Ex-99.4
INVESTMENT ADVISORY AGREEMENT
Agreement, made as of the lst day of September, 1989,
between The Prudential Insurance Company of America, a New Jer-
sey mutual insurance company (hereinafter "Adviser") and Pru-
dential Bache Securities, Inc., a Delaware corporation
(hereinafter "Sponsor"), an indirect wholly-owned subsidiary of
Prudential.
WHEREAS, Sponsor has in the past sponsored numerous
series of Prudential Unit Trusts; and
WHEREAS, Sponsor has been appointed the sponsor of
all series of National Municipal Trusts; and
WHEREAS, Sponsor proposes to be the sponsor of all
series of Prudential Unit Trusts and National Municipal Trusts;
and
WHEREAS, all such unit investment trusts described
above, together with all subsequent series or different series
of Prudential Unit Trusts and/or National Municipal Trusts,
have been or shall be registered under the Investment Company
Act of 1940, as amended (the 0000 Xxx) (all such trusts re-
ferred to collectively herein as the "Trusts"); and
WHEREAS, Sponsor desires to retain Adviser to render
investment advisory and portfolio supervisory services; and
WHEREAS, Adviser desires to perform such services in
accordance with the terms of this Agreement;
In consideration of the premises and mutual promises and cove-
nants hereinafter set forth, THE PARTIES HEREBY AGREE AS
FOLLOWS:
1. Appointment of Adviser.
Sponsor hereby appoints the Adviser to act as invest-
ment adviser to it in respect of the Trusts for the period and
on the terms set forth in this Agreement. The Adviser accepts
such appointment and agrees to render the services herein set
forth, for the compensation herein provided. Sponsor acknowl-
edges that pursuant to a Service Agreement between Adviser and
its wholly-owned subsidiary The Prudential Investment Corpora-
tion ("PIC"), PIC will furnish such services as Adviser may re-
quire in connection with its performance of its obligations un-
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der this Agreement. Adviser shall continue to have responsi-
bility for all investment advisory services undertaken by this
Agreement.
2. Service and Duties.
Subject to the general supervision of Sponsor, the
Adviser shall:
A. supervise the composition of the Trusts' portfo-
lio of securities, including the selection and purchase of such
securities for accumulation account of Sponsor for subsequent
deposit in the Trusts in accordance with the Trusts' investment
objectives and policies as stated in the prospectus relating to
each series of the Trusts.
B. determine the securities to be purchased by
Sponsor for subsequent deposit in the Trusts and as agent for
Sponsor will effect such purchases pursuant to its determina-
tions.
C. continuously monitor developments affecting the
securities in each series of Trust, including material changes
in the credit quality of securities holdings, and promptly rec-
ommend actions that Adviser believes should be taken, if any,
based upon such material changes.
D. make recommendations to the Sponsor to direct
the Trustee of such Trust, as appropriate, to: (i) hold Trust
securities; (ii) sell Trust securities; (iii) consent or refuse
consent to modifications, amendments or adjustments to the
terms of any security in a Trust or agree to an exchange offer
or other similar transaction; or (iv) hold securities of an is-
xxxx which may be experiencing financial difficulty in in-
stances where the Adviser believes that a negotiated settlement
or "workout" may result in a better return to holders of Trust
units than a sale of such securities.
With respect to (iv), if Sponsor concurs with Ad-
viser's recommendation, Adviser shall monitor the work-out
situation and/or participate in negotiations, and provide ad-
vice to Sponsor, provided that Sponsor or Trust shall bear the
expense of retention of outside counsel or other experts which
Adviser may recommend or any other costs which may result from
such recommendation. Any modification of terms of securities
held in a Trust as a result of such negotiations, the incurring
of additional expenses by the trust and/or the acceptance of
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the terms of any settlement must be authorized by Sponsor or
Trustee.
Notwithstanding anything in this section 2D to the
contrary, any expense of counsel, accountants, consultants
and/or other entities or persons the retention of which is
deemed necessary by the Adviser in order for the Adviser to
make recommendations to the Sponsor as set forth herein shall
be borne solely by the Adviser.
