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SCHEDULE 14C
(Rule 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the Securities
Exchange Act of 1934 (Amendment No. )
Check the appropriate box:
[X] Preliminary Information Statement
[ ] Confidential, for use of the Commission Only (as permitted by Rule
14c-5(d)(2))
[ ] Definitive Information Statement
The Target Portfolio Trust
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form of Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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THE TARGET PORTFOLIO TRUST(SM)
TOTAL RETURN BOND PORTFOLIO
INTERMEDIATE-TERM BOND PORTFOLIO
TARGET FUNDS
TOTAL RETURN BOND FUND
PRUDENTIAL DIVERSIFIED FUNDS
PRUDENTIAL DIVERSIFIED CONSERVATIVE GROWTH FUND
PRUDENTIAL DIVERSIFIED MODERATE GROWTH FUND
GATEWAY CENTER THREE
100 MULBERRY STREET
NEWARK, NEW JERSEY 07102-4077
------------------------
INFORMATION STATEMENT
AUGUST 3, 2000
------------------------
TO THE SHAREHOLDERS:
On March 1, 2000, at a regular meeting of the Boards of Trustees of The
Target Portfolio Trust(SM) (Target I), Target Funds (Target II) and Prudential
Diversified Funds (PDF and, collectively with Target I and Target II, the
Trusts), the Trustees approved new subadvisory agreements for the Total Return
Bond and Intermediate-Term Bond Portfolios of Target I, the Total Return Bond
Fund of Target II, and for the Prudential Diversified Conservative Growth and
the Prudential Diversified Moderate Growth Funds of PDF (collectively, the
Portfolios). The subadvisory agreements approved by the Boards of Trustees were
entered into between Prudential Investments Fund Management LLC, each Trust's
Manager, and Pacific Investment Management Company LLC (PIMCO). This information
statement informs you of the circumstances surrounding the Boards' approvals of
the new subadvisory agreements and provides you with an overview of their terms.
By order of the Boards,
WILLIAM V. HEALEY
Assistant Secretary
THIS IS NOT A PROXY STATEMENT. WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE
REQUESTED NOT TO SEND US A PROXY.
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THE TARGET PORTFOLIO TRUST(SM)
TOTAL RETURN BOND PORTFOLIO
INTERMEDIATE-TERM BOND PORTFOLIO
TARGET FUNDS
TOTAL RETURN BOND FUND
PRUDENTIAL DIVERSIFIED FUNDS
PRUDENTIAL DIVERSIFIED CONSERVATIVE GROWTH FUND
PRUDENTIAL DIVERSIFIED MODERATE GROWTH FUND
(800) 225-1852
------------------------
GATEWAY CENTER THREE
100 MULBERRY STREET
NEWARK, NEW JERSEY 07102-4077
------------------------
INFORMATION STATEMENT
JULY 25, 2000
------------------------
This information statement is being furnished to the shareholders of the
Total Return Bond and Intermediate-Term Bond Portfolios of The Target Portfolio
Trust (Target I), the Total Return Bond Fund of Target Funds (Target II), and
the Prudential Diversified Conservative Growth and Prudential Diversified
Moderate Growth Funds of Prudential Diversified Funds (PDF and, collectively
with Target I and Target II, the Trusts). Each Trust is a management investment
company registered under the Investment Company Act of 1940, as amended (the
Investment Company Act) and is organized as a Delaware business trust. The
Trusts' trustees are referred to here as the "Boards," "Board Members" or
"Trustees." The Trusts' principal executive office is Gateway Center Three, 100
Mulberry Street, Newark, New Jersey 07102-4077.
We are providing shareholders of the Total Return Bond and
Intermediate-Term Bond Portfolios of Target I, the Total Return Bond Fund of
Target II and the Prudential Diversified Conservative Growth and Prudential
Diversified Moderate Growth Funds of PDF (collectively, the Portfolios) as of
May 5, 2000 with this information statement in lieu of a proxy statement,
pursuant to the terms of an exemptive order the Trusts received from the
Securities and Exchange Commission (SEC). The exemptive order permits the
Trusts' manager, Prudential Investments Fund Management LLC (PIFM or the
Manager), to hire new subadvisers and to make certain changes to existing
subadvisory contracts with the approval of the Boards, but without obtaining
shareholder approval. This information statement relates to the approval by the
Trustees of new subadvisory agreements dated as of May 5, 2000 between
Prudential Investments Fund Management LLC (PIFM or the Manager) and Pacific
Investment Management Company LLC (PIMCO) with respect to: (i) the Total Return
Bond and Intermediate-Term Bond Portfolios of Target I; (ii) the Total Return
Bond Fund of Target II; (iii) the Prudential Diversified Conservative Growth
Fund of PDF; and (iv) the Prudential Diversified Moderate Growth Fund of PDF
(collectively, the Subadvisory Agreements). The Trustees approved the
Subadvisory Agreements, copies of which are attached hereto as Exhibit A, on
March 1, 2000. PIMCO had served as subadviser to each of the Portfolios under
subadvisory agreements dated November 14, 1994, in the case of the Total Return
Bond and Intermediate-Term Bond Portfolios of Target I, November 12, 1998 in the
case of the Prudential Diversified Conservative Growth and Prudential
Diversified Moderate Growth Funds of PDF, and October 29, 1999 in the case of
the Total Return Bond Fund of Target II. Each of those subadvisory agreements
terminated on May 5, 2000 as a result of a change in the ownership of PIMCO. The
previous subadvisory agreements were last approved by the Trustees, including a
majority of the Trustees who were not parties to the contracts and were not
interested persons of those parties (as defined in the Investment Company Act),
on May 26, 1999, in the case of the Total Return Bond and Intermediate-Term Bond
Portfolios of Target I, on August 26, 1999, in the case of the Prudential
Diversified Conservative Growth
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and Prudential Diversified Moderate Growth Funds of PDF, and August 25, 1999 in
the case of the Total Return Bond Fund of Target II.
PIMCO will pay for the costs associated with preparing and distributing
this information statement to their respective shareholders. This information
statement will be mailed on or about August 4, 2000.
THE MANAGER
Prudential Investments Fund Management LLC, Gateway Center Three, 100
Mulberry Street, Newark, New Jersey 07102-4077, serves as the Trusts' Manager
under management agreements dated as of November 9, 1992 in the case of Target
I, November 12, 1998 in the case of PDF and August 25, 1999 in the case of
Target II. PIFM is a subsidiary of The Prudential Insurance Company of America
(Prudential) and is a part of Prudential Investments, which is a business group
of Prudential. As of April 30, 2000, PIFM served as the manager to 42 open-end
investment companies and as Manager or administrator to 22 closed-end investment
companies with aggregate assets of approximately $75.6 billion. Information
concerning officers of the Trusts is set forth in Exhibit C.
