XXXXXX CALIFORNIA MUNICIPAL 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 California Municipal 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 CALIFORNIA MUNICIPAL FUND
As compensation for services provided by Prudential Investment Management,
Inc., Prudential Investments LLC will pay Prudential Investent Management,
Inc. a fee equal, on an annualized basis, to the following:
ADVISORY FEE
XXXXXX CALIFORNIA MUNICIPAL FUND
California Series .25%
California Income Series .25%
California Money Market Series .25%
Dated as of July 17, 2003.
