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SCHEDULE 14C
(Rule 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the Securities
Exchange Act of 1934 (Amendment No. )
Check the appropriate box:
[ ] Preliminary Information Statement
[ ] Confidential, for use of the Commission Only (as permitted by Rule
14c-5(d)(2))
[X] Definitive Information Statement
The Target Portfolio Trust
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] 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 of Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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THE TARGET PORTFOLIO TRUST(SM)
SMALL CAPITALIZATION GROWTH PORTFOLIO
GATEWAY CENTER THREE
100 MULBERRY STREET
NEWARK, NEW JERSEY 07102-4077
------------------------
INFORMATION STATEMENT
NOVEMBER 24, 1999
------------------------
TO THE SHAREHOLDERS:
On August 25, 1999, at a regular meeting of the Board of Trustees of The
Target Portfolio Trust(SM) (the Trust), the Trustees approved a new subadvisory
agreement for the Small Capitalization Growth Portfolio (the Portfolio). The
subadvisory agreement approved by the Board of Trustees was entered into between
Prudential Investments Fund Management LLC, the Trust's Manager, and Fleming
Asset Management USA (Fleming USA). Fleming USA assumed investment advisory
responsibility for the Portfolio on August 26, 1999. This information statement
informs you of the circumstances surrounding the Board's approval of the new
subadvisory agreement and provides you with an overview of its terms.
By order of the Board,
DAVID F. CONNOR
Secretary
THIS IS NOT A PROXY STATEMENT. WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE
REQUESTED NOT TO SEND US A PROXY.
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THE TARGET PORTFOLIO TRUST(SM)
SMALL CAPITALIZATION GROWTH PORTFOLIO
(800) 225-1852
------------------------
GATEWAY CENTER THREE
100 MULBERRY STREET
NEWARK, NEW JERSEY 07102-4077
------------------------
INFORMATION STATEMENT
NOVEMBER 24, 1999
------------------------
This information statement is being furnished to the shareholders of the
Small Capitalization Growth Portfolio (the Portfolio) of The Target Portfolio
Trust(SM) (the Trust) in lieu of a proxy statement, pursuant to the terms of an
exemptive order the Trust received from the Securities and Exchange Commission
(SEC). The exemptive order permits the Trust's manager to hire new subadvisers
and to make certain changes to existing subadvisory contracts with the approval
of the Board of Trustees, without obtaining shareholder approval.
The Trust is a management investment company registered under the
Investment Company Act of 1940, as amended (the Investment Company Act) and is
organized as a Delaware business trust. The Trust's trustees are referred to
here as the "Board," "Board Members" or "Trustees." The Trust's principal
executive office is Gateway Center Three, 100 Mulberry Street, Newark, New
Jersey 07102-4077.
We are providing shareholders of the Portfolio as of October 1, 1999 with
the information statement. This information statement relates to the approval by
the Trustees of a new subadvisory agreement dated as of August 25, 1999
(Subadvisory Agreement) between the Trust's Manager and Fleming Asset Management
USA (Fleming USA). Fleming USA assumed its advisory duties with respect to the
Portfolio on August 26, 1999. The Trustees approved the Subadvisory Agreement, a
copy of which is attached as Exhibit A, on August 25, 1999. The material terms
of the new Subadvisory Agreement are substantially the same as those of the
previous subadvisory agreement, except that Fleming USA receives a subadvisory
fee from the Trust's Manager at a higher rate. The previous subadvisory
agreement, dated January 2, 1995, between the Trust's Manager and Investment
Advisers, Inc. (IAI) was last approved by the Trustees, including a majority of
the Trustees who were not parties to the contract and were not interested
persons of those parties (as defined in the Investment Company Act), on May 12,
1999.
The Portfolio will pay for the costs associated with preparing and
distributing this information statement, which will be mailed on or about
November 24, 1999.
THE TARGET PROGRAM
The Trust consists of ten separate investment portfolios, including the
Portfolio. Shares of the portfolios are offered to participants in the
Prudential Securities Target Program (the Target Program), an investment
advisory service that provides to investors asset allocation recommendations
with respect to the portfolios based on an evaluation of an investor's
investment objectives and risk tolerances. The Target Program or shares of the
Trust (without participation in the Target Program) are also available to banks,
trust companies and other investment advisory services which maintain securities
accounts with Prudential Securities Incorporated (Prudential Securities) and to
certain fee-based programs sponsored by Prudential Securities and its affiliates
which include mutual funds as investment options and for which the portfolios
are an available option without payment of the Target Program fee. Participation
in the Target Program is subject to payment of a program fee that is separate
from the portfolios' management fees. For all accounts other than Individual
Retirement Accounts (IRAs) and qualified employee benefit plans (collectively,
Plans), the quarterly advisory fee is charged at a maximum annual rate of 1.5%
of assets invested in equity portfolios, such as the
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Portfolio. For Plan accounts, the quarterly advisory fee is charged at the
maximum annual rate of 1.25% of assets invested in equity portfolios.