SHAREHOLDER REPORTS
Target I's most recent annual report for the fiscal year ended December 31,
1999 has previously been sent to its shareholders. PDF's annual report for the
fiscal year ended July 31, 1999 and semi-annual report for the period ended
January 31, 2000 have previously been sent to its shareholders. Target II's
semi-annual report for the period ended January 31, 2000 has previously been
sent to its shareholders. EACH TRUST'S MOST RECENT ANNUAL AND SEMI-ANNUAL
REPORTS MAY BE OBTAINED WITHOUT CHARGE BY WRITING THE TRUST AT GATEWAY CENTER
THREE, 100 MULBERRY STREET, NEWARK, NEW JERSEY 07102-4077 OR BY CALLING (800)
225-1852 (TOLL FREE).
SHAREHOLDINGS
The table below sets forth each Portfolio's net asset value and number of
outstanding shares as of May 5, 2000.
<TABLE>
<CAPTION>
NET ASSET VALUE SHARES OUTSTANDING
PORTFOLIO AT MAY 5, 2000 AT MAY 5, 2000
--------- --------------- ------------------
<S> <C> <C>
Total Return Bond Portfolio (Target I)................ $ 9.77 6,458,297
Intermediate-Term Bond Portfolio (Target I)........... $ 9.83 11,071,957
CLASS A SHARES
Total Return Bond Fund (Target II).................... $ 9.74 1,219,556
Prudential Diversified Conservative Growth Fund
(PDF).............................................. $10.82 1,300,618
Prudential Diversified Moderate Growth Fund (PDF)..... $11.90 3,754,310
CLASS B SHARES
Total Return Bond Fund (Target II).................... $ 9.74 821,785
Prudential Diversified Conservative Growth Fund
(PDF).............................................. $10.81 3,634,252
Prudential Diversified Moderate Growth Fund (PDF)..... $11.85 7,790,159
CLASS C SHARES
Total Return Bond Fund (Target II).................... $ 9.74 611,837
Prudential Diversified Conservative Growth Fund
(PDF).............................................. $10.81 1,152,313
Prudential Diversified Moderate Growth Fund (PDF)..... $11.85 2,289,451
CLASS Z SHARES
Prudential Diversified Conservative Growth Fund
(PDF).............................................. $10.82 69,726
Prudential Diversified Moderate Growth Fund (PDF)..... $11.92 89,543
</TABLE>
Management does not know of any person who owned beneficially 5% or more of
the shares of the Total Return Bond and Intermediate-Term Bond Portfolios of
Target I as of May 5, 2000. Information on shareholders owning beneficially or
of record 5% or more of any class of shares of the other Portfolios as of May 5,
2000 is set forth in Exhibit D. To the knowledge of management, the executive
officers and Board
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Members of the Trusts, as a group, owned less than 1% of the outstanding shares
of each Portfolio as of May 5, 2000.
NEW SUBADVISORY AGREEMENTS
On March 1, 2000, the Trustees, including the non-interested Trustees,
unanimously approved the Subadvisory Agreements and the selection by PIFM of
PIMCO to continue to manage the Portfolios. PIMCO had previously served as
subadviser to the Portfolios under subadvisory agreements that automatically
terminated on May 5, 2000.
In a transaction that closed on May 5, 2000 (the Transaction), Allianz of
America, Inc. (Allianz of America) acquired approximately 70% of the outstanding
partnership interests in PIMCO Advisors L.P. (PIMCO Advisors), the parent of
PIMCO, for a total consideration of approximately $3.3 billion. Allianz of
America is a subsidiary of Allianz AG, a large, publicly-traded insurance
company based in Germany. The remainder of the outstanding partnership interests
in PIMCO Advisors are owned by Pacific Life Insurance Company (Pacific Life).
In connection with the closing, Allianz of America entered into a put/call
arrangement for the possible disposition of Pacific Life's interest in PIMCO
Advisors. The put option held by Pacific Life allows it to require Allianz of
America, on the last business day of each calendar quarter following the closing
of the Transaction, to purchase at a formula-based price all of the PIMCO
Advisors units owned directly or indirectly by Pacific Life. The call option
held by Allianz of America allows it, beginning January 31, 2003 or upon a
change in control of Pacific Life, to require Pacific Life to sell or cause to
be sold to Allianz of America, at the same price, all of the PIMCO Advisors
units owned directly or indirectly by Pacific Life.
As part of the Transaction, PIMCO Advisors and PIMCO entered into
employment, retention and incentive arrangements with key employees of PIMCO
Advisors and PIMCO. These benefits included new employment agreements, retention
and incentive awards vesting over a term of years and restricted stock grants.
In addition, certain key employees of PIMCO Advisors' investment advisory
subsidiaries received payments in respect of previously existing non-competition
arrangements in connection with the acquisition by Allianz of America of the
PIMCO Advisors units on which such arrangements were based.
POST-TRANSACTION STRUCTURE AND OPERATIONS.
As a result of the Transaction, PIMCO Advisors and PIMCO are now controlled
by Allianz of America. Allianz of America controls PIMCO Advisors and PIMCO
through its managing member interest in Pacific-Allianz Partners LLC
(PacPartners LLC), which is the sole general partner of PIMCO Advisors following
the Transaction. While Allianz of America controls PacPartners LLC, Pacific Life
holds a portion of its continuing interest in PIMCO Advisors through an interest
in PacPartners LLC. Allianz of America, through subsidiaries, is managing member
of PacPartners LLC and has the full authority and control over all actions taken
by PacPartners LLC as the general partner of PIMCO Advisors, provided that
Pacific Life's consent is required for certain extraordinary actions.
Operationally, PIMCO remains independent and leads the global fixed income
investment efforts of Allianz AG. In this regard, PIMCO coordinates its
activities with Allianz Asset Management ("AAM"), a subsidiary of Allianz AG
that coordinates global Allianz asset management activities. To permit the
provision of advisory services to non-U.S. clients of Allianz AG, PIMCO
personnel, including personnel with portfolio management responsibility for
certain of the Fund(s), may become affiliated with AAM or other Allianz-
controlled advisory firms. PIMCO also may call upon the research capabilities
and resources of Allianz AG and its advisory affiliates in connection with
providing investment advice to its clients. PIMCO will continue to operate in
the United States under its existing name.
