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 August 10,
1998, and effective as of May 26, 1998.
WHEREAS, the parties have agreed that the Sub-Investment Manager will
provide investment advisory services to Investment Manager in respect of 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, managed advisory accounts and the insurance company general
accounts, listed on Schedule A;
NOW THEREFORE, it is agreed as follows:
1. Section 5 of the Agreement is hereby amended to read as follows:
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 Account's 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.
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's
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.
However, Sub-Investment Manager shall not be responsible for issuing settlement
instructions to the Custodian with respect to the GFI accounts listed on
Schedule A. The Investment Manager shall have settlement responsibilities for
such accounts. When applicable, 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 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 favor of) the Custodian.
2
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.
2. Section 8 of the Agreement is hereby amended to read as follows:
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. With respect to the GFI accounts listed on Schedule A,
Sub-Investment Manager will not be responsible for said reports. The Investment
Manager shall have reporting responsibilities for such accounts.
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.
3. Schedules A and B to the Agreement are hereby amended and substituted
by the attached Schedules A and B, respectively:
3
IN WITNESS WHEREOF, the parties have caused this Amendment to be signed as
of the date indicated above.
THE PRUDENTIAL INVESTMENT CORPORATION
BY: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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NAME: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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TITLE: Senior Vice President
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PRICOA ASSET MANAGEMENT LIMITED
BY: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
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NAME: ▇▇▇▇▇ ▇▇▇▇▇▇▇
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TITLE: Director
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BY: /s/ ▇▇▇▇-▇▇▇▇ Chereau
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NAME: ▇▇▇▇-▇▇▇▇ Chereau
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TITLE: Director
----------------------
4
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
*PRICOA Worldwide Investors Portfolio
- Emerging Markets Fixed Income Fund 30 basis points
+ Swire Pacific Foreign Bond Portfolio Cost + 5% of cost
+ Swire Pacific Domestic Bond Portfolio Cost + 5% of cost
+ ▇▇▇▇ ▇▇▇▇▇ Foreign Bond Portfolio Cost + 5% of cost
+ ▇▇▇▇ ▇▇▇▇▇ Domestic Bond Portfolio Cost + 5% of cost
+ Cathay Pacific Foreign Bond Portfolio Cost + 5% of cost
+ Cathay Pacific Domestic Bond Portfolio Cost + 5% of cost
+ HAECO Foreign Bond Portfolio Cost + 5% of cost
+ HAECO Domestic Bond Portfolio Cost + 5% of cost
+ HAECO Expatriot Foreign Bond Portfolio Cost + 5% of cost
+ HAECO Expatriot Domestic Bond Portfolio Cost + 5% of cost
+ Prudential Trust Foreign Cost + 5% of cost
+ Prudential Trust Global Bond Cost + 5% of cost
+ Prudential Trust Currency Hedged International Cost + 5% of cost
+ ▇▇▇▇ Atlantic Global Yield Cost + 5% of cost
+ Global Income Fund (FCP) Cost + 5% of cost
+ American National Can Bond Cost + 5% of cost
+ General Global Development Cost + 5% of cost
+ Arkansas Public Employees Retirement Scheme Cost + 5% of cost
MONEY
MARKET
FUNDS * PRICOA Money Market Portfolio,
Deutsche ▇▇▇▇ Series Cost + 5% of cost
* PRICOA Money Market Portfolio,
Pound Sterling Series Cost + 5% of cost
EQUITY
FUNDS o 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 Cost + 5% of cost
Account
o 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
o TOLI GLOBAL-Roche Retiree Welfare Investment
Trust Cost + 5% of cost
o Prudential Global Genesis Fund, Inc. Cost + 5% of cost
o Prudential Europe Growth Fund, Inc. Cost + 5% of cost
o PRICOA World Wide Investors Portfolio,
European Growth Fund 55 basis points
o PRICOA Worldwide Investors Portfolio,
Global Small Companies Fund 55 basis points(1)
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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: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Date: August 10, 1998
FOR PRICOA ASSET MANAGEMENT LIMITED
Director: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇ Director: /s/ ▇▇▇▇-▇▇▇▇ Chereau
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Date: August 10, 1998 Date: August 10, 1998
---------------------- -------------------------
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1 * = denotes PMFIM London Accounts
+ = denotes GFI London Accounts
o = denotes Global Equities London Accounts
2
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 and the Fund's Statement of Additional Information,
as they may be 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 ▇▇▇▇▇'▇ 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, as it may be amended from time to time.
