<PAGE>
As filed with the Securities and Exchange Commission on March 27, 2000
Securities Act Registration No. 333-95849
Investment Company Act Registration No. 811-09805
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [_]
Pre-Effective Amendment No. 1 [X]
Post-Effective Amendment No. [_]
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [_]
Amendment No. 1 [X]
(Check appropriate box or boxes)
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STRATEGIC PARTNERS SERIES
(Exact name of registrant as specified in charter)
GATEWAY CENTER THREE
100 MULBERRY STREET
NEWARK, NEW JERSEY 07102-4077
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (973) 367-1495
David F. Connor
Gateway Center Three
100 Mulberry Street
Newark, New Jersey 07102-4077
(Name and Address of Agent for Service)
Approximate date of proposed public offering:
As soon as practicable after the effective
date of the Registration Statement.
Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
Title of Securities Being Registered . . . . Shares of beneficial interest,
par value $.001 per share.
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<PAGE>
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Strategic Partners/SM/
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Strategic Partners Focused Growth Fund
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PROSPECTUS
MARCH 27, 2000
FUND TYPE Stock
OBJECTIVE Long-term growth of capital
[GRAPHIC]
As with all mutual funds, the Securities and
Exchange Commission has not approved or
disapproved the Fund's shares, nor has the
SEC determined that this prospectus is
complete or accurate. It is a criminal
offense to state otherwise.
<PAGE>
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Table of Contents
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<TABLE>
<C> <S>
1 Risk/Return Summary
1 Investment Objective and Principal Strategies
2 Principal Risks
2 Evaluating Performance
3 Fees and Expenses
5 How the Fund Invests
5 Investment Objective and Policies
6 Other Investments and Strategies
10 Investment Risks
13 How the Fund is Managed
13 Board of Trustees
13 Manager
13 Sub-Manager
13 Investment Advisers
14 Portfolio Managers
14 Distributor
15 Fund Distributions and Tax Issues
15 Distributions
16 Tax Issues
17 If You Sell or Exchange Your Shares
19 How to Buy, Sell and Exchange Shares of the Fund
19 Initial Offering of Shares
20 How to Buy Shares
26 How to Sell Your Shares
30 How to Exchange Your Shares
31 Telephone Redemptions or Exchanges
For More Information (Back Cover)
</TABLE>
The Fund's Distributor will solicit subscriptions for the Fund's shares during
a subscription period expected to last from April 12, 2000 to May 26, 2000. The
Fund expects to begin a continuous offering of its shares on June 12, 2000.
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Strategic Partners Focused Growth Fund (800) 225-1852
[GRAPHIC]
<PAGE>
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Risk/Return Summary
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This section highlights key information about the Strategic Partners Focused
Growth Fund, which we refer to as "the Fund." The Fund is a separate series of
Strategic Partners Series ("the Company"). Additional information follows this
summary.
INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES
Our investment objective is long-term growth of capital. This means we seek
investments whose price will increase over several years. We normally invest at
least 65% of total assets in equity-related securities of U.S. companies that
we believe have strong capital appreciation potential. The Fund's strategy is
to combine the efforts of two investment advisers and to invest in the favorite
stock selection ideas of three portfolio managers (two of whom invest as a
team). Each investment adviser to the Fund utilizes a growth style to select
approximately 20 securities. The portfolio managers build a portfolio with
stocks in which they have the highest confidence and may invest more than 5% of
the Fund's assets in any one issuer. The Fund may actively and frequently trade
its portfolio securities.
The primary equity-related securities in which the Fund invests are common
stocks. Generally, each investment adviser will consider selling or reducing a
stock position when, in their opinion, the stock has experienced a fundamental
disappointment in earnings; it has reached an intermediate-term price objective
and its outlook no longer seems sufficiently promising; a relatively more
attractive stock emerges; or the stock has experienced adverse price movement.
A price decline of a stock does not necessarily mean that an investment adviser
will sell the stock at that time. During market declines, either investment
adviser may add to positions in favored stocks, which can result in a somewhat
more aggressive strategy, with a gradual reduction of the number of companies
in which the adviser invests. Conversely, in rising markets, either investment
adviser may reduce or eliminate fully valued positions, which can result in a
more conservative investment strategy, with a gradual increase in the number of
companies represented in the adviser's portfolio segment.
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We're Growth Investors
In deciding which stocks to buy, each investment adviser uses what is known as
a growth investment style. This means that each adviser will invest in stocks
they believe could experience superior sales or earnings growth.
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1
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Risk/Return Summary
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While we make every effort to achieve our objective, we can't guarantee
success.
PRINCIPAL RISKS
Although we try to invest wisely, all investments involve risk. Since the Fund
invests primarily in equity-related securities, there is the risk that the
price of a particular stock we own could go down, or the value of the equity
markets or a sector of them could go down. Stock markets are volatile. The
Fund's holdings can vary significantly from broad market indexes, and
performance of the Fund can deviate from the performance of such indexes.
The Fund is nondiversified, meaning we can invest more than 5% of our assets
in the securities of any one issuer. Investing in a nondiversified mutual fund,
particularly a fund investing in approximately 40 equity-related securities,
involves greater risk than investing in a diversified fund because a loss
resulting from the decline in the value of one security may represent a greater
portion of the total assets of a nondiversified fund.
The Fund may actively and frequently trade its portfolio securities. High
portfolio turnover results in higher transaction costs and can affect the
Fund's performance and have adverse tax consequences.
Like any mutual fund, an investment in the Fund could lose value and you
could lose money. For more detailed information about the risks associated with
the Fund, see "How the Fund Invests--Investment Risks."
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
EVALUATING PERFORMANCE
Because the Fund is new, no performance history is included in this prospectus.
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Strategic Partners Focused Growth Fund [GRAPHIC] (800) 225-1852
2
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Risk/Return Summary
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FEES AND EXPENSES
These tables show the sales charges, fees and expenses that you may pay if you
buy and hold shares of each share class of the Fund--Class A, B, C and Z. Each
share class has different sales charges--known as loads-- and expenses, but
represents an investment in the same fund. Class Z shares are available only to
a limited group of investors. For more information about which share class may
be right for you, see "How to Buy, Sell and Exchange Shares of the Fund."
Shareholder Fees/1/ (paid directly from your investment)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Z
<S> <C> <C> <C> <C>
Maximum sales charge (load) imposed on
purchases (as a percentage of
offering price) 5% None 1% None
Maximum deferred sales charge (load)
(as a percentage of the lower of
original purchase price or sale
proceeds) None 5%/2/ 1%/3/ None
Maximum sales charge (load) imposed on
reinvested dividends and other
distributions None None None None
Redemption fees None None None None
Exchange fee None None None None
</TABLE>
Annual Fund Operating Expenses (deducted from Fund assets)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Z
<S> <C> <C> <C> <C>
Management fees .90% .90% .90% .90%
+ Distribution and service (12b-1) fees .30%/4/ 1.00% 1.00% None
+ Other expenses/5/ .23% .23% .23% .23%
= Total annual Fund operating expenses 1.43% 2.13% 2.13% 1.13%
- Fee waiver .05% None None None
= Net annual Fund operating expenses 1.38%/4/ 2.13% 2.13% 1.13%
</TABLE>
1 Your broker may charge you a separate or additional fee for purchases and
sales of shares.
2 The contingent deferred sales charge (CDSC) for Class B shares decreases by
1% annually to 1% in the fifth and sixth years and 0% in the seventh year.
Class B shares convert to Class A shares approximately seven years after
purchase.
3 The CDSC for Class C shares is 1% for shares redeemed within 18 months of
purchase.
4 For the fiscal year ending 2-28-01, the Distributor of the Fund has
contractually agreed to reduce its distribution and service (12b-1) fees for
Class A shares to .25 of 1% of the average daily net assets of the Class A
shares.
5 Other expenses are estimated, since this is a new fund.
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3
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Risk/Return Summary
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Example
This example will help you compare the fees and expenses of the Fund's
different share classes and the cost of investing in the Fund with the cost of
investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the time periods
indicated and then sell all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that
the Fund's operating expenses remain the same, except for the Distributor's
reduction of distribution and service (12b-1) fees for Class A shares during
the first year. Although your actual costs may be higher or lower, based on
these assumptions, your costs would be:
<TABLE>
<CAPTION>
1 YR 3 YRS
<S> <C> <C>
Class A shares $633 $925
Class B shares $716 $967
Class C shares $414 $760
Class Z shares $115 $359
</TABLE>
You would pay the following expenses on the same investment if you did not sell
your shares:
<TABLE>
<CAPTION>
1 YR 3 YRS
<S> <C> <C>
Class A shares $633 $925
Class B shares $216 $667
Class C shares $314 $760
Class Z shares $115 $359
</TABLE>
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Strategic Partners Focused Growth Fund (800) 225-1852
[GRAPHIC]
4
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How the Fund Invests
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INVESTMENT OBJECTIVE AND POLICIES
In pursuing our objective of long-term growth of capital, we normally invest at
least 65% of the Fund's total assets in equity-related securities of U.S.
companies that we believe have strong capital appreciation potential.
In addition to common stocks in which the Fund primarily invests,
equity-related securities include nonconvertible preferred stocks; convertible
securities; American Depositary Receipts (ADRs); warrants and rights that can
be exercised to obtain stock; investments in various types of business
ventures, including partnerships and joint ventures; real estate investment
trusts (REITs); and similar securities. Convertible securities are securities--
like bonds, corporate notes and preferred stocks--that we can convert into the
company's common stock or some other equity security.
We may buy common stocks of companies of every size--small-, medium- and
large-capitalization-- although our investments are mostly in medium- and
large-capitalization stocks. The Fund intends to be fully invested, holding
less than 5% of its total assets in cash under normal market conditions.
Division of Assets
Strategy. Under normal conditions, there will be an approximately equal
division of the Fund's assets between the two investment advisers. All daily
cash inflows (that is, purchases and reinvested distributions) and outflows
(that is, redemptions and expense items) will be divided between the two
investment advisers as the Manager deems appropriate. There will be a periodic
rebalancing of each segment's assets to take account of market fluctuations in
order to maintain the approximately equal allocation. As a consequence, the
Manager may allocate assets from the portfolio segment that has appreciated
more to the other.
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Our Growth Style
Alliance Capital Management's portfolio manager, Alfred Harrison, utilizes the
fundamental analysis and research of Alliance's large internal research staff.
In selecting stocks for the Fund, he emphasizes stock selection and investment
in a limited number of companies that have strong management, superior industry
positions, excellent balance sheets and the ability to demonstrate superior
earnings growth.
Jennison Associates' portfolio managers, Spiros Segalas and Kathleen
McCarragher, invest in mid-size and large companies experiencing some or all of
the following: high sales growth, high unit growth, high or improving returns
on assets and equity and a strong balance sheet. These companies generally
trade at high prices relative to their current earnings.
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5
<PAGE>
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How the Fund Invests
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Risks. Reallocations may result in additional costs since sales of securities
may result in higher portfolio turnover. Also, because each investment adviser
selects portfolio securities independently, it is possible that a security held
by one portfolio segment may also be held by the other portfolio segment of the
Fund or that the two advisers may simultaneously favor the same industry. The
Manager will monitor the overall portfolio to ensure that any such overlaps do
not create an unintended industry concentration. In addition, if one investment
adviser buys a security as the other adviser sells it, the net position of the
Fund in the security may be approximately the same as it would have been with a
single portfolio and no such sale and purchase, but the Fund will have incurred
additional costs. The Manager will consider these costs in determining the
allocation of assets. The Manager will consider the timing of reallocation
based upon the best interests of the Fund and its shareholders. To maintain the
Fund's federal income tax status as a regulated investment company, the Manager
also may have to sell securities on a periodic basis and the Fund could realize
capital gains that would not have otherwise occurred.
For more information, see "Investment Risks" and the Statement of Additional
Information, "Description of the Fund, Its Investments and Risks." The
Statement of Additional Information--which we refer to as the SAI--contains
additional information about the Fund. To obtain a copy, see the back cover
page of this prospectus.
The Fund's investment objective is a fundamental policy that cannot be
changed without shareholder approval. The Board can change investment policies
that are not fundamental.
OTHER INVESTMENTS AND STRATEGIES
In addition to the principal strategies, we may also use the following
investment strategies to try to increase the Fund's returns or protect its
assets if market conditions warrant.
Foreign Securities
We may invest in foreign securities, including stocks and other equity-related
securities, money market instruments and other fixed-income securities of
foreign issuers. We do not consider ADRs and other similar receipts or shares
to be foreign securities.
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Strategic Partners Focused Growth Fund (800) 225-1852
[GRAPHIC]
6
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How the Fund Invests
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Money Market Instruments
The Fund may temporarily hold cash or invest in high-quality foreign or
domestic money market instruments pending investment of proceeds from new sales
of Fund shares or to meet ordinary daily cash needs subject to the policy of
normally investing at least 65% of the Fund's assets in equity-related
securities. Money market instruments include the commercial paper of
corporations, certificates of deposit, bankers' acceptances and other
obligations of domestic and foreign banks, nonconvertible debt securities
(corporate and government), short-term obligations issued or guaranteed by the
U.S. government or its agencies or instrumentalities, repurchase agreements and
cash (foreign currencies or U.S. dollars).
Repurchase Agreements
The Fund may use repurchase agreements, where a party agrees to sell a security
to the Fund and then repurchase it at an agreed-upon price at a stated time.
This creates a fixed return for the Fund and is, in effect, a loan by the Fund.
Repurchase agreements are used for cash management purposes.
Temporary Defensive Investments
In response to adverse market, economic, political or other conditions, we may
temporarily invest up to 100% of the Fund's assets in money market instruments.
Investing heavily in these securities limits our ability to achieve our
investment objective, but can help to preserve the Fund's assets when the
equity markets are unstable.
Real Estate Investment Trusts
We may invest in the securities of real estate investment trusts known as
REITs. REITs are like corporations, except that they do not pay income taxes if
they meet certain IRS requirements. However, while REITs themselves do not pay
income taxes, the distributions they make to investors are taxable. REITs
invest primarily in real estate and distribute almost all of their income--most
of which comes from rents, mortgages and gains on sales of property--to
shareholders.
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7
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How the Fund Invests
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U.S. Government Securities
The Fund may invest in securities issued or guaranteed by the U.S. Treasury or
by an agency or instrumentality of the U.S. government. Not all U.S. government
securities are backed by the full faith and credit of the United States. Some
are supported only by the credit of the issuing agency.
Short Sales
The Fund may use short sales, where it sells a security it does not own, with
the expectation of a decline in the market value of that security. To complete
the transaction, the Fund will borrow the security to make delivery to the
buyer. The Fund must replace the security borrowed by purchasing it at the
market price at the time of replacement. The price at that time may be more or
less than the price at which the Fund sold the security. The Fund is required
to pay the lender any dividends or interest accrued. To borrow the security,
the Fund may pay a premium which would increase the cost of the security sold.
Derivative Strategies
We may use various derivative strategies to try to improve the Fund's returns.
We may use hedging techniques to try to protect the Fund's assets. We cannot
guarantee that these strategies will work, that the instruments necessary to
implement these strategies will be available, or that the Fund will not lose
money. Derivatives--such as futures, options and options on futures--involve
costs and can be volatile. With derivatives, an investment adviser tries to
predict whether the underlying investment--a security, market index, currency,
interest rate or some other benchmark--will go up or down at some future date.
We may use derivatives to try to reduce risk or to increase return consistent
with the Fund's overall investment objective. The investment adviser will
consider other factors (such as cost) in deciding whether to employ any
particular strategy or use any particular instrument. Any derivatives we use
may not match the Fund's underlying holdings.
Options. The Fund may purchase and sell put and call options on securities
indexes traded on U.S. or foreign securities exchanges or in the over-the-
counter market. An option is the right to buy or sell securities in exchange
for a premium. The Fund will sell only covered options.
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Strategic Partners Focused Growth Fund [GRAPHIC] (800) 225-1852
8
<PAGE>
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How the Fund Invests
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Futures Contracts and Related Options. The Fund may purchase and sell stock
index futures contracts and related options on stock index futures. The Fund
may purchase and sell futures contracts on foreign currencies and related
options on foreign currency futures contracts. A futures contract is an
agreement to buy or sell a set quantity of an underlying product at a future
date, or to make or receive a cash payment based on the value of a securities
index.
Additional Strategies
The Fund also follows certain policies when it borrows money (the Fund can
borrow up to 33 1/3% of the value of its total assets); lends its securities to
others (the Fund can lend up to 33 1/3% of the value of its total assets
including collateral received in the transaction); and holds illiquid
securities (the Fund may hold up to 15% of its net assets in illiquid
securities, including securities with legal or contractual restrictions on
resale, those without a readily available market and repurchase agreements with
maturities longer than seven days). The Fund is subject to certain investment
restrictions that are fundamental policies, which means they cannot be changed
without shareholder approval. For more information about these restrictions,
see the SAI.
Portfolio Turnover
It is not a principal strategy of the Fund to actively and frequently trade its
portfolio securities to achieve its investment objective. Nevertheless, the
Fund may have an annual portfolio turnover rate of up to 200%. Portfolio
turnover is generally the percentage found by dividing the lesser of portfolio
purchases and sales by the monthly average value of the portfolio. High
portfolio turnover (100% or more) results in higher brokerage commissions and
other costs and can affect the Fund's performance. It also can result in a
greater amount of distributions as ordinary income rather than long-term
capital gains.
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9
<PAGE>
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How the Fund Invests
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INVESTMENT RISKS
All investments involve risk, and investing in the Fund is no exception. Since
the Fund's holdings can vary significantly from broad market indexes,
performance of the Fund can deviate from performance of the indexes. This chart
outlines the key risks and potential rewards of the Fund's principal
investments and certain other non-principal investments the Fund may make. The
investment types are listed in the order in which they normally will be used by
the portfolio managers. See, too, "Description of the Fund, Its Investments and
Risks" in the SAI.
Investment Type
Risks Potential Rewards
% of Fund's Total
Assets
Equity-related . Individual stocks . Historically,
securities could lose value stocks have
outperformed
other
investments over
the long term
. The equity
At least 65% markets could go
down, resulting . Generally,
in a decline in economic growth
value of the means higher
Fund's corporate
investments profits, which
lead to an
. Changes in increase in
economic or stock prices,
political known as capital
conditions, both appreciation
domestic and
international,
may result in a
decline in value
of the Fund's
investments
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Foreign . Foreign markets, . Investors can
securities economies and participate in
political systems foreign markets
may not be as and companies
stable as in the operating in
U.S. those markets
Up to 20%
. May profit from
. Currency risk-- changing values
changing values of foreign
of foreign currencies
currencies can
cause losses . Opportunities
for
. May be less diversification
liquid than U.S.
stocks and bonds
. Differences in
foreign laws,
accounting
standards, public
information,
custody and
settlement
practices provide
less reliable
information on
foreign
investments and
involve more risk
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Strategic Partners Focused Growth Fund [GRAPHIC] (800) 225-1852
10
<PAGE>
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How the Fund Invests
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Investment Type (cont'd)
<TABLE>
<CAPTION>
% of Fund's Total Risks Potential Rewards
Assets
<S> <C> <C>
Derivatives . Derivatives such . The Fund could
as futures and make money and
Percentage options that are protect against
varies; usually used for hedging losses if the
less than 10% purposes may not investment
fully offset the analysis proves
underlying correct
positions and
this could result . One way to
in losses to the manage the
Fund that would Fund's
not have risk/return
otherwise balance is by
occurred locking in the
value of an
. Derivatives used investment ahead
for risk of time
management may
not have the
intended effects
and may result in
losses or missed
opportunities
. The other party
to a derivatives
contract could
default
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U.S. government . Not all are . May preserve the
securities insured or Fund's assets
guaranteed by the
Up to 35%; usu- government but . Principal and
ally less than only by the interest may be
10% issuing agency guaranteed by
the U.S.
. Limits potential government
for capital
appreciation
. Interest rate
risk--the risk
that the value of
most debt
obligations will
fall when
interest rates
rise; the longer
its maturity, the
more its value
typically falls
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Real estate . Performance . Real estate
investment trusts depends on the holdings can
(REITs) strength of real generate good
estate market, returns from
Up to 25%; usu- REIT management rents, rising
ally less than and property market values,
10% management which etc.
can be affected
by many factors, . Greater
including diversification
national and than direct
regional economic ownership
conditions
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Short sales . May magnify . May magnify
underlying underlying
Up to 25% of net investment losses investment gains
assets; usually
less than 10% . Investment costs
may exceed
potential
underlying
investment gains
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</TABLE>
11
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How the Fund Invests
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Investment Type (cont'd)
<TABLE>
<CAPTION>
% of Fund's Total Risks Potential Rewards
Assets
<S> <C> <C>
Illiquid . May be difficult . May offer a more
securities to value attractive yield
precisely or potential for
growth than more
Up to 15% of net . May be difficult widely traded
assets to sell at the securities
time or price
desired
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Money market . Limits potential . May preserve the
instruments for capital Fund's assets
appreciation
. Credit risk--the
Up to 100% on a risk that the
temporary basis default of an
issuer would
leave the Fund
with unpaid
interest or
principal
. Market risk--the
risk that the
market value of
an investment may
move up or down.
Market risk may
affect an
industry, a
sector or the
market as a whole
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</TABLE>
Strategic Partners Focused Growth Fund [GRAPHIC] (800) 225-1852
12
<PAGE>
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How the Fund is Managed
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BOARD OF TRUSTEES
The Company's Board of Trustees oversees the actions of the Manager, Sub-
Manager, Investment Advisers and Distributor, and decides on general policies.
The Board also oversees the Company's officers, who conduct and supervise the
daily business operations of the Fund.
MANAGER
Prudential Investments Fund Management LLC (PIFM)
Gateway Center Three, 100 Mulberry Street
Newark, NJ 07102-4077
Under a management agreement with the Fund, PIFM manages the Fund's
investment operations and administers its business affairs. PIFM is paid annual
management fees of .90 of 1% of the Fund's average net assets up to and
including $1 billion and .85 of 1% of average net assets over $1 billion. PIFM
has responsibility for all investment advisory services and supervises
Prudential Investments and the Fund's investment advisers.
PIFM and its predecessors have served as manager or administrator to
investment companies since 1987. As of January 31, 2000, PIFM served as the
manager to 43 mutual funds, and as manager or administrator to 22 closed-end
investment companies, with aggregate assets of approximately $74.9 billion.
SUB-MANAGER
The Prudential Investment Corporation, called Prudential Investments, serves as
the Sub-Manager for the portion of the Fund managed by Jennison Associates LLC
(Jennison). Prudential Investments' address is Prudential Plaza, 751 Broad
Street, Newark, NJ 07102. Prudential Investments provides services to PIFM as
PIFM may request from time to time in the management and administration of the
Fund. Prudential Investments has served as an adviser to mutual funds since
1984.
INVESTMENT ADVISERS
Alliance Capital Management, L.P. (Alliance) and Jennison are the Fund's
investment advisers. Alliance's address is 1345 Avenue of the Americas, New
York, NY 10105 and Jennison's address is 466 Lexington Avenue, New York, NY
10017.
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13
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How the Fund is Managed
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Alliance is a leading international investment adviser, supervising client
accounts with assets as of December 31, 1999 totaling more than $368 billion,
including 52 investment companies with assets of more than $143 billion.
Alliance has served as an investment adviser to mutual funds since 1983.
Jennison managed approximately $58.7 billion in assets as of January 31,
2000. Jennison has served as an investment adviser to mutual funds and other
clients since 1990.
PORTFOLIO MANAGERS
Alfred Harrison is portfolio manager for the portion of the Fund's assets
advised by Alliance. Mr. Harrison joined Alliance in 1978 and is manager of the
firm's Minneapolis office. He is Vice Chairman of Alliance Capital Management
Corporation.
Spiros Segalas and Kathleen McCarragher are co-portfolio managers for the
portion of the Fund's assets advised by Jennison. Spiros "Sig" Segalas has been
in the investment business for over 35 years and has managed equity portfolios
for investment companies since 1990. He was a founding member of Jennison in
1969 and currently serves as Director, President and Chief Investment Officer
of Jennison. Mr. Segalas received a B.A. from Princeton University and is a
member of the New York Society of Security Analysts. Kathleen McCarragher is a
Director and Executive Vice President of Jennison and is also Jennison's Growth
Equity Investment Strategist. She joined Jennison in 1998 after a 17-year
investment career, including positions at Weiss, Peck & Greer (1992 to 1998) as
a portfolio manager and State Street Research and Management Company, where she
was a member of the Investment Committee. She received a B.B.A. from the
University of Wisconsin and an M.B.A. from Harvard Business School.
DISTRIBUTOR
Prudential Investment Management Services LLC (PIMS) distributes the Fund's
shares under a Distribution Agreement with the Fund. The Fund has Distribution
and Service Plans under Rule 12b-1 of the Investment Company Act. Under the
Plans and the Distribution Agreement, PIMS pays the expenses of distributing
the Fund's Class A, B, C and Z shares and provides certain shareholder support
services. The Fund pays distribution and other fees to PIMS as compensation for
its services for each class of shares other than Class Z. These fees--known as
12b-1 fees--are shown in the "Fees and Expenses" tables.
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Strategic Partners Focused Growth Fund (800) 225-1852
[GRAPHIC]
14
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Fund Distributions and Tax Issues
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Investors who buy shares of the Fund should be aware of some important tax
issues. For example, the Fund distributes dividends of ordinary income and any
realized net capital gains to shareholders. These distributions are subject to
taxes, unless you hold your shares in a 401(k) plan, an Individual Retirement
Account (IRA) or some other qualified tax-deferred plan or account. Dividends
and distributions from the Fund also may be subject to state and local income
tax in the state where you live.
Also, if you sell shares of the Fund for a profit, you may have to pay
capital gains taxes on the amount of your profit, again unless you hold your
shares in a qualified tax-deferred plan or account.
The following briefly discusses some of the important federal tax issues you
should be aware of, but is not meant to be tax advice. For tax advice, please
speak with your tax adviser.
DISTRIBUTIONS
The Fund distributes dividends of any net investment income to shareholders
typically once a year. For example, if the Fund owns ACME Corp. stock and the
stock pays a dividend, the Fund will pay out a portion of this dividend to its
shareholders, assuming the Fund's income is more than its costs and expenses.
The dividends you receive from the Fund will be taxed as ordinary income
whether or not they are reinvested in the Fund.
The Fund also distributes realized net capital gains to shareholders--
typically once a year. Capital gains are generated when the Fund sells its
assets for a profit. For example, if the Fund bought 100 shares of ACME Corp.
stock for a total of $1,000 and more than one year later sold the shares for a
total of $1,500, the Fund has net long-term capital gains of $500, which it
will pass on to shareholders (assuming the Fund's total gains are greater than
any losses it may have). Capital gains are taxed differently depending on how
long the Fund holds the security--if a security is held more than one year
before it is sold, long-term capital gains are taxed at the rate of 20%, but if
the security is held one year or less, short-term capital gains are taxed at
ordinary income rates of up to 39.6%. Different rates apply to corporate
shareholders.
For your convenience, Fund distributions of dividends and capital gains are
automatically reinvested in the Fund without any sales charge. If you ask us to
pay the distributions in cash, we will send you a check if your
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15
<PAGE>
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Fund Distributions and Tax Issues
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account is with the Transfer Agent. Otherwise, if your account is with a
broker, you will receive a credit to your account. Either way, the
distributions may be subject to taxes, unless your shares are held in a
qualified tax-deferred plan or account. For more information about automatic
reinvestment and other shareholder services, see "Step 4: Additional
Shareholder Services" in the next section.
TAX ISSUES
Form 1099
Every year, you will receive a Form 1099, which reports the amount of dividends
and capital gains we distributed to you during the prior year. If you own
shares of the Fund as part of a qualified tax-deferred plan or account, your
taxes are deferred, so you will not receive a Form 1099. However, you will
receive a Form 1099 when you take any distributions from your qualified tax-
deferred plan or account.
Fund distributions are generally taxable to you in the calendar year they
are received, except when we declare certain dividends in the fourth quarter
and actually pay them in January of the following year. In such cases, the
dividends are treated as if they were paid on December 31 of the prior year.
Corporate shareholders are eligible for the 70% dividends-received deduction
for certain dividends.
Withholding Taxes
If federal tax law requires you to provide the Fund with your taxpayer
identification number and certifications as to your tax status, and you fail to
do this, or if you are otherwise subject to backup withholding, we will
withhold and pay to the U.S. Treasury 31% of your distributions and sale
proceeds. Dividends of net investment income and short-term capital gains paid
to a nonresident foreign shareholder generally will be subject to a U.S.
withholding tax of 30%. This rate may be lower, depending on any tax treaty the
U.S. may have with the shareholder's country.
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16 Strategic Partners Focused Growth Fund [GRAPHIC] (800) 225-1852
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Fund Distributions and Tax Issues
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If You Purchase Just Before Record Date
If you buy shares of the Fund just before the record date (the date that
determines who receives the distribution), that distribution will be paid to
you. As explained above, the distribution may be subject to income or capital
gains taxes. You may think you've done well since you bought shares one day and
soon thereafter received a distribution. That is not so because when dividends
are paid out, the value of each share of the Fund decreases by the amount of
the dividend to reflect the payout, although this may not be apparent because
the value of each share of the Fund also will be affected by the market
changes, if any. The distribution you receive makes up for the decrease in
share value. However, the timing of your purchase does mean that part of your
investment came back to you as taxable income.
Qualified or Tax-Deferred Retirement Plans
Retirement plans and accounts allow you to defer paying taxes on investment
income and capital gains. Contributions to these plans may also be tax
deductible, although distributions from these plans generally are taxable. In
the case of Roth IRA accounts, contributions are not tax deductible, but
distributions from the plan may be tax-free.
IF YOU SELL OR EXCHANGE YOUR SHARES
If you sell any shares of the Fund for a profit, you have realized a capital
gain, which is subject to tax unless you hold shares in a qualified tax-
deferred plan or account. The amount of tax you pay depends on how long you
owned your shares. If you sell shares of the Fund for a loss, you may have a
capital loss, which you may use to offset certain capital gains you have.
If you sell shares and realize a loss, you will not be permitted to use the
loss to the extent you replace the shares (including pursuant to the
reinvestment of a dividend) within a 61-day period (beginning 30 days before
the sale of the shares). If you acquire shares of the Fund and sell
- -----------------------------------------------------
+ $ CAPITAL GAIN
(taxes owed)
RECEIPTS FROM SALE [GRAPHIC] OR
- $ CAPITAL LOSS
(offset against gain)
- -----------------------------------------------------
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17
<PAGE>
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Fund Distributions and Tax Issues
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your shares within 90 days, you may not be allowed to include certain charges
incurred in acquiring the shares for purposes of calculating gain or loss
realized upon the sale of the shares.
Exchanging your shares of the Fund for the shares of a future series of the
Company is considered a sale for tax purposes. In other words, it's a "taxable
event." Therefore, if the shares you exchanged have increased in value since
you purchased them, you have capital gains, which are subject to the taxes
described above.
Any gain or loss you may have from selling or exchanging Fund shares will
not be reported on Form 1099; however, proceeds from the sale will be reported
on Form 1099-B. Therefore, unless you hold your shares in a qualified tax-
deferred plan or account, you or your financial adviser should keep track of
the dates on which you buy and sell--or exchange--Fund shares, as well as the
amount of any gain or loss on each transaction. For tax advice, please see your
tax adviser.
Automatic Conversion of Class B Shares
We have obtained a legal opinion that the conversion of Class B shares into
Class A shares--which happens automatically approximately seven years after
purchase--is not a "taxable event" because it does not involve an actual sale
of your Class B shares. This opinion, however, is not binding on the Internal
Revenue Service. For more information about the automatic conversion of Class B
shares, see "Class B Shares Convert to Class A Shares After Approximately Seven
Years" in the next section.
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18 Strategic Partners Focused Growth Fund [GRAPHIC] (800) 225-1852
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How to Buy, Sell and
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Exchange Shares of the Fund
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INITIAL OFFERING OF SHARES
PIMS will solicit subscriptions for Class A, Class B, Class C and Class Z
shares of the Fund during a subscription period beginning April 12, 2000 and
expected to end May 26, 2000. Fund shares subscribed for during this time will
be issued at a net asset value of $10.00 per share on a closing date expected
to occur on June 1, 2000. An initial sales charge of 5% (5.26% of the net
amount invested) is imposed on each transaction in Class A shares. The initial
sales charge may be reduced depending on the amount of the purchase as shown in
the table under "Reducing or Waiving Class A's Initial Sales Charge." An
initial sales charge of 1% (1.01% of the net amount invested) is imposed on
each transaction in Class C shares. Your broker will notify you of the end of
the subscription period. Payment for Fund shares will be due within three days.
If you send an order during the subscription period along with payment, your
money will be returned unless you allow the money to be invested in Prudential
MoneyMart Assets, Inc. (MoneyMart Fund), a money market fund. If this is your
first investment in MoneyMart Fund, all amounts received and invested in
MoneyMart Fund, including any dividends received on these funds, will be
automatically invested in this Fund on the closing date. You will not receive
share certificates. If you previously owned shares of MoneyMart Fund, dividends
accrued on your shares will not be exchanged for Fund shares. The minimum
initial investment is $1,000 for Class A and Class B shares and $2,500 for
Class C shares. There are no minimum investment requirements for Class Z
shares.
If you subscribe for shares, you will not have any rights as a shareholder
of the Fund until your shares are paid for and their issuance has been
reflected in the Fund's books. We reserve the right to withdraw, modify or
terminate the initial offering without notice and to refuse any order in whole
or in part.
The Fund will be closed for purchases after May 26, 2000 to June 9, 2000,
while the investment advisers invest the proceeds of the offering in accordance
with the Fund's investment objective and policies (the closing period).
Beginning on or about June 12, 2000, the Fund will commence a continuous
offering of its shares. During the closing period, shareholders may redeem
existing positions, but the Fund will be closed to new purchases.
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19
<PAGE>
How to Buy, Sell and
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Exchange Shares of the Fund
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HOW TO BUY SHARES
Step 1: Open an Account
If you don't have an account with a securities firm that is permitted to buy or
sell shares of the Fund for you, call the Fund's Transfer Agent, Prudential
Mutual Fund Services LLC (PMFS), at (800) 225-1852, or contact:
Prudential Mutual Fund Services LLC
Attn: Investment Services
P.O. Box 15020
New Brunswick, NJ 08906-5020
To purchase by wire, call the number above to obtain an application. After
PMFS receives your completed application, you will receive an account number.
We have the right to reject any purchase order (including an exchange into the
Fund) or suspend or modify the Fund's sale of its shares.
Step 2: Choose a Share Class
Individual investors can choose among Class A, Class B, Class C and Class Z
shares of the Fund, although Class Z shares are available only to a limited
group of investors.
Multiple share classes let you choose a cost structure that better meets
your needs. With Class A shares, you pay the sales charge at the time of
purchase, but the operating expenses each year are lower than the expenses of
Class B and Class C shares. With Class B shares, you only pay a sales charge if
you sell your shares within six years (that is why it is called a Contingent
Deferred Sales Charge or CDSC), but the operating expenses each year are higher
than Class A share expenses. With Class C shares, you pay a 1% front-end sales
charge and a 1% CDSC if you sell within 18 months of purchase, but the
operating expenses are also higher than the expenses for Class A shares.
When choosing a share class, you should consider the following:
. The amount of your investment
. The length of time you expect to hold the shares and the impact of
varying distribution fees
. The different sales charges that apply to each share class--Class A's
front-end sales charge vs. Class B's CDSC vs. Class C's low front-end
sales charge and low CDSC
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Strategic Partners Focused Growth Fund [GRAPHIC] (800) 225-1852
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How to Buy, Sell and
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Exchange Shares of the Fund
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. Whether you qualify for any reduction or waiver of sales charges
. The fact that Class B shares automatically convert to Class A shares
approximately seven years after purchase
. Whether you qualify to purchase Class Z shares.
See "How to Sell Your Shares" for a description of the impact of CDSCs.
Share Class Comparison. Use this chart to help you compare the Fund's different
share classes. The discussion following this chart will tell you whether you
are entitled to a reduction or waiver of any sales charges.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Z
<S> <C> <C> <C> <C>
Minimum purchase $1,000 $1,000 $2,500 None
amount/1/
Minimum amount for $100 $100 $100 None
subsequent purchases/1/
Maximum initial 5% of the public None 1% of the public None
sales charge offering price offering price
Contingent Deferred None If sold during: 1% on sales None
Sales Charge Year 1 5% made within
(CDSC)/2/ Year 2 4% 18 months of
Year 3 3% purchase/2/
Year 4 2%
Years 5/6 1%
Year 7 0%
Annual distribution .30 of 1%; 1% 1% None
(12b-1) and service fees (.25 of 1%
shown as a percentage of currently)
average net assets/3/
</TABLE>
1 The minimum investment requirements do not apply to certain retirement and
employee savings plans and custodial accounts for minors. The minimum initial
and subsequent investment for purchases made through the Automatic Investment
Plan is $50. For more information, see "Additional Shareholder Services--
Automatic Investment Plan."
2 For more information about the CDSC and how it is calculated, see "How to
Sell Your Shares--Contingent Deferred Sales Charge (CDSC)."
3 These distribution fees are paid from the Fund's assets on a continuous
basis. Over time, the fees will increase the cost of your investment and may
cost you more than paying other types of sales charges. The service fee for
Class A, Class B and Class C shares is .25 of 1%. The distribution fee for
Class A shares is limited to .30 of 1% (including the .25 of 1% service fee).
Class B and Class C shares pay a distribution fee (in addition to the service
fee) of .75 of 1%. For the fiscal year ending 2-28-01, the Distributor of the
Fund has contractually agreed to reduce its distribution and service (12b-1)
fees for Class A shares to .25 of 1% of the average daily net assets of the
Class A shares.
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21
<PAGE>
How to Buy, Sell and
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Exchange Shares of the Fund
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Reducing or Waiving Class A's Initial Sales Charge
The following describes the different ways investors can reduce or avoid paying
Class A's initial sales charge.
Increase the Amount of Your Investment. You can reduce Class A's sales charge
by increasing the amount of your investment. This table shows how the sales
charge decreases as the amount of your investment increases.
<TABLE>
<CAPTION>
SALES CHARGE AS % SALES CHARGE AS % DEALER
AMOUNT OF PURCHASE OF OFFERING PRICE OF AMOUNT INVESTED REALLOWANCE
<S> <C> <C> <C>
Less than $25,000 5.00% 5.26% 4.75%
$25,000 to $49,999 4.50% 4.71% 4.25%
$50,000 to $99,999 4.00% 4.17% 3.75%
$100,000 to $249,999 3.25% 3.36% 3.00%
$250,000 to $499,999 2.50% 2.56% 2.40%
$500,000 to $999,999 2.00% 2.04% 1.90%
$1 million and above/1/ None None None
</TABLE>
1 If you invest $1 million or more, you can buy only Class A shares, unless you
qualify to buy Class Z shares.
To satisfy the purchase amounts above, you can:
. Invest with an eligible group of related investors
. Sign a Letter of Intent, stating in writing that you or an eligible group
of related investors will purchase a certain amount of shares in the Fund
and other Prudential mutual funds within 13 months.
The Distributor may reallow Class A's sales charge to dealers.
Benefit Plans. Benefit Plans can avoid Class A's initial sales charge if the
Benefit Plan has existing assets of at least $1 million or 250 eligible
employees or participants. For these purposes, a Benefit Plan is a pension,
profit-sharing or other employee benefit plan qualified under Section 401 of
the Internal Revenue Code, a deferred compensation or annuity plan under
Sections 403(b) and 457 of the Internal Revenue Code, a rabbi trust, or a
nonqualified deferred compensation plan.
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[GRAPHIC]
Strategic Partners Focused Growth Fund (800) 225-1852
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How to Buy, Sell and
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Exchange Shares of the Fund
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Mutual Fund Programs. Waivers are also available to investors in certain
programs sponsored by brokers, investment advisers and financial planners who
have agreements with the Fund's Distributor relating to:
. Mutual fund "wrap" or asset allocation programs where the sponsor places
Fund trades and charges its clients a management, consulting or other fee
for its services
. Mutual fund "supermarket" programs where the sponsor links its clients'
accounts to a master account in the sponsor's name and the sponsor
charges a fee for its services.
Broker-dealers, investment advisers or financial planners sponsoring these
mutual fund programs may offer their clients more than one class of shares in
the Fund in connection with different pricing options for their programs.
Investors should consider carefully any separate transaction and other fees
charged by these programs in connection with investing in each available share
class before selecting a share class.
Other Types of Investors. Other investors pay no sales charge, including
certain officers, employees or agents of the Manager and its affiliates, the
investment advisers of the Fund and registered representatives and employees of
brokers that have entered into a dealer agreement with the Distributor. To
qualify for a reduction or waiver of the sales charge, you must notify the
Transfer Agent or your broker at the time of purchase. For more information,
see the SAI, "Purchase, Redemption and Pricing of Fund Shares--Reduction and
Waiver of Initial Sales Charge--Class A Shares."
Waiving Class C's Initial Sales Charge
Benefit Plans. Benefit Plans (as defined above) may purchase Class C shares
without paying an initial sales charge.
Investment of Redemption Proceeds from Other Investment Companies. The initial
sales charge will be waived for purchases of Class C shares if the purchase is
made with money from the redemption of shares of any unaffiliated investment
company. These purchases must be made within 60 days of the redemption. This
waiver is not available to investors who purchase shares directly from the
Transfer Agent. If you are entitled to the waiver, you must notify either the
Transfer Agent or your broker. The Transfer Agent may require any supporting
documents it considers appropriate.
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23
<PAGE>
How to Buy, Sell and
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Exchange Shares of the Fund
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Qualifying for Class Z Shares
Class Z shares of the Fund can be purchased by any of the following:
. Any Benefit Plan, as defined above, and certain nonqualified plans,
provided the Benefit Plan--in combination with other plans sponsored by
the same employer or group of related employers--has at least $50 million
in defined contribution assets
. Current and former Trustees of the Company
. The Manager or an investment adviser or one of their respective
affiliates, with an investment of $10 million or more.
In connection with the sale of shares, the Manager, the Distributor or one
of their affiliates may pay brokers, financial advisers and other persons a
commission of up to 4% of the purchase price for Class B shares, up to 2% of
the purchase price for Class C shares and a finder's fee for Class A or Class Z
shares from their own resources based on a percentage of the net asset value of
shares sold or otherwise.
Class B Shares Convert to Class A Shares After Approximately Seven Years
If you buy Class B shares and hold them for approximately seven years, we will
automatically convert them into Class A shares without charge. At that time, we
will also convert any Class B shares that you purchased with reinvested
dividends and other distributions. Since the 12b-1 fees for Class A shares are
lower than for Class B shares, converting to Class A shares lowers your Fund
expenses.
When we do the conversion, you will get fewer Class A shares than the number
of converted Class B shares if the price of the Class A shares is higher than
the price of Class B shares. The total dollar value will be the same, so you
will not have lost any money by getting fewer Class A shares. We do the
conversions quarterly, not on the anniversary date of your purchase. For more
information, see the SAI, "Purchase, Redemption and Pricing of Fund Shares--
Conversion Feature--Class B Shares."
Step 3: Understanding the Price You'll Pay
The price you pay for each share of the Fund is based on the share value. The
share value of a mutual fund--known as the net asset value or NAV--is
determined by a simple calculation: it's the total value of the Fund (assets
minus liabilities) divided by the total number of shares outstanding. For
example, if the value of the investments held by Fund XYZ (minus its
- --------------------------------------------------------------------------------
24 Strategic Partners Focused Growth Fund [GRAPHIC] (800) 225-1852
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How to Buy, Sell and
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Exchange Shares of the Fund
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Mutual Fund Shares
The NAV of mutual fund shares changes every day because the value of a fund's
portfolio changes constantly. For example, if Fund XYZ holds ACME Corp. stock
in its portfolio and the price of ACME stock goes up while the value of the
fund's other holdings remains the same and expenses don't change, the NAV of
Fund XYZ will increase.
- --------------------------------------------------------------------------------
liabilities) is $1,000 and there are 100 shares of Fund XYZ owned by
shareholders, the price of one share of the fund--or the NAV--is $10 ($1,000
divided by 100). Portfolio securities are valued based upon market quotations
or, if not readily available, at fair value as determined in good faith under
procedures established by the Company's Board. Most national newspapers report
the NAVs of most mutual funds, which allows investors to check the price of
mutual funds daily.
We determine the NAV of our shares once each business day at 4:15 p.m. New
York time on days that the New York Stock Exchange (NYSE) is open for trading.
The NYSE is closed on most national holidays and Good Friday. Because the Fund
may invest in foreign securities, its NAV may change on days when you cannot
buy or sell shares. We do not determine the NAV on days when we have not
received any orders to purchase, sell or exchange Fund shares, or when changes
in the value of the Fund's portfolio do not materially affect the NAV.
What Price Will You Pay for Shares of the Fund?
For Class A and Class C shares, you'll pay the public offering price, which is
the NAV next determined after we receive your order to purchase, plus an
initial sales charge (unless you're entitled to a waiver). For Class B and
Class Z shares, you will pay the NAV next determined after we receive your
order to purchase (remember, there are no up-front sales charges for these
share classes). Your broker may charge you a separate or additional fee for
purchases of shares.
Step 4: Additional Shareholder Services
As a Fund shareholder, you can take advantage of the following services and
privileges:
Automatic Reinvestment. As we explained in the "Fund Distributions and Tax
Issues" section, the Fund pays out--or distributes--its net investment income
and capital gains to all shareholders. For your convenience, we will
- --------------------------------------------------------------------------------
25
<PAGE>
How to Buy, Sell and
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Exchange Shares of the Fund
- --------------------------------------------------------------------------------
automatically reinvest your distributions in the Fund at NAV without any sales
charge. If you want your distributions paid in cash, you can indicate this
preference on your application, notify your broker or notify the Transfer Agent
in writing (at the address below) at least five business days before the date
we determine who receives dividends.
Prudential Mutual Fund Services LLC
Attn: Account Maintenance
P.O. Box 15015
New Brunswick, NJ 08906-5015
Automatic Investment Plan. You can make regular purchases of the Fund for as
little as $50 by having the funds automatically withdrawn from your bank or
brokerage account at specified intervals.
Systematic Withdrawal Plan. A systematic withdrawal plan is available that will
provide you with monthly, quarterly, semi-annual or annual redemption checks.
Remember, the sale of Class B and Class C shares may be subject to a CDSC.
Reports to Shareholders. Every year we will send you an annual report (along
with an updated prospectus) and a semi-annual report, which contain important
financial information about the Fund. To reduce Fund expenses, we will send one
annual shareholder report, one semi-annual shareholder report and one annual
prospectus per household, unless you instruct us or your broker otherwise.
HOW TO SELL YOUR SHARES
You can sell your shares of the Fund for cash (in the form of a check) at any
time, subject to certain restrictions.
When you sell shares of the Fund--also known as redeeming your shares--the
price you will receive will be the NAV next determined after the Transfer
Agent, the Distributor or your broker receives your order to sell. If your
broker holds your shares, your broker must receive your order to sell by 4:15
p.m. New York time to process the sale on that day. Otherwise contact:
Prudential Mutual Fund Services LLC
Attn: Redemption Services
P.O. Box 15010
New Brunswick, NJ 08906-5010
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26 Strategic Partners Focused Growth Fund [GRAPHIC] (800) 225-1852
<PAGE>
How to Buy, Sell and
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Exchange Shares of the Fund
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Generally, we will pay you for the shares that you sell within seven days
after the Transfer Agent, the Distributor or your broker receives your sell
order. If you hold shares through a broker, payment will be credited to your
account. If you are selling shares you recently purchased with a check, we may
delay sending you the proceeds until your check clears, which can take up to 10
days from the purchase date. You can avoid delay if you purchase shares by
wire, certified check or cashier's check. Your broker may charge you a separate
or additional fee for sales of shares.
Restrictions on Sales
There are certain times when you may not be able to sell shares of the Fund, or
when we may delay paying you the proceeds from a sale. As permitted by the
Commission, this may happen only during unusual market conditions or
emergencies when the Fund can't determine the value of its assets or sell its
holdings. For more information, see the SAI, "Purchase, Redemption and Pricing
of Fund Shares--Sale of Shares."
If you are selling more than $100,000 of shares, you want the check sent to
someone or some place that is not in our records or you are a business or a
trust and if you hold your shares directly with the Transfer Agent, you will
need to have the signature on your sell order "signature guaranteed" by an
"eligible guarantor institution." An "eligible guarantor institution" includes
any bank, broker-dealer or credit union. For more information, see the SAI,
"Purchase, Redemption and Pricing of Fund Shares--Sale of Shares--Signature
Guarantee."
Contingent Deferred Sales Charge (CDSC)
If you sell Class B shares within six years of purchase or Class C shares
within 18 months of purchase, you will have to pay a CDSC. To keep the CDSC as
low as possible, we will sell amounts representing shares in the following
order:
. Amounts representing shares you purchased with reinvested dividends and
distributions
. Amounts representing the increase in NAV above the total amount of
payments for shares made during the past six years for Class B shares and
18 months for Class C shares
. Amounts representing the cost of shares held beyond the CDSC period (six
years for Class B shares and 18 months for Class C shares).
- --------------------------------------------------------------------------------
27
<PAGE>
How to Buy, Sell and
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Exchange Shares of the Fund
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Since shares that fall into any of the categories listed above are not
subject to the CDSC, selling them first helps you to avoid--or at least
minimize--the CDSC.
Having sold the exempt shares first, if there are any remaining shares that
are subject to the CDSC, we will apply the CDSC to amounts representing the
cost of shares held for the longest period of time within the applicable CDSC
period.
As we noted before in the "Share Class Comparison" chart, the CDSC for Class
B shares is 5% in the first year, 4% in the second, 3% in the third, 2% in the
fourth and 1% in the fifth and sixth years. The rate decreases on the first day
of the month following the anniversary date of your purchase, not on the
anniversary date itself. The CDSC is 1% for Class C shares--which is applied to
shares sold within 18 months of purchase. For both Class B and Class C shares,
the CDSC is calculated based on the lesser of the original purchase price or
the redemption proceeds. For purposes of determining how long you've held your
shares, all purchases during the month are grouped together and considered to
have been made on the last day of the month.
The holding period for purposes of determining the applicable CDSC will be
calculated from the first day of the month after initial purchase, excluding
any time shares were held in a money market fund.
Waiver of the CDSC--Class B Shares
The CDSC will be waived if the Class B shares are sold:
. After a shareholder is deceased or disabled (or, in the case of a trust
account, the death or disability of the grantor). This waiver applies to
individual shareholders, as well as shares owned in joint tenancy,
provided the shares were purchased before the death or disability
. To provide for certain distributions--made without IRS penalty--from a
tax-deferred retirement plan, IRA or Section 403(b) custodial account
. On certain sales from a Systematic Withdrawal Plan.
For more information on the above and other waivers, see the SAI, "Purchase,
Redemption and Pricing of Fund Shares--Waiver of Contingent Deferred Sales
Charge--Class B Shares."
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28 Strategic Partners Focused Growth Fund [GRAPHIC] (800) 225-1852
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How to Buy, Sell and
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Exchange Shares of the Fund
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Waiver of the CDSC--Class C Shares
Benefit Plans. The CDSC will be waived on redemptions from Benefit Plans
holding shares through a broker for which the broker provides administrative or
recordkeeping services.
Redemption in Kind
If the sales of Fund shares you make during any 90-day period reach the lesser
of $250,000 or 1% of the value of the Fund's net assets, we can then give you
securities from the Fund's portfolio instead of cash. If you want to sell the
securities for cash, you would have to pay the costs charged by a broker.
Small Accounts
If you make a sale that reduces your account value to less than $1000, we may
sell the rest of your shares (without charging any CDSC) and close your
account. We would do this to minimize the Fund's expenses paid by other
shareholders. We will give you 60 days' notice, during which time you can
purchase additional shares to avoid this action. This involuntary sale does not
apply to shareholders who own their shares as part of a 401(k) plan, an IRA or
some other qualified tax-deferred plan or account.
