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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant[x]
Filed by a Party other than the Registrant[ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
_________________________________________
THE PRUDENTIAL INSTITUTIONAL FUND
_________________________________________
THE PRUDENTIAL INSTITUTIONAL FUND
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction
applies:
_______________________________________
2) Aggregate number of securities to which transaction applies:
_______________________________________
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:1
_______________________________________
4) Proposed maximum aggregate value of transaction:
_______________________________________
1 Set forth the amount on which the filing fee is calculated and state
how it was determined.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
1) Amount Previously Paid:
_________________________
2) Form, Schedule or Registration Statement No.:
_________________________
3) Filing Party:
_________________________
4) Date Filed:
_________________________
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THE PRUDENTIAL INSTITUTIONAL FUND
INTERNATIONAL STOCK FUND
NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS
November 16, 1995
To the Shareholders:
A special meeting of the holders of shares of beneficial interest
of the International Stock Fund ("Fund"), a series of The Prudential
Institutional Fund ("Company"), will be held on November 16, 1995 at 9:30
a.m., eastern time, at Prudential Plaza, 751 Broad Street, Newark, New
Jersey 07102-3777 for the following purposes:
(1) To approve a Subadvisory Agreement between Prudential
Institutional Fund Management, Inc. and Mercator Asset
Management, L.P. on behalf of the Fund; and
(2) To transact such other business as may properly come
before the meeting or any adjournments thereof.
You will be entitled to vote at the meeting and any adjournments
thereof if you owned shares of the Fund at the close of business on
October 6, 1995. If you attend the meeting, you may vote your shares in
person. If you do not expect to attend the meeting, please complete,
date, sign and return the enclosed proxy card in the enclosed postage paid
envelope.
By order of the Board of Trustees,
S. JANE ROSE
Secretary
October 20, 1995
21 Prudential Plaza
751 Broad Street
Newark, New Jersey 07102-3777
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THE PRUDENTIAL INSTITUTIONAL FUND
INTERNATIONAL STOCK FUND
Prudential Plaza
751 Broad Street
Newark, New Jersey 07102-3777
_________________
PROXY STATEMENT
_________________
Special Meeting of Shareholders to Be Held on November 16, 1995
This is a proxy statement for the International Stock Fund
("Fund"), a series of The Prudential Institutional Fund ("Company"), in
connection with the solicitation of proxies made by, and on behalf of, the
Company's Board of Trustees ("Trustees") to be used at a special meeting
of shareholders and at any adjournments thereof ("Meeting").
A quorum of forty percent of the shares of beneficial interest of
the Fund ("Shares") outstanding at the close of business on October 6,
1995 ("Record Date"), represented in person or by proxy, must be present
for the transaction of business at the Meeting. In the absence of a
quorum or in the event that a quorum is present at the Meeting but votes
sufficient to approve the proposal are not received, the persons named as
proxies may propose one or more adjournments of the Meeting to permit
further solicitation of proxies. Any such adjournment will require the
affirmative vote of a majority of those Shares represented at the Meeting
in person or by proxy. If a quorum is present, the persons named as
proxies will vote those proxies that they are entitled to vote FOR the
proposal in favor of such an adjournment, and will vote those proxies
required to be voted AGAINST the proposal against such adjournment. A
shareholder vote may be taken on the proposal in this proxy statement
prior to any such adjournment if sufficient votes have been received and
it is otherwise appropriate.
Abstentions will be counted as Shares present for purposes of
determining whether a quorum is present but will not be voted for or
against any adjournment. Accordingly, abstentions effectively will be a
vote against adjournment or against the proposal where the required vote
is a percentage of the Shares present. Abstentions will not be counted,
however, as votes cast for purposes of determining whether sufficient
votes have been received to approve the proposal.
The individuals named as proxies in the enclosed proxy card will
vote in accordance with your directions as indicated thereon if your proxy
card is received properly executed. If you give no voting instructions,
your Shares will be voted in favor of the proposal described in this proxy
statement. Your proxy card may be revoked by giving another proxy, by
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letter or telegram revoking your proxy if received by the Company prior to
the Meeting, or by appearing and voting at the Meeting.
