1
EXHIBIT (d)(2)(ii)
TARGET FUNDS
(Small Capitalization Growth Fund)
SUBADVISORY AGREEMENT
Agreement made on this _____ day of September, 1999, between Prudential
Investments Fund Management LLC (PIFM or the Manager), a New York limited
liability company, and Sawgrass Asset Management, L.L.C. (the Adviser), a
Delaware limited liability company.
WHEREAS, PIFM has entered into a management agreement (the Management
Agreement) with Target Funds (the Trust), a Delaware business trust and an
open-end management investment company registered under the Investment Company
Act of 0000 (xxx 0000 Xxx), pursuant to which PIFM will act as manager of the
Trust.
WHEREAS, shares of the Trust are divided into separate series or
portfolios (each a portfolio), each of which is established pursuant to a
resolution of the Trustees of the Trust, and the Trustees may from time to time
terminate such portfolios or establish and terminate additional portfolios.
WHEREAS, PIFM has the responsibility of evaluating, recommending,
supervising and compensating investment advisers to each portfolio of the Trust
and desires to retain the Adviser to provide investment advisory services to the
Small Capitalization Growth Fund of the Trust (the Fund) in connection with the
management of the Trust and to manage such portion of the Fund as the Manager
shall from time to time direct, and the Adviser 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 Trust, the Adviser shall manage such portion of the investment operations of
the Fund as the Manager shall direct and shall manage the composition of such
portion of the Fund, including the purchase, retention and disposition thereof,
in accordance with the Fund's investment objective, policies and restrictions as
stated in the Prospectus (such Prospectus and
2
Statement of Additional Information as currently in effect and as amended or
supplemented from time to time being herein called the "Prospectus") as
delivered to the Adviser from time to time by the Manager and subject to the
following understandings:
(i) The Adviser shall provide supervision of such portion 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 it manages will be invested or held uninvested as cash.
(ii) In the performance of its duties and obligations under
this Agreement, the Adviser shall act in conformity with the Agreement and
Declaration of Trust, By-Laws and Prospectus of the Trust and the Fund as
provided to the Adviser by the Manager and with the written instructions and
directions of the Manager and of the Trustees of the Trust 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.
(iii) The Adviser shall determine the securities and
commodities or other assets to be purchased or sold by such portion of the Fund
and will place orders pursuant to its determination with or through such
persons, brokers, dealers or futures commission merchants (including but not
limited to Prudential Securities Incorporated) to carry out the policy with
respect to brokerage as set forth in the Trust'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 Adviser will give
primary consideration to securing best execution. Within the framework of this
policy, the Adviser 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 Adviser's other clients may be a
party. It is understood that Prudential Securities Incorporated may be used as a
broker for securities transactions but that no formula has been adopted for
allocation of
2
3
the Fund's investment transaction business. It is also understood that it is
desirable for the Trust that the Adviser 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 Trust than may result when allocating brokerage to other brokers
solely on the basis of seeking lowest price. Therefore, the Adviser is
authorized to place orders for the purchase and sale of securities and
commodities or other assets for the Fund with such brokers or futures commission
merchants, subject to review by the 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
Adviser in connection with the Adviser's services to other clients.
On occasions when the Adviser deems the purchase or sale of a security,
commodity or other asset to be in the best interest of the Fund as well as other
clients of the Adviser, the Adviser, to the extent permitted by applicable laws
and regulations, may, but shall be under no obligation to, aggregate the
securities, commodities or other assets to be sold or purchased in order to
obtain best execution. In such event, allocation of the securities, commodities
or other assets so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Adviser in the manner the Adviser considers to
be the most equitable and consistent with its fiduciary obligations to the Trust
and to such other clients.
(iv) The Adviser shall maintain all books and records with
respect to the portfolio transactions required by subparagraphs (b)(5), (6),
(7), (9), (10) and (11) and paragraph (f) of Rule 31a-l under the 1940 Act and
shall render to the Trustees such periodic and special reports as the Board may
reasonably request.
