THE TARGET ASSET ALLOCATION FUNDS Target Conservative Allocation Fund Target Moderate Allocation Fund Target Growth Allocation Fund SUBADVISORY AGREEMENT
THE TARGET ASSET ALLOCATION FUNDS
Target Conservative Allocation Fund
Target Moderate Allocation Fund
Target Growth Allocation Fund
SUBADVISORY AGREEMENT
Agreement made as of this 13th day of December, 2008 between Prudential Investments
LLC (PI or the Manager), a New York limited liability company and Massachusetts Financial Services Company (the Subadviser or MFS), a Delaware corporation.
WHEREAS, the Manager has entered into a Management Agreement, dated May 25, 2004, (the Management Agreement) with The Target Asset Allocation Funds, a Delaware statutory 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 acts as Manager of the Trust; and
WHEREAS, the Manager desires to retain the Subadviser to provide investment advisory services to the Target Conservative Allocation Fund, Target Moderate Allocation Fund and Target Growth Allocation Fund (individually and collectively referred to hereafter as the Fund), which are each a series of the Trust, and to manage such portion of the Fund's portfolio 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:
I. (a) Subject to the supervision of the Manager and the Board of Trustees of the Trust (the Board), 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 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 portfolio as the Manager shall direct and the
Subadviser shall have discretion without prior consultation with the Manager to determine from time to time what investments and securities will be purchased, retained, sold or loaned (other than directing a securities lending program) 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, as amended, and the By-Laws of the Trust and Prospectus of the Fund and any procedures adopted by the Board applicable to the Fund and any amendments to those procedures (Board Procedures) which have been provided to it by the Manager (the Trust Documents), and with the instructions and directions of the Manager and of the Board, and co-operate with the Manager's (or its designee's) personnel responsible for monitoring the Fund's
compliance.
The Subadviser shall also comply at all times with the 1940 Act, the Investment Advisers Act of 1940, as amended (the Advisers Act), the Internal Revenue Code of 1986, as amended, and all other applicable federal and state laws and regulations, including securities law (collectively "Applicable Law"). Subject to the Manager's oversight, Subadviser shall monitor compliance with Applicable Law based on
Subadviser's books and records and, to the extent provided, information provided by Manager and/or Custodian as defined in Section 3 of this Agreement.
The Manager shall provide Subadviser timely with copies of any updated Trust Documents. With the exception of the Prospectus, until the Manager, the Fund, or the Board delivers any Fund Document regarding the management of the Fund or the Subadviser's duties hereunder to the Subadviser, including, but not limited to, the Trust Documents and Board Procedures, the Subadviser shall not be liable and shall be fully protected in relying on any previously delivered document sent by the
Manager, the Fund, or the Board to the Subadviser.
(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 shall place orders with or through such persons, brokers, dealers or futures commission merchants (including but not limited to any broker-dealer affiliated with the Manager or the Subadviser) to carry out the policy with respect to brokerage as set forth in the Fund's Prospectus or as the Board may direct from time to time. In
providing the Fund with investment supervision, it is recognized that the Subadviser shall give primary consideration to seeking best execution. Within the framework of this policy, the Subadviser may consider the receipt of services that affect securities transactions and incidental functions, such as clearance and
settlement functions, and advice as to the value of securities, the advisability of investing in securities, the availability of securities or purchasers or sellers of securities and analyses and reports concerning issues, industries, securities, economic factors, trends, portfolio strategy, and the performance of accounts, the financial responsibility, 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. 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 identities 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 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, shall 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.
The Manager hereby agrees and consents that the Subadviser and its affiliates are authorized to execute cross agency transactions for the Fund, provided such transactions comply with applicable laws and regulations.
(iv) The Subadviser shall maintain all books and records with respect to the Fund's portfolio transactions effected by it as required by any applicable federal or state securities laws or regulations, including the 1940 Act, the 1934 Act and the Advisers
Act. The Subadviser shall furnish to the Manager or the Board all information relating to the Subadviser's services under this Agreement reasonably requested by the Manager and the Board within a reasonable period of time after the Manager or the
Board makes such request. The Subadviser shall make reasonably available its employees and officers for consultation with any of the trustees or officers or employees of the Trust with respect to any matter discussed herein, including, without limitation,
the valuation of the Fund's securities.
(v) The Subadviser or its affiliates 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. The Subadviser shall furnish the Manager routinely with
daily information concerning portfolio transactions and other reports as agreed upon from time to time concerning transactions, portfolio holdings and performance of the Fund, in such form and frequency as may be mutually agreed upon from time to time.
The Subadviser agrees to review the Fund and discuss the management of the Fund with the Manager and the Board as either or both shall from time to time reasonably request.