As of the Record Date, the Fund had 9,027,566 Shares issued and
outstanding. The persons listed in Appendix A owned of record or
beneficially 5% or more of the Fund's outstanding Shares on the Record
Date. All costs associated with the Meeting, including the solicitation
of proxies, will be borne by Prudential Institutional Fund Management,
Inc. ("PIFM"), the Company's Manager. Solicitations will be made
primarily by mail but also may include telephone communications by regular
employees of PIFM, who will not receive any compensation therefor from the
Fund. Each Share of the Fund is entitled to one vote. This proxy will be
mailed to shareholders on or about October 20, 1995. You may obtain a
copy of the Company's most recent annual or semi-annual report to
shareholders, which includes information relating to the Fund, free of
charge, by writing to the Company at 21 Prudential Plaza, 751 Broad
Street, Newark, New Jersey 07102-3777 or by calling 1-800-824-7513.
PROPOSAL 1. APPROVAL OF THE SUBADVISORY AGREEMENT
The Trustees and Prudential Institutional Fund Management, Inc.
propose that Mercator Asset Management, L.P. ("Mercator") be appointed as
a subadviser of the Fund. If this appointment is approved by
shareholders, Mercator would replace Mercator Asset Management, Inc.
("Mercator Inc."), an indirect wholly-owned subsidiary of The Prudential
Insurance Company of America ("The Prudential"), as the Fund's subadviser,
contingent upon its satisfactorily registering with the Securities and
Exchange Commission ("SEC") as an investment adviser. Mercator currently
has pending an investment adviser registration with the SEC.
Mercator Inc. has been investment subadviser to the Fund since
the Fund's inception in 1992 pursuant to a subadvisory agreement between
PIFM and Mercator Inc. dated October 30, 1992 ("Current Agreement").
Mercator Inc., Mercator and certain other parties have entered into a
"Contribution Agreement" pursuant to which Mercator is contemplated to
assume the investment advisory business of Mercator Inc. If shareholders
approve Mercator's appointment as subadviser, Mercator will provide the
same portfolio management services as Mercator Inc., will employ the same
portfolio manager and other key personnel as Mercator Inc., and will
receive substantially the same subadvisory fee that Mercator Inc.
currently receives.
The terms of the Contribution Agreement call for Mercator Inc. to
receive a limited partnership interest in Mercator. As a result, The
Prudential and Mercator Inc. may be deemed to be receiving compensation
for the proposed assignment of the Current Agreement. Accordingly, as
discussed below under "Trustees and Officers", The Prudential and Mercator
Inc. intend to avail themselves of the safe harbor provided by Section
15(f) of the Investment Company Act of 1940 ("1940 Act").
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The proposed retention of Mercator is based primarily on the
desire of the Trustees to have key personnel employed by Mercator continue
providing portfolio management services to the Fund. Peter F. Spano, a
Managing Director of Mercator Inc., has served as the Fund's portfolio
manager since the Fund's inception and is responsible for the day-to-day
portfolio management of the Fund.
At a meeting held on October 2, 1995, the Trustees determined
that it would be in the best interests of the Fund and its shareholders to
continue these services by retaining Mercator as the Fund's investment
subadviser. In making this decision, the Trustees considered, among other
factors, Mercator's specialized experience and success to date as a global
and international investment manager, Mr. Spano's experience and track
record to date as the Fund's portfolio manager, the other key personnel
employed by Mercator who would continue to assist in portfolio management
activities, other portfolio management alternatives available to the Fund
and facilities, financial strength, quality of services and client
communication capabilities offered by Mercator. Mercator Inc. currently
operates independently of PIFM and the Fund in researching and
recommending investment opportunities. In considering the Proposed
Agreement (as defined below), the Trustees noted that Mercator Inc.
principals will have an interest in the profits of this new advisory
business.
Accordingly, at their October 2, 1995 meeting, the Trustees
unanimously voted that (1) subject to shareholder approval, Mercator be
appointed as the Fund's investment subadviser and the proposed subadvisory
agreement between PIFM and Mercator ("Proposed Agreement") be approved,
and (2) the Proposed Agreement be submitted for shareholder approval.
These decisions included the unanimous approval of all Trustees who are
not "interested persons" of the Company, PIFM, Mercator Inc. or Mercator,
as that term is defined in the 1940 Act ("Independent Trustees").
Description of the Subadvisory Agreement
Under the Proposed Agreement, there will be no material changes
in the subadvisory services formerly provided by Mercator Inc. that
Mercator will provide to the Fund. Mercator will provide investment
advisory services to the Fund. Mercator will be responsible for
providing a continuous investment program for the Fund, subject to the
supervision of the Trustees and PIFM. As the Current Agreement similarly
provides, as compensation for Mercator's services and for expenses borne
by Mercator under the Proposed Agreement, PIFM (not the Fund) will pay
Mercator monthly a fee at an annual rate equal to .75 of 1% of the Fund's
average daily net assets up to and including $50 million, and .60 of 1% of
the Fund's average daily net assets in excess of $50 million. In
addition, under the Proposed Agreement, Mercator's fee will be further
reduced to .45 of 1% of the Fund's average daily net assets in excess of
$300 million.