3. Brokerage.
Adviser may purchase securities either directly from
the issuer or from any broker and/or dealer in such securities,
including Sponsor or any other affiliate; in placing orders
with brokers and/or dealers the Adviser intends to seek best
price and execution for purchases and sales; the foregoing un-
derstanding, however, being subject in all respects to the fol-
lowing:
On occasions when the Adviser deems the purchase of a
security to be in the best interest of the Trusts as well as
affiliates or other customers of the Adviser, the Adviser may,
to the extent permitted by applicable laws and regulations, but
shall not be obligated to, aggregate the securities to be pur-
chased in order to obtain the best execution and lower broker-
age commissions, if any. In such event, allocation of the se-
curities so purchased, as well as the expense incurred in the
transaction, will be made by the Adviser in the manner it con-
xxxxxx to be the most equitable and consistent with its fiduci-
ary obligations to its affected customers.
It is also understood that it is desirable that the
Adviser have access to supplemental investment and market re-
search and security and economic analysis provided by brokers
who may execute brokerage transactions at a higher cost than
may result when allocating brokerage to other brokers on the
basis of seeking the most favorable price and efficient execu-
tion. Therefore, the Adviser is authorized to place orders for
the securities with such brokers subject to review by the Spon-
sor from time to time with respect to the extent and continua-
tion of this practice. It is understood that the services pro-
vided by such brokers may be useful to the Adviser in connec-
tion with its services to other clients.
4. Provision of Funds.
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The Adviser shall have no obligation to provide funds
or credit for the purchase of securities on behalf of Sponsor,
such funds or credit to be provided by Sponsor to the Adviser
or as directed by the Adviser promptly upon demand therefor.
5. Delivery of Securities.
The Adviser shall arrange for the delivery of the se-
curities purchased on behalf of Sponsor to the offices of Spon-
sor or any other location that Sponsor may specify.
6. Duty of Care.
The Adviser shall use the same skill and care in the
selection of the Trusts' portfolios as it uses in the admini-
stration of other accounts for which it has investment respon-
sibility as agent.
7. Compliance With Prospectus and Applicable Law.
The Adviser, in the performance of its duties and ob-
ligations under this Agreement, shall act in conformity with
the Prospectus for each series of the Trusts and with the in-
structions and directions of Sponsor and will conform to and
comply with all applicable federal and state laws and regula-
tions.
8. Insurance.
With respect to any insured series of the Trust the
Adviser shall arrange for security insurance, which term shall
include all forms of portfolio insurance and insurance to ma-
turity, provided, however, that for any Trust whose Portfolio
contains securities that are not insured prior to the Date of
Deposit, the Adviser shall select an Insurer unless Sponsor
shall object to such Insurer selected in which case an Insurer
agreeable both to the Adviser and Sponsor shall be selected,
and the cost of such insurance shall be paid directly to the
insurer by Sponsor or by the Trust for insured Trusts which
have purchased security insurance.
9. Reports.
The Adviser shall provide written reports to Sponsor
at least annually, describing the overall credit quality of the
Trusts, which reports detail material changes in credit quality
of any of the securities held by the Trusts.
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10. Valuations.
Subject to the general supervision of Prudential-
Bache, the Adviser shall continuously monitor developments af-
fecting the securities in each series of the Trusts, including
a periodic review of the pricing evaluation of the evaluator of
the securities in the Trusts to ascertain the reasonableness of
such evaluations, and shall report any evaluations it believes
to be unreasonable to Sponsor.
11. Books and Records.
The Adviser shall (1) maintain books and records with
respect to the securities transactions in respect of the Trusts
to the extent relevant as set forth in Regulation 270.3la-1,
(b)(1), (b)(5), (b)(6), (b)(7), (b)(9), (b)(10), and (b)(12) of
the 1940 Act, (2) render to Sponsor immediate reports of such
transactions and (3) maintain books and records providing the
substantiation for the annual reports relating to the portfolio
supervisory services rendered by the Adviser.
