SUB-INVESTMENT MANAGEMENT AGREEMENT
This Sub-Investment Management Agreement (this "AGREEMENT") between THE
PRUDENTIAL INVESTMENT CORPORATION ("PIC"), a corporation organized and existing
under the laws of the State of New Jersey. ("INVESTMENT MANAGER"), and PRICOA
ASSET MANAGEMENT LTD ("PRICOA"), a private limited company organized and
existing under the laws of England and regulated by IMRO in the conduct of its
investment business ("SUB-INVESTMENT MANAGER"), is made as of September 30, 1997
and will come into force at the commencement of business on the next business
day after that date. No services will be provided under this Agreement until it
comes into force.
W I T N E S S E T H:
WHEREAS, Investment Manager desires Sub-Investment Manager to manage
and control the investment of the assets contained in the Client Accounts;
WHEREAS, Sub-Investment Manager is willing to accept the duties and
responsibilities of an investment manager with respect to the Client Accounts;
and
WHEREAS, Sub-Investment Manager is regulated in the conduct of its
investment business by IMRO.
NOW THEREFORE, in consideration of the premises and mutual
considerations provided in this Agreement, and intending to be legally bound,
Investment Manager and Sub-Investment Manager agree as follows:
1. APPOINTMENT. Sub-Investment Manager will act as an investment
manager with respect to the Client Accounts which are detailed in SCHEDULE A
annexed to this Agreement. In providing its services Sub-Investment Manager will
act for Investment Manager on the basis that Investment Manager is a non-private
customer (as defined for the purposes of IMRO rules). The parties acknowledge
that with respect to the Client Accounts listed on SCHEDULE A as of the date
hereof, the Investment Manager is the customer of Sub-Investment Manager for
purposes of IMRO.
2. FEES. Investment Manager will pay Sub-Investment Manager, as
compensation for its services under this Agreement, a fee determined in
accordance with SCHEDULE A annexed to this Agreement.
3. AUTHORITY OF INVESTMENT MANAGER. Subject to section 4 of this
Agreement, Sub-Investment Manager shall have the discretionary authority to
manage and control the assets in the Client Accounts, including the power to
acquire assets for and dispose of assets in the Client Accounts. When exercising
its authority under this section 3, Sub-Investment Manager shall be under no
obligation to consult with or obtain the consent of
Investment Manager, subject to any written instructions and procedures which
Investment Manager shall communicate to Sub-Investment Manager.
Provided Sub-Investment Manager manages the Client Accounts in
accordance with the guidelines set out in SCHEDULE B (as altered from time to
time by agreement in writing), neither Sub-Investment Manager nor any of its
agents, executives or employees shall be liable for any depreciation in the
value of the Client Accounts or the consequences of any investment decisions
made in good faith and in the absence of gross negligence or willful default. In
this connection, Investment Manager accepts and agrees to the provisions of
SCHEDULE E (Ratification, Indemnity and Exclusion of Liability) which forms part
of this Agreement.
All transactions shall be subject to IMRO rules and the rules of any
other regulatory authority to which Sub-Investment Manager is subject and to the
dealing, settlement and other applicable rules or customs of the market or
exchange (if any) on which such transaction is effected. In the event of any
conflict between the terms of this Agreement and any such rules or customs, the
latter shall prevail.
The authority given to Sub-Investment Manager to manage the Client
Accounts shall be irrevocable until this Agreement is terminated pursuant to
clause 12 below and shall continue in force despite any event which might
otherwise terminate it, until Sub-Investment Manager has actual notice of such
event.
4. INVESTMENT LIMITATIONS AND GUIDELINES. Investment Manager may from
time to time communicate general investment guidelines to Sub-Investment Manager
with respect to the Client Accounts, and Sub-Investment Manager shall be
obligated to act in accordance therewith. Until contrary general investment
guidelines are communicated from Investment Manager to Sub-Investment Manager,
the Client Accounts shall be managed in accordance with the guidelines contained
in SCHEDULE B annexed hereto.
5. CUSTODY OF MONEY AND INVESTMENTS AND SETTLEMENT PROCEDURES.
Investment Manager shall appoint a custodian or custodians for the Client
Accounts ("the Custodian") and will establish the Client Accounts by paying or
delivering to the Custodian such cash sum or securities holdings as may be
agreed. The initial composition and value of the Client Accounts will be as set
out in SCHEDULE C annexed to this Agreement.
The Client Accounts shall be accounted for, and will be valued, in the
Client Accounts currency. Sub-Investment Manager may, at its discretion, buy and
sell other currencies on behalf of Investment Manager if this is required for
the efficient management of the Client Accounts.
2
In respect of Sub-Investment Manager's equity operations, Investment
Manager's Equity Operations Department is responsible for issuing settlement
instructions to the Custodian and Sub-Investment Manager has no authority to
issue such instructions.
In respect of Sub-Investment Manager's equity operations, Investment
Manager will instruct the Custodian duly to settle all transactions in
accordance with Investment Manager's Equity Operations Department instructions,
to deal with all stock benefits as directed by Investment Manager's Equity
Operations Department and to deliver to Investment Manager's Equity Operations
Department on such basis as may be agreed detailed statements of Investment
Manager's securities and cash accounts.
In respect of Sub-Investment Manager's bond operations, Sub-Investment
Manager is responsible for issuing settlement instructions to the Custodian.
Investment Manager will instruct the Custodian duly to settle all transactions
in accordance with Sub-Investment Manager's instructions, to deal with all stock
benefits as directed by Sub-Investment Manager and to deliver to Sub-Investment
Manager on such basis as may be agreed detailed statements of Investment
Manager's securities and cash accounts.
The Custodian is the custodian of the Client Accounts for Investment
Manager and not for Sub-Investment Manager and, accordingly, Sub-Investment
Manager cannot accept responsibility for any default on the part of the
Custodian or any nominee or agent for it. Investment Manager shall be
responsible for the fees and charges of the Custodian.
The Custodian shall duly settle every transaction not closed out by
Sub-Investment Manager hereunder by its settlement date and shall deal with
stock benefits. Sub-Investment Manager's responsibility shall be limited to the
issue (or procuring the issue) to the Custodian of delivery, payment or other
investment instructions in respect of Sub-Investment Manager's bond operations.
Investment Manager shall forthwith settle all transactions not settled
by the Custodian or closed out by Sub-Investment Manager. Sub-Investment Manager
shall be entitled to close out any such transaction not so settled or which
Sub-Investment Manager reasonably believes will or may not be duly settled; all
losses shall be for Investment Manager's account and all costs Sub-Investment
Manager incurs shall be debited to the Client Accounts. Sub-Investment Manager's
obligations are limited to those expressly provided for herein and, in
particular, Sub-Investment Manager shall have no responsibility for the
settlement of any transaction (including, for the avoidance of doubt, the
payment of any margin).
Investment Manager may at any time deliver or transfer further
investments or funds to the Custodian for credit to the Client Accounts and
shall notify, or cause the Custodian to notify, Sub-Investment Manager
accordingly. Investment Manager agrees that it will not withdraw any investments
or money from the Client Accounts without prior notification to Sub-Investment
Manager. Unless Investment Manager notifies Sub-Investment Manager
3
otherwise, Sub-Investment Manager shall direct the cash investments acquired
under any transaction entered into by Sub-Investment Manager hereunder to be
delivered to (and any transfer form to be executed in favour of) the Custodian.
Sub-Investment Manager shall not hold the Client Accounts nor be
entitled to call for delivery of the Client Accounts to itself; accordingly,
Sub-Investment Manager will not itself hold money on behalf of Investment
Manager nor be the registered holder of any of Investment Manager's Investments.
6. BROKERAGE. Subject to any guidelines annexed hereto, Sub-Investment
Manager shall use its best efforts to obtain execution of orders at the most
favorable prices reasonably obtainable. When determining the most favorable
prices reasonably obtainable, Sub-Investment Manager may consider, in accordance
with Section 28(e) of the Securities Exchange Act of 1934, the value of the
receipt by Sub-Investment Manager of services that affect securities
transactions and incidental functions, such as clearance and settlement
services, and advice as to the value of securities, the advisability of
investing in securities, the availability of securities or purchasers or buyers
of securities, and analyses and reports concerning issues, industries,
securities, economic factors, trends, portfolio strategy, and the performance of
accounts. Commissions charged by brokers who provide these services may be
somewhat higher than the commissions charged by brokers who do not provide these
services, provided that if Sub-Investment Manager should at any time enter into
any arrangement with a broker to provide Sub-Investment Manager with research
and other facilities or any other services or benefits in return for placing
business with it, the arrangement will provide that all transactions for the
Client Accounts with or through that broker will be effected by that broker so
as to secure best execution (disregarding any benefit which may ensure directly
or indirectly to Investment Manager from the facilities, services or benefits
provided under the arrangement). Sub-Investment Manager will, in any event,
disclose to Investment Manager any such arrangements in existence at the date of
this Agreement and will thereafter disclose any such arrangement to Investment
Manager on each anniversary thereof. Details of Sub-Investment Manager' policy
on Soft Commission (Soft Dollar) Agreements are set out In SCHEDULE D (Soft
Commission) annexed on this Agreement.
In the course of its business Sub-Investment Manager intends to perform
investment management and advisory services for other clients. Investment
Manager's attention is drawn to the contents of SCHEDULE F (Conflicts) which
sets out the basis on which Sub-Investment Manager is to act both having regard
to its duties to Investment Manager and its other clients and in transactions in
which Sub-Investment Manager or connected persons may be involved (whether as
principal or as agent).
7. OTHER ACTIVITIES OF SUB-INVESTMENT MANAGER. In addition to the
investment management services performed under this Agreement, Sub-Investment
Manager may engage in any other business and may render investment advisory
services to any other person. Sub-Investment Manager may render investment
advisory services to any other
4
person, even if Sub-Investment Manager or the other person may have investment
policies similar to those followed by Sub-Investment Manager for the Client
Accounts. Sub-Investment Manager may, at any time, buy or sell, or may direct or
recommend that another person buy or sell, securities of the same kind or class
that are purchased or sold for the Client Accounts upon the directions of
Sub-Investment Manager.
8. REPORTS. In respect of Sub-Investment Manager's bond operations,
Sub-Investment Manager shall promptly review any custodian's periodic statements
of account for investments in the Client Accounts, reconcile any differences,
and certify the correctness of the statements of account, as reconciled, to
Investment Manager.
In respect of Sub-Investment Manager's equity operations,
Sub-Investment Manager will not have any responsibility for the reconciliation
of investments in the Client Accounts with any custodian's periodic statements,
such responsibility lying with Investment Manager's Equity Operations
Department.
Sub-Investment Manager shall not be responsible for preparing
valuations of the Clients Accounts. Sub-Investment Manager will provide to
Investment Manager such advice or information as it may reasonably require for
the purpose of preparing statements and calculating the value of the Client
Accounts. Sub-Investment Manager will also provide Investment Manager with
periodic reviews and analysis of the Client Accounts and any other reports and
information that Investment Manager may reasonably require. Investment Manager
hereby confirms that it does not want Sub-Investment Manager to send Investment
Manager periodic statements as defined by IMRO Rules.
