1
EXHIBIT (4)(i)
PRUDENTIAL VARIABLE CONTRACT ACCOUNT - 2
Management Agreement
Agreement made this 23rd day of March, 2001, between Prudential Variable
Contract Account - 2, a separate account of The Prudential Insurance Company of
America (the Fund), and Prudential Investments Fund Management LLC, a New York
limited liability company (the Manager).
W I T N E S S E T H
WHEREAS, the Fund is a diversified, open-end management investment
company registered under the Investment Company Act of 1940, as amended (the
1940 Act); and
WHEREAS, the Fund desires to retain the Manager to render or contract to
obtain as hereinafter provided investment advisory services to the Fund and the
Fund also desires to avail itself of the facilities available to the Manager
with respect to the administration of its day to day business affairs, and the
Manager is willing to render such investment advisory and administrative
services;
NOW, THEREFORE, the parties agree as follows:
1. The Fund hereby appoints the Manager to act as manager of the Fund
and as administrator of its business affairs for the period and on the terms set
forth in this Agreement. The Manager accepts such appointment and agrees to
render the services herein described, for the compensation herein provided. The
Manager is authorized to enter into a subadvisory agreement with Xxxxxxxx
Associates LLC, or any other sub-adviser, whether or not affiliated with
Prudential (each, a Subadviser) pursuant to which such Subadviser shall furnish
to the Fund the investment advisory services in connection with the management
of the Fund (each, a Subadvisory Agreement). The Manager is authorized to retain
more than one Subadviser, and if there is more than one Subadviser, the Manager
is authorized to allocate the Fund's assets among the Subadvisers. The Manager
will continue to have responsibility for all investment advisory services
furnished pursuant to any Subadvisory Agreement. The Fund and Manager understand
and agree that Manager will manage the Fund in a manager-of-managers style,
which contemplates that Manager will, among other things, (i) continually
evaluate the performance of each Subadviser through quantitative and qualitative
analysis and consultations with such Subadviser (ii) periodically make
recommendations to the Fund's Committee as to whether the contract with one or
more Subadvisers should be renewed, modified, or terminated and (iii)
periodically report to the FundSection s Committee regarding the results of its
evaluation and monitoring functions. The Fund recognizes that a Subadviser's
services may be terminated or modified pursuant to this process, and that the
Manager may appoint a new Subadviser for a Subadviser that is so removed.
1
2
2. Subject to the supervision of the Committee of the Fund, the
Manager shall administer the Fund's business affairs and, in connection
therewith, shall furnish the Fund with office facilities and with clerical,
bookkeeping and recordkeeping services at such office facilities and, subject to
Section 1 hereof and any Subadvisory Agreement, the Manager shall manage the
investment operations of the Fund and the composition of the Fund's portfolio
investments, including the purchase, retention and disposition thereof, in
accordance with the Fund's investment objectives, policies and restrictions as
stated in the Fund's SEC registration statement, and subject to the following
understandings:
(a) The Manager (or a Subadviser under the Manager's
supervision) shall provide supervision of the Fund's investments, and
shall determine from time to time what investments or 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.
(b) The Manager, in the performance of its duties and
obligations under this Agreement, shall act in conformity with the Plan
of Operations, Rules and Regulations of the Fund, the Fund's SEC
registration statement, and the instructions and directions of the
Committee of the Fund, and will conform to and comply with the
requirements of the 1940 Act and all other applicable federal and state
laws and regulations. In connection therewith, the Manager shall, among
other things, prepare and file (or cause to be prepared and filed) such
reports as are, or may in the future be, required by the Securities and
Exchange Commission.