The Adviser agrees that all records which it main-
tains for Sponsor are the property of Sponsor and it will
promptly surrender any of such records to Sponsor upon Spon-
sor's request. The Adviser further agrees to preserve for a
period of not less than six years or for such other period as
the Securities and Exchange Commission shall require any such
records as are required to be maintained by the Adviser with
respect to services rendered on behalf of Sponsor.
12. Conflicts of Interest.
The investment advisory services of the Adviser to
the Trusts under this Agreement are not to be deemed exclusive,
and the Adviser shall be free to render similar services to
others. Adviser may give advice and take action with respect
to any of its own or affiliated accounts, or the accounts of
other clients which may differ from action taken with respect
to the Trust's account.
13. Expenses.
During the term of this Agreement, the Adviser will
(i) furnish, at the Adviser's expense, the services of such
persons competent to perform the duties set forth in this
Agreement, including such administrative and clerical functions
as are necessary, in order to provide the effective selection
and effectuation of purchases of securities for the Trusts and
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to provide continuous portfolio supervisory services and main-
tain or provide for the maintenance of such books and records
as are required to be maintained; (ii) provide, at the Ad-
viser's expense, adequate office space and utilities and all
necessary office equipment and related services for those per-
sons performing the duties set forth in this Agreement; and
(iii) pay all expenses incurred by it in connection with its
activities under this Agreement other than the costs of securi-
ties purchased for the Trusts and any taxes and brokerage com-
missions or insurance premiums in connection therewith, and any
additional expenses incurred as a result of negotiations or
work-outs approved by Sponsor or Trustee as provided in Para-
graph 2D.
14. Compensation
A. For the services to be rendered and the obliga-
tions assumed by the Adviser pursuant to this Agreement, Spon-
sor will pay to the Adviser the following: (a) .06% of the ag-
gregate par amount of all securities purchased for and depos-
ited in each Trust; and (b) 20% of the Cumulative Accumulation
Amount realized by Sponsor on the effective date of the Trusts.
For the purposes hereof, "Cumulative Accumulation Amount" means
the gross accumulation account profits less accumulation ac-
count losses realized by Sponsor upon the effective date of the
Trusts, less letter of credit costs and insurance premiums paid
by Sponsor covering securities in the Trusts. Cumulative Accu-
mulation Amount shall not include any profit or loss realized
by the Sponsor subsequent to the effective date of the Trusts.
In the event the Cumulative Accumulation Amount is a loss, the
Adviser shall owe Sponsor 20% of such loss, but only if payment
of such amount may be accomplished by deducting such amount
from amounts due and owing by Sponsor to Adviser pursuant to
subparagraphs A and B of this paragraph 14.
B. The Adviser may determine to sell a security or
securities and if so directed by Sponsor will sell a security
or securities held in the accumulation account of Sponsor prior
to the deposit of such security or securities into the Trusts.
Such sale or sales may result in the realization of a profit or
a loss. Sponsor shall pay the Adviser 20% of the Cumulative
Predeposit Transaction Amount if such amount shall reflect a
profit and the Adviser shall owe Sponsor 20% of the Cumulative
Predeposit Transaction Amount if such amount shall reflect a
loss, the Adviser shall owe Sponsor 20% of such loss, but only
if payment of such amount may be accomplished by deducting such
amount from amounts due and owing by Sponsor to Adviser pursu-
ant to subparagraphs A and B of this paragraph 14. For the
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purposes hereof "Cumulative Predeposit Transaction Amount"
shall mean the amount of the aggregate of all profits realized
less the amount of the aggregate of all losses realized from
the sale of securities purchased after the date of this Agree-
ment and prior to deposit into and effectiveness of the Trusts
and shall include any hedging gains or losses realized.