(v) The Adviser shall provide the Trust's custodian (the
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
3
4
Manager with such information upon request of the Manager. The Adviser shall
reconcile its records of the Fund's securities and cash managed by the Adviser
with statements provided by the Custodian at least once each month. The Adviser
shall provide the Manager with a written report on each such reconciliation,
including information on any discrepancies noted and actions taken by the
Adviser in response thereto, by the tenth business day of the following month to
the extent reasonably practicable.
(vi) The investment management services provided by the
Adviser hereunder are not exclusive, and the Adviser shall be free to render
similar services to others.
(b) Services to be furnished by the Adviser under this Agreement may be
furnished through the medium of any of its directors, officers or employees.
(c) The Adviser shall keep the Fund's books and records required to be
maintained by the Adviser pursuant to paragraph 1(a)(iv) hereof and shall timely
furnish to the Manager all information relating to the Adviser's services
hereunder needed by the Manager to keep the other books and records of the Trust
required by Rule 31a-1 under the 1940 Act. The Adviser agrees that all records
which it maintains for the Fund are the property of the Trust and the Adviser
will surrender promptly to the Trust any of such records upon the Trust's
request. The Adviser 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 it pursuant to paragraph 1(a) hereof.
(d) The Adviser agrees to maintain adequate compliance procedures to
ensure its compliance with the 1940 Act, the Investment Advisers Act of 1940
(Advisers Act) and other applicable state and federal laws and regulations.
(e) The Adviser shall furnish to the Manager copies of all records
prepared in connection with (i) the performance of this Agreement and (ii) the
reports prepared in accordance with the compliance procedures maintained
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 shall
4
5
oversee and review the Adviser's performance of its duties under this Agreement.
3. The Manager shall compensate the Adviser for the services provided
and the expenses assumed pursuant to this Subadvisory Agreement at the annual
rate of .40 of 1% of the average daily net assets of the portion of the Fund
managed by the Adviser. This fee will be computed daily and paid monthly.
4. The Adviser shall not be liable for any error of judgment or for any
loss suffered by the Fund, the Trust 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 Adviser's part in the
performance of its duties or from its reckless disregard of its obligations and
duties under this Agreement, provided, however, that nothing in this Agreement
shall be deemed to waive any rights the Manager or the Trust may have against
the Adviser under federal or state securities laws, including for acts of good
faith.
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 Trust at any
time, without the payment of any penalty, by the Trustees 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 Adviser 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 Adviser's directors, officers or employees 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,
5
6
nor limit the Adviser'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
Adviser at its principal office all prospectuses, proxy statements, reports to
shareholders, sales literature or other material prepared for distribution to
shareholders of the Trust or the public, which refer to the Adviser in any way;
provided, however, that any such item which describes or characterizes the
Adviser's investment process with respect to the Fund, the names of any of its
clients (other than the Trust or advisory clients of PIFM and its affiliates) or
any of its performance results shall be furnished to the Adviser by first class
or overnight mail, facsimile transmission equipment or hand delivery prior to
use thereof, and such item shall not be used if the Adviser reasonably objects
to such use in writing within forty-eight (48) hours (or such other time as may
be mutually agreed) after receipt thereof (provided, however, that if such item
is not received by the Adviser during normal business hours on a business day,
such period shall end forty-eight (48) hours after the start of normal business
hours on the next succeeding business day).
8. This Agreement may be amended by mutual consent, but the consent of
the Trust 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.
6
7
IN WITNESS WHEREOF, the Parties hereto have caused this instrument to
be executed by their officers designated below on the day and year first above
written.
PRUDENTIAL INVESTMENTS FUND MANAGEMENT LLC
By: ______________________________________
SAWGRASS ASSET MANAGEMENT, L.L.C.
By: ______________________________________
7