PRUDENTIAL INVESTMENT PORTFOLIOS 3 (formerly JennisonDryden Opportunity Funds) Prudential Real Assets Fund SUBADVISORY AGREEMENT
PRUDENTIAL INVESTMENT PORTFOLIOS 3
(formerly JennisonDryden Opportunity Funds)
Prudential Real Assets Fund
SUBADVISORY AGREEMENT
Agreement made as of this 30th day of September, 2011 between Prudential Investments LLC (PI or the Manager), a New York limited liability
company, and Jefferies Asset Management, LLC (Jefferies or the Subadviser), a Delaware limited liability company.
WHEREAS, the Manager has entered into a Management Agreement (the Management Agreement) dated December 1, 2010, with Prudential Investment Portfolios 3, a Delaware business trust (the Trust) 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 act as Manager of the Prudential Real Assets Fund (the Fund), a non-diversified series of the Trust; and
WHEREAS, the Manager, acting pursuant to the Management Agreement, desire 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
NOW, THEREFORE, the Patties agree as follows:
1. (a) Subject to the supervision of the Manager and the Board of Trustees of the Trust, the Subadviser shall manage such portion of the Fund's portfolio as delegated to the Subadviser by the Manager, including the purchase, retention and disposition thereof, in accordance with the Fund's investment objectives, policies and restrictions as stated in its then current prospectus and statement of additional information (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 Agreement and Declaration of Trust of the Trust, as amended, the By-laws of the Trust, the Prospectus
of the Fund, and the Trust's valuation procedures and any other procedures adopted by the Board applicable to the Fund (and any amendments thereto) as provided to it by the Manager (the Trust Documents) and with the instructions and directions of the Manager and of the Board of Trustees of the
Trust, co-operate with the Manager's (or their designees') personnel responsible for monitoring the Trust'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 Commission). The Manager shall provide Subadviser timely with copies of any updated Trust 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 may place orders with or through such persons, brokers, dealers or futures commission merchants (including but not limited to any broker, dealer or futures commission merchants affiliated with the Manager or Subadviser) to carry out the policy with respect to brokerage as set forth in the Fund's
Prospectus or as the Board of Trustees may direct in writing 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 xxxxx. The Manager (or Subadviser) to the Fund each shall have discretion to
effect investment transactions for the Fund through broker-dealers (including, to the extent legally permissible, broker-dealers affiliated with
the Subadviser(s) qualified to obtain best execution of such transactions who provide brokerage and/or research services, as such services are defined in Section 28(e) of the Securities Exchange Act of 1934, as amended (the 1934 Act), and to cause the Fund to pay any such broker-dealers an amount of commission for
effecting a portfolio transaction in excess of the amount of commission another broker-dealer would have charged for effecting that transaction, if the brokerage or research services provided by such broker-dealer,
viewed in light of either that particular investment transaction or the overall responsibilities of the Manager (or the Subadviser) with respect to the Fund and other accounts as to which they or it may exercise investment discretion (as such term is defined in Section 3(a)(35) of the 1934 Act), are reasonable in relation to the amount of
commission. Pursuant to the rules promulgated under Section 326 of the USA Patriot Act, broker-dealers are required to obtain, verify and record
information that identifies each person who opens an account with them. In accordance therewith, broker-dealers whom the Subadviser selects to execute transactions in the Fund's account may seek identifying information about the Trust and/or the Fund.
On occasions when the Sub adviser 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 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 Trust 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 Rule 31 a-
I under the 1940 Act, and shall render to the Board of Trustees such periodic and special reports as the Trustees may reasonably request. The Subadviser shall make reasonably available its employees and officers for consultation with any of the Trustees 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 an affiliate shall provide the Fund'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 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 manage 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 Trust's Board as to whether the contract with one or more subadvisers should be renewed, modified, or terminated, and (iii) periodically report to the Trust'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.