Sub-Investment Manager will arrange for Investment Manager to receive
promptly copies of confirmation slips and any contract notes relating to each
transaction effected for the Client Accounts directly from the agents executing
those transactions.
9. WARRANTIES. Each party hereby warrants to the other that it has full
power and authority to enter into and perform this Agreement.
SUB-INVESTMENT MANAGER WARRANTIES
a. Sub-Investment Manager warrants that it is registered
as an investment adviser under the Investment
ADVISERS ACT of 1940 (the "ADVISERS ACT") and is
regulated by IMRO in the conduct of its investment
business. Sub-Investment Manager shall immediately
notify Investment Manager of any change in its status
as such.
b. Sub-Investment Manager will carry out its duties and
obligations under this Agreement in accordance with
the requirements and fiduciary
5
standards applicable to it which are contained in
ERISA or any regulations promulgated thereunder.
c. To the extent that any provision of this Agreement,
schedule or other documents annexed hereto, or
written or oral instruction given to Sub-Investment
Manager in connection with the management of the
Client Accounts shall conflict with any provision of
ERISA or the Advisers Act or any regulation
promulgated thereunder, the provision of ERISA or the
Advisers Act or the regulation shall be followed.
INVESTMENT MANAGER WARRANTIES
Investment Manager warrants and undertakes to Sub-Investment
Manager that:
a. for so long as Sub-Investment Manager's appointment
remains in force Investment Manager will ensure that
the Client Accounts remain free from any lien, charge
or other encumbrance (unless effected by
Sub-Investment Manager). Investment Manager will not
sell, assign or otherwise dispose of any part of the
Client Accounts or agree to do so (except through
Sub-Investment Manager) or appoint any other
investment manager or investment adviser in respect
of the whole or any part of the Client Accounts
without Sub-Investment Manager's prior written
consent;
b. Investment Manager is not resident or domiciled in
the United Kingdom for taxation purposes and
Investment Manager will advise Sub-Investment Manager
forthwith of any change in such status; and
c. Investment Manager will comply with all legal and
regulatory requirements of the United Kingdom or
elsewhere which apply to the Client Accounts or to
Investment Manager and will promptly supply
Sub-Investment Manager with any information or other
assistance necessary to enable Sub-Investment Manager
to properly discharge any duties or responsibilities
which such requirements may at any time impose upon
Sub-Investment Manager; and
d. Investment Manager does not carry on investment
business (as defined by the FSA) in the UK.
10. VOTING OF PORTFOLIO SECURITIES. Unless Investment Manager otherwise
specifically requests in writing, Sub-Investment Manager will not be required to
take any action, or render any advice, with respect to the voting of portfolio
securities.
6
11. COMPLAINTS PROCEDURE. If Investment Manager has any complaint about
Sub-Investment Manager's performance under this Agreement Investment Manager
should direct that complaint, in the first instance, to the appropriate
portfolio manager. If the portfolio manager is unable to resolve the complaint
within two (2) business days or the sums involved are material, he will refer it
to one of Sub-Investment Manager's directors who will investigate and attempt to
resolve the complaint in accordance with Sub-Investment Manager's complaints
procedure (a copy of which is available on request). If the director is unable
to do so, he will refer the matter to Sub-Investment Manager's compliance
officer. Investment Manager also has a right of complaint direct to the
Investment Ombudsman.
12. TERMINATION. Sub-Investment Manager may terminate this Agreement on
30 days' written notice to Investment Manager. Investment Manager may terminate
Sub-Investment Manager's appointment as an investment manager at any time upon
written notice which will take effect immediately upon receipt. Termination of
this Agreement will be without prejudice to the completion of transactions
already initiated and accordingly, despite the termination of this Agreement,
Sub-Investment Manager shall be entitled to:
a. settle or close out all transactions entered into or for which the
order was placed with a broker or which was otherwise initiated or
agreed by Sub-Investment Manager on Investment Manager's behalf
hereunder, in good faith before Sub-Investment Manager received
notice of termination (or, if later, the expire of any such
notice); and
b. require Investment Manager to pay all outstanding fees and expenses
including those incurred pursuant to paragraph (a) above.
Investment Manager shall pay Sub-Investment Manager on demand the
amount of any costs incurred in closing out any transaction and shall also pay
Sub-Investment Manager all unpaid fees and expenses which Sub-Investment Manager
shall discharge on Investment Manager's behalf. Any losses incurred on a closing
out shall be for Investment Manager's account. On termination of this Agreement,
Investment Manager shall pay to Sub-Investment Manager such proportion of
Sub-Investment Manager's fees and expenses as may have accrued to the date such
termination takes effect.
The provisions relating to ratification, indemnity and exclusion of
liability set out in SCHEDULE E shall apply notwithstanding termination of this
Agreement.
13. NO ASSIGNMENT. Sub-Investment Manager may not assign (as that term
is defined by the Advisers Act) this Agreement without the prior written consent
of Investment Manager.
7
14. CONFIDENTIAL RELATIONSHIP. Each party shall use its best efforts to
treat all information and advice furnished by the other party to it as
confidential and to avoid disclosing same to third parties (other than
associates of Sub-Investment Manager) except as agreed to in writing by both
parties or where Sub-Investment Manager is requested or required to do so by
IMRO or any other regulatory or fiscal authority or as required by law.
Conversely, Sub-Investment Manager shall not be required to disclose or
use for the benefit of Investment Manager any confidential information relating
to or acquired while working on the managed Client Accounts or affairs of
another client or to disclose or use any other information not known to the
manager of the Client Accounts even though it is known to any of Sub-Investment
Manager's employees, directors or agents.
15. DISCLOSURE STATEMENT. Investment Manager acknowledges receipt of
Sub-Investment Manager's Disclosure Statement, as required by Rule 204-3 under
the Advisers Act, more than 48 hours prior to the date of execution of this
Agreement as written above.
16. TERMINOLOGY: In this Agreement (including the Schedules), the
following terms bear the following respective meanings:
"THE FSA" means the Financial Services Xxx 0000.
"INVESTMENTS" mean all shares, debt securities, warrants, options and
futures (other than options and futures relating to land) and any other assets,
rights or interests which constitute an investment for the purposes of Part I of
Schedule 1 to the FSA (or which would do so apart from the Notes to the
respective paragraphs in Part I of that Schedule) and commodity options and
currencies.
"OPTIONS" means options other than options to subscribe shares or debt
securities.
"THE CLIENT ACCOUNTS" means all investments, money, assets (including
the benefit of contracts) or borrowings for the time being subject to
Sub-Investment Manager's discretionary authority hereunder, including, for the
avoidance of doubt, liabilities relating to investments sold short (that is sold
even though not yet so held). The term does not include any portion of an
account managed by Investment Manager that is not subject to Sub-Investment
Manager's discretionary authority.
"THE CLIENT ACCOUNTS CURRENCY" means US$
"CONNECTED PERSON" means any person who is Sub-Investment Manager's
holding company or controller, any person who is a controller or subsidiary of
any such person and any company of which Sub-Investment Manager or any connected
person is a controller or who (whether or not such a person) is Sub-Investment
Manager's associate, and "controller" bears the same meaning as in the FSA.
8
"IMRO" means The Investment Management Regulatory Organization Limited.
"IMRO RULES" means the rules and regulations of and guidance issued by
IMRO as for the time being in force (and so that if Sub-Investment Manager
obtains any waiver or dispensation from an IMRO rule that rule shall to the
extent of that waiver or dispensation be deemed not to be in force) and "rules"
shall be construed accordingly in relation to any other regulator, market or
exchange.
"THE SIB" means the Securities and Investments Board, the supervisory
regulatory agency under the FSA.
"STOCK BENEFITS" means rights attaching to investments (other than
voting rights) and takeover, rights or other offers relating to investments, and
references to dealing with stock benefits or stock benefit situations are
referenced to exercising any such rights and accepting any such offers or
refraining from doing so.
In this Agreement (including the Schedules):
(a) References to acquiring investments include references to writing
put options and exercising call options.
(b) References to selling investments include references to writing or
granting futures contracts or call options, selling investments
short (that is, selling investments which are not yet part of the
Client Accounts) and exercising put options.
(c) References to settling transactions include references to paying
margin calls, premiums and deposits and delivering collateral as
required in relation to any investment acquired or sold by
Sub-Investment Manager hereunder.
Terms and expressions defined in IMRO rules and not specifically defined herein
bear the same respective meanings herein.
17. COMMUNICATIONS. To the extent reasonable and practical,
communications from Investment Manager to Sub-Investment Manager, or vice versa,
shall be in writing or in another reasonable manner and promptly confirmed in
writing.
18. GENERAL. This Agreement constitutes the entire agreement of the
parties with respect to the management of the assets in the Client Accounts and
may be amended only by a written instrument signed by Investment Manager and
Sub-Investment Manager.
For all purposes of this Agreement, Sub-Investment Manager shall act as
an independent contractor and nothing in this Agreement shall constitute
Sub-Investment
9
Manager as Investment Manager's dependent agent or as creating any form of
partnership or joint venture between Sub-Investment Manager and Investment
Manager. Except as provided in this Agreement, neither party shall have any
authority to bind, obligate or represent the other
19. GOVERNING LAWS. This Agreement shall be construed in accordance
with the laws of the State of New Jersey (without regard to the legislative or
judicial conflict of laws/rules of any state), except to the extent superseded
by federal law.
IN WITNESS WHEREOF, Investment Manager and Sub-Investment Manager have
executed this Agreement as of the day and year written above.
THE PRUDENTIAL INVESTMENT CORPORATION
By:_____________________________
Name:___________________________
Title:__________________________
PRICOA ASSET MANAGEMENT LTD.
By:_____________________________ By: _______________________________
Name:___________________________ Name:______________________________
Title:__________________________ Title: ___________________________
10
SCHEDULE A
TO THE SUB-INVESTMENT MANAGEMENT AGREEMENT BETWEEN
THE PRUDENTIAL INVESTMENT CORPORATION AND
PRICOA ASSET MANAGEMENT LIMITED
SCHEDULE OF REMUNERATION
FUND ANNUAL FEE
Prudential International Bond Fund
(formerly The Global Government Plus Fund, Inc.) 30 basis points
The Global Total Return Fund, Inc. 30 basis points
Prudential Intermediate Global Income Fund, Inc. 30 basis points
Prudential Global Limited Maturity Fund, Inc. 30 basis points
PRICOA World Wide Investors Portfolio 30 basis points
PRICOA Money Market Portfolio, Deutsche Xxxx Series 30 basis points
PRICOA Money Market Portfolio, Pound Sterling Series 0 basis points
Prudential Global Genesis Fund, Inc. 55 basis points
Prudential General Account:
-European Portion of the Small Cap Account 65 basis points
-European Small Cap Account 65 basis points
-European Portion of Global Small Cap Account 65 basis points
Prudential Group Trust Account (Pru Plan)
-European Portion of International Large Cap Account 100 basis points
-European Portion of International Small Cap Account
100 basis points
TOLI GLOBAL-Roche Retiree Welfare Investment Trust 100 basis points
--------------------------------------------------------------------------------
1. The fee payable for each quarter is calculated at the above rates on
the average funds under management during the quarter.