90-Day Repurchase Privilege
After you redeem your shares, you have a 90-day period during which you may
reinvest any of the redemption proceeds in shares of the Fund without paying an
initial sales charge. Also, if you paid a CDSC when you redeemed your shares,
we will credit your new account with the appropriate number of shares to
reflect the amount of the CDSC you paid. In order to take advantage of this
one-time privilege, you must notify the Transfer Agent or your broker at the
time of the repurchase. See the SAI, "Purchase, Redemption and Pricing of Fund
Shares--Sale of Shares."
Retirement Plans
To sell shares and receive a distribution from a retirement account, call your
broker or the Transfer Agent for a distribution request form. There are special
distribution and income tax withholding requirements for distributions from
retirement plans and you must submit a withholding form with your request to
avoid delay. If your retirement plan account is held for
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<PAGE>
How to Buy, Sell and
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Exchange Shares of the Fund
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you by your employer or plan trustee, you must arrange for the distribution
request to be signed and sent by the plan administrator or trustee. For
additional information, see the SAI.
HOW TO EXCHANGE YOUR SHARES
You can exchange your shares of the Fund for shares of the same class in any
other series of Strategic Partners Series, as well as shares of certain money
market funds, if you satisfy the minimum investment requirements. For example,
you can exchange Class A shares of the Fund for Class A shares of another
series of Strategic Partners Series, but you can't exchange Class A shares for
Class B, Class C or Class Z shares. Class A and Class Z shares of the Fund also
may be exchanged into Class A shares of Prudential MoneyMart Assets, Inc. and
Class B and Class C shares of the Fund also may be exchanged into shares of
Prudential Special Money Market Fund, Inc. After an exchange, at redemption,
the CDSC will be calculated from the first day of the month after initial
purchase, excluding any time shares were held in a money market fund. We may
change the terms of the exchange privilege after giving you 60 days' notice. As
of the date of this Prospectus, there are no other series of Strategic Partner
Series. Therefore, you can currently exchange only into a money market fund, as
described above.
If you hold shares through a broker, you must exchange shares through your
broker. Otherwise contact:
Prudential Mutual Fund Services LLC
Attn: Exchange Processing
P.O. Box 15010
New Brunswick, NJ 08906-5010
There is no sales charge for exchanges. However, if you exchange--and then
sell--Class B shares within approximately six years of your original purchase
or Class C shares within 18 months of your original purchase, you must still
pay the applicable CDSC. If you have exchanged Class B or Class C shares into a
money market fund, the time you hold the shares in the money market fund will
not be counted in calculating the required holding periods for CDSC liability.
Remember, as we explained in the section entitled "Fund Distributions and
Tax Issues--If You Sell or Exchange Your Shares," exchanging shares is
considered a sale for tax purposes. Therefore, if the shares you exchange
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[GRAPHIC]
Strategic Partners Focused Growth Fund (800) 225-1852
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<PAGE>
How to Buy, Sell and
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Exchange Shares of the Fund
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are worth more than you paid for them, you may have to pay capital gains tax.
For additional information about exchanging shares, see the SAI, "Shareholder
Investment Account--Exchange Privilege."
Frequent Trading
Frequent trading of Fund shares in response to short-term fluctuations in the
market--also known as "market timing"--may make it very difficult to manage the
Fund's investments. When market timing occurs, the Fund may have to sell
portfolio securities to have the cash necessary to redeem the market timer's
shares. This can happen at a time when it is not advantageous to sell any
securities, so the Fund's performance may be hurt. When large dollar amounts
are involved, market timing can also make it difficult to use long-term
investment strategies because we cannot predict how much cash the Fund will
have to invest. When, in our opinion, such activity would have a disruptive
effect on portfolio management, the Fund reserves the right to refuse purchase
orders and exchanges into the Fund by any person, group or commonly controlled
account. The decision may be based upon dollar amount, volume and frequency of
trading. The Fund may notify a market timer of rejection of an exchange or
purchase order after the day the order is placed. If the Fund allows a market
timer to trade Fund shares, it may require the market timer to enter into a
written agreement to follow certain procedures and limitations.
TELEPHONE REDEMPTIONS OR EXCHANGES
You may redeem your shares in any amount by calling the Fund at (800) 225-1852.
In order to redeem your shares by telephone, you must call the Fund before 4:15
p.m. New York time to receive a redemption amount based on that day's NAV.
The Fund's Transfer Agent will record your telephone instructions and
request specific account information before redeeming shares. The Fund will not
be liable if it follows instructions that it reasonably believes are made by
the shareholder. If the Fund does not follow reasonable procedures, it may be
liable for losses due to unauthorized or fraudulent telephone instructions.
In the event of drastic economic or market changes, you may have difficulty
in redeeming your shares by telephone. If this occurs, you should consider
redeeming your shares by mail or through your broker.
The telephone redemption procedure may be modified or terminated at any
time. If this occurs, you will receive a written notice from the Fund.
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FOR MORE INFORMATION
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Please read this prospectus before you invest in the Fund and keep it for future
reference. For information or shareholder questions contact:
Prudential Mutual Fund Services LLC
P.O. Box 15005
New Brunswick, NJ 08906-5005
(800) 225-1852
(732) 482-7555 (Calling from outside the U.S.)
Additional information about the Fund can be obtained without charge and can be
found in the following documents
Statement of Additional Information (SAI) (incorporated by reference into this
prospectus)
Annual Report
(contains a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance)
Semiannual Report
[LOGO]
MFSP500A SPFGPRO
You can also obtain copies of Fund documents from the Securities and Exchange
Commission as follows
BY MAIL
Securities and Exchange Commission
Public Reference Section
Washington, DC 20549-0102
BY ELECTRONIC REQUEST
[email protected]
(The SEC charges a fee to copy documents.)
IN PERSON
Public Reference Room in Washington, DC (For hours of operation, call
1-202-942-8090)
VIA THE INTERNET
on the EDGAR Database at
http://www.sec.gov
CUSIP Numbers
Class A Shares--86276R 10 6
Class B Shares--86276R 20 5
Class C Shares--86276R 30 4
Class Z Shares--86276R 40 3
Investment Company Act File No. 811-09805
[GRAPHIC] Printed on Recycled Paper
<PAGE>
STRATEGIC PARTNERS FOCUSED GROWTH FUND
Statement of Additional Information
dated , 2000
Strategic Partners Focused Growth Fund (the Fund) is a non-diversified
series of Strategic Partners Series, an open-end, management investment
company (the Company). The investment objective of the Fund is long-term
growth of capital. It seeks to achieve this objective by investing primarily
in approximately 40 equity-related securities of U.S. companies that are
selected by the Fund's two investment advisers (approximately 20 by each) as
having strong growth potential. There can be no assurance that the Fund's
investment objective will be achieved. See "Description of the Fund, Its
Investments and Risks."
The Company's address is Gateway Center Three, 100 Mulberry Street, Newark,
New Jersey 07102-4077, and its telephone number is (800) 225-1852.
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Prospectus of the Fund dated , 2000, a copy
of which may be obtained from the Company upon request.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Fund History............................................................... B-2
Description of the Fund, Its Investments and Risks......................... B-2
Investment Restrictions.................................................... B-14
Management of the Company.................................................. B-15
Control Persons and Principal Holders of Securities........................ B-17
Investment Advisory and Other Services..................................... B-17
Brokerage Allocation and Other Practices................................... B-21
Capital Shares, Other Securities and Organization.......................... B-22
Purchase, Redemption and Pricing of Fund Shares............................ B-23
Shareholder Investment Account............................................. B-31
Net Asset Value............................................................ B-33
Taxes, Dividends and Distributions......................................... B-34
Performance Information.................................................... B-37
Financial Statements....................................................... B-
Report of Independent Accountants.......................................... B-
Appendix I--General Investment Information................................. I-1
Appendix II................................................................
</TABLE>
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MFSP500B SPFGSAI
<PAGE>
FUND HISTORY
Strategic Partners Focused Growth Fund (the Fund) is a series of Strategic
Partners Series (the Company), which was established as a Delaware business
trust on January 28, 2000.
DESCRIPTION OF THE FUND, ITS INVESTMENTS AND RISKS
(a) Classification. The Company is an open-end, management investment
company. The Fund is a non-diversified series of the Company.
(b) and (c) Investment Strategies, Policies and Risks. The Fund's investment
objective is long-term growth of capital. Under normal market conditions, the
Fund intends to invest primarily (at least 65% of its total assets) in
approximately 40 equity-related securities of U.S. companies that are selected
by the Fund's two investment advisers (approximately 20 by each) as having
strong growth potential. While all of the principal investment policies and
strategies for seeking to achieve this objective are described in the Fund's
Prospectus, the Fund may from time to time use the securities, instruments,
principal and non-principal policies and strategies that are further described
below in seeking to achieve its objective. The Fund may not be successful in
achieving its objective and you can lose money.
Equity-Related Securities
Equity-related securities include common stocks as well as preferred stocks;
securities convertible into or exchangeable for common or preferred stocks;
equity investments in partnerships, joint ventures and other forms of non-
corporate investment; real estate investment trusts (REITs); American
Depositary Receipts (ADRs); American Depositary Shares (ADSs); and warrants
and rights exercisable for equity securities. Purchased options are not
considered equity securities for the Fund's purposes. The Fund will not invest
more than 5% of its total assets in unattached rights and warrants.
American Depositary Receipts (ADRs) and American Depositary Shares (ADSs).
ADRs and ADSs are U.S. dollar-denominated certificates or shares issued by a
United States bank or trust company and represent the right to receive
securities of a foreign issuer deposited in a domestic bank or foreign branch
of a United States bank and traded on a United States exchange or in the over-
the-counter market. Generally, ADRs and ADSs are in registered form. There are
no fees imposed on the purchase or sale of ADRs and ADSs when purchased from
the issuing bank or trust company in the initial underwriting, although the
issuing bank or trust company may impose charges for the collection of
dividends and the conversion of ADRs and ADSs into the underlying securities.
Investment in ADRs and ADSs has certain advantages over direct investment in
the underlying foreign securities since: (1) ADRs and ADSs are denominated in
U.S. dollars, registered domestically, easily transferable, and market
quotations are readily available for them; and (2) issuers whose securities
are represented by ADRs and ADSs are usually subject to auditing, accounting,
and financial reporting standards comparable to those of domestic issuers.
Warrants and Rights. A warrant gives the holder thereof the right to
subscribe by a specified date to a stated number of shares of stock of the
issuer at a fixed price. Warrants tend to be more volatile than the underlying
stock, and if, at a warrant's expiration date the stock is trading at a price
below the price set in the warrant, the warrant will expire worthless.
Conversely, if at the expiration date, the underlying stock is trading at a
price higher than the price set in the warrant, the Fund can acquire the stock
at a price below its market value. Rights are similar to warrants but normally
have a shorter duration and are distributed directly by the issuer to
shareholders. Rights and warrants have no voting rights, receive no dividends
and have no rights with respect to the corporation issuing them.
Real Estate Investment Trusts. The Fund may invest in securities of real
estate investment trusts or REITs. Unlike corporations, REITs do not have to
pay income taxes if they meet certain requirements of the Internal Revenue
Code of 1986, as amended (Internal Revenue Code). To qualify, a REIT must
distribute at least 95% of its taxable income to its shareholders and receive
at least 75% of that income from rents, mortgages and sales of property. REITs
offer investors greater liquidity and diversification than direct ownership of
a handful of properties, as well as greater income potential than an
investment in common stock. Like any investment in real estate, though, a
REIT's performance depends on several factors, such as its ability to find
tenants for its properties, to renew leases and to finance property purchases
and renovations.
U.S. Government Securities
U.S. Treasury Securities. The Fund is permitted to invest in U.S. Treasury
securities, including bills, notes, bonds and other debt securities issued by
the U.S. Treasury. These instruments are direct obligations of the U.S.
government and, as such, are backed by the "full faith and credit" of the
United States. They differ primarily in their interest rates, the lengths of
their maturities and the dates of their issuances.
B-2
<PAGE>
Securities Issued or Guaranteed by U.S. Government Agencies and
Instrumentalities. The Fund may invest in securities issued by agencies of
the U.S. government or instrumentalities of the U.S. government. These
obligations, including those which are guaranteed by federal agencies or
instrumentalities, may or may not be backed by the full faith and credit of
the United States. Obligations of the Government National Mortgage Association
(GNMA), the Farmers Home Administration and the Small Business Administration
are backed by the full faith and credit of the United States. In the case of
securities not backed by the full faith and credit of the United States, the
Fund must look principally to the agency issuing or guaranteeing the
obligation for ultimate repayment and may not be able to assert a claim
against the United States if the agency or instrumentality does not meet its
commitments. Securities in which the Fund may invest which are not backed by
the full faith and credit of the United States include obligations such as
those issued by the Federal Home Loan Bank, the Federal Home Loan Mortgage
Corporation (FHLMC), the Federal National Mortgage Association, the Student
Loan Marketing Association, Resolution Funding Corporation and the Tennessee
Valley Authority, each of which has the right to borrow from the U.S. Treasury
to meet its obligations, and obligations of the Farm Credit System, the
obligations of which may be satisfied only by the individual credit of the
issuing agency. FHLMC investments may include collateralized mortgage
obligations.
Obligations issued or guaranteed as to principal and interest by the U.S.
government may be acquired by the Fund in the form of custodial receipts that
evidence ownership of future interest payments, principal payments or both on
certain U.S. Treasury notes or bonds. Such notes and bonds are held in custody
by a bank on behalf of the owners. These custodial receipts are commonly
referred to as Treasury strips.
The values of U.S. government securities (like those of other fixed-income
securities generally) will change as interest rates fluctuate. During periods
of falling U.S. interest rates, the values of U.S. government securities
generally rise and, conversely, during periods of rising interest rates, the
values of such securities generally decline. The magnitude of these
fluctuations will generally be greater for securities with longer-term
maturities.
Foreign Investments
The Fund is permitted to invest up to 20% of its total assets in securities
of foreign issuers, including money market instruments and debt and equity
securities. ADRs and ADSs are not considered foreign securities within this
limitation.
Investing in securities of foreign issuers and countries involves certain
considerations and risks which are not typically associated with investing in
securities of domestic companies. Foreign issuers are not generally subject to
uniform accounting, auditing and financial standards or other requirements
comparable to those applicable to U.S. companies. There may also be less
government supervision and regulation of foreign securities exchanges, brokers
and public companies than exist in the United States. Dividends and interest
paid by foreign issuers may be subject to withholding and other foreign taxes
which may decrease the net return on such investments as compared to dividends
and interest paid to the Fund by domestic companies. There may be the
possibility of expropriations, confiscatory taxation, political, economic or
social instability or diplomatic developments which could affect assets of the
Fund held in foreign countries.
There may be less publicly available information about foreign issuers and
governments compared to reports and ratings published about U.S. companies.
Foreign securities markets have substantially less volume than, for example,
the New York Stock Exchange and securities of some foreign issuers are less
liquid and more volatile than securities of comparable U.S. companies.
Brokerage commissions and other transaction costs of foreign securities
exchanges are generally higher than in the United States.
In addition, if the security is denominated in a foreign currency, it will
be affected by changes in currency exchange rates and in exchange control
regulations, and costs will be incurred in connection with conversions between
currencies. A change in the value of any such currency against the U.S. dollar
will result in a corresponding change in the U.S. dollar value of the Fund's
securities denominated in that currency. Such changes also will affect the
Fund's income and distributions to shareholders. In addition, although the
Fund will receive income in such currencies, the Fund will be required to
compute and distribute its income in U.S. dollars. Therefore, if the exchange
rate for any such currency declines after the Fund's income has been accrued
and translated into U.S. dollars, the Fund could be required to liquidate
portfolio securities to make such distributions, particularly in instances in
which the amount of income the Fund is required to distribute is not
immediately reduced by the decline in such currency. Similarly, if an exchange
rate declines between the time the Fund incurs expenses in U.S. dollars and
the time such expenses are paid, the amount of such currency required to be
converted into U.S. dollars in order to pay such expenses in U.S. dollars will
be greater than the equivalent amount in any such currency of such expenses at
the time they were incurred. The Fund may, but need not, enter into foreign
currency forward contracts, options on foreign currencies and futures
contracts on foreign currencies and related options, for hedging purposes,
including: locking-in the U.S. dollar price of the purchase or sale of
securities denominated in a foreign currency; locking-in the U.S. dollar
equivalent of dividends to be paid on such securities which are held by the
Fund; and protecting the U.S. dollar value of such securities which are held
by the Fund.
B-3
<PAGE>
Under the Internal Revenue Code, changes in an exchange rate which occur
between the time the Fund accrues interest or other receivables or accrues
expenses or other liabilities denominated in a foreign currency and the time
the Fund actually collects such receivables or pays such liabilities will
result in foreign currency gains or losses that increase or decrease an
investment company's taxable income. The exchange rates between the U.S.
dollar and other currencies can be volatile and are determined by such factors
as supply and demand in the currency exchange markets, international balances
of payments, government intervention, speculation and other economic and
political conditions.
Foreign securities include securities of any foreign country an investment
adviser considers appropriate for investment by the Fund. Foreign securities
may also include securities of foreign issuers that are traded in U.S. dollars
in the United States although the underlying security is usually denominated
in a foreign currency.
The costs attributable to foreign investing are higher than the costs of
domestic investing. For example, the cost of maintaining custody of foreign
securities generally exceeds custodian costs for domestic securities, and
transaction and settlement costs of foreign investing are frequently higher
than those attributable to domestic investing. Foreign investment income may
be subject to foreign withholding or other government taxes that could reduce
the return to the Fund on those securities. Tax treaties between the United
States and certain foreign countries may, however, reduce or eliminate the
amount of foreign tax to which the Fund would be subject.
Risk Factors and Special Considerations of Investing in Euro-Denominated
Securities
On January 1, 1999, 11 of the 15 member states of the European Monetary
Union introduced the "euro" as a common currency. During a three-year
transitional period, the euro will coexist with each member state's national
currency. By July 1, 2002, the euro is expected to become the sole legal
tender of the member states. During the transition period, the Fund will treat
the euro as a separate currency from the national currency of any member
state.
The adoption by the member states of the euro will eliminate the substantial
currency risk among member states and will likely affect the investment
process and considerations of the Fund's investment advisers. To the extent
the Fund holds non-U.S. dollar-denominated securities, including those
denominated in the euro, the Fund will still be subject to currency risk due
to fluctuations in those currencies as compared to the U.S. dollar.
The medium- to long-term impact of the introduction of the euro in member
states cannot be determined with certainty at this time. In addition to the
effects described above, it is likely that more general long-term
ramifications can be expected, such as changes in economic environment and
changes in behavior of investors, all of which will impact the Fund's
investments.
Risk Management and Return Enhancement Strategies
The Fund also may engage in various portfolio strategies, including using
derivatives, to seek to reduce certain risks of its investments and to attempt
to enhance return. These strategies currently include the use of options on
stock indexes and futures contracts and options on indexes. The Fund also may
purchase futures contracts on foreign currencies and on debt securities and
aggregates of debt securities. The Fund's ability to use these strategies may
be limited by various factors, such as market conditions, regulatory limits
and tax considerations and there can be no assurance that any of these
strategies will succeed. The Fund, and thus its investors, may lose money
through any unsuccessful use of these strategies. If new financial products
and risk management techniques are developed, the Fund may use them to the
extent consistent with its investment objective and policies.
Options on Securities Indexes. The Fund may purchase and write (that is,
sell) put and call options on securities indexes that are traded on U.S. or
foreign securities exchanges or in the over-the-counter market to try to
enhance return or to hedge the Fund's portfolio. The Fund may write covered
put and call options to generate additional income through the receipt of
premiums, purchase put options in an effort to protect the value of a security
that it owns against a decline in market value and purchase call options in an
effort to protect against an increase in the price of securities it intends to
purchase. The Fund also may purchase put and call options to offset previously
written put and call options of the same series.
A call option gives the purchaser, in exchange for a premium paid, the
right, for a specified period of time, to purchase the position subject to the
option at a specified price (the exercise price or strike price). The writer
of a call option, in return for the premium, has the obligation, upon exercise
of the option, to deliver a specified amount of cash to the purchaser upon
receipt of the exercise price. When the Fund writes a call option, the Fund
gives up the potential for gain on the underlying position in excess of
B-4
<PAGE>
the exercise price of the option during the period that the option is open. A
put option gives the purchaser, in return for a premium, the right, for a
specified period of time, to sell the position subject to the option to the
writer of the put at the specified exercise price. The writer of the put
option, in return for the premium, has the obligation, upon exercise of the
option, to acquire the position at the exercise price. The Fund might,
therefore, be obligated to purchase the underlying position for more than its
current market price.
The Fund will write only "covered" options. A written option is covered if,
as long as the Fund is obligated under the option, it (1) owns an offsetting
position in the underlying securities that comprise the index or (2)
segregates cash or other liquid assets in an amount equal to or greater than
its obligation under the option. Under the first circumstance, the Fund's
losses are limited because it owns the underlying position; under the second
circumstance, in the case of a written call option, the Fund's losses are
potentially unlimited. There is no limitation on the amount of call options
the Fund may write.
The multiplier for an index option performs a function similar to the unit
of trading for a stock option. It determines the total dollar value per
contract of each point in the difference between the exercise price of an
option and the current level of the underlying index. A multiplier of 100
means that a one-point difference will yield $100. Options on different
indexes may have different multipliers. Because exercises of index options are
settled in cash, a call writer cannot determine the amount of its settlement
obligations in advance and, unlike call writing on specific stocks, cannot
provide in advance for, or cover, its potential settlement obligations by
acquiring and holding the underlying securities. In addition, unless the Fund
has other liquid assets which are sufficient to satisfy the exercise of a
call, the Fund would be required to liquidate portfolio securities or borrow
in order to satisfy the exercise.
Because the value of an index option depends upon movements in the level of
the index rather than the price of a particular security, whether the Fund
will realize a gain or loss on the purchase or sale of an option on an index
depends upon movements in the level of securities prices in the market
generally or in an industry or market segment rather than movements in the
price of a particular security. Accordingly, successful use by the Fund of
options on indexes would be subject to an investment adviser's ability to
predict correctly movements in the direction of the securities market
generally or of a particular industry. This requires different skills and
techniques than predicting changes in the price of individual stocks. The
investment advisers currently use such techniques in conjunction with the
management of other mutual funds.
Risks of Transactions in Options. An option position may be closed out only
on an exchange, board of trade or other trading facility which provides a
secondary market for an option of the same series. Although the Fund will
generally purchase or write only those options for which there appears to be
an active secondary market, there is no assurance that a liquid secondary
market on an exchange will exist for any particular option, or at any
particular time, and for some options no secondary market on an exchange or
otherwise may exist. In such event it might not be possible to effect closing
transactions in particular options, with the result that the Fund would have
to exercise its options in order to realize any profit and would incur
brokerage commissions upon the exercise of call options and upon the
subsequent disposition of underlying securities acquired through the exercise
of call options or upon the purchase of underlying securities for the exercise
of put options. If the Fund as a covered call option writer is unable to
effect a closing purchase transaction in a secondary market, it will not be
able to sell the underlying security until the option expires or it delivers
the underlying security upon exercise.
Reasons for the absence of a liquid secondary market on an exchange include
the following: (1) there may be insufficient trading interest in certain
options; (2) restrictions may be imposed by an exchange on opening
transactions or closing transactions or both; (3) trading halts, suspensions
or other restrictions may be imposed with respect to particular classes or
series of options or underlying securities; (4) unusual or unforeseen
circumstances may interrupt normal operations on an exchange; (5) the
facilities of an exchange or a clearing corporation may not at all times be
adequate to handle current trading volume; or (6) one or more exchanges could,
for economic or other reasons, decide or be compelled at some future date to
discontinue the trading of options (or a particular class or series of
options), in which event the secondary market on that exchange (or in the
class or series of options) would cease to exist, although outstanding options
on that exchange that had been issued by a clearing corporation as a result of
trades on that exchange would continue to be exercisable in accordance with
their terms. There is no assurance that higher than anticipated trading
activity or other unforeseen events might not, at times, render certain of the
facilities of any of the clearing corporations inadequate, and thereby result
in the institution by an exchange of special procedures which may interfere
with the timely execution of customers' orders. The Fund intends to purchase
and sell only those options which are cleared by clearinghouses whose
facilities are considered to be adequate to handle the volume of options
transactions.
Risks of Options on Indexes. The Fund's purchase and sale of options on
indexes will be subject to risks described above under "Risks of Transactions
in Options." In addition, the distinctive characteristics of options on
indexes create certain risks that are not present with stock options.
B-5
<PAGE>
Index prices may be distorted if trading of certain stocks included in the
index is interrupted. Trading in the index options also may be interrupted in
certain circumstances, such as if trading were halted in a substantial number
of stocks included in the index. If this occurred, the Fund would not be able
to close out options which it had purchased or written and, if restrictions on
exercise were imposed, may be unable to exercise an option it holds, which
could result in substantial losses to the Fund. It is the Fund's policy to
purchase or write options only on indexes which include a number of stocks
sufficient to minimize the likelihood of a trading halt in the index.
The ability to establish and close out positions on such options will be
subject to the development and maintenance of a liquid secondary market. It is
not certain that this market will develop in all index option contracts. The
Fund will not purchase or sell any index option contract unless and until, in
an investment adviser's opinion, the market for such options has developed
sufficiently that the risk in connection with such transactions is not
substantially greater than the risk in connection with options on securities
in the index.
Special Risks of Writing Calls on Indexes. Because exercises of index
options are settled in cash, a call writer such as the Fund cannot determine
the amount of its settlement obligations in advance and, unlike call writing
on specific stocks, cannot provide in advance for, or cover, its potential
settlement obligations by acquiring and holding the underlying securities.
However, the Fund will write call options on indexes only under the
circumstances described below under "Limitations on the Purchase and Sale of
Options on Stock Indexes and Futures Contracts and Options on Futures
Contracts."
Price movements in the Fund's portfolio probably will not correlate
precisely with movements in the level of the index and, therefore, the Fund
bears the risk that the price of the securities held by the Fund may not
increase as much as the index. In such event, the Fund would bear a loss on
the call which is not completely offset by movements in the price of the
Fund's portfolio. It is also possible that the index may rise when the Fund's
portfolio of stocks does not rise. If this occurred, the Fund would experience
a loss on the call which is not offset by an increase in the value of its
portfolio and might also experience a loss in its portfolio. However, because
the value of a diversified portfolio will, over time, tend to move in the same
direction as the market, movements in the value of the Fund in the opposite
direction as the market would be likely to occur for only a short period or to
a small degree.
Unless the Fund has other liquid assets which are sufficient to satisfy the
exercise of a call, the Fund would be required to liquidate portfolio
securities in order to satisfy the exercise. Because an exercise must be
settled within hours after receiving the notice of exercise, if the Fund fails
to anticipate an exercise, it may have to borrow from a bank (in amounts not
exceeding 20% of the Fund's total assets) pending settlement of the sale of
securities in its portfolio and would incur interest charges thereon.
When the Fund has written a call, there is also a risk that the market may
decline between the time the Fund has a call exercised against it, at a price
which is fixed as of the closing level of the index on the date of exercise,
and the time the Fund is able to sell stocks in its portfolio. As with stock
options, the Fund will not learn that an index option has been exercised until
the day following the exercise date but, unlike a call on stock where the Fund
would be able to deliver the underlying securities in settlement, the Fund may
have to sell part of its investment portfolio in order to make settlement in
cash, and the price of such investments might decline before they can be sold.
This timing risk makes certain strategies involving more than one option
substantially more risky with index options than with stock options. For
example, even if an index call which the Fund has written is "covered" by an
index call held by the Fund with the same strike price, the Fund will bear the
risk that the level of the index may decline between the close of trading on
the date the exercise notice is filed with the clearing corporation and the
close of trading on the date the Fund exercises the call it holds or the time
the Fund sells the call which, in either case, would occur no earlier than the
day following the day the exercise notice was filed.
If the Fund holds an index option and exercises it before final
determination of the closing index value for that day, it runs the risk that
the level of the underlying index may change before closing. If such a change
causes the exercised option to fall out-of-the-money, the Fund will be
required to pay the difference between the closing index value and the
exercise price of the option (times the applicable multiplier) to the assigned
writer. Although the Fund may be able to minimize this risk by withholding
exercise instructions until just before the daily cutoff time or by selling
rather than exercising an option when the index level is close to the exercise
price, it may not be possible to eliminate this risk entirely because the
cutoff times for index options may be earlier than those fixed for other types
of options and may occur before definitive closing index values are announced.
Futures Contracts. As a purchaser of a futures contract, the Fund incurs an
obligation to take delivery of a specified amount of the obligation underlying
the futures contract at a specified time in the future for a specified price.
As a seller of a futures contract, the Fund incurs an obligation to deliver
the specified amount of the underlying obligation at a specified time in
return for
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an agreed upon price. The Fund may purchase futures contracts on stock indexes
and foreign currencies. The Fund may purchase futures contracts on debt
securities, including U.S. government securities, aggregates of debt
securities, stock indexes and foreign currencies.
A "sale" of a futures contract (or a "short" futures position) means the
assumption of a contractual obligation to deliver the securities or currency
underlying the contract at a specified price at a specified future time. A
"purchase" of a futures contract (or a "long" futures position) means the
assumption of a contractual obligation to acquire the securities or currency
underlying the contract at a specified price at a specified future time.
Certain futures contracts are settled on a net cash payment basis rather than
by the sale and delivery of the securities or currency underlying the futures
contract. U.S. futures contracts have been designed by exchanges that have
been designated as "contract markets" by the Commodity Futures Trading
Commission (the CFTC), an agency of the U.S. government, and must be executed
through a futures commission merchant (that is, a brokerage firm) which is a
member of the relevant contract market. Futures contracts trade on these
contract markets and the exchange's affiliated clearing organization
guarantees performance of the contracts as between the clearing members of the
exchange.
At the time a futures contract is purchased or sold, the Fund must allocate
cash or securities as a deposit payment (initial margin). It is expected that
the initial margin on U.S. exchanges will vary from one-half of 1% to 4% of
the face value of the contract. Under certain circumstances, however, such as
during periods of high volatility, the Fund may be required by an exchange to
increase the level of its initial margin payment. Thereafter, the futures
contract is valued daily and the payment in cash of "variation margin" may be
required, a process known as "mark-to-the-market." Each day the Fund is
required to provide or is entitled to receive variation margin in an amount
equal to any change in the value of the contract since the preceding day.
Although most futures contracts call for actual delivery or acceptance of
securities or cash, the contracts usually are closed out before the settlement
date without the making or taking of delivery. A futures contract sale is
closed out by effecting a futures contract purchase for the same aggregate
amount of the specific type of security and the same delivery date. If the
sale price exceeds the offsetting purchase price, the seller would be paid the
difference and would realize a gain. If the offsetting purchase price exceeds
the sale price, the seller would pay the difference and would realize a loss.
Similarly, a futures contract purchase is closed out by effecting a futures
contract sale for the same aggregate amount of the specific type of security
(or currency) and the same delivery date. If the offsetting sale price exceeds
the purchase price, the purchaser would realize a gain, whereas if the
purchase price exceeds the offsetting sale price, the purchaser would realize
a loss. There is no assurance that the Fund will be able to enter into a
closing transaction.
When the Fund enters into a futures contract it is initially required to
segregate with its Custodian, in the name of the broker performing the
transaction, an "initial margin" of cash or other liquid assets equal to
approximately 2% to 3% of the contract amount. Initial margin requirements are
established by the exchanges on which futures contracts trade and may, from
time to time, change. In addition, brokers may establish margin deposit
requirements in excess of those required by the exchanges.
Initial margin in futures transactions is different from margin in
securities transactions in that initial margin does not involve the borrowing
of funds by a brokers' client but is, rather, a good faith deposit on a
futures contract which will be returned to the Fund upon the proper
termination of the futures contract. The margin deposits made are marked-to-
market daily and the Fund may be required to segregate subsequent deposits at
its Custodian for that purpose, of cash or other liquid assets, called
"variation margin," in the name of the broker, which are reflective of price
fluctuations in the futures contract.
A stock index futures contract is an agreement in which the writer (or
seller) of the contract agrees to deliver to the buyer an amount of cash equal
to a specific dollar amount times the difference between the value of a
specific stock index at the close of the last trading day of the contract and
the price at which the agreement is made. No physical delivery of the
underlying stocks in the index is made. When the futures contract is entered
into, each party deposits an initial margin with a broker or in a segregated
custodial account of approximately 5% of the contract amount. Subsequent
variation market payments will be made on a daily basis as the price of the
underlying stock index fluctuates, making the long and short positions in the
futures contracts more or less valuable.
The ordinary spreads between values in the cash and futures markets, due to
differences in the character of those markets, are subject to distortions. In
addition, futures contracts entail risks. First, all participants in the
futures market are subject to initial and variation margin requirements.
Rather than meeting additional variation margin requirements, investors may
close futures contracts through offsetting transactions which could distort
the normal relationship between the cash and futures markets. Second, the
liquidity of the futures market depends on participants entering into
offsetting transactions rather than making or taking delivery. To the extent
participants decide to make or take delivery, liquidity in the futures market
could be reduced, thus producing price distortions. Third, from the point of
view of speculators, the margin deposit requirements in the futures market are
less
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onerous than margin requirements in the securities market. Increased
participation by speculators in the futures market may cause temporary price
distortions. Due to the possibility of distortion, a correct forecast of
general interest rate trends by an investment adviser may still not result in
a successful transaction.
Options on Futures Contracts. The Fund will also enter into options on
futures contracts for certain bona fide hedging, return enhancement and risk
management purposes. The Fund may purchase put and call options and write
(that is, sell) "covered" put and call options on futures contracts that are
traded on U.S. and foreign exchanges. An option on a futures contract gives
the purchaser the right, but not the obligation, to assume a position in a
futures contract (a long position if the option is a call and a short position
if the option is a put) at a specified exercise price at any time during the
option exercise period. The writer of the option is required upon exercise to
assume an offsetting futures position (a short position if the option is a
call and a long position if the option is a put). If the option is exercised
by the holder before the last trading day during the option period, the option
writer delivers the futures position, as well as any balance in the writer's
futures margin account, which represents the amount by which the market price
of the stock index futures contract at exercise exceeds, in the case of a
call, or is less than, in the case of a put, the exercise price of the option
on the stock index future. If it is exercised on the last trading day, the
option writer delivers to the option holder cash in an amount equal to the
difference between the option exercise price and the closing level of the
relevant index on the date the option expires.
The holder or writer of an option may terminate its position by selling or
purchasing an option of the same series. There is no guarantee that such
closing transactions can be effected.
The Fund may only write (that is, sell) covered put and call options on
futures contracts. The Fund will be considered "covered" with respect to a
call option it writes on a futures contract if the Fund owns the securities or
currency which is deliverable under the futures contract or an option to
purchase that futures contract having a strike price equal to or less than the
strike price of the "covered" option and having an expiration date not earlier
than the expiration date of the "covered" option, or if it segregates and
maintains with its Custodian for the term of the option cash or other liquid
assets, equal to the fluctuating value of the optioned futures. The Fund will
be considered "covered" with respect to a put option it writes on a futures
contract if it owns an option to sell that futures contract having a strike
price equal to or greater than the strike price of the "covered" option and
having an expiration date not earlier than the expiration date of the
"covered" option, or if it segregates with its Custodian for the term of the
option cash or other liquid assets at all times equal in value to the exercise
price of the put (less any initial margin deposited by the Fund with its
Custodian with respect to such put option). There is no limitation on the
amount of the Fund's assets which can be segregated.
Writing a put option on a futures contract serves as a partial hedge against
an increase in the value of securities the Fund intends to acquire. If the
futures price at expiration of the option is above the exercise price, the
Fund will retain the full amount of the option premium which provides a
partial hedge against any increase that may have occurred in the price of the
securities the Fund intends to acquire. If the market price of the underlying
futures contract is below the exercise price when the option is exercised, the
Fund will incur a loss, which may be wholly or partially offset by the
decrease in the value of the securities the Fund intends to acquire.
Writing a call option on a futures contract serves as a partial hedge
against a decrease in the value of the Fund's portfolio securities. If the
market price of the underlying futures contract at expiration of a written
call option is below the exercise price, the Fund will retain the full amount
of the option premium, thereby partially hedging against any decline that may
have occurred in the Fund's holdings of securities. If the futures price when
the option is exercised is above the exercise price, however, the Fund will
incur a loss, which may be wholly or partially offset by the increase in the
value of the securities in the Fund's portfolio which were being hedged.
The Fund will purchase put options on futures contracts to hedge its
portfolio against the risk of a decline in the value of the securities it owns
as a result of market activity or fluctuating currency exchange rates. The
Fund will also purchase call options on futures contracts as a hedge against
an increase in the value of securities the Fund intends to acquire as a result
of market activity or fluctuating currency exchange rates.
Futures Contracts on Foreign Currencies and Options Thereon. The Fund may
buy and sell futures contracts on foreign currencies and purchase and write
options thereon. Generally, foreign currency futures contracts and options
thereon are similar to the futures contracts and options thereon discussed
previously. By entering into currency futures and options thereon on U.S. and
foreign exchanges, the Fund will seek to establish the rate at which it will
be entitled to exchange U.S. dollars for another currency at a future time. By
selling currency futures, the Fund will seek to establish the number of
dollars it will receive at delivery for a certain amount of a foreign
currency. In this way, whenever the Fund anticipates a decline in the value of
a foreign currency against
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the U.S. dollar, the Fund can attempt to "lock in" the U.S. dollar value of
some or all of the securities held in its portfolio that are denominated in
that currency. By purchasing currency futures, the Fund can establish the
number of dollars it will be required to pay for a specified amount of a
foreign currency in a future month. Thus if the Fund intends to buy securities
in the future and expects the U.S. dollar to decline against the relevant
foreign currency during the period before the purchase is effected, the Fund
can attempt to "lock in" the price in U.S. dollars of the securities it
intends to acquire. At the time a futures contract is purchased or sold, the
Fund must allocate cash or securities as initial margin. Thereafter, the
futures contract is valued daily and the payment of "variation margin" may be
required, resulting in the Fund's paying or receiving cash that reflects any
decline or increase, respectively, in the contract's value, that is, "marked-
to-market."
The purchase of options on currency futures will allow the Fund, for the
price of the premium and related transaction costs it must pay for the option,
to decide whether or not to buy (in the case of a call option) or to sell (in
the case of a put option) a futures contract at a specified price at any time
during the period before the option expires. If an investment adviser, in
purchasing an option, has been correct in its judgment concerning the
direction in which the market or the price of a foreign currency would move as
against the U.S. dollar, the Fund may exercise the option and thereby take a
futures position to hedge against the risk it had correctly anticipated or
close out the option position at a gain that will offset, to some extent,
market or currency exchange losses otherwise suffered by the Fund. If exchange
rates move in a way the Fund did not anticipate, however, the Fund will have
incurred the expense of the option without obtaining the expected benefit; any
such movement in exchange rates may also thereby reduce rather than enhance
the Fund's profits on its underlying securities transactions.
The Fund may also use European-style options. This means that the option is
only exercisable immediately prior to its expiration. This is in contrast to
American-style options, which are exercisable at any time prior to the
expiration date of the option.
Additional Risks of Options, Futures Contracts and Options on Futures
Contracts. Futures contracts and options thereon on securities and currencies
may be traded on foreign exchanges. Such transactions may not be regulated as
effectively as similar transactions in the U.S., may not involve a clearing
mechanism and related guarantees, and are subject to the risk of governmental
actions affecting trading in, or the prices of, foreign securities. The value
of such positions also could be adversely affected by (1) other complex
foreign political, legal and economic factors, (2) lesser availability than in
the U.S. of data on which to make trading decisions, (3) delays in the Fund's
ability to act upon economic events occurring in the foreign markets during
non-business hours in the U.S., (4) the imposition of different exercise and
settlement terms and procedures and margin requirements than in the U.S. and
(5) lesser trading volume.
Exchanges on which options, futures contracts and options on futures
contracts are traded may impose limits on the positions that the Fund may take
in certain circumstances.
Special Risk Considerations Relating to Futures Contracts and Options
Thereon. There are several risks in connection with the use of futures
contracts as a hedging device. Due to the imperfect correlation between the
price of futures contracts and movements in the currency or group of
currencies, the price of a futures contract may move more or less than the
price of the currencies being hedged. The use of these instruments will hedge
only the currency risks associated with investments in foreign securities, not
market risks. In the case of futures contracts on securities indexes, the
correlation between the price of the futures contract and the movements in the
index may not be perfect. Therefore, a correct forecast of currency rates,
market trends or international political trends by an investment adviser may
still not result in a successful hedging transaction.
The Fund's ability to establish and close out positions in futures contracts
and options on futures contracts will be subject to the development and
maintenance of liquid markets. Although the Fund generally will purchase or
sell only those futures contracts and options thereon for which there appears
to be a liquid market, there is no assurance that a liquid market on an
exchange will exist for any particular futures contract or option thereon at
any particular time. In the event no liquid market exists for a particular
futures contract or option thereon in which the Fund maintains a position, it
will not be possible to effect a closing transaction in that contract or to do
so at a satisfactory price and the Fund would have to either make or take
delivery under the futures contract or, in the case of a written option, wait
to sell the underlying securities until the option expires or is exercised or,
in the case of a purchased option, exercise the option. In the case of a
futures contract or an option on a futures contract which the Fund has written
and which the Fund is unable to close, the Fund would be required to maintain
margin deposits on the futures contract or option and to make variation margin
payments until the contract is closed.
Successful use of futures contracts and options thereon by the Fund is
subject to the ability of an investment adviser to predict correctly movements
in the direction of interest and foreign currency rates and the market
generally. If the investment adviser's expectations are not met, the Fund
would be in a worse position than if a hedging strategy had not been pursued.
For example, if the Fund has hedged against the possibility of an increase in
interest rates which would adversely affect the price of securities in
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its portfolio and the price of such securities increases instead, the Fund
will lose part or all of the benefit of the increased value of its securities
because it will have offsetting losses in its futures positions. In addition,
in such situations, if the Fund has insufficient cash to meet daily variation
margin requirements, it may have to sell securities to meet the requirements.
These sales may, but will not necessarily, be at increased prices which
reflect the rising market. The Fund may have to sell securities at a time when
it is disadvantageous to do so.
The hours of trading of futures contracts may not conform to the hours
during which the Fund may trade the underlying securities. To the extent that
the futures markets close before the securities markets, significant price and
rate movements can take place in the securities markets that cannot be
reflected in the futures markets.
Limitations on the Purchase and Sale of Options on Stock Indexes and Futures
Contracts and Options on Futures Contracts. The Fund will engage in
transactions in futures contracts and options thereon only for bona fide
hedging, return enhancement and risk management purposes, in each case in
accordance with the rules and regulations of the CFTC, and not for
speculation.
The Fund will write put options on stock indexes and futures contracts on
foreign currencies only if they are covered by segregating with the Fund's
Custodian an amount of cash or other liquid assets equal to the aggregate
exercise price of the puts. In accordance with CFTC regulations, the Fund may
not purchase or sell futures contracts or options thereon if the initial
margin and premiums for options on futures would exceed 5% of the liquidation
value of the Fund's total assets after taking into account unrealized profits
and unrealized losses on such contracts; provided, however, that in the case
of an option that is in-the-money at the time of the purchase, the in-the-
money amount may be excluded in calculating the 5% limitation. The above
restriction does not apply to the purchase and sale of futures contracts and
options thereon for bona fide hedging purposes within the meaning of the CFTC
regulations. In instances involving the purchase of futures contracts or call
options thereon or the writing of put options thereon by the Fund, an amount
of cash and other liquid assets equal to the market value of the futures
contracts and options thereon (less any related margin deposits), will be
segregated with the Fund's Custodian to cover the position, or alternative
cover will be employed, thereby insuring that the use of such instruments is
unleveraged. The Fund does not intend to purchase options on securities
indexes if the aggregate premiums paid for such outstanding options would
exceed 10% of the Fund's total assets.
Except as described below, the Fund will write call options on indexes only
if on such date it holds a portfolio of stocks at least equal to the value of
the index times the multiplier times the number of contracts. When the Fund
writes a call option on a broadly-based stock market index, the Fund will
segregate or put into escrow with its Custodian, or pledge to a broker as
collateral for the option, cash or other liquid assets substantially
replicating the movement of the index, in the judgment of the Fund's
investment adviser, with a market value at the time the option is written of
not less than 100% of the current index value times the multiplier times the
number of contracts.
If the Fund has written an option on an industry or market segment index, it
will segregate with its Custodian, or pledge to a broker as collateral for the
option, at least ten "qualified securities," all of which are stocks of
issuers in such industry or market segment, with a market value at the time
the option is written of not less than 100% of the current index value times
the multiplier times the number of contracts. Such stocks will include stocks
which represent at least 50% of the weighting of the industry or market
segment index and will represent at least 50% of the Fund's holdings in that
industry or market segment. No individual security will represent more than
15% of the amount so segregated or pledged in the case of broadly-based stock
market index options or 25% of such amount in the case of industry or market
segment index options. If at the close of business on any day the market value
of such qualified securities so segregated or pledged falls below 100% of the
current index value times the multiplier times the number of contracts, the
Fund will so segregate or pledge an amount in cash or other liquid assets
equal in value to the difference. In addition, when the Fund writes a call on
an index which is in-the-money at the time the call is written, the Fund will
segregate with its Custodian or pledge to the broker as collateral cash or
other liquid assets equal in value to the amount by which the call is in-the-
money times the multiplier times the number of contracts. Any amount
segregated pursuant to the foregoing sentence may be applied to the Fund's
obligation to segregate additional amounts in the event that the market value
of the qualified securities falls below 100% of the current index value times
the multiplier times the number of contracts. A "qualified security" is an
equity security which is listed on a national securities exchange or listed on
NASDAQ against which the Fund has not written a stock call option and which
has not been hedged by the Fund by the sale of stock index futures. However,
if the Fund holds a call on the same index as the call written where the
exercise price of the call held is equal to or less than the exercise price of
the call written or greater than the exercise price of the call written if the
difference is segregated by the Fund in cash or other liquid assets with its
Custodian, it will not be subject to the requirements described in this
paragraph.
The Fund may engage in futures contracts and options on futures transactions
as a hedge against changes, resulting from market or political conditions, in
the value of the currencies to which the Fund is subject or to which the Fund
expects to be subject
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in connection with future purchases. The Fund may engage in such transactions
when they are economically appropriate for the reduction of risks inherent in
the ongoing management of the Fund. The Fund may write options on futures
contracts to realize through the receipt of premium income a greater return
than would be realized in the Fund's portfolio securities alone.
The Fund's purchase and sale of futures contracts and purchase and writing
of options on futures contracts will be for the purpose of protecting its
portfolio against anticipated future changes in foreign currency exchange
rates which might otherwise either adversely affect the value of the Fund's
portfolio securities or adversely affect the prices of securities that the
Fund intends to purchase at a later date, and to enhance the Fund's return. As
an alternative to bona fide hedging as defined by the CFTC, the Fund may
comply with a different standard established by CFTC rules with respect to
futures contracts and options thereon purchased by the Fund incidental to the
Fund's activities in the securities markets, under which the value of the
assets underlying such positions will not exceed the sum of (1) cash or other
liquid assets segregated for this purpose, (2) cash proceeds on existing
investments due within thirty days and (3) accrued profits on the particular
futures contract or option thereon.
In addition, CFTC regulations may impose limitations on the Fund's ability
to engage in certain return enhancement and risk management strategies. There
are no limitations on the Fund's use of futures contracts and options on
futures contracts beyond the restrictions set forth above.
Although the Fund intends to purchase or sell futures and options on futures
only on exchanges where there appears to be an active market, there is no
guarantee that an active market will exist for any particular contract or at
any particular time. If there is not a liquid market at a particular time, it
may not be possible to close a futures position at such time, and, in the
event of adverse price movements, the Fund would continue to be required to
make daily cash payments of variation margin. However, when futures positions
are used to hedge portfolio securities, such securities will not be sold until
the futures positions can be liquidated. In such circumstances, an increase in
the price of securities, if any, may partially or completely offset losses on
the futures contracts.
Risks of Risk Management and Return Enhancement Strategies
Participation in the options or futures market and in currency exchange
transactions involves investment risks and transaction costs to which the Fund
would not be subject absent the use of these strategies. The Fund, and thus
its investors, may lose money through any unsuccessful use of these
strategies. If a Subadviser's predictions of movements in the direction of the
securities or foreign currency markets are inaccurate, the adverse
consequences to the Fund may leave the Fund in a worse position than if such
strategies were not used. Risks inherent in the use of these strategies
include: (1) dependence on a Subadviser's ability to predict correctly
movements in the direction of securities prices and currency markets; (2)
imperfect correlation between the price of options and futures contracts and
options thereon and movements in the prices of the securities or currencies
being hedged; (3) the fact that skills needed to use these strategies are
different from those needed to select portfolio securities; (4) the possible
absence of a liquid secondary market for any particular instrument at any
time; (5) the risk that the counterparty may be unable to complete the
transaction; and (6) the possible inability of the Fund to purchase or sell a
portfolio security at a time that otherwise would be favorable for it to do
so, or the possible need for the Fund to sell a portfolio security at a
disadvantageous time, due to the need for the Fund to maintain "cover" or to
segregate assets in connection with hedging transactions.
Position Limits. Transactions by the Fund in futures contracts and options
will be subject to limitations, if any, established by each of the exchanges,
boards of trade or other trading facilities (including NASDAQ) governing the
maximum number of options in each class which may be written or purchased by a
single investor or group of investors acting in concert, regardless of whether
the options are written on the same or different exchanges, boards of trade or
other trading facilities or are held or written in one or more accounts or
through one or more brokers. Thus, the number of futures contracts and options
which the Fund may write or purchase may be affected by the futures contracts
and options written or purchased by other investment advisory clients of an
investment adviser. An exchange, board of trade or other trading facility may
order the liquidations of positions found to be in excess of these limits, and
it may impose certain other sanctions.
Repurchase Agreements
The Fund may enter into repurchase agreements, whereby the seller of the
security agrees to repurchase that security from the Fund at a mutually
agreed-upon time and price. The repurchase date is usually quite short,
possibly overnight or a few days, although it may extend over a number of
months. The resale price is in excess of the purchase price, reflecting an
agreed-upon rate of return effective for the period of time the Fund's money
is invested in the repurchase agreement. The Fund's repurchase agreements will
at all times be fully collateralized in an amount at least equal to the resale
price. The instruments held as collateral are valued daily, and if the value
of the instruments declines, the Fund will require additional collateral. If
the seller defaults and the value of the collateral securing the repurchase
agreement declines, the Fund may incur a loss.
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The Fund will enter into repurchase transactions only with parties meeting
creditworthiness standards approved by the applicable investment adviser. In
the event of a default or bankruptcy by a seller, the Fund will promptly seek
to liquidate the collateral.
[The Fund participates in a joint repurchase account with other investment
companies managed by Prudential Investments Fund Management LLC (PIFM)
pursuant to an order of the Securities and Exchange Commission (the
Commission). On a daily basis, any uninvested cash balances of the Fund may be
aggregated with those of such investment companies and invested in one or more
repurchase agreements. Each fund participates in the income earned or accrued
in the joint account based on the percentage of its investment. ]
Lending of Securities
Consistent with applicable regulatory requirements, the Fund may lend its
portfolio securities to brokers, dealers and financial institutions, provided
that outstanding loans do not exceed in the aggregate 33 1/3% of the value of
the Fund's total assets and provided that such loans are callable at any time
by the Fund and are at all times secured by cash or other liquid assets or an
irrevocable letter of credit in favor of the Fund equal to at least 100% of
the market value, determined daily, of the loaned securities. The advantage of
such loans is that the Fund continues to receive payments in lieu of the
interest and dividends of the loaned securities, while at the same time
earning interest either directly from the borrower or on the collateral which
will be invested in short-term obligations.
