EXHIBIT (d)(2)
PRUDENTIAL EQUITY INCOME FUND
SUBADVISORY AGREEMENT
Agreement made as of this 1st day of March, 1988, and amended and restated
as of January 1, 2000, between Prudential Investments Fund Management LLC, a
New York limited liability company and successor to Prudential Mutual Fund
Management Inc., a Delaware Corporation ("PMF" or the "Manager"), and The
Prudential Investment Corporation, a New Jersey Corporation (the
"Subadviser").
WHEREAS, the Manager has entered into a Management Agreement, dated March
1, 1998, and amended and restated as of June 1, 1995 (the "Management
Agreement"), with Prudential Equity Income Fund, formerly known as Prudential-
Bache Equity Income Fund (the "Fund"), a Massachusetts business trust and a
diversified open-end management investment company registered under the
Investment Company Act of 1940 (the "1940 Act"), pursuant to which PMF will act
as Manager of the Fund.
WHEREAS, PMF desires to retain the Subadviser to provide investment
advisory services to the Fund in connection with the management of the Fund and
the Subadviser is willing to render such investment advisory services.
NOW, THEREFORE, the Parties agree as follows;
1. (a) Subject to the supervision of the Manager and of the Trustees of
the Fund, the Subadviser shall manage the investment operations of the Fund
and 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 the Fund's
investments and 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
Declaration of Trust, By-Laws and Prospectus of the Fund and with the
instructions and directions of the Manager and of the Trustees of the
Fund 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.
(iii) The Subadviser shall determine the securities and futures
contracts to be purchased or sold by the Fund and will place orders
with or through such persons, brokers, dealers or
futures commission merchants (including but not limited to Prudential-Bache
Securities Inc.) to carry out the policy with respect to brokerage as set forth
in the Fund's Registration Statement and Prospectus or as the Trustees 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-Bache Securities Inc. 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
Trustees 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
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paragraph (f) of Rule 31a-1 under the 1940 Act and shall render to the Fund's
Trustees such periodic and special reports as the Trustees may reasonably
request.
(v) The Subadviser shall provide the Fund's Custodian on each business day
with information relating to all transactions concerning the Fund's assets 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.
(b) The Subadviser shall authorize and permit any of its directors, officers
and employees who may be elected as Trustees 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 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.
2. The Manager shall continue to have responsibility for all services to be
provided to the Fund pursuant to the Management Agreement and shall oversee and
review the Subadviser's performance of its duties under this Agreement.
3. The Manager shall pay the Subadviser at the annual rate of .30 of 1% of the
Fund's average daily net assets up to $500 million, .238 of 1% of average daily
net assets between $500 million and $1 billion, .214 of 1% of average daily net
assets between $1 billion and $1.5 billion and .191 of 1% of average daily net
assets in excess of $1.5 billion for furnishing the services described in
paragraph 1 hereof.
4. The Subadviser shall not be liable for any error of judgement 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.
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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 Trustees 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 Trustee,
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.
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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.
/s/ Xxxxxx X. Xxxxx
By ---------------------------------
Executive Vice President
THE PRUDENTIAL INVESTMENT CORPORATION
/s/ Xxxx X. Xxxxxxxxxx, Xx.
By ---------------------------------
President
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