2. Fees are due and invoiced on the first day of each calendar quarter
(1 January, 1 April, 1 July and 1 October), calculated at the above
rates on funds under management at the end of the previous quarter (i.e.
on 31 December, 31 March, 30 June and 30 September).
3. The difference between the fee paid on the first day of the quarter
(2 above) and the fee payable for the quarter (1 above) is added
to/deducted from the next quarter's fee payment.
4. Fees are payable with 30 days of invoice date.
5. Fees are calculated pro-rata where funds are not managed for the full
term of a calendar quarter.
11
SCHEDULE B
TO THE SUB-INVESTMENT MANAGEMENT AGREEMENT BETWEEN
THE PRUDENTIAL INVESTMENT CORPORATION AND
PRICOA ASSET MANAGEMENT LTD
INVESTMENT GUIDELINES FOR CLIENT ACCOUNTS
The investment guidelines for the following Prudential Mutual Funds are as set
out in each fund's statutory documentation (i.e., the Prospectuses and
Statements of Additional Information). The following are highlights from those
documents, however, Sub-Investment Manager is subject to them in their entirety.
PRUDENTIAL INTERNATIONAL BOND FUND, INC. (formerly, The Global Government Plus
Fund, Inc.)
The Fund's investment objective is to seek total return, the components of which
are current income and capital appreciation. The Fund attempts to achieve its
objective by investing primarily in debt securities issued or guaranteed by
governments, semi-government entities, governmental agencies, supranational
entities and other governmental entities in the United States and in other
countries and denominated in the currencies of such countries.
The Fund's detailed investment polices and investment restrictions are set out
in the Fund's Prospectus dated February 28, 1997 and the Fund's Statement of
Additional Information dated February 28, 1997.
THE GLOBAL TOTAL RETURN FUND, INC.
The Fund's investment objective is to seek total return, the components of which
are current income and capital appreciation. The Fund attempts to achieve its
objective by investing, under normal circumstances, at least 65% of its total
assets in governmental (including supranational), semi-governmental or
government agency debt securities or in short-term bank debt securities or
deposits in the United States and in foreign countries denominated in US dollars
or in foreign currencies, including debt securities issued or guaranteed by the
US Government and foreign governments, their agencies, authorities or
instrumentalities. The remainder is generally invested in corporate debt
securities or longer term bank debt securities.
The Fund will invest primarily in investment grade securities or in non-rated
securities determined by the Fund's investment adviser to be of equivalent
quality. The Fund may invest up to 10% of its total assets in debt securities
rated below investment grade, with a minimum rating of B, by either S&P or
Xxxxx'x or by another NRSRO, or, if unrated, are deemed to be of equivalent
quality by the investment adviser.
The Fund's detailed investment policies and investment restrictions are set out
in the Fund's Prospectus dated February 28, 1997.
12
PRUDENTIAL INTERMEDIATE GLOBAL INCOME FUND, INC.
The Fund's objective is to seek to maximise total return, the components of
which are current income and capital appreciation. The Fund will attempt to
achieve its objective by investing primarily in obligations issued or guaranteed
by the US Government, its agencies, authorities or instrumentalities and in
obligations issued or guaranteed by certain foreign governments,
quasi-governmental entities, governmental agencies, supranational entities or
any of their political subdivisions or instrumentalities. The Fund will invest
primarily in investment grade securities or in non-rated securities determined
by the Fund's investment adviser to be of equivalent quality. The Fund may
invest up to 10% of its total assets in debt securities rated below investment
grade, with a minimum rating of B, by either S&P or Xxxxx'x or by another NRSRO,
or if unrated, are deemed to be of equivalent quality by the investment adviser.
The Fund's detailed investment policies and investment restrictions are set out
in the Fund's Prospectus dated February 28, 1997 and the Fund's Statement of
Additional Information dated February 28, 1997.
PRUDENTIAL GLOBAL LIMITED MATURITY FUND, INC.
The Fund's investment objective is to maximise total return, the components of
which are current income and capital appreciation. The Fund seeks to achieve its
objective by investing primarily in a portfolio of debt securities denominated
in the US dollar and a range of foreign currencies. The Fund will maintain a
weighted average maturity of more than 2, but less than 5, years with the
maturity for any individual security generally not exceeding 10 years. The Fund
may also invest up to 20% of its total assets in debt securities rated below
investment grade, with a minimum rating of B, by either S&P or Xxxxx'x or by
another NRSRO, or, if unrated, are deemed to be of equivalent quality by the
investment adviser.
The Fund's detailed investment policies and investment restrictions are set out
in the Fund's Prospectus dated December 30, 1996 and the Fund's Statement of
Additional Information dated December 30, 1996.
PRICOA WORLDWIDE INVESTORS PORTFOLIO
The Fund's investment objective is to seek total return, the components of which
are current income and capital appreciation. The Fund seeks to achieve its
investment objective by investing primarily in investment grade bonds issued by
governments and corporations with varying maturities. It may also have limited
exposure to non-investment grade issues from emerging markets.
The Fund's detailed investment policies and investment restrictions are set out
in the Fund's Prospectus dated October 28, 1996.
PRICOA MONEY MARKET PORTFOLIO
The Fund's investment objective is to provide the highest level of current
income in each designated currency consistent with safety of principal. Each
Series seeks to achieve this objective by investing in a portfolio of high
quality money market instruments and short-term debt obligations having a
maturity of one year or less denominated (1) in the designated currency of the
Series or (2) in US dollars (or other currencies) in combination with forward
currency exchange contracts to purchase matching amounts of the designated
currency.
13
The Fund's detailed investment policies and investment restrictions are set out
in the Fund's Prospectus dated June 12, 1991.
PRUDENTIAL GLOBAL GENESIS FUND, INC.
The Fund's investment objective is long-term growth of capital. The Fund seeks
to achieve its investment objective by investing primarily in common stocks,
common stock equivalents (such as warrants and convertible debt securities) and
other equity securities (including preferred stocks) of smaller foreign and
domestic companies. Under normal circumstances, the Fund will invest 65% of its
total assets in such securities.
The Fund's detailed investment policies and investment restrictions are set out
in the Fund's Prospectus dated July 30, 1997 and the Fund's Statement of
Additional Information dated July 30,1997.
The investment guidelines for the remaining funds are as follows:
PRUDENTIAL GENERAL ACCOUNT
EUROPEAN PORTION OF THE SMALL CAP ACCOUNT
1. Investments will be composed primarily of securities publicly traded in
Europe.
2. Investments will be targeted in securities of small capitalization
companies. The majority of investments to be in the stocks with market
capitalization less than $1.5 billion.
3. No more than 10% of the portfolio will be invested in any one company at the
time of purchase.
4. The portfolio will not purchase more than 10% of the issued capital of any
one company.
5. Investments in cash and related instruments will not exceed 25% of the
portfolio, except during initial portfolio building.
6. Currency hedging of underlying stock positions only (requires approval of
Global Small Cap Equities CIO). Foreign currency futures and options
contracts can only be employed to hedge underlying currency exposure (i.e.,
up to but not more than 100% of underlying exposure to a foreign currency as
measured by the value of cash plus securities held in that foreign
currency).
EUROPEAN SMALL CAP ACCOUNT
1. Investments will be composed primarily of securities publicly traded in
Europe.
2. Investments will be targeted in securities of small capitalization
companies. (Stocks which primarily make up the lowest 20 percent of the
total market capitalization of $30 million to$1.5 billion. The majority of
investments to be in the stocks with market capitalization less than $750
million.)
3. No more than 10% of the portfolio will be invested in stocks larger than
$1.5 billion and not represented in the Salomon Brothers Extended Market
Index ("EMI").
4. No more than 10% of the portfolio will be invested in any one company at the
time of purchase.
5. The portfolio will not purchase more than 10% of the issued capital of any
one company.
6. Investments in cash and related instruments will not exceed 25% of the
portfolio, except during portfolio building.
14
7. Currency hedging of underlying stock positions only (requires approval of
Global Small Cap Equities CIO). Foreign currency futures and options
contracts can only be employed to hedge underlying currency exposure (i.e.,
up to but not more than 100% of underlying exposure to a foreign currency as
measured by the value of cash plus securities held in that foreign
currency).
EUROPEAN PORTION OF THE GLOBAL SMALL CAP ACCOUNT
1. Investments will be composed primarily of securities publicly traded in
Europe.
2. Investments will be targeted in securities of small capitalization
companies. The majority of investments to be in the stocks with market
capitalization less than $750 million.)
3. No more than 10% of the portfolio will be invested in any one company at the
time of purchase.
4. The portfolio will not purchase more than 10% of the issued capital of any
one company.
5. Investments in cash and related instruments will not exceed 25% of the
portfolio, except during initial portfolio building.
6. Currency hedging of underlying stock positions only (requires approval of
Global Small Cap Equities CIO). Foreign currency futures and options
contracts can only be employed to hedge underlying currency exposure (i.e.,
up to but not more than 100% of underlying exposure to a foreign currency as
measured by the value of cash plus securities held in that foreign
currency).
PRUDENTIAL GROUP TRUST ACCOUNT (PRU PLAN)
EUROPEAN PORTION OF THE INTERNATIONAL LARGE CAP ACCOUNT
1. The investment objective will be long term capital appreciation through
investment in a broadly diversified portfolio from outside the United
States. The portfolio will be measured against the Xxxxxx Xxxxxxx
International "EAFE" Index.
2. Investments will be composed primarily of securities publicly traded in
Europe.
3. Portfolio will be invested primarily (75%) in securities of large
capitalization companies.
4. No more than 10% of the portfolio will be invested in any one company at the
time of purchase.
5. The portfolio will not purchase more than 10% of the issued capital of any
one company.
6. Investments in cash and related instruments will not exceed 15% of the
portfolio, except during initial portfolio building.
7. Currency hedging of underlying stock positions only (requires approval of
Global Small Cap Equities CIO).
EUROPEAN PORTION OF THE INTERNATIONAL SMALL CAP ACCOUNT
1. Investments will be composed primarily of securities publicly traded in
Europe.
2. Portfolio will be primarily in securities of small capitalization companies.
The majority of investments to be in the stocks with market capitalization
less than $750 million.
15
3. No more than 10% of the portfolio will be invested in stocks larger than
$1.5 billion and not represented in the Salomon Brothers Extended Market
Index ("EMI").
4. No more than 10% of the portfolio will be invested in any one company at the
time of purchase.
5. The portfolio will not purchase more than 10% of the issued capital of any
one company.
6. Investments in cash and related instruments will not exceed 15% of the
portfolio, except during initial portfolio building.
7. Currency hedging of underlying stock positions only (requires approval of
Global Small Cap Equities CIO).
