Exhibit 99(d)(2)
XXXXXX MUNICIPAL SERIES FUND
SUBADVISORY AGREEMENT
Agreement made as of this 17th day of July, 2003 between Prudential Investments
LLC (PI or the Manager), a New York limited liability company and Prudential
Investment Management, Inc. (PIM or the Subadviser),
WHEREAS, the Manager has entered into a Management Agreement (the Management
Agreement) dated December 30, 1988, with Xxxxxx Municipal Series Fund, a
Massachusetts trust (the Trust) and a diversified, open-end management
investment company registered under the Investment Company Act of 1940 as
amended (the 1940 Act), pursuant to which PI acts as Manager of the Trust; and
WHEREAS, the Manager desires to retain the Subadviser to provide investment
advisory services to the Trust and one or more of its series as specified in
Schedule A hereto (individually and collectively, with the Trust, referred to
herein as the Trust) and to manage such portion of the Trust as the Manager
shall from time to time direct, and the Subadviser is willing to render such
investment advisory services; and
NOW, THEREFORE, the Parties agree as follows:
1. (a) Subject to the supervision of the Manager and the Board of Trustees of
the Trust, the Subadviser shall manage such portion of the Trust's portfolio,
including the purchase, retention and disposition thereof, in accordance with
the Trust's investment objectives, policies and restrictions as stated in its
then current prospectus and statement of additional information (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 Trust'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 Trust, 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 copies of the Declaration of Trust,
By-Laws and Prospectus of the Trust provided to it by the Manager (the Trust
Documents) and with the instructions and directions of the Manager and of the
Board of Trustees of the Trust, co-operate with the Manager's (or its
designee's) personnel responsible for monitoring the Trust's compliance and will
conform 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. 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 (the Commission). The Manager shall
provide Subadviser timely with copies of any updated Trust documents.
(iii) The Subadviser shall determine the securities and futures contracts to be
purchased or sold by such portion of the Trust's portfolio, as applicable, 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 Trust's Prospectus
or as the Board of Trustees may direct from time to time. In providing the Trust
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. The Manager (or Subadviser) to the
Trust each shall have discretion to effect investment transactions for the Trust
through broker-dealers (including, to the extent legally permissible,
broker-dealers affiliated with the
Subadviser(s)) qualified to obtain best execution of such transactions who
provide brokerage and/or research services, as such services are defined in
Section 28(e) of the Securities Exchange Act of 1934, as amended (the "1934
Act"), and to cause the Trust to pay any such broker-dealers an amount of
commission for effecting a portfolio transaction in excess of the amount of
commission another broker-dealer would have charged for effecting that
transaction, if the brokerage or research services provided by such
broker-dealer, viewed in light of either that particular investment transaction
or the overall responsibilities of the Manager (or the Subadviser) with respect
to the Trust and other accounts as to which they or it may exercise investment
discretion (as such term is defined in Section 3(a)(35) of the 1934 Act), are
reasonable in relation to the amount of commission.
On occasions when the Subadviser deems the purchase or sale of a security or
futures contract to be in the best interest of the Trust 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 Trust and to such other
clients.
(iv) The Subadviser shall maintain all books and records with respect to the
Trust's portfolio transactions effected by it as 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 Trust's Board of Trustees such periodic and
special reports as the Trustees 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 Trust with respect to any matter
discussed herein, including, without limitation, the valuation of the Trust's
securities.
(v) The Subadviser or an affiliate shall provide the Trust's Custodian on each
business day with information relating to all transactions concerning the
portion of the Trust'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 Trust 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 Trust's Board
as to whether the contract with one or more subadvisers should be renewed,
modified, or terminated, and (iii) periodically report to the Trust'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.
(vii) The Subadviser acknowledges that the Manager and the Trust intend to rely
on Rule 17a-10, Rule 10f-3, Rule 12d3-1 and Rule 17e-1 under the 1940 Act, and
the Subadviser hereby agrees that it shall not consult with any other subadviser
to the Trust with respect to transactions in securities for the Trust's
portfolio or any other transactions of Trust assets.
(b) The Subadviser shall authorize and permit any of its directors, officers and
employees who may be elected as Trustees or officers of the Trust 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 Trust'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 Trust
required by Rule 31a-1 under the 1940 Act or any successor regulation. The
Subadviser agrees that all
records which it maintains for the Trust are the property of the Trust, and the
Subadviser will surrender promptly to the Trust any of such records upon the
Trust'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 or any successor
regulation any such records as are required to be maintained by it pursuant to
paragraph 1(a) hereof.
(d) In connection with its duties under this Agreement, the Subadviser agrees to
maintain adequate compliance procedures to ensure its compliance with the 1940
Act, the Investment Advisers Act of 1940, as amended, 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.