THE MANAGER
Prudential Investments Fund Management LLC (PIFM or the Manager), Gateway
Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077, serves as the
Trust's Manager under a management agreement (the Management Agreement) dated as
of November 9, 1992. PIFM is a subsidiary of Prudential Securities Incorporated
and The Prudential Insurance Company of America (Prudential) and is a part of
Prudential Investments, which is a business group of Prudential. As of September
30, 1999, PIFM served as the manager to 46 open-end investment companies and as
Manager or administrator to 22 closed-end investment companies with aggregate
assets of approximately $72.6 billion. Information concerning the Trust's
current management arrangements can be found in Exhibit B. Information
concerning officers of the Trust is set forth in Exhibit C.
SHAREHOLDER REPORTS
The Trust's most recent annual report for the fiscal year ended December
31, 1998 and semi-annual report for the period ended June 30, 1999, have
previously been sent to shareholders and may be obtained without charge by
writing the Trust at Gateway Center Three, 100 Mulberry Street, Newark, New
Jersey 07102-4077 or by calling (800) 225-1852 (toll free).
SHAREHOLDINGS
As of October 1, 1999, the Portfolio's net asset value was approximately
$148,511,039, of which amount approximately $78,259,771 was managed by Fleming
USA. As of October 1, 1999, there were 9,374,084 outstanding shares of the
Portfolio. Management does not know of any person who owned beneficially 5% or
more of the shares of the Portfolio as of October 1, 1999. In addition, to the
knowledge of management, the executive officers and Board Members of the Trust,
as a group, owned less than 1% of the outstanding shares of the Portfolio as of
that date.
NEW SUBADVISORY AGREEMENT
On August 25, 1999, the Trustees, including a majority of the Trustees who
are not parties to the Subadvisory Agreement or interested persons of such
parties (as defined in the Investment Company Act) (the non-interested
Trustees), unanimously approved the Subadvisory Agreement and the selection by
PIFM of Fleming USA as Adviser to replace IAI. At that time, the Trustees also
unanimously approved termination of the previous subadvisory agreement between
the Trust's Manager and IAI, primarily due to recent personnel changes at IAI.
After considering several alternatives, PIFM recommended Fleming USA to the
Trustees as a replacement for IAI.
The new Subadvisory Agreement contains terms and conditions similar to
those of the subadvisory agreement with IAI, except that the rate of the
subadvisory fee paid to Fleming USA by the Manager is higher than the rate of
the subadvisory fee previously paid to IAI. Because the subadvisory fee is paid
by PIFM and not the Portfolio, the higher subadvisory fee rate will not increase
the expenses of the Portfolio. See "Terms of Subadvisory Agreement" below.
Fleming USA renders investment advice in accordance with the Portfolio's
investment objective and policies and also makes investment decisions to
purchase and sell securities on behalf of the Portfolio, subject to the
supervision of PIFM.
Section 15 of the Investment Company Act requires that a majority of the
Portfolio's outstanding voting securities approve the Subadvisory Agreement.
However, on September 11, 1996, the SEC issued an order granting the Trust and
PIFM exemptive relief from the requirements of Section 15. According to the
SEC's order, which is subject to a number of conditions (including approval by
the Trust's shareholders, which was received on October 30, 1996), PIFM may now
enter into subadvisory agreements on behalf of the Trust without receiving prior
shareholder approval. Thus, execution and implementation of the Subadvisory
Agreement did not require shareholder consent.
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BOARD CONSIDERATION OF SUBADVISORY AGREEMENT
At a regular meeting of the Board, at which all of the Trustees were in
attendance, the Board of Trustees considered and unanimously approved the
Subadvisory Agreement on August 25, 1999. In considering approval of the
Subadvisory Agreement, the Trustees, including the non-interested Trustees,
considered whether approval of the Subadvisory Agreement was in the best
interests of the Trust and shareholders of the Portfolio. At the meeting, the
Trust's Manager stressed the investment experience, reputation and performance
record of the investment team at Fleming USA. The Trustees reviewed materials
furnished by management and Fleming USA and met with representatives of Fleming
USA. Among other things, the Trustees considered the investment philosophy and
style of Fleming USA, its relative performance record, its security selection
experience and preferences, personnel, facilities, financial strength, quality
of service and client communications. The Board also considered the nature,
quality and extent of services expected to be provided to the Portfolio by
Fleming USA as well as its reputation in the asset management industry.