A loan may be terminated by the borrower or by the Fund at any time. If the
borrower fails to maintain the requisite amount of collateral, the loan
automatically terminates and the Fund could use the collateral to replace the
securities while holding the borrower liable for any excess of replacement
cost over collateral. As with any extensions of credit, there are risks of
delay in recovery and in some cases loss of rights in the collateral should
the borrower of the securities fail financially. However, these loans of
portfolio securities will only be made to firms determined to be creditworthy
pursuant to procedures approved by the Board of Trustees of the Company. On
termination of the loan, the borrower is required to return the securities to
the Fund, and any gain or loss in the market price during the loan would inure
to the Fund.
Since voting or consent rights which accompany loaned securities pass to the
borrower, the Fund will follow the policy of calling the loan, in whole or in
part as may be appropriate, to permit the exercise of such rights if the
matters involved would have a material effect on the Fund's investment in the
securities which are the subject of the loan. The Fund will pay reasonable
finders', administrative and custodial fees in connection with a loan of its
securities or may share the interest earned on collateral with the borrower.
Borrowing
The Fund may borrow up to 33 1/3% of the value of its total assets
(calculated when the loan is made) for temporary, extraordinary or emergency
purposes or for the clearance of transactions. The Fund may pledge up to 20%
of its total assets to secure these borrowings. If the Fund's asset coverage
for borrowings falls below 300%, the Fund will take prompt action (within 3
days) to reduce its borrowings. If the 300% asset coverage should decline as a
result of market fluctuations or other reasons, the Fund may be required to
sell portfolio securities to reduce the debt and restore the 300% asset
coverage, even though it may be disadvantageous from an investment standpoint
to sell securities at that time. The Fund will not purchase portfolio
securities when borrowings exceed 5% of the value of its total assets.
Illiquid Securities
The Fund may hold up to 15% of its net assets in illiquid securities. If the
Fund were to exceed this limit, the investment advisers would take prompt
action to reduce the Fund's holdings in illiquid securities to no more than
15% of its net assets as required by applicable law. Illiquid securities
include repurchase agreements which have a maturity of longer than seven days,
securities with legal or contractual restrictions on resale (restricted
securities) and securities that are not readily marketable in markets within
or outside of the United States. Repurchase agreements subject to demand are
deemed to have a maturity equal to the applicable notice period.
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended (Securities Act),
securities which are otherwise not readily marketable and repurchase
agreements having a maturity of longer than seven days. Securities which have
not been registered under the Securities Act are referred to as private
placements or restricted securities and are purchased directly from the issuer
or in the secondary market. Mutual funds do not typically hold a significant
amount of these restricted or other illiquid securities
B-12
<PAGE>
because of the potential for delays on resale and uncertainty in valuation.
Limitations on resale may have an adverse effect on the marketability of
portfolio securities and a mutual fund might be unable to dispose of
restricted or other illiquid securities promptly or at reasonable prices and
might thereby experience difficulty satisfying redemptions within seven days.
A mutual fund might also have to register such restricted securities in order
to dispose of them resulting in additional expense and delay. Adverse market
conditions could impede such a public offering of securities.
In recent years, however, a large institutional market has developed for
certain securities that are not registered under the Securities Act including
repurchase agreements, commercial paper, foreign securities, municipal
securities, convertible securities and corporate bonds and notes.
Institutional investors depend on an efficient institutional market in which
the unregistered security can be readily resold or on an issuer's ability to
honor a demand for repayment. The fact that there are contractual or legal
restrictions on resale to the general public or to certain institutions may
not be indicative of the liquidity of such investments.
Rule 144A under the Securities Act allows for a broader institutional
trading market for securities otherwise subject to restriction on resale to
the general public. Rule 144A establishes a "safe harbor" from the
registration requirements of the Securities Act for resales of certain
securities to qualified institutional buyers. The investment adviser
anticipates that the market for certain restricted securities such as
institutional commercial paper and foreign securities will expand further as a
result of this regulation and the development of automated systems for the
trading, clearance and settlement of unregistered securities of domestic and
foreign issuers, such as the PORTAL System sponsored by the National
Association of Securities Dealers, Inc. (NASD).
Restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act and privately placed commercial paper for which there is a
readily available market are treated as liquid only when deemed liquid under
procedures established by the Trustees. The Fund's investment in Rule 144A
securities could have the effect of increasing illiquidity to the extent that
qualified institutional buyers become, for a limited time, uninterested in
purchasing Rule 144A securities. The investment advisers will monitor the
liquidity of such restricted securities subject to the supervision of the
Board of Trustees. In reaching liquidity decisions, an investment adviser will
consider, among others, the following factors: (1) the frequency of trades and
quotes for the security; (2) the number of dealers wishing to purchase or sell
the security and the number of other potential purchasers; (3) dealer
undertakings to make a market in the security and (4) the nature of the
security and the nature of the marketplace trades (for example, the time
needed to dispose of the security, the method of soliciting offers and the
mechanics of the transfer). In addition, in order for commercial paper that is
issued in reliance on Section 4(2) of the Securities Act to be considered
liquid, (a) it must be rated in one of the two highest rating categories by at
least two nationally recognized statistical rating organizations (NRSRO), or
if only one NRSRO rates the securities, by that NRSRO, or, if unrated, be of
comparable quality in the view of an investment adviser; and (b) it must not
be "traded flat" (that is, without accrued interest) or in default as to
principal or interest.
Securities of Other Investment Companies
The Fund is permitted to invest up to 10% of its total assets in securities
of other non-affiliated investment companies. The Fund does not intend to
invest in such securities during the coming year. If the Fund does invest in
securities of other investment companies, shareholders of the Fund may be
subject to duplicate management and advisory fees. See "Investment
Restrictions."
Segregated Assets
The Fund segregates with its Custodian, State Street Bank and Trust Company,
cash, U.S. government securities, equity securities (including foreign
securities), debt securities or other liquid, unencumbered assets equal in
value to its obligations in respect of potentially leveraged transactions.
These include forward contracts, when-issued and delayed delivery securities,
futures contracts, written options and options on futures contracts (unless
otherwise covered). If collateralized or otherwise covered, in accordance with
Commission guidelines, these will not be deemed to be senior securities. The
assets segregated will be marked-to-market daily.
When-Issued and Delayed Delivery Securities
The Fund may purchase or sell securities on when-issued or delayed delivery
basis. When-issued or delayed delivery transactions arise when securities are
purchased or sold by the Fund with payment and delivery taking place as much
as a month or more in the future in order to secure what is considered to be
an advantageous price and yield to the Fund at the time of entering into the
transaction. The Fund's Custodian will segregate cash or other liquid assets
having a value equal to or greater than the Fund's purchase commitments. The
securities so purchased are subject to market fluctuation and no interest
accrues to the
B-13
<PAGE>
purchaser during the period between purchase and settlement. At the time of
delivery of the securities the value may be more or less than the purchase
price and an increase in the percentage of the Fund's assets committed to the
purchase of securities on a when-issued or delayed delivery basis may increase
the volatility of the Fund's net asset value.
(d) Temporary Defensive Strategy and Short-Term Investments
When adverse market or economic conditions dictate a defensive strategy, the
Fund may temporarily invest without limit in high quality money market
instruments, including commercial paper of corporations, foreign government
securities, certificates of deposit, bankers' acceptances and other
obligations of domestic and foreign banks, non-convertible debt securities
(corporate and government), obligations issued or guaranteed by the U.S.
government, its agencies or its instrumentalities, repurchase agreements and
cash (foreign currencies or U.S. dollars). Money market instruments typically
have a maturity of one year or less as measured from the date of purchase.
The Fund may also temporarily hold cash or invest in high quality foreign or
domestic money market instruments pending investment of proceeds from new
sales of Fund shares or to meet ordinary daily cash needs subject to the 65%
policy.
(e) Portfolio Turnover
As a result of the investment policies described above, the Fund may engage
in a substantial number of portfolio transactions. The portfolio turnover rate
is generally the percentage computed by dividing the lesser of portfolio
purchases or sales (excluding all securities, including options, whose
maturities or expiration date at acquisition were one year or less) by the
monthly average value of the portfolio. High portfolio turnover (100% or more)
involves correspondingly greater brokerage commissions and other transaction
costs, which are borne directly by the Fund. In addition, high portfolio
turnover may also mean that a proportionately greater amount of distributions
to shareholders will be taxed as ordinary income rather than long-term capital
gains compared to investment companies with lower portfolio turnover. See
"Brokerage Allocation and Other Practices" and "Taxes, Dividends and
Distributions."
INVESTMENT RESTRICTIONS
The following restrictions are fundamental policies. Fundamental policies
are those which cannot be changed without the approval of the holders of a
majority of the Fund's outstanding voting securities. A "majority of the
Fund's outstanding voting securities," when used in this Statement of
Additional Information, means the lesser of (1) 67% of the shares represented
at a meeting at which more than 50% of the outstanding voting shares are
present in person or represented by proxy or (2) more than 50% of the
outstanding voting shares.
The Fund may not:
1. Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of transactions); provided that
the deposit or payment by the Fund of initial or maintenance margin in
connection with futures or options is not considered the purchase of a
security on margin.
2. Make short sales of securities or maintain a short position if, when
added together, more than 25% of the value of the Fund's net assets would be
(i) deposited as collateral for the obligation to replace securities borrowed
to effect short sales and (ii) allocated to segregated accounts in connection
with short sales. Short sales "against-the-box" are not subject to this
limitation.
3. Issue senior securities, borrow money or pledge its assets, except that
the Fund may borrow up to 33 1/3% of the value of its total assets (calculated
when the loan is made) for temporary, extraordinary or emergency purposes or
for the clearance of transactions. The Fund may pledge up to 20% of the value
of its total assets to secure such borrowings. For purposes of this
restriction, the purchase or sale of securities on a when-issued or delayed
delivery basis, forward foreign currency exchange contracts and collateral
arrangements relating thereto, and collateral arrangements with respect to
futures contracts and options thereon and with respect to the writing of
options and obligations of the Fund to Trustees pursuant to deferred
compensation arrangements are not deemed to be a pledge of assets subject to
this restriction.
4. Purchase any security (other than obligations of the U.S. government, its
agencies or instrumentalities) if as a result 25% or more of the Fund's total
assets (determined at the time of the investment) would be invested in a
single industry.
B-14
<PAGE>
5. Buy or sell real estate or interests in real estate, except that the Fund
may purchase and sell securities which are secured by real estate, securities
of companies which invest or deal in real estate and publicly traded
securities of real estate investment trusts.
6. Buy or sell commodities or commodity contracts, except that the Fund may
purchase and sell financial futures contracts and options thereon, and forward
foreign currency exchange contracts.
7. Act as underwriter except to the extent that, in connection with the
disposition of portfolio securities, it may be deemed to be an underwriter
under certain federal securities laws.
8. Make investments for the purpose of exercising control or management.
9. Invest in securities of other non-affiliated investment companies, except
by purchases in the open market involving only customary brokerage commissions
and as a result of which the Fund will not hold more than 3% of the
outstanding voting securities of any one investment company, will not have
invested more than 5% of its total assets in any one investment company and
will not have invested more than 10% of its total assets (determined at the
time of investment) in such securities of one or more investment companies, or
except as part of a merger, consolidation or other acquisition.
10. Make loans, except through (a) repurchase agreements and (b) loans of
portfolio securities limited to 33 1/3% of the Fund's total assets.
11. Purchase more than 10% of all outstanding voting securities of any one
issuer.
Whenever any fundamental investment policy or investment restriction states
a maximum percentage of the Fund's assets, it is intended that if the
percentage limitation is met at the time the investment is made, a later
change in percentage resulting from changing total or net asset values will
not be considered a violation of such policy. However, in the event that the
Fund's asset coverage for borrowings falls below 300%, the Fund will take
prompt action to reduce its borrowings, as required by applicable law.
MANAGEMENT OF THE COMPANY
<TABLE>
<CAPTION>
Position Principal Occupations
Name and Address** (Age) with Company During Past Five Years
------------------------ ------------ ----------------------
<C> <C> <S>
Eugene C. Dorsey (72) Trustee Retired President, Chief Executive Officer and Trustee
of the Gannett Foundation (now Freedom Forum); former
Publisher of four Gannett Newspapers and Vice
President of Gannett Co., Inc.; past Chairman,
Independent Sector, Washington, D.C. (largest national
coalition of philanthropic organizations); former
Chairman of the American Council for the Arts; former
Director of the Advisory Board of Chase Manhattan Bank
of Rochester.
*Robert F. Gunia (53) Trustee and Vice Executive Vice President and Chief Administrative
President Officer (since June 1999) of Prudential Investments;
Corporate Vice President (since September 1997) of The
Prudential Insurance Company of America (Prudential);
Executive Vice President and Treasurer (since December
1996) of Prudential Investments Fund Management LLC
(PIFM); President (since April 1999) of Prudential
Investment Management Services LLC (PIMS); formerly
Senior Vice President (March 1987-March 1999) of
Prudential Securities Incorporated (Prudential
Securities) and 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.
</TABLE>
B-15
<PAGE>
<TABLE>
<CAPTION>
Position with Principal Occupations
Name and Address** (Age) the Company During Past Five Years
------------------------ ------------- ----------------------
<C> <C> <S>
Robert E. LaBlanc (65) Trustee President of Robert E. LaBlanc Associates, Inc.
(telecommunications) since 1981; formerly General
Partner at Salomon Brothers; formerly Vice Chairman of
Continental Telecom; Director of Salient 3
Communications, Storage Technology Corporation, Titan
Corporation, TIE/communications, Inc., The Tribune
Company, Chartered Semiconductor Manufacturing, Ltd.
and Manhattan College.
Douglas H. McCorkindale Trustee President (since September 1997) and Vice Chairman
(60) (since March 1984) of Gannett Co., Inc.; and Director
of Continental Airlines, Inc., Gannett Co., Inc. and
Global Crossing Ltd.
Thomas T. Mooney (58) Trustee President of the Greater Rochester Metro Chamber of
Commerce; former Deputy Monroe County Executive;
former Rochester City Manager; Trustee of Center for
Governmental Research, Inc.; Director of Blue Cross of
Rochester, Executive Service Corps of Rochester and
Monroe County Water Authority.
*David R. Odenath, Jr. Trustee and Vice Officer in Charge, President, Chief Executive Officer
(42) President and Chief Operating Officer (since June 1999), PIFM;
Senior Vice President (since June 1999), Prudential;
formerly Senior Vice President (August 1993-May 1999),
PaineWebber Group, Inc.
Stephen Stoneburn (56) Trustee President and Chief Executive Officer, Quadrant Media
Corp. (publishing) (since June 1996); formerly Senior
Vice President and Managing Director, Cowles Business
Media (January 1993-1995); prior thereto, Senior Vice
President (January 1991-1992) and Publishing Vice
President (May 1989-December 1990) of Gralla
Publications (a division of United Newspapers, U.K.);
formerly Senior Vice President of Fairchild
Publications, Inc.
*John R. Strangfeld, Jr. Trustee and Chief Executive Officer, Chairman, President and
(45) President Director of The Prudential Investment Corporation
(since January 1990); Executive Vice President of
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).
Clay T. Whitehead (61) Trustee President of National Exchange Inc. (new business
development firm) (since May 1983).
David F. Connor (36) Secretary Assistant General Counsel (since March 1998) of PIFM;
Associate Attorney, Drinker Biddle & Reath LLP prior
thereto.
Grace C. Torres (40) Treasurer First Vice President (since December 1996) of PIFM;
and Principal First Vice President (since March 1994) of Prudential
Financial and Securities; formerly First Vice President (March 1994-
Accounting September 1996) of Prudential Mutual Fund Management,
Officer Inc.
Stephen M. Ungerman (46) Assistant Tax Director (since March 1996) of Prudential
Treasurer Investments and the Private Asset Group of The
Prudential Insurance Company of America (Prudential);
formerly First Vice President (February 1993-September
1996) of Prudential Mutual Fund Management, Inc.
</TABLE>
- ---------
* "Interested" Trustee, as defined in the Investment Company Act, by reason of
affiliation with the Manager, Sub-Manager, a Subadviser or the Distributor.
** The address of the Trustees and officers is c/o Prudential Investments Fund
Management LLC, Gateway Center Three, 100 Mulberry Street, Newark, New
Jersey 07102-4077.
The Company has Trustees who, in addition to overseeing the actions of the
Fund's Manager, Sub-Manager, Subadvisers and Distributor, decide upon matters
of general policy. The Trustees also review the actions of the Fund's officers
who conduct and supervise the daily business operations of the Fund.
B-16
<PAGE>
The Trustees have adopted a retirement policy which calls for the retirement
of Trustees on December 31 of the year in which they reach the age of 75.
Pursuant to the terms of the Management Agreement with the Fund, the Manager
pays all compensation of officers and employees of the Company as well as the
fees and expenses of all Trustees of the Company who are affiliated persons of
the Manager. The Company currently pays each of its Trustees who is not an
affiliated person of PIFM or the investment advisers annual compensation of
$ in addition to certain out-of-pocket expenses. The amount of annual
compensation paid to each Trustee may change as a result of the introduction
of additional funds on the boards of which the Trustee will be asked to serve,
as well as service by such Trustee on one or more committees.
Trustees may receive their Trustees' fees pursuant to a deferred fee
agreement with the Company. Under the terms of the agreement, the Company
accrues daily the amount of Trustees' fees in installments which accrue
interest at a rate equivalent to the prevailing rate applicable to 90-day U.S.
Treasury bills at the beginning of each calendar quarter or, pursuant to a
Commission exemptive order, at the daily rate of return of the Fund (the Fund
rate). Payment of the interest so accrued is also deferred and accruals become
payable at the option of the Trustee. The Company's obligation to make
payments of deferred Trustees' fees, together with interest thereon, is a
general obligation of the Company.
The following table sets forth the aggregate compensation paid for the
calendar year ended December 31, 1999 to the Trustees who are not affiliated
with the Manager for service on the boards of all investment companies managed
by PIFM (Fund Complex), including an estimate for the current year for the
Company.
Compensation Table
<TABLE>
<CAPTION>
Total 1999
Compensation
From Fund
Complex Paid
Name of Trustee To Trustees
--------------- -----------------
<S> <C>
Eugene C. Dorsey** $ ( / )*
Robert F. Gunia+ None
Robert E. LaBlanc $
Douglas H. McCorkindale* $ 80,000 (24/49)*
Thomas T. Mooney** $129,500 (35/75)*
David R. Odenath, Jr.+ None
Stephen Stoneburn $ ( / )*
John R. Strangfeld, Jr.+ None
Clay T. Whitehead $ 77,000 (38/66)*
</TABLE>
- ---------
* Indicates number of funds/portfolios in Fund Complex to which aggregate
compensation relates.
** Total compensation from all of the funds in the Fund Complex for the
calendar year ended December 31, 1999, includes amounts deferred at the
election of Trustees under the funds' deferred compensation plans.
Including accrued interest, total compensation amounted to $ , $135,102
and $156,478 for Messrs. Dorsey, McCorkindale and Mooney, respectively.
+ Interested Trustees do not receive compensation from the Company or any fund
in the Fund Complex.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Trustees of the Company are eligible to purchase Class Z shares of the Fund,
which are sold without either an initial sales charge or contingent deferred
sales charge to a limited group of investors.
As of the date of this Statement of Additional Information, PIFM owned all
of the shares of the Fund and controlled the Fund.
INVESTMENT ADVISORY AND OTHER SERVICES
(a) Manager, Sub-Manager and Investment Advisers
The manager of the Fund is Prudential Investments Fund Management LLC (PIFM
or the Manager), Gateway Center Three, 100 Mulberry Street, Newark, New Jersey
07102-4077. PIFM serves as manager to all of the other investment companies
that,
B-17
<PAGE>
together with the Funds, comprise the Prudential mutual funds. See "How the
Fund is Managed--Manager" in the Prospectus of the Fund. As of January 31,
2000, PIFM managed and/or administered open-end and closed-end management
investment companies with assets of approximately $74.9 billion.
PIFM is a subsidiary of Prudential Securities and The Prudential Insurance
Company of America (Prudential). Prudential Mutual Fund Services LLC (PMFS or
the Transfer Agent), a wholly-owned subsidiary of PIFM, serves as the transfer
agent for the Fund.
Pursuant to the Management Agreement with the Company (the Management
Agreement), PIFM, subject to the supervision of the Company's Board of
Trustees and in conformity with the stated policies of the Fund, manages both
the investment operations of the Fund and the composition of the Fund's
portfolio, including the purchase, retention, disposition and loan of
securities and other assets. In connection therewith, PIFM is obligated to
keep certain books and records of the Fund. PIFM also administers the Fund's
business affairs and, in connection therewith, furnishes the Fund with office
facilities, together with those ordinary clerical and bookkeeping services
which are not being furnished by State Street Bank and Trust Company, the
Fund's custodian (the Custodian), and PMFS, the Fund's transfer and dividend
disbursing agent. The management services of PIFM for the Fund are not
exclusive under the terms of the Management Agreement and PIFM is free to, and
does, render management services to others.
For its services, PIFM receives, pursuant to the Management Agreement, a fee
at an annual rate of .90 of 1% of the Fund's average daily net assets up to
and including $1 billion and .85 of 1% of average daily net assets in excess
of $1 billion. The fee is computed daily and payable monthly.
In connection with its management of the business affairs of the Fund, PIFM
bears the following expenses:
(a) the salaries and expenses of all personnel of the Fund and the Manager,
except the fees and expenses of Trustees who are not affiliated persons of
PIFM or the Fund's investment advisers;
(b) all expenses incurred by PIFM or by the Fund in connection with managing
the ordinary course of the Fund's business, other than those assumed by the
Fund as described below; and
(c) the costs and expenses payable to The Prudential Investment Corporation,
doing business as Prudential Investments (PI or the Sub-Manager), Alliance
Capital Management, L.P. (Alliance) and Jennison Associates LLC (Jennison, and
collectively with Alliance, the investment advisers or the Subadvisers)
pursuant to the sub-management between PIFM and PI and the subadvisory
agreements between PIFM and Alliance or Jennison, respectively (the
Subadvisory Agreements).
Under the terms of the Management Agreement, the Fund 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 Fund's investment advisers, (c) the fees and certain expenses
of the Custodian and Transfer Agent, including the cost of providing records
to the Manager in connection with its obligation of maintaining required
records of the Fund and of pricing the Fund's shares, (d) the charges and
expenses of legal counsel and independent accountants for the Fund, (e)
brokerage commissions and any issue or transfer taxes chargeable to the Fund
in connection with its securities transactions, (f) all taxes and corporate
fees payable by the Fund to governmental agencies, (g) the fees of any trade
associations of which the Fund may be a member, (h) the cost of share
certificates representing shares of the Fund, (i) the cost of fidelity and
liability insurance, (j) certain organization expenses of the Fund and the
fees and expenses involved in registering and maintaining registration of the
Fund and of its shares with the Commission, including the preparation and
printing of the Fund's registration statements and prospectuses for such
purposes, and paying the fees and expenses of notice filings made in
accordance with state securities laws, (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, (l) litigation and indemnification expenses
and other extraordinary expenses not incurred in the ordinary course of the
Fund's business and (m) distribution fees.
The Management Agreement provides that PIFM will not be liable for any error
of judgment or for any loss suffered by the Fund 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 provides that it will terminate automatically
if assigned, and that it may be terminated without penalty by either party
upon not more than 60 days' nor less than 30 days' written notice. 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.
PIFM has entered into a Sub-Management Agreement with PI and a Subadvisory
Agreement with each Subadviser. The Sub-Management Agreement provides that PI
shall provide Jennison certain research services and will assist with the
maintenance of
B-18
<PAGE>
books and records as Jennison may request from time to time. For its services,
PI is compensated by PIFM at an annual rate of .60 of 1% of the average daily
net assets for the portion of such assets which Jennison manages on total Fund
assets up to and including $1 billion and .55 of 1% of such average daily net
assets on total Fund assets in excess of $1 billion.
The Subadvisory Agreements provide that the Subadvisers will furnish
investment advisory services to approximately 50% of the Fund's portfolio in
connection with the management of the Fund. In connection therewith, Alliance
and Jennison are obligated to keep certain books and records of the Fund.
Under the Subadvisory Agreements, the Subadvisers, subject to the supervision
of PIFM, are responsible for managing the assets of the Fund in accordance
with its investment objective, investment program and policies. The
Subadvisers determine what securities and other instruments are purchased and
sold for the Fund and are responsible for obtaining and evaluating financial
data relevant to the Fund. PIFM continues to have responsibility for all
investment advisory services pursuant to the Management Agreement. Under the
Subadvisory Agreements, Alliance is compensated by PIFM for its services at an
annual rate of .60 of 1% of the average daily net assets for the portion of
such assets which Alliance manages up to and including $1 billion and .55 of
1% of such average daily net assets in excess of $1 billion, and Jennison is
compensated by PI, as Sub-Manager, for its services at an annual rate of .30
of 1% of the average daily net assets advised by Jennison on total Fund assets
up to $1 billion and .25 of 1% of such average daily net assets on total Fund
assets in excess of $1 billion.
The Sub-Management Agreement and each Subadvisory Agreement provide that
each will terminate in the event of its assignment (as defined in the
Investment Company Act) or upon the termination of the Management Agreement.
The Sub-Management Agreement and each Subadvisory Agreement may be terminated
by the Company, PIFM, PI or the applicable Subadviser upon not more than 60
days', nor less than 30 days', written notice. The Sub-Management Agreement
and each Subadvisory Agreement provides that each will continue in effect for
a period of more than two years from its execution only so long as such
continuance is specifically approved at least annually in accordance with the
requirements of the Investment Company Act.
(b) Principal Underwriter, Distributor and Rule 12b-1 Plans
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 Fund. PIMS is a subsidiary of
Prudential.
Pursuant to separate Distribution and Service Plans (the Class A Plan, the
Class B Plan and the Class C Plan, collectively, the Plans) adopted by the
Company on behalf of the Fund under Rule 12b-1 under the Investment Company
Act and a distribution agreement (the Distribution Agreement), the Distributor
incurs the expenses of distributing the Fund's Class A, Class B and Class C
shares, respectively. The Distributor also incurs the expenses of distributing
the Class Z shares under the Distribution Agreement with the Fund, none of
which are reimbursed by or paid for by the Fund.
The expenses incurred under the Plans include commissions and account
servicing fees paid to, or on account of, brokers or financial institutions
which have entered into agreements with the Distributor, advertising expenses,
the cost of printing and mailing prospectuses to potential investors and
indirect and overhead costs of the Distributor associated with the sale of
Fund shares, including lease, utility, communications and sales promotion
expenses.
Under the Plans, the Fund is obligated to pay distribution and/or service
fees to the Distributor as compensation for its distribution and service
activities, not as reimbursement for specific expenses incurred. If the
Distributor's expenses exceed its distribution and service fees, the Fund will
not be obligated to pay any additional expenses. If the Distributor's expenses
are less than such distribution and service fees, it will retain its full fees
and realize a profit.
The distribution and/or service fees may also be used by the Distributor to
compensate on a continuing basis brokers in consideration for the
distribution, marketing, administrative and other services and activities
provided by brokers with respect to the promotion of the sale of the Fund's
shares and the maintenance of related shareholder accounts.
Class A Plan. Under the Class A Plan, the Fund may pay the Distributor for
its distribution-related expenses with respect to Class A shares at an annual
rate of up to .30 of 1% of the average daily net assets of the Class A shares.
The Class A Plan provides that (1) up to .25 of 1% of the average daily net
assets of the Class A shares may be used to pay for personal service and/or
the maintenance of shareholder accounts (service fee) and (2) total
distribution fees (including the service fee of .25 of 1%) may not exceed .30
of 1% of the average daily net assets of the Class A shares. The Distributor
has contractually agreed to limit its distribution-related fees payable under
the Class A Plan to .25 of 1% of the average daily net assets of the Class A
shares for the fiscal year ending February 28, 2001.
Class B and Class C Plans. Under the Class B and Class C Plans, the Fund
pays the Distributor for its distribution-related expenses with respect to
Class B and Class C shares at an annual rate of 1% of the average daily net
assets of each of the Class B
B-19
<PAGE>
and Class C shares. The Class B and Class C Plans provide for the payment to
the Distributor of (1) an asset-based sales charge of .75 of 1% of the average
daily net assets of each of the Class B and Class C shares, respectively, and
(2) a service fee of .25 of 1% of the average daily net assets of each of the
Class B and Class C shares. The service fee is used to pay for personal
service and/or the maintenance of shareholder accounts. The Distributor also
receives contingent deferred sales charges from certain redeeming shareholders
and, with respect to Class C shares, an initial sales charge.
The Distributor also receives the proceeds of contingent deferred sales
charges paid by investors upon certain redemptions of Class B shares and an
initial sales charge and the proceeds of contingent deferred sales charges
paid by investors upon certain redemptions of Class C shares.
Distribution expenses attributable to the sale of Class A, Class B or Class
C shares of the Fund will be allocated to each such class based upon the ratio
of sales of each such class to the sales of Class A, Class B and Class C
shares of the Fund other than expenses allocable to a particular class. The
distribution fee and sales charge of one class will not be used to subsidize
the sale of another class.
The Class A, Class B and Class C Plans continue in effect from year to year,
provided that each such continuance is approved at least annually by a vote of
the Board of Trustees, including a majority vote of the Trustees who are not
interested persons of the Company and who have no direct or indirect financial
interest in the Class A, Class B and Class C Plan or in any agreement related
to the Plans (the Rule 12b-1 Trustees), cast in person at a meeting called for
the purpose of voting on such continuance. A Plan may be terminated at any
time, without penalty, by the vote of a majority of the Rule 12b-1 Trustees or
by the vote of the holders of a majority of the outstanding shares of the
applicable class of the Fund on not more than 60 days', nor less than 30
days', written notice to any other party to the Plan. The Plans may not be
amended to increase materially the amounts to be spent for the services
described therein without approval by the shareholders of the applicable
class, and all material amendments are required to be approved by the Board of
Trustees in the manner described above. Each Plan will automatically terminate
in the event of its assignment. The Fund will not be obligated to pay expenses
incurred under any Plan if it is terminated or not continued.
Pursuant to each Plan, the Board of Trustees will review at least quarterly
a written report of the distribution expenses incurred on behalf of each class
of shares of the Fund by the Distributor. The report will include an
itemization of the distribution expenses and the purposes of such
expenditures. In addition, as long as the Plans remain in effect, the
selection and nomination of Rule 12b-1 Trustees shall be committed to the Rule
12b-1 Trustees.
Pursuant to the Distribution Agreement, the Fund has agreed to indemnify the
Distributor to the extent permitted by applicable law against certain
liabilities under the federal securities laws.
In addition to distribution and service fees paid by the Fund under the
Class A, Class B and Class C Plans, the Manager (or one of its affiliates) may
make payments to dealers (including Prudential Securities) and other persons
who distribute shares of the Fund (including Class Z shares). Such payments
may be calculated by reference to the net asset value of shares sold by such
persons or otherwise.
Fee Waivers/Subsidies
PIFM may from time to time waive all or a portion of its management fee and
subsidize all or a portion of the operating expenses of the Fund. In addition,
the Distributor has contractually agreed to waive a portion of its
distribution fees for the Class A shares for the fiscal year ending February
28, 2001. Fee waivers and subsidies will increase the Fund's total return.
NASD Maximum Sales Charge Rule
Pursuant to rules of the NASD, the Distributor is required to limit
aggregate initial sales charges, deferred sales charges and asset-based sales
charges to 6.25% of total gross sales of each class of shares. Interest
charges equal to the prime rate plus one percent per annum may be added to the
6.25% limitation. Sales from the reinvestment of dividends and distributions
are not included in the calculation of the 6.25% limitation. The annual asset-
based sales charge of the Fund may not exceed .75 of 1%. The 6.25% limitation
applies to each class of the Fund rather than on a per shareholder basis. If
aggregate sales charges were to exceed 6.25% of total gross sales of any
class, all sales charges on shares of that class would be suspended.
(c) Other Service Providers
State Street Bank and Trust Company, One Heritage Drive, North Quincy,
Massachusetts 02171, serves as Custodian for the portfolio securities of the
Fund and cash and in that capacity maintains certain financial and accounting
books and records pursuant
B-20
<PAGE>
to an agreement with the Company. Subcustodians provide custodial services for
the Fund's foreign assets held outside the United States.
Prudential Mutual Fund Services LLC (PMFS), Raritan Plaza One, Edison, New
Jersey 08837, serves as the Transfer and Dividend Disbursing Agent of the
Fund. PMFS is a wholly-owned subsidiary of PIFM. PMFS provides customary
transfer agency services to the Fund, including the handling of shareholder
communications, the processing of shareholder transactions, the maintenance of
shareholder account records, payment of dividends and distributions and
related functions. For these services, PMFS receives an annual fee per
shareholder account of $10.00, a new account set-up fee for each manually
established account of $2.00 and a monthly inactive zero balance account fee
per shareholder account of $.20. PMFS is also reimbursed for its out-of-pocket
expenses, including but not limited to postage, stationery, printing,
allocable communication expenses and other costs.
PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, New York
10036, serves as the Fund's independent accountants, and in that capacity
audits the annual financial statements of the Fund.
Codes of Ethics
The Board of Trustees of the Fund has adopted a Code of Ethics. In addition,
the Manager, Subadvisers and Distributor have each adopted a Code of Ethics
(the Codes). The Codes permit personnel subject to the Codes to invest in
securities, including securities that may be purchased or held by the Fund.
However, the protective provisions of the Codes prohibit certain investments
and limit such personnel from making investments during periods when the Fund
is making such investments. The Codes are on public file with, and are
available from, the Commission.
BROKERAGE ALLOCATION AND OTHER PRACTICES
The Manager is responsible for decisions to buy and sell securities, futures
and options on securities and futures for the Fund, the selection of brokers,
dealers and futures commission merchants to effect the transactions and the
negotiation of brokerage commissions, if any. The term "Manager" as used in
this section includes the Subadvisers. Broker-dealers may receive brokerage
commissions on Fund portfolio transactions, including options and the purchase
and sale of underlying securities upon the exercise of options. On foreign
securities exchanges, commissions may be fixed. Orders may be directed to any
broker or futures commission merchant including, to the extent and in the
manner permitted by applicable law, Prudential Securities and its affiliates.
Brokerage commissions on United States securities options and futures are
subject to negotiation between the Manager and the broker or futures
commission merchant.
In the over-the-counter markets, securities are generally traded on a "net"
basis with dealers acting as principal for their own accounts without a stated
commission, although the price of the security usually includes a profit to
the dealer. In underwritten offerings, securities are purchased at a fixed
price which includes an amount of compensation to the underwriter, generally
referred to as the underwriter's concession or discount. On occasion, certain
money market instruments and U.S. government agency securities may be
purchased directly from the issuer, in which case no commissions or discounts
are paid. The Fund will not deal with Prudential Securities or any affiliate
in any transaction in which Prudential Securities or any affiliate acts as
principal, except in accordance with rules of the Commission. Thus, it will
not deal in the over-the-counter market with Prudential Securities acting as
market maker, and it will not execute a negotiated trade with Prudential
Securities if execution involves Prudential Securities' acting as principal
with respect to any part of the Fund's order.
In placing orders for portfolio securities of the Fund, the Manager's
overriding objective is to obtain the best possible combination of favorable
price and efficient execution. The Manager seeks to effect each transaction at
a price and commission that provides the most favorable total cost or proceeds
reasonably attainable in the circumstances. The factors that the Manager may
consider in selecting a particular broker, dealer or futures commission
merchant (firms) are the Manager's knowledge of negotiated commission rates
currently available and other current transaction costs; the nature of the
portfolio transaction; the size of the transaction; the desired timing of the
trade; the activity existing and expected in the market for the particular
transaction; confidentiality; the execution, clearance and settlement
capabilities of the firms; the availability of research and research related
services provided through such firms; the Manager's knowledge of the financial
stability of the firms; the Manager's knowledge of actual or apparent
operational problems of firms; and the amount of capital, if any, that would
be contributed by firms executing the transaction. Given these factors, the
Fund may pay transaction costs in excess of that which another firm might have
charged for effecting the same transaction.
When the Manager selects a firm that executes orders or is a party to
portfolio transactions, relevant factors taken into consideration are whether
that firm has furnished research and research products and/or services, such
as research reports,
B-21
<PAGE>
research compilations, statistical and economic data, computer data bases,
quotation equipment and services, research oriented computer software,
hardware and services, reports concerning the performance of accounts,
valuations of securities, investment related periodicals, investment seminars
and other economic services and consultants. Such services are used in
connection with some or all of the Manager's investment activities; some of
such services, obtained in connection with the execution of transactions for
one investment account, may be used in managing other accounts, and not all of
these services may be used in connection with the Fund.
The Manager maintains an internal allocation procedure to identify those
firms who have provided it with research and research related products and/or
services, and the amount that was provided, and to endeavor to direct
sufficient commissions to them to ensure the continued receipt of those
services that the Manager believes provides a benefit to the Fund and its
other clients. The Manager makes a good faith determination that the research
and/or service is reasonable in light of the type of service provided and the
price and execution of the related portfolio transactions.
When the Manager deems the purchase or sale of equities to be in the best
interests of the Fund or its other clients, including Prudential, the Manager
may, but is under no obligation to, aggregate the transactions in order to
obtain the most favorable price or lower brokerage commissions and efficient
execution. In such event, allocation of the transactions, as well as the
expenses incurred in the transaction, will be made by the Manager in the
manner it considers to be most equitable and consistent with its fiduciary
obligations to its clients.
The allocation or orders among firms and the commission rates paid are
reviewed periodically by the Company's Board of Trustees. Portfolio securities
may not be purchased from any underwriting or selling syndicate of which
Prudential Securities or any affiliate, during the existence of the syndicate,
is a principal underwriter (as defined in the Investment Company Act), except
in accordance with rules of the Commission. This limitation, in the opinion of
the Fund, will not significantly affect the Fund's ability to pursue its
present investment objective. However, in the future, in other circumstances,
the Fund may be at a disadvantage because of this limitation in comparison to
other funds with similar objectives but not subject to such limitations.
Subject to the above considerations, Prudential Securities (or any
affiliate) may act as a securities broker or futures commission merchant for
the Fund. In order for Prudential Securities (or any affiliate) to effect any
portfolio transactions for the Fund, the commissions, fees or other
remuneration received by Prudential Securities (or any affiliate) must be
reasonable and fair compared to the commissions, fees or other remuneration
paid to other firms in connection with comparable transactions involving
similar securities or futures being purchased or sold on an exchange during a
comparable period of time. This standard would allow Prudential Securities (or
any affiliate) to receive no more than the remuneration which would be
expected to be received by an unaffiliated firm in a commensurate arm's-length
transaction. Furthermore, the Board of Trustees of the Company, including a
majority of non-interested Trustees, has adopted procedures which are
reasonably designed to provide that any commissions, fees or other
remuneration paid to Prudential Securities (or any affiliate) are consistent
with the foregoing standard. In accordance with Section 11(a) of the
Securities Exchange Act of 1934, Prudential Securities may not retain
compensation for effecting transactions on a national securities exchange for
the Fund unless the Fund has expressly authorized the retention of such
compensation. Prudential Securities must furnish to the Fund at least annually
a statement setting forth the total amount of all compensation retained by
Prudential Securities from transactions effected for the Fund during the
applicable period. Brokerage and futures transactions with Prudential
Securities (or any affiliate) are also subject to such fiduciary standards as
may be imposed upon Prudential Securities (or such affiliate) by applicable
law.
CAPITAL SHARES, OTHER SECURITIES AND ORGANIZATION
The Company is authorized to issue an unlimited number of shares of
beneficial interest, $.001 par value per share divided into four classes,
designated Class A, Class B, Class C and Class Z shares. Each class of shares
represents an interest in the same assets of the Fund and is identical in all
respects except that (1) each class is subject to different sales charges and
distribution and/or service fees (except for Class Z shares, which are not
subject to any sales charges and distribution and/or service fees), which may
affect performance, (2) each class has exclusive voting rights on any matter
submitted to shareholders that relates solely to its arrangement and has
separate voting rights on any matter submitted to shareholders in which the
interests of one class differ from the interests of any other class, (3) each
class has a different exchange privilege, (4) only Class B shares have a
conversion feature and (5) Class Z shares are offered exclusively for sale to
a limited group of investors. In accordance with the Company's Declaration of
Trust, the Trustees may authorize the creation of additional series and
classes within such series, with such preferences, privileges, limitations and
voting and dividend rights as the Trustees may determine. The voting rights of
the shareholders of a series or class can be modified only by the vote of
shareholders of that series or class.
B-22
<PAGE>
Shares of the Fund, when issued, are fully paid, nonassessable, fully
transferable and redeemable at the option of the holder. Shares are also
redeemable at the option of the Fund under certain circumstances. Each share
of each class is equal as to earnings, assets and voting privileges, except as
noted above, and each class of shares (with the exception of Class Z shares,
which are not subject to any distribution or service fees) bears the expenses
related to the distribution of its shares. Except for the conversion feature
applicable to the Class B shares, there are no conversion, preemptive or other
subscription rights. In the event of liquidation, each share of the Fund is
entitled to its portion of all of the Fund's assets after all debt and
expenses of the Fund have been paid. Since Class B and Class C shares
generally bear higher distribution expenses than Class A shares, the
liquidation proceeds to shareholders of those classes are likely to be lower
than to Class A shareholders and to Class Z shareholders, whose shares are not
subject to any distribution and/or service fees.
The Company does not intend to hold annual meetings of shareholders unless
otherwise required by law. The Company will not be required to hold meetings
of shareholders unless, for example, the election of Trustees is required to
be acted on by shareholders under the Investment Company Act. Shareholders
have certain rights, including the right to call a meeting upon the vote of
10% of the Company's outstanding shares for the purpose of voting on the
removal of one or more Trustees or to transact any other business.
Under the Declaration of Trust, the Trustees may authorize the creation of
additional series of shares (the proceeds of which would be invested in
separate, independently managed portfolios with distinct investment objectives
and policies and share purchase, redemption and net asset value procedures)
with such preferences, privileges, limitations and voting and dividend rights
as the Trustees may determine. All consideration received by the Fund for
shares of any additional series, and all assets in which such consideration is
invested, would belong to that series (subject only to the rights of creditors
of that series) and would be subject to the liabilities related thereto. Under
the Investment Company Act, shareholders of any additional series of shares
would normally have to approve the adoption of any advisory contract relating
to such series and of any changes in the fundamental investment policies
related thereto.
The Trustees have the power to alter the number and the terms of office of
the Trustees, provided that always at least a majority of the Trustees have
been elected by the shareholders of the Fund. The voting rights of
shareholders are not cumulative, so that holders of more than 50 percent of
the shares voting can, if they choose, elect all Trustees being selected,
while the holders of the remaining shares would be unable to elect any
Trustees.
PURCHASE, REDEMPTION AND PRICING OF FUND SHARES
Shares of the Fund may be purchased at a price equal to the next determined
net asset value (NAV) per share plus a sales charge which, at the election of
the investor, may be imposed either (1) at the time of purchase (Class A or
Class C shares) or (2) on a deferred basis (Class B or Class C shares). Class
Z shares of the Fund are offered to a limited group of investors at NAV
without any sales charges.
Purchase by Wire
For an initial purchase of shares of the Fund by wire, you must complete an
application and telephone PMFS to receive an account number at (800) 225-1852
(toll-free). The following information will be requested: your name, address,
tax identification number, class election, dividend distribution election,
amount being wired and wiring bank. Instructions should then be given by you
to your bank to transfer funds by wire to State Street Bank and Trust Company
(State Street), Boston, Massachusetts, Custody and Shareholder Services
Division, Attention: Strategic Partners Focused Growth Fund, specifying on the
wire the account number assigned by PMFS and your name and identifying the
class in which you are eligible to invest (Class A, Class B, Class C or Class
Z shares).
If you arrange for receipt by State Street of federal funds prior to the
calculation of NAV (4:15 P.M., New York time) on a business day, you may
purchase shares of the Fund as of that day.
In making a subsequent purchase order by wire, you should wire State Street
directly and should be sure that the wire specifies Strategic Partners Focused
Growth Fund, Class A, Class B, Class C or Class Z shares and your name and
individual account number. It is not necessary to call PMFS to make subsequent
purchase orders utilizing federal funds. The minimum amount which may be
invested by wire is $1,000.
B-23
<PAGE>
Issuance of Fund Shares for Securities
Transactions involving the issuance of Fund shares for securities (rather
than cash) will be limited to (1) reorganizations, (2) statutory mergers, or
(3) other acquisitions of portfolio securities that (a) meet the investment
objective and policies of the Fund, (b) are liquid and not subject to
restrictions on resale, (c) have a value that is readily ascertainable via
listing on or trading in a recognized United States or international exchange
or market, and (d) are approved by one of the Fund's investment advisers.
Specimen Price Make-up
Under the current distribution arrangements between the Fund and the
Distributor, Class A shares are sold with a maximum sales charge of 5%, Class
C* shares are sold with a 1% sales charge, and Class B* and Class Z shares are
sold at NAV. Using the NAV of the Fund at the inception of the Fund's public
offering, the maximum offering price of the Fund's shares is as follows:
<TABLE>
<CAPTION>
<S> <C>
Class A
Net asset value and redemption price per Class A share.................. $10.00
Maximum sales charge (5% of offering price)............................. .53
------
Maximum offering price to public........................................ $10.53
======
Class B
Net asset value, offering price and redemption price per Class B
share*................................................................. $10.00
======
Class C
Net asset value and redemption price per Class C share*................. $10.00
Sales charge (1% of offering price)..................................... .10
------
Offering price to public................................................ $10.00
======
Class Z
Net asset value, offering price and redemption price per Class Z share.. $10.00
======
</TABLE>
- ---------
* Class B and Class C shares are subject to a contingent deferred sales charge
on certain redemptions.
Selecting a Purchase Alternative
The following is provided to assist you in determining which method of
purchase best suits your individual circumstances and is based on current fees
and expenses being charged to the Fund:
If you intend to hold your investment in the Fund for less than 4 years and
do not qualify for a reduced sales charge on Class A shares, since Class A
shares are subject to an initial sales charge of 5% and Class B shares are
subject to a CDSC of 5% which declines to zero over a 6 year period, you
should consider purchasing Class C shares over either Class A or Class B
shares.
If you intend to hold your investment for longer than 4 years, but less than
5 years, and do not qualify for a reduced sales charge on Class A shares, you
should consider purchasing Class B or Class C shares over Class A shares. This
is because the initial sales charge plus the cumulative annual distribution-
related fee on Class A shares would exceed those of the Class B and Class C
shares if you redeem your investment during this time period. In addition,
more of your money would be invested initially in the case of Class C shares,
because of the relatively low initial sales charge, and all of your money
would be invested initially in the case of Class B shares, which are sold at
NAV.
If you intend to hold your investment for longer than 5 years, you should
consider purchasing Class A shares over either Class B or Class C shares. This
is because the maximum sales charge plus the cumulative annual distribution-
related fee on Class A shares would be less than those of the Class B and
Class C shares.
If you qualify for a reduced sales charge on Class A shares, it may be more
advantageous for you to purchase Class A shares over either Class B or Class C
shares regardless of how long you intend to hold your investment. However,
unlike Class B shares, you would not have all of your money invested initially
because the sales charge on Class A shares is deducted at the time of
purchase.
If you do not qualify for a reduced sales charge on Class A shares and you
purchase Class B or Class C shares, you would have to hold your investment for
more than 6 years in the case of Class B shares and for more than 5 years in
the case of Class C
B-24
<PAGE>
shares for the higher cumulative annual distribution-related fee on those
shares plus, in the case of Class C shares, the 1% initial sales charge to
exceed the initial sales charge plus the cumulative annual distribution-
related fees on Class A shares. This does not take into account the time value
of money, which further reduces the impact of the higher Class B or Class C
distribution-related fee on the investment, fluctuations in NAV, the effect of
the return on the investment over this period of time or redemptions when the
CDSC is applicable.
Reduction and Waiver of Initial Sales Charge--Class A Shares
Benefit Plans. Class A shares may be purchased at NAV, without payment of
an initial sales charge, by pension, profit-sharing or other employee benefit
plans qualified under Section 401 of the Internal Revenue Code, deferred
compensation or annuity plans under Sections 401(a), 403(b) and 457 of the
Internal Revenue Code, "rabbi" trusts and non-qualified deferred compensation
plans (collectively, Benefit Plans), provided that the Benefit Plan has
existing assets of at least $ or 250 eligible employees or participants.
Class A shares may be purchased at NAV by participants who are repaying loans
made from such plans to the participant.
Other Waivers. In addition, Class A shares may be purchased at NAV, through
the Distributor or the Transfer Agent, by:
. Officers of the Prudential mutual funds (including the Fund)
. Employees of the Distributor, Prudential Securities, PIFM and their
subsidiaries and members of the families of such persons who maintain an
"employee related" account at Prudential Securities or the Transfer
Agent
. Employees of subadvisers of the Prudential mutual funds provided that
purchases at NAV are permitted by such person's employer
. Prudential, directors, employees and special agents of Prudential and
its subsidiaries and all persons who have retired directly from active
service with Prudential or one of its subsidiaries
. Registered representatives and employees of brokers who have entered
into a selected dealer agreement with the Distributor provided that
purchases at NAV are permitted by such person's employer
. Real estate brokers, agents and employees of real estate brokerage
companies affiliated with the Prudential Real Estate Affiliates who
maintain an account at Prudential Securities, Prusec or with the
Transfer Agent
. Investors who have a business relationship with a financial adviser who
joined Prudential Securities from another investment firm, provided that
(1) the purchase is made within 180 days of the commencement of the
financial adviser's employment at Prudential Securities, or within one
year in the case of Benefit Plans, (2) the purchase is made with
proceeds of a redemption of shares of any open-end non-money market fund
sponsored by the financial adviser's previous employer (other than a
fund which imposes a distribution or service fee of .25 of 1% or less)
and (3) the financial adviser served as the client's broker on the
previous purchase
. Investors in Individual Retirement Accounts, provided the purchase is
made in a directed rollover to such Individual Retirement Account or
with the proceeds of a tax-free rollover of assets from a Benefit Plan
for which Prudential provides administrative or recordkeeping services
and further provided that such purchase is made within 60 days of
receipt of the Benefit Plan distribution
. Orders placed by broker-dealers, investment advisers or financial
planners who have entered into an agreement with the Distributor, who
place trades for their own accounts or the accounts of their clients and
who charge a management, consulting or other fee for their services (for
example, mutual fund "wrap" or asset allocation programs)
. Orders placed by clients of broker-dealers, investment advisers or
financial planners who place trades for customer accounts if the
accounts are linked to the master account of such broker-dealer,
investment adviser or financial planner and the broker-dealer,
investment adviser or financial planner charges the clients a separate
fee for its services (for example, mutual fund "supermarket" programs).
For an investor to obtain any reduction or waiver of the initial sales
charges, at the time of the sale either the Transfer Agent must be notified
directly by the investor or the Distributor must be notified by the broker
facilitating the transaction that the sale
B-25
<PAGE>
qualifies for the reduced or waived sales charge. The reduction or waiver will
be granted subject to confirmation of your entitlement. No initial sales
charges are imposed upon Class A shares acquired upon the reinvestment of
dividends and distributions.
Combined Purchase and Cumulative Purchase Privilege. If an investor or
eligible group of related investors purchases Class A shares of the Fund
concurrently with Class A shares of other Prudential mutual funds, the
purchases may be combined to take advantage of the reduced sales charges
applicable to larger purchases. See "How to Buy, Sell and Exchange Shares of
the Fund--Reducing or Waiving Class A's Initial Sales Charge" in the
Prospectus of the Fund.
An eligible group of related Fund investors includes any combination of the
following:
. An individual
. The individual's spouse, their children and their parents
. The individual's and spouse's Individual Retirement Account (IRA)
. Any company controlled by the individual (a person, entity or group that
holds 25% or more of the outstanding voting securities of a company will
be deemed to control the company, and a partnership will be deemed to be
controlled by each of its general partners)
. A trust created by the individual, the beneficiaries of which are the
individual, his or her spouse, parents or children
. A Uniform Gifts to Minors Act/Uniform Transfers to Minors Act account
created by the individual or the individual's spouse
. One or more employee benefit plans of a company controlled by an
individual.
