
the most favorable price and efficient execution. Consistent with this
policy, the Manager 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 other clients of the Manager 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
Manager have access to supplemental investment and market research and
security and economic analysis provided by brokers or futures commission
merchants and that such brokers may execute brokerage transactions at a
higher cost to the Fund than may result when allocating brokerage to other
brokers or futures commission merchants on the basis of seeking the most
favorable price and efficient
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execution. Therefore, the Manager is authorized to pay higher brokerage
commissions for the purchase and sale of securities and futures contracts
for the Fund to brokers or futures commission merchants who provide such
research and analysis, subject to review by the Company'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 broker
or futures commission merchant may be useful to the Manager in connection
with its services to other clients.
On occasions when the Manager deems the purchase or sale of a security
or a futures contract to be in the best interest of the Fund as well as
other clients of the Manager or the Subadviser, the Manager, 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 so 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 Manager in the
manner it considers to be the most equitable and consistent with its
fiduciary obligations to the Fund and to such other clients.
(d) The Manager shall maintain all books and records with respect to
the Fund's portfolio transactions and shall render to the Company's Board
of Directors such periodic and special reports as the Board may reasonably
request.
(e) The Manager shall be responsible for the financial and accounting
records to be maintained by the Fund (including those being maintained by
the
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Fund's Custodian).
(f) The Manager shall provide to the Fund's Custodian on each
business day information relating to all transactions concerning the
Fund's assets.
(g) The investment management services of the Manager to the Fund
under this Agreement are not to be deemed exclusive, and the Manager shall
be free to render similar services to others.
3. The Fund has delivered to the Manager copies of each of the
following documents and will deliver to it all future amendments and
supplements, if any:
(a) Agreement and Articles of Incorporation of the Company, as filed
with the Secretary of State of Maryland (such Articles of Incorporation, as
in effect on the date hereof and as amended from time to time, are herein
called the "Articles of Incorporation");
(b) By-Laws of the Company (such By-Laws, as in effect on the date
hereof and as amended from time to time, are herein called the "By-Laws");
(c) Certified resolutions of the Board of Directors of the Company
authorizing the appointment of the Manager and approving the form of this
agreement;
(d) Registration Statement under the 1940 Act and the Securities Act
of 1933, as amended, on Form N-1A (the Registration Statement), as filed
with the Securities and Exchange Commission (the Commission) relating to
the Fund and its shares and all amendments thereto;
(e) Notification of Registration of the Company under the 1940 Act on
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Form N-8A as filed with the Commission and all amendments thereto; and
(f) Prospectus of the Fund (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").
4. The Manager shall authorize and permit any of its officers and
employees who may be elected as Directors or officers of the Company to serve in
the capacities in which they are elected. All services to be furnished by the
Manager under this Agreement may be furnished through the medium of any such
officers or employees of the Manager.
5. The Manager shall keep the Fund's books and records required to be
maintained by it pursuant to paragraph 2 hereof. The Manager agrees that all
records which it maintains for the Fund are the property of the Fund and it will
surrender promptly to the Fund any such records upon the Fund's request,
provided however that the Manager may retain a copy of such records. The
Manager further agrees to preserve for the periods prescribed by Rule 31a-2
under the 1940 Act any such records as are required to be maintained by the
Manager pursuant to Paragraph 2 hereof.
6. During the term of this Agreement, the Manager shall pay the
following expenses:
(i) the salaries and expenses of all personnel of the Fund and the
Manager except the fees and expenses of Directors who are not affiliated
persons of the Manager or the Fund's Subadviser,
(ii) all expenses incurred by the Manager or by the Fund in connection
with
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managing the ordinary course of the Fund's business other than those
assumed by the Fund herein, and
(iii) the costs and expenses payable to PIC pursuant to the
Subadvisory Agreement.