C. Payments set forth above in sub-paragraphs A and
B shall be made by Sponsor to Adviser on a quarterly basis
within 30 days of the end of each quarter. The calculation of
payments pursuant to subparagraph 14A shall be made on a quar-
terly basis, based on all Trusts whose effective date falls
within each such quarter. The calculation of payments pursuant
to subparagraph 14B shall be made on a quarterly basis, based
on all trades for which the trade date falls within each such
quarter. In the event that certain figures affecting the pay-
ment amount are not available, such amount(s) will be excluded
from the current quarterly payment calculation and applied to
the next quarterly payment. A sample form of billing is at-
tached to this Agreement.
D. Sponsor agrees that if Adviser shall not have
earned a minimum of $200,000 by one year from the date of this
Agreement and for each annual period thereafter from compensa-
tion earned pursuant to sub-paragraphs A and B above, Sponsor
will pay the difference between the amount earned and $200,000,
such amount being due and payable within 120 days after the end
of each such annual period.
E. Sponsor shall pay an additional fee of $325,000,
for the one year period from the date hereof and such amounts
as shall be agreed to for each annual period thereafter. Such
fee is to be paid in quarterly installments, which fee is in
payment for the review, analysis and supervision of existing
National Municipal Trusts Series. Adviser shall provide to the
Sponsor an allocation by trust, of time spent in connection
with such review, analysis and supervision at the end of each
one year period.
15. Limitation on Liability.
The Adviser shall not be liable for any error of
judgment or for any loss suffered by Sponsor or the Trusts in
connection with the matters to which this Agreement relates,
except a loss resulting from willful misfeasance, bad faith or
gross negligence on its part in the performance of its duties
or from reckless disregard by it of its obligations and duties
under this Agreement.
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16. Status of Adviser.
Except as otherwise provided herein, the Adviser
shall for all purposes herein be deemed to be an independent
contractor and shall have no authority to act for or represent
the Trusts in any way or otherwise be deemed an agent of the
Trusts except in the normal course of fulfilling its duties un-
der this Agreement.
17. Notification.
During the term of this Agreement, Sponsor agrees to
furnish the Adviser at its principal office all prospectuses,
updates, reports, sales literature, or other material prepared
for distribution to investors in the Trusts or the public,
which refer to the Adviser in any way, prior to use thereof and
not to use such material if the Adviser reasonably objects in
writing within five business days (or such other time as may be
mutually agreed) after receipt thereof. In the event of termi-
nation of this Agreement, Sponsor will continue to furnish to
the Adviser copies of any of the above-mentioned materials
which refer in any way to the Adviser.
Sponsor shall furnish on a monthly basis detailed in-
formation concerning redemption of Trust units, bond calls and
sales directed and executed by Sponsor and/or Trustee, or any
other change to a Trust portfolio which is effected by a party
other than Adviser. In addition, Sponsor shall furnish or oth-
erwise make available to the Adviser such other information re-
lating to the business affairs of the Trusts as the Adviser at
any time, or from time to time, reasonably requests in order to
discharge its obligations hereunder.
18. Duration and Termination.
This Agreement, unless sooner terminated as provided
herein, shall continue automatically for successive twelve
month periods. This Agreement may be terminated by either
party at any time on thirty days notice to the other, which no-
xxxx shall be in writing delivered by registered mail or any
express mail service. This Agreement will automatically and
immediately terminate in the event of its assignment (as de-
fined in the 1940 Act).
19. Amendment of This Agreement.
This Agreement may be amended by mutual consent, but
any such amendment must be evidenced by an instrument in writ-
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ing signed by the party against which enforcement of such
amendment is sought.
20. Miscellaneous.
The captions in this Agreement are included for con-
venience of reference only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction
or effect. If any provisions of this Agreement shall be held
or made invalid by a court decision, statute, rule or other-
wise, the remainder of this Agreement shall not be affected
thereby. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective suc-
cessors.
21. Governing Law.
This Agreement shall be governed by and construed in
accordance with 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 be-
low as of the day and year first above written.
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: /s/ Xxxxx X. Xxxxxxxx
Name: Xxxxx X. Xxxxxxxx
Title:Managing Director
PRUDENTIAL-BACHE SECURITIES,
INC.
By: Name:
Title:
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