<PAGE> 1
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:
---------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------------
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:
---------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------------
5) Total fee paid:
---------------------------------------------------------------------
<PAGE> 2
[ ] 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 or Schedule and the date of its filing.
1) Amount Previously Paid:
----------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------------------
3) Filing Party:
----------------------------------------------------------------------
4) Date Filed:
----------------------------------------------------------------------
<PAGE> 3
Preliminary Copy
THE TARGET PORTFOLIO TRUST(SM)
LARGE CAPITALIZATION VALUE PORTFOLIO
TARGET FUNDS
LARGE CAPITALIZATION VALUE FUND
--------------------
GATEWAY CENTER THREE
100 MULBERRY STREET
NEWARK, NEW JERSEY 07102
--------------------
INFORMATION STATEMENT
AUGUST ____, 2000
--------------------
TO THE SHAREHOLDERS:
On May 24, 2000, at a regular meeting of the Boards of Trustees of The
Target Portfolio Trust(SM) (Target I) and Target Funds (Target II and, together
with Target I, the Trusts), the Trustees approved new subadvisory agreements for
the Large Capitalization Value Portfolio of Target I and the Large
Capitalization Value Fund of Target II (together, 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
J.P. Morgan Investment Management Inc. 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.
-------------------------------------------------------------------------------
<PAGE> 4
THE TARGET PORTFOLIO TRUST(SM)
LARGE CAPITALIZATION VALUE PORTFOLIO
TARGET FUNDS
LARGE CAPITALIZATION VALUE FUND
(800) 225-1852
--------------------
GATEWAY CENTER THREE
100 MULBERRY STREET
NEWARK, NEW JERSEY 07102-4077
--------------------
INFORMATION STATEMENT
AUGUST ____, 2000
--------------------
This information statement is being furnished to the shareholders of the
Large Capitalization Value Portfolio of The Target Portfolio Trust (Target I)
and the Large Capitalization Value Fund of Target Funds (Target II and, together
with Target I, the Trusts). Each Trust is an open-end, 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 Large Capitalization Value Portfolio
of Target I and the Large Capitalization Value Fund of Target II (together, the
Portfolios) as of July 31, 2000 with this information statement in lieu of a
proxy statement, pursuant to the terms of an exemptive order 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 May 24, 2000 between PIFM and J.P.
Morgan Investment Management Inc. (J.P. Morgan) with respect to: (i) the Large
Capitalization Value Portfolio of Target I and (ii) the Large Capitalization
Value Fund of Target II (together, the Subadvisory Agreements). On May 24, 2000,
the Trustees approved the Subadvisory Agreements, copies of which are attached
hereto as Exhibit A.
The Portfolios will pay for the costs associated with preparing and
distributing this information statement to shareholders of the Portfolios. This
information statement will be mailed on or about August 22, 2000.
1
<PAGE> 5
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
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. 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 July 31, 2000.
<TABLE>
<CAPTION>
NET ASSET VALUE SHARES OUTSTANDING
PORTFOLIO AT JULY 31, 2000 AT JULY 31, 2000
--------- ---------------- ----------------
<S> <C> <C>
Large Capitalization Value Portfolio of Target I $11.94 19,452,305
Large Capitalization Value Fund of Target II
Class A Shares $9.33 552,373
Class B Shares $9.28 1,216,784
Class C Shares $9.28 1,378,525
</TABLE>
Management does not know of any person who owned beneficially 5% or more
of the shares of the Large Capitalization Value Portfolio of Target I or of any
class of the Large Capitalization Value Fund of Target II as of July 31, 2000.
To the knowledge of management, the executive officers and Board Members of the
Trusts, as a group, owned less than 1% of the outstanding shares of each
Portfolio as of July 31, 2000.