Also, an eligible group of related Fund investors may include an employer
(or group of related employers) and one or more qualified retirement plans of
such employer or employers (an employer controlling, controlled by or under
common control with another employer is deemed related to that employer).
The Transfer Agent, the Distributor or your broker must be notified at the
time of purchase that the investor is entitled to a reduced sales charge. The
reduced sales charge will be granted subject to confirmation of the investor's
holdings. The Combined Purchase and Cumulative Purchase Privilege does not
apply to individual participants in any retirement or group plans.
Letter of Intent. Reduced sales charges also are available to investors (or
an eligible group of related investors) who enter into a written Letter of
Intent providing for the purchase, within a thirteen-month period, of shares
of the Fund (Investment Letter of Intent). Retirement and group plans may also
qualify to purchase Class A shares at NAV by entering into a Letter of Intent
whereby they agree to enroll, within a thirteen-month period, a specified
number of eligible employees or participants (Participant Letter of Intent).
For purposes of the Investment Letter of Intent, all shares of the Fund and
shares of other Prudential mutual funds (excluding money market funds other
than those acquired pursuant to the exchange privilege) which were previously
purchased and are still owned are also included in determining the applicable
reduction. However, the value of shares held directly with the Transfer Agent
and through your broker will not be aggregated to determine the reduced sales
charge.
A Letter of Intent permits a purchaser, in the case of an Investment Letter
of Intent, to establish a total investment goal to be achieved by any number
of investments over a thirteen-month period and, in the case of a Participant
Letter of Intent, to establish a minimum eligible employee or participant
enrollment goal over a thirteen-month period. Each investment made during the
period, in the case of an Investment Letter of Intent, will receive the
reduced sales charge applicable to the amount represented by the goal, as if
it were a single investment. In the case of a Participant Letter of Intent,
each investment made during the period will be made at net asset value.
Escrowed Class A shares totaling 5% of the dollar amount of the Letter of
Intent will be held by the Transfer Agent in the name of the purchaser, except
in the case of retirement and group plans where the employer or plan sponsor
will be responsible for paying any applicable sales charge. The effective date
of an Investment Letter of Intent (except in the case of retirement and group
plans), may be back-dated up to 90 days, in order that any investments made
during this 90-day period, valued at the purchaser's cost, can be applied to
the fulfillment of the Letter of Intent goal.
The Investment Letter of Intent does not obligate the investor to purchase,
nor the Fund to sell, the indicated amount. Similarly, the Participant Letter
of Intent does not obligate the retirement or group plan to enroll the
indicated number of eligible employees
B-26
<PAGE>
or participants. In the event the Letter of Intent goal is not achieved within
the thirteen-month period, the purchaser (or the employer or plan sponsor in
the case of any retirement or group plan) is required to pay the difference
between the sales charge otherwise applicable to the purchases made during
this period and sales charge actually paid. Such payment may be made directly
to the Distributor or, if not paid, the Distributor will liquidate sufficient
escrowed shares to obtain such difference. If the goal is exceeded in an
amount which qualifies for a lower sales charge, a price adjustment is made by
refunding to the purchaser the amount of excess sales charge, if any, paid
during the thirteen-month period. Investors electing to purchase Class A
shares of the Fund pursuant to a Letter of Intent should carefully read such
Letter of Intent.
The Distributor must be notified at the time of purchase that the investor
is entitled to a reduced sales charge. The reduced sales charge will, in the
case of an Investment Letter of Intent, be granted subject to confirmation of
the investor's holdings or in the case of a Participant Letter of Intent,
subject to confirmation of the number of eligible employees or participants in
the retirement or group plan. Letters of Intent are not available to
individual participants in any retirement or group plans.
Class B Shares
The offering price of Class B shares for investors choosing one of the
deferred sales charge alternatives is the NAV next determined following
receipt of an order in proper form by the Transfer Agent, your broker or the
Distributor. Although there is no sales charge imposed at the time of
purchase, redemptions of Class B shares may be subject to a CDSC. See "Sale of
Shares--Contingent Deferred Sales Charge" below.
The Distributor will pay, from its own resources, sales commissions of up to
4% of the purchase price of Class B shares to brokers, financial advisers and
other persons who sell Class B shares at the time of sale. This facilitates
the ability of the Fund to sell the Class B shares without an initial sales
charge being deducted at the time of purchase. The Distributor anticipates
that it will recoup its advancement of sales commissions from the combination
of the CDSC and the distribution fee.
Class C Shares
The offering price of Class C shares is the next determined NAV plus a 1%
sales charge. In connection with the sale of Class C shares, the Distributor
will pay, from its own resources, brokers, financial advisers and other
persons which distribute Class C shares a sales commission of up to 2% of the
purchase price at the time of the sale.
Waiver of Initial Sales Charge--Class C Shares
Benefit Plans. Class C shares may be purchased at NAV, without payment of
an initial sales charge, by Benefit Plans (as defined above).
Investment of Redemption Proceeds from Other Investment Companies.
Investors may purchase Class C shares at NAV, without the initial sales
charge, with the proceeds from the redemption of shares of any unaffiliated
registered investment company. Such purchases must be made within 60 days of
the redemption. This waiver is not available to investors who purchase shares
directly from the Transfer Agent. You must notify the Transfer Agent directly
or through your broker if you are entitled to this waiver and provide the
Transfer Agent with such supporting documents as it may deem appropriate.
Class Z Shares
Class Z shares of the Fund currently are available for purchase by the
following categories of investors:
. Pension, profit-sharing or other employee benefit plans qualified under
Section 401 of the Internal Revenue Code, deferred compensation and
annuity plans under Sections 457 and 403(b)(7) of the Internal Revenue
Code and non-qualified plans for which the Fund is an available option
(collectively, Benefit Plans), provided such Benefit Plans (in
combination with other plans sponsored by the same employer or group of
related employers) have at least $50 million in defined contribution
assets
. Participants in any fee-based program or trust program sponsored by an
affiliate of the Distributor which includes mutual funds as investment
options and for which the Fund is an available option
. Current and former Trustees of the Company
. The Manager, Sub-Manager or a Subadviser or any of their affiliates with
an investment of $10 million or more.
B-27
<PAGE>
After a Benefit Plan qualifies to purchase Class Z shares, all subsequent
purchases will be for Class Z shares.
In connection with the sale of Class Z shares, the Manager, the Distributor
or one of their affiliates may pay brokers, financial advisers and other
persons which distribute shares a finder's fee, from its own resources, based
on a percentage of the net asset value of shares sold by such persons.
Sale of Shares
You can redeem your shares at any time for cash at the NAV next determined
after the redemption request is received in proper form (in accordance with
procedures established by the Transfer Agent in connection with investors'
accounts) by the Transfer Agent, the Distributor or your broker. In certain
cases, however, redemption proceeds will be reduced by the amount of any
applicable CDSC, as described below. See "Contingent Deferred Sales Charge"
below. If you are redeeming your shares through a broker, your broker must
receive your sell order before the Fund computes its NAV for that day (that
is, 4:15 P.M., New York time) in order to receive that day's NAV. Your broker
will be responsible for furnishing all necessary documentation to the
Distributor and may charge you for its services in connection with redeeming
shares of the Fund.
If you hold shares in non-certificate form, a written request for redemption
signed by you exactly as the account is registered is required. If you hold
certificates, the certificates, signed in the name(s) shown on the face of the
certificates, must be received by the Transfer Agent, the Distributor or your
broker in order for the redemption request to be processed. If redemption is
requested by a corporation, partnership, trust or fiduciary, written evidence
of authority acceptable to the Transfer Agent must be submitted before such
request will be accepted. All correspondence and documents concerning
redemptions should be sent to the Fund in care of its Transfer Agent,
Prudential Mutual Fund Services LLC, Attention: Redemption Services, P.O. Box
15010, New Brunswick, New Jersey 08906-5010, the Distributor or to your
broker.
Signature Guarantee. If the proceeds of the redemption (1) exceed $100,000,
(2) are to be paid to a person other than the record owner, (3) are to be sent
to an address other than the address on the Transfer Agent's records, or (4)
are to be paid to a corporation, partnership, trust or fiduciary, and your
shares are held directly with the Transfer Agent, the signature(s) on the
redemption request and on the certificates, if any, or stock power must be
guaranteed by an "eligible guarantor institution." An "eligible guarantor
institution" includes any bank, broker, dealer or credit union. The Transfer
Agent reserves the right to request additional information from, and make
reasonable inquiries of, any eligible guarantor institution.
Payment for shares presented for redemption will be made by check within
seven days after receipt by the Transfer Agent, the Distributor or your broker
of the certificate and/or written request, except as indicated below. If you
hold shares through a broker, payment for shares presented for redemption will
be credited to your account at your broker, unless you indicate otherwise.
Such payment may be postponed or the right of redemption suspended at times
(1) when the New York Stock Exchange is closed for other than customary
weekends and holidays, (2) when trading on such Exchange is restricted, (3)
when an emergency exists as a result of which disposal by the Fund of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Fund fairly to determine the value of its net assets, or
(4) during any other period when the Commission, by order, so permits;
provided that applicable rules and regulations of the Commission shall govern
as to whether the conditions prescribed in (2), (3) or (4) exist.
Redemption in Kind. If the Trustees determine that it would be detrimental
to the best interests of the remaining shareholders of the Fund to make
payment wholly or partly in cash, the Fund may pay the redemption price in
whole or in part by a distribution in kind of securities from the investment
portfolio of the Fund, in lieu of cash, in conformity with applicable rules of
the Commission. Securities will be readily marketable and will be valued in
the same manner as in a regular redemption. If your shares are redeemed in
kind, you would incur transaction costs in converting the assets into cash.
The Fund, however, has elected to be governed by Rule 18f-1 under the
Investment Company Act, under which the Fund is obligated to redeem shares
solely in cash up to the lesser of $250,000 or 1% of the NAV of the Fund
during any 90-day period for any one shareholder.
Involuntary Redemption. In order to reduce expenses of the Fund, the
Trustees may redeem all of the shares of any shareholder, other than a
shareholder which is an IRA or other tax-deferred retirement plan, whose
account has a net asset value of less than $500 due to a redemption. The Fund
will give such shareholders 60 days' prior written notice in which to purchase
sufficient additional shares to avoid such redemption. No CDSC will be imposed
on any such involuntary redemption.
90-day Repurchase Privilege. If you redeem your shares and have not
previously exercised the repurchase privilege, you may reinvest any portion or
all of the proceeds of such redemption in shares of the Fund at the NAV next
determined after the order is received, which must be within 90 days after the
date of the redemption. Any CDSC paid in connection with such
B-28
<PAGE>
redemption will be credited (in shares) to your account. (If less than a full
repurchase is made, the credit will be on a pro rata basis.) You must notify
the Transfer Agent, either directly or through the Distributor or your broker,
at the time the repurchase privilege is exercised to adjust your account for
the CDSC you previously paid. Thereafter, any redemptions will be subject to
the CDSC applicable at the time of the redemption. See "Contingent Deferred
Sales Charge" below. Exercise of the repurchase privilege will generally not
affect federal tax treatment of any gain realized upon redemption. However, if
the redemption was made within a 30 day period of the repurchase and if the
redemption resulted in a loss, some or all of the loss, depending on the
amount reinvested, may not be allowed for federal income tax purposes.
Contingent Deferred Sales Charge
Redemptions of Class B shares will be subject to a contingent deferred sales
charge or CDSC declining from 5% to zero over a six-year period. Class C
shares redeemed within 18 months of purchase will be subject to a 1% CDSC. The
CDSC will be deducted from the redemption proceeds and reduce the amount paid
to you. The CDSC will be imposed on any redemption by you which reduces the
current value of your Class B or Class C shares to an amount which is lower
than the amount of all payments by you for shares during the preceding six
years, in the case of Class B shares, and 18 months, in the case of Class C
shares. A CDSC will be applied on the lesser of the original purchase price or
the current value of the shares being redeemed. Increases in the value of your
shares or shares acquired through reinvestment of dividends or distributions
are not subject to a CDSC. The amount of any CDSC will be paid to and retained
by the Distributor.
The amount of the CDSC, if any, will vary depending on the number of years
from the time of payment for the purchase of shares until the time of
redemption of such shares. Solely for purposes of determining the number of
years from the time of any payment for the purchase of shares, all payments
during a month will be aggregated and deemed to have been made on the last day
of the month. The CDSC will be calculated from the first day of the month
after the initial purchase, excluding the time shares were held in a money
market fund.
The following table sets forth the rates of the CDSC applicable to
redemption of Class B shares:
<TABLE>
<CAPTION>
Contingent Deferred Sales
Charge as a Percentage
Year Since Purchase of Dollars Invested or
Payment Made Redemption Proceeds
------------------- -------------------------
<S> <C>
First........................................ 5.0%
Second....................................... 4.0%
Third........................................ 3.0%
Fourth....................................... 2.0%
Fifth........................................ 1.0%
Sixth........................................ 1.0%
Seventh...................................... None
</TABLE>
In determining whether a CDSC is applicable to a redemption, the calculation
will be made in a manner that results in the lowest possible rate. It will be
assumed that the redemption is made first of amounts representing shares
acquired pursuant to the reinvestment of dividends and distributions; then of
amounts representing the increase in NAV above the total amount of payments
for the purchase of Class B shares made during the preceding six years and 18
months for Class C shares; then of amounts representing the cost of shares
held beyond the applicable CDSC period; and finally, of amounts representing
the cost of shares held for the longest period of time within the applicable
CDSC period.
For example, assume you purchased 100 Class B shares at $10 per share for a
cost of $1,000. Subsequently, you acquired 5 additional Class B shares through
dividend reinvestment. During the second year after the purchase you decide to
redeem $500 of your investment. Assuming at the time of the redemption the NAV
had appreciated to $12 per share, the value of your Class B shares would be
$1,260 (105 shares at $12 per share). The CDSC would not be applied to the
value of the reinvested dividend shares and the amount which represents
appreciation ($260). Therefore, $240 of the $500 redemption proceeds ($500
minus $260) would be charged at a rate of 4% (the applicable rate in the
second year after purchase) for a total CDSC of $9.60.
For federal income tax purposes, the amount of the CDSC will reduce the
gain, or increase the loss, as the case may be, on the amount recognized on
the redemption of shares.
Waiver of Contingent Deferred Sales Charge--Class B Shares. The CDSC will
be waived in the case of a redemption following the death or disability of a
shareholder or, in the case of a trust account, following the death or
disability of the grantor.
B-29
<PAGE>
The waiver is available for total or partial redemptions of shares owned by a
person, either individually or in joint tenancy, at the time of death or
initial determination of disability, provided that the shares were purchased
prior to death or disability.
The CDSC will also be waived in the case of a total or partial redemption in
connection with certain distributions made without penalty under the Internal
Revenue Code from a tax-deferred retirement plan, an IRA or Section 403(b)
custodial account. These distributions are:
(1) in the case of a tax-deferred retirement plan, a lump-sum or other
distribution after retirement;
(2) in the case of an IRA (including a Roth IRA), a lump-sum or other
distribution after attaining age 59 1/2 or a periodic distribution based on
life expectancy;
(3) in the case of a Section 403(b) custodial account, a lump sum or other
distribution after attaining age 59 1/2; and
(4) a tax-free return of an excess contribution or plan distributions
following the death or disability of the shareholder, provided that the shares
were purchased prior to death or disability.
The waiver does not apply in the case of a tax-free rollover or transfer of
assets, other than one following a separation from service (that is, following
voluntary or involuntary termination of employment or following retirement).
Under no circumstances will the CDSC be waived on redemptions resulting from
the termination of a tax-deferred retirement plan, unless such redemptions
otherwise qualify for a waiver as described above. Shares purchased with
amounts used to repay a loan from such plans on which a CDSC was not
previously deducted will thereafter be subject to a CDSC without regard to the
time such amounts were previously invested. In the case of a 401(k) plan, the
CDSC will also be waived upon the redemption of shares purchased with amounts
used to repay loans made from the account to the participant and from which a
CDSC was previously deducted.
Systematic Withdrawal Plan. The CDSC will be waived (or reduced) on certain
redemptions from a Systematic Withdrawal Plan. On an annual basis, up to 12%
of the total dollar amount subject to the CDSC may be redeemed without charge.
The Transfer Agent will calculate the total amount available for this waiver
annually on the anniversary date of your purchase. The CDSC will be waived (or
reduced) on redemptions until this threshold 12% is reached.
In addition, the CDSC will be waived on redemptions of shares held by
Trustees of the Company.
You must notify the Fund's Transfer Agent either directly or through your
broker at the time of redemption, that you are entitled to waiver of the CDSC
and provide the Transfer Agent with such supporting documentation as it may
deem appropriate. The waiver will be granted subject to confirmation of your
entitlement. In connection with these waivers, the Transfer Agent will require
you to submit the supporting documentation set forth below.
<TABLE>
<S> <C>
Category of Waiver Required Documentation
Death A copy of the shareholder's death
certificate or, in the case of a
trust, a copy of the grantor's death
certificate, plus a copy of the trust
agreement identifying the grantor.
Disability--An individual will be A copy of the Social Security
considered disabled if he or she Administration award letter or a
is unable to engage in any letter from a physician on the
substantial gainful activity by physician's letterhead stating that
reason of any medically the shareholder (or, in the case of a
determinable physical or mental trust, the grantor) is permanently
impairment which can be expected disabled. The letter must also
to result in death or to be of indicate the date of disability.
long-continued and indefinite
duration.
Distribution from an IRA or 403(b) A copy of the distribution form from
Custodial Account the custodial firm indicating (i) the
date of birth of the shareholder and
(ii) that the shareholder is over age
59 and is taking a normal
distribution--signed by the
shareholder.
Distribution from Retirement Plan A letter signed by the plan
administrator/trustee indicating the
reason for the distribution.
Excess Contributions A letter from the shareholder (for an
IRA) or the plan administrator/trustee
on company letterhead indicating the
amount of the excess and whether or
not taxes have been paid.
</TABLE>
B-30
<PAGE>
The Transfer Agent reserves the right to request such additional documents
as it may deem appropriate.
Waiver of Contingent Deferred Sales Charge--Class C Shares
The CDSC will be waived on redemptions from Benefit Plans holding shares
through a broker for which the broker provides administrative or recordkeeping
services.
Conversion Feature--Class B Shares
Class B shares will automatically convert to Class A shares on a quarterly
basis approximately seven years after purchase. Conversions will be effected
at relative net asset value without the imposition of any additional sales
charge.
Since the Fund tracks amounts paid rather than the number of shares bought
on each purchase of Class B shares, the number of Class B shares eligible to
convert to Class A shares (excluding shares acquired through the automatic
reinvestment of dividends and other distributions) (the Eligible Shares) will
be determined on each conversion date in accordance with the following
formula: (1) the ratio of (a) the amounts paid for Class B shares purchased at
least seven years prior to the conversion date to (b) the total amount paid
for all Class B shares purchased and then held in your account (2) multiplied
by the total number of Class B shares purchased and then held in your account.
Each time any Eligible Shares in your account convert to Class A shares, all
shares or amounts representing Class B shares then in your account that were
acquired through the automatic reinvestment of dividends and other
distributions will convert to Class A shares.
For purposes of determining the number of Eligible Shares, if the Class B
shares in your account on any conversion date are the result of multiple
purchases at different net asset values per share, the number of Eligible
Shares calculated as described above will generally be either more or less
than the number of shares actually purchased approximately seven years before
such conversion date. For example, if 100 shares were initially purchased at
$10 per share (for a total of $1,000) and a second purchase of 100 shares was
subsequently made at $11 per share (for a total of $1,100), 95.24 shares would
convert approximately seven years from the initial purchase (that is, $1,000
divided by $2,100 (47.62%), multiplied by 200 shares equals 95.24 shares). The
Manager reserves the right to modify the formula for determining the number of
Eligible Shares in the future as it deems appropriate on notice to
shareholders.
Since annual distribution-related fees are lower for Class A shares than
Class B shares, the per share NAV of the Class A shares may be higher than
that of the Class B shares at the time of conversion. Thus, although the
aggregate dollar value will be the same, you may receive fewer Class A shares
than Class B shares converted.
For purposes of calculating the applicable holding period for conversions,
all payments for Class B shares during a month will be deemed to have been
made on the last day of the month, or for Class B shares acquired through
exchange, or a series of exchanges, on the last day of the month in which the
original payment for purchases of such Class B shares was made. For Class B
shares previously exchanged for shares of a money market fund, the time period
during which such shares were held in the money market fund will be excluded.
For example, Class B shares held in a money market fund for one year would not
convert to Class A shares until approximately eight years from purchase. For
purposes of measuring the time period during which shares are held in a money
market fund, exchanges will be deemed to have been made on the last day of the
month. Class B shares acquired through exchange will convert to Class A shares
after expiration of the conversion period applicable to the original purchase
of such shares.
The conversion feature may be subject to the continuing availability of
opinions of counsel or rulings of the Internal Revenue Service (1) that the
dividends and other distributions paid on Class A, Class B, Class C and Class
Z shares will not constitute "preferential dividends" under the Internal
Revenue Code and (2) that the conversion of shares does not constitute a
taxable event. The conversion of Class B shares into Class A shares may be
suspended if such opinions or rulings are no longer available. If conversions
are suspended, Class B shares of the Fund will continue to be subject,
possibly indefinitely, to their higher annual distribution and service fee.
SHAREHOLDER INVESTMENT ACCOUNT
Upon the initial purchase of Fund shares, a Shareholder Investment Account
is established for each investor under which the shares are held for the
investor by the Transfer Agent. If a share certificate is desired, it must be
requested in writing for each transaction. Certificates are issued only for
full shares and may be redeposited in the Account at any time. There is no
charge to the investor for issuance of a certificate. The Fund makes available
to its shareholders the following privileges and plans.
B-31
<PAGE>
Automatic Reinvestment of Dividends and Distributions
For the convenience of investors, all dividends and distributions are
automatically reinvested in full and fractional shares of the Fund. An
investor may direct the Transfer Agent in writing not less than five full
business days prior to the record date to have subsequent dividends or
distributions sent in cash rather than reinvested. In the case of recently
purchased shares for which registration instructions have not been received on
the record date, cash payment will be made directly to the broker. Any
shareholder who receives a cash payment representing a dividend or
distribution may reinvest such dividend or distribution at NAV by returning
the check or the proceeds to the Transfer Agent within 30 days after the
payment date. Such investment will be made at the NAV per share next
determined after receipt of the check or proceeds by the Transfer Agent. Such
shareholder will receive credit for any CDSC paid in connection with the
amount of proceeds being reinvested.
Dollar Cost Averaging
Dollar cost averaging is a method of accumulating shares by investing a
fixed amount of dollars in shares at set intervals. An investor buys more
shares when the price is low and fewer shares when the price is high. The
average cost per share is lower than it would be if a constant number of
shares were bought at set intervals.
Dollar cost averaging may be used, for example, to plan for retirement, to
save for a major expenditure, such as the purchase of a home, or to finance a
college education. The cost of a year's education at a four-year college today
averages around $14,000 at a private college and around $6,000 at a public
university. Assuming these costs increase at a rate of 7% a year, as has been
projected, for the freshman class of 2011, the cost of four years at a private
college could reach $210,000 and over $90,000 at a public university./1/
The following chart shows how much you would need in monthly investments to
achieve specified lump sums to finance your investment goals./2/
<TABLE>
<CAPTION>
Period of
Monthly Investments: $100,000 $150,000 $200,000 $250,000
-------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
25 Years............................. $ 105 $ 158 $ 210 $ 263
20 Years............................. 170 255 340 424
15 Years............................. 289 438 578 722
10 Years............................. 547 820 1,093 1,366
5 Years.............................. 1,361 2,041 2,721 3,402
</TABLE>
See "Automatic Investment Plan"
- ---------
/1/ Source information concerning the costs of education at public and
private universities is available from The College Board Annual Survey of
Colleges, 1993. Average costs for private institutions include tuition, fees,
room and board for the 1993-1994 academic year.
/2/ The chart assumes an effective rate of return of 8% (assuming monthly
compounding). This example is for illustrative purposes only and is not
intended to reflect the performance of an investment in shares of the Fund.
The investment return and principal value of an investment will fluctuate so
that an investor's shares when redeemed may be worth more or less than their
original cost.
Automatic Investment Plan (AIP)
Under AIP, an investor may arrange to have a fixed amount automatically
invested in shares of the Fund monthly by authorizing his or her bank account
or brokerage account to be debited to invest specified dollar amounts in
shares of the Fund. The investor's bank must be a member of the Automatic
Clearing House System. Share certificates are not issued to AIP participants.
Further information about this program and an application form can be
obtained from the Transfer Agent, the Distributor or your broker.
Systematic Withdrawal Plan
A systematic withdrawal plan is available to shareholders through the
Transfer Agent, the Distributor or your broker. Such withdrawal plan provides
for monthly or quarterly checks in any amount, except as provided below, up to
the value of the shares in the shareholder's account. Withdrawals of Class B
or Class C shares may be subject to a CDSC.
B-32
<PAGE>
In the case of shares held through the Transfer Agent (1) a $10,000 minimum
account value applies, (2) withdrawals may not be for less than $100 and (3)
the shareholder must elect to have all dividends and/or distributions
automatically reinvested in additional full and fractional shares at NAV on
shares held under this plan.
The Transfer Agent, the Distributor or your broker acts as an agent for the
shareholder in redeeming sufficient full and fractional shares to provide the
amount of the periodic withdrawal payment. The systematic withdrawal plan may
be terminated at any time, and the Distributor reserves the right to initiate
a fee of up to $5 per withdrawal, upon 30 days' written notice to the
shareholder.
Withdrawal payments should not be considered as dividends, yield or income.
If periodic withdrawals continuously exceed reinvested dividends and
distributions, the shareholder's original investment will be correspondingly
reduced and ultimately exhausted.
Furthermore, each withdrawal constitutes a redemption of shares, and any
gain or loss realized must be recognized for federal income tax purposes. In
addition, withdrawals made concurrently with purchases of additional shares
are inadvisable because of the sales charges applicable to (1) the purchase of
Class A and Class C shares and (2) the redemption of Class B and Class C
shares. Each shareholder should consult his or her own tax adviser with regard
to the tax consequences of the plan, particularly if used in connection with a
retirement plan.
Tax-Deferred Retirement Accounts
Individual Retirement Accounts. An individual retirement account (IRA)
permits the deferral of federal income tax on income earned in the account
until the earnings are withdrawn. The following chart represents a comparison
of the earnings in a personal savings account with those in an IRA, assuming a
$2,000 annual contribution, an 8% rate of return and a 39.6% federal income
tax bracket and shows how much more retirement income can accumulate within an
IRA as opposed to a taxable individual savings account.
Tax-Deferred Compounding/1/
<TABLE>
<CAPTION>
Contributions Personal
Made Over: Savings IRA
------------- -------- -------
<S> <C> <C>
10 years.............................................. $26,165 $31,291
15 years.............................................. 44,675 58,649
20 years.............................................. 68,109 98,846
25 years.............................................. 97,780 157,909
30 years.............................................. 135,346 244,692
</TABLE>
- ---------
/1/The chart is for illustrative purposes only and does not represent the
performance of the Fund or any specific investment. It shows taxable versus
tax-deferred compounding for the periods and on the terms indicated. Earnings
in a traditional IRA account will be subject to tax when withdrawn from the
account. Distributions from a Roth IRA which meet the conditions required
under the Internal Revenue Code will not be subject to tax upon withdrawal
from the account.
NET ASSET VALUE
The Fund's net asset value per share or NAV is determined by subtracting its
liabilities from the value of its assets and dividing the remainder by the
number of outstanding shares. NAV is calculated separately for each class. The
Fund will compute its NAV at 4:15 P.M., New York time, on each day the New
York Stock Exchange is open for trading except on days on which no orders to
purchase, sell or redeem Fund shares have been received or days on which
changes in the value of the Fund's portfolio securities do not affect NAV. In
the event the New York Stock Exchange closes early on any business day, the
NAV of the Fund's shares shall be determined at a time between such closing
and 4:15 P.M., New York time. The New York Stock Exchange is closed on the
following holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.
Under the Investment Company Act, the Board of Trustees is responsible for
determining in good faith the fair value of securities of the Fund. In
accordance with procedures adopted by the Board of Trustees, the value of
investments listed on a
B-33
<PAGE>
securities exchange and NASDAQ National Market System securities (other than
options on stock and stock indexes) are valued at the last sales price on such
exchange system on the day of valuation, or, if there was no sale on such day,
the mean between the last bid and asked prices on such day, as provided by a
pricing service or at the bid price on such day in the absence of an asked
price. Corporate bonds (other than convertible debt securities) and U.S.
government securities that are actively traded in the over-the-counter market,
including listed securities for which the primary market is believed by the
Manager, in consultation with a Subadviser, to be over-the-counter, are valued
on the basis of valuations provided by an independent pricing agent or
principal market maker which uses information with respect to transactions in
bonds, quotations from bond dealers, agency ratings, market transactions in
comparable securities and various relationships between securities in
determining value. Convertible debt securities that are actively traded in the
over-the-counter market, including listed securities for which the primary
market is believed by the Manager in consultation with the Subadvisers to be
over-the-counter, are valued at the mean between the last reported bid and
asked prices provided by principal market makers. Options on stock and stock
indexes traded on an exchange are valued at the mean between the most recently
quoted bid and asked prices on the respective exchange and futures contracts
and options thereon are valued at their last sale prices as of the close of
trading on the applicable commodities exchange or board of trade or, if there
was no sale on the applicable commodities exchange or board of trade on such
day, at the mean between the most recently quoted bid and asked prices on such
exchange or board of trade. Quotations of foreign securities in a foreign
currency are converted to U.S. dollar equivalents at the current rate obtained
from a recognized bank or dealer, and foreign currency forward contracts are
valued at the current cost of covering or offsetting such contracts. Should an
extraordinary event, which is likely to affect the value of the security,
occur after the close of an exchange on which a portfolio security is traded,
such security will be valued at fair value considering factors determined in
good faith by an investment adviser under procedures established by and under
the general supervision of the Company's Board of Trustees.
Securities or other assets for which reliable market quotations are not
readily available or for which the pricing agent or principal market maker
does not provide a valuation or methodology or provides a valuation or
methodology that, in the judgment of the Manager or applicable Subadviser (or
Valuation Committee or Board of Trustees), does not represent fair value, are
valued by the Valuation Committee or Board of Trustees in consultation with
the Manager and applicable Subadviser, including its portfolio managers,
traders and research and credit analysts on the basis of the following
factors: cost of the security, transactions in comparable securities,
relationships among various securities and such other factors as may be
determined by the Manager, Subadviser, Board of Trustees or Valuation
Committee to materially affect the value of the security. Short-term
investments are valued at cost, with interest accrued or discount amortized to
the date of maturity, if their original maturity was 60 days or less, unless
this is determined by the Board of Trustees not to represent fair value.
Short-term securities with remaining maturities of more than 60 days, for
which market quotations are readily available, are valued at their current
market quotations as supplied by an independent pricing agent or principal
market maker.
Although the legal rights of each class of shares are substantially
identical, the different expenses borne by each class will result in different
NAVs and dividends. The NAV of Class B and Class C shares will generally be
lower than the NAV of Class A shares as a result of the larger distribution-
related fee to which Class B and Class C shares are subject. The NAV of Class
Z shares will generally be higher than the NAV of Class A, Class B or Class C
shares because Class Z shares are not subject to any distribution or service
fee. It is expected, however, that the NAV of the four classes will tend to
converge immediately after the recording of dividends, if any, which will
differ by approximately the amount of the distribution and/or service fee
expense accrual differential among the classes.
TAXES, DIVIDENDS AND DISTRIBUTIONS
The Fund intends to elect to qualify and intends to remain qualified as a
regulated investment company under Subchapter M of the Internal Revenue Code.
This relieves the Fund (but not its shareholders) from paying federal income
tax on income and capital gains which are distributed to shareholders, and
permits net capital gains of the Fund (that is, the excess of net long-term
capital gains over net short-term capital losses) to be treated as long-term
capital gains of the shareholders, regardless of how long shareholders have
held their shares in the Fund. Net capital gains of the Fund which are
available for distribution to shareholders will be computed by taking into
account any capital loss carryforward of the Fund.
Qualification of the Fund as a regulated investment company requires, among
other things, that (a) the Fund derive at least 90% of its annual gross income
(without reduction for losses from the sale or other disposition of securities
or foreign currencies) from interest, dividends, payments with respect to
securities loans and gains from the sale or other disposition of securities or
options thereon or foreign currencies, or other income (including but not
limited to gains from options, futures or forward contracts) derived with
respect to its business of investing in such securities or currencies; (b) the
Fund diversify its holdings so that, at the end of each quarter of the taxable
year, (1) at least 50% of the value of the Fund's assets is represented by
cash, U.S.
B-34
<PAGE>
government securities and other securities limited in respect of any one
issuer to an amount not greater than 5% of the value of the Fund's assets and
10% of the outstanding voting securities of such issuer, and (2) not more than
25% of the value of its assets is invested in the securities of any one issuer
(other than U.S. government securities); and (c) the Fund distribute to its
shareholders at least 90% of its net investment income and net short-term
gains (that is, the excess of net short-term capital gains over net long-term
capital losses) in each year.
Gains or losses on sales of securities by the Fund will be treated as long-
term capital gains or losses if the securities have been held by it for more
than one year, except in certain cases where the Fund acquires a put or writes
a call thereon or otherwise holds an offsetting position with respect to the
securities. Other gains or losses on the sale of securities will be short-term
capital gains or losses. Gains and losses on the sale, lapse or other
termination of options on securities will be treated as gains and losses from
the sale of securities. If an option written by the Fund on securities lapses
or is terminated through a closing transaction, such as a repurchase by the
Fund of the option from its holder, the Fund will generally realize short-term
capital gain or loss. If securities are sold by the Fund pursuant to the
exercise of a call option written by it, the Fund will include the premium
received in the sale proceeds of the securities delivered in determining the
amount of gain or loss on the sale. Certain of the Fund's transactions may be
subject to wash sale, short sale, constructive sale, anti-conversion and
straddle provisions of the Internal Revenue Code which may, among other
things, require the Fund to defer recognition of losses. In addition, debt
securities acquired by the Fund may be subject to original issue discount and
market discount rules which, respectively, may cause the Fund to accrue income
in advance of the receipt of cash with respect to interest or cause gains to
be treated as ordinary income.
Special rules apply to most options on stock indexes, futures contracts and
options thereon. These investments will generally constitute Section 1256
contracts and will be required to be "marked to market" for federal income tax
purposes at the end of the Fund's taxable year; that is, treated as having
been sold at market value. Sixty percent of any gain or loss recognized on
these deemed sales and on actual dispositions will be treated as long-term
capital gain or loss, and the remainder will be treated as short-term capital
gain or loss.
Gain or loss on the sale, lapse or other termination of options on stock and
on narrowly-based stock indexes will be capital gain or loss and will be long-
term or short-term depending on the holding period of the option. In addition,
positions which are part of a "straddle" will be subject to certain wash sale,
short sale and constructive sale provisions of the Internal Revenue Code. In
the case of a straddle, the Fund may be required to defer the recognition of
losses on positions it holds to the extent of any unrecognized gain on
offsetting positions held by the Fund.
Gains or losses attributable to fluctuations in exchange rates which occur
between the time the Fund accrues interest or other receivables or accrues
expenses or other liabilities denominated in a foreign currency and the time
the Fund actually collects such receivables or pays such liabilities are
treated as ordinary income or ordinary loss. Similarly, gains or losses on
dispositions of debt securities denominated in a foreign currency attributable
to fluctuations in the value of the foreign currency between the date of
acquisition of the security and the date of disposition also are treated as
ordinary gain or loss. These gains or losses, referred to under the Internal
Revenue Code as "Section 988" gains or losses, increase or decrease the amount
of the Fund's investment company taxable income available to be distributed to
its shareholders as ordinary income, rather than increasing or decreasing the
amount of the Fund's net capital gain. If Section 988 losses exceed other
investment company taxable income during a taxable year, the Fund would not be
able to make any ordinary dividend distributions, or distributions made before
the losses were realized would be recharacterized as a return of capital to
shareholders, rather than as an ordinary dividend, reducing each shareholder's
basis in his or her Fund shares.
Shareholders electing to receive dividends and distributions in the form of
additional shares will have a cost basis for federal income tax purposes in
each share so received equal to the NAV of a share of the Fund on the
reinvestment date.
Any dividends or distributions paid shortly after a purchase by an investor
may have the effect of reducing the per share net asset value of the
investor's shares by the per share amount of the dividends or distributions.
Furthermore, such dividends or distributions, although in effect a return of
capital, are subject to federal income taxes. Therefore, prior to purchasing
shares of the Fund, the investor should carefully consider the impact of
dividends or capital gains distributions which are expected to be or have been
announced.
Any loss realized on a sale, redemption or exchange of shares of the Fund by
a shareholder will be disallowed to the extent the shares are replaced within
a 61-day period beginning 30 days before the disposition of shares. Shares
purchased pursuant to the reinvestment of a dividend will constitute a
replacement of shares.
B-35
<PAGE>
A shareholder who acquires shares of the Fund and sells or otherwise
disposes of such shares within 90 days of acquisition may not be allowed to
include certain sales charges incurred in acquiring such shares for purposes
of calculating gain or loss realized upon a sale or exchange of shares of the
Fund.
Dividends of net investment income and distributions of net short-term
capital gains paid to a shareholder (including a shareholder acting as a
nominee or fiduciary) who is a nonresident alien individual, a foreign
corporation or a foreign partnership (foreign shareholder) are subject to a
30% (or lower treaty rate) withholding tax upon the gross amount of the
dividends unless the dividends are effectively connected with a U.S. trade or
business conducted by the foreign shareholder. Capital gain distributions paid
to a foreign shareholder are generally not subject to withholding tax. A
foreign shareholder will, however, be required to pay U.S. income tax on any
dividends and capital gain distributions which are effectively connected with
a U.S. trade or business of the foreign shareholder.
Dividends received by corporate shareholders are eligible for a dividends-
received deduction of 70% to the extent the Fund's income is derived from
qualified dividends received by the Fund from domestic corporations. Dividends
attributable to foreign corporations, interest income, capital and currency
gain, gain or loss from Section 1256 contracts (described above), and income
from certain other sources will not constitute qualified dividends. Individual
shareholders are not eligible for the dividends-received deduction.
The per share dividends on Class B and Class C shares will be lower than the
per share dividends on Class A and Class Z shares as a result of the higher
distribution-related fee applicable to the Class B and Class C shares. The per
share distributions of net capital gains, if any, will be paid in the same
amount for Class A, Class B, Class C and Class Z shares. See "Net Asset
Value."
The Fund is required to distribute 98% of its ordinary income in the same
calendar year in which it is earned. The Fund is also required to distribute
during the calendar year 98% of the capital gain net income it earned during
the 12 months ending on October 31 of such calendar year. In addition, the
Fund must distribute during the calendar year all undistributed ordinary
income and undistributed capital gain net income from the prior year or the
twelve-month period ending on October 31 of such prior calendar year,
respectively. To the extent it does not meet these distribution requirements,
the Fund will be subject to a nondeductible 4% excise tax on the undistributed
amount. For purposes of this excise tax, income on which the Fund pays income
tax is treated as distributed.
The Fund may, from time to time, invest in "passive foreign investment
companies" (PFICs). A PFIC is a foreign corporation that, in general, meets
either of the following tests: (a) at least 75% of its gross income is passive
or (b) an average of at least 50% of its assets produce, or are held for the
production of, passive income. If the Fund acquires and holds stock in a PFIC
beyond the end of the year of its acquisition, the Fund will be subject to
federal income tax on a portion of any "excess distribution" received on the
stock or on any gain from disposition of the stock (collectively, PFIC
income), plus interest thereon, even if the Fund distributes the PFIC income
as a taxable dividend to its shareholders. The balance of the PFIC income will
be included in the Fund's investment company taxable income and, accordingly,
will not be taxable to it to the extent that income is distributed to its
shareholders. The Fund may make a "mark-to-market" election with respect to
any marketable stock it holds of a PFIC. If the election is in effect, at the
end of the Fund's taxable year, the Fund will recognize the amount of gains,
if any, as ordinary income with respect to PFIC stock. No loss will be
recognized on PFIC stock, except to the extent of gains recognized in prior
years. Alternatively, the Fund, if it meets certain requirements, may elect to
treat any PFIC in which it invests as a "qualified electing fund," in which
case, in lieu of the foregoing tax and interest obligation, the Fund will be
required to include in income each year its pro rata share of the qualified
electing fund's annual ordinary earnings and net capital gain, even if they
are not distributed to the Fund; those amounts would be subject to the
distribution requirements applicable to the Fund described above.
Income received by the Fund from sources within foreign countries may be
subject to withholding and other taxes imposed by such countries. Income tax
treaties between certain countries and the United States may reduce or
eliminate such taxes. It is impossible to determine in advance the effective
rate of foreign tax to which the Fund will be subject, since the amount of the
Fund's assets to be invested in various countries will vary. The Fund does not
expect to meet the requirements of the Internal Revenue Code for "passing-
through" to its shareholders any foreign income taxes paid.
Foreign shareholders are advised to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in the
Fund.
Dividends and distributions may also be subject to state and local taxes.
B-36
<PAGE>
PERFORMANCE INFORMATION
Average Annual Total Return. The Fund may from time to time advertise its
average annual total return. Average annual total return is determined
separately for Class A, Class B, Class C and Class Z shares.
Average annual total return is computed according to the following formula:
P(1 + T) to the power of n = ERV
<TABLE>
<S> <C> <C> <C>
Where: P = hypothetical initial payment of $1000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $1000 payment made at the
beginning of the 1, 5 or 10 year periods at the end of the 1, 5 or 10 year
periods (or fractional portion thereof).
</TABLE>
Average annual total return takes into account any applicable initial or
deferred sales charges but does not take into account any federal or state
income taxes that may be payable upon redemption.
Aggregate Total Return. The Fund may also advertise its aggregate total
return. Aggregate total return is determined separately for Class A, Class B,
Class C and Class Z shares.
Aggregate total return represents the cumulative change in the value of an
investment in the Fund and is computed according to the following formula:
ERV--P
------
P
<TABLE>
<S> <C> <C> <C>
Where: P = a hypothetical initial payment of $1000.
ERV = ending redeemable value of a hypothetical $1000 payment made at the beginning
of the 1, 5 or 10 year periods at the end of the 1, 5 or 10 year periods (or
fractional portion thereof).
</TABLE>
Aggregate total return does not take into account any federal or state
income taxes that may be payable upon redemption or any applicable initial or
contingent deferred sales charges.
Yield. The Fund may from time to time advertise its yield as calculated
over a 30-day period. Yield is calculated separately for Class A, Class B,
Class C and Class Z shares. The yield will be computed by dividing the Fund's
net investment income per share earned during this 30-day period by the
maximum offering price per share on the last day of this period. Yield is
calculated according to the following formula:
( a - b )
YIELD = 2[( ----- + 1)6-1]
( cd )
<TABLE>
<S> <C> <C> <C>
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period that were entitled to receive
dividends.
d = the maximum offering price per share on the last day of the period.
</TABLE>
Yield fluctuates and an annualized yield quotation is not a representation
by the Fund as to what an investment in the Fund will actually yield for any
given period.
Advertising.
PRUDENTIAL'S INVESTMENT MANAGEMENT RESEARCH (IMR)--MAKING A DIFFERENCE IN THE
SELECTION OF PRUDENTIAL-SOLD PRODUCTS
The Basic Need for Due Diligence/What is Investment Management Research?
Identifying attractive investment strategies offered by high-quality
investment management firms, evaluating their performance, and keeping abreast
of relevant developments concerning such firms and strategies is both
difficult and time consuming. It was this
B-37
<PAGE>
realization that spurred the formation of the Investment Management Research
(IMR) group in early 1998. IMR provides investment management research advice
and consulting support to all groups and clients that use money management
products offered by Prudential and its subsidiaries. IMR may represent the
first centralized research department focused on the entire worldwide money
management community within a major U.S.-based financial services firm.
The Team:
IMR has a highly specialized, well-trained staff of eight analysts devoted
full-time to following the global money management community. Members of the
department possess or are currently pursuing advanced degrees such as the
Masters in Business Administration (MBA) and/or advanced certifications such
as the Chartered Financial Analyst (CFA) designation. In addition, members of
the team have significant financial-services industry experience, with diverse
backgrounds, and prior analytical experience. The specialized knowledge and
talent of the IMR team is a valuable resource for Prudential and its clients.
Mission
IMR's mission is:
. To conduct high-quality research and due diligence on investment
management firms and the vehicles and strategies they offer;
. To provide superior insight on issues related to investment management
topics and industry related issues; and
. To distribute such research in an effective manner to agents and
financial advisors so that the clients of the firm may achieve their
long-term financial goals and objectives.
Functions and Products of IMR:
. Analytical Input into Program Decisions
. Ensuring a World Class Menu of Investment Management Strategies
. Research Reports on Mutual Funds and Separate Accounts
. Mutual Fund Selection Guides
. White Papers on Investment Management Industry-Related Issues
Set forth below is a chart which compares the performance of different types
of investments over the long-term and the rate of inflation./1/
Performance Comparison of Different Types of Investments
Over The Long Term (12/31/25 - 12/31/99)
[BAR CHART]
Common Stocks 11.4%
Long-Term Gov't. Bonds 5.1%
Inflation 3.1%
- ---------
/1/ Source: Ibbotson Associates. Used with permission. All rights reserved.
Common stock returns are based on the Standard & Poor's 500 Composite Stock
Price Index, a market-weighted, unmanaged index of 500 common stocks in a
variety of industry sectors. It is a commonly used indicator of broad stock
price movements. This chart is for illustrative purposes only and is not
intended to represent the performance of any particular investment or fund.
Investors cannot invest directly in an index. Past performance is not a
guarantee of future results.
B-38
<PAGE>
Information About the Investment Advisers. Jennison Associates LLC has 30
years of experience in managing growth stock portfolios. Jennison uses a
bottom-up stock selection approach to identify companies they believe exhibit
superior absolute and relative earnings growth, and which are attractively
valued. The Jennison team is led by Spiros "Sig" Segalas, recently named
Manager of the Decade by Mutual Fund Magazine (11/30/99), and Kathleen
McCarragher. Sig also manages the well-known Harbor Capital Appreciation Fund.
Alliance Capital Management, L.P. is a premier manager of growth-oriented
mutual funds. Alliance selects securities based on proprietary research
conducted by 270 investment professionals in 21 investment offices worldwide.
The Alliance Large Capitalization Growth Team is led by Alfred Harrison, who
has managed the well-known Alliance Premier Growth Fund since 1992. The
Alliance team begins its stock selection with a primary research universe of
about 500 companies, and this is narrowed to an "Alliance 100," from which
stocks for the Fund are selected.
- --------------------------------------
Annual Sector Returns
- --------------------------------------
S&P 500 Index 12/31/98 to 12/31/99
- --------------------------------------
[BAR CHART]
Technology 75%
Capital Goods 27%
Basic Materials 24%
Consumer Cyclicals 21%
Communication Services 17%
Energy 16%
Financials Index 2%
Consumer Staples -8%
Healthcare -9%
Transportation -11%
Utilities -12%
Source: Standard & Poor's Index Industry Group Performance
B-39
<PAGE>
<TABLE>
<CAPTION>
STRATEGIC PARTNERS SERIES
Statement of Assets and Liabilities STRATEGIC PARTNERS FOCUSED GROWTH FUND
- ------------------------------------------------------------------------------------------------
Assets March 15, 2000
--------------
<S> <C>
Cash............................................................................. $100,000
Deferred offering costs.......................................................... 258,000
--------
Total assets.................................................................. 358,000
--------
Liabilities
Offering costs payable........................................................... 258,000
--------
Total liabilities............................................................. 258,000
--------
Net Assets (Note 1)
Applicable to 10,000 shares of beneficial interest............................ $100,000
========
Net assets were comprised of:
Shares of beneficial interest, at par...................................... $ 10
Paid-in capital in excess of par........................................... 99,990
--------
$100,000
========
Calculation of Offering Price
Class A:
Net asset value and redemption price per Class A share
($25,000 / 2,500 shares of beneficial interest issued and outstanding)..... $10.00
Maximum sales charge (5% of offering price)................................... .53
---------
Offering price to public...................................................... $10.53
=========
Class B:
Net asset value, offering price and redemption price per Class B share
($25,000 / 2,500 shares of beneficial interest issued and outstanding)..... $10.00
=========
Class C:
Net asset value and redemption price per Class C share
($25,000 / 2,500 shares of beneficial interest issued and outstanding)..... $10.00
Sales charge (1% of offering price)........................................... .10
---------
Offering price to public...................................................... $10.10
=========
Class Z:
Net asset value, offering price and redemption price per Class Z share
($25,000 / 2,500 shares of beneficial interest issued and outstanding)..... $10.00
=========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 40
<PAGE>
STRATEGIC PARTNERS SERIES
Notes to Financial Statements STRATEGIC PARTNERS FOCUSED GROWTH FUND
- -------------------------------------------------------------------------------
Note 1.
Strategic Partners Series--Strategic Partners Focused Growth Fund (the 'Fund'),
a separately managed series of the Strategic Partners Series (the 'Trust'),
which was organized as a business trust in Delaware on January 26, 2000, is an
open-end, non-diversified management investment company. The Fund had no
significant operations other than the issuance of 2,500 shares each of Class A,
Class B, Class C, and Class Z beneficial interest for $100,000 on March 15, 2000
to Prudential Investments Fund Management LLC (PIFM or Manager).
Certain costs incurred and to be incurred in connection with the initial
offering of shares of the Fund, estimated at $258,000, will be deferred and
amortized over the period of benefit, not to exceed 12 months from the date of
the Fund's commencement of operations. Estimated organizational expenses of the
Fund in the amount of approximately $12,100 incurred prior to the offering of
the Fund's shares will be paid by the Manager.
- --------------------------------------------------------------------------------
Note 2. Agreements
The Trust will be entering into a management agreement with PIFM.
The management fee paid PIFM will be computed daily and payable monthly, at an
annual rate of .90 of 1% of the average daily net assets of the Fund up to and
including $1 billion and .85 of 1% on average net assets over $1 billion.
The Trust will be entering into a distribution agreement with Prudential
Investment Management Services LLC (the Distributor or PIMS) for distribution of
the Fund's shares. Pursuant to separate Plans of Distribution (the Class A Plan,
the Class B Plan and the Class C Plan, collectively the Plans) adopted by the
Trust under Rule 12b-1 of the Investment Company Act of 1940, the Distributor
incurs the expenses of distributing the Fund's Class A, Class B and Class C
shares. These expenses include commissions and account servicing fees paid to,
or on account of, financial advisers of Prudential Securities and Pruco
Securities Corporation (Prusec), affiliates of the manager, commissions paid to,
or on account of, other broker-dealers or certain financial institutions which
have entered into agreements with the Distributor, advertising expenses, the
cost of printing and mailing prospectuses to potential investors and indirect
and overhead costs of Prudential Securities and Prusec associated with the sale
of Fund shares, including lease, utility, communications and sales promotion
expenses.
Pursuant to the Class A Plan, the Fund will compensate the Distributor for its
expenses with respect to Class A shares at an annual rate of up to .30 of 1% of
the average daily net asset value of the Class A shares. The Distributor has
agreed to limit its distribution-related fees payable under the Class A Plan to
.25 of 1% of the average daily net asset value of the Class A shares for the
fiscal period ending February 28, 2001.
Pursuant to the Class B and Class C Plans, the Fund will compensate the
Distributor for its distribution-related expenses with respect to Class B and
Class C shares at an annual rate of 1% of the average daily net assets of Class
B and Class C shares. No distribution or service fees are paid to PIMS as
distributor of the Class Z shares.
Prudential Mutual Fund Services LLC, a wholly owned subsidiary of PIFM, serves
as the Trust's transfer agent.