The Trustees discussed and reviewed the terms of the proposed Subadvisory
Agreement. It was noted that the main difference between the Subadvisory
Agreement and the prior subadvisory agreement was that the Subadvisory Agreement
provided for a higher subadvisory fee rate. Under the Subadvisory Agreement,
Fleming USA would be entitled to an annual fee of .40% of the average daily net
assets of the Portfolio managed by Fleming USA. The Trustees noted that because
the subadvisory fee was paid by PIFM and not the Portfolio, the higher
subadvisory fee rate would not increase the expenses of the Portfolio. It was
noted that the other material terms of the Subadvisory Agreement were
substantially the same as those in the prior subadvisory agreement. There were a
number of minor differences between the Subadvisory Agreement and the
subadvisory agreement that had been in place with IAI. First, the language of
the Subadvisory Agreement clarified that Fleming USA is only responsible for
managing a portion of the Portfolio's assets. Second, the Subadvisory Agreement
specifically required Fleming USA to reconcile its records of the securities and
cash in its portion of the Portfolio with statements provided by the Trust's
custodian on a monthly basis and to report to the Manager on each such
reconciliation, including information on any discrepancies noted and actions
taken by Fleming USA to address those discrepancies. Third, the language of the
Subadvisory Agreement clarified that Fleming USA may place brokerage business
for the Portfolio through brokers who provide Fleming USA with certain research
services, even though such brokers may charge higher brokerage fees than other
brokers. Fourth, the subadvisory agreement with IAI had a non-compete provision
which generally prohibited IAI from managing another mutual fund like the
Portfolio. The Subadvisory Agreement did not include such a provision. In
addition, the identity of the subadviser and the dates of execution,
effectiveness and termination in the Subadvisory Agreement differed from those
in the prior subadvisory agreement with IAI. Based upon their review, the
Trustees concluded that the proposed Subadvisory Agreement was reasonable, fair
and in the best interests of the Trust and the shareholders of the Portfolio,
and that the fee provided in the proposed Subadvisory Agreement was fair and
reasonable. Accordingly, after consideration of the above factors, and such
other factors and information as they deemed relevant, the Trustees, including
the non-interested Trustees, unanimously approved the Subadvisory Agreement.
INFORMATION CONCERNING FLEMING USA
Fleming USA, 320 Park Avenue, New York, NY 10022, began managing its
portion of the Portfolio effective August 26, 1999. Fleming USA is a division of
Robert Fleming, Inc., which is a wholly-owned subsidiary of Robert Fleming
Holdings (Flemings Group). Globally, the Flemings Group manages over $115
billion of assets on behalf of private investors, companies, institutions,
governments and central banks. Approximately half of its assets under management
are pension funds for institutions. The balance of its assets under management
are in open- and closed-end pooled investment vehicles.
Exhibit D contains information about another fund managed by Fleming USA
with an investment objective and strategies similar to the Portfolio's. Exhibit
D also lists the principal executive officer and directors of Fleming USA.
Pursuant to the Subadvisory Agreement, Fleming USA manages a portion of the
assets of the Portfolio. Sawgrass Asset Management LLC, 4337 Pablo Oaks Court
Building 200, Jacksonville, FL 32224 manages the other portion of the Portfolio.
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TERMS OF SUBADVISORY AGREEMENT
Under the Subadvisory Agreement, Fleming USA is compensated by PIFM (and
not the Portfolio) at an annual rate of .40 of 1% of the Portfolio's average net
assets managed by Fleming USA. The Subadvisory Agreement provides that, subject
to PIFM's and the Board of Trustees' supervision, Fleming USA is responsible for
managing the investment operations of its portion of the Portfolio and for
making investment decisions and placing orders to purchase and sell securities
for its portion of the Portfolio, all in accordance with the investment
objective and policies of the Portfolio as reflected in the current Prospectus
and Statement of Additional Information of the Trust and as may be adopted from
time to time by the Board of Trustees. In accordance with the requirements of
the Investment Company Act, Fleming USA also provides PIFM with all books and
records relating to the transactions it executes and renders to the Trustees
such periodic and special reports as the Board of Trustees may reasonably
request.
Duration and Termination. The Subadvisory Agreement will remain in full
force and effect for a period of two years from the date of its execution, and
will continue thereafter as long as its continuance is specifically approved at
least annually by vote of a majority of the outstanding voting securities (as
that term is defined in the Investment Company Act) of the Portfolio, or by the
Board of Trustees, including the approval by a majority of non-interested
Trustees, at a meeting called for the purpose of voting on such approval;
provided, however, that (1) the Subadvisory Agreement may be terminated at any
time without the payment of any penalty, either by vote of the Board of Trustees
or by vote of a majority of the outstanding voting securities of the Portfolio,
(2) the Subadvisory Agreement will terminate immediately in the event of its
assignment (within the meaning of the Investment Company Act) or upon the
termination of the Trust's management agreement with PIFM, and (3) the
Subadvisory Agreement may be terminated at any time by Fleming USA or PIFM on
not more than 60 days' nor less than 30 days' written notice to the other party
to the Subadvisory Agreement.
Liability. The Subadvisory Agreement provides that, in the absence of
willful misfeasance, bad faith, gross negligence in the performance of its
duties, or reckless disregard of its obligations and duties thereunder, Fleming
USA will not be liable for any act or omission in connection with its activities
as subadviser to the Portfolio.
SHAREHOLDER PROPOSALS
As a Delaware business trust, the Trust is not required to hold annual
meetings of shareholders and the Trustees currently do not intend to hold such
meetings unless shareholder action is required in accordance with the Investment
Company Act or the Trust's Declaration of Trust. A shareholder proposal intended
to be presented at any meeting of shareholders of the Trust must be received by
the Trust a reasonable time before the Trustees' solicitation relating thereto
is made in order to be included in the Trust's proxy statement and form of proxy
relating to that meeting and presented at the meeting. The mere submission of a
proposal by a shareholder does not guarantee that the proposal will be included
in the proxy statement because certain rules under the federal securities laws
must be complied with before inclusion of the proposal is required.