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During the year ended September 30, 1995 PIFM paid or accrued to
Mercator Inc. a fee of $ 788,564 pursuant to the terms of the Current
Agreement. This fee would remain the same under the proposed new fee
structure, based on the current size of the Fund.
Similar to the Current Agreement, the Proposed Agreement provides
that Mercator will not be liable for any error of judgment or mistake of
law or for any loss suffered by the Company in connection with the
performance of the Proposed Agreement, except a loss resulting from
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties. The Proposed Agreement also provides that
Mercator shall be held liable for its own negligence (but not mere errors
in portfolio management judgment) with respect to errors relating to
portfolio trades ("portfolio trade negligence") and that Mercator shall
indemnify and hold harmless the Fund and PIFM from any and all claims,
losses, expenses, obligations and liabilities (including reasonable
attorneys' fees) that arise or result from Mercator's willful misfeasance,
bad faith, gross negligence, portfolio trade negligence or reckless
disregard of its duties under the Proposed Agreement.
If approved by shareholders, the Proposed Agreement would be
executed in or about December, 1995 by PIFM and Mercator. Unless
terminated sooner, it would remain in effect for two years following its
execution. Thereafter, it would continue automatically for successive
annual periods, provided that it is specifically approved at least
annually (1) by a vote of a majority of the Independent Trustees and (2)
by all Trustees or by a vote of a majority of the outstanding Shares of
the Fund. The Proposed Agreement may be terminated by the Fund at any
time, without the payment of any penalty, by the Trustees of the Trust or
by vote of a majority of the outstanding voting securities (as defined in
the 1940 Act) of the Fund, or by the Manager or Mercator at any time,
without the payment of any penalty, on not more than 60 days' nor less
than 30 days' written notice to the other party. The Proposed Agreement
shall terminate automatically in the event of its assignment (as defined
in the 1940 Act) or upon the termination of the management agreement
between PIFM and the Company (the " Management Agreement").
Information about Mercator
Mercator is a limited partnership organized on October 4, 1995
under the laws of the state of Delaware. It is an investment management
firm that intends to provide investment advisory services to institutional
clients, including employee benefit plans, endowments, foundations, other
tax-exempt funds and registered investment companies. As previously
noted, under the terms of a Contribution Agreement among Mercator Inc.,
Mercator and certain other parties, it is contemplated that Mercator will
assume the investment advisory business of Mercator Inc. Mercator Inc.
manages approximately $1.8 billion in assets as of June 30, 1995,
including The Preferred International Fund, a series of The Preferred
Group of Mutual Funds, an open-end management investment company . As of
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September 30, 1995, The Preferred International Fund had assets totalling
$120.2 million.
For its services to The Preferred International Fund, Mercator
Inc. currently receives, and it is anticipated that Mercator will receive,
a fee based upon all assets of Caterpillar Investment Management Ltd.
that it provides investment advisory services to (the "Combined Assets").
Caterpillar Investment Management Ltd. is the manager of The Preferred
Group of Mutual Funds. The fee paid by Caterpillar Investment Management
Ltd. is equal to .75 of 1% of the first $50 million of Combined Assets and
.60 of 1% of Combined Assets in excess of $50 million. In addition,
Mercator Inc. currently is waiving a portion of its fee (.15%) on Combined
Assets in excess of $300 million.
Mercator's general partners are four Florida corporations: JZT
Corp., KXB Corp., TXB Corp., and MXW Corp. Mercator's limited partner is
Mercator Inc., a wholly-owned indirect subsidiary of The Prudential. John
G. Thompson, Peter F. Spano, Kenneth B. Brown, and Michael A. Williams are
the sole shareholders of JZT Corp., PXS Corp., KXB Corp. and MXW
Corp., respectively. The address of Mercator and each of the general
partners is 2400 East Commercial Blvd., Suite 810, Fort Lauderdale,
Florida 33308.
Recommendation of the Board of Trustees
To minimize any potential disruption of portfolio management
services and to continue to have key personnel employed by Mercator
provide portfolio management services to the Fund, the Trustees decided to
appoint Mercator as subadviser to the Fund and recommend that shareholders
approve the Proposed Agreement. In approving the Proposed Agreement, the
Trustees analyzed the factors it deemed relevant, including: the services
provided by Mercator to its other clients; the ability of Mercator to
provide services to the Fund; its personnel, operations, and financial
condition; its proposed fee schedule; and other factors that would affect
positively or negatively the provision of portfolio management services.