Both William S. Thompson Jr., the current Chief Executive Officer of PIMCO,
and William H. Gross, the current Chief Investment Officer of PIMCO, have roles
on the Executive Committee of AAM, with Mr. Thompson serving as the Executive
Committee's Deputy Chairman. Messrs. Thompson and Gross entered into employment
contracts with a term of seven years following the Transaction. Other key
employees,
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of PIMCO and PIMCO Advisors also contractually agreed to remain with PIMCO for
significant periods following the Transaction.
DESCRIPTION OF ALLIANZ AG AND ITS AFFILIATES. Allianz AG, the parent of
Allianz of America, is a publicly traded German Aktiengesellschaft (a German
publicly-traded company) which, together with its subsidiaries, comprises the
world's second largest insurance group as measured by premium income. Allianz AG
is a leading provider of financial services, particularly in Europe, and is
represented in 68 countries world-wide through subsidiaries, branch and
representative offices, and other affiliated entities. In its last fiscal year,
the Allianz group wrote approximately $50 billion in gross insurance premiums.
After completion of the Transaction, PIMCO and the Allianz group combined have
over $650 billion in assets under management. Allianz AG's address is:
Koniginstrasse 28, D-80802, Munich, Germany.
Significant institutional shareholders of Allianz AG currently include,
among others, Dresdner Bank AG, Deutsche Bank AG, Munich Reinsurance and
HypoVereinsbank. BNP Paribas, Credit Lyonnais, Munich Reinsurance,
HypoVereinsbank, Dresdner Bank AG and Deutsche Bank AG, as well as certain
broker-dealers that might be deemed to be affiliated with these entities, such
as Bankers Trust Company, DB Alex Brown LLC, Deutsche Bank Securities, Inc. and
Dresdner Kleinwort Benson North America LLC (collectively, the "Affiliated
Brokers"), may be considered to be affiliated persons of PIMCO. Absent an SEC
exemption or other relief, the Portfolios generally are precluded from effecting
principal transactions with the Affiliated Brokers, and their ability to
purchase securities being underwritten by an Affiliated Broker or to utilize the
Affiliated Brokers for agency transactions is subject to restrictions. PIMCO
does not believe that the applicable restrictions on transactions with the
Affiliated Brokers described above materially adversely affects its ability to
provide services to the Portfolios, the Portfolios' ability to take advantage of
market opportunities, or the Portfolios' overall performance. Other portfolios
of the Trusts for which PIMCO (or an affiliate) does not serve as investment
subadviser are not, in general, subject to these same restrictions.
ANTICIPATED IMPACT OF THE TRANSACTION ON MANAGEMENT OF THE
PORTFOLIOS. PIMCO received structural and contractual protections as terms of
the Transaction that ensure PIMCO's operational autonomy and continuity of
management. PIMCO is confident that Allianz AG is committed to the people and
process that have led to PIMCO's success over the years. Accordingly, the
Transaction should not have an immediate impact, other than as already noted
above, on the management of the Portfolios or PIMCO's capacity to provide the
type, quality, or quantity of services that it has provided, and the Portfolios
should continue to receive the same high quality of service after the
Transaction. As discussed below, however, PIMCO believes that the Transaction
offers the potential to enhance significantly its future ability to deliver
quality investment services.
THE BENEFITS OF THE TRANSACTION. PIMCO anticipates that the Transaction
with Allianz AG benefits PIMCO and the Portfolios in a variety of ways,
including the following:
- PIMCO's investment expertise is enhanced because of the business
experience and relationships that Allianz AG has built around the globe,
particularly in Europe. PIMCO's access to European markets and business
opportunities is greatly enhanced by Allianz AG's experience and
relationships. The combined global resources of PIMCO and Allianz AG
allow PIMCO to take advantage of the growth in international markets and
the potential for premier money managers in the global marketplace.
- Allianz AG has a team of fixed income professionals in place that
currently manages more than $100 billion in assets. Integration of these
professionals and assets with PIMCO provides an opportunity for
furthering PIMCO's global fixed income expertise.
- The rotation of many of PIMCO's key investment professionals through
international offices and overseas personnel through PIMCO's offices will
result in more seasoned professionals with global experience.
- The combination provides additional career opportunities for PIMCO
professionals, furthering PIMCO's ability to attract and retain the best
people.
- Allianz AG has a stated growth strategy to be among the top five
providers of its services in the world's key markets, which is a key
factor in PIMCO's decision to proceed with the Transaction. The
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combined entity is the sixth largest investment manager in the world. The
Transaction significantly increases assets under PIMCO's management, and
offers the opportunity for continued growth in the future. Strong
relative investment results depend on a sound, disciplined investment
process and effective execution; size can be a benefit to both.
SECTION 15(f) OF THE INVESTMENT COMPANY ACT. Section 15(f) provides a
non-exclusive safe harbor for an investment adviser to an investment company or
any affiliated persons to receive any amount or benefit in connection with a
"change in control" of the investment adviser as long as two conditions are
satisfied. First, an "unfair burden" must not be imposed on investment company
clients of the adviser as a result of the transaction, or any express or implied
terms, conditions or understandings applicable to the transaction. The term
"unfair burden" (as defined in the Investment Company Act) includes any
arrangement during the two-year period after the transaction whereby the
investment adviser (or predecessor or successor adviser), or any "interested
person" (as defined in the Investment Company Act) of any such adviser, receives
or is entitled to receive any compensation, directly or indirectly, from such an
investment company or its security holders (other than fees for bona fide
investment advisory or other services) or from any other person in connection
with the purchase or sale of securities or other property to, from or on behalf
of such investment company. The Board has been advised that PIMCO is aware of no
circumstances arising from the Transaction that might result in an unfair burden
being imposed on the Trusts. The second condition of Section 15(f) is that
during the three-year period after the transaction, at least 75% of each such
investment company's board of directors must not be "interested persons" (as
defined in the Investment Company Act) of the investment adviser (or predecessor
or successor adviser). Each Board, as currently constituted, complies with this
requirement.
The Transaction constituted a change in actual control of PIMCO, causing an
assignment of PIMCO's original subadvisory agreements with respect to the
Portfolios. Under Section 15 of the Investment Company Act and the terms of the
original subadvisory agreements, the agreements automatically terminated when
this assignment occurred.
The Subadvisory Agreements contain substantially identical terms and
conditions as the subadvisory agreements in effect with PIMCO prior to May 5,
2000. See "Terms of Subadvisory Agreements" below. PIMCO renders investment
advice to each Portfolio in accordance with its investment objective and
policies and also makes investment decisions to purchase and sell securities on
behalf of each Portfolio, subject to the supervision of PIFM.