2
<PAGE> 6
NEW SUBADVISORY AGREEMENTS
On May 24, 2000, the Trustees, including a majority of the Trustees who
are not parties to the Subadvisory Agreements or interested persons of such
parties (as defined in the Investment Company Act) (the non-interested
Trustees), unanimously approved the Subadvisory Agreements and the selection by
PIFM of J.P. Morgan to replace INVESCO Capital Management, Inc. (INVESCO) as a
subadviser to the Portfolios. At that time, the Trustees also unanimously
approved termination of the previous subadvisory agreements between the Trust's
Manager and INVESCO for the reasons set forth below.
The Trustees terminated INVESCO as a subadviser to the Portfolios for a
number of reasons. First, the portion of each Portfolio managed by INVESCO had
been underperforming the Russell 1000 Value Index (Russell 1000V), a benchmark
securities index for each Portfolio, and industry medians for similar funds.
Second, INVESCO's strategy had not tracked closely enough to the Russell 1000V
which made the Portfolios' performance more volatile relative to that index.
PIFM recommended J.P. Morgan to the Trustees as a replacement for INVESCO.
The Subadvisory Agreements contain terms and conditions similar to those
of the subadvisory agreements with INVESCO. See "Terms of Subadvisory
Agreements," below. J.P. Morgan renders investment advice to a portion of the
Portfolios in accordance with the investment objective and policies of each
Portfolio and also makes investment decisions to purchase and sell securities on
behalf of the Portfolios, 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
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 the
Trust's shareholders, which was received on October 30, 1996 in the case of
Target I and on September 13, 1999 in the case of Target II), PIFM may enter
into certain subadvisory agreements on behalf of the Trust without receiving
prior shareholder approval. Thus, the execution and implementation of the
Subadvisory Agreements did not require shareholder consent.
BOARD CONSIDERATION OF THE 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 May
24, 2000. In considering the approval of the Subadvisory Agreements, the
Trustees, including the non-interested Trustees, considered whether approval of
each Subadvisory Agreement was in the best interests of the relevant Trust and
shareholders of the relevant Portfolio. At the meeting, the Trusts' Manager
stressed the investment experience, reputation, performance record and highly
structured investment approach of the investment team at J.P. Morgan. The
Trustees reviewed materials furnished by management and J.P. Morgan and met with
representatives of J.P. Morgan. Among other things, the Trustees considered the
investment philosophy and process of J.P. Morgan, its relative performance
record and performance compared to the Russell 1000V, and its personnel,
facilities, compliance procedures and financial strength. In addition, the
Trusts' Manager stressed that given the dual adviser approach to managing the
assets of the Portfolios, an adviser with more of a core approach to the Russell
1000V would better complement the style of
3
<PAGE> 7
Hotchkis and Wiley, the other adviser to each Portfolio. The Board also
considered the nature, quality and extent of services expected to be provided to
the Portfolios by J.P. Morgan as well as the reputation of the J.P. Morgan
investment team in the asset management industry.
The Trustees discussed and reviewed the terms of the Subadvisory
Agreements. It was noted that the material terms of the Subadvisory Agreements
were substantially the same as those in the prior subadvisory agreements. There
were a number of minor differences between the Subadvisory Agreements and the
agreements that had been in place with INVESCO. First, the Subadvisory
Agreements specifically require J.P. Morgan to reconcile its records of the
securities and cash in its portion of each Portfolio with statements provided by
the Trust's custodian on a monthly basis and to report to the Manager on each
such reconciliation, including information on any discrepancies noted and
actions taken by J.P. Morgan to address those discrepancies. Second, the
Subadvisory Agreements require J.P. Morgan or the Manager to indemnify the other
party to the contract (including that other party's officers, directors and
employees) for any liability and expenses incurred as a result of J.P. Morgan's
or the Manager's willful misfeasance, bad faith, gross negligence, reckless
disregard of its duties under the Subadvisory Agreements or violation of law.