16
TOLI GLOBAL- ROCHE RETIREE WELFARE INVESTMENT TRUST (EUROPEAN PORTION OF THE
GLOBAL ACCOUNT)
1. Investment will be composed primarily of securities publicly traded
represented in the EMI as well as the stock exchanges of Mexico, Thailand,
Indonesia, Philippines, Taiwan, and South Korea, as well as options and
futures contracts related to those securities and convertible bonds of small
capitalization companies. No options, futures, or other derivatives will add
any leverage to the portfolio. Investment may also be made in cash or in the
equivalents of cash or in any commingled money market account maintained by
Prudential.
2. Investments will be targeted primarily in securities of companies of small
market capitalization of less than Stocks which are included in the
portfolio not meeting the cap size definition should normally be ones which
are constituents of the EMI, except for Southeast Asia where larger traded
stocks may be used.
3. No more than 7% of any regional sub-portfolio will be invested in any one
company at the time of purchase; no more than 3% of the total global
portfolio will be so invested.
4. The portfolio will not purchase more than 10% of the issued capital of any
one company. The regional portfolios are generally kept diversified in 30 to
60 names. Industry weights are determined on a bottom up basis but monitored
at the portfolio level and may cut back to limit potential sector risk.
5. Investments in cash and related instruments will not exceed 17% of the
portfolio, except during initial building.
6. Currency hedging will be allowed, although it is not anticipated that Global
Small Cap Equity will employ an active currency overlay program. Any
currency hedging must be covered by an underlying cash/stock position.
GENERAL
SUBJECT TO THE INVESTMENT GUIDELINES FOR THE CLIENT ACCOUNTS DESCRIBED HEREIN OR
AS SUBSEQUENTLY NOTIFIED TO SUB-INVESTMENT MANAGER IN WRITING:
1. The Client Accounts may contain securities which are or were the subject of
a relevant offer or issue, whether at the time Sub-Investment Manager
acquires them on behalf of Investment Manager, within a period of 12 months
preceding that or otherwise. For the purpose of this paragraph, a "relevant
offer or issue" is an offer or issue of any securities (whether or not those
securities are to be listed on the London Stock Exchange or any other
recognized or designated investment exchange) which is or was sponsored,
underwritten, managed or arranged, or in connection with which other
services were provided, by Sub-Investment Manager or a connected person.
2. Sub-Investment Manager may not commit Investment Manager to any obligation
to underwrite any issue or offer for sale of securities.
3. Sub-Investment Manager may, on behalf of Investment Manager, acquire or
dispose of units in a regulated collective investment scheme, whether or not
operated, managed or advised by Sub-Investment Manager or a connected
person.
4. Sub-Investment Manager may enter into repo or reverse repo transactions but
may not otherwise lend or borrow securities for any purpose.
17
5. Sub-Investment Manager is authorized by Investment Manager to deal in
warrants, options (including traded options) futures or contracts for
differences on behalf of Investment Manager (provided they are investments
as defined herein). The limits on margins will vary as between the Client
Accounts as set out in Schedule B above and the Prospectuses and Statements
of Additional Information mentioned therein.
6. Where the requisite currency of settlement is not the Client Accounts
Currency Sub-Investment Manager shall be entitled to use spot or forward
foreign exchange contracts (and accordingly enter into them on Investment
Manager's behalf) to fund the acquisition of spot or forward investments or
dispose of sale proceeds in a foreign currency. Notwithstanding
Sub-Investment Manager's right to do this, Investment Manager accepts that
if a liability in one currency is matched by an asset in a different
currency, or if any investment acquired or sold hereunder is denominated or
paid for in a currency other than the Client Accounts Currency, a movement
of exchange rates may be unfavourable rather than favourable, on the gain or
loss otherwise experienced on the investment.
18
SCHEDULE C
TO THE SUB-INVESTMENT AGREEMENT BETWEEN
THE PRUDENTIAL INVESTMENT CORPORATION AND
PRICOA ASSET MANAGEMENT LIMITED
THE INITIAL COMPOSITION AND VALUE OF CLIENT ACCOUNTS
[See Attached Documents]
19
SCHEDULE D
TO THE SUB-INVESTMENT AGREEMENT BETWEEN
THE PRUDENTIAL INVESTMENT CORPORATION AND
PRICOA ASSET MANAGEMENT LIMITED
SOFT COMMISSION
1. Soft Commission Agreements
A list of the Soft Commission Agreements which Sub-Investment Manager has
entered into from time to time is available from Sub-Investment Manager upon
request. Details of the Soft Commission Agreements are also available from
Sub-Investment Manager upon request.
2. Soft Commission Policy Statement
The provision of commissions under a Soft Commission Agreement will allow
Sub-Investment Manager to provide Investment Manager with services that could
not otherwise be provided as cost effectively.
Sub-Investment Manager will not enter into Soft Commission Agreements unless:
(a) the benefits provided under the agreement are goods or services which can
reasonably be expected to assist in the provision of Sub-Investment Manager's
services to customers, and are in fact so used and fall within the permitted
categories of goods and services under the Rules;
(b) the broker concerned agrees to provide Best Execution on transactions
effected for customers;
(c) Sub-Investment Manager is satisfied that the terms of business and methods
by which the relevant broking services will be supplied do not involve any
potential for a comparative price disadvantage to customers.
Sub-Investment Manager will send Investment Manager annual reports on
Sub-Investment Manager's Soft Commission Arrangements as required by the IMRO
rules.
20
SCHEDULE E
TO THE SUB-INVESTMENT AGREEMENT BETWEEN
THE PRUDENTIAL INVESTMENT CORPORATION AND
PRICOA ASSET MANAGEMENT LIMITED
RATIFICATION, INDEMNITY AND EXCLUSION OF LIABILITY
1. Investment Manager hereby undertakes to ratify and confirm everything done by
Sub-Investment Manager in the performance or purported performance in good faith
of Sub-Investment Manager's duties hereunder and by the Custodian or depository
in settlement of any transactions entered into by Sub-Investment Manager on
Investment Manager's behalf hereunder and not closed out prior to the settlement
date.
2. Investment Manager shall indemnify Sub-Investment Manager against all costs,
expenses, claims, actions, demands or liabilities (including costs and expenses
incurred in any proceedings relating there to and including any liability for
payment of tax on Investment Manager's income or profits) which may be suffered
or incurred by or made against Sub-Investment Manager in connection with
Sub-Investment Manager's appointment hereunder or the performance or purported
performance in good faith, of Sub-Investment Manager's duties hereunder.
However, this indemnity shall not apply where Sub-Investment Manager has been
grossly negligent or has willfully defaulted or in relation to breaches by
Sub-Investment Manager of IMRO rules or the requirements of the FSA.
3. Sub-Investment Manager shall use its best efforts and judgment and shall
exercise due care in performing its duties and acting as investment manager
hereunder. However, Sub-Investment Manager shall not be liable for any
depreciation in value of the Client Accounts, loss of profit, gain or income
suffered by Investment Manager in relation to the Client Accounts unless it
results from Sub-Investment Manager's gross negligence or willful default and
for this purpose the failure to use or disclose confidential information
relating to another client or any other person shall not be regarded as gross
negligence or willful default.
4. Sub-Investment Manager shall not be responsible or required to indemnify
Investment Manager for any loss resulting from the failure or default of any
broker, or other agent, or counter-party.
5. In this Schedule, references to Sub-Investment Manager include references to
all Sub-Investment Manager's connected persons and or their directors, employees
or agents.
21
SCHEDULE F
TO THE SUB-INVESTMENT AGREEMENT BETWEEN
THE PRUDENTIAL INVESTMENT CORPORATION AND
PRICOA ASSET MANAGEMENT LIMITED
CONFLICTS
1. Sub-Investment Manager (and any connected person) may carry on investment and
trading activities for its own account and may act as investment manager or
investment adviser for other clients (whether or not connected persons) on terms
including provisions for remuneration on terms which may be different from those
under this Agreement, including payment of a performance fee.
2. Provided that Sub-Investment Manager acts in good faith and fairly as between
Investment Manager and all other clients concerned and conforms to IMRO rules,
Sub-Investment Manager shall not be required to prefer Investment Manager's
interests to its own interests or to the interests of its other clients or to
subordinate the interests of itself or such other clients to Investment
Manager's interests. In particular in case of competition Sub-Investment Manager
may acquire or dispose of investments on a pro rata basis, or such other basis
as Sub-Investment Manager considers fair and reasonable, as between Investment
Manager and itself or such other clients. When considering or deciding whether
or not to acquire or dispose of an investment for Investment Manager or
executing a decision to do so, Sub-Investment Manager may also consider or
decide upon such acquisition or disposal or execute such a decision for itself
or other clients at the same time (whether by way of block trading or otherwise)
and may advise advisory clients accordingly without having first to initiate or
effect the relevant transaction for Investment Manager.
3. Sub-Investment Manager shall not be required to acquire for Investment
Manager any investment which Sub-Investment Manager in good faith considers not
to be suitable for Investment Manager even though Sub-Investment Manager may
consider that investment suitable for either itself or any connected person or
for other clients and accordingly acquire that investment for its own account or
for any connected person or for, (or recommended that investment to) such other
clients. This applies similarly in the case of sales.
4. Sub-Investment Manager and its connected persons may carry on investment and
trading activities for its own account and may carry out investment advisory or
management services for other clients. Accordingly, Investment Manager accepts
that when Sub-Investment Manager deals for Investment Manager Sub-Investment
Manager, or any connected person may have an interest that is material to the
investment or transaction concerned. In particular, Investment Manager
acknowledges that Sub-Investment Manager may acquire or dispose of investments
on Investments Manager's behalf hereunder notwithstanding that Sub-Investment
Manager or any connected person may have or simultaneously acquire or dispose of
positions in such investments in such investments for its own account or for
other clients.
22
SCHEDULE A (AMENDED)
TO THE SUB-INVESTMENT MANAGEMENT AGREEMENT BETWEEN
THE PRUDENTIAL INVESTMENT CORPORATION AND
PRICOA ASSET MANAGEMENT LIMITED
SCHEDULE OF REMUNERATION
LIST OF FUNDS ANNUAL FEE
------------- ----------
BOND FUND Prudential International Bond Fund
(formerly The Global Government Plus Fund, Inc.) 30 Basis Points
The Global Total Return Fund, Inc. 30 Basis Points
Prudential Intermediate Global Income Fund, Inc. 30 Basis Points
Prudential Global Limited Maturity Fund, Inc. 30 Basis Points
MONEY MARKET FUNDS: PRICOA World Wide Investors Portfolio, Global Bond Fund 30 Basis Points
PRICOA Money Market Portfolio, Deutsche Xxxx Series 30 Basis Points
PRICOA Money Market Portfolio, Pound Sterling Series 0 Basis Points
EQUITY FUNDS: Prudential General Account:
-European Portion of the Small Cap Account 65 Basis Points
-European Small Cap Account 65 Basis Points
-European Portion of Global Small Cap Account 65 Basis Points
Prudential Group Trust Account (Pru Plan)
-European Portion of International Large Cap Account 100 Basis Points
-European Portion of International Small Cap Account 100 Basis Points
TOLI GLOBAL-Roche Retiree Welfare Investment Trust 100 Basis Points
Prudential Global Genesis Fund, Inc. 55 Basis Points
Prudential Europe Growth Fund, Inc. 55 Basis Points
PRICOA World Wide Investors Portfolio, European Growth Fund 55 Basis Points
--------------------------------------------------------------------------------
1. Investment Manager will pay Sub-Investment Manager a fee equal to the greater
of the amount of Sub-Investment Manager's expenses associated with
Sub-Investment Manager's management for Investment Manager of the funds above,
plus 5% of such expenses, or the basis point fees.
