1
EXHIBIT (d)(14)
PRUDENTIAL DIVERSIFIED FUNDS
(Prudential Diversified High Growth Fund)
SUBADVISORY AGREEMENT
Agreement made as of this 12th day of November, 1998, between
Prudential Investments Fund Management LLC (PIFM or the Manager), a New York
limited liability company, The Prudential Investment Corporation. (the Adviser),
a company organized under the laws of New Jersey.
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 ▇▇▇▇ (▇▇▇ ▇▇▇▇ ▇▇▇), 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 High 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.
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 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 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
2
3
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 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 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
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
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.
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 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.
(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
5
6
performance of its duties under this Agreement.
3. The Manager shall reimburse the Adviser for reasonable costs and
expenses incurred by the Adviser determined in a manner acceptable to the
Manager in furnishing the services described in Paragraph 1 hereof.
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 ▇▇▇▇ ▇▇▇) 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 ▇▇▇▇ ▇▇▇) or upon the termination of the
Management Agreement.
6. Nothing in this Agreement shall limit or restrict the right of any
of the Adviser's directors, officers or employees to engage in any other
business or to devote his or her time and attention in part to the management or
other aspects of any business, whether of a similar or dissimilar nature, nor
limit the Adviser's right to engage in any other business or to render services
6
7
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. 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.
PRUDENTIAL INVESTMENTS FUND MANAGEMENT LLC
By /s/▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Executive Vice President
7
8
THE PRUDENTIAL INVESTMENT CORPORATION
By /s/▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Vice President
8