DAVID F. CONNOR,
Secretary
Dated: November 24, 1999
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EXHIBIT A
THE TARGET PORTFOLIO TRUST
(SMALL CAPITALIZATION GROWTH PORTFOLIO)
SUBADVISORY AGREEMENT
Agreement made on this 26th day of August, 1999, between Prudential
Investments Fund Management LLC (PIFM or the Manager), a New York limited
liability company, and Fleming Asset Management USA (the Adviser), a division of
Robert Fleming, Inc., a Delaware corporation.
WHEREAS, PIFM has entered into a management agreement (the Management
Agreement) with The Target Portfolio Trust (the Trust), a Delaware business
trust and an open-end management investment company registered under the
Investment Company Act of 1940 (the 1940 Act), pursuant to which PIFM will act
as manager of the Trust.
WHEREAS, shares of the Trust are divided into separate series or portfolios
(each a portfolio), each of which is established pursuant to a resolution of the
Trustees of the Trust, and the Trustees may from time to time terminate such
portfolios or establish and terminate additional portfolios.
WHEREAS, PIFM has the responsibility of evaluating, recommending,
supervising and compensating investment advisers to each portfolio of the Trust
and desires to retain the Adviser to provide investment advisory services to the
Small Capitalization Growth Portfolio of the Trust (the Fund) in connection with
the management of the Trust and to manage such portion of the Fund as the
Manager shall from time to time direct, and the Adviser is willing to render
such investment advisory services.
NOW, THEREFORE, the Parties agree as follows:
1. (a) Subject to the supervision of the Manager and of the Trustees
of the Trust, the Adviser shall manage such portion of the investment
operations of the Fund as the Manager shall direct and shall manage the
composition of such portion of the Fund, including the purchase, retention
and disposition thereof, in accordance with the Fund's investment
objective, policies and restrictions as stated in the Prospectus (such
Prospectus and Statement of Additional Information as currently in effect
and as amended or supplemented from time to time being herein called the
"Prospectus") as delivered to the Adviser from time to time by the Manager
and subject to the following understandings:
(i) The Adviser shall provide supervision of such portion of the
Fund's investments and determine from time to time what investments and
securities will be purchased, retained, sold or loaned by the Fund, and
what portion of the assets it manages will be invested or held
uninvested as cash.
(ii) In the performance of its duties and obligations under this
Agreement, the Adviser shall act in conformity with the Agreement and
Declaration of Trust, By-Laws and Prospectus of the Trust and the Fund
as provided to the Adviser by the Manager and with the written
instructions and directions of the Manager and of the Trustees of the
Trust and will conform to and comply with the requirements of the 1940
Act, the Internal Revenue Code of 1986, as amended, and all other
applicable federal and state laws and regulations.
(iii) The Adviser shall determine the securities and commodities or
other assets to be purchased or sold by such portion of the Fund and
will place orders pursuant to its determination with or through such
persons, brokers, dealers or futures commission merchants (including but
not limited to Prudential Securities Incorporated) to carry out the
policy with respect to brokerage as set forth in the Trust's
Registration Statement and Prospectus or as the Trustees may direct from
time to time. In providing the Fund with investment supervision, it is
recognized that the Adviser will give primary consideration to securing
best execution. Within the framework of this policy, the Adviser may
consider the financial responsibility, research and investment
information and other services
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provided by brokers, dealers or futures commission merchants who may
effect or be a party to any such transaction or other transactions to
which the Adviser's other clients may be a party. It is understood that
Prudential Securities Incorporated may be used as a broker for
securities transactions but that no formula has been adopted for
allocation of the Fund's investment transaction business. It is also
understood that it is desirable for the Trust that the Adviser have
access to supplemental investment and market research and security and
economic analysis provided by brokers or futures commission merchants
who may execute brokerage transactions at a higher cost to the Trust
than may result when allocating brokerage to other brokers solely on the
basis of seeking lowest price. Therefore, the Adviser is authorized to
place orders for the purchase and sale of securities and commodities or
other assets for the Fund with such brokers or futures commission
merchants, subject to review by the Trustees from time to time with
respect to the extent and continuation of this practice. It is
understood that the services provided by such brokers or futures
commission merchants may be useful to the Adviser in connection with the
Adviser's services to other clients.
On occasions when the Adviser deems the purchase or sale of a
security, commodity or other asset to be in the best interest of the
Fund as well as other clients of the Adviser, the Adviser, to the extent
permitted by applicable laws and regulations, may, but shall be under no
obligation to, aggregate the securities, commodities or other assets to
be sold or purchased in order to obtain best execution. In such event,
allocation of the securities, commodities or other assets so purchased
or sold, as well as the expenses incurred in the transaction, will be
made by the Adviser in the manner the Adviser considers to be the most
equitable and consistent with its fiduciary obligations to the Trust and
to such other clients.