Third, the Subadvisory Agreements give J.P. Morgan forty-eight hours to review
and object to the use of any prospectus, proxy statement, report to
shareholders, sales literature or other material prepared for distribution to
shareholders of the Trusts that describes or characterizes J.P. Morgan, J.P.
Morgan's investment process with respect to the Portfolios or any of J.P.
Morgan's investment results.
In addition, there were two other minor differences between the
Subadvisory Agreement relating to Target I and the agreement relating to Target
I that had been in place with INVESCO. First, the language of the Subadvisory
Agreement relating to Target I clarifies that J.P. Morgan is only responsible
for managing a portion of each Portfolio's assets. Second, the subadvisory
agreement with INVESCO for the Large Capitalization Value Portfolio of Target I
had a non-compete provision that generally prohibited INVESCO from managing
another similar mutual fund. The Subadvisory Agreement relating to Target I does
not include such a provision.
Based upon their review, the Trustees concluded that the Subadvisory
Agreements were reasonable, fair and in the best interests of each of the Trusts
and the shareholders of each of the relevant Portfolios, and that the fee
provided in each of the Subadvisory Agreements (which in each case was the same
as in the prior subadvisory agreements) 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 J.P. MORGAN. J.P. Morgan, 522 Fifth Avenue, New
York, NY 10036, began managing its portion of the Portfolios after the close of
business on May 24, 2000. J.P. Morgan was created in 1984 out of the Trust and
Investment Division of Morgan Guaranty Trust Company of New York. J.P. Morgan is
a registered investment adviser under the Investment Advisers Act of 1940, as
amended, and is a wholly-owned subsidiary of J.P. Morgan & Co. Incorporated.
J.P. Morgan manages employee benefit funds of corporations, labor unions and
state and local governments and the accounts of other institutional investors.
As of June 30,
4
<PAGE> 8
2000, J.P. Morgan managed assets totaling approximately $369 billion.
Exhibit D lists the principal executive officer and directors of J. P.
Morgan. As of August 4, 2000, J.P. Morgan did not act as investment adviser or
subadviser to registered investment company portfolios, other than the
Portfolios, with investment objectives, policies and strategies that are
substantially similar to those of the Portfolios.
Pursuant to the Subadvisory Agreements, J.P. Morgan manages a portion of
the assets of each Portfolio. Hotchkis and Wiley, 725 South Figueroa Street,
Suite 4000, Los Angeles, CA 90017 manages the other portion of each Portfolio's
assets.
TERMS OF SUBADVISORY AGREEMENTS
Under the Subadvisory Agreements, J.P. Morgan is compensated by PIFM (and
not the Portfolios) from its management fee at an annual rate of .30 of 1% of
each Portfolio's average net assets managed by J.P. Morgan. The Subadvisory
Agreements provide that, subject to PIFM's and the Boards of Trustees'
supervision, J.P. Morgan is responsible for managing the investment operations
of each Portfolio (or portion thereof allocated to J.P. Morgan) and for making
investment decisions and placing orders to purchase and sell securities for each
Portfolio (or portion thereof allocated to J.P. Morgan), 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 Boards. In accordance with the requirements of the
Investment Company Act, J.P. Morgan 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.
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 by a majority of
non-interested Trustees, at a meeting called for the purpose of voting on such
approval; provided, however, that (1) each 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, (2) each 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) each
Subadvisory Agreement may be terminated without penalty at any time by J.P.
Morgan 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, or gross negligence in the performance of its
duties or reckless disregard of its obligations and duties thereunder, J.P.
Morgan will not be liable for any act or omission in connection with its
activities as subadviser to the Portfolios.
5
<PAGE> 9
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 that 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 , 2000
-----
6
<PAGE> 10
EXHIBIT A
THE TARGET PORTFOLIO TRUST
(Large Capitalization Value Portfolio)
SUBADVISORY AGREEMENT
Agreement made on this 24th day of May, 2000, between Prudential
Investments Fund Management LLC (PIFM or the Manager), a New York limited
liability company, and J.P. Morgan Investment Management Inc. (the Adviser), a
Delaware corporation.