The Trustees also considered Mercator's policy of selecting
brokers on the basis of research or other services provided only when such
use is consistent with seeking best available price and most favorable
execution. The Trustees realize that research services furnished by
brokers through which the Fund effects securities transactions may be used
by Mercator in advising other accounts that it advises. Conversely,
research services furnished to Mercator in connection with other accounts
Mercator advises may be used by Mercator in advising the Fund.
Information and research received from brokers will be in addition to, and
not in lieu of, the services required to be performed by Mercator under
the Proposed Agreement.
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If Proposal 1 is not approved by shareholders, the Trustees would
then consider whether other arrangements for the provision of investment
subadvisory services are appropriate and in the best interests of the
Fund's shareholders, or whether PIFM should provide such services to the
Fund itself.
Vote Required
Approval of Proposal 1 requires the affirmative vote of the
holders of the lesser of (1) 67% or more of the Shares of the Fund present
at the Meeting, if the holders of more than 50% of the outstanding Fund
Shares are present or represented by proxy at the Meeting, or (2) more
than 50% of the outstanding Shares of the Fund entitled to vote at the
Meeting.
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU
VOTE "FOR" PROPOSAL 1.
INFORMATION ABOUT THE COMPANY
Current Advisory Arrangements
PIFM is a Pennsylvania corporation organized in May 1992 and
registered as an investment adviser under the Investment Advisers Act of
1940. PIFM serves as Manager of the Company pursuant to the Management
Agreement dated October 30, 1992. Mercator Inc. serves as subadviser to
the Fund pursuant to the Current Agreement, which also is dated October
30, 1992. The Management and the Current Agreements were approved by the
Company's initial shareholder on October 12, 1992, and their continuance
was last approved by the Trustees on November 10, 1994. As of September
1, 1995 all of the Trustees and officers of the Company owned beneficially
less than 1% of the Fund.
The principal address of PIFM and PIFM's director is 30
Scranton Office Park, Moosic, Pennsylvania 18507. The director and
principal executive officers of PIFM are: Mark R. Fetting, President and
Director; Thomas A. Early, Vice President and Secretary; Nancy L.
Lindgren, Vice President and Comptroller; Martin Pfinsgraff, Treasurer;
and Walter E. Watkins, Jr., Vice President .
Under the Management Agreement, and subject to the supervision of
the Trustees, PIFM has agreed, among other duties, to provide a continuous
investment program for the Fund's portfolio, monitor each subadviser's
investment performance, and supervise all aspects of the Company's
operations. The Management Agreement expressly permits advisory services
to be delegated to and performed by a subadviser. Under the Management
Agreement, the Company bears all of its expenses not specifically assumed
by PIFM incurred in its operation and the offering of shares. As required
by state regulations, PIFM will reimburse the Fund if and to the extent
that the aggregate operating expenses of the Fund in any fiscal year
exceed applicable limits.
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For services provided under the Management Agreement, the Fund
pays PIFM a fee, computed daily and paid monthly, of 1.15% of the Fund's
average daily net assets. During the fiscal year ended September 30,
1995, the Fund paid (or accrued) to PIFM fees of $1,367,665, and PIFM
subsidized expenses of the Fund in the amount of $47,700, due to voluntary
expense limitations.
Prudential Retirement Services, Inc., 751 Broad Street, Newark,
New Jersey 07102, an affiliated broker-dealer, serves as the Company's
principal underwriter. Prudential Retirement Services, Inc. will continue
to serve as principal underwriter to the Company after the Proposed
Agreement is approved.
Prudential Mutual Fund Management, Inc. ("PMF"), One Seaport
Plaza, New York, New York 10292, or its wholly-owned subsidiaries, which
serve as the Company's administrator and transfer agent, received fees
from the Fund in the amount of $188,057 for the fiscal year ended
September 30, 1995. PMF or its wholly-owned subsidiaries will continue to
serve as administrator, transfer agent, and dividend disbursement agent to
the Fund after the Proposed Agreement is approved by shareholders.
Trustees and Officers
Trustees and officers of the Company who also are employed by
PIFM or Mercator are:
Thomas A. Early, Vice President. Mr. Early serves as Vice
President and Secretary of PIFM.
