1
Exhibit (d)(2)(V)
TARGET FUNDS
(Total Return Bond Fund)
SUBADVISORY AGREEMENT
Agreement made as of this 5th day of May, 2000, between Prudential
Investments Fund Management LLC (PIFM or the Manager), a New York limited
liability company, and Pacific Investment Management Company LLC (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 a
diversified open-end management investment company registered under the
Investment Company Act of 0000 (xxx 0000 Xxx), pursuant to which PIFM acts 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 shall enter into subadvisory agreements with one or more subadvisers with
respect to the management of the Total Return Bond Fund of the Trust (the
Portfolio) in connection with the management of the Trust.
WHEREAS, the Manager desires to retain the Adviser to provide investment
advisory services to the Portfolio and to manage such portion of the Portfolio
as the Manager shall from time to time direct and the Adviser is willing to
render such investment advisory services.
2
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 Portfolio as the Manager shall direct and shall manage the composition
of such Portfolio, including the purchase, retention and disposition thereof,
in accordance with the Portfolio'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 (copies of such amendments or supplements to be provided to
the Adviser at the time of such amendment or supplement) being herein called
the "Prospectus"), a copy of which is being currently provided to the Adviser,
and subject to the following understandings:
(i) The Adviser shall provide supervision of such portion of the
Portfolio's investments as the Manager shall direct and determine from time to
time what investments and securities will be purchased, retained, sold or
loaned by the Portfolio, and what portion of the assets it manages will be
invested or held uninvested as cash, including negotiating and entering into
appropriate documentation with counterparties, brokers, dealers or futures
commission merchants to effectuate such purchases and sales.
(ii) In the performance of its duties and obligations under this
Agreement, the Adviser shall act in conformity with the Declaration of Trust,
By-Laws and Prospectus of the Trust and the Portfolio and with the 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 and all other applicable federal and state laws and regulations.
(iii) The Adviser shall determine the securities and futures contracts to
be purchased or sold by such portion of the Portfolio and will place orders
with or through such
2
3
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
Portfolio with investment supervision, it is recognized that the Adviser will
give primary consideration to securing the most favorable price and efficient
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 principal broker for securities transactions but
that no formula has been adopted for allocation of the Portfolio'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 on the basis of
seeking the most favorable price and efficient execution. Therefore, the Adviser
is authorized to place orders for the purchase and sale of securities and
futures contracts for the Portfolio 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 or
futures contract to be in the best interest of the Portfolio as well as other
clients of the Adviser, the
3
4
Adviser, 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 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-1 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 on each business day
with information relating to all transactions concerning the portion of the
Portfolio's assets it manages and shall provide the Manager with such
information upon request of the Manager.
(vi) Title to all investments shall be held in the name of the Trust,
provided that for convenience in buying, selling and exchanging securities
(stocks, bonds, commercial paper, etc.), title to such securities may be held in
the name of the Portfolio's Custodian or its nominee, which Custodian shall be
selected by the Manager. Neither the Adviser nor any parent, subsidiary or
related firm shall take custody or possession of or handle any cash,
securities, mortgages or deeds of trust, or other indicia of ownership of the
Portfolio's investments, or otherwise act as custodian of such investments. All
cash and the indicia of ownership of all other investments shall be held by the
Portfolio's Custodian. The Adviser shall not be liable for any act or omission
of such Custodian.
4
5
(vii) 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 Portfolio'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 Portfolio 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 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
maintenance of compliance procedures 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 Portfolio pursuant to the Management Agreement and shall
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, a fee at an
annual rate of .25 of 1%
5
6
of the average daily net assets of the portion of the Portfolio 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 Portfolio, 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.
5. To the extent indemnification is provided to the Manager by the Trust
under the Management Agreement, the Manager shall indemnify the Adviser and hold
it harmless from and against all damages, liabilities, costs and expenses
(including reasonable attorneys' fees and amounts reasonably paid in settlement)
incurred by the Adviser in or by reason of any pending, threatened or completed
action, suit, investigation or other proceeding (including an action or suit by
or in the right of the Trust or its security holders) arising out of or
otherwise based upon any action actually or allegedly taken or omitted to be
taken by the Manager, the Trust or the Adviser in connection with this
Agreement; provided, however, that nothing contained herein shall protect or be
deemed to protect the Adviser against or entitle or be deemed to entitle the
Adviser to indemnification in respect of any liability to the Trust or its
security holders to which the Adviser would otherwise be subject by reason of
its willful misfeasance, bad faith or gross negligence in the performance of its
duties, by reason of its reckless disregard of its duties and obligations under
this Agreement.
6. 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
6
7
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 Portfolio, 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.
7. 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 a dissimilar nature, nor limit
or restrict 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,
except as described in Paragraph 1(a)(vii) above.
8. 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,
prior to use thereof and not to use material if the Adviser 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 Adviser
hereunder by first class or overnight mail, facsimile transmission equipment or
hand delivery.
9. It is understood that the name "Pacific Investment Management Company"
or "PIMCO" or any derivative thereof or logo associated with that name is the
valuable property of the Adviser and that the Manager or the Trust has the
right to use such name (or derivative or logo) in offering materials of the
Trust and/or Portfolio with the approval of the Adviser and for
7
8
so long as the Adviser is a subadviser to the Trust and/or the Portfolio. Upon
termination of this Agreement between the Adviser and the Manager, the Trust
and the Manager shall forthwith cease to use such name (or derivative or logo),
except as may be required by applicable law or regulation.
10. Concurrently with the execution of this Management Agreement, the
Adviser is delivering to the Manager a copy of Part II of its Form ADV, as
revised, on file with the Securities and Exchange Commission. The Manager
acknowledges receipt of such copy.
11. The Adviser has delivered to the Manager a copy of its Disclosure
Document, as revised, on file with the Commodity Futures Trading Commission.
The Manager hereby acknowledges receipt of such copy.
12. Any written notice required by or pertaining to this Subadvisory
Agreement shall be personally delivered to the party for whom it is intended,
at the address stated below, or shall be sent to such party by prepaid first
class mail or facsimile.
If to the Manager: Prudential Investments Fund Management LLC
Xxxxxxx Xxxxxx Xxxxx, 0xx Xxxxx
Xxxxxx, XX 00000
Fax: 000-000-0000
Attention: Xxxxxx X. Xxxxx
If to the Trust: Target Funds
Xxxxxxx Xxxxxx Xxxxx, 0xx Xxxxx
Xxxxxx, XX 00000
Fax: 000-000-0000
Attention: Secretary, Target Funds
If to the Adviser: Pacific Investment Management Company LLC
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
8
9
Fax: 000-000-0000
Attention: Chief Administrative Officer
cc: Xxxxxx X. Xxxxxx, Senior Vice President
13. 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.
14. 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 FUND MANAGEMENT LLC
By: /s/ Xxxxxx X. Xxxxx
------------------------------
Xxxxxx X. Xxxxx
Executive Vice President
PACIFIC INVESTMENT MANAGEMENT COMPANY LLC
By: /s/ Xxxxx X. Xxxxxx
-------------------------------
Xxxxx X. Xxxxxx
Managing Director
[LEGAL SEAL]
9