Section 15(a) of the Investment Company Act requires that a majority of
each Portfolio's outstanding voting securities approve its Subadvisory
Agreement. However, on September 11, 1996, the SEC issued an order granting the
Trusts and PIFM exemptive relief from the requirements of Section 15(a).
According to the SEC's order, which is subject to a number of conditions
(including approval by each Trust's shareholders, which was received on October
30, 1996 in the case of Target I, on October 1, 1998 in the case of PDF, and on
September 13, 1999 in the case of Target II), PIFM may now enter into
subadvisory agreements on behalf of each Trust without receiving prior
shareholder approval. Thus, execution and implementation of the new Subadvisory
Agreements did not require shareholder approval.
BOARD CONSIDERATION OF SUBADVISORY AGREEMENTS
At a regular meeting of the Boards at which all of the Trustees were in
attendance, the Boards of Trustees considered and unanimously approved the
Subadvisory Agreements on March 1, 2000. In considering the approval of the
Subadvisory Agreements, the Trustees, including the non-interested Trustees,
considered whether the approval of each Subadvisory Agreement was in the best
interests of the relevant Trust and the shareholders of the relevant
Portfolio(s). At the meeting, the Trustees reviewed materials furnished by
management and PIMCO and met with representatives of PIMCO. Among other things,
the Trustees considered the investment philosophy and style of PIMCO, its
relative performance record, its personnel and its financial strength. The Board
also considered the investment management services provided by PIMCO to the
Portfolios prior to March 1, 2000, and PIMCO's representation that the new
ownership structure would not adversely affect the nature and quality of those
services.
The Trustees discussed and reviewed the terms of the Subadvisory Agreements
which are substantially identical to those of the corresponding subadvisory
agreements in effect with PIMCO prior to May 5, 2000.
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Based upon their review, the Trustees concluded that each Subadvisory Agreement
was reasonable, fair and in the best interests of the relevant Trust and the
shareholders of the relevant Portfolio(s), and that the fee provided in the
Subadvisory Agreements (in each case, the same as in the previous subadvisory
agreement with PIMCO) was fair and reasonable. Accordingly, after consideration
of the above factors, and such other factors and information as they deemed
relevant, the Trustees, including the non-interested Trustees, unanimously
approved the Subadvisory Agreements.
INFORMATION CONCERNING PIMCO
PIMCO has specialized in fixed income investing since the firm was
established in 1971. PIMCO is registered as an investment adviser under the
Investment Advisers Act of 1940 and is registered as a commodity trading adviser
with the Commodity Futures Trading Commission. The address of PIMCO is 840
Newport Center Drive, Suite 300, Newport Beach, CA 92660. As of June 30, 2000,
PIMCO had approximately $199 billion in assets under management.
Exhibit E contains information about the other mutual funds managed by
PIMCO with investment objectives and strategies similar to those of the
Portfolios (or portions thereof managed by PIMCO). Exhibit E also lists the
principal executive officer and managing directors of PIMCO.
Pursuant to the Subadvisory Agreement with respect to the Prudential
Diversified Conservative Growth Fund, PIMCO manages a portion of the assets of
that Portfolio. The other portions of that Portfolio are managed by Jennison
Associates LLC, 466 Lexington Avenue, New York, NY 10017; The Prudential
Investment Corporation, 751 Broad Street, Newark, NJ 07102; Franklin Advisers,
Inc., 777 Mariners Island Blvd., San Mateo, CA 94404; and The Dreyfus
Corporation, 200 Park Avenue, New York, NY 10166.
Pursuant to the Subadvisory Agreement with respect to the Prudential
Diversified Moderate Growth Fund, PIMCO manages a portion of the assets of that
Portfolio. The other portions of that Portfolio are managed by Jennison
Associates LLC, 466 Lexington Avenue, New York, NY 10017; The Prudential
Investment Corporation, 751 Broad Street, Newark, NJ 07102; Franklin Advisers,
Inc., 777 Mariners Island Blvd., San Mateo, CA 94404; Lazard Asset Management,
30 Rockefeller Plaza, New York, NY 10112; and The Dreyfus Corporation, 200 Park
Avenue, New York, NY 10166.
TERMS OF SUBADVISORY AGREEMENTS
Under the Subadvisory Agreements, PIMCO is compensated by PIFM from its
management fee (and not the Portfolios) at an annual rate of .25 of 1% of each
Portfolio's average net assets managed by PIMCO. The Subadvisory Agreements
provide that, subject to PIFM's and the Board of Trustees' supervision, PIMCO is
responsible for managing the investment operations of each Portfolio (or portion
thereof allocated to PIMCO) and for making investment decisions and placing
orders to purchase and sell securities for each Portfolio (or portion thereof
allocated to PIMCO), all in accordance with the investment objective and
policies of each Portfolio as reflected in its current Prospectus and Statement
of Additional Information and as may be adopted from time to time by the Board.
In accordance with the requirements of the Investment Company Act, PIMCO also
provides PIFM with all books and records relating to the transactions it
executes and renders to the Trustees such periodic and special reports as the
Boards of Trustees may reasonably request.
The Subadvisory Agreements recognize that PIMCO may, from time to time,
seek research assistance and rely on other investment management resources of
its affiliated companies, and the Portfolios will disclose that a portion of the
compensation received by PIMCO from the Manager may be paid to those affiliates
in return for such services provided. These arrangements have no impact on
PIMCO's continuing responsibility for the management of the Portfolios and do
not cause any increase in the overall fees or expenses borne by the Portfolios.
Duration and Termination. Each Subadvisory Agreement will remain in full
force and effect for a period of two years from the date of its execution, and
will continue thereafter as long as its continuance is specifically approved at
least annually by vote of a majority of the outstanding voting securities (as
that term is defined in the Investment Company Act) of the relevant
Portfolio(s), or by the Board, including the approval
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by a majority of non-interested Trustees, at a meeting called for the purpose of
voting on such approval; provided, however, that (1) the Subadvisory Agreement
may be terminated at any time without the payment of any penalty, either by vote
of the Board or by vote of a majority of the outstanding voting securities of
the Portfolio(s), (2) the Subadvisory Agreement will terminate immediately in
the event of its assignment (within the meaning of the Investment Company Act)
or upon the termination of the Trust's management agreement with PIFM, and (3)
the Subadvisory Agreement may be terminated without penalty at any time by PIMCO
or PIFM on not more than 60 days' nor less than 30 days' written notice to the
other party to the Subadvisory Agreement.
