PRUDENTIAL SMALL COMPANY FUND, INC.
SUBADVISORY AGREEMENT
Agreement made as of this 2nd day of February, 2001 between Prudential
Investments Fund Management LLC (PIFM or the Manager) and Xxxxxxxx Associates
LLC (the Subadviser or Xxxxxxxx).
WHEREAS, the Manager has entered into a Management Agreement, dated
February 2, 2001 (the Management Agreement), with Prudential Small Company Fund,
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 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 1, 2001 and is intended to supersede the agreement
dated August 24, 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 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
------------------------
Xxxxxx X. Xxxxx
Executive Vice President
XXXXXXXX ASSOCIATES LLC
BY: /s/ Xxxxx X. Xxxxxx
------------------------
Xxxxx X. Xxxxxx
Executive Vice President
. SCHEDULE A
Prudential 20/20 Focus Fund VALUE SLEEVE
0.375% to $1 bil. and
0.3325% over $ 1 bil.
GROWTH SLEEVE
.30 of 1% to $300 mil.
.25 of 1% over $300 mil.
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Prudential Natural Resources Fund, Inc. 0.375%
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Prudential Sector Funds, Inc.
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Prudential Financial Services Fund 0.375%*
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Prudential Technology Fund 0.375%*
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Prudential Utility Fund 0.300% to $250 mil.
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0.238% next $500 mil.
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0.203% next $750 mil.
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0.170% next $500 mil.
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0.140% next $2 bil.
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0.122% next $2 bil.
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0.105% over $6 bil.
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Prudential Small Company Fund, Inc. 0.455%
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Prudential U.S. Emerging Growth Fund, Inc. 0.300% to $1 bil.
0.261% over $1 bil.
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* As to the Strategically Managed segment's assets