PIFM, PIMS and Prudential Securities are indirect wholly owned subsidiaries of
The Prudential Insurance Company of America.
- --------------------------------------------------------------------------------
41
<PAGE>
STRATEGIC PARTNERS SERIES
Report of Independent Accountants STRATEGIC PARTNERS FOCUSED GROWTH FUND
- -------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
Strategic Partners Series--Strategic Partners Focused Growth Fund:
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of Strategic Partners
Series--Strategic Partners Focused Growth Fund (the 'Trust') at March 15, 2000,
in conformity with accounting principles generally accepted in the United
States. This financial statement is the responsibility of the Trust's
management; our responsibility is to express an opinion on this financial
statement based on our audit. We conducted our audit of this financial statement
in accordance with auditing standards generally accepted in the United States,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statement is free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statement, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
March 16, 2000
- --------------------------------------------------------------------------------
42
<PAGE>
APPENDIX I--GENERAL INVESTMENT INFORMATION
The following terms are used in mutual fund investing.
Asset Allocation
Asset allocation is a technique for reducing risk, providing balance. Asset
allocation among different types of securities within an overall investment
portfolio helps to reduce risk and to potentially provide stable returns,
while enabling investors to work toward their financial goal(s). Asset
allocation is also a strategy to gain exposure to better performing asset
classes while maintaining investment in other asset classes.
Diversification
Diversification is a time-honored technique for reducing risk, providing
"balance" to an overall portfolio and potentially achieving more stable
returns. Owning a portfolio of securities mitigates the individual risks (and
returns) of any one security. Additionally, diversification among types of
securities reduces the risks (and general returns) of any one type of
security.
Duration
Debt securities have varying levels of sensitivity to interest rates. As
interest rates fluctuate, the value of a bond (or a bond portfolio) will
increase or decrease. Longer term bonds are generally more sensitive to
changes in interest rates. When interest rates fall, bond prices generally
rise. Conversely, when interest rates rise, bond prices generally fall.
Duration is an approximation of the price sensitivity of a bond (or a bond
portfolio) to interest rate changes. It measures the weighted average maturity
of a bond's (or a bond portfolio's) cash flows, i.e., principal and interest
rate payments. Duration is expressed as a measure of time in years--the longer
the duration of a bond (or a bond portfolio), the greater the impact of
interest rate changes on the bond's (or the bond portfolio's) price. Duration
differs from effective maturity in that duration takes into account call
provisions, coupon rates and other factors. Duration measures interest rate
risk only and not other risks, such as credit risk and, in the case of non-
U.S. dollar denominated securities, currency risk. Effective maturity measures
the final maturity dates of a bond (or a bond portfolio).
Market Timing
Market timing--buying securities when prices are low and selling them when
prices are relatively higher--may not work for many investors because it is
impossible to predict with certainty how the price of a security will
fluctuate. However, owning a security for a long period of time may help
investors offset short-term price volatility and realize positive returns.
Power of Compounding
Over time, the compounding of returns can significantly impact investment
returns. Compounding is the effect of continuous investment on long-term
investment results, by which the proceeds of capital appreciation (and income
distributions, if elected) are reinvested to contribute to the overall growth
of assets. The long-term investment results of compounding may be greater than
that of an equivalent initial investment in which the proceeds of capital
appreciation and income distributions are taken in cash.
Standard Deviation
Standard deviation is an absolute (non-relative) measure of volatility
which, for a mutual fund, depicts how widely the returns varied over a certain
period of time. When a fund has a high standard deviation, its range of
performance has been very wide, implying greater volatility potential.
Standard deviation is only one of several measures of a fund's volatility.
I-1
<PAGE>
PART C
OTHER INFORMATION
Item 23. Exhibits.
(a)(1) Agreement and Declaration of Trust. Incorporated by reference to
Exhibit (a)(1) to the Registration Statement on Form N-1A filed on
February 1, 2000 (File No. 333-95849).
(2) Certificate of Trust. Incorporated by reference to Exhibit (a)(2)
to the Registration Statement on Form N-1A filed on February 1, 2000
(File No. 333-95849).
(b) By-laws.*
(c) Instruments Defining Rights of Shareholders.*
(d) (1) Form of Management Agreement between the Registrant and
Prudential Investments Fund Management LLC.*
(2) Form of Sub-Management Agreement between Prudential Investments
Fund Management LLC and The Prudential Investment Corporation.*
(3) Form of Subadvisory Agreement between The Prudential Investment
Corporation and Jennison Associates LLC.*
(4) Form of Subadvisory Agreement between Prudential Investments Fund
Management LLC and Alliance Capital Management, L.P.*
(e) (1) Form of Distribution Agreement with Prudential Investment
Management Services LLC.*
(2) Form of Dealer Agreement.*
(g) (1) Custodian Contract between the Registrant and State Street Bank
and Trust Company.*
(2) Amendment to Custodian Contract.*
(h) Form of Transfer Agency and Service Agreement between the Registrant
and Prudential Mutual Fund Services LLC.*
(i) Opinion and consent of Counsel.*
(j) Consent of independent accountants.*
(m) (1) Form of Distribution and Service Plan for Class A shares.*
(2) Form of Distribution and Service Plan for Class B shares.*
(3) Form of Distribution and Service Plan for Class C shares.*
(n) Rule 18f-3 Plan.*
(p) (1) Fund Code of Ethics.*
(2) Manager, Sub-Manager and Distributor Code of Ethics.*
(3) Alliance Capital Management L.P. Code of Ethics.*
(4) Jennison Associates LLC Code of Ethics.*
- ---------
* Filed herewith.
Item 24. Persons Controlled by or under Common Control with Registrant.
None.
Item 25. Indemnification.
As permitted by Sections 17(h) and (i) of the Investment Company Act of 1940
(the 1940 Act) and pursuant to Del. Code Ann. title 12 sec. 3817, a Delaware
business trust may provide in its governing instrument for the indemnification
of its officers and trustees from and against any and all claims and demands
whatsoever. Article VII, Section 2 of the Agreement and Declaration of Trust
(Exhibit a(1) to the Registration Statement) states that (1) the Registrant
shall indemnify any present trustee or officer to the fullest extent permitted
by law against liability, and all expenses reasonably incurred by him or her
in connection with any claim, action, suit or proceeding in which he or she is
involved by virtue of his or her service as a trustee, officer or both, and
against any amount incurred in settlement thereof and (2) all persons
extending credit to, contracting with or having any claim against the
C-1
<PAGE>
Registrant shall look only to the assets of the appropriate Series (or if no
Series has yet been established, only to the assets of the Registrant).
Indemnification will not be provided to a person adjudged by a court or other
adjudicatory body to be liable to the Registrant or its shareholders by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of
his or her duties (collectively "disabling conduct"). In the event of a
settlement, no indemnification may be provided unless there has been a
determination, as specified in the Agreement and Declaration of Trust, that
the officer or trustee did not engage in disabling conduct. In addition,
Article XI of Registrant's By-Laws (Exhibit b to the Registration Statement)
provides that any trustee, officer, employee or other agent of Registrant
shall be indemnified by the Registrant against all liabilities and expenses
subject to certain limitations and exceptions contained in Article XI of the
By-Laws. As permitted by Section 17(i) of the 1940 Act, pursuant to Section 10
of the Distribution Agreement (Exhibit e to the Registration Statement), the
Distributor of the Registrant may be indemnified against liabilities which it
may incur, except liabilities arising from bad faith, gross negligence,
willful misfeasance or reckless disregard of duties.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (Securities Act) may be permitted to Trustees, officers
and controlling persons of the Registrant pursuant to the foregoing provisions
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the 1940 Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a Trustee,
officer, or controlling person of the Registrant in connection with the
successful defense of any action, suit or proceeding) is asserted against the
Registrant by such Trustee, officer or controlling person in connection with
the shares being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the 1940 Act and will be governed
by the final adjudication of such issue.
The Registrant will purchase an insurance policy insuring its officers and
Trustees against liabilities, and certain costs of defending claims against
such officers and Trustees, to the extent such officers and Trustees are not
found to have committed conduct constituting willful misfeasance, bad faith,
gross negligence or reckless disregard in the performance of their duties. The
insurance policy also insures the Registrant against the cost of
indemnification payments to officers and Trustees under certain circumstances.
Section 8 of the Management Agreement (Exhibit d(1) to the Registration
Statement), Section 4 of the Sub-Management Agreement (Exhibit d(2) to the
Registration Statement) and Section 4 of each Subadvisory Agreement (Exhibits
d(3) and d(4) to the Registration Statement) limit the liability of Prudential
Investments Fund Management LLC (PIFM), The Prudential Investment Corporation
(PIC), Jennison Associates LLC and Alliance Capital Management, L.P.,
respectively, to liabilities arising from willful misfeasance, bad faith or
gross negligence in the performance of their respective duties or from
reckless disregard by them of their respective obligations and duties under
the agreements.
The Registrant hereby undertakes that it will apply the indemnification
provisions of its By-Laws and the Distribution Agreement in a manner
consistent with Release No. 11330 of the Securities and Exchange Commission
under the 1940 Act so long as the interpretation of Section 17(h) and 17(i) of
such Act remain in effect and are consistently applied.
Under Section 17(h) of the 1940 Act, it is the position of the staff of the
Securities and Exchange Commission that if there is neither a court
determination on the merits that the defendant is not liable nor a court
determination that the defendant was not guilty of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of one's office, no indemnification will be permitted unless an
independent legal counsel (not including a counsel who does work for either
the Registrant, its investment adviser, its principal underwriter or persons
affiliated with these persons) determines, based upon a review of the facts,
that the person in question was not guilty of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct
of his or her office.
Under its Agreement and Declaration of Trust, the Registrant may advance
funds to provide for indemnification. Pursuant to the Securities and Exchange
Commission staff's position on Section 17(h), advances will be limited in the
following respect:
(1) Any advances must be limited to amounts used, or to be used, for the
preparation and/or presentation of a defense to the action (including
cost connected with preparation of a settlement);
(2) Any advances must be accompanied by a written promise by, or on behalf
of, the recipient to repay that amount of the advance which exceeds the
amount to which it is ultimately determined that he is entitled to
receive from the Registrant by reason of indemnification;
(3) Such promise must be secured by a surety bond or other suitable
insurance; and
(4) Such surety bond or other insurance must be paid for by the recipient
of such advance.
C-2
<PAGE>
Item 26. Business and Other Connections of Investment Adviser.
(a) Prudential Investments Fund Management LLC
See "How the Fund is Managed--Manager" in the Prospectus constituting Part A
of this Registration Statement and "Investment Advisory and Other Services" in
the Statement of Additional Information constituting Part B of this
Registration Statement.
The business and other connections of the officers of PIFM are listed in
Schedules A and D of Form ADV of PIFM as currently on file with the Securities
and Exchange Commission, the text of which is hereby incorporated by reference
(File No. 801-31104).
The business and other connections of PIFM's directors and principal
executive officers are set forth below. Except as otherwise indicated, the
address of each person is Gateway Center Three, 100 Mulberry Street, Newark,
NJ 07102-4077.
<TABLE>
<CAPTION>
Name and Address Position with PIFM Principal Occupations
---------------- ------------------ ---------------------
<C> <S> <C>
David R. Odenath, Jr. Officer in Charge, Officer in Charge, President, Chief Executive Officer
President, Chief and Chief Operating Officer, PIFM; Senior Vice
Executive Officer President, The Prudential Insurance Company of
and Chief Operating America (Prudential)
Officer
Robert F. Gunia Executive Vice Executive Vice President and Chief Administrative
President and Chief Officer, PIFM; Vice President, Prudential; President,
Administrative Prudential Investment Management Services LLC (PIMS)
Officer
William V. Healey Executive Vice Executive Vice President, Chief Legal Officer and
President, Chief Secretary, PIFM; Vice President and Associate General
Legal Officer and Counsel, Prudential; Senior Vice President, Chief
Secretary Legal Officer and Secretary, PIMS
Brian W. Henderson Executive Vice Executive Vice President, PIFM; Senior Vice President
President and Chief Operating Officer, PIMS
Stephen Pelletier Executive Vice Executive Vice President, PIFM
President
Judy A. Rice Executive Vice Executive Vice President, PIFM
President
Lynn M. Waldvogel Executive Vice Executive Vice President, PIFM
President
(b) The Prudential Investment Corporation (PIC)
See "How the Fund is Managed--Sub-Manager" in the Prospectus constituting
Part A of this Registration Statement and "Investment Advisory and Other
Services" in the Statement of Additional Information constituting Part B of
this Registration Statement.
The business and other connections of PIC's directors and executive officers
are as set forth below. Except as otherwise indicated, the address of each
person is Prudential Plaza, Newark, NJ 07102.
<CAPTION>
Name and Address Position with PIC Principal Occupations
---------------- ----------------- ---------------------
<C> <S> <C>
Jeffrey Hiller Chief Compliance Chief Compliance Officer, Prudential Global Asset
Officer Management
John R. Strangfeld, Jr. Chairman of the Board, President of Prudential Global Asset Management Group
President, Chief of Prudential; Senior Vice President, Prudential;
Executive Officer and Chairman of the Board, President, Chief Executive
Director Officer and Director, PIC
Bernard Winograd Senior Vice President Chief Executive Officer, Prudential Real Estate
and Investors; Senior Vice President and Director, PIC
Director
</TABLE>
(c) Jennison Associates LLC.
See "How the Fund is Managed--Investment Advisers" in the Prospectus
constituting Part A of this Registration Statement and "Investment Advisory
and Other Services" in the Statement of Additional Information constituting
Part B of this Registration Statement.
The business and other connections of Jennison directors and executive
officers are listed in its Form ADV as currently on file with the Securities
and Exchange Commission (File No. 801-5608), the text of which is hereby
incorporated by reference.
(d) Alliance Capital Management, L.P.
C-3
<PAGE>
See "How the Fund is Managed--Investment Advisers" in the Prospectus
constituting Part A of this Registration Statement and "Investment Advisory
and Other Services" in the Statement of Additional Information constituting
Part B of this Registration Statement.
The business and other connections of the directors and executive officers
of Alliance Capital Management Corporation, the general partner of Alliance
Capital Management, L.P., are listed in its Form ADV as currently on file with
the Securities and Exchange Commission (File No. 801-32361), the text of which
is hereby incorporated by reference.
Item 27. Principal Underwriters.
(a) Prudential Investment Management Services LLC (PIMS)
PIMS is distributor for Cash Accumulation Trust, COMMAND Government Fund,
COMMAND Money Fund, COMMAND Tax-Free Fund, Global Utility Fund, Inc.,
Nicholas-Applegate Fund, Inc. (Nicholas-Applegate Growth Equity Fund),
Prudential Balanced Fund, Prudential California Municipal Fund, 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 Total Return 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
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 20/20 Focus Fund, Prudential Tax-Free Money Fund, Inc., Prudential
Tax-Managed Funds, Prudential World Fund, Inc., Strategic Partners Series,
Target Funds, The Prudential Investment Portfolios, Inc. and The Target
Portfolio Trust.
PIMS is also distributor of the following unit investment trusts: Separate
Accounts: Prudential's Gibraltar Fund, Inc., The Prudential Variable Contract
Account -2, The Prudential Variable Contract Account -10, The Prudential
Variable Contract Account -11, The Prudential Variable Contract Account -24, The
Prudential Variable Contract Account GI -2, The Prudential Discovery Select
Group Variable Contract Account, The Pruco Life Flexible Premium Variable
Annuity Account, The Pruco Life of New Jersey Flexible Premium Variable Annuity
Account, The Prudential Individual Variable Contract Account and The Prudential
Qualified Individual Variable Contract Account.
(b) Information concerning the directors and officers of PIMS is set forth
below.
<TABLE>
<CAPTION>
Positions and Positions and
Offices with Offices with
Name(1) Underwriter Registrant
- ------- ------------- -------------
<S> <C> <C>
Margaret Deverell.. Vice President and Chief Financial Officer None
Robert F. Gunia.... President None
Kevin Frawley...... Senior Vice President and Compliance Officer None
213 Washington
Street
Newark, NJ 07102
William V. Healey.. Senior Vice President, Secretary and None
Chief Legal Officer
Brian W. Henderson. Senior Vice President and Officer None
John R. Strangfeld, Advisory Board Member None
Jr................
</TABLE>
- ---------
(/1/)The address of each person named is Prudential Plaza, 751 Broad Street,
Newark, New Jersey 07102 unless otherwise indicated.
(c) Registrant has no principal underwriter who is not an affiliated person
of the Registrant.
Item 28. Location of Accounts and Records.
All accounts, books and other documents required to be maintained by Section
31(a) of the 1940 Act and the Rules thereunder are maintained at the offices
of State Street Bank and Trust Company, One Heritage Drive, North Quincy,
Massachusetts 02171; The Prudential Investment Corporation, Prudential Plaza,
745 Broad Street, Newark, New Jersey 07102; the Registrant, Gateway Center
Three, 100 Mulberry Street, Newark, New Jersey 07102-4077; Jennison Associates
LLC, 466 Lexington Avenue, New York,
C-4
<PAGE>
New York 10017; Alliance Capital Management, L.P., 1345 Avenue of the
Americas, New York, New York, 10105 and 601 Second Avenue South, Suite 5000,
Minneapolis, Minnesota 55402; and Prudential Mutual Fund Services LLC, Raritan
Plaza One, Edison, New Jersey 08837. Documents required by Rules 31a-1(b)(5),
(6), (7), (9), (10) and (11) and 31a-1(f) and Rules 31a-1(b)(4) and (11) and
31a-1(d) will be kept at Gateway Center Three, 100 Mulberry Street, Newark,
New Jersey 07102-4077, and the remaining accounts, books and other documents
required by such other pertinent provisions of Section 31(a) and the Rules
promulgated thereunder will be kept by State Street Bank and Trust Company and
Prudential Mutual Fund Services LLC.
Item 29. Management Services.
Other than as set forth under the captions "How the Fund is Managed--
Manager," "How the Fund is Managed-- Sub-Manager," "How the Fund is Managed--
Investment Advisers" and "How the Fund is Managed--Distributor" in the
Prospectus and the caption "Investment Advisory and Other Services" in the
Statement of Additional Information, constituting Parts A and B, respectively,
of this Registration Statement, Registrant is not a party to any management-
related service contract.
Item 30. Undertakings.
Not applicable.
C-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act and the Investment
Company Act, the Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, duly authorized, in the City of
Newark, and State of New Jersey, on the 24th day of March, 2000.
STRATEGIC PARTNERS SERIES
By /s/ John R. Strangfeld, Jr.
---------------------------------
John R. Strangfeld, Jr., President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Eugene C. Dorsey Trustee March 24, 2000
- --------------------------------------
Eugene C. Dorsey
/s/ Robert F. Gunia Trustee March 24, 2000
- --------------------------------------
Robert F. Gunia
/s/ Robert E. LaBlanc Trustee March 24, 2000
- --------------------------------------
Robert E. LaBlanc
/s/ Douglas H. McCorkindale Trustee March 24, 2000
- --------------------------------------
Douglas H. McCorkindale
/s/ Thomas T. Mooney Trustee March 24, 2000
- --------------------------------------
Thomas T. Mooney
/s/ David R. Odenath, Jr. Trustee March 24, 2000
- --------------------------------------
David R. Odenath, Jr.
/s/ Stephen Stoneburn Trustee March 24, 2000
- --------------------------------------
Stephen Stoneburn
/s/ John R. Strangfeld, Jr. President and Trustee March 24, 2000
- --------------------------------------
John R. Strangfeld, Jr.
/s/ Clay T. Whitehead Trustee March 24, 2000
- --------------------------------------
Clay T. Whitehead
/s/ Grace C. Torres Treasurer and Principal Financial March 24, 2000
- --------------------------------------
Grace C. Torres and Accounting Officer
</TABLE>
C-6
<PAGE>
STRATEGIC PARTNERS SERIES
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<C> <S>
(a)(1) Agreement and Declaration of Trust. Incorporated by reference
to Exhibit (a)(1) to the Registration Statement on Form N-1A
filed on February 1, 2000 (File No. 333-95849).
(a)(2) Certificate of Trust. Incorporated by reference to Exhibit
(a)(2) to the Registration Statement on Form N-1A filed on
February 1, 2000 (File No. 333-95849).
(b) By-laws.*
(c) Instruments Defining Rights of Shareholders.*
(d)(1) Form of Management Agreement between the Registrant and
Prudential Investments Fund Management LLC.*
(d)(2) Form of Sub-Management Agreement between Prudential Investments
Fund Management LLC and The Prudential Investment Corporation.*
(d)(3) Form of Subadvisory Agreement between The Prudential Investment
Corporation and Jennison Associates LLC.*
(d)(4) Form of Subadvisory Agreement between Prudential Investments
Fund Management LLC and Alliance Capital Management, L.P.*
(e)(1) Form of Distribution Agreement with Prudential Investment
Management Services LLC.*
(e)(2) Form of Dealer Agreement.*
(g)(1) Custodian Contract between the Registrant and State Street Bank
and Trust Company.*
(g)(2) Amendment to Custodian Contract.*
(h) Form of Transfer Agency and Service Agreement between the
Registrant and Prudential Mutual Fund Services LLC.*
(i) Opinion and consent of Counsel.*
(j) Consent of independent accountants.*
(m)(1) Form of Distribution and Service Plan for Class A shares.*
(m)(2) Form of Distribution and Service Plan for Class B shares.*
(m)(3) Form of Distribution and Service Plan for Class C shares.*
(n) Rule 18f-3 Plan.*
(p)(1) Fund Code of Ethics.*
(p)(2) Manager, Sub-Manager and Distributor Code of Ethics.*
(p)(3) Alliance Capital Management L.P. Code of Ethics.*
(p)(4) Jennison Associates LLC Code of Ethics.*
</TABLE>
- ----------
*Filed herewith.
<PAGE>
Exhibit 99.(b)
BY-LAWS
OF
STRATEGIC PARTNERS SERIES
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I - AGREEMENT AND DECLARATION OF TRUST......................................... 1
Section 1. Agreement and Declaration of Trust........................................ 1
Section 2. Definitions............................................................... 1
ARTICLE II - OFFICES................................................................... 1
Section 1. Principal Office.......................................................... 1
Section 2. Registered Office and Other Office........................................ 1
ARTICLE III - SHAREHOLDERS............................................................. 1
Section 1. Meetings.................................................................. 1
Section 2. Notice of Meetings........................................................ 2
Section 3. Record Date for Meetings.................................................. 2
Section 4. Proxies................................................................... 2
Section 5. Inspection of Books....................................................... 3
Section 6. Action without Meeting.................................................... 3
Section 7. Application of this Article............................................... 4
ARTICLE IV - TRUSTEES.................................................................. 4
Section 1. Meetings of the Trustees.................................................. 4
Section 2. Quorum and Manner of Acting............................................... 5
ARTICLE V - COMMITTEES................................................................. 5
Section 1. Executive and Other Committees............................................ 5
Section 2. Meetings, Quorum and Manner of Acting..................................... 5
ARTICLE VI - OFFICERS.................................................................. 6
Section 1. General Provisions....................................................... 6
Section 2. Term of Office and Qualifications........................................ 6
Section 3. Removal.................................................................. 6
Section 4. Powers and Duties of the Chairman........................................ 6
Section 5. Powers and Duties of the President....................................... 7
Section 6. Powers and Duties of the Vice President.................................. 7
Section 7. Powers and Duties of the Treasurer....................................... 7
Section 8. Powers and Duties of the Secretary....................................... 8
Section 9. Powers and Duties of Assistant Treasurers................................ 8
Section 10. Powers and Duties of Assistant Secretaries............................... 8
Section 11. Compensation of Officers and Trustees.................................... 8
ARTICLE VII - FISCAL YEAR.............................................................. 9
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
ARTICLE VIII - SEAL.................................................................... 9
ARTICLE IX - WAIVERS OF NOTICE......................................................... 9
ARTICLE X - CUSTODY OF SECURITIES...................................................... 9
Section 1. Employment of a Custodian............................................... 9
Section 2. Action upon Termination of Custodian Agreement.......................... 9
Section 3. Provisions of Custodian Contract........................................ 10
Section 4. Central Certificate System.............................................. 11
ARTICLE XI - INDEMNIFICATION OF TRUSTEES, OFFICERS, EMPLOYEES AND OTHER AGENTS......... 11
Section 1. Agents, Proceedings, Expenses........................................... 11
Section 2. Indemnification......................................................... 11
Section 3. Limitations, Settlements................................................ 12
Section 4. Insurance, Rights Not Exclusive......................................... 12
Section 5. Advance of Expenses..................................................... 12
Section 6. Fiduciaries of Employee Benefit Plan.................................... 13
ARTICLE XII - AMENDMENTS............................................................... 13
</TABLE>
(ii)
<PAGE>
BY-LAWS
OF
STRATEGIC PARTNERS SERIES
ARTICLE I
Agreement and Declaration of Trust
Section 1. Agreement and Declaration of Trust. These By-Laws shall be
subject to the Agreement and Declaration of Trust, as from time to time amended,
supplemented or restated (the "Declaration of Trust") of Strategic Partners
Series (the "Trust").
Section 2. Definitions. Unless otherwise defined herein, the terms used
herein have the respective meanings given them in the Declaration of Trust.
ARTICLE II
Offices
Section 1. Principal Office. The principal office of the Trust shall be
located in the City of Newark, State of New Jersey, or such other location as
the Trustees may from time to time determine.
Section 2. Registered Office and Other Offices. The registered office of
the Trust shall be located in the City of Wilmington, State of Delaware or such
other location within the State of Delaware as the Trustees may from time to
time determine. The Trust may establish and maintain such other offices and
places of business as the Trustees may from time to time determine.
ARTICLE III
Shareholders
Section 1. Meetings. Meetings of the Shareholders shall be held at the
principal executive offices of the Trust or at such other place within the
United States of America as the Trustees shall designate. Meetings of the
Shareholders shall be called by the Secretary whenever (i) ordered by the
Trustees or (ii) for the purpose of voting on the removal of any Trustee,
requested in writing by Shareholders holding at least ten percent (10%) of the
outstanding Shares entitled to vote. If the Secretary, when so ordered or
requested, refuses or neglects for more than 10 days to call such meetings, the
Trustees or the
<PAGE>
Shareholders so requesting, may, in the name of the Secretary, call the meeting
by giving notice thereof in the manner required when notice is given by the
Secretary.
Section 2. Notice of Meetings. Except as otherwise herein provided, notice
of all meetings of the Shareholders, stating the time, place and purposes of the
meeting, shall be given by the Secretary by delivering or mailing, postage
prepaid, to each Shareholder entitled to vote at said meeting at his or her
address as recorded on the register of the Trust at least ten (10) days and not
more than ninety (90) days before the meeting. Only the business stated in the
notice of the meeting shall be considered at such meeting. Notice of adjournment
of a Shareholders' meeting to another time or place need not be given, if such
time and place are announced at the meeting and the adjourned meeting is held
within a reasonable time after the date set for the original meeting. No notice
need be given to any Shareholder who shall have failed to inform the Trust of
his or her current address or if a written waiver of notice, executed before or
after the meeting by the Shareholder or his or her attorney thereunto
authorized, is filed with the records of the meeting.
Section 3. Record Date for Meetings. For the purpose of determining the
Shareholders who are entitled to notice of and to vote at any meeting, the
Trustees may from time to time close the transfer books for such period, not
exceeding thirty (30) days, as the Trustees may determine; or without closing
the transfer books the Trustees may fix a date not more than ninety (90) days
prior to the date of any meeting of Shareholders as a record date for the
determination of the persons to be treated as Shareholders of record for such
purpose.
Section 4. Proxies. At any meeting of Shareholders, any holder of Shares
entitled to vote thereat may vote either in person or by written proxy signed by
the Shareholder, provided that no proxy shall be voted at any meeting unless it
shall have been placed on file with the Secretary, or with such other officer or
agent of the Trust as the Secretary may direct, for verification prior to the
time at which such vote shall be taken; provided, however, that notwithstanding
any other provision of this Section 4 to the contrary, the Trustees may at any
time adopt one or more electronic, telecommunication, telephonic, computerized
or other alternatives to execution of a written instrument that will enable
holders of Shares entitled to vote at any meeting to appoint a proxy to vote
such holders' Shares at such meeting. Proxies may be solicited in
2
<PAGE>
the name of one or more Trustees or one or more of the officers of the Trust.
Only Shareholders of record shall be entitled to vote. When any Share is held
jointly by several persons, any one of them may vote at any meeting in person or
by proxy in respect of such Share, but if more than one of them shall be present
at such meeting in person or by proxy, and such joint owners or their proxies so
present disagree as to any vote to be cast, such vote shall not be received in
respect of such Share. A proxy purporting to be executed by or on behalf of a
Shareholder shall be deemed valid unless challenged at or prior to its exercise,
and the burden of proving invalidity shall rest on the challenger. If the holder
of any such Share is a minor or a person of unsound mind, and subject to
guardianship or the legal control of any other person as regards the charge or
management of such Share, he or she may vote by his or her guardian or such
other person appointed or having such control, and such vote may be given in
person or by proxy. At all meetings of the Shareholders, unless the voting is
conducted by inspectors, all questions relating to the qualifications of voters,
the validity of proxies, and the acceptance or rejection of votes shall be
decided by the chairman of the meeting. Except as otherwise provided herein or
in the Declaration of Trust, all matters relating to the giving, voting or
validity of proxies shall be governed by the General Corporation Law of the
State of Delaware relating to proxies, and judicial interpretations thereunder,
as if the Trust were a Delaware corporation and the Shareholders were
shareholders of a Delaware corporation.
Section 5. Inspection of Books. The Trustees shall from time to time
determine whether and to what extent, and at what times and places, and under
what conditions and regulations the accounts and books of the Trust or any of
them shall be open to the inspection of the Shareholders; and no Shareholder
shall have any right to inspect any account or book or document of the Trust
except as conferred by law or otherwise by the Trustees or by resolution of the
Shareholders.
Section 6. Action without Meeting. Any action that may be taken at any
meeting of Shareholders may be taken without a meeting and without prior notice
if a consent in writing setting forth the action so taken is signed by the
holders of outstanding Shares having not less than the minimum number of votes
that would be necessary to authorize or take that action at a meeting at which
all Shares entitled to vote on that action were present and voted. All such
consents shall be filed with the records of Shareholder meetings. Such consents
shall be treated for all purposes as a vote taken at a meeting of Shareholders.
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Section 7. Application of this Article. Meetings of Shareholders shall
consist of Shareholders of any Series (or Class thereof) or of all Shareholders,
as determined pursuant to the Declaration of Trust, and this Article shall be
construed accordingly.
ARTICLE IV
Trustees
Section 1. Meetings of the Trustees. The Trustees may in their discretion
provide for regular or stated meetings of the Trustees. Notice of regular or
stated meetings need not be given. Meetings of the Trustees other than regular
or stated meetings shall be held whenever called by the Chairman, the President,
or by any two of the Trustees, at the time being in office. Notice of the time
and place of each meeting other than regular or stated meetings shall be given
by the Secretary or an Assistant Secretary or by the officer or Trustees calling
the meeting and shall be delivered or mailed, postage prepaid, to each Trustee
at least two days before the meeting, or shall be telegraphed, cabled, or wired
to each Trustee at his or her business address, or personally delivered to him
or her, at least one day before the meeting. Such notice may, however, be waived
by any Trustees. Notice of a meeting need not be given to any Trustee if a
written waiver of notice, executed by him or her before or after the meeting, is
filed with the records of the meeting, or to any Trustee who attends the
meeting without protesting prior thereto or at its commencement the lack of
notice to him or her. A notice or waiver of notice need not specify the purpose
of any meeting. The Trustees may meet by means of a telephone conference circuit
or similar communications equipment by means of which all persons participating
in the meeting are connected, which meeting shall be deemed to have been held at
a place designated by the Trustees at the meeting. Participation in a telephone
conference meeting shall constitute presence in person at such meeting. Any
action required or permitted to be taken at any meeting of the Trustees may be
taken by the Trustees without a meeting if a majority of the Trustees then in
office (or such higher number of Trustees as would be required to act on the
matter under the Declaration of Trust, these By-Laws or applicable law if a
meeting were held) consent to the action in writing and the written consents are
filed with the records of the Trustees' meetings. Such consents shall be treated
for all purposes as a vote taken at a meeting of the
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Trustees. Notwithstanding the foregoing, all actions of the Trustees shall be
taken in compliance with the provisions of the Investment Company Act of 1940,
as amended.
Section 2. Quorum and Manner of Acting. A majority of the Trustees then in
office shall constitute a quorum for the transaction of business. If at any
meeting of the Trustees there shall be less than a quorum present, a majority of
those present may adjourn the meeting from time to time until a quorum shall be
obtained. Notice of an adjourned meeting need not be given. The act of the
majority of the Trustees present at any meeting at which there is a quorum shall
be the act of the Trustees, except as may be otherwise specifically provided by
law or by the Declaration of Trust or by these By-Laws.
ARTICLE V
Committees
Section 1. Operating and Other Committees. The Trustees by vote of a
majority of all the Trustees may elect from their own number an Operating
Committee to consist of not less than three (3) Trustees to hold office at the
pleasure of the Trustees, which shall have the power to conduct the current and
ordinary business of the Trust while the Trustees are not in session, including
the purchase and sale of securities and the designation of securities to be
delivered upon redemption of Shares of the Trust, and such other powers of the
Trustees as the Trustees may, from time to time, delegate to them except those
powers by law, the Declaration of Trust or these By-laws they are prohibited
from delegating. The Trustees may also elect from their own number or otherwise
other Committees from time to time, the number composing such Committees, the
powers conferred upon the same (subject to the same limitations as with respect
to the Operating Committee), the terms of membership on such Committees and the
termination or circumstances giving rise to the termination of such Committees
to be determined by the Trustees. The Trustees may designate a chairman of any
such Committee. In the absence of such designation the Committee may elect its
own chairman.
Section 2. Meetings, Quorum and Manner of Acting. The Trustees may (1)
provide for stated meetings of any Committees, (2) specify the manner of calling
and notice required for a special meeting of any Committee, (3) specify the
number of members of a Committee required to constitute a quorum and the numbers
of members of a Committee required to exercise specified powers delegated to
such
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Committee, (4) authorize the making of decisions to exercise specified powers by
written assent of the requisite number of members of a Committee without a
meeting, and (5) authorize the members of a Committee to meet by means of a
telephone conference circuit. Each Committee shall keep regular minutes of its
meetings and records of decisions taken without a meeting and cause them to be
recorded in a book designated for that purpose and kept at the principal
executive offices of the Trust.
ARTICLE VI
Officers
Section 1. General Provisions. The officers of the Trust shall be a
President, a Treasurer and a Secretary, who shall be elected by the Trustees.
The Trustees may elect or appoint such other officers or agents as the business
of the Trust may require, including a Chairman of the Board ("Chairman"), one or
more Vice Presidents, one or more Assistant Secretaries, and one or more
Assistant Treasurers. The Trustees may delegate to any officer or Committee the
power to appoint any subordinate officers or agents.
Section 2. Term of Office and Qualifications. Except as otherwise provided
by law, the Declaration of Trust or these By-Laws, the President, the Treasurer
and the Secretary, and all other officers shall hold office at the pleasure of
the Trustees. The Secretary and Treasurer may be the same person. A Vice
President and the Treasurer or a Vice President and the Secretary may be the
same person, but the offices of Vice President, Secretary and Treasurer shall
not be held by the same person. The President shall hold no other office, but
may be a Trustee of the Trust. Except as above provided, any two offices may be
held by the same person. The Chairman, if there be one, shall be a Trustee and
may but need not be a Shareholder. Any other officer may be but none need be a
Trustee or Shareholder.
Section 3. Removal. The Trustees, at any regular or special meeting of the
Trustees, may remove any officer with or without cause, by a vote of a majority
of the Trustees then in office. Any officer or agent appointed by an officer or
committee may be removed with or without cause by such appointing officer or
committee.
Section 4. Powers and Duties of the Chairman. The Chairman, if such an
officer is elected, shall if present preside at meetings of the Shareholders and
the Trustees, shall be the chief executive officer of the Trust and shall,
subject to the control of the Trustees, have general supervision, direction and
control
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of the business and the officers of the Trust and exercise and perform such
other powers and duties as may be from time to time assigned to him by the
Trustees or prescribed by the Declaration of Trust or these By-Laws.
Section 5. Powers and Duties of the President. Subject to the powers of the
Chairman, if there be such an officer, the President shall be the principal
executive officer of the Trust. He or she may call meetings of the Trustees and
of any Committee thereof when he or she deems it necessary and, in the absence
of the Chairman, shall preside at all meetings of the Shareholders and the
Trustees. Subject to the control of the Trustees, the Chairman and any
Committees of the Trustees, within their respective spheres, as provided by the
Trustees, the President shall at all times exercise a general supervision and
direction over the affairs of the Trust. The President shall have the power to
employ attorneys, accountants and other advisers and agents for the Trust and to
employ such subordinate officers, agents, clerks and employees as he or she may
find necessary to transact the business of the Trust. He or she shall also have
the power to grant, issue, execute or sign such powers of attorney, proxies or
other documents as may be deemed advisable or necessary in furtherance of the
interests of the Trust. The President shall have such other powers and duties as
from time to time may be conferred upon or assigned to him or her by the
Trustees.
Section 6. Powers and Duties of the Vice President. In the absence or
disability of the President, the Vice President or, if there be more than one
Vice President, any Vice President designated by the Trustees shall perform all
the duties and may exercise any of the powers of the President, subject to the
control of the Trustees. Each Vice President shall perform such other duties as
may be assigned to him or her from time to time by the Trustees or the
President.
Section 7. Powers and Duties of the Treasurer. The Treasurer shall be the
principal financial and accounting officer of the Trust. The Treasurer shall
deliver all funds of the Trust which may come into his or her hands to such
Custodian as the Trustees may employ pursuant to Article X of these By-Laws. He
or she shall render a statement of condition of the finances of the Trust to the
Trustee as often as they shall require the same and he or she shall in general
perform all the duties incident to the office of Treasurer and such other duties
as from time to time may be assigned to him or her by the Trustees. The
Treasurer
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shall give a bond for the faithful discharge of his or her duties, if required
so to do by the Trustees, in such sum and with such surety or sureties as the
Trustees shall require.
Section 8. Powers and Duties of the Secretary. The Secretary shall keep the
minutes of all meetings of the Trustees and of the Shareholders in proper books
provided for that purpose; he or she shall have custody of the seal of the
Trust; he or she shall have charge of the Share transfer books, lists and
records unless the same are in the charge of the Transfer Agent. The Secretary
shall attend to the giving and serving of all notices by the Trust in accordance
with the provisions of these By-laws and as required by law; and subject to
these By-Laws, he or she shall in general perform all duties incident to the
office of the Secretary and such other duties as from time to time may be
assigned to him or her by the Trustees.
Section 9. Powers and Duties of Assistant Treasurers. In the absence or
disability of the Treasurer, any Assistant Treasurer designated by the Trustees
shall perform all the duties, and may exercise any of the powers, of the
Treasurer. Each Assistant Treasurer shall perform such other duties as from time
to time may be assigned to him or her by the Trustees. Each Assistant Treasurer
shall give a bond for the faithful discharge of his or her duties, if required
so to do by the Trustees, in such sum and with such surety or sureties as the
Trustees shall require.
Section 10. Powers and Duties of Assistant Secretaries. In the absence or
disability of the Secretary, any Assistant Secretary designated by the Trustees
shall perform all the duties, and may exercise any of the powers, of the
Secretary. Each Assistant Secretary shall perform such other duties as from time
to time may be assigned to him or her by the Trustees.
Section 11. Compensation of Officers and Trustees. Subject to any
applicable provisions of the Declaration of Trust, the compensation of the
officers and Trustees shall be fixed from time to time by the Trustees or, in
the case of officers, by any Committee or officer upon whom such power may be
conferred by the Trustees. No officer shall be prevented from receiving such
compensation as such officer by reason of the fact that he or she is also a
Trustee.
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ARTICLE VII
Fiscal Year
The fiscal year of the Trust shall end on such date as the Trustees shall
from time to time determine.
ARTICLE VIII
Seal
The Trustees may adopt a seal which shall be in such form and shall have
such inscription thereon as the Trustees may from time to time prescribe.
ARTICLE IX
Waivers of Notice
Whenever any notice whatever is required to be given by law, the
Declaration of Trust or these By-laws, a waiver thereof in writing, signed by
the person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto. A notice shall be deemed to
have been telegraphed, cabled or wired for the purposes of these By-Laws when it
has been delivered to a representative of any telegraph, cable or wire company
with instructions that it be telegraphed, cabled or wired.
ARTICLE X
Custody of Securities
Section 1. Employment of a Custodian. The Trust shall place and at all
times maintain in the custody of a Custodian (including any sub-custodian for
the Custodian) all funds, securities and similar investments included in the
Trust Property. The Custodian (and any sub-custodian) shall be a bank having not
less than $20,000,000 aggregate capital, surplus and undivided profits and shall
be appointed from time to time by the Trustees, who shall fix its remuneration.
Section 2. Action upon Termination of Custodian Agreement. Upon termination
of a Custodian Agreement or inability of the Custodian to continue to serve, the
Trustees shall promptly appoint a successor custodian, but in the event that no
successor custodian can be found who has the required
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qualifications and is willing to serve, the Trustees shall call as promptly as
possible a special meeting of the Shareholders to determine whether the Trust
shall function without a custodian or shall be liquidated. If so directed by a
vote of holders of the majority of the outstanding Shares entitled to vote, the
Custodian shall deliver and pay over all Trust Property held by it as specified
in such vote.
Section 3. Provisions of Custodian Contract. The following provisions shall
apply to the employment of a Custodian and to any contract entered into with the
Custodian so employed: The Trustees shall cause to be delivered to the Custodian
all securities included in the Trust Property or to which the Trust may become
entitled, and shall order the same to be delivered by the Custodian only in
completion of a sale, exchange, transfer, pledge, loan of portfolio securities
to another person, or other disposition thereof, all as the Trustees may
generally or from time to time require or approve or to a successor Custodian;
and the Trustees shall cause all funds included in the Trust Property or to
which it may become entitled to be paid to the Custodian, and shall order the
same disbursed only for investment against delivery of the securities acquired
(including securities acquired under a repurchase agreement), or the return of
cash held as collateral for loans of portfolio securities, or in payment of
expenses, including management compensation, and liabilities of the Trust,
including distributions to Shareholders, or to a successor Custodian.
Notwithstanding anything to the contrary to these By-Laws, upon receipt of
proper instructions, which may be standing instructions, the Custodian may
deliver funds in the following cases: In connection with repurchase agreements,
the Custodian shall transmit prior to receipt on behalf of the Fund of any
securities or other property, funds from the Fund's custodian account to a
special custodian approved by the Trustees of the Fund, which funds shall be
used to pay for securities to be purchased by the Fund subject to the Fund's
obligation to sell and the seller's obligation to repurchase such securities (in
such case, the securities shall be held in the custody of the special
custodian); in connection with the Trust's purchase or sale of financial
futures contracts, the Custodian shall transmit, prior to receipt on behalf of
the Fund of any securities or other property, funds from the Trust's custodian
account in order to furnish and to maintain funds with brokers as margin to
guarantee the performance of the Trust's futures obligations in accordance with
the applicable requirements of commodities exchanges and brokers.
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Section 4. Central Certificate System. Subject to applicable rules,
regulations and orders adopted by the Commission, the Trustees may direct the
Custodian to deposit all or any part of the securities owned by the Trust in a
system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, or such other person as
may be permitted by the Commission, or otherwise in accordance with the 1940
Act, pursuant to which system all securities of any particular class or series
of any issuer deposited within the system are treated as fungible and may be
transferred or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal only
upon the order of the Trust.
ARTICLE XI
Indemnification of Trustees, Officers,
Employees and Other Agents
Section 1. Agents, Proceedings, Expenses. For the purpose of this Article,
"agent" means any Person who is or was a Trustee, officer, employee or other
agent of the Trust or is or was serving at the request of the Trust as a
trustee, director, officer, employee or agent of another organization in which
the Trust has any interest as a shareholder, creditor or otherwise; "proceeding"
means any threatened, pending or completed claim, action, suit or proceeding,
whether civil, criminal, administrative or investigative (including appeals);
and "expenses" includes, without limitation, attorneys' fees, costs, judgments,
amounts paid in settlement, fines, penalties and all other liabilities
whatsoever.
Section 2. Indemnification. The Trust shall indemnify agents of the Trust
(each a "Covered Person") against judgments, fines, settlements and expenses to
the fullest extent authorized, and in the manner permitted, by applicable
federal and state law.
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Section 3. Insurance, Rights Not Exclusive. The rights of indemnification
herein provided may be insured against by policies maintained by the Trust on
behalf of any agent, shall be severable, shall not be exclusive of or affect any
other rights to which any agent may now or hereafter be entitled and shall inure
to the benefit of the heirs, executors and administrators of any agent. Pursuant
and subject to Sections 2 and 4, the Trust shall indemnify each Covered Person
against, or advance the expenses of any Covered Person for, the amount of any
deductible provided in any liability insurance policy maintained by the Trust.
Section 4. Advance of Expenses. The Trust shall advance the expenses of
Covered Persons who are parties to any Proceeding to the fullest extent
authorized, and in the manner permitted, by applicable federal and state law.
For purposes of this paragraph, "Proceeding" means any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative.
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Section 5. Fiduciaries of Employee Benefit Plan. The Article does not apply
to any proceeding against any Trustee, investment manager or other fiduciary of
an employee benefit plan in that person's capacity as such, even though that
person may also be an agent of this Trust as defined in Section 1 of this
Article. Nothing contained in this Article shall limit any right to
indemnification to which such Trustee, investment manager, or other fiduciary
may be entitled by contract or otherwise which shall be enforceable to the
extent permitted by applicable law other than this Article.
ARTICLE XII
Amendments
These By-Laws, or any of them, may be altered, amended or repealed, or new
By-laws may be adopted by (a) a vote of holders of the majority of the
outstanding Shares entitled to vote or (b) by the Trustees, provided, however,
that no By-law may be amended, adopted or repealed by the Trustees if such
amendment, adoption or repeal is required by applicable law, the Declaration of
Trust or these By-Laws, to be submitted to a vote of the Shareholders.
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Exhibit 99.(c)
The following provisions of the Declaration of Trust and By-Laws of
Strategic Partners Series constitute all instruments defining the rights of
holders of the securities proposed to be offered:
I. Relevant Provisions of Declaration of Trust:
Article III Shares
Article IV The Board of Trustees
Article V Shareholders' Voting Powers and
Meetings
Article VIII, Section 2 Termination of Trust or Series
Article VIII, Section 4 Amendments
Article VIII, Section 9 Derivative Actions
II. Relevant Provisions of By-Laws:
Article III Shareholders
Article XII Amendments
<PAGE>
Exhibit 99.(d)(1)
STRATEGIC PARTNERS SERIES
Strategic Partners Focused Growth Fund
Management Agreement
--------------------
Agreement made this ____ day of March, 2000, between Strategic Partners
Series (the Trust), a Delaware business trust, on behalf of its series,
Strategic Partners Focused Growth Fund (the Fund), and Prudential Investments
Fund Management LLC, a New York limited liability company (the Manager).
W I T N E S S E T H
WHEREAS, the Trust is an open-end, management investment company
registered under the Investment Company Act of 1940, as amended (the 1940 Act);
and
WHEREAS, the Trust desires to retain the Manager to render or contract
to obtain as hereinafter provided investment advisory services to the Fund and
the Fund also desires to avail itself of the facilities available to the Manager
with respect to the administration of its day to day business affairs, and the
Manager is willing to render such investment advisory and administrative
services;
NOW, THEREFORE, the parties agree as follows:
1. The Trust hereby appoints the Manager to act as manager of the Fund
and administrator of its business affairs for the period and on the terms set
forth in this Agreement. The Manager accepts such appointment and agrees to
render the services herein described, for the compensation herein provided. The
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Manager is authorized to enter into agreements with: (i) Alliance Capital
Management, L.P. (Alliance or the Subadviser) pursuant to which Alliance shall
furnish to the Fund the investment advisory services in connection with the
management of a portion of the Fund (the Subadvisory Agreement), and (ii) The
Prudential Investment Corporation (PIC or the Sub-Manager) pursuant to which PIC
shall furnish to the Fund certain advisory and recordkeeping services with
respect to the portion of the Fund to be advised by Jennison Associates LLC (the
Sub-Management Agreement). The Manager will continue to have responsibility for
all investment advisory services furnished pursuant to the Subadvisory
Agreement.
2. Subject to the supervision of the Board of Trustees of the Trust,
the Manager shall administer the Fund's business affairs and, in connection
therewith, shall furnish the Fund with office facilities and with clerical,
bookkeeping and recordkeeping services at such office facilities and, subject to
Section 1 hereof and the Subadvisory Agreement, the Manager shall manage the
investment operations of the Fund and the composition of the Fund's portfolio,
including the purchase, retention and disposition thereof, in accordance with
the Fund's investment objective, policies and restrictions as stated in the
Prospectus (hereinafter defined) and subject to the following understandings:
(a) The Manager shall provide supervision of the Fund's investments
and/or determine from time to time what investments or securities will be
purchased, retained, sold or loaned by the Fund, and what portion of the
assets will be invested or held uninvested as cash.
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(b) The Manager, in the performance of its duties and obligations
under this Agreement, shall act in conformity with the Declaration of Trust
and By-Laws of the Trust and the Prospectus (as each of the foregoing is
hereinafter defined) of the Fund and with the instructions and directions of
the Board of Trustees of the Trust and will conform to and comply with the
requirements of the 1940 Act and all other applicable federal and state laws
and regulations.
(c) The Manager shall determine the securities and futures contracts
to be purchased or sold by the Fund and will place orders pursuant to its
determinations with or through such persons, brokers, dealers or futures
commission merchants (including but not limited to Prudential Securities
Incorporated) in conformity with the policy with respect to brokerage as set
forth in the Trust's Registration Statement and the Fund's Prospectus
(hereinafter defined) or as the Board of Trustees may direct from time to
time. In providing the Fund with investment supervision, it is recognized
that the Manager will give primary consideration to securing the most
favorable price and efficient execution. Consistent with this policy, the
Manager may consider the financial responsibility, research and investment
information and other services provided by brokers, dealers or futures
commission merchants who may effect or be a party to any such transaction or
other transactions to which other clients of the Manager may be a party. It
is understood that Prudential Securities Incorporated may be used as
principal broker for
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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 Fund that the Manager have access to supplemental
investment and market research and security and economic analysis provided
by brokers or futures commission merchants and that such brokers may execute
brokerage transactions at a higher cost to the Fund than may result when
allocating brokerage to other brokers or futures commission merchants on the
basis of seeking the most favorable price and efficient execution.
Therefore, the Manager is authorized to pay higher brokerage commissions for
the purchase and sale of securities and futures contracts for the Fund to
brokers or futures commission merchants who provide such research and
analysis, subject to review by the Trust's Board of Trustees from time to
time with respect to the extent and continuation of this practice. It is
understood that the services provided by such broker or futures commission
merchant may be useful to the Manager in connection with its services to
other clients.
On occasions when the Manager deems the purchase or sale of a security
or a futures contract to be in the best interest of the Fund as well as
other clients of the Manager, the Sub-Manager or the Subadviser, the
Manager, to the extent permitted by applicable laws and regulations, may,
but shall be under no obligation to, aggregate the securities or futures
contracts to be so sold or purchased in order to obtain the most favorable
price or lower brokerage commissions and efficient execution. In such event,
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allocation of the securities or futures contracts so purchased or sold, as
well as the expenses incurred in the transaction, will be made by the
Manager in the manner it considers to be the most equitable and consistent
with its fiduciary obligations to the Fund and to such other clients.
(d) The Manager shall maintain all books and records with respect to
the Fund's portfolio transactions and shall render to the Trust's Board of
Trustees such periodic and special reports as the Board may reasonably
request.
(e) The Manager shall be responsible for the financial and accounting
records to be maintained by the Fund (including those being maintained by
the Trust's Custodian).
