Exhibit (D)(7)
THE PRUDENTIAL INVESTMENT PORTFOLIOS, INC.
Prudential Xxxxxxxx Value Fund
Subadvisory Agreement
Agreement made as of this ___th day of _______ 2002 between Prudential
Investments LLC (PI or the Manager), a New York limited liability company and
Xxxxxxxx Associates LLC (Xxxxxxxx or the Subadviser),
WHEREAS, the Manager has entered into a Management Agreement, as
amended and restated on ________, 2002 (the Management Agreement), with The
Prudential Investment Portfolios, Inc. (the Fund), a Maryland corporation and a
diversified, open-end management investment company registered under the
Investment Company Act of 1940 as amended (the 1940 Act), pursuant to which PI
acts as Manager of the Fund; and
WHEREAS, PI desires to retain the Subadviser to provide investment
advisory services to the Fund and one or more of its series as specified in
Schedule A hereto (individually and collectively, with the Fund, referred to
herein as 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
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
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 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 copies of the Articles of Incorporation, By-Laws
and Prospectus of the Fund provided to it by the Manager
(the Fund Documents) and with the instructions and
directions of the Manager and of the Board of Directors of
the Fund, co-operate 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, as amended, 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. The Manager shall provide Subadviser timely with
copies of any updated Fund documents.
(iii) The Subadviser shall determine the securities and
futures contracts to be purchased or sold by such portion of
the Fund's portfolio, as applicable, 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
effected by it as 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
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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 or its affiliate 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, 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 such
Subadviser (ii) periodically make recommendations to the Fund's Board as
to whether the contract with one or more subadvisers should be renewed,
modified, or terminated and (iii) periodically report to the Fund's Board
regarding the results of its evaluation and monitoring functions.
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) In connection with its duties under this Agreement, the Subadviser agrees
to maintain adequate compliance procedures to ensure its compliance with the
1940 Act, the Investment Advisers Act of 1940, as amended, 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
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compliance procedures pursuant to paragraph 1(d) hereof as the Manager
may reasonably request.
(f) The Subadviser shall be responsible for the voting of all
shareholder proxies with respect to the investments and securities held
in the Fund's portfolio, subject to such reporting and other
requirements as shall be established by the Manager.
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. The Manager shall provide (or
cause the Fund's custodian to provide) timely information to the Subadviser
regarding such matters as the composition of assets in the portion of the Fund
managed by the Subadviser, cash requirements and cash available for investment
in such portion of the Fund, and all other information as may be reasonably
necessary for the Subadviser to perform its duties hereunder (including any
excerpts of minutes of meetings of the Board of Directors of the Fund that
affect the duties of the Subadviser).
3. For the services provided and the expenses assumed pursuant to this
Agreement, the Manager shall pay the Subadviser as full compensation therefore,
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. Liability for payment of compensation by the Manager to the
Subadviser under this Agreement is contingent upon the Manager's receipt of
payment from the Fund for management services described under the Management
Agreement between the Fund and the Manager. Expense caps or fee waivers for the
Fund that may be agreed to by the Manager, but not agreed to by the Subadviser,
shall not cause a reduction in the amount of the payment to the Subadviser by
the Manager.
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. The Subadviser agrees that it will
promptly notify the Fund and the Manager of the occurrence or anticipated
occurrence of any event that would result in the assignment (as defined in the
0000 Xxx) of this Agreement, including, but not limited to, a change or
anticipated change in control (as defined in the 1940
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Act) of the Subadviser; provided that the Subadviser need not provide notice of
such an anticipated event before the anticipated event is a matter of public
record.
Any notice or other communication required to be given pursuant to Section 5 of
this Agreement shall be deemed duly given if delivered or mailed by registered
mail, postage prepaid, (1) to the Manager at Gateway Center Three, 000 Xxxxxxxx
Xxxxxx, 0xx Xxxxx, Xxxxxx, XX 00000-0000, Attention: Secretary; (2) to the Fund
at Gateway Center Three, 4th Floor, 000 Xxxxxxxx Xxxxxx, Xxxxxx, XX 00000-0000,
Attention: Secretary; or (3) to the Subadviser at Xxx Xxxxxx Xxxxxx, Xxxxxx,
Xxxxxxx XX0X 0XX.
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 LLC
BY: ______________________
NAME: Xxxxxx X. Xxxxx
TITLE: Executive Vice President
XXXXXXXX ASSOCIATES LLC
BY: _______________________
NAME: Xxxxx X. Xxxxxx
TITLE: Executive Vice President
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Schedule A
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THE PRUDENTIAL INVESTMENT PORTFOLIOS, INC.
Prudential Xxxxxxxx Value Fund
As compensation for services provided by Xxxxxxxx, PI will pay Xxxxxxxx a fee
equal, on an annualized basis, to the following:
0.30% annually on the average daily net assets under management up to $300
million; and
0.25% annually on the average daily net assets under management in excess of
$300 million.
Dated as of _________, 2002.
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