2. Sub-Investment Manager will invoice Investment Manager at the end of each
quarter for actual fees due as calculated in accordance with 1 above and
invoices will be payable within 30 days of invoice date.
3. Investment Manager will undertake to use best endeavours to prepay each
quarter's estimated fees at the beginning of the relevant quarter (1 January, 1
April, 1 July, 1 October).
4. Fees are calculated pro-rata where funds are not managed for the full term of
a calendar quarter.
This amended schedule is deemed to be effective as of January 1, 1998.
FOR THE PRUDENTIAL INVESTMENT CORPORATION
By:_______________________________
Date:_____________________________
FOR PRICOA ASSET MANAGEMENT LIMITED
Director: ________________________ Director: _________________________
Date: ________________________________ Date: ____________________________
23
A M E N D M E N T
TO SUB-INVESTMENT MANAGEMENT AGREEMENT ("AGREEMENT")
BETWEEN THE PRUDENTIAL INVESTMENT CORPORATION
("INVESTMENT MANAGER")
AND
PRICOA ASSET MANAGEMENT LIMITED ("SUB-INVESTMENT MANAGER")
This Amendment to the Agreement dated September 30, 1997, is dated
January 8, 1998 and effective as of December 1, 1997.
WHEREAS, the parties have agreed that the Sub-Investment Manager will
provide investment advisory services to the Prudential Europe Growth Fund, Inc.,
a registered investment company under the Investment Company Act of 1940, and
PRICOA Worldwide Investors Portfolio-European Growth Fund, an investment company
organized under the laws of the Grand Duchy of Luxembourg ;
NOW THEREFORE, it is agreed as follows:
1. Section 1 of the Agreement is hereby amended to read as follows:
APPOINTMENT. Sub-Investment Manager will act as an investment manager
with respect to the Client Accounts which are detailed in SCHEDULE A annexed to
this Agreement. In providing its services Sub-Investment Manager will act for
Investment Manager on the basis that Investment Manager is a non-private
customer (as defined for the purposes of IMRO rules). Investment Manager agrees
that it is the only customer of Sub-Investment Manager hereunder for the
purposes of IMRO Rules and that, notwithstanding Investment Manager has
identified the Client Accounts to Sub-Investment Manager, none of the Client
Accounts will be an indirect customer of Sub-Investment Manager for those
purposes. In addition to providing investment management services,
Sub-Investment Manager may arrange for the execution of trades on behalf of the
Investment Manager for portfolios specified from time to time by the Investment
Manager.
2. Schedules A and B to the Agreement are hereby amended and
substituted by the attached Schedules A and B, respectively:
24
IN WITNESS WHEREOF, the parties have caused this Amendment to be signed
as of the date indicated above.
THE PRUDENTIAL INVESTMENT CORPORATION
BY:
---------------------------------------------
NAME: XXXXXXXX X. XXXXXX
-------------------------------------------
TITLE: SENIOR VICE PRESIDENT
------------------------------------------
PRICOA ASSET MANAGMENT LIMITED
BY:
---------------------------------------------
NAME:
-------------------------------------------
TITLE:
------------------------------------------
BY:
---------------------------------------------
NAME:
-------------------------------------------
TITLE:
------------------------------------------
25
SCHEDULE A (AMENDED)
TO THE SUB-INVESTMENT MANAGEMENT AGREEMENT BETWEEN
THE PRUDENTIAL INVESTMENT CORPORATION AND
PRICOA ASSET MANAGEMENT LIMITED
SCHEDULE OF REMUNERATION
FUND ANNUAL FEE
Prudential International Bond Fund
(formerly The Global Government Plus Fund, Inc.) 30 basis points
The Global Total Return Fund, Inc. 30 basis points
Prudential Intermediate Global Income Fund, Inc. 30 basis points
Prudential Global Limited Maturity Fund, Inc. 30 basis points
PRICOA world Wide Investors Portfolio, Global Bond Fund 30 basis points
PRICOA World Wide Investors Portfolio, European Growth Fund 55 basis points
PRICOA Money Market Portfolio, Deutsche Xxxx Series 30 basis points
PRICOA Money Market Portfolio, Pound Sterling Series 0 basis points
Prudential General Account:
-European Portion of the Small Cap Account 65 basis points
-European Small Cap Account 65 basis points
-European Portion of the Global Small Cap Account 65 basis points
Prudential Group Trust Account (Pru Plan)
-European Portion of International Large Cap Account 100 basis points
-European Portion of International Small Cap Account 100 basis points
TOLI GLOBAL-Roche Retiree Welfare Investment Trust 100 basis points
Prudential Global Genesis Fund, Inc. 55 basis points
Prudential Europe Growth Fund, Inc. 55 basis points
--------------------------------------------------------------------------------
1. The fee payable for each quarter is calculated at the above rates on
the average funds under management during the quarter.
2. Sub-Investment Manager will invoice Investment Manager at the end of
each quarter for actual fees due as calculated in accordance with 1
above and invoices will be payable within 30 days of invoice date.
3. Investment Manager will undertake to use best endeavors to prepay
each quarter's estimated fees at the beginning of the relevant quarter
(1 January, 1 April, 1 July, 1 October)
4. Fees are calculated pro-rata where funds are not managed for the full
term of a calendar quarter.
This amended schedule is deemed to be effective from the commencement
of this agreement.
FOR THE PRUDENTIAL INVESTMENT CORPORATION
By:_______________________________
Date:
FOR PRICOA ASSET MANAGEMENT LIMITED
Director: ____________________ Director: _______________________
Date: _________________________ Date:____________________________
26
SCHEDULE B
TO THE SUB-INVESTMENT MANAGEMENT AGREEMENT BETWEEN
THE PRUDENTIAL INVESTMENT CORPORATION AND
PRICOA ASSET MANAGEMENT LTD
INVESTMENT GUIDELINES FOR CLIENT ACCOUNTS
The investment guidelines for the following Prudential Mutual Funds are as set
out in each fund's statutory documentation:
PRUDENTIAL INTERNATIONAL BOND FUND, INC. (formerly, The Global Government Plus
Fund, Inc.)
The Fund's investment objective is to seek total return, the components of which
are current income and capital appreciation. The Fund attempts to achieve its
objective by investing primarily in debt securities issued or guaranteed by
governments, semi-government entities, governmental agencies, supranational
entities and other governmental entities in the United States and in other
countries and denominated in the currencies of such countries.
The Fund's detailed investment polices and investment restrictions are set out
in the Fund's Prospectus dated February 28, 1997 and the Fund's Statement of
Additional Information dated February 28, 1997.
THE GLOBAL TOTAL RETURN FUND, INC.
The Fund's investment objective is to seek total return, the components of which
are current income and capital appreciation. The Fund attempts to achieve its
objective by investing, under normal circumstances, at least 65% of its total
assets in governmental (including supranational), semi-governmental or
government agency debt securities or in short-term bank debt securities or
deposits in the United States and in foreign countries denominated in US dollars
or in foreign currencies, including debt securities issued or guaranteed by the
US Government and foreign governments, their agencies, authorities or
instrumentalities. The remainder is generally invested in corporate debt
securities or longer term bank debt securities.
The Fund will invest primarily in investment grade securities or in non-rated
securities determined by the Fund's investment adviser to be of equivalent
quality. The Fund may invest up to 10% of its total assets in debt securities
rated below investment grade, with a minimum rating of B, by either S&P or
Xxxxx'x or by another NRSRO, or, if unrated, are deemed to be of equivalent
quality by the investment adviser.
27
The Fund's detailed investment policies and investment restrictions are set out
in the Fund's Prospectus dated February 28, 1997.
PRUDENTIAL INTERMEDIATE GLOBAL INCOME FUND, INC.
The Fund's objective is to seek to maximize total return, the components of
which are current income and capital appreciation. The Fund will attempt to
achieve its objective by investing primarily in obligations issued or guaranteed
by the US Government, its agencies, authorities or instrumentalities and in
obligations issued or guaranteed by certain foreign governments,
quasi-governmental entities, governmental agencies, supranational entities or
any of their political subdivisions or instrumentalities. The Fund will invest
primarily in investment grade securities or in non-rated securities determined
by the Fund's investment adviser to be of equivalent quality. The Fund may
invest up to 10% of its total assets in debt securities rated below investment
grade, with a minimum rating of B, by either S&P or Xxxxx'x or by another NRSRO,
or if unrated, are deemed to be of equivalent quality by the investment adviser.
The Fund's detailed investment policies and investment restrictions are set out
in the Fund's Prospectus dated February 28, 1997 and the Fund's Statement of
Additional Information dated February 28, 1997.
PRUDENTIAL GLOBAL LIMITED MATURITY FUND, INC.
The Fund's investment objective is to maximize total return, the components of
which are current income and capital appreciation. The Fund seeks to achieve its
objective by investing primarily in a portfolio of debt securities denominated
in the US dollar and a range of foreign currencies. The Fund will maintain a
weighted average maturity of more than 2, but less than 5, years with the
maturity for any individual security generally not exceeding 10 years. The Fund
may also invest up to 20% of its total assets in debt securities rated below
investment grade, with a minimum rating of B, by either S&P or Xxxxx'x or by
another NRSRO, or, if unrated, are deemed to be of equivalent quality by the
investment adviser.
The Fund's detailed investment policies and investment restrictions are set out
in the Fund's Prospectus dated December 30, 1996 and the Fund's Statement of
Additional Information dated December 30, 1996.
PRICOA WORLDWIDE INVESTORS PORTFOLIO, GLOBAL BOND FUND
The Fund's investment objective is to seek total return, the components of which
are current income and capital appreciation. The Fund seeks to achieve its
investment objective by investing primarily in investment grade bonds issued by
governments and corporations with varying maturities. It may also have limited
exposure to non-investment grade issues from emerging markets.
28
The Fund's detailed investment policies and investment restrictions are set out
in the Fund's Prospectus dated October 28, 1996.
PRICOA WORLDWIDE INVESTORS PORTFOLIO, EUROPEAN GROWTH FUND
The Fund's investment objective is long-term growth of capital through
investment in a portfolio of transferable equity and debt securities of
companies domiciled in Europe.
The Fund's detailed investment policies and investment restrictions are set out
in the Fund's Prospectus dated October 28, 1996.
PRICOA MONEY MARKET PORTFOLIO
The Fund's investment objective is to provide the highest level of current
income in each designated currency consistent with safety of principal. Each
Series seeks to achieve this objective by investing in a portfolio of high
quality money market instruments and short-term debt obligations having a
maturity of one year or less denominated (1) in the designated currency of the
Series or (2) in US dollars (or other currencies) in combination with forward
currency exchange contracts to purchase matching amounts of the designated
currency.