Liability. The Subadvisory Agreements provide that, in the absence of
willful misfeasance, bad faith, gross negligence in the performance of its
duties, or reckless disregard of its obligations and duties thereunder, PIMCO
will not be liable for any act or omission in connection with its activities as
subadviser to the Portfolios.
SHAREHOLDER PROPOSALS
As Delaware business trusts, the Trusts are not required to hold annual
meetings of shareholders and the Trustees currently do not intend to hold such
meetings unless shareholder action is required in accordance with the Investment
Company Act or the Trusts' Declarations of Trust. A shareholder proposal
intended to be presented at any meeting of shareholders of any Trust must be
received by the Trust a reasonable time before the Trustees' solicitation
relating thereto is made in order to be included in the Trust's proxy statement
and form of proxy relating to that meeting and presented at the meeting. The
mere submission of a proposal by a shareholder does not guarantee that the
proposal will be included in the proxy statement because certain rules under the
federal securities laws must be complied with before inclusion of the proposal
is required.
WILLIAM V. HEALEY,
Assistant Secretary
Dated: August 3, 2000
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EXHIBIT A
THE TARGET PORTFOLIO TRUST
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 The Target Portfolio Trust (the Trust), a Delaware business
trust and a diversified open-end management investment company registered under
the Investment Company Act of 1940 (the 1940 Act), 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 Intermediate-Term Bond Portfolio and Total
Return Bond Portfolio of the Trust (the Portfolios) in connection with the
management of the Trust.
WHEREAS, the Manager desires to retain the Adviser to provide investment
advisory services to the Portfolios and to manage such portion of the Portfolios
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 Portfolios as the Manager shall direct and shall manage
the composition of such Portfolios, 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 Addition 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
Portfolios' investments as the Manager shall direct and determine from
time to time what investments and securities will be purchased,
retained, sold or loaned by a Portfolio, and what portion of the assets
it manages will be invested or held uninvested as cash. The Adviser may
from time to time seek research assistance and rely on investment
management resources available to it through its affiliated companies,
but in no case shall such reliance relieve the Adviser of any of its
obligations hereunder, nor shall the Portfolios be responsible for any
additional fees or expenses hereunder as a result.
(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 Portfolios 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 a Portfolio and
will place orders 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
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<PAGE> 11
Prospectus or as the Trustees may direct from time to time. In providing
the Portfolios 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 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 Portfolios' 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 Portfolios 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 a Portfolio
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 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 Portfolios' 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; provided, however, that the Adviser agrees
that neither it, nor any person controlled by it, nor any successor
shall serve or accept retention as investment adviser, investment
manager or similar service provider during the term of this Agreement
and for the period of one year after the termination of this Agreement
with or for the benefit of any investment company registered under the
1940 Act that seeks as a primary market for its shares asset allocation
programs sponsored by U.S. broker-dealers similar in nature or market to
the Prudential Securities Target Program.
(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 Portfolios' 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 Portfolios
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
A-2
<PAGE> 12
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 Portfolios 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% of the average daily net assets of the portion
of the Portfolios 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 a 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 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 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 1940 Act) of a 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 1940 Act) 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)(vi) 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
A-3
<PAGE> 13
(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 Portfolios with the approval of the Adviser
and for so long as the Adviser is a subadviser to the Trust and/or the
Portfolios. 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. 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.
11. 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/ ROBERT F. GUNIA
------------------------------------
Robert F. Gunia
Executive Vice President
PACIFIC INVESTMENT MANAGEMENT COMPANY
LLC
By: /s/ BRENT L. HOLDEN
------------------------------------
Brent L. Holden
Managing Director
A-4
<PAGE> 14
PRUDENTIAL DIVERSIFIED FUNDS
(PRUDENTIAL DIVERSIFIED CONSERVATIVE GROWTH 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 company organized under the laws of the State of Delaware.
WHEREAS, PIFM has entered into a management agreement (the Management
Agreement) with Prudential Diversified Funds (the Trust), a Delaware business
trust and a diversified open-end management investment company registered under
the Investment Company Act of 1940 (the 1940 Act), 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
Prudential Diversified Conservative 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 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. The Adviser may from time to time seek research
assistance and rely on investment management resources available to it
through its affiliated companies, but in no case shall such reliance
relieve the Adviser of any of its obligations hereunder, nor shall the
Fund be responsible for any additional fees or expenses hereunder as a
result.
(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
A-5
<PAGE> 15
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 broker for securities
transactions but that no formula has been adopted for allocation of 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 on the basis of seeking best
execution. 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-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 (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. 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.
(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.
A-6
<PAGE> 16
(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
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 .25 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.
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 1940 Act) 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
1940 Act) or upon the termination of the Management Agreement. Adviser
shall promptly notify Manager in the event that there is a change in the
partners of Adviser that may constitute an assignment of this 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, 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 twenty-four (24) 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 twenty-four (24) hours after the start of normal
business hours on the next succeeding business day).
8. Concurrently with the execution of this Agreement, the Adviser is
delivering to PIFM a copy Part II of its Form ADV, as revised, on file with
the Securities and Exchange Commission and a copy of its Disclosure
Document, as revised, on file with the Commodity Futures Trading
Commission. PIFM acknowledges receipt of such documents.
A-7
<PAGE> 17
9. Any written notice required by or pertaining to this 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 PIFM: Prudential Investments Fund Management LLC
3 Gateway Center, 9th Floor
Newark, NJ 07102-4077
Fax: (973) 367-8065
Attention: General Counsel
If to the Adviser:
Pacific Investment Management Company LLC
840 Newport Center Drive, Suite 360
Newport Beach, CA 92660
Fax: (714) 720-1376
Attention: John S. Loftus, Executive Vice President
cc: Chief Administrative Officer
10. 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.
11. 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/ ROBERT F. GUNIA
------------------------------------
Robert F. Gunia
Executive Vice President
PACIFIC INVESTMENT MANAGEMENT COMPANY
LLC
By:
/s/ BRENT L. HOLDEN
------------------------------------
Brent L. Holden
Managing Director
A-8
<PAGE> 18
PRUDENTIAL DIVERSIFIED FUNDS
(PRUDENTIAL DIVERSIFIED MODERATE GROWTH 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 company organized under the laws of the State of Delaware.
WHEREAS, PIFM has entered into a management agreement (the Management
Agreement) with Prudential Diversified Funds (the Trust), a Delaware business
trust and a diversified open-end management investment company registered under
the Investment Company Act of 1940 (the 1940 Act), 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
Prudential Diversified Moderate 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 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. The Adviser may from time to time seek research
assistance and rely on investment management resources available to it
through its affiliated companies, but in no case shall such reliance
relieve the Adviser of any of its obligations hereunder, nor shall the
Fund be responsible for any additional fees or expenses hereunder as a
result.
