PRUDENTIAL TAX-MANAGED SMALL-CAP FUND, INC.
SUBADVISORY AGREEMENT
Agreement made as of this 23rd day of February, 2001 between Prudential
Investments Fund Management LLC (PIFM or the Manager) and The Prudential
Investment Corporation (the Subadviser or PIC).
WHEREAS, the Manager has entered into a Management Agreement, dated
February 23, 2001 (the Management Agreement), with Prudential Tax-Managed
Small-Cap 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 23, 2001 and is intended to supersede the agreement
dated April 4, 1997, and amended and restated as of January 1, 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 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
-------------------
Xxxxxx X. Xxxxx
Executive Vice President
THE PRUDENTIAL INVESTMENT CORPORATION
BY: /s/ Xxxx X. Xxxxxxxxxx
----------------------
Xxxx X. Xxxxxxxxxx
President
SCHEDULE A
Prudential Index Series Fund 0.150%
Prudential Stock Index Fund
Prudential Sector Funds, Inc.
Prudential Financial Services Fund - Enhanced Index Segment 0.375%
Prudential Health Sciences Fund - Enhanced Index Segment 0.375%
Prudential Technology Fund - Enhanced Index Segment 0.375%
Prudential Tax-Managed Funds
Prudential Tax-Managed Equity Fund 0.325% to $500 mil.
0.285% over $500 mil.
Prudential Tax-Managed Small-Cap Fund, Inc. 0.390%
The Prudential Investment Portfolios, Inc.
Prudential Active Balanced Fund 0.325% to $1 bil.
0.285% over $1 bil.