The Fund's detailed investment policies and investment restrictions are set out
in the Fund's Prospectus dated June 12, 1991.
PRUDENTIAL GLOBAL GENESIS FUND, INC.
The Fund's investment objective is long-term growth of capital. The Fund seeks
to achieve its investment objective by investing primarily in common stocks,
common stock equivalents (such as warrants and convertible debt securities) and
other equity securities (including preferred stocks) of smaller foreign and
domestic companies. Under normal circumstances, the Fund will invest 65% of its
total assets in such securities.
The Fund's detailed investment policies and investment restrictions are set out
in the Fund's Prospectus dated July 30, 1997 and the Fund's Statement of
Additional Information dated July 30,1997.
PRUDENTIAL EUROPE GROWTH FUND, INC.
The Fund's investment objective is to seek long-term growth of capital. The Fund
attempts to achieve this objective by investing primarily in equity securities
(common stock, securities convertible into common stock and preferred stock) of
companies domiciled in Europe.
29
The Fund's detailed investment policies and investment restrictions are set out
in the Fund's Prospectus dated July 1, 1997, and the Fund's Statement of
Additional Information dated July 1, 1997.
The investment guidelines for the remaining funds are as follows:
PRUDENTIAL GENERAL ACCOUNT
EUROPEAN PORTION OF THE SMALL CAP ACCOUNT
1. Investments will be composed primarily of securities publicly traded in
Europe.
2. Investments will be targeted in securities of small capitalization
companies. (Stocks which primarily make up the lowest 20 percent of the
total market capitalization of $30 million to $1.5billion. The majority of
investments to be in the stocks with market capitalization less than $750
million.)
3. No more than 10% of the portfolio will be invested in stocks larger than
$1.5 billion and not represented in the Salomon Brothers Extended Market
Index ("EMI").
4. No more than 10% of the portfolio will be invested in any one company at the
time of purchase.
5. The portfolio will not purchase more than 10% of the issued capital of any
one company.
6. Investments in cash and related instruments will not exceed 25% of the
portfolio, except during initial portfolio building.
7. Currency hedging of underlying stock positions only (requires approval of
Global Small Cap Equities CIO). Foreign currency futures and options
contracts can only be employed to hedge underlying currency exposure (i.e.,
up to but not more than 100% of underlying exposure to a foreign currency as
measured by the value of cash plus securities held in that foreign
currency).
EUROPEAN SMALL CAP ACCOUNT
1. Investments will be composed primarily of securities publicly traded in
Europe.
2. Investments will be targeted in securities of small capitalization
companies. (Stocks which primarily make up the lowest 20 percent of the
total market capitalization of $30 million to$1.5 billion. The majority of
investments to be in the stocks with market capitalization less than $750
million.)
30
3. No more than 10% of the portfolio will be invested in stocks larger than
$1.5 billion and not represented in the Salomon Brothers Extended Market
Index ("EMI").
4. No more than 10% of the portfolio will be invested in any one company at the
time of purchase.
5. The portfolio will not purchase more than 10% of the issued capital of any
one company.
6. Investments in cash and related instruments will not exceed 25% of the
portfolio, except during portfolio building.
7. Currency hedging of underlying stock positions only (requires approval of
Global Small Cap Equities CIO). Foreign currency futures and options
contracts can only be employed to hedge underlying currency exposure (i.e.,
up to but not more than 100% of underlying exposure to a foreign currency as
measured by the value of cash plus securities held in that foreign
currency).
EUROPEAN PORTION OF THE GLOBAL SMALL CAP ACCOUNT
1. Investments will be composed primarily of securities publicly traded in
Europe.
2. Investments will be targeted in securities of small capitalization
companies. (Stocks which primarily make up the lowest 20 percent of the
total market capitalization of $30 million to$1.5 billion. The majority of
investments to be in the stocks with market capitalization less than $750
million.)
3. No more than 10% of the portfolio will be invested in stocks larger than
$1.5 billion and not represented in the Salomon Brothers Extended Market
Index ("EMI").
4. No more than 10% of the portfolio will be invested in any one company at the
time of purchase.
5. The portfolio will not purchase more than 10% of the issued capital of any
one company.
6. Investments in cash and related instruments will not exceed 25% of the
portfolio, except during initial portfolio building.
7. Currency hedging of underlying stock positions only (requires approval of
Global Small Cap Equities CIO). Foreign currency futures and options
contracts can only be employed to hedge underlying currency exposure (i.e.,
up to but not
31
more than 100% of underlying exposure to a foreign currency as measured by
the value of cash plus securities held in that foreign currency).
PRUDENTIAL GROUP TRUST ACCOUNT (PRU PLAN)
EUROPEAN PORTION OF THE INTERNATIONAL LARGE CAP ACCOUNT
1. The investment objective will be long term capital appreciation through
investment in a broadly diversified portfolio from outside the United
States. The portfolio will be measured against the Xxxxxx Xxxxxxx
International "EAFE" Index.
2. Investments will be composed primarily of securities publicly traded in
Europe.
3. Portfolio will be invested primarily (75%) in securities of large
capitalization companies (greater than $1.5 billion).
4. No more than 10% of the portfolio will be invested in any one company at the
time of purchase.
5. The portfolio will not purchase more than 10% of the issued capital of any
one company.
32
6. Investments in cash and related instruments will not exceed 15% of the
portfolio, except during initial portfolio building.
7. Currency hedging of underlying stock positions only (requires approval of
Global Small Cap Equities CIO).
EUROPEAN PORTION OF THE INTERNATIONAL SMALL CAP ACCOUNT
1. Investments will be composed primarily of securities publicly traded in
Europe.
2. Portfolio will be primarily (70%) in securities of small capitalization
companies.(Stocks which primarily make up the lowest 20 percent of the total
market capitalization of $30 million to$1.5 billion. The majority of
investments to be in the stocks with market capitalization less than $750
million.)
3. No more than 10% of the portfolio will be invested in stocks larger than
$1.5 billion and not represented in the Salomon Brothers Extended Market
Index ("EMI").
4. No more than 10% of the portfolio will be invested in any one company at the
time of purchase.
5. The portfolio will not purchase more than 10% of the issued capital of any
one company.
6. Investments in cash and related instruments will not exceed 15% of the
portfolio, except during initial portfolio building.
7. Currency hedging of underlying stock positions only (requires approval of
Global Small Cap Equities CIO).
TOLI GLOBAL- ROCHE RETIREE WELFARE INVESTMENT TRUST (EUROPEAN PORTION OF THE
GLOBAL ACCOUNT)
1. Investment will be composed primarily of securities publicly traded
represented in the EMI as well as the stock exchanges of Mexico, Thailand,
Indonesia, Philippines, Taiwan, and South Korea, as well as options and
futures contracts related to those securities and convertible bonds of small
capitalization companies. No options, futures, or other derivatives will add
any leverage to the portfolio. Investment may also be made in cash or in the
equivalents of cash or in any commingled money market account maintained by
Prudential.
2. Investments will be targeted primarily (i.e. a minimum of 70% of the
invested portion of the portfolio) in securities of companies which meet
Global Small Cap
33
Equities definition of small capitalization companies. Throughout the world,
Global Small Cap Equities uses the largest market cap of the stocks in
lowest 20% of the market capitalization, within the U. S. markets as its
upper capitalization limit (currently $1.5 billion), except in Japan where
Global Small Cap Equities applies the 20% test separately due to currency
fluctuations. (In Japan, the upper limit is currently $1.5 billion). The
majority of investments to be in the stocks with market capitalization less
than $750 million. Stocks which are included in the portfolio not meeting
the cap size definition should normally be ones which are constituents of
the EMI, except for Southeast Asia where larger traded stocks may be used.
3. No more than 7% of any regional sub-portfolio will be invested in any one
company at the time of purchase; no more than 3% of the total global
portfolio will be so invested.
4. The portfolio will not purchase more than 10% of the issued capital of any
one company. The regional portfolios are generally kept diversified in 30 to
60 names. Industry weights are determined on a bottom up basis but monitored
at the portfolio level and may cut back to limit potential sector risk.
5. Investments in cash and related instruments will not exceed 17% of the
portfolio, except during initial building.
6. Currency hedging will be allowed, although it is not anticipated that Global
Small Cap Equity will employ an active currency overlay program. Any
currency hedging must be covered by an underlying cash/stock position.
7. Within the global portfolio, none of the four regions (Japan, Southeast
Asia, Europe, or North America) will be weighted at time of purchase (or
allocation shift) by more than 12% of the benchmark weight or less than 12%
of the benchmark weight. This 12% guideline will also apply to country
weights within each regional sub-portfolio.
GENERAL
SUBJECT TO THE INVESTMENT GUIDELINES FOR THE CLIENT ACCOUNTS DESCRIBED HEREIN OR
AS SUBSEQUENTLY NOTIFIED TO SUB-INVESTMENT MANAGER IN WRITING:
1. The Client Accounts may contain securities which are or were the subject of
a relevant offer or issue, whether at the time Sub-Investment Manager
acquires them on behalf of Investment Manager, within a period of 12 months
preceding that or otherwise. For the purpose of this paragraph, a "relevant
offer or issue"
34
is an offer or issue of any securities (whether or not those securities are
to be listed on the London Stock Exchange or any other recognized or
designated investment exchange) which is or was sponsored, underwritten,
managed or arranged, or in connection with which other services were
provided, by Sub-Investment Manager or a connected person.
2. Sub-Investment Manager may not commit Investment Manager to any obligation
to underwrite any issue or offer for sale of securities.
3. Sub-Investment Manager may, on behalf of Investment Manager, acquire or
dispose of units in a regulated collective investment scheme, whether or not
operated, managed or advised by Sub-Investment Manager or a connected
person.
4. Sub-Investment Manager may enter into repo or reverse repo transactions but
may not otherwise lend or borrow securities for any purpose.
5. Sub-Investment Manager is authorized by Investment Manager to deal in
warrants, options (including traded options) futures or contracts for
differences on behalf of Investment Manager (provided they are investments
as defined herein). The limits on margins will vary as between the Client
Accounts as set out in Schedule B above and the Prospectuses and Statements
of Additional Information mentioned therein.
6. Where the requisite currency of settlement is not the Client Accounts
Currency Sub-Investment Manager shall be entitled to use spot or forward
foreign exchange contracts (and accordingly enter into them on Investment
Manager's behalf) to fund the acquisition of spot or forward investments or
dispose of sale proceeds in a foreign currency. Notwithstanding
Sub-Investment Manager's right to do this, Investment Manager accepts that
if a liability in one currency is matched by an asset in a different
currency, or if any investment acquired or sold hereunder is denominated or
paid for in a currency other than the Client Accounts Currency, a movement
of exchange rates may be unfavorable rather than favorable, on the gain or
loss otherwise experienced on the investment.
35
A M E N D M E N T
TO SUB-INVESTMENT MANAGEMENT AGREEMENT ("AGREEMENT")
BETWEEN THE PRUDENTIAL INVESTMENT CORPORATION
("INVESTMENT MANAGER")
AND
PRICOA ASSET MANAGEMENT LIMITED ("SUB-INVESTMENT MANAGER")
This Amendment to the Agreement dated September 30, 1997, is dated
February 11, 1998, and effective as of January 1, 1998.