(c) The Manager (or the Subadviser under the Manager's
supervision) shall determine the securities and futures contracts to be
purchased or sold by the Fund and will place orders pursuant to its
determinations with or through such persons, brokers, dealers or futures
commission merchants (including but not limited to Prudential Securities
Incorporated) in conformity with the policy with respect to brokerage as
set forth in the Fund's SEC Registration Statement or as the Committee
may direct from time to time. In providing the Fund with investment
supervision, it is recognized that the Manager (or the Subadviser under
the Manager's supervision) will give primary consideration to securing
the most favorable price and efficient execution. Consistent with this
policy, the Manager (or Subadviser under the Manager's supervision) 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 other clients of the Manager (or
Subadviser) may be a party. It is understood that Prudential Securities
Incorporated (or a broker-dealer affiliated with a Subadviser) may be
used as principal broker for securities transactions, but that no formula
has been
2
3
adopted for allocation of the Fund's investment transaction business. It
is also understood that it is desirable for the Fund that the Manager (or
Subadviser) have access to supplemental investment and market research
and security and economic analysis provided by brokers or futures
commission merchants, and that such brokers or FCMs may execute brokerage
transactions at a higher cost to the Fund than may result when allocating
brokerage to other brokers or futures commission merchants on the basis
of seeking the most favorable price and efficient execution. Therefore,
the Manager (or the Subadviser under the Manager's supervision) is
authorized to pay higher brokerage commissions for the purchase and sale
of securities and futures contracts for the Fund to brokers or futures
commission merchants who provide such research and analysis, subject to
review by the Fund's Committee from time to time with respect to the
extent and continuation of this practice. It is understood that the
services provided by such broker or futures commission merchant may be
useful to the Manager (or the Subadviser) in connection with its services
to other clients.
On occasions when the Manager (or a Subadviser under the Manager's
supervision) deems the purchase or sale of a security or a futures
contract to be in the best interest of the Fund as well as other clients
of the Manager (or the Subadviser) the Manager (or 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 so 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
Manager (or the Subadviser) in the manner it considers to be the most
equitable and consistent with its fiduciary obligations to the Fund and
to such other clients.
(d) The Manager (or the Subadviser under the Manager's
supervision) shall maintain all books and records with respect to the
Fund's portfolio transactions and shall render to the Fund's Committee
such periodic and special reports as the Committee may reasonably
request.
(e) The Manager (or the Subadviser under the Manager's
supervision) shall be responsible for the financial and accounting
records to be maintained by the Fund (including those being maintained by
the Fund's Custodian).
(f) The Manager (or the Subadviser under the Manager's
supervision) shall provide the Fund's Custodian on each business day
information relating to all transactions concerning the Fund's assets.
(g) The investment management services of the Manager to the
Fund under this Agreement are not to be deemed exclusive, and the Manager
shall be free to render similar services to others.
3
4
(h) The Manager shall make reasonably available its employees
and officers for consultation with any of the Committee members,
officers, or employees of the Fund with respect to any matter discussed
herein, including, without limitation, the valuation of the Fund's
securities.
3. The Fund has delivered to the Manager copies of each of the
following documents and will deliver to it all future amendments and
supplements, if any:
(a) Rules and Regulations of the Fund (such Rules and
Regulations, as in effect on the date hereof and as amended from time to
time, are herein called the "Rules and Regulations");
(b) Certified resolutions of the Committee members of the Fund
authorizing the appointment of the Manager and approving the form of this
agreement;
(c) Registration Statement under the 1940 Act and the
Securities Act of 1933, as amended, on Form N-3 (the Registration
Statement), as filed with the Securities and Exchange Commission (the
Commission) relating to the Fund and its shares of beneficial interest
and all amendments thereto; and
(d) Prospectus and Statement of Additional Information of the
Fund.
4. The Manager shall authorize and permit any of its officers and
employees who may be elected as Committee members or officers of the Fund to
serve in the capacities in which they are elected. All services to be furnished
by the Manager under this Agreement may be furnished through the medium of any
such officers or employees of the Manager.
5. The Manager shall keep the Fund's books and records required to be
maintained by it pursuant to paragraph 2 hereof. The Manager agrees that all
records which it maintains for the Fund are the property of the Fund, and it
will surrender promptly to the Fund any such records upon the Fund's request,
provided however that the Manager may retain a copy of such records. The Manager
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 the Manager
pursuant to Paragraph 2 hereof.
6. During the term of this Agreement, the Manager shall pay the
following expenses:
(a) the salaries and expenses of all Committee members,
officers, and employees of the Fund and the Manager,
(b) all expenses incurred by the Manager in connection with
managing the ordinary course of the Fund's business, other than those
assumed by the
4
5
Fund herein,
(c) the costs and expenses payable to a Subadviser pursuant to
a Subadvisory Agreement,
(d) the registration of the Fund and its shares of capital
stock for the offer or sale under federal and state securities laws,
(e) the preparation, printing and distribution of prospectuses
for the Fund, and advertising and sales literature referring to the Fund
for use and offering any security to the public,
(f) the preparation and distribution of reports and acts of the
Fund required by and under federal and state securities laws,
(g) the legal and auditing services that may be required by the
Fund,
(h) the conduct of annual and special meetings of persons
having voting rights, and
(i) the custodial and safekeeping services that may be required
by the Fund.