WHEREAS, PIFM has entered into a management agreement (the Management
Agreement) with The Target Portfolio Trust (the Trust), a Delaware business
trust and an 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
Large Capitalization Value Portfolio 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
A-1
<PAGE> 11
will be invested or held uninvested as cash.
(ii) In the performance of its duties and obligations under this
Agreement, the Adviser shall act in conformity with the 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 to carry out the policy
with respect to brokerage as set forth in the Trust's Registration
Statement and Prospectus. In selecting brokers, dealers or futures
commission merchants to execute transactions for the Fund, 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 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 a broker for securities transactions subject to the requirements
of the 1940 Act and the Adviser's determination of best execution. 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 solely on the basis of
seeking lowest price. 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 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
A-2
<PAGE> 12
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) by 10:00 a.m. (New York time) each business day with
information relating to all transactions that occurred on the previous
business day 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 to the extent reasonably
practicable.
(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,
employees, affiliates or agents.
(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 comply with the 1940 Act, the Investment Advisers Act of 1940 (Advisers Act)
and other applicable state and federal laws and 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) any
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 .30 of 1% of the
A-3
<PAGE> 13
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, provided, however, that nothing in this Agreement
shall be deemed to waive any rights the Manager or the Trust may have against
the Adviser under federal or state securities laws. The Manager shall indemnify
the Adviser, its affiliated persons, its officers, directors and employees, for
any liability and expenses, including attorneys fees, which may be sustained as
a result of the Manager's willful misfeasance, bad faith, gross negligence,
reckless disregard of its duties hereunder or violation of applicable law,
including, without limitation, the 1940 Act and federal and state securities
laws. The Adviser shall indemnify the Manager, its affiliated persons, its
officers, directors and employees, for any liability and expenses, including
attorneys fees, which may be sustained as a result of the Adviser's willful
misfeasance, bad faith, gross negligence, reckless disregard of its duties
hereunder or violation of applicable law, including, without limitation, the
1940 Act and federal and state securities laws.
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) and five business days after the
Adviser receives written notice of the termination of the Management Agreement.
6. Nothing in this Agreement shall limit or restrict the right of any
of the Adviser's directors, officers or employees to engage in any other
business or to devote his or her time and attention in part to the management or
other aspects of any business, whether of a similar or 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 or any of its affiliates, 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 forty-eight (48) hours (or
A-4
<PAGE> 14
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 forty-eight (48) hours after the
start of normal business hours on the next succeeding business day).
8. 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.
9. 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 on the day and year first above
written.
PRUDENTIAL INVESTMENTS FUND MANAGEMENT LLC
By /s/ Robert F. Gunia
---------------------------------
Robert F. Gunia
Executive Vice President
J.P. MORGAN INVESTMENT MANAGEMENT INC.
By /s/ David J. Fermo
---------------------------------
David J. Fermo
Vice President
A-5
<PAGE> 15
TARGET FUNDS
(Large Capitalization Value Fund)
SUBADVISORY AGREEMENT
Agreement made on this 24th day of May, 2000, between Prudential
Investments Fund Management LLC (PIFM or the Manager), a New York limited
liability company, and J.P. Morgan Investment Management Inc. (the Adviser), a
Delaware corporation.
WHEREAS, PIFM has entered into a management agreement (the Management
Agreement) with Target Funds (the Trust), a Delaware business trust and an
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
Large Capitalization Value 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.
(ii) In the performance of its duties and obligations under this
Agreement, the
A-6
<PAGE> 16
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 to carry out
the policy with respect to brokerage as set forth in the Trust's
Registration Statement and Prospectus. In selecting brokers, dealers or
futures commission merchants to execute transactions for the Fund, 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 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 a broker for securities transactions subject to the requirements
of the 1940 Act and the Adviser's determination of best execution. 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 solely on the basis of
seeking lowest price. 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 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.