(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 Trust's Board as to whether the contract with the Subadviser 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 Sub adviser 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 17a-IO, Rule 10f-3, Rule 12d3-1 and Rule 17e-l 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 keep the Fund's books and records required to be maintained by the Subadviser pursuant to paragraph l(a) hereof in the form and for the period required by Rule 31a-2 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 shall 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 Fund's books and records maintained by the Subadviser shall be made available, within a reasonable period of time following submission of a written request, to the Fund's accountants or auditors during regular business hours at the Subadviser's
offices. The Fund, the
Manager or their respective authorized representatives shall have the right to copy any records in the Subadviser's possession that pertain to the Fund. These books, records, information, or reports may be made available to properly authorized government
representatives consistent with state and federal law and/or regulations, provided that the Subadviser is given prior notice of such disclosure, unless such prior notice is prohibited by law or regulation. In the event of the termination of this Agreement, the
Fund's books and records maintained by the Subadviser shall be returned to the Fund or the Manager upon the request of the Trust, provided that the Subadviser shall be permitted to keep copies of such records. The Subadviser agrees that the policies and
procedures it has established for managing the Fund's portfolio (or appropriately detailed summaries thereof, including, but not limited to, all policies and procedures designed to ensure compliance with federal and state laws and regulations governing the
adviser/client relationship and management and operation of the Fund, shall be made available for inspection by the Fund, the Manager or their respective authorized representatives upon reasonable written request within not more than ten (10) business
days.
(c) The Subadviser shall maintain a written code of ethics (the Code of Ethics) that it reasonably believes complies with the requirements of Rule 17j-l under the 1940 Act and Rule 204A-l 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- under the 1940 Act and Rule 204A-l 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 andregulations. 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, as applicable, 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. The Subadviser shall be responsible for the preparation and filing of Form 13F on behalf of the Fund, unless otherwise directed by the Manager.
(d) The Subadviser shall furnish to the Co-Managers copies of all records prepared in connection with the maintenance of compliance procedures pursuant to paragraph 1 (c) hereof as the Co-Managers may reasonably request.
(e) 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 in accordance with the Subadviser's proxy voting policy and procedures, subject to such reasonable reporting and other requirements as shall be established by the Manager which may include use by Manager of a third-party vendor for proxy voting administration services ..
It shall be the sole responsibility of the Fund, Manager, or Custodian (and not of the Subadviser) to process and file any claim forms relating to any securities action claims litigation by or on behalf of the Fund.
(f) Upon reasonable request from the Manager, the Subadviser (through a qualified person) shall 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.
(g) 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 any information in the Prospectus is (or will become) materially inaccurate or incomplete.
(h) The Subadviser shall comply with Board Procedures 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 Board Procedures.
(i) The Subadviser shall keep the Fund and the Manager informed of developments relating to its duties as Subadviser of which the Sub adviser 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-l and Rule 38a-l under the 1940 Act, concerning the Subadviser'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 reports) required to be made by Rule 17j-1 ( d)(l} 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 Sub adviser'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 that affect the duties of the Subadviser).
The Manager shall provide on an on-going basis a list of all publicly traded affiliates of the Manager which may not be purchased by the Fund (such list shall include security name, cusip number, serlol and/or applicable ticker) and a list of all brokers and
underwriters affiliated with the Manager for reporting transactions under applicable provisions of the 1940 Act.
3. The assets of the Fund shall be maintained in the custody of a custodian as designated within an agreement between the Fund and the custodian (the "Custodian"). Subadviser shall have no liability for the acts or omissions of the
Custodian, unless such act or omission is taken solely in reliance upon instruction given to the Custodian by a representative of Subadviser properly authorized to give such instruction.
4. 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 (as calculated by the Custodian) of the portion of the Fund managed by the Subadviser as described in the attached Schedule A. 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. If this Agreement becomes effective or terminates, or if the manner of determining the applicable fee changes, in the
middle of any month, the fee (if any) for the period from the effective date to the end of such month or from the beginning of such month to the date of termination or change, as the case may be, shall be prorated according to the proportion which such period bears to the full month in which such effectiveness or
termination or change occurs.
5 (a) 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 or bad faith 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 reasonable attorneys' fees, which may be sustained as a result of the Manager's willful
misfeasance, bad faith, or 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 reasonable
attorneys' fees, which may be sustained as a result of the Subadviser's willful misfeasance, bad faith, or reckless disregard of its duties hereunder or
violation of applicable law, including, without limitation, the 1940 Act and federal and state securities laws. In any event, neither the Subadviser nor its affiliates shall be liable for any loss or damage arising or reSUlting from the acts or omissions of the Fund's custodian, any broker, financial institution or any
other third party with or through whom the Subadviser arranges or enters into a transaction with respect to the Fund.