WHEREAS, the parties have agreed that the Sub-Investment Manager will
provide investment advisory services to the registered investment companies
established under the Investment Company Act of 1940, the investment companies
organized under the laws of the Grand Duchy of Luxembourg and the insurance
company general accounts, listed on Schedule A;
NOW THEREFORE, it is agreed as follows:
1. Section 12 of the Agreement is hereby amended to read as follows:
TERMINATION. Sub-Investment Manager may terminate this Agreement on 60
days' written notice to Investment Manager, with respect to managed
accounts and investment companies. Investment Manager may terminate
Sub-Investment Manager's appointment as an investment manager at any
time upon written notice which will take effect immediately upon
receipt. With respect to the registered investment companies, the
agreement also (i) may be terminated without the payment of any
penalty, by the board of directors of such registered investment
company or by a vote of a majority of the outstanding voting securities
on not more than 60 days' written notice to the Sub-Investment Manager;
(ii) shall continue in effect for a period more than two years from the
date of execution, only so long as such continuance is specifically
approved at least annually in conformity with the requirements of the
Investment Company Act of 1940; and (iii) shall terminate automatically
for a particular registered investment company upon the termination of
Investment Manager's Sub-Advisory Agreement for such registered
investment company. Termination of this Agreement will be without
prejudice to the completion of transactions already initiated and
accordingly, despite termination of this Agreement, Sub-Investment
Manager shall be entitled to:
a. settle or close out all transactions entered into or for which
the order was placed with a broker or which was otherwise
initiated or agreed by Sub-Investment Manager on Investment
Manager's behalf hereunder, in good faith before Sub-Investment
Manager received notice of termination (or, if later, the
expiration of such notice); and
36
b. require Investment Manager to pay all outstanding fees and
expenses including those incurred pursuant to paragraph (a)
above.
2. Section 13 of the Agreement is hereby amended to read as follows:
NO ASSIGNMENT Sub-Investment Manager may not make on assignment (as
that term is defined in the Investment Advisers Act of 1940) of this
Agreement without the prior written consent of Investment Manager. This
Agreement, with respect to registered investment companies, shall not
be assigned by either party hereto and shall automatically terminate
forthwith in the event of such assignment (as that term is defined in
the Investment Company Act of 1940).
3. Schedules A and B to the Agreement are hereby amended and
substituted by the attached Schedules A and B, respectively:
IN WITNESS WHEREOF, the parties have caused this Amendment to be signed
as of the date indicated above.
THE PRUDENTIAL INVESTMENT CORPORATION
BY:
-----------------------------------------
NAME: XXXXXXXX X. XXXXXX
---------------------------------------
TITLE: SENIOR VICE PRESIDENT
--------------------------------------
PRICOA ASSET MANAGMENT LIMITED
BY:
-----------------------------------------
NAME:
---------------------------------------
TITLE:
--------------------------------------
BY:_________________________________________
NAME:______________________________________
TITLE:_______________________________________
37
SCHEDULE A (AMENDED)
TO THE SUB-INVESTMENT MANAGEMENT AGREEMENT BETWEEN
THE PRUDENTIAL INVESTMENT CORPORATION AND
PRICOA ASSET MANAGEMENT LIMITED
SCHEDULE OF REMUNERATION
LIST OF FUNDS ANNUAL FEE
-------------- ----------
BOND FUNDS
Prudential International Bond Fund, Inc.
(formerly The Global Government Plus Fund, Inc.) Cost + 5% of cost
The Global Total Return Fund, Inc. Cost + 5% of cost
Prudential Intermediate Global Income Fund, Inc. Cost + 5% of cost
Prudential Global Limited Maturity Fund, Inc. Cost + 5% of cost
PRICOA Worldwide Investors Portfolio, Global Bond Fund 30 basis points
MONEY MARKET FUNDS
PRICOA Money Market Portfolio, Deutsche Xxxx Series 30 basis points
PRICOA Money Market Portfolio, Pound Sterling Series 0 basis points
EQUITY FUNDS Prudential General Account:
-European Portion of the Small Cap Account Cost + 5% of cost
-European Small Cap Account Cost + 5% of cost
- European Large Cap Account Cost + 5% of cost
-European Portion of the Global Small Cap Account Cost + 5% of cost
Prudential Group Trust Account (Pru Plan)
-European Portion of International Large Cap Account Cost + 5% of cost
-European Portion of International Small Cap Account Cost + 5% of cost
38
TOLI GLOBAL-Roche Retiree Welfare Investment Trust Cost +5% of cost
Prudential Global Genesis Fund, Inc. Cost +5% of cost
Prudential Europe Growth Fund, Inc. Cost + 5% of cost
39
PRICOA Worldwide Investors Portfolio,
European Growth Fund 55 basis points
--------------------------------------------------------------------------------
1. The fee payable for each quarter is calculated at the above rates on
the average funds under management during the quarter.
2. Sub-Investment Manager will invoice Investment Manager at the end of
each quarter for actual fees due as calculated in accordance with 1 above and
invoices will be payable within 30 days of invoice date.
3. Investment Manager will undertake to use best endeavors to prepay
each quarter's estimated fees at the beginning of the relevant quarter (1
January, 1 April, 1 July, 1 October)
4. Fees are calculated pro-rata where funds are not managed for the
full term of a calendar quarter.
This amended schedule is deemed to be effective as of January 1, 1998.
FOR THE PRUDENTIAL INVESTMENT CORPORATION
By:_______________________________
Date:_____________________________
FOR PRICOA ASSET MANAGEMENT LIMITED
Director: ____________________ Director: _________________________
Date: _________________________ Date: ____________________________
40
SCHEDULE B
TO THE SUB-INVESTMENT MANAGEMENT AGREEMENT BETWEEN
THE PRUDENTIAL INVESTMENT CORPORATION AND
PRICOA ASSET MANAGEMENT LTD
INVESTMENT GUIDELINES FOR CLIENT ACCOUNTS
The investment guidelines for the following Prudential Mutual Funds are as set
out in each fund's statutory documentation:
PRUDENTIAL INTERNATIONAL BOND FUND, INC. (formerly, The Global Government Plus
Fund, Inc.)
The Fund's investment objective is to seek total return, the components of which
are current income and capital appreciation. The Fund attempts to achieve its
objective by investing at least 65% of its total assets in debt securities of
issuers located in at least three countries, excluding the United States (except
in periods of market weakness). The Fund invests in foreign debt securities
issued by foreign corporate issuers as well as securities issued or guaranteed
by foreign governments, semi-governmental entities, governmental agencies,
supranational entities and other governmental entities.
The Fund's detailed investment policies and investment restrictions are set out
in the Fund's Prospectus and Statement of Additional Information as amended from
time to time.
THE GLOBAL TOTAL RETURN FUND, INC.
The Fund's investment objective is to seek total return, the components of which
are current income and capital appreciation. The Fund attempts to achieve its
objective by investing, under normal circumstances, at least 65% of its total
assets in governmental (including supranational), semi-governmental or
government agency debt securities or in short-term bank debt securities or
deposits in the United States and in foreign countries denominated in US dollars
or in foreign currencies, including debt securities issued or guaranteed by the
US Government and foreign governments, their agencies, authorities or
instrumentalities. The remainder is generally invested in corporate debt
securities or longer term bank debt securities.
The Fund will invest primarily in investment grade securities or in non-rated
securities determined by the Fund's investment adviser to be of equivalent
quality. The Fund may invest up to 10% of its total assets in debt securities
rated below investment grade, with a minimum rating of B, by either S&P or
Xxxxx'x or by another NRSRO, or, if unrated, are deemed to be of equivalent
quality by the investment adviser.
The Fund's detailed investment policies and investment restrictions are set out
in the Fund's Prospectus and Statement of Additional Information as amended from
time to time.
41
PRUDENTIAL INTERMEDIATE GLOBAL INCOME FUND, INC.
The Fund's objective is to seek to maximize total return, the components of
which are current income and capital appreciation. The Fund will attempt to
achieve its objective by investing primarily in obligations issued or guaranteed
by the US Government, its agencies, authorities or instrumentalities and in
obligations issued or guaranteed by certain foreign governments,
quasi-governmental entities, governmental agencies, supranational entities or
any of their political subdivisions or instrumentalities. The Fund will invest
primarily in investment grade securities or in non-rated securities determined
by the Fund's investment adviser to be of equivalent quality. The Fund may
invest up to 10% of its total assets in debt securities rated below investment
grade, with a minimum rating of B, by either S&P or Xxxxx'x or by another NRSRO,
or if unrated, are deemed to be of equivalent quality by the investment adviser.
The Fund's detailed investment policies and investment restrictions are set out
in the Fund's Prospectus and Statement of Additional Information as amended from
time to time.
PRUDENTIAL GLOBAL LIMITED MATURITY FUND, INC.
The Fund's investment objective is to maximize total return, the components of
which are current income and capital appreciation. The Fund seeks to achieve its
objective by investing primarily in a portfolio of investment grade debt
securities denominated in the US dollar and a range of foreign currencies. The
Fund will maintain a weighted average maturity of more than 2, but less than 5,
years with the maturity for any individual security generally not exceeding 10
years. The Fund may also invest up to 20% of its total assets in debt securities
rated below investment grade, with a minimum rating of B, by either S&P or
Xxxxx'x or by another NRSRO, or, if unrated, are deemed to be of equivalent
quality by the investment adviser.
The Fund's detailed investment policies and investment restrictions are set out
in the Fund's Prospectus and Statement of Additional Information as amended from
time to time.
PRICOA WORLDWIDE INVESTORS PORTFOLIO, GLOBAL BOND FUND
The Fund's investment objective is to seek total return, the components of which
are current income and capital appreciation. The Fund seeks to achieve its
investment objective by investing primarily in investment grade bonds issued by
governments and corporations with varying maturities. It may also have limited
exposure to non-investment grade issues from emerging markets.
The Fund's detailed investment policies and investment restrictions are set out
in the Fund's Prospectus as amended from time to time.
PRICOA WORLDWIDE INVESTORS PORTFOLIO, EUROPEAN GROWTH FUND
42
The Fund's investment objective is long-term growth of capital through
investment in a portfolio of transferable equity and debt securities of
companies domiciled in Europe.
The Fund's detailed investment policies and investment restrictions are set out
in the Fund's Prospectus amended from time to time.
PRICOA MONEY MARKET PORTFOLIO
The Fund's investment objective is to provide the highest level of current
income in each designated currency consistent with safety of principal. Each
Series seeks to achieve this objective by investing in a portfolio of high
quality money market instruments and short-term debt obligations having a
maturity of one year or less denominated (1) in the designated currency of the
Series or (2) in US dollars (or other currencies) in combination with forward
currency exchange contracts to purchase matching amounts of the designated
currency.
The Fund's detailed investment policies and investment restrictions are set out
in the Fund's offering circular as amended from time to time.
PRUDENTIAL GLOBAL GENESIS FUND, INC.