(iv) The Adviser shall maintain all books and records with respect
to the portfolio transactions required by subparagraphs (b)(5), (6),
(7), (9), (10) and (11) and paragraph (f) of Rule 31a-1 under the 1940
Act and shall render to the Trustees such periodic and special reports
as the Board may reasonably request.
(v) The Adviser shall provide the Trust's custodian (the Custodian)
on each business day with information relating to all transactions
concerning the portion of the Fund's assets it manages and shall provide
the Manager with such information upon request of the Manager. The
Adviser shall reconcile its records of the Fund's securities and cash
managed by the Adviser with statements provided by the Custodian at
least once each month. The Adviser shall provide the Manager with a
written report on each such reconciliation, including information on any
discrepancies noted and actions taken by the Adviser in response
thereto, within five business days after the Adviser receives the
above-referenced statement from the Custodian, to the extent reasonably
practicable.
(vi) The investment management services provided by the Adviser
hereunder are not exclusive, and the Adviser shall be free to render
similar services to others.
(vii) The Manager shall forward to the Adviser or its proxy voting
agent any proxy materials relating to portfolio securities held by the
portion of the Fund managed by the Adviser.
(b) Services to be furnished by the Adviser under this Agreement
may be furnished through the medium of any of its directors, officers or
employees.
(c) The Adviser shall keep the Fund's books and records required to
be maintained by the Adviser pursuant to paragraph 1(a)(iv) hereof and
shall timely furnish to the Manager all information relating to the
Adviser's services hereunder needed by the Manager to keep the other books
and records of the Trust required by Rule 31a-1 under the 1940 Act. The
Adviser agrees that all records which it maintains for the Fund are the
property of the Trust and the Adviser will surrender promptly to the Trust
any of such records upon the Trust's request. The Adviser further agrees to
preserve for the periods prescribed by Rule 31a-2 under the 1940 Act any
such records as are required to be maintained by it pursuant to paragraph
1(a) hereof.
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(d) The Adviser agrees to maintain adequate compliance procedures
to ensure its compliance with the 1940 Act, the Investment Advisers Act of
1940 (Advisers Act) and other applicable state and federal laws and
regulations.
(e) The Adviser shall furnish to the Manager copies of all records
prepared in connection with (i) the performance of this Agreement and (ii)
the reports prepared in accordance with the compliance procedures
maintained pursuant to paragraph 1(d) hereof as the Manager may reasonably
request.
2. The Manager shall continue to have responsibility for all services
to be provided to the Fund pursuant to the Management Agreement and shall
oversee and review the Adviser's performance of its duties under this
Agreement.
3. The Manager shall compensate the Adviser for the services provided
and the expenses assumed pursuant to this Subadvisory Agreement at the
annual rate of .40 of 1% of the average daily net assets of the portion of
the Fund managed by the Adviser. This fee will be computed daily and paid
monthly.
4. The Adviser shall not be liable for any error of judgment or for
any loss suffered by the Fund, the Trust or the Manager in connection with
the matters to which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on the Adviser's part in
the performance of its duties or from its reckless disregard of its
obligations and duties under this Agreement, provided, however, that
nothing in this Agreement shall be deemed to waive any rights the Manager
or the Trust may have against the Adviser under federal or state securities
laws, including for acts of good faith.
5. This Agreement shall continue in effect for a period of more than
two years from the date hereof only so long as such continuance is
specifically approved at least annually in conformity with the requirements
of the 1940 Act; provided, however, that this Agreement may be terminated
by the Trust at any time, without the payment of any penalty, by the
Trustees or by vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Fund, or by the Manager or the Adviser at
any time, without the payment of any penalty, on not more than 60 days' nor
less than 30 days' written notice to the other party. This Agreement shall
terminate automatically in the event of its assignment (as defined in the
1940 Act) or upon the termination of the Management Agreement.
6. Nothing in this Agreement shall limit or restrict the right of any
of the Adviser's directors, officers or employees to engage in any other
business or to devote his or her time and attention in part to the
management or other aspects of any business, whether of a similar or
dissimilar nature, nor limit the Adviser's right to engage in any other
business or to render services of any kind to any other corporation, firm,
individual or association.
7. During the term of this Agreement, the Manager agrees to furnish
the Adviser at its principal office all prospectuses, proxy statements,
reports to shareholders, sales literature or other material prepared for
distribution to shareholders of the Trust or the public, which refer to the
Adviser in any way; provided, however, that any such item which describes
or characterizes the Adviser's investment process with respect to the Fund,
the names of any of its clients (other than the Trust or advisory clients
of PIFM and its affiliates) or any of its performance results shall be
furnished to the Adviser by first class or overnight mail, facsimile
transmission equipment or hand delivery prior to use thereof, and such item
shall not be used if the Adviser reasonably objects to such use in writing
within forty-eight (48) hours (or such other time as may be mutually
agreed) after receipt thereof (provided, however, that if such item is not
received by the Adviser during normal business hours on a business day,
such period shall end forty-eight (48) hours after the start of normal
business hours on the next succeeding business day).
8. This Agreement may be amended by mutual consent, but the consent of
the Trust must be obtained in conformity with the requirements of the 1940
Act.
9. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below on the day and year first above
written.
PRUDENTIAL INVESTMENTS FUND
MANAGEMENT LLC
By: /s/ ROBERT F. GUNIA
------------------------------------
Robert F. Gunia
Executive Vice President
FLEMING ASSET MANAGEMENT USA
By: /s/ LAWRENCE A. KIMMEL
------------------------------------
Lawrence A. Kimmel
Secretary and Director of Compliance
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EXHIBIT B
MANAGEMENT OF THE TRUST
THE MANAGER
Prudential Investments Fund Management LLC (PIFM or the Manager), Gateway
Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077, serves as the
Trust's Manager under a management agreement (the Management Agreement) dated as
of November 9, 1992 and renewed thereafter as required by the Investment Company
Act of 1940, as amended (the Investment Company Act).
The Management Agreement was last approved by the Trustees of the Trust,
including a majority of the Trustees who were not parties to the contract and
were not interested persons of those parties (as defined in the Investment
Company Act) on May 26, 1999. It was approved by the sole shareholder of the
Trust on October 14, 1992.
TERMS OF THE MANAGEMENT AGREEMENT
Pursuant to the Management Agreement, PIFM, subject to the supervision of
the Trustees and in conformity with the stated policies of the Trust, manages
both the investment operations of the Trust and the composition of the Trust's
portfolios, including the purchase, retention and disposition thereof. The
Manager is authorized to enter into subadvisory agreements for investment
advisory services in connection with the management of the Trust and each
portfolio thereof. The Manager will continue to have responsibility for all
investment advisory services furnished pursuant to any such investment advisory
agreements.
The Manager reviews the performance of all subadvisers, and makes
recommendations to the Trustees with respect to the retention and renewal of
contracts. In connection therewith, PIFM is obligated to keep certain books and
records of the Trust. PIFM also administers the Trust's business affairs and, in
connection therewith, furnishes the Trust with office facilities, together with
those ordinary clerical and bookkeeping services which are not being furnished
by State Street Bank and Trust Company, the Trust's custodian and Prudential
Mutual Fund Services LLC (PMFS), the Trust's transfer and dividend disbursing
agent. The management services of PIFM for the Trust are not exclusive under the
terms of the Management Agreement and PIFM is free to, and does, render
management services to others.
PIFM has authorized any of its directors, officers and employees who have
been elected as Trustees or officers of the Trust to serve in the capacities in
which they have been elected. All services furnished by PIFM under the
Management Agreement may be furnished by any such directors, officers or
employees of PIFM.
In connection with its management of the business affairs of the Trust,
PIFM bears the following expenses:
(a) the salaries and expenses of all of its and the Trust's personnel
except the fees and expenses of Trustees who are not affiliated persons of
PIFM or each portfolio's subadviser(s);
(b) all expenses incurred by PIFM or by the Trust in connection with
managing the ordinary course of the Trust's business, other than those
assumed by the Trust, as described below; and
(c) the fees payable to each subadviser pursuant to the subadvisory
agreements between PIFM and each subadviser.
For its services, PIFM is compensated by each portfolio of the Trust. The
annual management fee for the Portfolio is paid at the rate of .60% of the
average daily net assets of the Portfolio.
The Management Agreement also provides that, in the event the expenses of
the Trust (including the fees of PIFM, but excluding interest, taxes, brokerage
commissions, distribution fees and litigation and indemnification expenses and
other extraordinary expenses not incurred in the ordinary course of the Trust's
business) for any fiscal year exceed the lowest applicable annual expense
limitation established and enforced pursuant to the statutes or regulations of
any jurisdiction in which the Trust's shares are qualified for offer and sale,
the compensation due to PIFM will be reduced by the amount of such excess.
Reductions in excess of the
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<PAGE> 12
total compensation payable to PIFM will be paid by PIFM to the Trust. No such
reductions were required during the fiscal year ended December 31, 1998. No
jurisdiction currently limits the Trust's expenses.
Under the terms of the Management Agreement, the Trust is responsible for
the payment of the following expenses: (a) the fees payable to the Manager, (b)
the fees and expenses of Trustees who are not affiliated persons of the Manager
or the Trust's subadvisers, (c) the fees and certain expenses of the Trust's
custodian and transfer and dividend disbursing agent, including the cost of
providing records to the Manager in connection with its obligation of
maintaining required records of the Trust and of pricing Trust shares, (d) the
charges and expenses of the Trust's legal counsel and independent accountants,
(e) brokerage commissions and any issue or transfer taxes chargeable to the
Trust in connection with its securities transactions, (f) all taxes and
corporate fees payable by the Trust to governmental agencies, (g) the fees of
any trade associations of which the Trust may be a member, (h) the cost of share
certificates representing shares of the Trust, (i) the cost of fidelity and
liability insurance, (j) the fees and expenses involved in registering and
maintaining registration of the Trust and of its shares with the SEC and
qualifying the Trust's shares under state securities laws, including the
preparation and printing of the Trust's registration statements and prospectuses
for such purposes, (k) allocable communications expenses with respect to
investor services and all expenses of shareholders' and Trustees' meetings and
of preparing, printing and mailing reports, proxy statements and prospectuses to
shareholders in the amount necessary for distribution to the shareholders, and
(l) litigation and indemnification expenses and other extraordinary expenses not
incurred in the ordinary course of the Trust's business.