(b) The Manager acknowledges and agrees that the Subadviser makes no representation or warranty, expressed or implied, that any level of performance or investment results will be achieved by the Fund or that the Fund will perform comparably with any standard or index, including other clients of the Subadviser, whether
public or private.
6. Subject to the right of each of the Manager and Subadviser to comply with applicable law, including any demand of any regulatory or taxing
authority h,aving jurisdiction over it, the parties hereto shall treat as confidential all information pertaining to
the Fund and the actions of the 'Manager and Subadviser in respect thereof. In accordance with Regulation
S-P, if non-public personal information regarding either party's customers or consumers is disclosed to the other party in connection with the
Agreement, the party receiving such information will not disclose or use that information other than as necessary to carry out the purposes of this Agreement.
7. 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 shall 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 0000 Xxx) 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. Notwithstanding any provisions to the contrary in this Agreement, this Agreement shall terminate automatically and without notice (other than notice to stop trading in the Fund's portfolio) to the Subadviser upon the execution of a new Agreement with a successor subadviser.
8. 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 Trust at Gateway Center Three, 4th Floor, 000 Xxxxxxxx Xxxxxx, Xxxxxx, XX 00000-0000, Attention:
Secretary; or (3) to the Subadviser at 000 Xxxxxxxx Xxxxxx, Xxxxxx, XX 00000, Attention: Secretary.
9. 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 Trust or 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.
10. 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 (including the Subadviser's name, derivatives thereof and any logo associated therewith), 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 and prior to the distribution of such material. Sales literature may be furnished to the Subadviser hereunder by first-class or overnight mail, facsimile transmission equipment or hand delivery. The
Manager hereby approves the use of the Manager's, the Trust's or the Fund's name (and any derivatives thereof or any logos associated with those names) on a representative client list of the Subadviser.
11 The parties to this Agreement each agree to cooperate in a reasonable manner with each other in the event that any of them should become involved in a legal, administrative, judicial or regulatory action, claim, or suit as a result of performing its obligations under this Agreement.
12. 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.
13. This Agreement shall be governed by the laws of the State of New York.
14. The parties agree that this Agreement shall become effective as of the date that management and control ofthe Fund's securities are transferred to the Subadviser from the transition manager responsible for the transition of the Fund's portfolio.
15. The Manager acknowledges that the Subadviser has provided it with a copy of the Subadviser's most recent Form ADV as filed with the Securities and Exchange Commission, for its benefit and the benefit of the Trust.
16. This Agreement in no way restricts the Subadviser's right to perform investment management or other services for any person or entity, and the performance of such services for others shall not be deemed to violate or give rise to any duty or obligation to the Fund or to the Trust. The Trust and the Manager understand that the Subadviser shall not have any obligation to purchase or sell any security for the Fund which
it (as investment manager for other clients, or as principal) or its affiliates or employees may purchase or sell for its or their own account or for the account of any other clients, if it is the Subadviser's opinion that such transaction or investment appears unsuitable or undesirable for the
Fund.
17. 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.
MASSACHUSETTS INANCIAL SERVICES COMPANY
BY: /s/ Xxxxxx X. Xxxxxxx
Print Name: Xxxxxx X. Xxxxxxx
Title: President
PRUDENTIAL INVESTMENTS LLC
BY: /s/ Xxxxxx X. Xxxxx
Name: Xxxxxx X. Xxxxx
Title: Executive Vice President
Schedule A
TARGET CONSERVATIVE ALLOCATION FUND
TARGET MODERATE ALLOCATION FUND
TARGET GROWTH ALLOCATION FUND
As compensation for services provided by Massachusetts Financial Services Company (MFS), Prudential Investments LLC (PI) will pay MFS a fee equal, on an annualized basis, to the following:
|
Fund Name |
Fee |
|
Target Conservative Allocation Fund |
0.375% of combined average daily net assets up to $250 million; |
*Combined average daily assets are assets in all portfolios subadvised by MFS that are managed by Prudential Investments LLC or by Prudential Investments LLC and AST Investment Services,
Inc. that have substantially the same investment strategy (i.e.
domestic large capitalization growth). Such portfolios are the Large Capitalization Growth Portfolio of The Target Portfolio Trust; Target Conservative Allocation Fund, Target Moderate Allocation Fund and Target Growth Allocation Fund,
each a series of Target Asset Allocation Funds; and AST MFS Growth Portfolio, a series of Advanced Series Trust.
Dated as of December 13, 2008