The Fund's investment objective is long-term growth of capital. The Fund seeks
to achieve its investment objective by investing primarily in common stocks,
common stock equivalents (such as warrants and convertible debt securities) and
other equity securities (including preferred stocks) of smaller foreign and
domestic companies. Under normal circumstances, the Fund will invest 65% of its
total assets in such securities.
The Fund's detailed investment policies and investment restrictions are set out
in the Fund's Prospectus and Statement of Additional Information as amended from
time to time.
PRUDENTIAL EUROPE GROWTH FUND, INC.
The Fund's investment objective is to seek long-term growth of capital. The Fund
attempts to achieve this objective by investing primarily in equity securities
(common stock, securities convertible into common stock and preferred stock) of
companies domiciled in Europe.
The Fund's detailed investment policies and investment restrictions are set out
in the Fund's Prospectus and Statement of Additional Information as amended from
time to time.
The investment guidelines for the remaining funds are as follows:
PRUDENTIAL GENERAL ACCOUNT
EUROPEAN PORTION OF THE SMALL CAP ACCOUNT
1. Investments will be composed primarily of securities publicly traded in
Europe.
43
2. Investments will be targeted in securities of small capitalization
companies. (Stocks which primarily make up the lowest 20 percent of the
total market capitalization of $30 million to $1.5 billion. The majority of
investments to be in the stocks with market capitalization less than $750
million.)
3. No more than 10% of the portfolio will be invested in stocks larger than
$1.5 billion and not represented in the Salomon Brothers Extended Market
Index ("EMI").
4. No more than 10% of the portfolio will be invested in any one company at the
time of purchase.
5. The portfolio will not purchase more than 10% of the issued capital of any
one company.
6. Investments in cash and related instruments will not exceed 25% of the
portfolio, except during initial portfolio building.
7. Currency hedging of underlying stock positions only (requires approval of
Global Equities CIO). Foreign currency futures and options contracts can
only be employed to hedge underlying currency exposure (i.e., up to but not
more than 100% of underlying exposure to a foreign currency as measured by
the value of cash plus securities held in that foreign currency).
EUROPEAN SMALL CAP ACCOUNT
1. Investments will be composed primarily of securities publicly traded in
Europe.
2. Investments will be targeted in securities of small capitalization
companies. (Stocks which primarily make up the lowest 20 percent of the
total market capitalization of $30 million to $1.5 billion. The majority of
investments to be in the stocks with market capitalization less than $750
million.)
3. No more than 10% of the portfolio will be invested in stocks larger than
$1.5 billion and not represented in the Salomon Brothers Extended Market
Index ("EMI").
4. No more than 10% of the portfolio will be invested in any one company at the
time of purchase.
5. The portfolio will not purchase more than 10% of the issued capital of any
one company.
6. Investments in cash and related instruments will not exceed 25% of the
portfolio, except during portfolio building.
44
7. Currency hedging of underlying stock positions only (requires approval of
Global Equities CIO). Foreign currency futures and options contracts can
only be employed to hedge underlying currency exposure (i.e., up to but not
more than 100% of underlying exposure to a foreign currency as measured by
the value of cash plus securities held in that foreign currency).
EUROPEAN LARGE CAP ACCOUNT
1. Investments will be composed primarily of publicly traded securities of
companies headquartered in European countries, the majority of which would
also be included in the MSCI European Index.
2. The portfolio will consist of no fewer than 25 securities, and no single
security will represent more than 10% of the portfolio at the time of
purchase.
3. The portfolio will not purchase more than 10% of the issued capital of any
one company.
4. Investments in cash and related instruments, except during the initial
portfolio building period, will not exceed 15% of the portfolio.
5. The portfolio may use futures contracts, forward contracts, options and
derivatives related to the underlying stock or foreign exchange markets of
the countries in which they are invested, provided such instruments are used
in bona fide hedging transactions.
6. Additional policies and guidelines will be established by the Portfolio
Management Group.
EUROPEAN PORTION OF THE GLOBAL SMALL CAP ACCOUNT
1. Investments will be composed primarily of securities publicly traded in
Europe.
2. Investments will be targeted in securities of small capitalization
companies. (Stocks which primarily make up the lowest 20 percent of the
total market capitalization of $30 million to $1.5 billion. The majority of
investments to be in the stocks with market capitalization less than $750
million.)
3. No more than 10% of the portfolio will be invested in stocks larger than
$1.5 billion and not represented in the Salomon Brothers Extended Market
Index ("EMI").
4. No more than 10% of the portfolio will be invested in any one company at the
time of purchase.
5. The portfolio will not purchase more than 10% of the issued capital of any
one company.
45
6. Investments in cash and related instruments will not exceed 25% of the
portfolio, except during initial portfolio building.
7. Currency hedging of underlying stock positions only (requires approval of
Global Equities CIO). Foreign currency futures and options contracts can
only be employed to hedge underlying currency exposure (i.e., up to but not
more than 100% of underlying exposure to a foreign currency as measured by
the value of cash plus securities held in that foreign currency).
PRUDENTIAL GROUP TRUST ACCOUNT (PRU PLAN)
EUROPEAN PORTION OF THE INTERNATIONAL LARGE CAP ACCOUNT
1. The investment objective will be long term capital appreciation through
investment in a broadly diversified portfolio from outside the United
States. The portfolio will be measured against the Xxxxxx Xxxxxxx
International "EAFE" Index.
2. Investments will be composed primarily of securities publicly traded in
Europe.
3. Portfolio will be invested primarily (75%) in securities of large
capitalization companies (greater than $1.5 billion).
4. No more than 10% of the portfolio will be invested in any one company at the
time of purchase.
5. The portfolio will not purchase more than 10% of the issued capital of any
one company.
6. Investments in cash and related instruments will not exceed 15% of the
portfolio, except during initial portfolio building.
7. Currency hedging of underlying stock positions only (requires approval of
Global Equities CIO).
EUROPEAN PORTION OF THE INTERNATIONAL SMALL CAP ACCOUNT
1. Investments will be composed primarily of securities publicly traded in
Europe.
2. Portfolio will be primarily (70%) in securities of small capitalization
companies.(Stocks which primarily make up the lowest 20 percent of the total
market capitalization of $30 million to$1.5 billion. The majority of
investments to be in the stocks with market capitalization less than $750
million.)
3. No more than 10% of the portfolio will be invested in stocks larger than
$1.5 billion and not represented in the Salomon Brothers Extended Market
Index ("EMI").
46
4. No more than 10% of the portfolio will be invested in any one company at the
time of purchase.
5. The portfolio will not purchase more than 10% of the issued capital of any
one company.
6. Investments in cash and related instruments will not exceed 15% of the
portfolio, except during initial portfolio building.
7. Currency hedging of underlying stock positions only (requires approval of
Global Equities CIO).
TOLI GLOBAL- ROCHE RETIREE WELFARE INVESTMENT TRUST (EUROPEAN PORTION OF THE
GLOBAL ACCOUNT)
1. Investment will be composed primarily of securities publicly traded
represented in the EMI as well as the stock exchanges of Mexico, Thailand,
Indonesia, Philippines, Taiwan, and South Korea, as well as options and
futures contracts related to those securities and convertible bonds of small
capitalization companies. No options, futures, or other derivatives will add
any leverage to the portfolio. Investment may also be made in cash or in the
equivalents of cash or in any commingled money market account maintained by
Prudential.
2. Investments will be targeted primarily (i.e. a minimum of 70% of the
invested portion of the portfolio) in securities of companies which meet
Global Equities definition of small capitalization companies. Throughout the
world, Global Equities uses the largest market cap of the stocks in lowest
20% of the market capitalization, within the U. S. markets as its upper
capitalization limit (currently $1.5 billion), except in Japan where Global
Equities applies the 20% test separately due to currency fluctuations. (In
Japan, the upper limit is currently $1.5 billion). The majority of
investments to be in the stocks with market capitalization less than $750
million. Stocks which are included in the portfolio not meeting the cap size
definition should normally be ones which are constituents of the EMI, except
for Southeast Asia where larger traded stocks may be used.
3. No more than 7% of any regional sub-portfolio will be invested in any one
company at the time of purchase; no more than 3% of the total global
portfolio will be so invested.
4. The portfolio will not purchase more than 10% of the issued capital of any
one company. The regional portfolios are generally kept diversified in 30 to
60 names. Industry weights are determined on a bottom up basis but monitored
at the portfolio level and may cut back to limit potential sector risk.
5. Investments in cash and related instruments will not exceed 17% of the
portfolio, except during initial building.
47
6. Currency hedging will be allowed, although it is not anticipated that Global
Equities will employ an active currency overlay program. Any currency
hedging must be covered by an underlying cash/stock position.
7. Within the global portfolio, none of the four regions (Japan, Southeast
Asia, Europe, or North America) will be weighted at time of purchase (or
allocation shift) by more than 12% of the benchmark weight or less than 12%
of the benchmark weight. This 12% guideline will also apply to country
weights within each regional sub-portfolio.
GENERAL
SUBJECT TO THE INVESTMENT GUIDELINES FOR THE CLIENT ACCOUNTS DESCRIBED HEREIN OR
AS SUBSEQUENTLY NOTIFIED TO SUB-INVESTMENT MANAGER IN WRITING:
1. The Client Accounts may contain securities which are or were the subject of
a relevant offer or issue, whether at the time Sub-Investment Manager
acquires them on behalf of Investment Manager, within a period of 12 months
preceding that or otherwise. For the purpose of this paragraph, a "relevant
offer or issue" is an offer or issue of any securities (whether or not those
securities are to be listed on the London Stock Exchange or any other
recognized or designated investment exchange) which is or was sponsored,
underwritten, managed or arranged, or in connection with which other
services were provided, by Sub-Investment Manager or a connected person.
2. Sub-Investment Manager may not commit Investment Manager to any obligation
to underwrite any issue or offer for sale of securities.
3. Sub-Investment Manager may, on behalf of Investment Manager, acquire or
dispose of units in a regulated collective investment scheme, whether or not
operated, managed or advised by Sub-Investment Manager or a connected
person.
4. Sub-Investment Manager may enter into repo or reverse repo transactions but
may not otherwise lend or borrow securities for any purpose.
5. Sub-Investment Manager is authorized by Investment Manager to deal in
warrants, options (including traded options) futures or contracts for
differences on behalf of Investment Manager (provided they are investments
as defined herein). The limits on margins will vary as between the Client
Accounts as set out in Schedule B above and the Prospectuses and Statements
of Additional Information mentioned therein.
6. Where the requisite currency of settlement is not the Client Accounts
Currency Sub-Investment Manager shall be entitled to use spot or forward
foreign exchange contracts (and accordingly enter into them on Investment
Manager's behalf) to fund the acquisition of spot or forward investments or
dispose of sale proceeds in a foreign currency.
48
Notwithstanding Sub-Investment Manager's right to do this, Investment
Manager accepts that if a liability in one currency is matched by an asset
in a different currency, or if any investment acquired or sold hereunder is
denominated or paid for in a currency other than the Client Accounts
Currency, a movement of exchange rates may be unfavorable rather than
favorable, on the gain or loss otherwise experienced on the investment.
49