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 ▇▇▇▇▇'▇ 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 the Fund's Statement of Additional
Information, as they may be 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 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
▇▇▇▇▇'▇ 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 the Fund's Statement of Additional
Information, as they may be 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.
2
The Fund's detailed investment policies and investment restrictions are
set out in the Fund's Prospectus, as it may be amended from time to time.
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, as it may be amended from time to time.
PRICOA WORLDWIDE INVESTORS PORTFOLIO, EMERGING MARKETS FIXED INCOME FUND
The Fund's investment objective is high current income with capital
appreciation as a secondary objective. The Fund seeks to achieve these
objectives primarily through investment in a portfolio of transferable debt
securities of issuers in emerging markets throughout the world. The Fund will
seek to take advantage of the significant potential of emerging economies by
investing in high yielding debt securities and other instruments issued by
governments and corporations in these developing 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, GLOBAL SMALL COMPANIES FUND
The Fund's investment objective is long-term growth of capital. The Fund
seeks to achieve this objective by investing primarily in transferable equity
securities (common stocks, securities convertible into common stocks and
preferred stocks) of corporations around the world with market capitalizations
of less than USD 1.5 billion (or equivalent in other currencies), measured at
the time of initial purchase. The Fund will not invest more than 10% of its net
assets in securities not listed on a stock exchange or dealt in on another
regulated market. Investment income is of incidental importance and the Fund may
invest in securities which do not produce any income.
The Fund's detailed investment policies and investment restrictions are
set out in the Fund's prospectus as 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
3
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, as it may be 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 the Fund's Statement of Additional
Information, as they may be 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 the Fund's Statement of Additional
Information, as they may be amended from time to time.
The investment guidelines for the remaining funds are as follows:
GLOBAL FIXED INCOME STRATEGY
The Global Fixed Income strategy is designed to provide the investor the
best opportunities worldwide. The objective is to outperform the ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ World Government Bond Index by investing in countries around the world,
including the United States. The strategy focuses on maximizing total return
through active management of currency and bond market exposures and duration,
and selective use of yield enhancing security selection strategies.
Accounts:
Pru Trust Global,
4
Global Income Fund
Cathay Pacific
Swire Pacific
▇▇▇▇ ▇▇▇▇▇
HAECO Local
HAECO Expatriate
NON-U.S. FIXED INCOME STRATEGY
The Non-US Fixed Income Strategy focuses on capturing opportunities
outside the US through non-dollar bond and currency exposure. Value is added
through active bond, currency and duration management from a non-domestic bond
universe. The objective is to outperform the ▇▇▇▇▇▇▇ ▇▇▇▇▇ Barney Non-US Dollar
World Government Bond Index.
Accounts:
Pru Trust Foreign
NON-US HEDGED FIXED INCOME STRATEGY
The Non-US Hedged Fixed Income strategy is for investors wanting long term
non-US bond exposure with limited currency exposure. The strategy focuses on a
non-dollar fully hedged benchmark, the ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Non-US Dollar
Currency Hedged World Government Bond Index, by selection and management of bond
market duration and exposure. Currency is managed from a hedged neutral position
with ▇▇▇▇▇▇ selectively lifted to add value.
Accounts:
Pru Trust Currency Hedged
General Developing Markets
GLOBAL SHORT TERM STRATEGY
The Global Short Term Strategy focuses on outperforming US short term market
opportunities through the active management of currency and investment in short
term fixed income securities.
Accounts:
▇▇▇▇ Atlantic Global Yield
PLEASE NOTE THE REMAINING 2 ACCOUNTS: AMERICAN NATIONAL CAN AND ARKANSAS
PERS ARE 1/2 HEDGED ACCOUNTS.
5
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 $1.5 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").
6
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 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.
7
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).
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 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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.
8
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").
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
9
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.
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
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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.
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