PRUDENTIAL EQUITY FUND, INC.
SUBADVISORY AGREEMENT
Agreement made as of this 16th day of February, 2001 between Prudential
Investments Fund Management LLC (PIFM or the Manager) and GE Asset Management,
Inc. (the Subadviser or GEAM).
WHEREAS, the Manager has entered into a Management Agreement, dated
May 2, 1988 (the Management Agreement), with Prudential Equity Fund, Inc. (the
Fund), a Maryland corporation and a diversified, 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 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 2, 2001;
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, 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
GE ASSET MANAGEMENT, INC.
BY: /s/ Xxxx Xxxxxx
----------------------------
Xxxx Xxxxxx
Vice President and Associate General Counsel
SCHEDULE A
As compensation for GEAM's services, PIFM will pay GEAM a fee equal, on an
annualized basis, to the following:
0.30 of 1% on the first $50 million of the average net assets under GEAM's
management; and
0.20 of 1% on the next $250 million of the average net assets under GEAM's
management; and
0.15 of 1% over $300 million of the average net assets under GEAM's
management.
For purposes of computing the fees set out above, PIFM will aggregate the
assets of The Prudential Series Fund, Inc.--Equity Portfolio and Prudential
Equity Fund, Inc. that are under GEAM's management. The parties may aggregate
the assets of other Prudential mutual fund portfolios which GEAM may subadvise
in the future with the portfolios described above by amending this Schedule A.