(f) The Subadviser shall be responsible for the voting of all shareholder
proxies with respect to the investments and securities held in the Trust's
portfolio, subject to such reporting and other requirements as shall be
established by the Manager.
2. The Manager shall continue to have responsibility for all services to be
provided to the Trust 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. The Manager shall provide (or
cause the Trust's custodian to provide) timely information to the Subadviser
regarding such matters as the composition of assets in the portion of the Trust
managed by the Subadviser, cash requirements and cash available for investment
in such portion of the Trust, and all other information as may be reasonably
necessary for the Subadviser to perform its duties hereunder (including any
excerpts of minutes of meetings of the Board of Trustees of the Trust that
affect the duties of the Subadviser).
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 Trust's average daily net assets of the
portion of the Trust managed by the Subadviser as described in the attached
Schedule A. Liability for payment of compensation by the Manager to the
Subadviser under this Agreement is contingent upon the Manager's receipt of
payment from the Trust for management services described under the Management
Agreement between the Trust and the Manager. Expense caps or fee waivers for the
Trust that may be agreed to by the Manager, but not agreed to by the Subadviser,
shall not cause a reduction in the amount of the payment to the Subadviser by
the Manager.
4. The Subadviser shall not be liable for any error of judgment or for any loss
suffered by the Trust 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, provided, however, that nothing in this Agreement shall be deemed to
waive any rights the Manager or the Trust may have against the Subadviser under
federal or state securities laws. The Manager shall indemnify the Subadviser,
its affiliated persons, its officers, directors and employees, for any liability
and expenses, including attorneys' fees, which may be sustained as a result of
the Manager's willful misfeasance, bad faith, gross negligence, reckless
disregard of its duties hereunder or violation of applicable law, including,
without limitation, the 1940 Act and federal and state securities laws. The
Subadviser shall indemnify the Manager, its affiliated persons, its officers,
directors and employees, for any liability and expenses, including attorneys'
fees, which may be sustained as a result of the Subadviser's willful
misfeasance, bad faith, gross negligence, or reckless disregard of its duties
hereunder or violation of applicable law, including, without limitation, the
1940 Act and federal and state securities laws.
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 Trust at any time, without
the payment of any penalty, by the Board of Trustees of the Trust or by vote of
a majority of the outstanding voting securities (as defined in the 0000 Xxx) of
the Trust, 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. The Subadviser agrees that it will promptly notify the
Trust and the Manager of the occurrence or anticipated occurrence of any event
that would result in the assignment (as defined in the 0000 Xxx) of this
Agreement, including, but not limited to, a change or anticipated change in
control (as defined in the 0000 Xxx) of the Subadviser; provided that the
Subadviser need not provide notice of such an anticipated event before the
anticipated event is a matter of public record.
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, 0xx Xxxxx, Xxxxxx, XX 00000-0000, Attention: Secretary; (2) to the Trust
at Gateway Center Three, 4th Floor, 000 Xxxxxxxx Xxxxxx, Xxxxxx, XX 00000-0000,
Attention: Secretary; or (3) to the Subadviser at Gateway Center Two, 000
Xxxxxxxx Xxxxxx, Xxxxxx, XX 00000-0000.
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 Trust 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 Trust 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 Trust
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.
10. Any question of interpretation of any term or provision of this Agreement
having a counterpart in or otherwise derived from a term or provision of the
1940 Act, shall be resolved by reference to such term or provision of the 1940
Act and to interpretations thereof, if any, by the United States courts or, in
the absence of any controlling decision of any such court, by rules, regulations
or orders of the Commission issued pursuant to the 1940 Act. In addition, where
the effect of a requirement of the 1940 Act, reflected in any provision of this
Agreement, is related by rules, regulation or order of the Commission, such
provision shall be deemed to incorporate the effect of such rule, regulation or
order.
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 LLC
By: /s/Xxxxxx X. Xxxxx
Name: Xxxxxx X. Xxxxx
Title: Executive Vice President
and Chief Administrative Officer
PRUDENTIAL INVESTMENT MANAGEMENT, INC.
By: /s/ Xxxxx X. Xxxxxxxx
Name: Xxxxx X. Xxxxxxxx
Title: Vice President
SCHEDULE A
XXXXXX MUNICIPAL SERIES FUND
As compensation for services provided by Prudential Investment Management,
Inc., Prudential Investments LLC will pay Prudential Investment Management,
Inc. a fee equal, on an annualized basis, to the following:
ADVISORY FEE
XXXXXX MUNICIPAL SERIES FUND
Florida Series .25%
New Jersey Series .25%
New Jersey Money Market Series .25%
New York Series .25%
New York Money Market Series .25%
Pennsylvania Series .25%
Dated as of July 17, 2003.