(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
A-9
<PAGE> 19
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 broker for securities
transactions but that no formula has been adopted for allocation of 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 on the basis of seeking best
execution. 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-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 (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. 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.
(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.
A-10
<PAGE> 20
(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
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 .25 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.
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 1940 Act) 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
1940 Act) or upon the termination of the Management Agreement. Adviser
shall promptly notify Manager in the event that there is a change in the
partners of Adviser that may constitute an assignment of this 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, 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 twenty-four (24) 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 twenty-four (24) hours after the start of normal
business hours on the next succeeding business day).
8. Concurrently with the execution of this Agreement, the Adviser is
delivering to PIFM a copy
Part II of its Form ADV, as revised, on file with the Securities and
Exchange Commission and a copy of its Disclosure Document, as revised, on
file with the Commodity Futures Trading Commission. PIFM acknowledges
receipt of such documents.
A-11
<PAGE> 21
9. Any written notice required by or pertaining to this 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 PIFM: Prudential Investments Fund Management LLC
3 Gateway Center, 9th Floor
Newark, NJ 07102-4077
Fax: (973) 367-8065
Attention: General Counsel
If to the Adviser:
Pacific Investment Management Company LLC
840 Newport Center Drive, Suite 360
Newport Beach, CA 92660
Fax: (714) 720-1376
Attention: John S. Loftus, Executive Vice President
cc: Chief Administrative Officer
10. 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.
11. 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/ ROBERT F. GUNIA
------------------------------------
Robert F. Gunia
Executive Vice President
PACIFIC INVESTMENT MANAGEMENT COMPANY
LLC
By:
/s/ BRENT L. HOLDEN
------------------------------------
Brent L. Holden
Managing Director
A-12
<PAGE> 22
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 1940 (the 1940 Act), 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.
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.
(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. The
Adviser may from time to time seek research assistance and rely on
investment management resources available to it through its affiliated
companies, but in no case shall such reliance relieve the Adviser of any
of its obligations hereunder, nor shall the Portfolio be responsible for
any additional fees or expenses hereunder as a result.
(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 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
A-13
<PAGE> 23
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 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-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 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 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.
A-14
<PAGE> 24
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% 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 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 1940 Act) 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 1940 Act) 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 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.
A-15
<PAGE> 25
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. 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.
12. 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/ ROBERT F. GUNIA
------------------------------------
Robert F. Gunia
Executive Vice President
PACIFIC INVESTMENT MANAGEMENT COMPANY
LLC
By:
/s/ BRENT L. HOLDEN
------------------------------------
Brent L. Holden
Managing Director
A-16
<PAGE> 26
EXHIBIT B
MANAGEMENT OF THE TRUSTS
THE MANAGER
Prudential Investments Fund Management LLC (PIFM or the Manager), Gateway
Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077, serves as the
Trusts' Manager under management agreements (the Management Agreements) dated as
of November 9, 1992 in the case of Target I, November 12, 1998 in the case of
PDF, and August 25, 1999 in the case of Target II, and renewed thereafter as
required by the Investment Company Act of 1940, as amended (the Investment
Company Act).
The Management Agreements were last approved by the Trustees of the Trust,
including a majority of the Trustees who were not parties to the contract and
were not interested persons of those parties (as defined in the Investment
Company Act) on May 24, 2000, in the case of Target I and PDF, and August 25,
1999 in the case of Target II. The Management Agreements were approved by the
sole shareholder of the Trusts on October 14, 1992 in the case of Target I, on
October 1, 1998 in the case of PDF, and on September 13, 1999 in the case of
Target II. The Management Agreements will be unchanged by PIMCO's change in
control.
INFORMATION ABOUT PIFM
PIFM is a subsidiary of The Prudential Insurance Company of America
(Prudential), a major, diversified insurance and financial services company.
Prudential's address is Prudential Plaza, Newark, New Jersey 07102-4077. PIFM is
organized in New York as a limited liability company, and its the Administrator
to Target I, Target II and PDF.
THE DISTRIBUTOR AND TRANSFER AGENT
Prudential Investment Management Services LLC (PIMS or the Distributor),
Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077, acts
as the distributor of the shares of the Trusts. PIMS is a subsidiary of
Prudential. Pursuant to distribution and service plans (the Plans) adopted under
Rule 12b-1 of the Investment Company Act, the Portfolios of PDF and Target II
bear the expense of distribution and service fees paid to PIMS with respect to
their respective Class A, Class B and Class C shares. For the fiscal year ended
July 31, 1999, PIMS received distribution and servicing fees aggregating
$320,500 and $134,178 with respect to the Prudential Diversified Conservative
Growth and Prudential Diversified Moderate Growth Funds, respectively. For the
period from November 3, 1999 (commencement of operations) through January 31,
2000, PIMS received distribution and servicing fees aggregating $31,438 with
respect to the Total Return Bond Fund of Target II.
Pruco Securities Corporation (Prusec), 111 Durham Avenue, South Plainfield,
New Jersey 07080-2398, a wholly-owned subsidiary of Prudential, is distributing
shares of the Trust pursuant to a dealer agreement between Prusec and PIMS.
Prusec received no compensation from the Trusts for distributing the Portfolios'
shares during each Trust's last fiscal year.
The Trusts' transfer agent is PMFS, Raritan Plaza One, Edison, New Jersey
08837. PMFS received $20,829 and $27,680 for its services in connection with the
Total Return Bond and Intermediate-Term Bond Portfolios, respectively, of Target
I during the fiscal year ended December 31, 1999. PMFS received $ and
$ for its services in connection with the Prudential Diversified
Conservative Growth and Prudential Diversified Moderate Growth Funds,
respectively, of PDF during the fiscal year ended July 31, 1999. PMFS received
$8,648 for its services in connection with the Total Return Bond Fund of Target
II during the period from November 3, 1999 (commencement of operations) through
January 31, 2000.
BROKERAGE
During the fiscal year ended December 31, 1999, the Total Return Bond and
Intermediate-Term Bond Portfolios of Target I paid no commissions to affiliated
broker-dealers. During the fiscal year ended July 31,
B-1
<PAGE> 27
1999, the Prudential Diversified Conservative Growth Fund of PDF paid
commissions aggregating $1,000 to Prudential Securities, a broker/dealer member
of the New York Stock Exchange and a wholly owned subsidiary of Prudential,
representing approximately 2.3% of the total brokerage commissions paid by that
Portfolio. During the fiscal year ended July 31, 1999, the Prudential
Diversified Moderate Growth Fund of PDF paid commissions aggregating $1,013 to
Prudential Securities, representing approximately 1.3% of the total brokerage
commissions paid by that Portfolio. During the period from November 3, 1999
(commencement of operations) through January 31, 2000, the Total Return Bond
Fund of Target II paid no commissions to affiliated broker-dealers.