The Fund assumes and will pay the expenses described below:
(a) the fees and expenses incurred by the Fund in connection with the
management of the investment and reinvestment of the Fund's assets,
(b) a portion of the fees and expenses of Directors who are not
affiliated persons of the Manager or the Fund's Subadviser,
(c) the fees and expenses of the Custodian that relate to (i) the
custodial function and the recordkeeping connected therewith, (ii)
preparing and maintaining the general accounting records of the Fund and
the providing of any such records to the Manager useful to the Manager in
connection with the Manager's responsibility for the accounting records of
the Fund pursuant to Section 31 of the 1940 Act and the rules promulgated
thereunder, (iii) the pricing of the shares of the Fund, including the cost
of any pricing service or services which may be retained pursuant to the
authorization of the Board of Directors of the Company, and (iv) for both
mail and wire orders, the cashiering function in connection with the
issuance and redemption of the Fund's securities,
(d) the fees and expenses of the Company's Transfer and Dividend
Disbursing Agent, which may be the Custodian, that relate to the
maintenance of each shareholder account,
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(e) the charges and expenses of legal counsel and independent
accountants for the Fund,
(f) brokers' commissions and any issue or transfer taxes chargeable
to the Fund in connection with its securities and futures transactions,
(g) all taxes and corporate fees payable by the Fund to federal,
state or other governmental agencies,
(h) the fees of any trade associations of which the Fund may be a
member,
(i) the cost of stock certificates representing shares of the Fund,
(j) a portion of the cost of fidelity, directors and officers and
errors and omissions insurance,
(k) the fees and expenses involved in registering and maintaining
registration of the Fund and of its shares with the Securities and Exchange
Commission, registering the Fund as a broker or dealer and paying notice
filing fees under state securities laws, including the preparation and
printing of the Fund's registration statements and the Fund's prospectuses
and statements of additional information for filing under federal and state
securities laws for such purposes,
(l) allocable communications expenses with respect to investor
services and all expenses of shareholders' and Directors' meetings and of
preparing, printing and mailing reports to shareholders in the amount
necessary for distribution to the shareholders,
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(m) litigation and indemnification expenses and other extraordinary
expenses not incurred in the ordinary course of the Fund's business, and
(n) any expenses assumed by the Fund pursuant to a Plan of
Distribution adopted in conformity with Rule 12b-1 under the 1940 Act.
7. For the services provided and the expenses assumed pursuant to
this Agreement, the Fund will pay to the Manager as full compensation therefor a
fee at an annual rate of .75 of 1% of the Fund's average daily net assets. This
fee will be computed daily and will be paid to the Manager monthly.
8. The Manager shall not be liable for any error of judgment or for
any loss suffered by the Fund in connection with the matters to which this
Agreement relates, except a loss resulting from a breach of fiduciary duty with
respect to the receipt of compensation for services (in which case any award of
damages shall be limited to the period and the amount set forth in Section
36(b)(3) of the 0000 Xxx) or 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 and duties under this Agreement.
9. 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
Company or by vote of a majority of the outstanding voting securities (as
defined in the 0000 Xxx) of the Fund, or by the
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Manager 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
1940 Act).
10. Nothing in this Agreement shall limit or restrict the right of
any officer or employee of the Manager who may also be a Director, officer or
employee of the Company 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 dissimilar nature, nor limit or restrict the right of
the Manager to engage in any other business or to render services of any kind to
any other corporation, firm, individual or association.
11. Except as otherwise provided herein or authorized by the Board of
Directors of the Company from time to time, the Manager shall for all purposes
herein be deemed to be an independent contractor and shall have no authority to
act for or represent the Fund in any way or otherwise be deemed an agent of the
Fund.
12. During the term of this Agreement, the Fund agrees to furnish the
Manager 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 in any way to the Manager,
prior to use thereof and not to use such material if the Manager reasonably
objects in writing within five business days (or such other time as may be
mutually agreed) after receipt thereof. In the event of termination of this
Agreement, the Fund will continue to furnish to the Manager copies of any of the
above mentioned materials which refer in any way to the Manager. Sales
literature may be furnished to the Manager hereunder by
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first-class or overnight mail, facsimile transmission equipment or hand
delivery. The Fund shall furnish or otherwise make available to the Manager
such other information relating to the business affairs of the Fund as the
Manager at any time, or from time to time, reasonably requests in order to
discharge its obligations hereunder.
13. 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.
14. Any notice or other communication required to be given pursuant
to this Agreement shall be deemed duly given if delivered or mailed by
registered mail, postage prepaid, (1) to the Manager at Gateway Center Three,
000 Xxxxxxxx Xxxxxx, Xxxxxx, XX 00000-0000, Attention: Secretary; or (2) to the
Company at Gateway Center Three, 000 Xxxxxxxx Xxxxxx, Xxxxxx, XX 00000-0000,
Attention: President.
15. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
16. The Company may use the names "Prudential Sector Funds, Inc.,
Prudential Financial Services Fund" or any name including the word "Prudential"
only for so long as this Agreement or any extension, renewal or amendment hereof
remains in effect, including any similar agreement with any organization which
shall have succeeded to the Manager's business as Manager or any extension,
renewal or amendment thereof remain in effect. At such time as such an
agreement shall no longer be in effect, the Fund will (to the extent that it
lawfully can) cease to use such a name or any other name indicating that it is
advised by, managed by or otherwise connected with the Manager, or any
organization which shall have so succeeded to
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such businesses. In no event shall the Company use the name "Prudential Sector
Funds, Inc., Prudential Financial Services Fund" or any name including the word
"Prudential" if the Manager's function is transferred or assigned to a company
of which The Prudential Insurance Company of America does not have control.
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 SECTOR FUNDS, INC.
By: /s/ Xxxxxx X. Xxxxx
---------------------
Xxxxxx X. Xxxxx
President
PRUDENTIAL INVESTMENTS FUND
MANAGEMENT LLC
By: /s/ Xxxx X. XxXxxxxxxx
-----------------------
Xxxx X. XxXxxxxxxx
Executive Vice President
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