PRUDENTIAL SMALL COMPANY FUND, INC.
INTERIM SUBADVISORY AGREEMENT
Agreement made as of this [24th] day of August, 2000 between Prudential
Investments Fund Management LLC (the Manager) and Xxxxxxxx Associates LLC (the
Subadviser or Xxxxxxxx).
WHEREAS, the Manager has entered into a Management Agreement, dated
January 31, 1989 (the Management Agreement), with Prudential Small Company
Fund, Inc., formerly Prudential-Bache Growth Opportunity Fund, Inc. (the
Fund), a diversified, open-end management investment company registered under
the Investment Company Act of 0000 (xxx 0000 Xxx); and
WHEREAS, The Prudential Investment Corporation (PIC) has provided
subadvisory services to the Fund under a Subadvisory Agreement dated January
31, 1989 with the Manager; and
WHEREAS, certain investment advisory responsibilities are being
transitioned from PIC to Xxxxxxxx; and
WHEREAS, PIFM desires to retain the Subadviser to provide investment
advisory services to the Fund, and the Subadviser is willing to render such
investment advisory services; and
WHEREAS, this Agreement is intended to supersede the Subadvisory
Agreement, dated January, 31, 1989, between the Manager and PIC.
NOW, THEREFORE, the Parties agree as follows:
1. (a) Subject to the supervision of the Manager and the Board of
Directors of the Fund, the Subadviser shall manage the investment
operations of the Fund as specified in Section 5 below, 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:
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(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. 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 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) to carry out the policy with respect to brokerage as set
forth in the Fund's 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, 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 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
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 or
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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 Board of Directors may
reasonably request. The Subadviser shall make reasonably available
its employees and officers for consultation with any of the Board's
members 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 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.
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(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.
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. 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.
4. For the services provided pursuant to this Agreement, the Manager
shall pay the Subadviser as full compensation therefor, a fee equal
to an annual rate of 0.455% of the average daily net assets of the
Fund under the management of the Subadviser.
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The compensation earned by the Subadviser under this
Agreement shall be held in an interest-bearing escrow account with
the Fund's custodian or a bank. If a majority of the Fund's
outstanding voting securities approve an agreement with the
Subadviser by the end of the 150-day period beginning with the
effective date of this Agreement, the amount in the escrow account
(including interest earned) shall be paid to the Subadviser. If a
majority of the Fund's outstanding voting securities do not approve
an agreement with the Subadviser by the end of the 150-day period
beginning with the effective date of this Agreement, the Subadviser
shall be paid, out of the escrow account, the lesser of (i) any costs
incurred by the Subadviser in performing this Agreement (plus
interest earned on that amount while in escrow); or (ii) the total
amount in the escrow account (including interest earned).
5. This Agreement shall continue in effect for a period of up to 150
days from the date hereof until an agreement with the Subadviser is
approved by a majority of the Fund's outstanding voting securities;
provided, however, that this Agreement may be terminated by the
Board of Directors of the Fund or a majority of the Fund's
outstanding voting securities on not more than 10 days written
notice to the Manager and the Subadviser. 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 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 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
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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
Jersey.
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:
--------------------------------
Xxxxxx X. Xxxxx
President
XXXXXXXX ASSOCIATES LLC
BY:
--------------------------------
Xxxxx X. Xxxxxx
Senior Vice President
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