(f) The Manager shall provide to the Trust's Custodian on each
business day information relating to all transactions concerning the Fund's
assets.
(g) The investment management services of the Manager to the Fund
under this Agreement are not to be deemed exclusive, and the Manager shall
be free to render similar services to others.
3. The Trust has delivered to the Manager copies of each of the
following documents and will deliver to it all future amendments and
supplements, if any:
(a) Declaration of Trust of the Trust, as filed with the Secretary of
State of Delaware (such Declaration of Trust, as in effect on the date
hereof
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and as amended from time to time, are herein called the "Declaration of
Trust");
(b) By-Laws of the Trust (such By-Laws, as in effect on the date hereof
and as amended from time to time, are herein called the "By-Laws");
(c) Certified resolutions of the Board of Trustees of the Trust
authorizing the appointment of the Manager and approving the form of this
agreement;
(d) Registration Statement under the 1940 Act and the Securities Act of
1933, as amended, on Form N-1A (the Registration Statement), as filed with
the Securities and Exchange Commission (the Commission) relating to the
Trust, including the Fund and its shares, and all amendments thereto;
(e) Notification of Registration of the Trust under the 1940 Act on
Form N-8A as filed with the Commission and all amendments thereto; and
(f) Prospectus of the Fund (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").
4. The Manager shall authorize and permit any of its directors,
officers and employees who may be elected as Trustees or officers of the Trust
to serve in the capacities in which they are elected. All services to be
furnished by the Manager under this Agreement may be furnished through the
medium of any such directors, officers or employees of the Manager.
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5. The Manager shall keep the Fund's books and records required to be
maintained by it pursuant to paragraph 2 hereof. The Manager agrees that all
records which it maintains for the Fund are the property of the Fund and it will
surrender promptly to the Fund any such records upon the Fund's request,
provided however that the Manager may retain a copy of such records. The Manager
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 the Manager
pursuant to Paragraph 2 hereof.
6. During the term of this Agreement, the Manager shall pay the
following expenses:
(i) the salaries and expenses of all personnel of the Fund and the
Manager except the fees and expenses of Trustees who are not affiliated
persons of the Manager or the Fund's Sub-Manager or Subadviser,
(ii) all expenses incurred by the Manager or by the Fund in connection
with managing the ordinary course of the Fund's business other than those
assumed by the Fund herein, and
(iii) the fees payable to Alliance pursuant to the Subadvisory
Agreement and fees payable to PIC pursuant to the Sub-Management Agreement.
The Fund assumes and will pay the expenses described below:
(a) the fees and expenses incurred by the Fund in connection with the
management of the investment and reinvestment of the Fund's assets,
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(b) the fees and expenses of Trustees who are not affiliated persons of
the Manager or the Fund's Sub-Manager or Subadviser,
(c) the fees and expenses of the Custodian that relate to (i) the
custodial function and the recordkeeping connected therewith, (ii) preparing
and maintaining the general accounting records of the Fund and the providing
of any such records to the Manager useful to the Manager in connection with
the Manager's responsibility for the accounting records of the Fund pursuant
to Section 31 of the 1940 Act and the rules promulgated thereunder, (iii)
the pricing of the shares of the Fund, including the cost of any pricing
service or services which may be retained pursuant to the authorization of
the Board of Trustees of the Trust, and (iv) for both mail and wire orders,
the cashiering function in connection with the issuance and redemption of
the Fund's securities,
(d) the fees and expenses of the Trust's Transfer and Dividend
Disbursing Agent, which may be the Custodian, that relate to the maintenance
of each shareholder account,
(e) the charges and expenses of legal counsel and independent
accountants for the Fund,
(f) brokers' commissions and any issue or transfer taxes chargeable to
the Fund in connection with its securities and futures transactions,
(g) all taxes and corporate fees payable by the Fund to federal, state
or other governmental agencies,
8
<PAGE>
(h) the fees of any trade associations of which the Fund may be a
member,
(i) the cost of typesetting and printing stock certificates
representing shares of the Fund,
(j) the cost of fidelity and directors and officers errors and
omissions insurance,
(k) the fees and expenses involved in registering and maintaining
registration of the Fund and of its shares with the Securities and Exchange
Commission, registering the Fund as a broker or dealer and paying notice
filing fees under state securities laws, including the preparation and
printing of the Trust's registration statements and the Fund's prospectuses
and statements of additional information for filing under federal and state
securities laws for such purposes,
(l) communications expenses with respect to investor services and all
expenses of shareholders' and Trustees' meetings and of preparing, printing
and mailing reports to shareholders in the amount necessary for distribution
to the shareholders,
(m) litigation and indemnification expenses and other extraordinary
expenses not incurred in the ordinary course of the Fund's business, and
(n) any expenses assumed by the Fund pursuant to a Plan of Distribution
adopted in conformity with Rule 12b-1 under the 1940 Act.
9
<PAGE>
With respect to any of the foregoing expenses that are general corporate
expenses, the Trust will allocate such expenses among all of its series,
including the Strategic Partners Focused Growth Fund, based upon each series'
relative net assets.
7. For the services provided and the expenses assumed pursuant to this
Agreement, the Fund will pay to the Manager as full compensation therefor a fee
at an annual rate of .90 of 1% of the Fund's average daily net assets up to $1
billion and .85 of 1% of the Fund's average daily net assets over $1 billion.
This fee will be computed daily and will be paid to the Manager monthly.
8. The Manager shall not be liable for any error of judgment or for
any loss suffered by the Fund in connection with the matters to which this
Agreement relates, except a loss resulting from a breach of fiduciary duty with
respect to the receipt of compensation for services (in which case any award of
damages shall be limited to the period and the amount set forth in Section
36(b)(3) of the 1940 Act) or loss resulting from willful misfeasance, bad faith
or gross negligence on its part in the performance of its duties or from
reckless disregard by it of its obligations and duties under this Agreement.
9. 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 Fund at any
time, without the payment of any penalty, by the Board of Trustees of the Trust
or
10
<PAGE>
by vote of a majority of the outstanding voting securities (as defined in the
1940 Act) of the Fund, or by the Manager 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).
10. Nothing in this Agreement shall limit or restrict the right of any
director, officer or employee of the Manager who may also be a Director, officer
or employee of the Trust 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 or restrict the right of
the Manager to engage in any other business or to render services of any kind to
any other corporation, firm, individual or association.
11. Except as otherwise provided herein or authorized by the Board of
Trustees of the Trust from time to time, the Manager shall for all purposes
herein be deemed to be an independent contractor and shall have no authority to
act for or represent the Fund in any way or otherwise be deemed an agent of the
Fund.
12. During the term of this Agreement, the Fund agrees to furnish the
Manager at its principal office all prospectuses, proxy statements, reports to
shareholders, sales literature, or other material prepared for distribution to
shareholders of the Fund or the public, which refer in any way to the Manager,
prior to use thereof and not to use such material if the Manager reasonably
objects in writing within five business days (or such other time as may be
mutually
11
<PAGE>
agreed) after receipt thereof. In the event of termination of this Agreement,
the Fund will continue to furnish to the Manager copies of any of the above
mentioned materials which refer in any way to the Manager. Sales literature may
be furnished to the Manager hereunder by first-class or overnight mail,
facsimile transmission equipment or hand delivery. The Fund shall furnish or
otherwise make available to the Manager such other information relating to the
business affairs of the Fund as the Manager at any time, or from time to time,
reasonably requests in order to discharge its obligations hereunder.
13. This Agreement may be amended by mutual consent, but the consent
of the Fund must be obtained in conformity with the requirements of the 1940
Act.
14. Any notice or other communication required to be given pursuant to
this Agreement shall be deemed duly given if delivered or mailed by registered
mail, postage prepaid, (1) to the Manager at Gateway Center Three, 100 Mulberry
Street, Newark, NJ 07102-4077, Attention: Secretary; or (2) to the Trust at
Gateway Center Three, 100 Mulberry Street, Newark, NJ 07102-4077, Attention:
President.
15. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
16. The Fund may use any name including the word "Prudential" only for
so long as this Agreement or any extension, renewal or amendment hereof remains
in effect, including any similar agreement with any organization which
12
<PAGE>
shall have succeeded to the Manager's business as Manager or any extension,
renewal or amendment thereof remain in effect. At such time as such an agreement
shall no longer be in effect, the Fund will (to the extent that it lawfully can)
cease to use such a name or any other name indicating that it is advised by,
managed by or otherwise connected with the Manager, or any organization which
shall have so succeeded to such businesses. In no event shall the Trust use any
name including the word "Prudential" if the Manager's function is transferred or
assigned to a company of which The Prudential Insurance Company of America does
not have control.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
STRATEGIC PARTNERS SERIES
By: __________________________
John R. Strangfeld
President
PRUDENTIAL INVESTMENTS FUND
MANAGEMENT LLC
By: __________________________
Robert F. Gunia
Executive Vice President
13
<PAGE>
Exhibit 99.(d)(2)
STRATEGIC PARTNERS SERIES
STRATEGIC PARTNERS FOCUSED GROWTH FUND
Sub-Management Agreement
------------------------
Agreement made as of this ____ day of _____________, 2000, between
Prudential Investments Fund Management LLC, a New York limited liability company
(PIFM or the Manager) and The Prudential Investment Corporation, a New Jersey
corporation (PIC or the Sub-Manager).
WHEREAS, PIFM has been selected to serve as Manager of Strategic Partners
Focused Growth Fund (the Fund), a series of Strategic Partners Series (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
an agreement dated ___________________, 2000 (the Management Agreement);
WHEREAS, pursuant to authority granted in the Management Agreement, PIFM
desires to retain PIC to provide investment advisory and administrative and
recordkeeping services to the Fund in connection with the management of a
portion of its assets and PIC 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 the Board of
Trustees of the Trust, the Sub-Manager shall manage the investment
operations of a portion of the Fund and the composition of a portion of the
Fund's portfolio, 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), and
subject to the following understandings:
(i) The Sub-Manager shall provide supervision of a portion of
the Fund's investments and of Jennison Associates LLC (Jennison or the
Subadviser) and oversee the selection by the Subadviser from time to
time of the investments and securities to be purchased, retained, sold
or loaned by the Fund, and the portion of the assets will be invested
or held uninvested as cash.
1
<PAGE>
(ii) In the performance of its duties and obligations under this
Agreement, the Sub-Manager shall act in conformity with the Agreement
and Declaration of Trust and By-Laws of the Trust and the Prospectus
of the Fund and with the instructions and directions of the Manager
and of the Board of Trustees of the Trust and will cooperate with
PIFM's compliance personnel responsible for ensuring compliance of the
Fund with the applicable requirements of the 1940 Act, the Internal
Revenue Code of 1986 and all other applicable federal and state laws
and regulations.
(iii) The Sub-Manager shall oversee and assist the Subadviser in
determining the securities and futures contracts to be purchased or
sold by a portion of the Fund and will oversee the Subadviser's
placement of orders 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 the Fund's Prospectus or as the Board of Trustees may
direct from time to time. In providing the Fund with investment
advice, it is recognized that the Sub-Manager and the Subadviser will
give primary consideration to securing the most favorable price and
efficient execution under the circumstances. Within the framework of
this policy, the Sub-Manager and the Subadviser may consider the
financial responsibility, research and investment information and
other services provided by brokers, dealers or futures commission
merchants who may effect or be a party to any such transaction or
other transactions to which the Sub-Manager's and the Subadviser's
other clients may be a party. It is understood that Prudential
Securities Incorporated may be used as principal broker for securities
transactions but that no formula has been adopted for allocation of
the Fund's investment transaction business. It is also understood that
it is desirable for the Fund that the Sub-Manager and the Subadviser
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 Fund than may result when allocating brokerage to
other brokers on the basis of seeking the most favorable price and
efficient execution. Therefore, the Sub-Manager and the Subadviser are
authorized to place orders for the purchase and sale of securities and
futures contracts for the Fund with such brokers or futures commission
merchants, subject to review by the Trust's Board of Trustees from
time to time with respect to the extent and continuation of this
2
<PAGE>
practice. It is understood that the services provided by such brokers
or futures commission merchants may be useful to the Sub-Manager and
the Subadviser in connection with the Sub-Manager's and the
Subadviser's services to other clients.
On occasions when the Sub-Manager and the Subadviser deem
the purchase or sale of a security or futures contract to be in the
best interest of the Fund as well as other clients of the Sub-Manager
or the Subadviser, the Sub-Manager and the Subadviser, to the extent
permitted by applicable laws and regulations, may, but shall be under
no obligation to, aggregate the securities or futures contracts to be
sold or purchased in order to obtain the most favorable price or lower
brokerage commissions and efficient execution. In such event,
allocation of the securities or futures contracts so purchased or
sold, as well as the expenses incurred in the transaction, will be
made by the Sub-Manager or the Subadviser in the manner the Sub-
Manager and the Subadviser consider to be the most equitable and
consistent with their fiduciary obligations to the Fund and to such
other clients.
(iv) The Sub-Manager shall maintain, either itself or with the
assistance of the Subadviser, all books and records with respect to
the Fund's 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 PIFM or the Board of Trustees such
periodic and special reports as PIFM or the Trustees may reasonably
request.
(v) The Sub-Manager, either itself or with the assistance of the
Subadviser, shall provide the Trust's Custodian on each business day
with information relating to all transactions concerning the Fund's
assets and shall provide the Manager with such information upon
request of the Manager.
(vi) The investment management and administrative services
provided by the Sub-Manager hereunder are not to be deemed exclusive,
and the Sub-Manager shall be free to render similar services to
others.
(b) The Sub-Manager shall authorize and permit any of its partners,
officers and employees who may be elected as Trustees or officers of the
Trust to serve in the capacities in which they are elected. Services to be
furnished by the Sub-Manager under this Agreement may be furnished
3
<PAGE>
through the medium of any of such Trustees, officers or employees.
(c) The Sub-Manager, either itself or with the assistance of the
Subadviser, shall keep the Fund's books and records required to be
maintained pursuant to paragraph 1(a) hereof and shall timely furnish to
the Manager all information relating to the Sub-Manager's services
hereunder needed by the Manager to keep the other books and records of the
Fund required by Rule 31a-1 under the 1940 Act. The Sub-Manager agrees that
all records which it maintains for the Fund are the property of the Fund
and the Sub-Manager will surrender promptly to the Fund any of such records
upon the Fund's request, provided however that the Sub-Manager may retain a
copy of such records. The Sub-Manager further agrees to preserve for the
periods prescribed by Rule 31a-2 of the Commission under the 1940 Act any
such records as are required to be maintained by it pursuant to paragraph
1(a) hereof.
2. The Manager shall continue to have responsibility for all services to
be provided to the Fund pursuant to the Management Agreement. The Manager
and Sub-Manager shall oversee and review the Subadviser's performance of
Subadviser's duties under the Subadvisory Agreement.
3. For the services provided in this Agreement, the Manager will pay to
the Sub-Manager as full compensation therefor a fee at an annual rate of
.60 of 1% of the average daily net assets of the portion of the Fund
advised and managed by the Sub-Manager on total Fund assets up to and
including $1 billion and .55 of 1% of the average daily net assets of the
portion of Fund advised and managed by the Sub-Manager on total Fund assets
in excess of $1 billion. This fee will be computed daily and paid to the
Sub-Manager monthly.
4. The Sub-Manager shall not be liable for any error of judgment or for any
loss suffered by the Fund, 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 Sub-Manager's part in the
performance of its duties or from its reckless disregard of its obligations
and duties under this Agreement.
5. This Agreement shall continue in effect for a period of more than two
years from the date hereof only so long as such continuance is specifically
approved at least annually in conformity with the requirements of the 1940
Act; provided, however, that this Agreement may be terminated by the Fund
at any time, without the payment of any penalty, by the Board of Trustees
of the Trust or by vote of a majority of the
4
<PAGE>
outstanding voting securities (as defined in the 1940 Act) of the Fund, or
by the Manager or the Sub-Manager 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 Sub-Manager'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 a
dissimilar nature, nor limit or restrict the Sub-Manager'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
Sub-Manager 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
Sub-Manager in any way, prior to use thereof and not to use material if the
Sub-Manager reasonably objects in writing five business days (or such other
time as may be mutually agreed) after receipt thereof. Sales literature may
be furnished to the Sub-Manager hereunder by first-class or overnight mail,
facsimile transmission equipment or hand delivery.
8. Any notice or other communication required to be given pursuant to
this Agreement shall be deemed duly given if delivered or mailed by
registered mail, postage prepaid, (1); to the Manager at Gateway Center
Three, 100 Mulberry Street, Newark, NJ 07102-4077, Attention: President, or
(2) to the Sub-Manager at Prudential Plaza, Newark, NJ 07102, Attention:
Secretary.
9. 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.
10. This Agreement shall be governed by the laws of the State of New York.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
PRUDENTIAL INVESTMENTS FUND MANAGEMENT LLC
BY: ____________________________
_______________
_______________
THE PRUDENTIAL INVESTMENT CORPORATION
BY: ____________________________
_______________
_______________
6
<PAGE>
Exhibit 99.(d)(3)
STRATEGIC PARTNERS SERIES
STRATEGIC PARTNERS FOCUSED GROWTH FUND
Subadvisory Agreement
---------------------
Agreement made as of this ____ day of _____________, 2000, between The
Prudential Investment Corporation, a New Jersey corporation (PIC or the Sub-
Manager), and Jennison Associates LLC, a Delaware limited liability company (the
Subadviser).
WHEREAS, the Sub-Manager has entered into a Sub-Management Agreement, dated
________________, 2000 (the Sub-Management Agreement), with Prudential
Investments Fund Management LLC (PIFM or the Manager);
WHEREAS, PIFM has been selected to serve as Manager of Strategic Partners
Focused Growth Fund (the Fund), a series of Strategic Partners Series (the
Trust), a Delaware business trust and an open-end, management investment company
registered under the Investment Company Act of 1940 (the 1940 Act);
WHEREAS, PIFM has selected PIC to serve as Sub-Manager with respect to a
portion of the Fund and to provide certain services to PIFM in the management of
the Fund, as described in the Sub-Management Agreement; and
WHEREAS, pursuant to authority granted in the Sub-Management Agreement, PIC
desires to retain the Subadviser to provide investment advisory services to the
Fund in connection with the management of a portion of its assets and the
Subadviser is willing to render such investment advisory services.
NOW, THEREFORE, the Parties agree as follows:
1. (a) Subject to the supervision of the Manager, the Sub-Manager and the
Board of Trustees of the Trust, the Subadviser shall manage the investment
operations of a portion of the Fund and the composition of a portion of the
Fund's portfolio, 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), and
subject to the following understandings:
1
<PAGE>
(i) The Subadviser shall provide supervision of a 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 will be invested or held
uninvested as cash.
(ii) In the performance of its duties and obligations under this
Agreement, the Subadviser shall act in conformity with the Agreement
and Declaration of Trust and By-Laws of the Trust and the Prospectus
of the Fund and with the instructions and directions of the Manager,
the Sub-Manager and of the Board of Trustees of the Trust and will
cooperate with PIFM's compliance personnel responsible for ensuring
compliance of the Fund with the applicable requirements of the 1940
Act, the Internal Revenue Code of 1986 and all other applicable
federal and state laws and regulations.
(iii) The Subadviser shall determine the securities and futures
contracts to be purchased or sold by a portion of the Fund and will
place orders 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 the
Fund's Prospectus or as the Board of Trustees may direct from time to
time. In providing the Fund with investment advice, it is recognized
that the Subadviser will give primary consideration to securing the
most favorable price and efficient execution under the circumstances.
Within the framework of this policy, the Subadviser may consider the
financial responsibility, research and investment information and
other services provided by brokers, dealers or futures commission
merchants who may effect or be a party to any such transaction or
other transactions to which the Subadviser's other clients may be a
party. It is understood that Prudential Securities Incorporated may be
used as principal broker for securities transactions but that no
formula has been adopted for allocation of the Fund's investment
transaction business. It is also understood that it is desirable for
the Fund that the Subadviser 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 Fund than may result when
allocating brokerage to other brokers on the basis of seeking the most
favorable price and efficient execution. Therefore, the Subadviser is
authorized to place orders for the purchase and sale of securities and
futures contracts
2
<PAGE>
for the Fund with such brokers or futures commission merchants,
subject to review by the Trust's Board of 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 Subadviser in connection
with the Subadviser's services to other clients.
On occasions when the Subadviser deems the purchase or sale
of a security or futures contract to be in the best interest of the
Fund as well as other clients of the Subadviser, the Subadviser, to
the extent permitted by applicable laws and regulations, may, but
shall be under no obligation to, aggregate the securities or futures
contracts to be sold or purchased in order to obtain the most
favorable price or lower brokerage commissions and efficient
execution. In such event, allocation of the securities or futures
contracts so purchased or sold, as well as the expenses incurred in
the transaction, will be made by the Subadviser in the manner the
Subadviser considers to be the most equitable and consistent with its
fiduciary obligations to the Fund and to such other clients.
(iv) The Subadviser shall maintain all books and records with
respect to the Fund's 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 Board of Trustees such
periodic and special reports as the Trustees may reasonably request.
(v) The Subadviser shall provide the Trust's Custodian on each
business day with information relating to all transactions concerning
the Fund's assets and shall provide the Manager and the Sub-Manager
with such information upon request of the Manager and the Sub-Manager,
respectively.
(vi) The investment management services provided by the
Subadviser hereunder are not to be deemed exclusive, and the
Subadviser shall be free to render similar services to others.
(b) The Subadviser shall authorize and permit any of its partners,
officers and employees who may be elected as Trustees or officers of the
Trust to serve in the capacities in which they are elected. Services to be
furnished by the Subadviser under this Agreement may be furnished through
the medium of any of such Trustees, officers or employees.
3
<PAGE>
(c) The Subadviser shall keep the Fund's books and records required to be
maintained by the Subadviser pursuant to paragraph 1(a) hereof and shall
timely furnish to the Manager or the Sub-Manager all information relating
to the Subadviser's services hereunder needed by the Manager or the Sub-
Manager to keep the other books and records of the Fund required by Rule
31a-1 under the 1940 Act. The Subadviser agrees that all records which it
maintains for the Fund are the property of the Fund and the Subadviser will
surrender promptly to the Fund any of such records upon the Fund's request,
provided however that the Subadviser may retain a copy of such records. The
Subadviser further agrees to preserve for the periods prescribed by Rule
31a-2 of the Commission under the 1940 Act any such records as are required
to be maintained by it pursuant to paragraph 1(a) hereof.
2. The Manager shall continue to have responsibility for all services to
be provided to the Fund pursuant to the Management Agreement. The Sub-
Manager shall continue to have responsibility for all services to be
provided to the Manager pursuant to the Sub-Management Agreement. The
Manager and Sub-Manager shall oversee and review the Subadviser's
performance of its duties under this Agreement.
3. For the services provided in this Agreement, the Sub-Manager will pay
to the Subadviser as full compensation therefor a fee at an annual rate of
.30 of 1% of the average daily net assets of the portion of the Fund
advised by the Subadviser on total Fund assets up to and including $1
billion and .25 of 1% of the average daily net assets of the portion of
Fund advised by the Subadviser on total Fund assets in excess of $1
billion. This fee will be computed daily and paid to the Subadviser
monthly.
4. The Subadviser shall not be liable for any error of judgment or for
any loss suffered by the Fund, the Manager or the Sub-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 Subadviser's
part in the performance of its duties or from its reckless disregard of its
obligations and duties under this Agreement.
5. This Agreement shall continue in effect for a period of more than two
years from the date hereof only so long as such continuance is specifically
approved at least annually in conformity with the requirements of the 1940
Act; provided, however, that this Agreement may be terminated by the Fund
at any time, without the payment of any penalty, by the Board of 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
4
<PAGE>
by the Manager, the Sub-Manager or the Subadviser 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 or the Sub-Management
Agreement.
6. Nothing in this Agreement shall limit or restrict the right of any of
the Subadviser'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 a
dissimilar nature, nor limit or restrict the Subadviser'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 Sub-Manager agrees to furnish
the Subadviser 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
Subadviser in any way, prior to use thereof and not to use material if the
Subadviser reasonably objects in writing five business days (or such other
time as may be mutually agreed) after receipt thereof. Sales literature may
be furnished to the Subadviser hereunder by first-class or overnight mail,
facsimile transmission equipment or hand delivery.
8. Any notice or other communication required to be given pursuant to
this Agreement shall be deemed duly given if delivered or mailed by
registered mail, postage prepaid, (1) to the Sub-Manager at Prudential
Plaza, Newark, NJ 07102, Attention: Secretary; or (2) to the Subadviser at
466 Lexington Avenue, New York, NY 10017, Attention: Secretary.
9. 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.
10. This Agreement shall be governed by the laws of the State of New York.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
THE PRUDENTIAL INVESTMENT CORPORATION
BY: ____________________________
_______________
_______________
JENNISON ASSOCIATES LLC
BY: ___________________________
Karen E. Kohler
Senior Vice President
6
<PAGE>
Exhibit 99.(d)(4)
STRATEGIC PARTNERS SERIES
STRATEGIC PARTNERS FOCUSED GROWTH FUND
Subadvisory Agreement
---------------------
Agreement made as of this ____ day of _____________, 2000, between
Prudential Investments Fund Management LLC, a New York limited liability company
(PIFM or the Manager), and Alliance Capital Management L.P., a
__________________________ (the Subadviser).
WHEREAS, the Manager has entered into a Management Agreement, dated
________________, 2000 (the Management Agreement), with Strategic Partners
Series (the Trust), a Delaware business trust and an open-end, management
investment company registered under the Investment Company Act of 1940 (the 1940
Act), on behalf of its series the Strategic Partners Focused Growth Fund (the
Fund), pursuant to which PIFM will act as Manager of the Fund.
WHEREAS, PIFM desires to retain the Subadviser to provide investment
advisory services to the Fund in connection with the management of a portion of
its assets and the Subadviser 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 Board of
Trustees of the Trust, the Subadviser shall manage the investment
operations of a portion of the Fund and the composition of a portion of the
Fund's portfolio, 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), and
subject to the following understandings:
(i) The Subadviser shall provide supervision of a 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 will be invested or held
uninvested as cash.
(ii) In the performance of its duties and obligations under this
Agreement, the Subadviser shall act in conformity with the
1
<PAGE>
Agreement and Declaration of Trust and By-Laws of the Trust and the
Prospectus of the Fund and with the instructions and directions of the
Manager and of the Board of Trustees of the Trust and will conform to
and comply with the applicable requirements of the 1940 Act, the
Internal Revenue Code of 1986 and all other applicable federal and
state laws and regulations.
(iii) The Subadviser shall determine the securities and futures
contracts to be purchased or sold by a portion of the Fund and will
place orders 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 the
Fund's Prospectus or as the Board of Trustees may direct from time to
time. In providing the Fund with investment advice, it is recognized
that the Subadviser will give primary consideration to securing the
most favorable price and efficient execution under the circumstances.
Within the framework of this policy, the Subadviser may consider the
financial responsibility, research and investment information and
other services provided by brokers, dealers or futures commission
merchants who may effect or be a party to any such transaction or
other transactions to which the Subadviser's other clients may be a
party. It is understood that Prudential Securities Incorporated may be
used as principal broker for securities transactions but that no
formula has been adopted for allocation of the Fund's investment
transaction business. It is also understood that it is desirable for
the Fund that the Subadviser 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 Fund than may result when
allocating brokerage to other brokers on the basis of seeking the most
favorable price and efficient execution. Therefore, the Subadviser is
authorized to place orders for the purchase and sale of securities and
futures contracts for the Fund with such brokers or futures commission
merchants, subject to review by the Trust's Board of 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 Subadviser in
connection with the Subadviser's services to other clients.
On occasions when the Subadviser deems the purchase or sale
of a security or futures contract to be in the best interest of the
2
<PAGE>
Fund as well as other clients of the Subadviser, the Subadviser, to
the extent permitted by applicable laws and regulations, may, but
shall be under no obligation to, aggregate the securities or futures
contracts to be sold or purchased in order to obtain the most
favorable price or lower brokerage commissions and efficient
execution. In such event, allocation of the securities or futures
contracts so purchased or sold, as well as the expenses incurred in
the transaction, will be made by the Subadviser in the manner the
Subadviser considers to be the most equitable and consistent with its
fiduciary obligations to the Fund and to such other clients.
(iv) The Subadviser shall maintain all books and records with
respect to the Fund's 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 Board of Trustees such
periodic and special reports as the Trustees may reasonably request.
(v) The Subadviser shall provide the Trust's Custodian on each
business day with information relating to all transactions concerning
the Fund's assets and shall provide the Manager with such information
upon request of the Manager.
(vi) The investment management services provided by the
Subadviser hereunder are not to be deemed exclusive, and the
Subadviser shall be free to render similar services to others.
(b) The Subadviser shall keep the Fund's books and records required to be
maintained by the Subadviser pursuant to paragraph 1(a) hereof and shall
timely furnish to the Manager all information relating to the Subadviser's
services hereunder needed by the Manager to keep the other books and
records of the Fund required by Rule 31a-1 under the 1940 Act. The
Subadviser agrees that all records which it maintains for the Fund are the
property of the Fund and the Subadviser will surrender promptly to the Fund
any of such records upon the Fund's request, provided however that the
Subadviser may retain a copy of such records. The Subadviser further agrees
to preserve for the periods prescribed by Rule 31a-2 of the Commission
under the 1940 Act any such records as are required to be maintained by it
pursuant to paragraph 1(a) hereof.
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 Subadviser's performance of its duties under this
3
<PAGE>
Agreement.
3. For the services provided in this Agreement, the Manager will pay to
the Subadviser as full compensation therefor a fee at an annual rate of .60
of 1% of the average daily net assets of the portion of the Fund advised by
the Subadviser on total Fund assets up to and including $1 billion and .55
of 1% of the average daily net assets of the portion of the Fund advised by
the Subadviser on total Fund assets in excess of $1 billion. This fee will
be computed daily and paid to the Subadviser monthly.
4. The Subadviser shall not be liable for any error of judgment or for
any loss suffered by the Fund 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 Subadviser's part in the
performance of its duties or from its reckless disregard of its obligations
and duties under this Agreement.
5. This Agreement shall continue in effect for a period of more than two
years from the date hereof only so long as such continuance is specifically
approved at least annually in conformity with the requirements of the 1940
Act; provided, however, that this Agreement may be terminated by the Fund
at any time, without the payment of any penalty, by the Board of 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 the
Subadviser 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 Subadviser's partners, 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 a
dissimilar nature, nor limit or restrict the Subadviser'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
Subadviser 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
Subadviser in any way, prior to use thereof and not to use material until
4
<PAGE>
the Subadviser provides affirmative approval of such use. Sales literature
may be furnished to the Subadviser hereunder by first-class or overnight
mail, facsimile transmission equipment or hand delivery.
8. Any notice or other communication required to be given pursuant to
this Agreement shall be deemed duly given if delivered or mailed by
registered mail, postage prepaid, (1) to the Manager at Gateway Center
Three, 100 Mulberry Street, Newark, NJ 07102-4077, Attention: Secretary; or
(2) to the Subadviser at 1345 Avenue of the Americas, New York, NY 10105,
Attention: Secretary.
9. 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.
10. This Agreement shall be governed by the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
PRUDENTIAL INVESTMENTS FUND MANAGEMENT LLC
BY: ____________________________
Robert F. Gunia
Executive Vice President
ALLIANCE CAPITAL MANAGEMENT L.P.
By: Alliance Capital Management Corporation,
general partner
BY: ___________________________
Mark R. Manley
Assistant Secretary
5
<PAGE>
Exhibit 99.(e)(1)
STRATEGIC PARTNERS SERIES
Distribution Agreement
----------------------
Agreement made as of _________________, 2000, between Strategic
Partners Series (the Fund), and Prudential Investment Management Services LLC, a
Delaware limited liability company (the Distributor).
WITNESSETH
WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended (the Investment Company Act), as an open-end, management
investment company and it is in the interest of the Fund to offer its shares for
sale continuously;
WHEREAS, the shares of the Fund are currently divided into classes and
series (all such shares being referred to herein as Shares) and the Fund
currently is authorized to offer Class A, Class B, Class C and Class Z Shares;
WHEREAS, the Distributor is a broker-dealer registered under the
Securities Exchange Act of 1934, as amended, and is engaged in the business of
selling shares of registered investment companies either directly or through
other broker-dealers;
WHEREAS, the Fund and the Distributor wish to enter into an agreement
with each other, with respect to the continuous offering of the Fund's Shares
from and after the date hereof in order to promote the growth of the Fund and
facilitate the distribution of its Shares; and
WHEREAS, the Fund has adopted plans of distribution pursuant to Rule
12b-1 under the Investment Company Act with respect to certain of its classes
and/or series of Shares (the Plans) authorizing payments by the Fund to the
Distributor with respect to the distribution of such classes and/or series of
Shares and the maintenance of related shareholder accounts.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor
------------------------------
The Fund hereby appoints the Distributor as the principal underwriter
and distributor of the Shares of the Fund to sell Shares to the public on behalf
of the Fund, and the Distributor hereby accepts such appointment and agrees to
act hereunder. The Fund hereby agrees during the term of this Agreement to sell
Shares of the Fund through the Distributor on the terms and conditions set forth
<PAGE>
below.
Section 2. Exclusive Nature of Duties
--------------------------
The Distributor shall be the exclusive representative of the Fund to
act as principal underwriter and distributor of the Fund's Shares, except that:
2.1 The exclusive rights granted to the Distributor to sell Shares of
the Fund shall not apply to Shares of the Fund issued in connection with the
merger or consolidation of any other investment company or personal holding
company with the Fund or the acquisition by purchase or otherwise of all (or
substantially all) the assets or the outstanding shares of any such company by
the Fund.
2.2 Such exclusive rights shall not apply to Shares issued by the
Fund pursuant to reinvestment of dividends or capital gains distributions or
through the exercise of any conversion feature or exchange privilege.
2.3 Such exclusive rights shall not apply to Shares issued by the
Fund pursuant to the reinstatement privilege afforded redeeming shareholders.
2.4 Such exclusive rights shall not apply to purchases made through
the Fund's transfer and dividend disbursing agent in the manner set forth in the
currently effective Prospectus. The term "Prospectus" shall mean the Prospectus
and Statement of Additional Information of the applicable series that is
included as part of the Fund's Registration Statement, as such Prospectus and
Statement of Additional Information may be amended or supplemented from time to
time, and the term "Registration Statement" shall mean the Registration
Statement filed by the Fund with the Securities and Exchange Commission and
effective under the Securities Act of 1933, as amended (Securities Act), and the
Investment Company Act, as such Registration Statement is amended from time to
time.
Section 3. Purchase of Shares from the Fund
--------------------------------
3.1 The Distributor shall have the right to buy from the Fund on
behalf of investors the Shares needed, but not more than the Shares needed
(except for clerical errors in transmission) to fill unconditional orders for
Shares placed with the Distributor by investors or registered and qualified
securities dealers and other financial institutions (selected dealers).
3.2 The Shares shall be sold by the Distributor on behalf of the Fund
and delivered by the Distributor or selected dealers, as described in Section
6.4 hereof, to investors at the offering price as set forth in the Prospectus.
3.3 The Fund shall have the right to suspend the sale of any or all
<PAGE>
classes and/or series of its Shares at times when redemption is suspended
pursuant to the conditions in Section 4.3 hereof or at such other times as may
be determined by the Board. The Fund shall also have the right to suspend the
sale of any or all classes and/or series of its Shares if a banking moratorium
shall have been declared by federal or New Jersey authorities.
3.4 The Fund, or any agent of the Fund designated in writing by the
Fund, shall be promptly advised of all purchase orders for Shares received by
the Distributor. Any order may be rejected by the Fund; provided, however, that
the Fund will not arbitrarily or without reasonable cause refuse to accept or
confirm orders for the purchase of Shares. The Fund (or its agent) will confirm
orders upon their receipt, will make appropriate book entries and upon receipt
by the Fund (or its agent) of payment therefor, will deliver deposit receipts
for such Shares pursuant to the instructions of the Distributor. Payment shall
be made to the Fund in New York Clearing House funds or federal funds. The
Distributor agrees to cause such payment and such instructions to be delivered
promptly to the Fund (or its agent).
Section 4. Repurchase or Redemption of Shares by the Fund
----------------------------------------------
4.1 Any of the outstanding Shares may be tendered for redemption at
any time, and the Fund agrees to repurchase or redeem the Shares so tendered in
accordance with its Declaration of Trust as amended from time to time, and in
accordance with the applicable provisions of the Prospectus. The price to be
paid to redeem or repurchase the Shares shall be equal to the net asset value
determined as set forth in the Prospectus. All payments by the Fund hereunder
shall be made in the manner set forth in Section 4.2 below.
4.2 The Fund shall pay the total amount of the redemption price as
defined in the above paragraph pursuant to the instructions of the Distributor
on or before the seventh day subsequent to its having received the notice of
redemption in proper form. The proceeds of any redemption of Shares shall be
paid by the Fund as follows: (i) in the case of Shares subject to a contingent
deferred sales charge, any applicable contingent deferred sales charge shall be
paid to the Distributor, and the balance shall be paid to or for the account of
the redeeming shareholder, in each case in accordance with applicable provisions
of the Prospectus; and (ii) in the case of all other Shares, proceeds shall be
paid to or for the account of the redeeming shareholder, in each case in
accordance with applicable provisions of the Prospectus.
4.3 Redemption of any class and/or series of Shares or payment may be
suspended at times when the New York Stock Exchange is closed for other than
customary weekends and holidays, when trading on said Exchange is
3
<PAGE>
restricted, when an emergency exists as a result of which disposal by the Fund
of securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Fund fairly to determine the value of its net assets, or
during any other period when the Securities and Exchange Commission, by order,
so permits.
Section 5. Duties of the Fund
------------------
5.1 Subject to the possible suspension of the sale of Shares as
provided herein, the Fund agrees to sell its Shares so long as it has Shares of
the respective class and/or series available.
5.2 The Fund shall furnish the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of Shares, and this shall
include one certified copy, upon request by the Distributor, of all financial
statements prepared for the Fund by independent public accountants. The Fund
shall make available to the Distributor such number of copies of its Prospectus
and annual and interim reports as the Distributor shall reasonably request.
5.3 The Fund shall take, from time to time, but subject to the
necessary approval of the Board, all necessary action to register Shares under
the Securities Act, to the end that there will be available for sale such number
of Shares as the Distributor reasonably may expect to sell. The Fund agrees to
file from time to time such amendments, reports and other documents as may be
necessary in order that there will be no untrue statement of a material fact in
the Registration Statement, or necessary in order that there will be no omission
to state a material fact in the Registration Statement which omission would make
the statements therein misleading.
5.4 The Fund shall use its best efforts to notify such states as the
Distributor and the Fund may approve of its intention to sell any appropriate
number of its Shares; provided that the Fund shall not be required to amend its
Declaration of Trust or By-Laws to comply with the laws of any state, to
maintain an office in any state, to change the terms of the offering of its
Shares in any state from the terms set forth in its Registration Statement, to
qualify as a foreign corporation in any state or to consent to service of
process in any state other than with respect to claims arising out of the
offering of its Shares. Any such notification may be withheld, terminated or
withdrawn by the Fund at any time in its discretion. As provided in Section 9
hereof, the expense of notification and maintenance of notification shall be
borne by the Fund. The Distributor shall furnish such information and other
material relating to its affairs and activities as may be required by the Fund
in connection with such notifications.
4
<PAGE>
Section 6. Duties of the Distributor
-------------------------
6.1 The Distributor shall devote reasonable time and effort to effect
sales of Shares, but shall not be obligated to sell any specific number of
Shares. Sales of the Shares shall be on the terms described in the Prospectus.
The Distributor may enter into like arrangements with other investment
companies. The Distributor shall compensate the selected dealers as set forth in
the Prospectus.
6.2 In selling the Shares, the Distributor shall use its best efforts
in all respects duly to conform with the requirements of all federal and state
laws relating to the sale of such securities. Neither the Distributor nor any
selected dealer nor any other person is authorized by the Fund to give any
information or to make any representations, other than those contained in the
Registration Statement or Prospectus and any sales literature approved by
appropriate officers of the Fund.
6.3 The Distributor shall adopt and follow procedures for the
confirmation of sales to investors and selected dealers, the collection of
amounts payable by investors and selected dealers on such sales and the
cancellation of unsettled transactions, as may be necessary to comply with the
requirements of Securities Exchange Act Rule 10b-10 and the rules of the
National Association of Securities Dealers, Inc. (NASD).
6.4 The Distributor shall have the right to enter into selected
dealer agreements with registered and qualified securities dealers and other
financial institutions of its choice for the sale of Shares, provided that the
Fund shall approve the forms of such agreements. Within the United States, the
Distributor shall offer and sell Shares only to such selected dealers as are
members in good standing of the NASD or are institutions exempt from
registration under applicable federal securities laws. Shares sold to selected
dealers shall be for resale by such dealers only at the offering price
determined as set forth in the Prospectus.
Section 7. Payments to the Distributor
---------------------------
7.1 With respect to classes and/or series of Shares which impose a
front-end sales charge, the Distributor shall receive and may retain any portion
of any front-end sales charge which is imposed on such sales and not reallocated
to selected dealers as set forth in the Prospectus, subject to the limitations
of Rule 2830 of the Conduct Rules of the NASD. Payment of these amounts to the
Distributor is not contingent upon the adoption or continuation of any
applicable Plans.
5
<PAGE>
7.2 With respect to classes and/or series of Shares which impose a
contingent deferred sales charge, the Distributor shall receive and may retain
any contingent deferred sales charge which is imposed on such sales as set forth
in the Prospectus, subject to the limitations of Rule 2830 of the Conduct Rules
of the NASD. Payment of these amounts to the Distributor is not contingent upon
the adoption or continuation of any Plan.
Section 8. Payment of the Distributor under the Plans
------------------------------------------
8.1 The Fund shall pay to the Distributor as compensation for
services under any Plans adopted by the Fund and this Agreement a distribution
and service fee with respect to the Fund's classes and/or series of Shares as
described in each of the Fund's respective Plans and this Agreement.
8.2 So long as a Plan or any amendment thereto is in effect, the
Distributor shall inform the Board of the commissions and account servicing fees
with respect to the relevant class and/or series of Shares to be paid by the
Distributor to account executives of the Distributor and to broker-dealers,
financial institutions and investment advisers which have dealer agreements with
the Distributor. So long as a Plan (or any amendment thereto) is in effect, at
the request of the Board or any agent or representative of the Fund, the
Distributor shall provide such additional information as may reasonably be
requested concerning the activities of the Distributor hereunder and the costs
incurred in performing such activities with respect to the relevant class and/or
series of Shares.
Section 9. Allocation of Expenses
----------------------
The Fund shall bear all costs and expenses of the continuous offering
of its Shares (except for those costs and expenses borne by the Distributor
pursuant to a Plan and subject to the requirements of Rule 12b-1 under the
Investment Company Act), including fees and disbursements of its counsel and
auditors, in connection with the preparation and filing of any required
Registration Statements and/or Prospectuses under the Investment Company Act or
the Securities Act, and all amendments and supplements thereto, and preparing
and mailing annual and periodic reports and proxy materials to shareholders
(including but not limited to the expense of setting in type any such
Registration Statements, Prospectuses, annual or periodic reports or proxy
materials). The Fund shall also bear the cost or expense of making notice
filings for the Shares for sale, and, if necessary or advisable in connection
therewith, of qualifying the Fund as a broker or dealer, in such states of the
United States or other jurisdictions as shall be selected by the Fund and the
Distributor pursuant to Section 5.4 hereof and the
6
<PAGE>
cost and expense payable to each such state for continuing notification therein
until the Fund decides to discontinue such notification pursuant to Section 5.4
hereof. As set forth in Section 8 above, the Fund shall also bear the expenses
it assumes pursuant to any Plan, so long as such Plan is in effect.
Section 10. Indemnification
---------------
10.1 The Fund agrees to indemnify, defend and hold the Distributor,
its officers and members and any person who controls the Distributor within the
meaning of Section 15 of the Securities Act, free and harmless from and against
any and all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any
reasonable counsel fees incurred in connection therewith) which the Distributor,
its officers, members or any such controlling person may incur under the
Securities Act, or under common law or otherwise, arising out of or based upon
any untrue statement of a material fact contained in the Registration Statement
or Prospectus or arising out of or based upon any alleged omission to state a
material fact required to be stated in either thereof or necessary to make the
statements in either thereof not misleading, except insofar as such claims,
demands, liabilities or expenses arise out of or are based upon any such untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with information furnished by the Distributor to the Fund
for use in the Registration Statement or Prospectus; provided, however, that
this indemnity agreement shall not inure to the benefit of any such officer,
member or controlling person unless a court of competent jurisdiction shall
determine in a final decision on the merits, that the person to be indemnified
was not liable by reason of willful misfeasance, bad faith or gross negligence
in the performance of its duties, or by reason of its reckless disregard of its
obligations under this Agreement (disabling conduct), or, in the absence of such
a decision, a reasonable determination, based upon a review of the facts, that
the indemnified person was not liable by reason of disabling conduct, by (a) a
vote of a majority of a quorum of Trustees or Trustees who are neither
"interested persons" of the Fund as defined in Section 2(a)(19) of the
Investment Company Act nor parties to the proceeding, or (b) an independent
legal counsel in a written opinion. The Fund's agreement to indemnify the
Distributor, its officers and members and any such controlling person as
aforesaid is expressly conditioned upon the Fund's being promptly notified of
any action brought against the Distributor, its officers or members, or any such
controlling person, such notification to be given by letter or telegram
addressed to the Fund at its principal business office. The Fund agrees promptly
to notify the Distributor of the commencement of any litigation or proceedings
against the Fund or any of its officers or directors in connection with the
issue and sale of any Shares.
10.2 The Distributor agrees to indemnify, defend and hold the Fund,
7
<PAGE>
its officers and Trustees and any person who controls the Fund, if any, within
the meaning of Section 15 of the Securities Act, free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending against such claims, demands or liabilities
and any reasonable counsel fees incurred in connection therewith) which the
Fund, its officers and Trustees or any such controlling person may incur under
the Securities Act or under common law or otherwise, but only to the extent that
such liability or expense incurred by the Fund, its Trustees or officers or such
controlling person resulting from such claims or demands shall arise out of or
be based upon any alleged untrue statement of a material fact contained in
information furnished by the Distributor to the Fund for use in the Registration
Statement or Prospectus or shall arise out of or be based upon any alleged
omission to state a material fact in connection with such information required
to be stated in the Registration Statement or Prospectus or necessary to make
such information not misleading. The Distributor's agreement to indemnify the
Fund, its officers and Trustees and any such controlling person as aforesaid, is
expressly conditioned upon the Distributor's being promptly notified of any
action brought against the Fund, its officers and directors or any such
controlling person, such notification being given to the Distributor at its
principal business office.
Section 11. Duration and Termination of this Agreement
------------------------------------------
11.1 This Agreement shall become effective as of the date first above
written and shall remain in force only so long as such continuance is
specifically approved at least annually by (a) the Board of the Fund, or by the
vote of a majority of the outstanding voting securities of the applicable class
and/or series of the Fund, and (b) by the vote of a majority of those Trustees
who are not parties to this Agreement or interested persons of any such parties
and who have no direct or indirect financial interest in this Agreement or in
the operation of any of the Fund's Plans or in any agreement related thereto
(Independent Trustees), cast in person at a meeting called for the purpose of
voting upon such approval.
11.2 This Agreement may be terminated at any time, without the
payment of any penalty, by a majority of the Independent Trustees or by vote of
a majority of the outstanding voting securities of the applicable class and/or
series of the Fund, or by the Distributor, on sixty (60) days' written notice to
the other party. This Agreement shall automatically terminate in the event of
its assignment.
11.3 The terms "affiliated person," "assignment," "interested person"
and "vote of a majority of the outstanding voting securities", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act.
8
<PAGE>
Section 12. Amendments to this Agreement
----------------------------
This Agreement may be amended by the parties only if such amendment is
specifically approved by (a) the Board of the Fund, or by the vote of a majority
of the outstanding voting securities of the applicable class and/or series of
the Fund, and (b) by the vote of a majority of the Independent Trustees cast in
person at a meeting called for the purpose of voting on such amendment.
Section 13. Separate Agreement as to Classes and/or Series
----------------------------------------------
The amendment or termination of this Agreement with respect to any
class and/or series shall not result in the amendment or termination of this
Agreement with respect to any other class and/or series unless explicitly so
provided.
Section 14. Governing Law
-------------
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of New Jersey as at the time in effect and
the applicable provisions of the Investment Company Act. To the extent that the
applicable law of the State of New Jersey, or any of the provisions herein,
conflict with the applicable provisions of the Investment Company Act, the
latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year above written.
Prudential Investment Management Services LLC
By: ____________________
Robert F. Gunia
President
Strategic Partners Series
By: ____________________
John R. Strangfeld
President
9
<PAGE>
Exhibit 99.(e)(2)
DEALER AGREEMENT
PRUDENTIAL INVESTMENT MANAGEMENT SERVICES LLC
Prudential Investment Management Services LLC ("Distributor") and
_________________ ("Dealer") have agreed that Dealer will participate in the
distribution of shares ("Shares") of all the funds and series thereof (as they
may exist from time to time) comprising the Prudential Mutual Fund Family (each
a "Fund" and collectively the "Funds") and any classes thereof for which
Distributor now or in the future serves as principal underwriter and
distributor, subject to the terms of this Dealer Agreement ("Agreement"). Any
such additional Funds will be included in this Agreement upon Distributor's
written notification to Dealer.
1. Licensing
---------
a. Dealer represents and warrants that it is: (i) a broker-dealer
registered with the Securities and Exchange Commission ("SEC"); (ii) a member in
good standing of the National Association of Securities Dealers, Inc. ("NASD");
and (iii) licensed by the appropriate regulatory agency of each state or other
jurisdiction in which Dealer will offer and sell Shares of the Funds, to the
extent necessary to perform the duties and activities contemplated by this
Agreement.
b. Dealer represents and warrants that each of its partners,
directors, officers, employees, and agents who will be utilized by Dealer with
respect to its duties and activities under this Agreement is either
appropriately licensed or exempt from such licensing requirements by the
appropriate regulatory agency of each state or other jurisdiction in which
Dealer will offer and sell Shares of the Funds.
c. Dealer agrees that: (i) termination or suspension of its
registration with the SEC; (ii) termination or suspension of its membership with
the NASD; or (iii) termination or suspension of its license to do business by
any state or other jurisdiction or federal regulatory agency shall immediately
cause the termination of this Agreement. Dealer further agrees to immediately
notify Distributor in writing of any such action or event.
d. Dealer agrees that this Agreement is in all respects subject to
the Conduct Rules of the NASD and such Conduct Rules shall control any provision
to the contrary in this Agreement.
e. Dealer agrees to be bound by and to comply with all applicable
state and federal laws and all rules and regulations promulgated thereunder
generally affecting the sale or distribution of mutual fund shares.
