1
5(bxv)
PRUDENTIAL DIVERSIFIED PORTFOLIOS
(Prudential Diversified Moderate Growth Portfolio)
SUBADVISORY AGREEMENT
Agreement made as of this _____ day of August, 1998, between
Prudential Investments Fund Management LLC (PIFM or the Manager), a New York
limited liability company, and ▇▇▇▇▇▇▇▇ Associates LLC (the Adviser), a company
organized under the laws of New York.
WHEREAS, PIFM has entered into a management agreement (the
Management Agreement) with Prudential Diversified Portfolios (the Trust), a
Delaware business trust and a diversified open-end management investment
company registered under the Investment Company Act of ▇▇▇▇ (▇▇▇ ▇▇▇▇ ▇▇▇),
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 Portfolio of
the Trust (the Portfolio) in connection with the management of the Trust and to
manage such portion of the Portfolio as the Manager shall from time to time
direct, and the Adviser is willing to render such investment advisory services.
2
NOW, THEREFORE, the Parties agree as follows:
1. (a) Subject to the supervision of the Manager and of
the Trustees of the Trust, the Adviser shall manage such
portion of the investment operations of the Portfolio as the
Manager shall direct and shall manage the composition of such
portion of the Portfolio, including the purchase, retention
and disposition thereof, in accordance with the Portfolio'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 Portfolio's investments 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.
(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 Portfolio 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
2
3
be purchased or sold by such portion of the Portfolio 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 Portfolio 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 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 best execution. Therefore, the Adviser
is authorized to place orders for the purchase and sale of
securities and commodities or other assets 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
3
4
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 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, 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 Portfolio'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 Portfolio'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.
4
5
(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 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) 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 Portfolio pursuant to the Management
Agreement and shall oversee and review the Adviser's
5
6
performance of its duties under this Agreement.
3. For the services provided in this Agreement, the
Manager will pay to the Adviser as full compensation a fee at the annual rate
of .30 of 1% of the average daily net assets of the portion of the Portfolio
managed by the Adviser with respect to the first $300 million, and .25 of 1%
with respect to the average daily net assets of the Portfolio managed by the
Adviser in excess of $300 million. This fee will be computed daily and paid to
the Adviser 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. 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 ▇▇▇▇
▇▇▇) 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 ▇▇▇▇ ▇▇▇) or
upon the termination of the Management Agreement.
6. Nothing in this Agreement shall limit or restrict the
right of any of the Adviser's directors, officers or employees to engage in any
other business or to devote his or her time and
6
7
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
Portfolio, 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. 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 as of the day and
year first above written.
7
8
PRUDENTIAL INVESTMENTS FUND MANAGEMENT LLC
By
----------------------------------------------
▇▇▇▇▇▇▇▇ ASSOCIATES LLC
By
---------------------------------------------
8