A-7
<PAGE> 17
(v) The Adviser shall provide the Trust's custodian (the
Custodian) by 10:00 a.m. (New York time) each business day with
information relating to all transactions that occurred on the previous
business day 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 to the extent reasonably
practicable.
(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,
employees, affiliates or agents.
(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 comply with the 1940 Act, the Investment Advisers Act of 1940
(Advisers Act) and other applicable state and federal laws and 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) any 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 .30 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.
A-8
<PAGE> 18
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, provided, however, that nothing in this Agreement
shall be deemed to waive any rights the Manager or the Trust may have against
the Adviser under federal or state securities laws. The Manager shall indemnify
the Adviser, its affiliated persons, its officers, directors and employees, for
any liability and expenses, including attorneys fees, which may be sustained as
a result of the Manager's willful misfeasance, bad faith, gross negligence,
reckless disregard of its duties hereunder or violation of applicable law,
including, without limitation, the 1940 Act and federal and state securities
laws. The Adviser shall indemnify the Manager, its affiliated persons, its
officers, directors and employees, for any liability and expenses, including
attorneys fees, which may be sustained as a result of the Adviser's willful
misfeasance, bad faith, gross negligence, reckless disregard of its duties
hereunder or violation of applicable law, including, without limitation, the
1940 Act and federal and state securities laws.
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) and five business days after the
Adviser receives written notice of the termination of the Management Agreement.
6. Nothing in this Agreement shall limit or restrict the right of any of
the Adviser's directors, officers or employees to engage in any other business
or to devote his or her time and attention in part to the management or other
aspects of any business, whether of a similar or 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 or any of its affiliates, 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 forty-eight (48) 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 forty-eight (48) hours after the start of normal business hours on the next
succeeding
A-9
<PAGE> 19
business day).
8. 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.
9. 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 on the day and year first above
written.
PRUDENTIAL INVESTMENTS FUND MANAGEMENT LLC
By /s/ Robert F. Gunia
---------------------------------
Robert F. Gunia
Executive Vice President
J.P. MORGAN INVESTMENT MANAGEMENT INC.
By /s/ David J. Fermo
---------------------------------
David J. Fermo
Vice President
A-10
<PAGE> 20
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 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 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 and on
September 13, 1999 in the case of Target II.
INFORMATION ABOUT PIFM
PIFM is a subsidiary of Prudential Securities Incorporated and 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 PIFM serves as the Administrator to Target I and Target
II. For its services, PIFM receives, pursuant to the Management Agreement, a fee
computed daily and payable monthly at an annual rate of .60 of 1% of the average
daily net assets of the Large Capitalization Value Portfolio of Target I. For
its services, PIFM receives, pursuant to the Management Agreement, a fee
computed daily and payable monthly at an annual rate of .70 of 1% of the average
daily net assets of the Large Capitalization Value Fund of Target II.
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 adopted by Target II
under Rule 12b-1 of the Investment Company Act, the Large Capitalization Value
Fund of Target II bears the expense of distribution and service fees paid to
PIMS with respect to its Class A, Class B and Class C shares. For the period
from November 3, 1999 (commencement of operations) through January 31, 2000,
PIMS received distribution and service fees aggregating $48,664 with respect to
the Large Capitalization Value Fund of Target II.
B-1
<PAGE> 21
Pruco Securities Corporation (Prusec), 111 Durham Avenue, South
Plainfield, New Jersey 07080-2398, a wholly-owned subsidiary of Prudential,
distributes shares of the Trusts pursuant to a dealer agreement between Prusec
and PIMS. Prusec received no compensation from Target I for distributing shares
of the Large Capitalization Value Portfolio during the fiscal year ended
December 31, 1999. Prusec received no compensation from Target II for
distributing shares of the Large Capitalization Value Fund during the period
from November 3, 1999 (commencement of operations) through January 31, 2000.