2. Orders
------
a. Dealer agrees to offer and sell Shares of the Funds (including
those of each of its classes) only at the regular public offering price
applicable to such Shares and in effect at the time of each transaction. The
procedures relating to all orders and the handling of each order (including the
manner of computing the net asset value of Shares and the effective time of
orders
A-1
<PAGE>
received from Dealer) are subject to: (i) the terms of the then current
prospectus and statement of additional information (including any supplements,
stickers or amendments thereto) relating to each Fund, as filed with the SEC
("Prospectus"); (ii) the new account application for each Fund, as supplemented
or amended from time to time; and (iii) Distributor's written instructions and
multiple class pricing procedures and guidelines, as provided to Dealer from
time to time. To the extent that the Prospectus contains provisions that are
inconsistent with this Agreement or any other document, the terms of the
Prospectus shall be controlling.
b. Distributor reserves the right at any time, and without notice to
Dealer, to suspend the sale of Shares or to withdraw or limit the offering of
Shares. Distributor reserves the unqualified right not to accept any specific
order for the purchase or sale of Shares.
c. In all offers and sales of the Shares to the public, Dealer is not
authorized to act as broker or agent for, or employee of, Distributor, any Fund
or any other dealer, and Dealer shall not in any manner represent to any third
party that Dealer has such authority or is acting in such capacity. Rather,
Dealer agrees that it is acting as principal for Dealer's own account or as
agent on behalf of Dealer's customers in all transactions in Shares, except as
provided in Section 3.i. hereof. Dealer acknowledges that it is solely
responsible for all suitability determinations with respect to sales of Shares
of the Funds to Dealer's customers and that Distributor has no responsibility
for the manner of Dealer's performance of, or for Dealer's acts or omissions in
connection with, the duties and activities Dealer provides under this Agreement.
d. All orders are subject to acceptance by Distributor in its sole
discretion and become effective only upon confirmation by Distributor.
e. Distributor agrees that it will accept from Dealer orders placed
through a remote terminal or otherwise electronically transmitted via the
National Securities Clearing Corporation ("NSCC") Fund/Serv Networking program,
provided, however, that appropriate documentation thereof and agreements
relating thereto are executed by both parties to this Agreement, including in
particular the standard NSCC Networking Agreement and any other related
agreements between Distributor and Dealer deemed appropriate by Distributor, and
that all accounts opened or maintained pursuant to that program will be governed
by applicable NSCC rules and procedures. Both parties further agree that, if
the NSCC Fund/Serv Networking program is used to place orders, the standard NSCC
Networking Agreement will control insofar as there is any conflict between any
provision of the Dealer Agreement and the standard NSCC Networking Agreement.
3. Duties of Dealer
----------------
a. Dealer agrees to purchase Shares only from Distributor or from
Dealer's customers.
b. Dealer agrees to enter orders for the purchase of Shares only from
Distributor and only for the purpose of covering purchase orders Dealer has
already received from its customers or for Dealer's own bona fide investment.
A-2
<PAGE>
c. Dealer agrees to date and time stamp all orders received by Dealer
and promptly, upon receipt of any and all orders, to transmit to Distributor all
orders received prior to the time described in the Prospectus for the
calculation of each Fund's net asset value so as to permit Distributor to
process all orders at the price next determined after receipt by Dealer, in
accordance with the Prospectus. Dealer agrees not to withhold placing orders for
Shares with Distributor so as to profit itself as a result of such inaction.
d. Dealer agrees to maintain records of all purchases and sales of
Shares made through Dealer and to furnish Distributor or regulatory authorities
with copies of such records upon request. In that regard, Dealer agrees that,
unless Dealer holds Shares as nominee for its customers or participates in the
NSCC Fund/Serv Networking program, at certain matrix levels, it will provide
Distributor with all necessary information to comply properly with all federal,
state and local reporting requirements and backup and nonresident alien
withholding requirements for its customer accounts including, without
limitation, those requirements that apply by treating Shares issued by the Funds
as readily tradable instruments. Dealer represents and agrees that all Taxpayer
Identification Numbers ("TINs") provided are certified, and that no account that
requires a certified TIN will be established without such certified TIN. With
respect to all other accounts, including Shares held by Dealer in omnibus
accounts and Shares purchased or sold through the NSCC Fund/Serv Networking
program, at certain matrix levels, Dealer agrees to perform all federal, state
and local tax reporting with respect to such accounts, including without
limitation redemptions and exchanges.
e. Dealer agrees to distribute or cause to be delivered to its
customers Prospectuses, proxy solicitation materials and related information and
proxy cards, semi-annual and annual shareholder reports and any other materials
in compliance with applicable legal requirements, except to the extent that
Distributor expressly undertakes to do so in writing.
f. Dealer agrees that if any Share is repurchased by any Fund or is
tendered for redemption within seven (7) business days after confirmation by
Distributor of the original purchase order from Dealer, Dealer shall forfeit its
right to any concession or commission received by Dealer with respect to such
Share and shall forthwith refund to Distributor the full concession allowed to
Dealer or commission paid to Dealer on the original sale. Distributor agrees to
notify Dealer of such repurchase or redemption within a reasonable time after
settlement. Termination or cancellation of this Agreement shall not relieve
Dealer from its obligation under this provision.
g. Dealer agrees that payment for Shares ordered from Distributor
shall be in Fed Funds, New York clearinghouse or other immediately available
funds and that such funds shall be received by Distributor by the earlier of:
(i) the end of the third (3/rd/) business day following Dealer's receipt of the
customer's order to purchase such Shares; or (ii) the settlement date
established in accordance with Rule 15c6-1 under the Securities Exchange Act of
1934, as amended. If such payment is not received by Distributor by such date,
Dealer shall forfeit its right to any concession or commission with respect to
such order, and Distributor reserves the right, without notice, forthwith to
cancel the sale, or, at its option, to sell the Shares ordered back to the Fund,
in which case Distributor may hold Dealer responsible for any loss, including
loss of profit, suffered by Distributor resulting from Dealer's failure to make
payment as aforesaid. If a purchase is made by check, the purchase is deemed
made upon conversion of the purchase instrument into Fed Funds, New York
clearinghouse or other immediately available funds.
A-3
<PAGE>
h. Dealer agrees that it: (i) shall assume responsibility for any
loss to the Fund caused by a correction to any order placed by Dealer that is
made subsequent to the trade date for the order, provided such order correction
was not based on any negligence on Distributor's part; and (ii) will immediately
pay such loss to the Fund upon notification.
i. Dealer agrees that in connection with orders for the purchase of
Shares on behalf of any IRAs, 401(k) plans or other retirement plan accounts, by
mail, telephone, or wire, Dealer shall act as agent for the custodian or trustee
of such plans (solely with respect to the time of receipt of the application and
payments), and Dealer shall not place such an order with Distributor until it
has received from its customer payment for such purchase and, if such purchase
represents the first contribution to such a retirement plan account, the
completed documents necessary to establish the retirement plan. Dealer agrees to
indemnify Distributor and its affiliates for any claim, loss, or liability
resulting from incorrect investment instructions received by Distributor from
Dealer.
j. Dealer agrees that it will not make any conditional orders for the
purchase or redemption of Shares and acknowledges that Distributor will not
accept conditional orders for Shares.
k. Dealer agrees that all out-of-pocket expenses incurred by it in
connection with its activities under this Agreement will be borne by Dealer.
l. Dealer agrees that it will keep in force appropriate broker's
blanket bond insurance policies covering any and all acts of Dealer's partners,
directors, officers, employees, and agents adequate to reasonably protect and
indemnify the Distributor and the Funds against any loss which any party may
suffer or incur, directly or indirectly, as a result of any action by Dealer or
Dealer's partners, directors, officers, employees, and agents.
m. Dealer agrees that it will maintain the required net capital as
specified by the rules and regulations of the SEC, NASD and other regulatory
authorities.
4. Dealer Compensation
-------------------
a. On each purchase of Shares by Dealer from Distributor, the total
sales charges and dealer concessions or commissions, if any, payable to Dealer
shall be as stated on Schedule A to this Agreement, which may be amended by
Distributor from time to time. Distributor reserves the right, without prior
notice, to suspend or eliminate such dealer concession or commissions by
amendment, sticker or supplement to the then current Prospectus for each Fund.
Such sales charges and dealer concessions or commissions, are subject to
reduction under a variety of circumstances as described in each Fund's then
current Prospectus. For an investor to obtain any reduction, Distributor must be
notified at the time of the sale that the sale qualifies for the reduced sales
charge. If Dealer fails to notify Distributor of the applicability of a
reduction in the sales charge at the time the trade is placed, neither
Distributor nor any Fund will be liable for amounts necessary to reimburse any
investor for the reduction that should have been effected. Dealer acknowledges
that no sales charge or concession or commission will be paid to Dealer on the
reinvestment of dividends or capital gains reinvestment or on Shares acquired in
exchange for
A-4
<PAGE>
Shares of another Fund, or class thereof, having the same sales charge structure
as the Fund, or class thereof, from which the exchange was made, in accordance
with the Prospectus.
b. In accordance with the Funds' Prospectuses, Distributor or any
affiliate may, but is not obligated to, make payments to dealers from
Distributor's own resources as compensation for certain sales that are made at
net asset value ("Qualifying Sales"). If Dealer notifies Distributor of a
Qualifying Sale, Distributor may make a contingent advance payment up to the
maximum amount available for payment on the sale. If any of the Shares
purchased in a Qualifying Sale are redeemed within twelve (12) months of the end
of the month of purchase, Distributor shall be entitled to recover any advance
payment attributable to the redeemed Shares by reducing any account payable or
other monetary obligation Distributor may owe to Dealer or by making demand upon
Dealer for repayment in cash. Distributor reserves the right to withhold
advances to Dealer, if for any reason Distributor believes that it may not be
able to recover unearned advances from Dealer.
c. With respect to any Fund that offers Shares for which distribution
plans have been adopted under Rule 12b-1 under the Investment Company Act of
1940, as amended ("Rule 12b-1 Plans"), Distributor also is authorized to pay the
Dealer continuing distribution and/or service fees, as specified in Schedule A
and the relevant Fund Prospectus, with respect to Shares of any such Fund, to
the extent that Dealer provides distribution, marketing, administrative and
other services and activities regarding the promotion of such Shares and the
maintenance of related shareholder accounts.
d. In connection with the receipt of distribution fees and/or service
fees under Rule 12b-1 Plans applicable to Shares purchased by Dealer's
customers, Distributor directs Dealer to provide enhanced shareholder services
such as: processing purchase and redemption transactions; establishing
shareholder accounts; and providing certain information and assistance with
respect to the Funds. (Redemption levels of shareholder accounts assigned to
Dealer will be considered in evaluating Dealer's continued ability to receive
payments of distribution and/or service fees.) In addition, Dealer agrees to
support Distributor's marketing efforts by, among other things, granting
reasonable requests for visits to Dealer's office by Distributor's wholesalers
and marketing representatives, including all Funds covered by a Rule 12b-1 Plan
on Dealer's "approved," "preferred" or other similar product lists, if
applicable, and otherwise providing satisfactory product, marketing and sales
support. Further, Dealer agrees to provide Distributor with supporting
documentation concerning the shareholder services provided, as Distributor may
reasonably request from time to time.
e. All Rule 12b-1 Plan distribution and/or servicing fees shall be
based on the value of Shares attributable to Dealer's customers and eligible for
such payment, and shall be calculated on the basis of and at the rates set forth
in the compensation schedule then in effect. Without prior approval by a
majority of the outstanding shares of a Fund, the aggregate annual fees paid to
Dealer pursuant to any Rule 12b-1 Plan shall not exceed the amounts stated as
the "annual maximums" in each Fund's Prospectus, which amount shall be a
specified percent of the value of the Fund's net assets held in Dealer's
customers' accounts that are eligible for payment pursuant to the Rule 12b-1
Plans (determined in the same manner as each Fund uses to compute its net assets
as set forth in its then current Prospectus).
A-5
<PAGE>
f. The provisions of any Rule 12b-1 Plan between the Funds and the
Distributor shall control over this Agreement in the event of any inconsistency.
Each Rule 12b-1 Plan in effect on the date of this Agreement is described in the
relevant Fund's Prospectus. Dealer hereby acknowledges that all payments under
Rule 12b-1 Plans are subject to limitations contained in such Rule 12b-1 Plans
and may be varied or discontinued at any time.
5. Redemptions, Repurchases and Exchanges
--------------------------------------
a. The Prospectus for each Fund describes the provisions whereby the
Fund, under all ordinary circumstances, will redeem Shares held by shareholders
on demand. Dealer agrees that it will not make any representations to
shareholders relating to the redemption of their Shares other than the
statements contained in the Prospectus and the underlying organizational
documents of the Fund, to which it refers, and that Dealer will pay as
redemption proceeds to shareholders the net asset value, minus any applicable
deferred sales charge or redemption fee, determined after receipt of the order
as discussed in the Prospectus.
b. Dealer agrees not to repurchase any Shares from its customers at a
price below that next quoted by the Fund for redemption or repurchase, i.e., at
the net asset value of such Shares, less any applicable deferred sales charge,
or redemption fee, in accordance with the Fund's Prospectus. Dealer shall,
however, be permitted to sell Shares for the account of the customer or record
owner to the Funds at the repurchase price then currently in effect for such
Shares and may charge the customer or record owner a fair service fee or
commission for handling the transaction, provided Dealer discloses the fee or
commission to the customer or record owner. Nevertheless, Dealer agrees that it
shall not under any circumstances maintain a secondary market in such
repurchased Shares.
c. Dealer agrees that, with respect to a redemption order it has
made, if instructions in proper form, including any outstanding certificates,
are not received by Distributor within the time customary or the time required
by law, the redemption may be canceled forthwith without any responsibility or
liability on Distributor's part or on the part of any Fund, or Distributor, at
its option, may buy the shares redeemed on behalf of the Fund, in which latter
case Distributor may hold Dealer responsible for any loss, including loss of
profit, suffered by Distributor resulting from Distributor's failure to settle
the redemption.
d. Dealer agrees that it will comply with any restrictions and
limitations on exchanges described in each Fund's Prospectus, including any
restrictions or prohibitions relating to frequent purchases and redemptions
(i.e., market timing).
6. Multiple Classes of Shares
--------------------------
Distributor may, from time to time, provide Dealer with written
guidelines or standards relating to the sale or distribution of Funds offering
multiple classes of Shares with different sales charges and distribution-related
operating expenses.
7. Fund Information
----------------
a. Dealer agrees that neither it nor any of its partners, directors,
officers, employees, and agents is authorized to give any information or make
any representations
A-6
<PAGE>
concerning Shares of any Fund except those contained in the Fund's then current
Prospectus or in materials provided by Distributor.
b. Distributor will supply to Dealer Prospectuses, reasonable
quantities of sales literature, sales bulletins, and additional sales
information as provided by Distributor. Dealer agrees to use only advertising or
sales material relating to the Funds that: (i) is supplied by Distributor, or
(ii) conforms to the requirements of all applicable laws or regulations of any
government or authorized agency having jurisdiction over the offering or sale of
Shares of the Funds and is approved in writing by Distributor in advance of its
use. Such approval may be withdrawn by Distributor in whole or in part upon
written notice to Dealer, and Dealer shall, upon receipt of such notice,
immediately discontinue the use of such sales literature, sales bulletins and
advertising. Dealer is not authorized to modify or translate any such materials
without Distributor's prior written consent.
8. Shares
------
a. Distributor acts solely as agent for the Fund and Distributor
shall have no obligation or responsibility with respect to Dealer's right to
purchase or sell Shares in any state or jurisdiction.
b. Distributor shall periodically furnish Dealer with information
identifying the states or jurisdictions in which it is believed that all
necessary notice, registration or exemptive filings for Shares have been made
under applicable securities laws such that offers and sales of Shares may be
made in such states or jurisdictions. Distributor shall have no obligation to
make such notice, registration or exemptive filings with respect to Shares in
any state or jurisdiction.
c. Dealer agrees not to transact orders for Shares in states or
jurisdictions in which it has been informed that Shares may not be sold or in
which it and its personnel are not authorized to sell Shares.
d. Distributor shall have no responsibility, under the laws
regulating the sale of securities in the United States or any foreign
jurisdiction, with respect to the qualification or status of Dealer or Dealer's
personnel selling Fund Shares. Distributor shall not, in any event, be liable or
responsible for the issue, form, validity, enforceability and value of such
Shares or for any matter in connection therewith.
e. Dealer agrees that it will make no offers or sales of Shares in
any foreign jurisdiction, except with the express written consent of
Distributor.
9. Indemnification
---------------
a. Dealer agrees to indemnify, defend and hold harmless Distributor
and the Funds and their predecessors, successors, and affiliates, each current
or former partner, officer, director, employee, shareholder or agent and each
person who controls or is controlled by Distributor from any and all losses,
claims, liabilities, costs, and expenses, including attorney fees, that may be
assessed against or suffered or incurred by any of them howsoever they arise,
and as they are incurred, which relate in any way to: (i) any alleged violation
of any statute or regulation (including without limitation the securities laws
and regulations of the United States or any state
A-7
<PAGE>
or foreign country) or any alleged tort or breach of contract, related to the
offer or sale by Dealer of Shares of the Funds pursuant to this Agreement
(except to the extent that Distributor's negligence or failure to follow correct
instructions received from Dealer is the cause of such loss, claim, liability,
cost or expense); (ii) any redemption or exchange pursuant to instructions
received from Dealer or its partners, affiliates, officers, directors, employees
or agents; or (iii) the breach by Dealer of any of its representations and
warranties specified herein or the Dealer's failure to comply with the terms and
conditions of this Agreement, whether or not such action, failure, error,
omission, misconduct or breach is committed by Dealer or its predecessor,
successor, or affiliate, each current or former partner, officer, director,
employee or agent and each person who controls or is controlled by Dealer.
b. Distributor agrees to indemnify, defend and hold harmless Dealer
and its predecessors, successors and affiliates, each current or former partner,
officer, director, employee or agent, and each person who controls or is
controlled by Dealer from any and all losses, claims, liabilities, costs and
expenses, including attorney fees, that may be assessed against or suffered or
incurred by any of them which arise, and which relate to any untrue statement of
or omission to state a material fact contained in the Prospectus or any written
sales literature or other marketing materials provided by the Distributor to the
Dealer, required to be stated therein or necessary to make the statements
therein not misleading.
c. Dealer agrees to notify Distributor, within a reasonable time, of
any claim or complaint or any enforcement action or other proceeding with
respect to Shares offered hereunder against Dealer or its partners, affiliates,
officers, directors, employees or agents, or any person who controls Dealer,
within the meaning of Section 15 of the Securities Act of 1933, as amended.
d. Dealer further agrees promptly to send Distributor copies of (i)
any report filed pursuant to NASD Conduct Rule 3070, including, without
limitation quarterly reports filed pursuant to Rule 3070(c), (ii) reports filed
with any other self-regulatory organization in lieu of Rule 3070 reports
pursuant to Rule 3070(e) and (iii) amendments to Dealer's Form BD.
e. Each party's obligations under these indemnification provisions
shall survive any termination of this Agreement.
10. Termination; Amendment
----------------------
a. In addition to the automatic termination of this Agreement
specified in Section 1.c. of this Agreement, each party to this Agreement may
unilaterally cancel its participation in this Agreement by giving thirty (30)
days prior written notice to the other party. In addition, each party to this
Agreement may terminate this Agreement immediately by giving written notice to
the other party of that other party's material breach of this Agreement. Such
notice shall be deemed to have been given and to be effective on the date on
which it was either delivered personally to the other party or any officer or
member thereof, or was mailed postpaid or delivered to a telegraph office for
transmission to the other party's designated person at the addresses shown
herein or in the most recent NASD Manual.
b. This Agreement shall terminate immediately upon the appointment of
a Trustee under the Securities Investor Protection Act or any other act of
insolvency by Dealer.
A-8
<PAGE>
c. The termination of this Agreement by any of the foregoing means
shall have no effect upon transactions entered into prior to the effective date
of termination and shall not relieve Dealer of its obligations, duties and
indemnities specified in this Agreement. A trade placed by Dealer subsequent to
its voluntary termination of this Agreement will not serve to reinstate the
Agreement. Reinstatement, except in the case of a temporary suspension of
Dealer, will only be effective upon written notification by Distributor.
d. This Agreement is not assignable or transferable and will
terminate automatically in the event of its "assignment," as defined in the
Investment Company Act of 1940, as amended and the rules, regulations and
interpretations thereunder. The Distributor may, however, transfer any of its
duties under this Agreement to any entity that controls or is under common
control with Distributor.
e. This Agreement may be amended by Distributor at any time by
written notice to Dealer. Dealer's placing of an order or accepting payment of
any kind after the effective date and receipt of notice of such amendment shall
constitute Dealer's acceptance of such amendment.
11. Distributor's Representations and Warranties
--------------------------------------------
Distributor represents and warrants that:
a. It is a limited liability company duly organized and existing and
in good standing under the laws of the state of Delaware and is duly registered
or exempt from registration as a broker-dealer in all states and jurisdictions
in which it provides services as principal underwriter and distributor for the
Funds.
b. It is a member in good standing of the NASD.
c. It is empowered under applicable laws and by Distributor's charter
and by-laws to enter into this Agreement and perform all activities and services
of the Distributor provided for herein and that there are no impediments, prior
or existing, regulatory, self-regulatory, administrative, civil or criminal
matters affecting Distributor's ability to perform under this Agreement.
d. All requisite actions have been taken to authorize Distributor to
enter into and perform this Agreement.
12. Additional Dealer Representations and Warranties
------------------------------------------------
In addition to the representations and warranties found elsewhere in
this Agreement, Dealer represents and warrants that:
a. It is duly organized and existing and in good standing under the
laws of the state, commonwealth or other jurisdiction in which Dealer is
organized and that Dealer will not offer Shares of any Fund for sale in any
state or jurisdiction where such Shares may not be legally sold or where Dealer
is not qualified to act as a broker-dealer.
A-9
<PAGE>
b. It is empowered under applicable laws and by Dealer's
organizational documents to enter into this Agreement and perform all activities
and services of the Dealer provided for herein and that there are no
impediments, prior or existing, regulatory, self-regulatory, administrative,
civil or criminal matters affecting Dealer's ability to perform under this
Agreement.
c. All requisite actions have been taken to authorize Dealer to enter
into and perform this Agreement.
d. It is not, at the time of the execution of this Agreement, subject
to any enforcement or other proceeding with respect to its activities under
state or federal securities laws, rules or regulations.
13. Setoff; Dispute Resolution; Governing Law
-----------------------------------------
a. Should any of Dealer's concession accounts with Distributor have a
debit balance, Distributor shall be permitted to offset and recover the amount
owed from any other account Dealer has with Distributor, without notice or
demand to Dealer.
b. In the event of a dispute concerning any provision of this
Agreement, either party may require the dispute to be submitted to binding
arbitration under the commercial arbitration rules and procedures of the NASD.
The parties agree that, to the extent permitted under such arbitration rules and
procedures, the arbitrators selected shall be from the securities industry.
Judgment upon any arbitration award may be entered by any state or federal court
having jurisdiction.
c. This Agreement shall be governed and construed in accordance with
the laws of the state of New Jersey, not including any provision which would
require the general application of the law of another jurisdiction.
14. Investigations and Proceedings
------------------------------
The parties to this Agreement agree to cooperate fully in any
securities regulatory investigation or proceeding or judicial proceeding with
respect to each's activities under this Agreement and promptly to notify the
other party of any such investigation or proceeding.
15. Captions
--------
All captions used in this Agreement are for convenience only, are not
a party hereof, and are not to be used in construing or interpreting any aspect
hereof.
16. Entire Understanding
--------------------
This Agreement contains the entire understanding of the parties hereto
with respect to the subject matter contained herein and supersedes all previous
agreements. This Agreement shall be binding upon the parties hereto when signed
by Dealer and accepted by Distributor.
A-10
<PAGE>
A-11
<PAGE>
17. Severability
------------
Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law.
If, however, any provision of this Agreement is held under applicable law to be
invalid, illegal, or unenforceable in any respect, such provision shall be
ineffective only to the extent of such invalidity, and the validity, legality
and enforceability of the remaining provisions of this Agreement shall not be
affected or impaired in any way.
18. Entire Agreement
----------------
This Agreement contains the entire understanding of the parties hereto
with respect to the subject matter contained herein and supersedes all previous
agreements and/or understandings of the parties. This Agreement shall be binding
upon the parties hereto when signed by Dealer and accepted by Distributor.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year set forth below.
PRUDENTIAL INVESTMENT MANAGEMENT
SERVICES LLC
By: _________________________________
Name:________________________________
Title:_______________________________
Date:________________________________
DEALER: _____________________________
By: _________________________________
(Signature)
Name: _______________________________
Title: ______________________________
Address:_____________________________
_____________________________
_____________________________
Telephone: _________________________
NASD CRD # ________________________
Prudential Dealer # ________________
(Internal Use Only)
Date: ______________________________
A-12
<PAGE>
Exhibit 99.(g)(1)
FORM OF
CUSTODIAN CONTRACT
Between
EACH OF THE PARTIES INDICATED ON APPENDIX A
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Employment of Custodian and Property to be Held by It....................... -1-
2. Duties to the Custodian with Respect to Property of The Fund Held By the
Custodian in the United States.............................................. -2-
2.1 Holding Securities................................................... -2-
2.2 Delivery of Securities............................................... -2-
2.3 Registration of Securities........................................... -6-
2.4 Bank Accounts........................................................ -7-
2.5 Availability of Federal Funds........................................ -7-
2.6 Collection of Income................................................. -8-
2.7 Payment of Fund Monies............................................... -8-
2.8 Liability for Payment in Advance of Receipt of Securities Purchased.. -11-
2.9 Appointment of Agents................................................ -11-
2.10 Deposit of Securities in Securities Systems.......................... -11-
2.10A Fund Assets Held in the Custodian's Direct Paper System.............. -13-
2.11 Segregated Account................................................... -14-
2.12 Ownership Certificates for Tax Purposes.............................. -15-
2.13 Proxies.............................................................. -16-
2.14 Communications Relating to Fund Portfolio Securities................. -16-
2.15 Reports to Trust by Independent Public Accountants................... -16-
3. Duties of the Custodian with Respect to Property of the Fund Held Outside
of the United States........................................................ -17-
3.1 Appointment of Foreign Sub-Custodians................................ -17-
3.2 Assets to be Held.................................................... -17-
3.3 Foreign Securities Depositories...................................... -18-
3.4 Segregation of Securities............................................ -18-
3.5 Agreements with Foreign Banking Institutions......................... -18-
3.6 Access of Independent Accountants of the Fund........................ -19-
3.7 Reports by Custodian................................................. -19-
3.9 Liability of Foreign Sub-Custodians.................................. -20-
3.10 Liability of Custodian............................................... -21-
3.11 Reimbursements for Advances.......................................... -21-
3.12 Monitoring Responsibilities.......................................... -22-
3.13 Branches of U.S. Banks............................................... -22-
4. Payments for Repurchases or Redemptions and Sales of Shares of the Fund..... -23-
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
5. Proper Instructions........................................................ -24-
6. Actions Permitted without Express Authority................................ -24-
7. Evidence of Authority...................................................... -25-
8. Duties of Custodian with Respect to the Books of Account and Calculation of
Net Asset Value and Net Income............................................. -26-
9. Records.................................................................... -26-
10. Opinion of Fund's Independent Accountant................................... -27-
11. Compensation of Custodian.................................................. -27-
12. Responsibility of Custodian................................................ -27-
13. Effective Period, Termination and Amendment................................ -29-
14. Successor Custodian........................................................ -30-
15. Interpretive and Additional Provisions..................................... -32-
16. Massachusetts Law to Apply................................................. -32-
17. Prior Contracts............................................................ -32-
18. The Parties................................................................ -32-
19. Limitation of Liability.................................................... -33-
</TABLE>
-ii-
<PAGE>
CUSTODIAN CONTRACT
------------------
This Contract between State Street Bank and Trust Company, a Massachusetts
trust company, having its principal place of business at 225 Franklin Street,
Boston, Massachusetts, 02110, hereinafter called the "Custodian", and each Fund
listed on Appendix A which evidences its agreement to be bound hereby executing
a copy of this Contract (each such Fund individually hereinafter referred to as
the "Fund").
WITNESSETH: That in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
-----------------------------------------------------
The Fund hereby employs the Custodian as the custodian of its assets,
including securities it desires to be held in places within the United States
("domestic securities") and securities it desires to be held outside the United
States ("foreign securities") pursuant to the provisions of the Articles of
Incorporation/ Declaration of Trust. The Fund agrees to deliver to the
Custodian all securities and cash owned by it, and all payments of income,
payments of principal or capital distributions received by it with respect to
all securities owned by the Fund from time to time, and the cash consideration
received by it for such new or treasury shares of capital stock, ("Shares") of
the Fund as may be issued or sold from time to time. The Custodian shall not be
responsible for any property of the Fund held or received by the Fund and not
delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article 5),
the Custodian shall from time to time employ one or more sub-custodians located
in the United States, but only in accordance with an applicable vote by the
Board of Directors/ Trustees of the Fund, and provided that the Custodian shall
have the same responsibility or liability to the Fund on account
<PAGE>
of any actions or omissions of any sub-custodian so employed as any such sub-
custodian has to the Custodian, provided that the Custodian agreement with any
such domestic sub-custodian shall impose on such sub-custodian responsibilities
and liabilities similar in nature and scope to those imposed by this Agreement
with respect to the functions to be performed by such sub-custodian. The
Custodian may employ as sub-custodians for the Fund's securities and other
assets the foreign banking institutions and foreign securities depositories
designated in Schedule "A" hereto but only in accordance with the provisions of
Article 3.
2. Duties of the Custodian with Respect to Property of The Fund Held By the
------------------------------------------------------------------------
Custodian in the United States.
- ------------------------------
2.1 Holding Securities. The Custodian shall hold and physically segregate
------------------
for the account of the Fund all non-cash property, to be held by it in the
United States, including all domestic securities owned by the Fund, other than
(a) securities which are maintained pursuant to Section 2.10 in a clearing
agency which acts as a securities depository or in a book-entry system
authorized by the U.S. Department of Treasury, collectively referred to herein
as "Securities System" and (b) commercial paper of an issuer for which State
Street Bank and Trust Company acts as issuing and paying agent ("Direct Paper")
which is deposited and/or maintained in the Direct Paper System of the Custodian
pursuant to Section 2.10A.
2.2 Delivery of Securities. The Custodian shall release and deliver
----------------------
domestic securities owned by the Fund held by the Custodian or in a Securities
System account of the Custodian or in the Custodian's Direct Paper book-entry
system account ("Direct Paper System") only upon receipt of Proper Instructions,
which may be continuing instructions when deemed appropriate by the parties, and
only in the following cases:
-2-
<PAGE>
(1) Upon sale of such securities for the account of the Fund and
receipt of payment therefor;
(2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Fund;
(3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.10 hereof;
(4) To the depository agent in connection with tender or other
similar offers for portfolio securities of the Fund;
(5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable; provided
that, in any such case, the cash or other consideration is to be
delivered to the Custodian;
(6) To the issuer thereof, or its agent, for transfer into the name
of the Fund or into the name of any nominee or nominees of the
Custodian or into the name or nominee name of any agent appointed
pursuant to Section 2.9 or into the name or nominee name of any
sub-custodian appointed pursuant to Article 1; or for exchange
for a different number of bonds, certificates or other evidence
representing the same aggregate face amount or number of units;
provided that, in any such case, the new securities are to be
--------
delivered to the Custodian;
(7) Upon the sale of such securities for the account of the Fund, to
the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery" custom; provided
that in any such case, the Custodian
-3-
<PAGE>
shall have no responsibility or liability for any loss arising
from the delivery of such securities prior to receiving payment
for such securities except as may arise from the Custodian's own
negligence or willful misconduct;
(8) For exchange or conversation pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment
of the securities of the issuer of such securities, or pursuant
to provisions for conversion contained in such securities, or
pursuant to any deposit agreement; provided that, in any such
case, the new securities and cash, if any, are to be delivered to
the Custodian;
(9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that, in
any such case, the new securities and cash, if any, are to be
delivered to the Custodian;
(10) For delivery in connection with any loans of securities made by
the Fund, but only against receipt of adequate collateral as
--------
agreed upon from time to time by the Custodian and the Fund,
which may be in the form of cash or obligations issued by the
United States government, its agencies or instrumentalities,
except that in connection with any loans for which collateral is
to be credited to the Custodian's account in the book-entry
system authorized by the U.S. Department of the Treasury, the
Custodian will not be held liable or responsible for the delivery
of securities owned by
-4-
<PAGE>
the Fund prior to the receipt of such collateral;
(11) For delivery as security in connection with any borrowings by the
Fund requiring a pledge of assets by the Fund, but only against
--------
receipt of amounts borrowed;
(12) For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian and a broker-dealer registered
under the Securities Exchange Act of 1934 (the "Exchange Act")
and a member of The National Association of Securities Dealers,
Inc. ("NASD"), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national
securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in
connection with transactions by the Fund;
(13) For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian, and a Futures Commission Merchant
registered under the Commodity Exchange Act, relating to
compliance with the rules of the Commodity Futures Trading
Commission and/or any Contract Market, or any similar
organization or organizations, regarding account deposits in
connection with transactions by the Fund;
(14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for the Fund, for delivery to such Transfer Agent or to
the holders of shares in connection with distributions in kind,
as may be described from time to time in the Fund's currently
effective prospectus and statement of additional
-5-
<PAGE>
information ("prospectus"), in satisfaction of requests by
holders of Shares for repurchase or redemption; and
(15) For any other proper business purpose, but only upon receipt of,
--------
in addition to Proper Instructions, a certified copy of a
resolution of the Board of Directors/Trustees or of the Executive
Committee signed by an officer of the Fund and certified by the
Secretary or an Assistant Secretary, specifying the securities to
be delivered, setting forth the purpose for which such delivery
is to be made, declaring such purpose to be a proper business
purpose, and naming the person or persons to whom delivery of
such securities shall be made.
2.3 Registration of Securities. Domestic securities held by the Custodian
--------------------------
(other than bearer securities) shall be registered in the name of the Fund or in
the name of any nominees of the Fund or of any nominee of the Custodian which
nominee shall be assigned exclusively to the Fund, unless the Fund has
------
authorized in writing the appointment of a nominee to be used in common with
other registered investment companies having the same investment adviser as the
Fund, or in the name or nominee name of any agent appointed pursuant to Section
2.9 or in the name or nominee name of any sub-custodian appointed pursuant to
Article 1. All securities accepted by the Custodian on behalf of the Fund under
the terms of this Contract shall be in "street name" or other good delivery
form. If, however, the Fund directs the Custodian to maintain securities in
"street name", the Custodian shall utilize its best efforts to timely collect
income due the Fund on such securities and to notify the Fund on a best efforts
basis of relevant corporate actions including, without limitation, pendency of
calls, maturities, tender or exchange
-6-
<PAGE>
offers.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
-------------
account or accounts in the United States in the name of the Fund, subject only
to draft or order by the Custodian acting pursuant to the terms of this
Contract, and shall hold in such account or accounts, subject to the provisions
hereof, all cash received by it from or for the account of the Fund, other than
cash maintained by the Fund, in a bank account established and used in
accordance with Rule 17f-3 under the Investment Company Act of 1940. Funds held
by the Custodian for the Fund may be deposited by it to its credit as Custodian
in the Banking Department of the Custodian or in such other banks or trust
companies as it may in its discretion deem necessary or desirable; provided,
--------
however, that every such bank or trust company shall be qualified to act as a
custodian under the Investment Company Act of 1940 and that each such bank or
trust company and the funds to be approved by vote of a majority of the Board of
Directors/Trustees of the Fund. Such funds shall be deposited by the Custodian
in its capacity as Custodian and shall be withdrawable by the Custodian only in
that capacity.
2.5 Availability of Federal Funds. Upon mutual agreement between the Fund
-----------------------------
and the Custodian, the Custodian shall, upon the receipt of Proper Instructions,
make federal funds available to the Fund as of specified times agreed upon from
time to time by the Fund and the Custodian in the amount of checks received in
payment for Shares of the Trust which are deposited into the Fund's account.
2.6 Collection of Income. Subject to the provisions of Section 2.3, the
--------------------
Custodian shall collect on a timely basis all income and other payments with
respect to registered securities held hereunder to which the Fund shall be
entitled either by law or pursuant to custom in the securities
-7-
<PAGE>
business, and shall collect on a timely basis all income and other payments with
respect to bearer securities if, on the date of payment by the issuer, such
securities are held by the Custodian or its agent thereof and shall credit such
income, as collected, to the Fund's custodian account. Without limiting the
generality of the foregoing, the Custodian shall detach and present for payment
all coupons and other income items requiring presentation as and when they
become due and shall collect interest when due on securities held hereunder.
Income due the Fund on securities loaned pursuant to the provisions of Section
2.2 (10) shall be the responsibility of the Fund. The Custodian will have no
duty or responsibility in connection therewith, other than to provide the Fund
with such information or data as may be necessary to assist the Fund in
arranging for the timely delivery to the Custodian of the income to which the
Fund is properly entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper Instructions, which may
----------------------
be continuing instructions when deemed appropriate by the parties, the Custodian
shall pay out monies of the Fund in the following cases only:
(1) Upon the purchase of securities held domestically, options,
futures contracts or options on futures contracts for the account
of the Fund but only (a) against the delivery of such securities,
or evidence of title to such options, futures contracts or
options on futures contracts, to the Custodian (or any bank,
banking firm or trust company doing business in the United States
or abroad which is qualified under the Investment Company Act of
1940, as amended, to act as a custodian and has been designated
by the Custodian as its agent for this purpose) registered in the
name of the Fund or in the name of a nominee of the Custodian
referred to in Section 2.3
-8-
<PAGE>
hereof or in proper form for transfer; (b) in the case of a
purchase effected through a Securities System, in accordance with
the conditions set forth in Section 2.10 hereof; (c) in the case
of a purchase involving the Direct Paper System, in accordance
with the conditions set forth in Section 2.10A; (d) in the case
of repurchase agreements entered into between the Fund and the
Custodian, or another bank, or a broker-dealer which is a member
of NASD, (i) against delivery of the securities either in
certificate form or through an entry crediting the Custodian's
account at the Federal Reserve Bank with such securities or (ii)
against delivery of the receipt evidencing purchase by the Fund
of securities owned by the Custodian along with written evidence
of the agreement by the Custodian to repurchase such securities
from the Fund or (e) for transfer to a time deposit account of
the Fund in any bank, whether domestic or foreign; such transfer
may be effected prior to receipt of a confirmation from a broker
and/or the applicable bank pursuant to Proper Instructions from
the Fund as defined in Article 5;
(2) In connection with conversion, exchange or surrender of
securities owned by the Fund as set forth in Section 2.2 hereof;
(3) For the redemption or repurchase of Shares issued by the Fund as
set forth in Article 4 hereof;
(4) For the payment of any expense or liability incurred by the Fund,
including but not limited to the following payments for the
account of the Fund:
-9-
<PAGE>
interest, taxes, management, accounting, transfer agent and legal
fees, and operating expenses of the Fund whether or not such
expenses are to be in whole or part capitalized or treated as
deferred expenses;
(5) For the payment of any dividends declared pursuant to the
governing documents of the Fund;
(6) For payment of the amount of dividends received in respect of
securities sold short;
(7) For any other proper purpose, but only upon receipt of, in
--------
addition to Proper Instructions, a certified copy of a resolution
of Board of Directors/Trustees or of the Executive Committee of
the Fund signed by an officer of the Fund and certified by its
Secretary or an Assistant Secretary, specifying the amount of
such payment, setting forth the purpose for which such payment is
to be made, declaring such purpose to be a proper purpose, and
naming the person or persons to whom such payment is to be made.
2.8 Liability for Payment in Advance of Receipt of Securities Purchased.
-------------------------------------------------------------------
Except as specifically stated otherwise in this Contract, in any and every case
where payment for purchase of securities for the account of the Fund is made by
the Custodian in advance of receipt of the securities purchased in the absence
of specific written instructions from the Fund to so pay in advance, the
Custodian shall be absolutely liable to the Fund for such securities to the same
extent as if the securities had been received by the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times in its
---------------------
discretion
-10-
<PAGE>
appoint (and may at any time remove) any other bank or trust company which is
itself qualified under the Investment Company Act of 1940, as amended, to act as
a custodian, as its agent to carry out such of the provisions of this Article 2
as the Custodian may from time to time direct; provided, however, that the
--------
appointment of any agent shall not relieve the Custodian of its responsibilities
or liabilities hereunder.
2.10 Deposit of Securities in Securities Systems. The Custodian may
-------------------------------------------
deposit and/or maintain domestic securities owned by the Fund in a clearing
agency registered with the Securities and Exchange Commission under Section 17A
of the Securities Exchange Act of 1934, which acts as a securities depository,
or in the book-entry system authorized by the U.S. Department of the Treasury
and certain federal agencies, collectively referred to herein as "Securities
System" in accordance with applicable Federal Reserve Board and Securities and
Exchange Commission rules and regulations, if any, and subject to the following
provisions:
(1) The Custodian may keep domestic securities of the Fund in a
Securities System provided that such securities are represented
in an account ("Account") of the Custodian in the Securities
System which shall not include any assets of the Custodian other
than assets held as a fiduciary, custodian or otherwise for
customers;
(2) The records of the Custodian with respect to domestic securities
of the Fund which are maintained in a Securities System shall
identify by book-entry those securities belonging to the Fund;
(3) The Custodian shall pay for domestic securities purchased for the
account of the Fund upon (i) receipt of advice from the
Securities System that such
-11-
<PAGE>
securities have been transferred to the Account, and (ii.) the
making of an entry on the records of the Custodian to reflect
such payment and transfer for the account of the Fund. The
Custodian shall transfer domestic securities sold for the account
of the Fund upon (i) receipt of advice from the Securities System
that payment for such securities has been transferred to the
Account, and (ii) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the account of
the Fund. Copies of all advices from the Securities System of
transfers of domestic securities for the account of the Fund
shall identify the Fund, be maintained for the Fund by the
Custodian and be provided to the Fund at its request. Upon
request, the Custodian shall furnish the Fund confirmation of
each transfer to or from the account of the Fund in the form of a
written advice or notice and shall furnish promptly to the Fund
copies of daily transaction sheets reflecting each day's
transactions in the Securities System for the account of the
Fund.
(4) The Custodian shall provide the Fund with any report obtained by
the Custodian on the Securities System's accounting system,
internal accounting control and procedures for safeguarding
securities deposited in the Securities System;
(5) The Custodian shall have received the initial or annual
certificate, as the case may be, required by Article 13 hereof;
(6) Anything to the contrary in this Contract notwithstanding, the
Custodian
-12-
<PAGE>
shall be liable to the Fund for any loss or damage to the Fund
resulting from use of the Securities System by reason of any
negligence, misfeasance or misconduct of the Custodian or any of
its agents or of any of its or their employees or from failure of
the Custodian or any such agent to enforce effectively such
rights as it may have against the Securities System; at the
election of the Fund, it shall be entitled to be subrogated to
the rights of the Custodian with respect to any claim against the
Securities System or any other person which the Custodian may
have as a consequence of any such loss or damage if and to the
extent that the Fund has not been made whole for any such loss or
damage.
2.10A Fund Assets Held in the Custodian's Direct Paper System. The
-------------------------------------------------------
Custodian may deposit and/or maintain securities owned by the Fund in the Direct
Paper System of the Custodian subject to the following provisions:
(1) No transaction relating to securities in the Direct Paper
System will be effected in the absence of Proper Instructions;
(2) The Custodian may keep securities of the Fund in the Direct
Paper System only if such securities are represented in an
account ("Account") of the Custodian in the Direct Paper System
which shall not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise for
customers;
(3) The records of the Custodian with respect to securities of the
Fund which are maintained in the Direct Paper System shall
identify by book-entry
-13-
<PAGE>
those securities belonging to the Fund;
(4) The Custodian shall pay for securities purchased for the
account of the Fund upon the making of an entry on the records
of the Custodian to reflect such payment and transfer of
securities to the account of the Fund. The Custodian shall
transfer securities sold for the account of the Fund upon the
making of an entry on the records of the Custodian to reflect
such transfer and receipt of payment for the account of the
Fund;
(5) The Custodian shall furnish the Fund confirmation of each
transfer to or from the account of the Fund, in the form of a
written advice or notice, of Direct Paper on the next business
day following such transfer and shall furnish to the Fund
copies of daily transaction sheets reflecting each day's
transaction in the Direct Paper System for the account of the
Fund;
(6) The Custodian shall provide the Fund with any report on its
system of internal accounting control as the Fund may
reasonably request from time to time;
2.11 Segregated Account. The Custodian shall upon receipt of Proper
------------------
Instructions establish and maintain a segregated account or accounts for and on
behalf of the Fund, into which account or accounts may be transferred cash
and/or securities, including securities maintained in an account by the
Custodian pursuant to Section 2.10 hereof, (i) in accordance with the provisions
of any agreement among the Fund, the Custodian and a broker-dealer registered
under the Exchange Act and a member of the NASD (or any futures commission
merchant registered under the Commodity Exchange Act), relating to compliance
with the rules of The Options Clearing Corporation and of any registered
national securities exchange (or the Commodity
-14-
<PAGE>
Futures Trading Commission or any registered contract market), or of any similar
organization or organizations, regarding escrow or other arrangements in
connection with transactions by the Fund, (ii) for purposes of segregating cash,
government securities or liquid, high-grade debt obligations in connection with
options purchased, sold or written by the Fund or commodity futures contracts or
options thereon purchased or sold by the Fund, (iii) for the purposes of
compliance by the Fund with the procedures required by Investment Company Act
Release No. 10666, or any subsequent release or releases of the Securities and
Exchange Commission relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper corporate purposes,
but only, in the case of clause (iv), upon receipt of, in addition to Proper
- --------
Instructions, a certified copy of a resolution of the Board of
Directors/Trustees or of the Executive Committee signed by an officer of the
Fund and certified by the Secretary or an Assistant Secretary, setting forth the
purpose or purposes of such segregated account and declaring such purposes to be
proper corporate purposes.
2.12 Ownership Certificates for Tax Purposes. The Custodian shall execute
---------------------------------------
ownership and other certificates and affidavits for all federal and state tax
purposes in connection with receipt of income or other payments with respect to
domestic securities of the Fund held by it and in connection with transfers of
such securities.
2.13 Proxies. The Custodian shall, with respect to the domestic securities
-------
held hereunder, cause to be promptly executed by the registered holder of such
securities, if the securities are registered otherwise than in the name of the
Fund or a nominee of the Fund, all proxies, without indication of the manner in
which such proxies are to be voted, and shall promptly deliver to the Fund such
proxies, all proxy soliciting materials and all notices relating to
-15-
<PAGE>
such securities.
2.14 Communications Relating to Fund Portfolio Securities. Subject to the
----------------------------------------------------
provisions of Section 2.3, the Custodian shall transmit promptly to the Fund all
written information (including, without limitation, pendency of calls and
maturities of securities held domestically and expirations of rights in
connection therewith and notices of exercise of call and put options written by
the Fund and the maturity of futures contracts purchased or sold by the Fund)
received by the Custodian from issuers of the securities being held for the
Fund. With respect to tender or exchange offers, the Custodian shall transmit
promptly to the Fund all written information received by the Custodian from
issuers of the securities whose tender or exchange is sought and from the party
(or his agents) making the tender or exchange offer. If the Fund desires to take
action with respect to any tender offer, exchange offer or any other similar
transaction, the Fund shall notify the Custodian at least three business days
prior to the date of which the Custodian is to take such action.
2.15 Reports to Fund by Independent Public Accountants. The Custodian
-------------------------------------------------
shall provide the Fund, at such times as the Fund may reasonably require, with
reports by independent public accountants on the accounting system, internal
accounting control and procedures for safeguarding securities, futures contracts
and options on futures contracts, including securities deposited and/or
maintained in a Securities System, relating to the services provided by the
Custodian under this Contract; such reports shall be of sufficient scope and in
sufficient detail, as may reasonably be required by the Fund to provide
reasonable assurance that any material inadequacies would be disclosed by such
examination, and, if there are no such inadequacies, the reports shall so state.
-16-
<PAGE>
3. Duties of the Custodian with Respect to Property of the Fund Held Outside
---------------------------------------------------------------------------
of the United States
- --------------------
3.1 Appointment of Foreign Sub-Custodians. The Fund hereby authorizes and
-------------------------------------
instructs the Custodian to employ as sub-custodians for the Fund's securities
and other assets maintained outside the United States the foreign banking
institutions and foreign securities depositories designated on Schedule A hereto
("foreign sub-custodians"). Upon receipt of "Proper Instructions", as defined in
Section 5 of this Contract, together with a certified resolution of the Fund's
Board of Directors/Trustees, the Custodian and the Fund may agree to amend
Schedule A hereto from time to time to designate additional foreign banking
institutions and foreign securities depositories to act as sub-custodian. Upon
receipt of Proper Instructions, the Fund may instruct the Custodian to cease the
employment of any one or more such sub-custodians for maintaining custody of the
Fund's assets.
3.2 Assets to be Held. The Custodian shall limit the securities and other
-----------------
assets maintained in the custody of the foreign sub-custodians to: (a) "foreign
securities", as defined in paragraph (c)(1) of Rule 17f-5 under the Investment
Company Act of 1940, and (b) cash and cash equivalents in such amounts as the
Custodian or the Fund may determine to be reasonably necessary to effect the
Fund's foreign securities transactions.
3.3 Foreign Securities Depositories. Except as may otherwise be agreed
-------------------------------
upon in writing by the Custodian and the Fund, assets of the Fund shall be
maintained in foreign securities depositories only through arrangements
implemented by the foreign banking institutions serving as sub-custodians
pursuant to the terms hereof. Where possible, such arrangements shall include
entry into agreements containing the provisions set forth in Section 3.5 hereof.
-17-
<PAGE>
3.4 Segregation of Securities. The Custodian shall identify on its books
-------------------------
as belonging to the Fund, the foreign securities of the Fund held by each
foreign sub-custodian. Each agreement pursuant to which the Custodian employs a
foreign banking institution shall require that such institution establish a
custody account for the Custodian on behalf of the Fund and physically segregate
in that account, securities and other assets of the Fund, and, in the event that
such institution deposits the Fund's securities in a foreign securities
depository, that it shall identify on its books as belonging to the Custodian,
as agent for the Fund, the securities so deposited.
3.5 Agreements with Foreign Banking Institutions. Each agreement with a
--------------------------------------------
foreign banking institution shall be substantially in the form set forth in
Exhibit I hereto and shall provide that (a) the Fund's assets will not be
subject to any right, charge, security interest, lien or claim of any kind in
favor of the foreign banking institution or its creditors or agent, except a
claim of payment for their safe custody or administration; (b) beneficial
ownership of the Fund's assets will be freely transferable without the payment
of money or value other than for custody or administration; (c) adequate records
will be maintained identifying the assets as belonging to the Fund; (d) officers
of or auditors employed by, or other representatives of the Custodian, including
to the extent permitted under applicable law the independent public accountants
for the Fund, will be given access to the books and records of the foreign
banking institution relating to its actions under its agreement with the
Custodian; and (e) assets of the Fund held by the foreign sub-custodian will be
subject only to the instructions of the Custodian or its agents.
3.6 Access of Independent Accountants of the Fund. Upon request of the
---------------------------------------------
Fund, the Custodian will use its best efforts to arrange for the independent
accountants of the Fund to be
-18-
<PAGE>
afforded access to the books and records of any foreign banking institution
employed as a foreign sub-custodian insofar as such books and records relate to
the performance of such foreign banking institution under its agreement with the
Custodian.
3.7 Reports by Custodian. The Custodian will supply to the Fund from time
--------------------
to time, as mutually agreed upon, statements in respect of the securities and
other assets of the Fund held by foreign sub-custodians, including but not
limited to an identification of entities having possession of the Fund's
securities and other assets and advices or notifications of any transfers of
securities to or from each custodial account maintained by a foreign banking
institution for the Custodian on behalf of the Fund indicating, as to securities
acquired for the Fund, the identity of the entity having physical possession of
such securities.
3.8 Transactions in Foreign Custody Account
---------------------------------------
(a) Except as otherwise provided in paragraph (b) of this Section 3.8,
the provision of Sections 2.2 and 2.7 of this Contract shall apply, in their
entirety to the foreign securities of the Fund held outside the United States by
foreign sub-custodians.
(b) Notwithstanding any provision of this Contract to the contrary,
settlement and payment for securities received for the account of the Fund and
delivery of securities maintained for the account of the Fund may be effected in
accordance with the customary established securities trading or securities
processing practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivering securities to the
purchaser thereof or to a dealer therefore (or an agent for such purchaser or
dealer) against a receipt with the expectation of receiving later payment for
such securities from such purchaser or dealer.
-19-
<PAGE>
(c) Securities maintained in the custody of a foreign sub-custodian
may be maintained in the name of such entity's nominee to the same extent as set
forth in Section 2.3 of this Contract, and the Fund agrees to hold any such
nominee harmless from any liability as a holder of record of such securities.