(vii) The Subadviser acknowledges that the Manager and the Trust intend to rely on Rule l7a-10, Rule 10f-3, Rule l2d3-1 and Rule 17e-1 under the 1940 Act, and the Subadviser hereby agrees that it shall not consult with any other subadviser to the Trust with respect to transactions in securities for the Fund's
portfolio or any other transactions of Fund assets.
(b) The Subadviser shall authorize and permit any of its directors, officers and employees who may be elected as Trustees or officers of the Trust 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 I(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 31 a-1 under the 1940 Act or any successor regulation. 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 31 a-2 of the Commission under the 1940 Act or any successor regulation any such records as are required to be maintained by it pursuant to paragraph I (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 maintain a written code of ethics (the Code of Ethics) that it reasonably believes complies with the requirements of Rule 17j-1 under the 1940 Act and Rule 204A-1 under the Advisers Act, a copy of which shall be provided to the Manager and the Fund, and shall institute procedures reasonably necessary to prevent any Access Person (as defined in Rule 17j-I under the 1940 Act and Rule 204A-1 under the Advisers Act) from violating its Code of Ethics. The Subadviser
shall follow such Code of Ethics in performing its services under this Agreement. Further, the Subadviser represents that it maintains adequate compliance procedures to ensure its compliance with the 1940 Act, the Advisers Act, and other applicable federal and state laws and regulations. In particular, the Subadviser represents that it has policies and procedures regarding the detection and prevention of the misuse of material, nonpublic information by the Subadviser and its employees
as required by the Xxxxxxx Xxxxxxx and Securities Fraud Enforcement Act of 1988, a copy of which it shall provide to the Manager and the Fund upon reasonable request. The Subadviser shall assure that its employees comply in all material respects with the provisions of Section 16 of the 1934 Act, and to cooperate reasonably with the Manager for purposes of filing any required reports with the Securities and Exchange Commission (the Commission) or such other regulator having appropriate
jurisdiction.
(f) 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.
(g) 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 reasonable reporting and other requirements as shall be
established by the Manager.
(h) The Subadviser acknowledges that it is responsible for evaluating whether market quotations are readily available for the Fund's portfolio securities, evaluating whether those market quotations are reliable for purposes of valuing the
Fund's portfolio securities, evaluating whether those market quotations are reliable for determining the Fund's net asset value per share and promptly notifying the Manager upon the occurrence
of any significant event with respect to any of the Fund's portfolio securities in accordance with the requirements of the 1940 Act and any related written guidance from the Commission and the Commission staff. Upon reasonable
request from the Manager, the Subadviser (through a qualified person) will assist the valuation committee of the Trust or the Manager in valuing securities of the Fund as may be required from time to time, including making available
information of which the Subadviser has knowledge related to the securities being valued.
(i) The Subadviser shall provide the Manager with any information reasonably requested regarding its management of the Fund's portfolio required for any shareholder report, amended registration statement, or prospectus supplement to be filed by the Trust with
the Commission. The Subadviser shall provide the Manager with any reasonable certification, documentation or other information reasonably requested or required by the Manager for purposes of the certifications of shareholder reports by the Trust's principal
financial officer and principal executive officer pursuant to the Sarbanes Oxley Act of 2002 or other law or regulation. The Subadviser shall promptly inform the Fund and the Manager if the Subadviser becomes aware of any information in the Prospectus
that-is (or will become) materially inaccurate or incomplete.
(j) The Subadviser shall comply with the Trust Documents provided to the Subadviser by the Manager or the Fund. The Subadviser shall notify the
Manager as soon as reasonably practicable upon detection of any material breach of such Trust Documents.
.