Mark R. Fetting, President and Trustee. Mr. Fetting is a
director and the President and Chief Operating Officer of PIFM.
Walter E. Watkins, Jr., Vice President. Mr. Watkins is a Vice
President of PIFM.
As discussed previously, The Prudential and Mercator Inc. intend
to avail themselves of the safe harbor provided by Section 15(f) of the
1940 Act. Under Section 15(f), an investment adviser may receive "any
benefit" in connection with the sale of any interest in such investment
adviser that results in an assignment of the investment advisory contract
with the investment company provided certain conditions are met. One of
the conditions of Section 15(f) is that, for a period of three years, at
least seventy-five percent of the members of the Board of Trustees must
not be interested persons of Mercator or Mercator Inc. To that end, it is
anticipated that Mr. Fetting and Eric A. Simonson, both of whom are
interested persons of PIFM, will resign as trustees of the Company if the
shareholders approve Mercator as subadviser of the Fund and the New
Agreement is executed, effective the date of such execution.
SHAREHOLDER PROPOSALS
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As a general matter, the Company does not hold regular annual or
other meetings of shareholders. Any shareholder who wishes to submit
proposals to be considered at a special meeting of the Company's
shareholders should send such proposals to the Company at 21 Prudential
Plaza, 751 Broad Street, Newark, New Jersey 07102-3777, so as to be
received a reasonable time before the proxy solicitation for that meeting
is made.
Shareholder proposals that are submitted in a timely manner will
not necessarily be included in the Company's proxy materials. Inclusion
of such proposals is subject to limitations under the federal securities
laws.
OTHER BUSINESS
Management knows of no business to be presented to the Meeting
other than the matters set forth in this statement, but should any other
matter requiring a vote of shareholders arise, the proxies will vote
thereon according to their best judgment in the interests of the Company.
By the order of the Board of Trustees,
S. JANE ROSE
Secretary
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APPENDIX A
PERCENTAGE
OF SHARES
SHAREHOLDER OWNED
----------- ----------
The Prudential Employee Savings Plan 41.63%
The Prudential Insurance Company of America
Human Resources Department
751 Broad Street
Newark, NJ 07102
The Prudential Insurance Company of America 13.51%
751 Broad Street
Newark, NJ 07102
Rite Aid Investment Opportunity Plan 5.60%
Rite Aid Corporation
30 Hunter Lane
Camp Hill, PA 17011
Deferred Compensation Plan for Employees of
The Metropolitan Transportation Authority,
its Subsidiaries and Affiliates and
Thrift Plan for Employees of
The Metropolitan Transportation Authority, 5.62%
its Subsidiaries and Affiliates
347 Madison Avenue
New York, NY 10017
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PROXY
THE PRUDENTIAL INSTITUTIONAL FUND
INTERNATIONAL STOCK FUND
Special Meeting of Shareholders - November 16, 1995
The undersigned hereby appoints as proxies Thomas A. Early, Marguerite
E.H. Morrison, and Walter E. Watkins, Jr., each with the power of
substitution, to vote for the undersigned all shares of beneficial
interest of the undersigned at the aforementioned meeting and any
adjournment thereof with all the power the undersigned would have if
personally present. The shares represented by this proxy will be voted
as instructed. Unless indicated to the contrary, this proxy shall be
deemed to indicate authority to vote "FOR" all proposals. This proxy is
solicited on behalf of the Board of Trustees.
Please date and sign this proxy and return it in the enclosed postage
paid envelope to: THE PRUDENTIAL INSTITUTIONAL FUND, P.O. BOX 868,
ELIZABETH, NJ 07207-9895
Please indicate your vote by an "X" in the appropriate box .
The Board of Trustees recommends a vote "FOR"
1. Approval of the proposed Subadvisory Agreement between Prudential
Institutional Fund Management, Inc. and Mercator Asset Management, L.P.
on behalf of the International Stock Fund, a series of The Prudential
Institutional Fund.
FOR _______ AGAINST _______ ABSTAIN ______
This proxy will not be voted unless it is dated and signed exactly as
instructed below.
________________________________________
Signature
________________________________________
Signature
Date: ___________________________, 1995
If shares are held jointly, each shareholder named should sign; if only
one signs, his or her signature will be binding. If the shareholder is a
corporation, the President or Vice President should sign in his or her own
name, indicating title. If the shareholder is a partnership, a partner
should sign in his or her own name, indicating that he or she is a
"Partner." If the shares are held in trust, the Trustee should sign his
or her name and indicate that he or she is signing as Trustee.
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