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Exhibit (d)(2)(iii)
TARGET FUNDS
(Small Capitalization Value Fund)
SUBADVISORY AGREEMENT
Agreement made as of this 29th day of October, 1999, between Prudential
Investments Fund Management LLC (PIFM or the Manager), a New York limited
liability company, and Lazard Asset Management, a division of Lazard Freres &
Co. LLC, (the Adviser), a New York 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 Small Capitalization Value Fund of the Trust
(the Portfolio) in connection with the management of the Trust.
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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. 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 each 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, being herein called the "Prospectus") 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 shall 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.
(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 persons, brokers, dealers or futures commission merchants
(including but not limited to
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Prudential Securities Incorporated and Lazard Freres & Co. LLC) 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 and Lazard Freres & Co. LLC may each 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
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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) 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
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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 .40 of 1% 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 the
willful misfeasance, bad faith or gross negligence of the Adviser in the
performance of its duties or from its reckless disregard of its obligations and
duties under this Agreement. Nothing in this Agreement shall be deemed to waive
any rights the Manager or the Trust may have against the Adviser under federal
and state securities laws.
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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 Portfolio, or by the Manager or the Adviser at any time, without the payment
of any penalty, on not more that 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 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)(vi) above.
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,
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. In the event of the termination of this Agreement, the
manager will continue to furnish the Adviser copies of such materials which
refer to the Adviser. Sales literature may be
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furnished to the Adviser hereunder by first class or overnight mail, facsimile
transmission equipment or hand delivery.
8. The Manager has delivered to the Adviser copies of each of the
following documents and will deliver to it all future amendments and
supplements, if any:
(a) Declaration of Trust, as filed with the Secretary of State of
Delaware (such Declaration of Trust, as in effect on the date hereof and as
amended from time to time, are herein called the Declaration of Trust);
(b) By-Laws of the Trust (such By-Laws, as in effect on the date
hereof and as amended from time to time, are herein called the By-Laws);
(c) Certified resolutions of the Trustees of the Trust authorizing
the appointment of the Manager and the Adviser and approving the form of this
Agreement;
(d) Registration Statement under the 1940 Act and the Securities Act
of 1933, as amended, on Form N-1A (the Registration Statement), as filed with
the Securities and Exchange Commission (the Commission) relating to the
Portfolio and shares of beneficial interest of the Portfolio and all amendments
thereto;
(e) Notification of Registration of the Trust under the 1940 Act on
Form N-8A as filed with the Commission and all amendments thereto; and
(f) Prospectus of the Portfolio (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).
9. 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.
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10. This Agreement shall be governed by the laws of the State of New York.
11. The Adviser agrees to notify the Manager of any change in the
membership of the Adviser within a reasonable time following such change. The
Manager agrees that the Adviser may refrain from providing any advice or
services concerning securities of companies of which any officers, directors,
partners or employees of the Adviser or any of the Adviser's affiliates are
officers or directors, or of companies for which the Adviser or any of the
Adviser's affiliates act as financial adviser, investment manager or in any
capacity that the adviser deems confidential, unless the Adviser determines in
its sole discretion that it may appropriately do so. The Manager appreciates
that, for good commercial and legal reasons, material nonpublic information
which becomes available to affiliates of the Adviser through these
relationships cannot be passed on to the Manager.
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
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LAZARD ASSET MANAGEMENT
By:
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10. This Agreement shall be governed by the laws of the State of New York.
11. The Adviser agrees to notify the Manager of any change in the
membership of the Adviser within a reasonable time following such change. The
Manager agrees that the Adviser may refrain from providing any advise or
services concerning securities of companies of which any officers, directors,
partners or employees of the Adviser or any of the Adviser's affiliates are
officers or directors, or of companies for which the Adviser or any of the
Adviser's affiliates act as financial adviser, investment manager or in any
capacity that the adviser deems confidential, unless the Adviser determines in
its sole discretion that it may appropriately do so. The Manager appreciates
that, for good commercial and legal reasons, material nonpublic information
which becomes available to affiliates of the Adviser through these
relationships cannot be passed on to the Manager.
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:
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LAZARD ASSET MANAGEMENT
By: [ILLEGIBLE]
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