B-2
<PAGE> 28
EXHIBIT C
OFFICER INFORMATION
<TABLE>
<CAPTION>
NAME (AGE) OFFICE(S) WITH THE TRUSTS PRINCIPAL OCCUPATIONS
---------- ------------------------- ---------------------
<S> <C> <C>
John R. Strangfeld (45)........... Trustee and President Chief Executive Officer, Chairman,
President and Director of The Prudential
Investment Corporation (since January
1990); Executive Vice President of the
Prudential Global Asset Management
Group of The Prudential Insurance
Company of America (Prudential) (since
February 1998); Chairman of PRICOA
Capital Group (since August 1989);
formerly various positions to Chief
Executive Officer of Private Asset
Management Group of Prudential
(November 1994-December 1998);
President and Director or Trustee of
45 funds within the Prudential Mutual
Funds.
Robert F. Gunia (52).............. Trustee and Vice President Executive Vice President and Chief
Administrative Officer (since June
1999) of Prudential Investments;
Executive Vice President and Treasurer
(since December 1996) of Prudential
Investments Fund Management LLC
(PIFM); President (since April 1999)
of Prudential Investment Management
Services LLC (PIMS); formerly
Corporate Vice President (September
1997-March 1999) of Prudential; Senior
Vice President (March 1987-May 1999)
of Prudential Securities Incorporated
(Prudential Securities); formerly
Chief Administrative Officer (July
1990-September 1996), Director
(January 1989-September 1996), and
Executive Vice President, Treasurer
and Chief Financial Officer (June
1987-September 1996) of Prudential
Mutual Fund Management, Inc.; Vice
President and Director (since May
1989) of The Asia Pacific Fund, Inc.
and Director or Trustee of 44 funds
within the Prudential Mutual Funds.
Grace C. Torres (40).............. Treasurer and Principal First Vice President (since December
Financial and Accounting 1996) of PIFM; First Vice President
Officer (since March 1994) of Prudential
Securities; formerly First Vice
President (March 1994-September 1996)
of Prudential Mutual Fund Management,
Inc.; formerly Vice President (July
1989-March 1994) of Bankers Trust
Corporation.
</TABLE>
C-1
<PAGE> 29
<TABLE>
<CAPTION>
NAME (AGE) OFFICE(S) WITH THE TRUSTS PRINCIPAL OCCUPATIONS
---------- ------------------------- ---------------------
<S> <C> <C>
Stephen M. Ungerman (46).......... Assistant Treasurer Tax Director (since March 1996) of
Prudential Investments and the Private
Asset Group of Prudential; formerly
First Vice President (February
1993-September 1996) of Prudential
Mutual Fund Management, Inc.
William V. Healey (46)............ Assistant Secretary Vice President and Associate General
Counsel of Prudential and Chief Legal
Officer of The Prudential Investment
Corporation (since August 1998);
Director, ICI Mutual Insurance Company
(since June 1999); formerly Associate
General Counsel of The Dreyfus
Corporation (Dreyfus), a subsidiary of
Mellon Bank, N.A. (Mellon Bank), and
an officer and/or director of various
affiliates of Mellon Bank and Dreyfus.
</TABLE>
C-2
<PAGE> 30
EXHIBIT D
5% SHAREHOLDERS
The table below sets forth information about persons who owned of record or
beneficially 5% or more of the outstanding shares of any class of the Portfolios
as of May 5, 2000.
<TABLE>
<CAPTION>
NAME AND ADDRESS CLASS NUMBER PERCENT
PORTFOLIO OF SHAREHOLDER OF SHARES OF SHARES OF CLASS
--------- ---------------- --------- --------- --------
<S> <C> <C> <C> <C>
Prudential Diversified Conservative Prudential Trust Company* Class A 109,999 8.45%
Growth Fund (PDF) FBO PRU-DC Clients
30 Scranton Office Park
Moosic, PA 18507
attn: John Surdy
Prudential Diversified Conservative R.K. Company* Class C 74,281 6.44%
Growth Fund (PDF) 1000 Royce Blvd.
Oakbrook, IL 60181
Prudential Diversified Conservative Prudential Trust Company* Class Z 4,790 6.87%
Growth Fund (PDF) FBO PRU-DC Clients
30 Scranton Office Park
Moosic, PA 18507
attn: John Surdy
Prudential Diversified Conservative Ms. Kimberly Nadick** Class Z 5,284 7.58%
Growth Fund (PDF) 111 East Kilbourn Avenue
Milwaukee, WI 53202
Prudential Diversified Conservative Oakbrook Realty &* Class Z 44,764 64.20%
Growth Fund (PDF) Investment LLC,
1000 Royce Blvd.
Oakbrook, IL 60181
Prudential Diversified Conservative Ms. Beverly Radulovic** Class Z 6,279 9.00%
Growth Fund (PDF) 7404 Admiral Drive
Alexandria, VA 22307
Prudential Diversified Moderate Prudential Trust Company* Class A 393,317 10.45%
Growth Fund (PDF) FBO PRU-DC Clients
30 Scranton Office Park
Moosic, PA 18507
attn: John Surdy
Prudential Diversified Moderate Dr. Edward Wotycha** Class Z 7,209 8.05%
Growth Fund (PDF) 120 Maple Ave., Apt. 2
Red Bank, NJ 07701
Prudential Diversified Moderate Prudential Trust Company* Class Z 30,198 33.72%
Growth Fund (PDF) FBO PRU-DC Clients
30 Scranton Office Park
Moosic, PA 18507
attn: John Surdy
Prudential Diversified Moderate Ms. Juanita P. Kendrick** Class Z 30,226 33.75%
Growth Fund (PDF) 101 N. Bayview St.