The Trusts' transfer agent is Prudential Mutual Fund Services LLC (PMFS),
Raritan Plaza One, Edison, New Jersey 08837. PMFS is a wholly-owned subsidiary
of PIFM. PMFS received $118,600 for its services in connection with the Large
Capitalization Value Portfolio of Target I during the fiscal year ended December
31, 1999. PMFS received $4,300 for its services in connection with the Large
Capitalization Value 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 Large Capitalization
Value Portfolio of Target I paid commissions aggregating $48,954 to Prudential
Securities, a broker/dealer member of the New York Stock Exchange and a
wholly-owned subsidiary of Prudential, representing approximately 20.1% of the
total brokerage commissions paid by that Portfolio. During the period from
November 3, 1999 (commencement of operations) through January 31, 2000, the
Large Capitalization Value Fund of Target II paid commissions aggregating $2,458
to Prudential Securities, representing approximately 11.4% of the total
brokerage commissions paid by that Portfolio.
B-2
<PAGE> 22
EXHIBIT C
OFFICER INFORMATION
<TABLE>
<CAPTION>
NAME (AGE) OFFICE WITH THE TRUST 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 Prudential (since
February 1998); Chairman of PRICOA Capital Group (since
August 1989); Chief Executive Officer of Private Asset
Management Group of Prudential (November 1994-December
1998).
Robert F. Gunia (51) Vice President Vice President (since September 1997) of Prudential
Investments; Executive Vice President and Treasurer
(since December 1996), Prudential Investments Fund
Management LLC (PIFM); Senior Vice President (since
March 1987) of Prudential Securities Incorporated
(Prudential Securities); formerly Chief Administrative
Officer (July 1990-September 1996), Director (January
1989-September 1996), 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.
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.
Grace C. Torres (39) Treasurer and Principal First Vice President (since December 1996) of PIFM; First
Financial and Accounting Vice President (since March 1993) of Prudential
Officer 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.
Stephen M. Ungerman (45) Assistant Treasurer Tax Director (since March 1996) of Prudential Investments;
formerly First Vice President (February 1993-September
1996) of Prudential Mutual Fund Management, Inc.
</TABLE>
C-1
<PAGE> 23
EXHIBIT D
J.P. MORGAN MANAGEMENT
The following table sets forth the name and principal occupation of the
principal executive officer and the directors of J.P. Morgan.
<TABLE>
<CAPTION>
POSITION AND
NAME PRINCIPAL OCCUPATION
---- --------------------
<S> <C>
Keith M. Schappert President, Director and Managing Director of J.P.
Morgan; Managing Director of Morgan Guaranty Trust
Company of New York (Morgan Guaranty).
Kenneth W. Anderson
Director and Managing Director of J.P. Morgan;
Managing Director of Morgan Guaranty.
Ronald R. Dewhurst
Director and Managing Director of J.P. Morgan;
Managing Director of Morgan Guaranty.
Gerard W. Lillis
Director and Managing Director of J.P. Morgan;
Managing Director of Morgan Guaranty.
John W. Schmidlin
Director and Managing Director of J.P. Morgan;
Managing Director of Morgan Guaranty.
Isabel H. Sloane
Director and Managing Director of J.P. Morgan;
Managing Director of Morgan Guaranty.
Hendrik Van Riel
Director and Managing Director of J.P. Morgan;
Managing Director of Morgan Guaranty.
Anthony P. Della Pietra, Jr
Chief Legal Officer and Managing Director of J.P.
Morgan; Managing Director of Morgan Guaranty.
Jeff Trongone
Chief Financial Officer and Vice President of J.P.
Morgan; Vice President of Morgan Guaranty.
Thomas J. Smith
Chief Compliance Officer and Vice President of J.P.
Morgan; Vice President of Morgan Guaranty.
</TABLE>
D-1
