PRUDENTIAL U.S. EMERGING GROWTH FUND, INC.
(formerly Prudential Emerging Growth 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
October 12, 1996 (the Management Agreement), with Prudential Emerging Growth
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 October 12,
1996 with PIFM, as amended and restated as of January 1, 2000; 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 October 12, 1996, between the Manager and PIC with respect
to the Fund.
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 and one or more of its series as specified
in Section 5 below, if any (individually and collectively,
with the Fund, referred to as 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 and Statement of
Investment 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:
1
(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
2
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 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.
(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.
3
(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 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 (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. The Manager shall pay the Subadviser for the services described in
paragraph 1 hereof as full compensation therefor, a fee equal to an annual rate
of the average daily net assets of the Fund under the management of the
Subadviser as described in the attached schedule A.
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
4
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).
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 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/Trustee, 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.
5
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
---------------------------------
Xxxxxx X. Xxxxx
Executive Vice President
XXXXXXXX ASSOCIATES LLC
BY: /s/ Xxxxx X. Xxxxxx
---------------------------------
Xxxxx X. Xxxxxx
Senior Vice President
6
SCHEDULE A
--------------------------------------------------------------------------------------------------------
Prudential 20/20 Focus Fund 0.375%
--------------------------------------------------------------------------------------------------------
Prudential Diversified Funds
--------------------------------------------------------------------------------------------------------
Prudential Diversified Conservative Growth Fund 0.375%
--------------------------------------------------------------------------------------------------------
Prudential Diversified Moderate Growth Fund 0.375%
--------------------------------------------------------------------------------------------------------
Prudential Diversified High Growth Fund 0.375%
--------------------------------------------------------------------------------------------------------
Prudential Equity Fund, Inc. 0.250% to $500 mil.
--------------------------------------------------------------------------------------------------------
0.226% next $500 mil.
--------------------------------------------------------------------------------------------------------
0.203% over 1 bil.
--------------------------------------------------------------------------------------------------------
Prudential Europe Growth Fund, Inc. 0.375%
--------------------------------------------------------------------------------------------------------
Prudential Global Genesis Fund, Inc. 0.500%
--------------------------------------------------------------------------------------------------------
Prudential Natural Resources Fund, Inc. 0.375%
--------------------------------------------------------------------------------------------------------
Prudential Pacific Growth Fund, Inc. 0.375%
--------------------------------------------------------------------------------------------------------
Prudential Real Estate Securities Fund 0.375%
--------------------------------------------------------------------------------------------------------
Prudential Sector Funds, Inc.
--------------------------------------------------------------------------------------------------------
Prudential Financial Services Fund 0.375%
--------------------------------------------------------------------------------------------------------
Prudential Technology Fund 0.375%
--------------------------------------------------------------------------------------------------------
Prudential Utility Fund 0.300% to $250 mil.
--------------------------------------------------------------------------------------------------------
0.238% next $500 mil.
--------------------------------------------------------------------------------------------------------
0.203% next $750 mil.
--------------------------------------------------------------------------------------------------------
0.170% next $500 mil.
--------------------------------------------------------------------------------------------------------
0.140% next $2 bil.
--------------------------------------------------------------------------------------------------------
0.122% next $2 bil.
--------------------------------------------------------------------------------------------------------
0.105% over $6 bil.
--------------------------------------------------------------------------------------------------------
Prudential Small Company Fund, Inc. 0.455%
--------------------------------------------------------------------------------------------------------
Prudential U.S. Emerging Growth Fund, Inc. 0.300%
--------------------------------------------------------------------------------------------------------
Prudential Value Fund (formerly Prudential Equity Income Fund) 0.300% to $500 mil.
0.238% next $500 mil.
0.214% next $500 mil.
0.191% over 1.5 bil.
--------------------------------------------------------------------------------------------------------
Prudential World Fund, Inc., Global Series 0.375%
--------------------------------------------------------------------------------------------------------
7