The Management Agreement provides that PIFM will not be liable for any
error of judgment or for any loss suffered by the Trust in connection with the
matters to which the Management Agreement relates, except a loss resulting from
willful misfeasance, bad faith, gross negligence or reckless disregard of duty.
The Management Agreement will continue in effect for a period of 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 Investment
Company Act. The Management Agreement also provides that it will terminate
automatically if assigned and that it may be terminated without penalty by the
Trustees of the Trust, by vote of a majority of the Trust's outstanding voting
securities (as defined in the Investment Company Act) or by the Manager, upon
not more than 60 days' nor less than 30 days' written notice.
INFORMATION ABOUT PIFM
PIFM is a subsidiary of Prudential Securities Incorporated (Prudential
Securities) and an indirect, wholly-owned subsidiary of The Prudential Insurance
Company of America (Prudential), a major, diversified insurance and financial
services company. Prudential's address is Prudential Plaza, Newark, New Jersey
07102-4077. PIFM is organized in New York as a limited liability company.
PIFM acts as manager for the following investment companies:
Open-End Management Investment Companies: Cash Accumulation Trust,
Command Money Fund, Command Government Fund, Command Tax-Free Fund, The
Global Total Return Fund, Inc., Global Utility Fund, Inc.,
Nicholas-Applegate Fund, Inc. (Nicholas-Applegate Growth Equity Fund),
Prudential Balanced Fund, Prudential California Municipal Fund, Prudential
Developing Markets Fund, Prudential Distressed Securities Fund, Inc.,
Prudential Diversified Bond Fund, Inc., Prudential Diversified Funds,
Prudential Emerging Growth Fund, Inc., Prudential Equity Fund, Inc.,
Prudential Equity Income Fund, Prudential Europe Growth Fund, Inc.,
Prudential Global Genesis Fund, Inc., Prudential Global Limited Maturity
Fund, Inc., Prudential Government Income Fund, Inc., Prudential Government
Securities Trust, Prudential High-Yield Fund, Inc., Prudential High Yield
Total Return Fund, Inc., Prudential Index Series Fund, Prudential
Institutional Liquidity Portfolio, Inc., Prudential Intermediate Global
Income Fund, Inc., Prudential International Bond Fund, Inc., Prudential
Mid-Cap Value Fund, Prudential MoneyMart Assets, Inc., Prudential Municipal
Bond Fund, Prudential Municipal Series Fund, Prudential National Municipals
Fund, Inc., Prudential Natural Resources Fund, Inc., Prudential Pacific
Growth Fund, Inc., Prudential Real Estate Securities Fund, Prudential
Sector Funds, Inc., Prudential Small-Cap Quantum Fund, Inc., Prudential
Small Company Value Fund, Inc., Prudential Special Money Market Fund, Inc.,
Prudential Structured Maturity Fund, Inc., Prudential Tax-Free
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<PAGE> 13
Money Fund, Inc., Prudential Tax-Managed Equity Fund, Prudential 20/20
Focus Fund, Prudential World Fund, Inc., The Prudential Investment
Portfolios, The Target Portfolio Trust and Target Funds.
Closed-End Management Investment Company: The High Yield Income Fund,
Inc.
PIFM'S DIRECTORS AND OFFICERS
The business and other connections of PIFM's directors and principal
executive officers are set forth below. The address of each person is Gateway
Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077.
<TABLE>
<CAPTION>
NAME POSITION WITH PIFM PRINCIPAL OCCUPATIONS
---- ------------------ ---------------------
<S> <C> <C>
David R. Odenath, Jr. Officer in Charge, President, Officer in Charge, President, Chief Executive
Chief Executive Officer and Officer and Chief Operating Officer, PIFM;
Chief Operating Officer Senior Vice President, The Prudential
Insurance Company of America (Prudential)
Robert F. Gunia...... Executive Vice President & Executive Vice President & Chief Administrative
Chief Administrative Officer, PIFM; Vice President, Prudential;
Officer President, Prudential Investment Management
Services LLC (PIMS)
William V. Healey.... Executive Vice President, Executive Vice President, Chief Legal Officer
Chief Legal Officer and and Secretary, PIFM; Vice President and
Secretary Associate General Counsel, Prudential; Senior
Vice President, Chief Legal Officer and
Secretary, PIMS
Brian W. Henderson... Executive Vice President Executive Vice President, PIFM; Senior Vice
President and Chief Operating Officer, PIMS
Stephen Pelletier.... Executive Vice President Executive Vice President, PIFM
Judy A. Rice......... Executive Vice President Executive Vice President, PIFM
Lynn M. Waldvogel.... Executive Vice President Executive Vice President, PIFM
</TABLE>
THE DISTRIBUTOR AND TRANSFER AGENT
Prudential Investment Management Services LLC (PIMS or the Distributor),
Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077, acts
as the distributor of the shares of the Trust but is not compensated by the
Trust for those services. Prior to June 1, 1998, Prudential Securities was the
Trust's distributor. PIMS and Prudential Securities are subsidiaries of
Prudential.