Fairhope, AL 36532
</TABLE>
D-1
<PAGE> 31
<TABLE>
<CAPTION>
NAME AND ADDRESS CLASS NUMBER PERCENT
PORTFOLIO OF SHAREHOLDER OF SHARES OF SHARES OF CLASS
--------- ---------------- --------- --------- --------
<S> <C> <C> <C> <C>
Total Return Bond Fund (Target II) PMG IIA Fund* Class A 655,669 54.01%
The Prudential Insurance
Company
of America
Equity Products
3 Gateway Center
Newark, NJ 07102
Total Return Bond Fund (Target II) Mr. Edward Unger** Class A 102,207 8.42%
Ingalls Memorial Hospital
1 Ingalls Drive
Harvey, IL 60426
</TABLE>
---------------
* record owner
** beneficial owner
D-2
<PAGE> 32
EXHIBIT E
OTHER FUNDS MANAGED BY PIMCO
The following table sets forth information relating to the other registered
investment company portfolios for which PIMCO acts as investment adviser or
subadviser with investment objectives, policies and strategies that are
substantially similar to those of the Portfolios (or portion thereof) managed by
PIMCO:
<TABLE>
<CAPTION>
APPROXIMATE
NET ASSETS
ADVISORY FEE RATE AS OF
NAME OF FUND (BASED ON AVERAGE NET ASSETS) JUNE 30, 2000
--------------------------- ----------------------------- -------------
<S> <C> <C>
PIMCO FUNDS:
PACIFIC INVESTMENT
MANAGEMENT SERIES
Total Return Fund Annual rate of 0.25% of average daily net $33,167,215,886
assets
Total Return Fund II Annual rate of 0.25% of average daily net $ 1,461,976,059
assets
Total Return Fund III Annual rate of 0.25% of average daily net $ 736,774,303
assets
PIMCO VARIABLE INSURANCE
TRUST
Total Return Bond Portfolio Annual rate of 0.40% of average daily net $ 13,163,500
assets
Total Return Bond Portfolio Annual rate of 0.40% of average daily net $ 5,364,298
II assets
AMERICAN SKANDIA TRUST
Total Return Bond Portfolio Annual rate of 0.30% of average daily net $ 1,134,495,018
assets on first $150 million; 0.25% of
average daily net assets on assets over $150
million paid monthly
FREMONT MUTUAL FUNDS, INC.
Total Return Fund Annual rate of 0.25% of average daily net $ 167,534,180
assets paid quarterly
JACKSON NATIONAL LIFE
SERIES TRUST
JNL/PIMCO Total Return Bond Annual rate of 0.25% of average daily net $ 14,379,758
Series assets excluding the value of client
contributed capital
MANULIFE
Manulife Total Return Trust Annual rate of 0.30% on first $50 million; $ 310,936,876
0.30% on $50-150 million; 0.25% on $150-200
million; 0.25% on $200-500 million and over
of daily net assets computed daily and paid
monthly
</TABLE>
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<PAGE> 33
<TABLE>
<CAPTION>
APPROXIMATE
NET ASSETS
ADVISORY FEE RATE AS OF
NAME OF FUND (BASED ON AVERAGE NET ASSETS) JUNE 30, 2000
--------------------------- ----------------------------- -------------
<S> <C> <C>
SALOMON SMITH BARNEY/
CONSULTING GROUPS CAPITAL
MARKET FUND
Intermediate Fixed Income Annual rate of 0.25%, multiplied by a $292,921,795
Investment Portfolio fraction, the numerator of which is the
average daily value of allocated assets and
the denominator of which is the average daily
value of the Portfolio's total assets computed
daily
</TABLE>
PIMCO MANAGEMENT
The following table sets forth the name and principal occupation of the
principal executive officer and the managing directors of PIMCO.
<TABLE>
<CAPTION>
NAME AND LENGTH OF POSITION AND
SERVICE WITH PIMCO PRINCIPAL OCCUPATION
------------------ --------------------
<S> <C>
William S. Thompson, Jr. Managing Director, Chief Executive Officer and Executive
(April 1993 to present) Committee Member, PIMCO; Member of Management Board and
Executive Committee, PIMCO Advisors L.P.; President, Chief
Executive Officer and Member, PIMCO Partners LLC.
William R. Benz, II Managing Director, PIMCO; Member of PIMCO Partners LLC.
(June 1986 to present)
Robert Wesley Burns Managing Director and Executive Committee Member, PIMCO;
(February 1987 to present) Member of PIMCO Partners LLC.
Chris P. Dialynas Managing Director, PIMCO; Member of PIMCO Partners LLC.
(July 1983 to present)
Mohamed A. El-Erian Managing Director, PIMCO.
(May 1999 to present)
William H. Gross Managing Director, PIMCO; Director and Vice President,
(June 1971 to present) StocksPLUS Management, Inc.; Member of Management Board,
PIMCO Advisors L.P.; Member of PIMCO Partners LLC.
John L. Hague Managing Director and Executive Committee Member, PIMCO;
(September 1987 to present) Member of PIMCO Partners LLC.
Pasi M. Hamalainen Managing Director, PIMCO.
(January 1994 to present)
Brent R. Harris Managing Director and Executive Committee Member, PIMCO;
(June 1985 to present) Director and Vice President, StocksPLUS Management, Inc.;
Member of Management Board and Executive Committee, PIMCO
Advisors L.P.; Member of PIMCO Partners LLC.
Brent L. Holden Managing Director, PIMCO.
(December 1989 to present)
Margaret E. Isberg Managing Director, PIMCO; Member of PIMCO Partners LLC
(August 1983 to present)
John S. Loftus Managing Director, PIMCO;
(August 1986 to present)
Dean S. Meiling Managing Director, PIMCO; Member of PIMCO Partners LLC.
(December 1976 to present)
</TABLE>
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<PAGE> 34
<TABLE>
<CAPTION>
NAME AND LENGTH OF POSITION AND
SERVICE WITH PIMCO PRINCIPAL OCCUPATION
------------------ --------------------
<S> <C>
James F. Muzzy Managing Director and Executive Committee Member, PIMCO;
(September 1971 to present) Director and Vice President, StocksPLUS Management, Inc.;
Member of PIMCO Partners LLC.
William F. Podlich, III Managing Director, PIMCO; Member of Management Board, PIMCO
(June 1966 to present) Advisors L.P.; Member of PIMCO Partners LLC.
William C. Powers Managing Director, PIMCO; Member of PIMCO Partners LLC.
(January 1991 to present)
Ernest L. Schmider Managing Director and Secretary, PIMCO; Director and
(March 1994 to present) Assistant Secretary, StocksPLUS Management, Inc.; Senior
Vice President, PIMCO Advisors L.P.; Secretary, PIMCO
Partners LLC.
Lee R. Thomas Managing Director, PIMCO; Member of PIMCO Partners LLC.
(April 1995 to present)
Benjamin L. Trosky Managing Director, PIMCO. Member of Management Board, PIMCO
(October 1990 to present) Advisors L.P.; Member of PIMCO Partners, LLC.
</TABLE>
E-3