(k) The Subadviser shall keep the Fund and the Manager informed of developments relating to its duties as Subadviser of which the Subadviser has, or should have, knowledge that would materially affect the
Fund. In this regard, the Subadviser shall provide the Trust, the Manager, and their respective officers with such periodic reports concerning the obligations the Subadviser has assumed under this
Agreement as the Fund and the Manager may from time to time reasonably request. Additionally, prior to each Board meeting, the Subadviser shall provide the Manager and the Board with reports regarding the Subadviser's management of the Fund's portfolio during the most recently completed quarter, in such form as may be
mutually agreed upon by the Subadviser and the Manager. The Subadviser shall certify quarterly to the Fund and the Manager that it and its "Advisory Persons" (as defined in Rule 17j-under the
0000 Xxx) have complied materially with the requirements of Rule 17j-l under the 1940 Act during the previous quarter or, if not, explain what the Subadviser has done to seek to ensure such compliance in the future. Annually, the Subadviser shall furnish a written
report, which complies with the requirements of Rule 17j-1 and Rule 38a-l under the 1940 Act, concerning the Subadvise(s Code of Ethics and compliance program, respectively, to the Fund and the Manager. Upon written request of the Fund or the Manager with respect to material violations of the Code of Ethics directly
affecting the Fund, the Subadviser shall permit representatives of the Fund or the Manager to examine reports (or summaries of the reprints)
required to be made by Rule 17j-l(d)(1) relating to enforcement of the Code of Ethics.
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 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 Trustees of the Trust that affect the duties of the
Subadviser).
3. For the services provided 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. 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 Trust for management services described under the Management Agreement between the Trust 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, provided, however, that nothing in this Agreement shall be deemed to
waive any rights the Manager or the Fund may have against the Subadviser under federal or state securities laws. The Manager shall indemnify the Subadviser, its affiliated persons, its officers, directors and employees, for any liability and expenses, including attorneys' fees, which may be sustained as a result of the Manager's willful misfeasance, bad faith, gross negligence, reckless disregard of
its duties hereunder or violation of applicable law, including, without limitation, the 1940 Act and federal and state securities laws. The Subadviser shall indemnify the Manager, their affiliated
persons, their officers, directors and employees, for any liability and expenses,
including attorneys' fees, which may be sustained as a result
of the Subadviser's willful misfeasance, bad faith, gross negligence, or reckless disregard of its duties hereunder or violation of
applicable law, including, without limitation, the 1940 Act and federal and state securities laws.
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 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 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 of control (as defmed
in the 0000 Xxx) of the Subadviser.
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 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, 000 Xxxxxxxx Xxxxxx, 0xx Xxxxx, Xxxxxx, XX 00000-0000,
Attention: Secretary; or (3) to the Subadviser at Xxx Xxxxxxx Xxxxx, 0X, Xxxxxxxx, XX 00000, Attention: General Counsel.
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 agree 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 without reference to
its conflicts of law provisions.
10. Any question of interpretation of any term or provision of this Agreement having a counterpart in or otherwise derived
from a term or provision of the 1940 Act, shall be resolved by reference to such term or provision of the 1940 Act and
to interpretations thereof, if any, by the United States courts or, in the absence of any controlling decision of any such court, by rules,
regulations or orders of the Commission issued pursuant to the 1940 Act. In addition, where the effect
of a requirement of the 1940 Act, reflected in any provision of this
Agreement, is related by rules, regulation or order of the Commission, such provision shall be deemed to incorporate the effect of such
rule, regulation or order.
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: /s/ Xxxxx X. Xxxxxxxx
Name:Xxxxx X. Xxxxxxxx
Title: / Executive Vice President
JEFFERIES ASSET MANAGEMENT, LLC
By: /s/ Xxxx X. Xx Xxxxxx
Name: Xxxx X. Xx Xxxxxx
Title: Co-President
SCHEDULE A
PRUDENTIAL INVESTMENT PORFOLIOS 3
As compensation for services provided by Jefferies Asset Management, LLC (Jefferies), Prudential Investments LLC (the Manager) will pay Jefferies an advisory fee on the net asset value of the portion of the Fund's portfolio that
is managed by Jefferies that is equal, on an annualized basis, to the following:
Portfolio Name:
Prudential Real Assets Fund
Advisory Fee:
0.45% of average daily net assets
(Fee applies only to the assets attributable to Jefferies)
Dated as of: September 30, 2011