Pruco Securities Corporation (Prusec), 111 Durham Avenue, South Plainfield,
New Jersey 07080-2398, a wholly-owned subsidiary of Prudential, is distributing
shares of the Trust pursuant to a dealer agreement between Prusec and Prudential
Securities. Prusec received no compensation for distributing the Portfolio's
shares during the fiscal year ended December 31, 1998.
The Trust's transfer agent is PMFS, Raritan Plaza One, Edison, New Jersey
08837. PMFS received $104,000 for its services in connection with the Portfolio
during the fiscal year ended December 31, 1998.
BROKERAGE
During the fiscal year ended December 31, 1998, the Portfolio paid no
commissions to affiliated broker-dealers.
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<PAGE> 15
EXHIBIT C
OFFICER INFORMATION
<TABLE>
<CAPTION>
NAME (AGE) OFFICE WITH THE TRUST PRINCIPAL OCCUPATIONS
---------- --------------------- ---------------------
<S> <C> <C>
John R. Strangfeld (45)........... Trustee and President Chief Executive Officer, Chairman,
President and Director of The
Prudential Investment Corporation
(since January 1990); Executive Vice
President of the Prudential Global
Asset Management Group of Prudential
(since February 1998); Chairman of
PRICOA Capital Group (since August
1989); Chief Executive Officer of
Private Asset Management Group of
Prudential (November 1994-December
1998); President and Director or
Trustee of 45 funds within the
Prudential Mutual Funds.
Robert F. Gunia (52).............. Trustee and Vice President Vice President (since September 1997) of
Prudential Investments; Executive Vice
President and Treasurer (since
December 1996) of Prudential
Investments Fund Management LLC
(PIFM); Senior Vice President (since
March 1987) of Prudential Securities
Incorporated (Prudential Securities);
formerly Chief Administrative Officer
(July 1990-September 1996), Director
(January 1989-September 1996), and
Executive Vice President, Treasurer
and Chief Financial Officer (June
1987-September 1996) of Prudential
Mutual Fund Management, Inc.; Vice
President and Director (since May
1989) of The Asia Pacific Fund, Inc.
and Director or Trustee of 44 funds
within the Prudential Mutual Funds.
David F. Connor (35).............. Secretary Assistant General Counsel (since March
1998) of PIFM; Associate Attorney,
Drinker Biddle & Reath LLP prior
thereto.
Grace C. Torres (40).............. Treasurer and Principal First Vice President (since December
Financial and Accounting 1996) of PIFM; First Vice President
Officer (since March 1993) of Prudential
Securities; formerly First Vice
President (March 1994-September 1996)
of Prudential Mutual Fund Management,
Inc. and Vice President (July
1989-March 1994) of Bankers Trust
Corporation.
Stephen M. Ungerman (46).......... Assistant Treasurer Tax Director (since March 1996) of
Prudential Investments; formerly First
Vice President (February
1993-September 1996) of Prudential
Mutual Fund Management, Inc.
</TABLE>
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<PAGE> 17
EXHIBIT D
FLEMING USA SMALL CAP GROWTH FUND
The following table sets forth information relating to the only other
registered investment company portfolio with an investment objective, policies
and strategies that are substantially similar to those of the Portfolio for
which Fleming USA acts as investment adviser or subadviser:
<TABLE>
<CAPTION>
APPROXIMATE
ADVISORY FEES NET ASSETS
ADVISORY FEE RATE WAIVED AS OF
FUND (BASED ON AVERAGE NET ASSETS) FOR LAST FISCAL YEAR SEPTEMBER 30, 1999
---- ----------------------------- -------------------- ------------------
<S> <C> <C> <C>
Fleming Fledgling Fund 1.00% N/A $1,800,000
</TABLE>
- ---------------
FLEMING USA MANAGEMENT
The following table sets forth the name and principal occupation of the
principal executive officer and the directors of Fleming USA.
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATION
---- --------------------
<S> <C>
Lord Kenwick of Clifton Chairman of the Board, Robert Fleming, Inc.;
Director of Robert Fleming Holdings
Mark Mattheys Director, Chief Operating Officer and Head of
Administration, Robert Fleming Inc.
Iain Saunders Director, Robert Fleming Inc.; Director of
Robert Fleming Holdings
Christopher Jones Director, Robert Fleming Inc.; Head of
Small Cap Investment Team, Fleming USA
Eduardo Canet Director and Director of Latin America Capital
Markets Robert Fleming Inc.
Jonathan Simon President, Fleming USA; Director,
Robert Fleming Inc.
Arthur Levy President, Vice Chairman, Director and
Head of Risk Arbitrage Desk,
Robert Fleming Inc.
Larry Kimmel Vice President and Head of Compliance, Fleming
USA
Charles Bridge Director and Head of Securities Trading,
Robert Fleming Inc.
Leonard Lubrano Director and Chief Financial Officer,
Robert Fleming Inc.
</TABLE>
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