7. The Fund assumes and will pay the expenses described below:
(a) brokers' commissions, issue or transfer taxes and other
charges and fees directly attributable to the Fund in connection with its
securities and futures transactions,
(b) all taxes and corporate fees payable by the Fund to
federal, state or other governmental agencies,
(c) the cost of fidelity, Committee members' and officers' and
errors and omissions insurance,
(d) litigation and indemnification expenses and other
extraordinary expenses not incurred in the ordinary course of the Fund's
business, and
(e) any expenses assumed by the Fund pursuant to a Distribution
and Service Plan adopted in a manner that is consistent with Rule 12b-1
under the 1940 Act.
8. For the services provided and the expenses assumed pursuant to
this Agreement, the Fund will pay to the Manager as full compensation therefor a
fee at the annual rate of 0.125% of the Fund's average daily net assets.
5
6
9. The Manager shall not be liable for any error of judgment or for
any loss suffered by the Fund in connection with the matters to which this
Agreement relates, except a loss resulting from a breach of fiduciary duty with
respect to the receipt of compensation for services (in which case any award of
damages shall be limited to the period and the amount set forth in Section
36(b)(3) of the 0000 Xxx) or 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.
10. 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 Committee 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 at any time, without the payment of any
penalty, on not more than 60 days' written notice to the other party. This
Agreement shall terminate automatically in the event of its assignment (as
defined in the 1940 Act). Manager shall provide written notice to the New Jersey
Department of Banking and Insurance (NJ) at least 30 days in advance of
Manager's termination of this Agreement, and shall notify NJ of a termination of
this Agreement initiated by the Committee or securityholders immediately after
it learns of such termination.
11. Nothing in this Agreement shall limit or restrict the right of any
officer or employee of the Manager who may also be a Committee member, 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 dissimilar nature, nor limit or restrict the right of
the Manager to engage in any other business or to render services of any kind to
any other corporation, firm, individual or association.
12. Except as otherwise provided herein or authorized by the Committee
of the Fund from time to time, the Manager shall for all purposes herein be
deemed to be an independent contractor, and shall have no authority to act for
or represent the Fund in any way or otherwise be deemed an agent of the Fund.
13. During the term of this Agreement, the Fund agrees to furnish the
Manager at its principal office all prospectuses, proxy statements, reports to
participants, sales literature, or other material prepared for distribution to
participants in the Fund or the public, which refer in any way to the Manager,
prior to use thereof and not to use such material if the Manager reasonably
objects in writing within five business days (or such other time as may be
mutually agreed) after receipt thereof. In the event of termination of this
Agreement, the Fund will continue to furnish to the Manager copies of any of the
above- mentioned materials which refer in any way to the
6
7
Manager. Sales literature may be furnished to the Manager hereunder by
first-class or overnight mail, facsimile transmission equipment or hand
delivery. The Fund shall furnish or otherwise make available to the Manager such
other information relating to the business affairs of the Fund as the Manager at
any time, or from time to time, reasonably requests in order to discharge its
obligations hereunder.
14. 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. No amendment or modification of this Agreement shall be effective unless
the amendment or modification is: (a) filed with the New Jersey Department of
Banking and Insurance (the NJDBI) at least 30 days prior to the proposed
effective date; (b) not disapproved by the NJDBI;(c) made in writing; and (d)
signed by the parties hereto.
15. 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 Prudential Investments Fund Management LLC at
Gateway Center Three, 000 Xxxxxxxx Xxxxxx, Xxxxxx, XX 00000-0000, Attention:
Secretary; or (2) to Prudential Variable Contract Account-2 at Gateway Center
Three, 000 Xxxxxxxx Xxxxxx, Xxxxxx, XX 00000-0000, Attention: President.
16. This Agreement shall be governed by and construed in accordance
with the laws of the State of New Jersey.
17. This Agreement supersedes any previous investment management
agreement with respect to the Fund.
7
8
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 VARIABLE CONTRACT ACCOUNT - 2
By:
-----------------------------------------
Xxxxx X. Xxxxxxx, Xx.
Chairman
PRUDENTIAL INVESTMENTS FUND MANAGEMENT LLC
By:
----------------------------------------
Xxxxxx X. Xxxxx
Executive Vice President
8
