The Prudential Investment Portfolios, Inc.
Prudential Active Balanced Fund
Subadvisory Agreement
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Agreement made as of this 23rd day of February, 2001 between Prudential
Investments Fund Management LLC (PIFM or the Manager) and The Prudential
Investment Corporation (the Subadviser or PIC).
WHEREAS, the Manager has entered into a Management Agreement, dated
February 23, 2001 (the Management Agreement), with The Prudential Investment
Portfolios, Inc. (the Fund), a Maryland corporation and an open-end management
investment company registered under the Investment Company Act of 0000 (xxx 0000
Xxx), pursuant to which PIFM acts as Manager of the Fund; and
WHEREAS, PIFM desires to retain the Subadviser to provide investment
advisory services to the Fund on behalf of its series, Prudential Active
Balanced Fund (individually and collectively, with the Fund, referred to herein
as the Fund) and to manage such portion of the Fund as the Manager shall from
time to time direct, and the Subadviser is willing to render such investment
advisory services; and
WHEREAS, this Agreement was approved by the Fund's shareholders at a
meeting held on February 22, 2001 and is intended to supersede the agreement
dated May 14, 1998, and amended and restated as of January 1, 2000, between PIFM
and the Subadviser;
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 such portion of the
investment operations of the Fund as the Manager shall direct and shall
manage the composition of the Fund's portfolio(s), 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 such
portion of the Fund'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 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, cooperate
with the Manager's (or its designee's) personnel responsible
for monitoring the Fund's compliance 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 such portion of
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 (or any broker or dealer affiliated with the
Subadviser) 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 or any broker or dealer affiliated with the
Subadviser 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 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 Directors may reasonably request. The
Subadviser shall make reasonably available its employees and
officers for consultation with any of the Directors 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 portion of the Fund'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 Fund 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 Fund's Board as to whether the
contract with the Subadviser should be renewed, modified, or
terminated and (iii) periodically report to the Fund'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.
(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.
(d) The Subadviser agrees to maintain adequate compliance procedures to
ensure its compliance with the 1940 Act, the Investment Advisers Act of
1940 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.
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. 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 Fund's average daily net
assets of the portion of the Fund managed by the Subadviser as
described in the attached Schedule A.
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.
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 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
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 INVESTMENTS FUND MANAGEMENT LLC
BY: /s/ Xxxxxx X. Xxxxx
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Xxxxxx X. Xxxxx
Executive Vice President
THE PRUDENTIAL INVESTMENT CORPORATION
BY: /s/ Xxxx X. Xxxxxxxxxx
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Xxxx X. Xxxxxxxxxx
President
Schedule A
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Prudential Index Series Fund 0.150%
Prudential Stock Index Fund
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Prudential Sector Funds, Inc.
Prudential Financial Services Fund - Enhanced Index Segment 0.375%
Prudential Health Sciences Fund - Enhanced Index Segment 0.375%
Prudential Technology Fund - Enhanced Index Segment 0.375%
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Prudential Tax-Managed Funds
Prudential Tax-Managed Equity Fund 0.325% to
$500 mil
0.285% over
$500 mil
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Prudential Tax-Managed Small-Cap Fund, Inc. 0.390%
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The Prudential Investment Portfolios, Inc.
Prudential Active Balanced Fund 0.325% to
$1 bil
0.285% over
$1 bil
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