3.9 Liability of Foreign Sub-Custodians. Each agreement pursuant to which
-----------------------------------
the Custodian employs a foreign banking institution as a foreign sub-custodian
shall require the institution to exercise reasonable care in the performance of
its duties and to indemnify, and hold harmless, the Custodian and each Fund from
and against any loss, damage, cost, expense, liability or claim arising out of
or in connection with the institution's performance of such obligations. At the
election of the Fund, it shall be entitled to be subrogated to the rights of the
Custodian with respect to any claims against a foreign banking institution as a
consequence of any such loss, damage, cost, expense, liability or claim if and
to the extent that the Fund has not been made whole for any such loss, damage,
cost, expense, liability or claim.
3.10 Liability of Custodian. The Custodian shall be liable for the acts
----------------------
or omissions of a foreign banking institution to the same extent as set forth
with respect to sub-custodians generally in this Contract and, regardless of
whether assets are maintained in the custody of a foreign banking institution, a
foreign securities depository or a branch of a U.S. bank as contemplated by
paragraph 3.13 hereof, the Custodian shall not be liable for any loss, damage,
cost, expense, liability or claim resulting from nationalization, expropriation,
currency restrictions, or acts of war or terrorism or any loss where the sub-
custodian has otherwise exercised reasonable care. Notwithstanding the
foregoing provisions of this paragraph 3.10, in delegating custody duties to
State Street London Ltd., the Custodian shall not be relieved of any
responsibility to the Fund for
-20-
<PAGE>
any loss due to such delegation, except such loss as may result from (a)
political risk (including, but not limited to, exchange control restrictions,
confiscation, expropriation, nationalization, insurrection, civil strife or
armed hostilities) or (b) other losses (excluding a bankruptcy or insolvency of
State Street London Ltd. not caused by political risk) due to Acts of God,
nuclear incident or other losses under circumstances where the Custodian and
State Street London Ltd. have exercised reasonable care.
3.11 Reimbursement for Advances. If the Fund requires the Custodian to
--------------------------
advance cash or securities for any purpose including the purchase or sale of
foreign exchange or of contracts for foreign exchange, or in the event that the
Custodian or its nominees shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connection with the performance
of this Contract, except such as may arise from its or its nominee's own
negligent action, negligent failure to act or willful misconduct, any property
at any time held for the account of the Fund shall be security therefor and
should the Fund fail to repay the Custodian promptly, the Custodian shall be
entitled to utilize available cash and to dispose of the Fund assets to the
extent necessary to obtain reimbursement.
3.12 Monitoring Responsibilities. The Custodian shall furnish annually to
---------------------------
the Fund, during the month of June, information concerning the foreign sub-
custodians employed by the Custodian. Such information shall be similar in kind
and scope to that furnished to the Fund in connection with the initial approval
of this Contract. In addition, the Custodian will promptly inform the Fund in
the event that the Custodian learns of a material adverse change in the
financial condition of a foreign sub-custodian or any material loss of the
assets of the Fund or in the case of any foreign sub-custodian not the subject
of an exemptive order from the Securities and Exchange
-21-
<PAGE>
Commission is notified by such foreign sub-custodian that there appears to be a
substantial likelihood that its shareholders' equity will decline below $200
million (U.S. dollars or the equivalent thereof) or that its shareholders'
equity has declined below $200 million (in each case computed in accordance with
generally accepted U.S. accounting principles).
3.13 Branches of U.S. Banks
----------------------
(a) Except as otherwise set forth in this Contract, the provisions of
Article 3 shall not apply where the custody of the Fund assets are maintained in
a foreign branch of a banking institution which is a "bank" as defined by
Section 2(a)(5) of the Investment Company Act of 1940 meeting the qualification
set forth in Section 26(a) of said Act. The appointment of any such branch as a
sub-custodian shall be governed by paragraph 1 of this Contract.
(b) Cash held for the Fund in the United Kingdom shall be maintained
in an interest bearing account established for the Fund with the Custodian's
London branch, which account shall be subject to the direction of the Custodian,
State Street London Ltd. or both.
4. Payments for Repurchases or Redemptions and Sales of Shares of the Fund.
-----------------------------------------------------------------------
From such funds as may be available for the purpose but subject to the
limitations of the Articles of Incorporation/Declaration of Trust and any
applicable votes of the Board of Directors/Trustees of the Fund pursuant
thereto, the Custodian shall, upon receipt of instructions from the Transfer
Agent, make funds available for payment to holders of Shares who have delivered
to the Transfer Agent a request for redemption or repurchase of their Shares.
In connection with the redemption or repurchase of Shares of the Fund, the
Custodian is authorized upon receipt of instructions from the Transfer Agent to
wire funds to or through a commercial
-22-
<PAGE>
bank designated by the redeeming shareholders. In connection with the redemption
or repurchase of Shares of the Fund, the Custodian shall honor checks drawn on
the Custodian by a holder of Shares, which checks have been furnished by the
Fund to the holder of Shares, when presented to the Custodian in accordance with
such procedures and controls as are mutually agreed upon from time to time
between the Fund and the Custodian.
The Custodian shall receive from the distributor for the Fund's Shares or
from the Transfer Agent of the Fund and deposit into the Fund's account such
payments as are received for Shares of the Fund issued or sold from time to time
by the Fund. The Custodian will provide timely notification to the Fund and the
Transfer Agent of any receipt by it of payments for Shares of the Fund.
5. Proper Instructions.
-------------------
Proper Instructions as used herein means a writing signed or initialed by
one or more person or persons as the officers of the Fund shall have from time
to time authorized. Each such writing shall set forth the specific transaction
or type of transaction involved, including a specific statement of the purpose
for which such action is requested. Oral instructions will be considered Proper
Instructions if the Custodian reasonably believes them to have been given by a
person authorized to give such instructions with respect to the transaction
involved. The Fund shall cause all oral instructions to be confirmed in writing.
It is understood and agreed that the Board of Directors/Directors/Trustees has
authorized (i) Prudential Mutual Fund Management Inc., as Manager of the Fund,
and (ii) The Prudential Investment Corporation (or Prudential-Bache Securities
Inc.), as Subadviser to the Fund, to deliver proper instructions with respect to
all matters for which proper instructions are required by this Article 5. The
Custodian may rely upon
-23-
<PAGE>
the certificate of an officer of the Manager or Subadviser, as the case may be,
with respect to the person or persons authorized on behalf of the Manager and
Subadviser, respectively, to sign, initial or give proper instructions for the
purpose of this Article 5. Proper Instructions may include communications
effected directly between electro-mechanical or electronic devices provided that
the Fund and the Custodian are satisfied that such procedures afford adequate
safeguards for the Fund's assets. For purposes of this Section, Proper
Instructions shall include instructions received by the Custodian pursuant to
any three-party agreement which requires a segregated asset account in
accordance with Section 2.11.
6. Actions Permitted without Express Authority.
-------------------------------------------
The Custodian may in its discretion, without express authority from the
Fund:
(1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this Contract,
provided that all such payments shall be accounted for to the Fund;
- --------
(2) surrender securities in temporary form for securities in
definitive form;
(3) endorse for collection, in the name of the Fund, checks, drafts
and other negotiable instruments; and
(4) in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and other dealings
with the securities and property of the Fund except as otherwise directed by the
Board of Directors/Trustees of the Fund.
7. Evidence of Authority
---------------------
The Custodian shall be protected in acting upon any instructions, notice,
request, consent, certificate or other instrument or paper believed by it to be
genuine and to have been properly
-24-
<PAGE>
executed by or on behalf of the Fund. The Custodian may receive and accept a
certified copy of a vote of the Board of Directors/Trustees of the Fund as
conclusive evidence (a) of the authority of any person to act in accordance with
such vote or (b) of any determination or of any action by the Board of
Directors/Trustees pursuant to the Articles of Incorporation/Declaration of
Fund as described in such vote, and such vote may be considered as in full force
and effect until receipt by the Custodian of written notice to the contrary.
8. Duties of Custodian with Respect to the Books of Account and Calculation of
---------------------------------------------------------------------------
Net Asset Value and Net Income.
- ------------------------------
The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Board of Directors/Trustees of the Fund to
keep the books of account of the Fund and/or compute the net asset value per
share of the outstanding shares of the Fund or, if directed in writing to do so
by the Fund, shall itself keep such books of account and/or compute such net
asset value per share. If so directed, the Custodian shall also calculate daily
the net income of the Fund as described in the Fund's currently effective
prospectus and shall advise the Fund and the Transfer Agent daily of the total
amounts of such net income and, if instructed in writing by an officer of the
Fund to do so, shall advise the Transfer Agent periodically of the division of
such net income among its various components. The calculations of the net asset
value per share and the daily income of the Fund shall be made at the time or
times described from time to time in the Fund's currently effective prospectus.
9. Records
-------
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will meet the
obligations of the Fund under the Investment
-25-
<PAGE>
Company Act of 1940, with particular attention to Section 31 thereof and Rules
31a-1 and 31a-2 thereunder. All such records shall be the property of the Fund
and shall at all times during the regular business hours of the Custodian be
open for inspection by duly authorized officers, employees or agents of the Fund
and employees and agents of the Securities and Exchange Commission. The
Custodian shall, at the Fund's request, supply the Fund with a tabulation of
securities owned by the Fund and held by the Custodian and shall, when requested
to do so by the Fund and for such compensation as shall be agreed upon between
the Fund and the Custodian, include certificate numbers in such tabulations.
10. Opinion of Fund's Independent Accountant
----------------------------------------
The Custodian shall take all reasonable action, as the Fund may from
time to time request, to obtain from year to year favorable opinions from the
Fund's independent accountants with respect to its activities hereunder in
connection with the preparation of the Fund's Form N-1A, Form N-2 (in the case
of a closed end fund) and Form N-SAR or other periodic reports to the Securities
and Exchange Commission and with respect to any other requirements of such
Commission.
11. Compensation of Custodian
-------------------------
The Custodian shall be entitled to reasonable compensation for its services
and expenses as Custodian, as agreed upon from time to time between the Fund and
the Custodian.
12. Responsibility of Custodian
---------------------------
So long as and to the extent that it is in the exercise of reasonable care,
the Custodian shall not be responsible for the title, validity or genuineness of
any property or evidence of title thereto received by it or delivered by it
pursuant to this Contract and shall be held harmless in acting upon
-26-
<PAGE>
any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of this Contract but
shall be kept indemnified by and shall be without liability to the Fund for any
action taken or omitted by it in good faith without negligence. It shall be
entitled to rely on and may act upon advice of counsel (who may be counsel for
the Fund) on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice. Notwithstanding the
foregoing, the responsibility of the Custodian with respect to redemptions
effected by check shall be in accordance with a separate Agreement entered into
between the Custodian and the Fund.
The Custodian shall be liable for the acts or omissions of a foreign
banking institution appointed pursuant to the provisions of Article 3 to the
same extent as set forth in Article 1 hereof with respect to sub-custodians
located in the United States and, regardless of whether assets are maintained in
the custody of a foreign banking institution, a foreign securities depository or
a branch of a U.S. bank as contemplated by paragraph 3.11 hereof, the Custodian
shall not be liable for any loss, damage, cost, expense, liability or claim
resulting from, or caused by, the direction of or authorization by the Fund to
maintain custody or any securities or cash of the Fund in a foreign country
including, but not limited to, losses resulting from nationalization,
expropriation, currency restrictions, or acts of war or terrorism.
If the Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Custodian, result in the Custodian or its nominee assigned to
the Fund being liable for the payment of money or
-27-
<PAGE>
incurring liability of some other form, the Fund, as a prerequisite to requiring
the Custodian to take such action, shall provide indemnity to the Custodian in
an amount and form satisfactory to it.
If the Fund requires the Custodian to advance cash or securities for any
purpose or in the event that the Custodian or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Contract, except such as may arise from
its or its nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the Fund shall be
security therefor and should the Fund fail to repay the Custodian promptly, the
Custodian shall be entitled to utilize available cash and to dispose of the Fund
assets to the extent necessary to obtain reimbursement provided, however that,
prior to disposing of Fund assets hereunder, the Custodian shall give the Fund
notice of its intention to dispose of assets identifying such assets and the
Fund shall have one business day from receipt of such notice to notify the
Custodian if the Fund wishes the Custodian to dispose of Fund assets of equal
value other than those identified in such notice.
13. Effective Period, Termination and Amendment
-------------------------------------------
This Contract shall become effective as of its execution, shall continue in
full force and effect until terminated as hereinafter provided, may be amended
at any time by mutual agreement of the parties hereto and may be terminated by
either party by an instrument in writing delivered or mailed, postage prepaid to
the other party, such termination to take effect not sooner than sixty (60) days
after the date of such delivery or mailing; provided, however that the Custodian
--------
shall not act under Section 2.10 hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the Board of
Directors/Trustees of the Fund has approved the initial
-28-
<PAGE>
use of a particular Securities System and the receipt of an annual certificate
of the Secretary or an Assistant Secretary that the Board of Directors/Trustees
has reviewed the use by the Fund of such Securities System, as required in each
case by Rule 17f-4 under the Investment Company Act of 1940, as amended and that
the Custodian shall not act under Section 2.10A hereof in the absence of receipt
of an initial certificate of the Secretary or an Assistant Secretary that the
Board of Directors/Trustees has approved the initial use of the Direct Paper
System and the receipt of an annual certificate of the Secretary or an Assistant
Secretary that the Board of Directors/Trustees has reviewed the use by the Fund
of the Direct Paper System; provided further, however, that the Fund shall not
-------- -------
amend or terminate this Contract in contravention of any applicable federal or
state regulations, or any provision of the Articles of Incorporation/Declaration
of Trust, and further, provided, that the Fund may at any time by action of its
Board of Directors/Trustees (i) substitute another bank or trust company for the
Custodian by giving notice as described above to the Custodian, or (ii)
immediately terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller of the Currency or
upon the happening of a like event at the direction of an appropriate regulatory
agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund shall pay to the Custodian such
compensation as may be due as of the date of such termination and shall likewise
reimburse the Custodian for its costs, expenses and disbursements.
14. Successor Custodian
-------------------
If a successor custodian shall be appointed by the Board of
Directors/Trustees of the Fund, the Custodian shall, upon termination, deliver
to such successor custodian at the office of
-29-
<PAGE>
the Custodian, duly endorsed and in the form for transfer, all securities then
held by it hereunder and shall transfer to an account of the successor custodian
all of the Fund's securities held in a Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a certified copy of a vote of the Board of
Directors/Trustees of the Fund, deliver at the office of the Custodian and
transfer such securities, funds and other properties in accordance with such
vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Directors/Trustees shall have been
delivered to the Custodian on or before the date when such termination shall
become effective, then the Custodian shall have the right to deliver to a bank
or trust company, which is a "bank" as defined in the Investment Company Act of
1940, doing business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities, funds and other
properties held by the Custodian and all instruments held by the Custodian
relative thereto and all other property held by it under this Contract and to
transfer to an account of such successor custodian all of the Fund's securities
held in any Securities System. Thereafter, such bank or trust company shall be
the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Directors/Trustees to appoint a successor custodian, the Custodian
shall be entitled to fair compensation for its services during such period
-30-
<PAGE>
as the Custodian retains possession of such securities, funds and other
properties and the provisions of this Contract relating to the duties and
obligations of the Custodian shall remain in full force and effect.
15. Interpretive and Additional Provisions
--------------------------------------
In connection with the operation of this Contract, the Custodian and the
Fund may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
--------
shall contravene any applicable federal or state regulations or any provision of
the Articles of Incorporation/ Declaration of Trust of the Fund. No
interpretative or additional provisions made as provided in the preceding
sentence shall be deemed to be an amendment of this Contract.
16. Massachusetts Law to Apply
--------------------------
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of the Commonwealth of Massachusetts.
17. Prior Contracts
---------------
This Contract supersedes and terminates, as of the date hereof, all prior
contracts between the Fund and the Custodian relating to the custody of the
Fund's assets.
18. The Parties
-----------
All references herein to the "Fund" are to each of the Funds listed on
Appendix A individually, as if this Contract were between such individual Fund
and the Custodian. With respect to any Fund listed on Appendix A which is
organized as a Massachusetts Business trust,
-31-
<PAGE>
references to Board of Directors and Articles of Incorporation shall be deemed a
reference to Board of Directors/Trustees and Articles of
Incorporation/Declaration of Trust respectively and reference to shares of
capital stock shall be deemed a reference to shares of beneficial interest.
19. Limitation of Liability
-----------------------
Each Fund listed on Appendix A that is referenced as a Massachusetts
Business Trust is the designation of the Trustees under a Declaration of Trust,
dated (see Appendix A) and all persons dealing with the Fund must look solely to
the property of the Fund for the enforcement of any claims against the Fund as
neither the Trustees, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the dates set forth on Appendix A.
-32-
<PAGE>
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/ [ILLEGIBLE] By /s/ [ILLEGIBLE]
- ------------------------- ----------------------------------------
Assistant Secretary Vice President
ATTEST EACH OF THE FUNDS LISTED ON APPENDIX A
/s/ S. Jane Rose By /s/ R.F. Gunia
- --------------------------- ----------------------------------------
S. Jane Rose R.F. Gunia
Secretary Vice President
-33-
<PAGE>
EXHIBIT 99.(G)(2)
AMENDMENT TO CUSTODIAN CONTRACT/AGREEMENT
This Amendment to the respective Custodian Contract/Agreement is made as of
February 22, 1999 by and between each of the funds listed on Schedule D
(including any series thereof, each, a "Fund") and State Street Bank and Trust
Company (the "Custodian"). Capitalized terms used in this Amendment without
definition shall have the respective meanings given to such terms in the
Custodian Contract/Agreement referred to below.
WHEREAS, each Fund and the Custodian have entered into a Custodian
Contract/Agreement dated as of the dates set forth on Schedule D (each contract,
as amended, a "Contract"); and
WHEREAS, each Fund and the Custodian desire to amend certain provisions of
the Contract to reflect revisions to Rule 17f-5 ("Rule 17f-5") promulgated under
the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, each Fund and the Custodian desire to amend and restate certain
other provisions of the Contract relating to the custody of assets of each of
the Funds held outside of the United States.
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements hereinafter contained, the parties hereby agree to amend the
Contract, to add the following new provisions which supersede the provisions in
the existing contracts relating to the custody of assets of the Funds outside
the United States.
3. The Custodian as Foreign Custody Manager.
----------------------------------------
3.1. Definitions.
-----------
Capitalized terms in this Article 3 shall have the following meanings:
"Country Risk" means all factors reasonably related to the systemic risk of
holding Foreign Assets in a particular country including, but not limited to,
such country's political environment; economic and financial infrastructure;
systemic custody and securities settlement practices; and laws and regulations
applicable to the safekeeping and recovery of Foreign Assets held in custody in
that country.
"Eligible Foreign Custodian" has the meaning set forth in section (a)(1) of Rule
17f-5, including a majority-owned or indirect subsidiary of a U.S. Bank (as
defined in Rule 17f-5), a bank holding company meeting the requirements of an
Eligible Foreign Custodian (as set forth in Rule 17f-5 or by other appropriate
action of the U.S. Securities and Exchange Commission (the "SEC")), or a foreign
branch of a Bank (as defined in Section 2(a)(5) of the 1940 Act) meeting the
requirements of a custodian under Section 17(f) of the 1940 Act, except that the
term does not include Mandatory Securities Depositories.
1
<PAGE>
"Foreign Assets" means any of the Funds' investments (including foreign
currencies) for which the primary market is outside the United States and such
cash and cash equivalents as are reasonably necessary to effect the Funds'
transactions in such investments.
"Foreign Custody Manager" has the meaning set forth in section (a)(2) of Rule
17f-5.
"Mandatory Securities Depository" means a foreign securities depository or
clearing agency that, either as a legal or practical matter, must be used if the
Fund determines to place Foreign Assets in a country outside the United States
(i) because required by law or regulation; (ii) because securities cannot be
withdrawn from such foreign securities depository or clearing agency; or (iii)
because maintaining or effecting trades in securities outside the foreign
securities depository or clearing agency is not consistent with systemic
custodial or market practices.
3.2. Delegation to the Custodian as Foreign Custody Manager.
------------------------------------------------------
Each Fund, by resolution adopted by its Board of Trustees/Directors (the
"Board"), hereby delegates to the Custodian subject to Section (b) of Rule 17f-
5, the responsibilities set forth in this Article 3 with respect to Foreign
Assets of the Fund held outside the United States, and the Custodian hereby
accepts such delegation, as Foreign Custody Manager with respect to the Funds.
3.3. Countries Covered.
-----------------
The Foreign Custody Manager shall be responsible for performing the delegated
responsibilities defined below only with respect to the countries and custody
arrangements for each such country listed on Schedule A to this Contract, which
list of countries may be amended from time to time by the Fund with the
agreement of the Foreign Custody Manager. The Foreign Custody Manager shall
list on Schedule A the Eligible Foreign Custodians selected by the Foreign
Custody Manager to maintain the assets of the Funds which list of Eligible
Foreign Custodians may be amended from time to time in the sole discretion of
the Foreign Custody Manager. Mandatory Securities Depositories are listed on
Schedule B to this Contract, which Schedule B may be amended from time to time
by the Foreign Custody Manager upon reasonable notice to the Fund. The Foreign
Custody Manager will provide amended versions of Schedules A and B in accordance
with Section 3.7 of this Article 3.
Upon the receipt by the Foreign Custody Manager of Proper Instructions to open
an account or to place or maintain Foreign Assets in a country listed on
Schedule A, and the fulfillment by a Fund of the applicable account opening
requirements for such country, the Foreign Custody Manager shall be deemed to
have been delegated by that Fund's Board responsibility as Foreign Custody
Manager with respect to that country and to have accepted such delegation.
Execution of this Amendment by the Fund shall be deemed to be a Proper
Instruction to open an account, or to place or maintain Foreign Assets, in each
country listed on Schedule A in which the Custodian has previously placed or
currently maintains Foreign Assets pursuant to the terms of the
2
<PAGE>
Contract. Following the receipt of Proper Instructions directing the Foreign
Custody Manager to close the account of a Fund with the Eligible Foreign
Custodian selected by the Foreign Custody Manager in a designated country, the
delegation by that Fund's Board to the Custodian as Foreign Custody Manager for
that country shall be deemed to have been withdrawn and the Custodian shall
immediately cease to be the Foreign Custody Manager of the Fund with respect to
that country.
The Foreign Custody Manager may withdraw its acceptance of delegated
responsibilities with respect to a designated country upon written notice to the
Fund. Thirty days (or such longer period as to which the parties agree in
writing) after receipt of any such notice by the Fund, the Custodian shall have
no further responsibility as Foreign Custody Manager to the Fund with respect to
the country as to which the Custodian's acceptance of delegation is withdrawn.
3.4. Scope of Delegated Responsibilities.
-----------------------------------
3.4.1. Selection of Eligible Foreign Custodians.
----------------------------------------
Subject to the provisions of this Article 3, the Fund's Foreign Custody Manager
may place and maintain the Foreign Assets in the care of the Eligible Foreign
Custodian selected by the Foreign Custody Manager in each country listed on
Schedule A, as amended from time to time.
In performing its delegated responsibilities as Foreign Custody Manager to place
or maintain Foreign Assets with an Eligible Foreign Custodian, the Foreign
Custody Manager shall determine that the Foreign Assets will be subject to
reasonable care, based on the standards applicable to custodians in the country
in which the Foreign Assets will be held by that Eligible Foreign Custodian,
after considering all factors relevant to the safekeeping of such assets,
including, without limitation the factors specified in Rule 17f-5(c)(1).
3.4.2. Contracts With Eligible Foreign Custodians.
------------------------------------------
The Foreign Custody Manager shall determine that the contract (or the rules or
established practices or procedures in the case of an Eligible Foreign Custodian
that is a foreign securities depository or clearing agency) governing the
foreign custody arrangements with each Eligible Foreign Custodian selected by
the Foreign Custody Manager will satisfy the requirements of Rule 17f-5(c)(2).
3.4.3. Monitoring.
----------
In each case in which the Foreign Custody Manager maintains Foreign Assets with
an Eligible Foreign Custodian selected by the Foreign Custody Manager, the
Foreign Custody Manager shall establish a system to monitor (i) the
appropriateness of maintaining the Foreign Assets with such Eligible Foreign
Custodian and (ii) the contract governing the custody arrangements established
by the Foreign Custody Manager with the Eligible Foreign Custodian (or the rules
or established practices and procedures in the case of an Eligible Foreign
Custodian selected by the Foreign
3
<PAGE>
Custody Manager which is a foreign securities depository or clearing agency that
is not a Mandatory Securities Depository). The Foreign Custody Manager shall
provide the Board at least annually with information as to the factors used in
such monitoring system. If the Foreign Custody Manager determines that the
custody arrangements with an Eligible Foreign Custodian it has selected are no
longer appropriate, the Foreign Custody Manager shall notify the Board in
accordance with Section 3.7 hereunder and withdraw the Foreign Assets from such
Eligible Foreign Custodian as soon as reasonably practicable.
3.5. Guidelines for the Exercise of Delegated Authority.
--------------------------------------------------
For purposes of this Article 3, the Foreign Custody Manager shall have no
responsibility for Country Risk as is incurred by placing and maintaining the
Foreign Assets in each country for which the Custodian is serving as Foreign
Custody Manager of the Portfolios. The Fund and the Custodian each expressly
acknowledge that the Foreign Custody Manager shall not be delegated any
responsibilities under this Article 3 with respect to Mandatory Securities
Depositories.
3.6. Standard of Care as Foreign Custody Manager of a Portfolio.
----------------------------------------------------------
In performing the responsibilities delegated to it, the Foreign Custody Manager
agrees to exercise reasonable care, prudence and diligence such as a person
having responsibility for the safekeeping of assets of management investment
companies registered under the 1940 Act would exercise.
3.7. Reporting Requirements.
----------------------
The Foreign Custody Manager shall report the placement of Foreign Assets with an
Eligible Foreign Custodian, the withdrawal of the Foreign Assets from an
Eligible Foreign Custodian and the placement of such Foreign Assets with another
Eligible Foreign Custodian by providing to the Board amended Schedules A or B at
the end of the calendar quarter in which an amendment to either Schedule has
occurred. The Foreign Custody Manager shall make written reports notifying the
Board of any other material change in the foreign custody arrangements of the
Funds described in this Article 3 promptly after the occurrence of the material
change.
3.8. Representations with Respect to Rule 17f-5.
------------------------------------------
The Foreign Custody Manager represents to the Fund that it is a U.S. Bank as
defined in section (a)(7) of Rule 17f-5.
3.9. Effective Date and Termination of the Custodian as Foreign Custody Manager.
--------------------------------------------------------------------------
The Board's delegation to the Custodian as Foreign Custody Manager of the Funds
shall be effective as of the date hereof and shall remain in effect until
terminated at any time, without penalty, by written notice from the terminating
party to the non-terminating party. Termination will become effective sixty (60)
days after receipt by the non-terminating party of such notice.
4
<PAGE>
The provisions of Section 3.3 hereof shall govern the delegation to and
termination of the Custodian as Foreign Custody Manager of the Funds with
respect to designated countries.
3.10. Most Favored Client.
-------------------
If at any time prior to termination of this Amendment, the Custodian, as a
matter of standard business practice, accepts delegation as Foreign Custody
Manager for its U.S. mutual fund clients on terms of materially greater benefit
to the Funds than set forth in this Amendment, the Custodian hereby agrees to
negotiate with the Funds in good faith with respect thereto.
4. Duties of the Custodian with Respect to Property of the Funds held
------------------------------------------------------------------
Outside the United States.
-------------------------
4.1 Definitions.
-----------
Capitalized terms in this Article 4 shall have the following meanings:
"Foreign Securities System" means either a clearing agency or a securities
depository listed on Schedule A hereto or a Mandatory Securities Depository
listed on Schedule B hereto.
"Foreign Sub-Custodian" means a foreign banking institution (including a foreign
branch of the Custodian or another Bank (as defined in Section 2(a)(5) of the
1940 Act)) serving as an Eligible Foreign Custodian.
4.2. Holding Securities.
------------------
The Custodian shall identify on its books as belonging to the Funds the foreign
securities held by each Foreign Sub-Custodian or Foreign Securities System. The
Custodian may hold foreign securities for all of its customers, including the
Funds, with any Foreign Sub-Custodian in an account that is identified as
belonging to the Custodian for the benefit of its customers, provided however,
-------- -------
that (i) the records of the Custodian with respect to foreign securities of the
Funds which are maintained in such account shall identify those securities as
belonging to the Funds and (ii), to the extent permitted and customary in the
market in which the account is maintained, the Custodian shall require that
securities so held by the Foreign Sub-Custodian be held separately from any
assets of such Foreign Sub-Custodian or of other customers of such Foreign Sub-
Custodian.
4.3. Foreign Securities Systems.
--------------------------
Foreign securities shall be maintained in a Foreign Securities System in a
designated country only through arrangements implemented by the Foreign Sub-
Custodian in such country pursuant to the terms of this Contract.
4.4. Transactions in Foreign Custody Account.
---------------------------------------
5
<PAGE>
4.4.1. Delivery of Foreign Assets.
--------------------------
The Custodian or a Foreign Sub-Custodian shall release and deliver foreign
securities of the Funds held by such Foreign Sub-Custodian, or in a Foreign
Securities System account, only upon receipt of Proper Instructions, which may
be continuing instructions when deemed appropriate by the parties, and only in
the following cases:
(i) upon the sale of such foreign securities for the Fund in accordance
with customary market practice in the country where such foreign
securities are held or traded, including, without limitation: (A)
delivery against expectation of receiving later payment; or (B) in
the case of a sale effected through a Foreign Securities System, in
accordance with the rules governing the operation of the Foreign
Securities System;
(ii) in connection with any repurchase agreement related to foreign
securities;
(iii) to the depository agent in connection with tender or other similar
offers for foreign securities of the Portfolios;
(iv) to the issuer thereof or its agent when such foreign securities are
called, redeemed, retired or otherwise become payable;
(v) to the issuer thereof, or its agent, for transfer into the name of
the Custodian (or the name of the respective Foreign Sub-Custodian
or of any nominee of the Custodian or such Foreign Sub-Custodian)
or for exchange for a different number of bonds, certificates or
other evidence representing the same aggregate face amount or
number of units;
(vi) to brokers, clearing banks or other clearing agents for examination
or trade execution in accordance with reasonable market custom;
provided that in any such case the Foreign Sub-Custodian shall have
--------
no responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for such
securities except as may arise from the Foreign Sub-Custodian's own
negligence or willful misconduct;
(vii) for exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of
the securities of the issuer of such securities, or pursuant to
provisions for conversion contained in such securities, or pursuant
to any deposit agreement;
(viii) in the case of warrants, rights or similar foreign securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities;
6
<PAGE>
(ix) for delivery as security in connection with any borrowing by the
Funds requiring a pledge of assets by the Funds;
(x) in connection with trading in options and futures contracts,
including delivery as original margin and variation margin;
(xi) in connection with the lending of foreign securities; and
(xii) for any other proper purpose, but only upon receipt of Proper
--- ----
Instructions specifying the foreign securities to be delivered,
setting forth the purpose for which such delivery is to be made,
declaring such purpose to be a proper trust\corporate purpose, and
naming the person or persons to whom delivery of such securities
shall be made.
4.4.2. Payment of Fund Monies.
----------------------
Upon receipt of Proper Instructions, which may be continuing instructions when
deemed appropriate by the parties, the Custodian shall pay out, or direct the
respective Foreign Sub-Custodian or the respective Foreign Securities System to
pay out, monies of a Fund in the following cases only:
(i) upon the purchase of foreign securities for the Fund, unless
otherwise directed by Proper Instructions, in accordance with
reasonable market settlement practice in the country where such
foreign securities are held or traded, including, without
limitation, (A) delivering money to the seller thereof or to a
dealer therefor (or an agent for such seller or dealer) against
expectation of receiving later delivery of such foreign securities;
or (B) in the case of a purchase effected through a Foreign
Securities System, in accordance with the rules governing the
operation of such Foreign Securities System;
(ii) in connection with the conversion, exchange or surrender of foreign
securities of the Fund;
(iii) for the payment of any expense or liability of the Fund, including
but not limited to the following payments: interest, taxes,
investment advisory fees, transfer agency fees, fees under this
Contract, legal fees, accounting fees, and other operating
expenses;
(iv) for the purchase or sale of foreign exchange or foreign exchange
contracts for the Fund, including transactions executed with or
through the Custodian or its Foreign Sub-Custodians;
(v) in connection with trading in options and futures contracts,
including delivery as
7
<PAGE>
original margin and variation margin;
(vi) for payment of part or all of the dividends received in respect of
securities sold short;
(vii) in connection with the borrowing or lending of foreign securities;
and
(viii) for any other proper purpose, but only upon receipt of Proper
--- ----
Instructions specifying the amount of such payment, setting forth
the purpose for which such payment is to be made, declaring such
purpose to be a proper trust\corporate purpose, and naming the
person or persons to whom such payment is to be made.
4.4.3. Market Conditions; Market Information.
-------------------------------------
Notwithstanding any provision of this Contract to the contrary, settlement and
payment for Foreign Assets received for the account of the Funds and delivery of
Foreign Assets maintained for the account of the Funds may be effected in
accordance with the customary established securities trading or processing
practices and procedures in the country or market in which the transaction
occurs generally accepted by Institutional Clients, including, without
limitation, delivering Foreign Assets to the purchaser thereof or to a dealer
therefor (or an agent for such purchaser or dealer) with the expectation of
receiving later payment for such Foreign Assets from such purchaser or dealer.
For purposes of this Agreement, the term "Institutional Clients" means U.S.
registered investment companies or major U.S. commercial banks, insurance
companies, pension funds or substantially similar institutions which, as a part
of their ordinary business operations, purchase or sell securities and make use
of global custody services.
The Custodian shall provide to the Board information with respect to material
changes in the custody and settlement practices in countries in which the
Custodian employs a Foreign Sub-Custodian. The Custodian shall provide, without
limitation, information relating to Foreign Securities Systems and other
information described in Schedule C. The Custodian may revise Schedule C from
time to time, provided that no such revision shall result in the Board being
provided with substantively less information than had previously been provided
hereunder and provided further that the Custodian shall in any event provide to
the Board at least annually the following information and opinions with respect
to the Board approved countries listed on Schedule A:
(i) legal opinions relating to whether local law restricts with respect
to U.S. registered mutual funds (a) access of a fund's independent
public accountants to books and records of a Foreign Sub-Custodian
or Foreign Securities System, (b) a fund's ability to recover in
the event of bankruptcy or insolvency of a Foreign Sub-Custodian or
Foreign Securities System, (c) a fund's ability to recover in the
event of a loss by a Foreign Sub-Custodian or Foreign Securities
System, and (d)
8
<PAGE>
the ability of a foreign investor to convert cash and cash
equivalents to U.S. dollars;
(ii) summary of information regarding Foreign Securities Systems; and
(iii) country profile information containing market practice for (a)
delivery versus payment, (b) settlement method, (c) currency
restrictions, (d) buy-in practices, (e) foreign ownership limits,
and (f) unique market arrangements.
4.5. Registration of Foreign Securities.
----------------------------------
The foreign securities maintained in the custody of a Foreign Sub-Custodian
(other than bearer securities) shall be registered in the name of the applicable
series or in the name of the Custodian or in the name of any Foreign Sub-
Custodian or in the name of any nominee of the foregoing, and the Fund agrees to
hold any such nominee harmless from any liability as a holder of record of such
foreign securities, except to the extent that the Fund incurs loss or damage due
to failure of such nominee to meet its standard of care set forth in the
Contract. The Custodian or a Foreign Sub-Custodian shall not be obligated to
accept securities on behalf of a Fund under the terms of this Contract unless
the form of such securities and the manner in which they are delivered are in
accordance with reasonable market practice.
4.6. Bank Accounts.
-------------
The Custodian shall identify on its books as belonging to the Fund cash
(including cash denominated in foreign currencies) deposited with the Custodian.
Where the Custodian is unable to maintain, or market practice does not
facilitate the maintenance of, cash on the books of the Custodian, a bank
account or bank accounts opened and maintained outside the United States on
behalf of a Fund with a Foreign Sub-Custodian shall be subject only to draft or
order by the Custodian or such Foreign Sub-Custodian, acting pursuant to the
terms of this Contract to hold cash received by or from or for the account of
the Portfolio.
4.7. Collection of Income.
--------------------
The Custodian shall use reasonable commercial efforts to collect all income and
other payments with respect to the Foreign Assets held hereunder to which the
Funds shall be entitled and shall credit such income, as collected, to the
applicable Fund. In the event that extraordinary measures are required to
collect such income, the Fund and the Custodian shall consult as to such
measures and as to the compensation and expenses of the Custodian relating to
such measures.
4.8. Shareholder Rights.
------------------
With respect to the foreign securities held pursuant to this Article 4, the
Custodian will use
9
<PAGE>
reasonable commercial efforts to facilitate the exercise of voting and other
shareholder rights, subject always to the laws, regulations and practical
constraints that may exist in the country where such securities are issued. The
Fund acknowledges that local conditions, including lack of regulation, onerous
procedural obligations, lack of notice and other factors may have the effect of
severely limiting the ability of the Fund to exercise shareholder rights.
4.9. Communications Relating to Foreign Securities.
---------------------------------------------
The Custodian shall transmit promptly to the Fund written information
(including, without limitation, pendency of calls and maturities of foreign
securities and expirations of rights in connection therewith) received by the
Custodian via the Foreign Sub-Custodians from issuers of the foreign securities
being held for the account of the Funds. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Fund written information so
received by the Custodian from issuers of the foreign securities whose tender or
exchange is sought or from the party (or its agents) making the tender or
exchange offer. Subject to the standard of care to which the Custodian is held
under this Agreement, the Custodian shall not be liable for any untimely
exercise of any tender, exchange or other right or power in connection with
foreign securities or other property of the Funds at any time held by it unless
(i) the Custodian or the respective Foreign Sub-Custodian is in actual
possession of such foreign securities or property and (ii) the Custodian
receives Proper Instructions with regard to the exercise of any such right or
power, and both (i) and (ii) occur at least three business days prior to the
date on which the Custodian is to take action to exercise such right or power.
4.10. Liability of Foreign Sub-Custodians and Foreign Securities Systems.
------------------------------------------------------------------
Each agreement pursuant to which the Custodian employs a Foreign Sub-Custodian
shall, to the extent possible, require the Foreign Sub-Custodian to exercise
reasonable care in the performance of its duties and, to the extent possible, to
indemnify, and hold harmless, the Custodian from and against any loss, damage,
cost, expense, liability or claim arising out of or in connection with the
Foreign Sub-Custodian's performance of such obligations. At each Fund's
election, a Fund shall be entitled to be subrogated to the rights of the
Custodian with respect to any claims against a Foreign Sub-Custodian as a
consequence of any such loss, damage, cost, expense, liability or claim if and
to the extent that a Fund and any applicable series have not been made whole for
any such loss, damage, cost, expense, liability or claim.
4.11. Tax Law.
-------
Except to the extent that imposition of any tax liability arises from the
Custodian's failure to perform in accordance with the terms of this Section 4.11
or from the failure of any Foreign Sub-Custodian to perform in accordance with
the terms of the applicable subcustody agreement, the Custodian shall have no
responsibility or liability for any obligations now or hereafter imposed on a
Fund, a series thereof or the Custodian as custodian of the Fund by the tax law
of the United States or of any state or political subdivision thereof. It shall
be the responsibility of each Fund to notify the Custodian of the obligations
imposed on the Fund or the Custodian as custodian of
10
<PAGE>
the Fund by the tax law of countries other than those mentioned in the above
sentence, including responsibility for withholding and other taxes, assessments
or other governmental charges, certifications and governmental reporting. The
sole responsibility of the Custodian with regard to such tax law shall be to use
reasonable efforts to assist the Fund with respect to any claim for exemption or
refund under the tax law of countries for which the Fund has provided such
information.
4.12. Liability of Custodian.
----------------------
Except as may arise from the Custodian's own negligence or willful misconduct or
the negligence or willful misconduct of a Sub-Custodian, the Custodian shall be
without liability to a Fund for any loss, liability, claim or expense resulting
from or caused by anything which is (A) part of Country Risk or (B) part of the
"prevailing country risk" of the Fund, as such term is used in SEC Release Nos.
IC-22658; IS-1080 (May 12, 1997) or as such term or other similar terms are now
or in the future interpreted by the SEC or by the staff of the Division of
Investment Management of the SEC.
The Custodian shall be liable for the acts or omissions of a Foreign Sub-
Custodian to the same extent as set forth with respect to sub-custodians
generally in the Contract and, regardless of whether assets are maintained in
the custody of a Foreign Sub-Custodian or a Foreign Securities System, the
Custodian shall not be liable for any loss, damage, cost, expense, liability or
claim resulting from nationalization, expropriation, currency restrictions, or
acts of war or terrorism, or any other loss where the Sub-Custodian has
otherwise acted with reasonable care.
III. Except as specifically superseded or modified herein, the terms and
provisions of the Contract shall continue to apply with full force and
effect. In the event of any conflict between the terms of the Contract
prior to this Amendment and this Amendment, the terms of this Amendment
shall prevail. If the Custodian is delegated the responsibilities of
Foreign Custody Manager pursuant to the terms of Article 3 hereof, in the
event of any conflict between the provisions of Articles 3 and 4 hereof,
the provisions of Article 3 shall prevail.
11
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Amendment to be
executed in its name and behalf by its duly authorized representative as of the
date first above written.
WITNESSED BY: STATE STREET BANK AND TRUST
COMPANY
/s/ Marc L. Parsons By: /s/ Ronald E. Logue
- ------------------- -------------------
Marc L. Parsons Ronald E. Logue
Associate Counsel Executive Vice President
Cash Accumulation Trust
Command Government Fund
Command Money Fund
Command Tax-Free Fund
Global Utility Fund, Inc.
Nicholas-Applegate Fund, Inc.
Prudential 2020 Focus 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 Index Series Fund
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 Institutional Liquidity Portfolio, Inc.
Prudential Intermediate Global Income Fund, Inc.
Prudential International Bond Fund, Inc.
The Prudential Investment Portfolios Fund, Inc.
Prudential Mid-Cap Value Fund
Prudential MoneyMart Assets, Inc.
12
<PAGE>
Prudential Mortgage Income Fund, Inc.
Prudential Multi-Sector Fund, 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 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 Money Fund, Inc.
Prudential Tax-Managed Equity Fund
Prudential Utility Fund, Inc.
Prudential World Fund, Inc.
The Global Total Return Fund, Inc.
The Target Portfolio Trust
The Asia Pacific Fund, Inc.
The High Yield Income Fund, Inc.
Witnessed By:
By: /s/ S. Jane Rose By: /s/ Grace Torres
---------------- ----------------
Grace Torres
Treasurer
First Financial Fund, Inc.
The High Yield Plus Fund, Inc.
Witnessed By:
By: /s/ Stephanie L. Bourque By: /s/ Arthur J. Brown
------------------------ -------------------
Arthur J. Brown
Secretary
13
<PAGE>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
Country Subcustodian Non-Mandatory Depositories
Argentina Citibank, N.A. --
Australia Westpac Banking Corporation --
Austria Erste Bank der Oesterreichischen --
Sparkassen AG
Bahrain British Bank of the Middle East --
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
Bangladesh Standard Chartered Bank --
Belgium Generale de Banque --
Bermuda The Bank of Bermuda Limited --
Bolivia Banco Boliviano Americano S.A. --
Botswana Barclays Bank of Botswana Limited --
Brazil Citibank, N.A. --
Bulgaria ING Bank N.V. --
Canada Canada Trustco Mortgage Company --
Chile Citibank, N.A. Deposito Central de
Valores S.A.
People's The Hongkong and Shanghai --
Republic Banking Corporation Limited,
of China Shanghai and Shenzhen branches
Colombia Cititrust Colombia S.A. --
Sociedad Fiduciaria
14
<PAGE>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
Country Subcustodian Non-Mandatory Depositories
Costa Rica Banco BCT S.A. --
Croatia Privredna Banka Zagreb d.d --
Cyprus Barclays Bank Plc. --
Cyprus Offshore Banking Unit
Czech Republic Ceskoslovenska Obchodni --
Banka, A.S.
Denmark Den Danske Bank --
Ecuador Citibank, N.A. --
Egypt National Bank of Egypt --
Estonia Hansabank --
Finland Merita Bank Limited --
France Banque Paribas --
Germany Dresdner Bank AG --
Ghana Barclays Bank of Ghana Limited --
Greece National Bank of Greece S.A. The Bank of Greece,
System for Monitoring
Transactions in
Securities in Book-Entry
Form
Hong Kong Standard Chartered Bank --
Hungary Citibank Budapest Rt. --
Iceland Icebank Ltd.
15
<PAGE>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
Country Subcustodian Non-Mandatory Depositories
India Deutsche Bank AG --
The Hongkong and Shanghai
Banking Corporation Limited
Indonesia Standard Chartered Bank --
Ireland Bank of Ireland --
Israel Bank Hapoalim B.M. --
Italy Banque Paribas --
Ivory Coast Societe Generale de Banques --
en Cote d'Ivoire
Jamaica Scotiabank Jamaica Trust and Merchant --
Bank Ltd.
Japan The Daiwa Bank, Limited Japan Securities
Depository Center
The Fuji Bank, Limited
Jordan British Bank of the Middle East --
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
Kenya Barclays Bank of Kenya Limited --
Republic of The Hongkong and Shanghai Banking
Korea Corporation Limited
Latvia JSC Hansabank-Latvija --
Lebanon British Bank of the Middle East
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
16
<PAGE>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
Country Subcustodian Non-Mandatory Depositories
Lithuania Vilniaus Bankas AB --
Malaysia Standard Chartered Bank --
Malaysia Berhad
Mauritius The Hongkong and Shanghai --
Banking Corporation Limited
Mexico Citibank Mexico, S.A. --
Morocco Banque Commerciale du Maroc --
Namibia (via) Standard Bank of South Africa --
The Netherlands MeesPierson N.V. --
New Zealand ANZ Banking Group --
(New Zealand) Limited
Norway Christiania Bank og --
Kreditkasse
Oman British Bank of the Middle East --
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
Pakistan Deutsche Bank AG --
Peru Citibank, N.A. --
Philippines Standard Chartered Bank --
Poland Citibank (Poland) S.A. --
Bank Polska Kasa Opieki S.A.
Portugal Banco Comercial Portugues --
17
<PAGE>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
Country Subcustodian Non-Mandatory Depositories
Romania ING Bank N.V. --
Russia Credit Suisse First Boston AO, Moscow --
(as delegate of Credit Suisse
First Boston, Zurich)
Singapore The Development Bank --
of Singapore Limited
Slovak Republic Ceskoslovenska Obchodni Banka, A.S. --
Slovenia Bank Austria d.d. Ljubljana --
South Africa Standard Bank of South Africa Limited --
Spain Banco Santander, S.A. --
Sri Lanka The Hongkong and Shanghai --
Banking Corporation Limited
Swaziland Standard Bank Swaziland Limited --
Sweden Skandinaviska Enskilda Banken --
Switzerland UBS AG --
Taiwan - R.O.C. Central Trust of China --
Thailand Standard Chartered Bank --
Trinidad
& Tobago Republic Bank Limited --
Tunisia Banque Internationale Arabe de Tunisie --
Turkey Citibank, N.A. --
Ottoman Bank
18
<PAGE>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
Country Subcustodian Non-Mandatory Depositories
Ukraine ING Bank, Ukraine --
United Kingdom State Street Bank and Trust Company, --
London Branch
Uruguay Citibank, N.A. --
Venezuela Citibank, N.A. --
Zambia Barclays Bank of Zambia Limited --
Zimbabwe Barclays Bank of Zimbabwe Limited --
Euroclear (The Euroclear System)/State Street London Limited
Cedel, S.A. (Cedel Bank, societe anonyme)/State Street London Limited
INTERSETTLE (for EASDAQ Securities)
* The global custody network approved by each fund is set forth below on
Schedules A-1 and A-2.
19
<PAGE>
Schedule A-1
Prudential Mutual Funds
State Street Global Custody Network
<TABLE>
<CAPTION>
Country Funds
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Argentina Mexico Global Utility Fund, Inc.
Australia Morocco Prudential 20/20 Focus Fund
Austria Netherlands Prudential Balanced Fund
Bangladesh/+/ New Zealand Prudential Equity Fund, Inc.
Belgium Norway Prudential Equity Income Fund
Brazil Pakistan Prudential Developing Markets Fund
Canada Peru Prudential Diversified Bond Fund, Inc.
Chile Philippines Prudential Distressed Securities Fund, Inc.
China Poland Prudential Diversified Funds
Columbia Portugal Prudential Emerging Growth Fund, Inc.
Cyprus Russia Prudential Global Genesis Fund, Inc.
Czech Republic Singapore Prudential Global Limited Maturity Fund, Inc.
Denmark Slovak Republic Prudential Index Series Fund
Ecuador South Africa Prudential Intermediate Global Income Fund, Inc.
Egypt Spain Prudential International Bond Fund, Inc.,
Finland Sri Lanka Prudential Mid-Cap Value Fund
France Sweden Prudential Natural Resources Fund, Inc.
Germany Switzerland Prudential Pacific Growth Fund, Inc.
Ghana Taiwan Prudential Real Estate Securities Fund
Greece Thailand Prudential Small-Cap Quantum Fund, Inc.
Hong Kong Turkey Prudential Small Company Value Fund, Inc.
Hungary Transnational Prudential Tax-Managed Equity Fund
India United Kingdom Prudential Utility Fund, Inc.
Indonesia Uruguay Prudential World Fund, Inc.
Ireland Venezuela The Prudential Investment Portfolios Fund, Inc.
Israel The Target Portfolio Trust
Italy The Global Total Return Fund, Inc.
Ivory Coast
Japan
Jordan
Kenya
Korea
Lebanon
Malaysia
- -----------------------------------------------------------------------------------------
+ Countries marked by a dagger have been approved only for The Target Portfolio Trust.
</TABLE>
<PAGE>
Schedule A-2
Prudential Mutual Funds
State Street Global Custody Network
<TABLE>
<CAPTION>
Country Funds
- -----------------------------------------------------------------------------------------
<S> <C>
United Kingdom Cash Accumulation Trust
Command Government Fund
Command Money Fund
Prudential Government Income Fund, Inc.
Prudential High Yield Fund, Inc.
Prudential High Yield Income Fund, Inc.
Prudential Institutional Liquidity Portfolio, Inc.
Prudential MoneyMart Assets, Inc.
Prudential Special Money Market Fund, Inc.
Prudential Structured Maturity Fund, Inc.
</TABLE>
<PAGE>
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
Country Mandatory Depositories
Argentina Caja de Valores S.A.
Australia Austraclear Limited
Reserve Bank Information and
Transfer System
Austria Oesterreichische Kontrollbank AG
(Wertpapiersammelbank Division)
Belgium Caisse Interprofessionnelle de Depot et
de Virement de Titres S.A.
Banque Nationale de Belgique
Brazil Companhia Brasileira de Liquidacao e
Custodia (CBLC)
Bolsa de Valores de Rio de Janeiro
All SSB clients presently use CBLC
Central de Custodia e de Liquidacao
Financeira de Titulos
Canada The Canadian Depository
for Securities Limited
People's Republic Shanghai Securities Central Clearing
of China and Registration Corporation
Shenzhen Securities Central Clearing
Co., Ltd.
Croatia
Czech Republic Stredisko cennych papiru
Czech National Bank
Denmark Vaerdipapircentralen
(the Danish Securities Center)
* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
<PAGE>
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
Country Mandatory Depositories
Egypt Misr Company for Clearing, Settlement,
and Central Depository
Finland The Finnish Central Securities
Depository
France Societe Interprofessionnelle
pour la Compensation des
Valeurs Mobilieres (SICOVAM)
Germany Deutsche Borse Clearing AG
Greece The Central Securities Depository
(Apothetirion Titlon AE)
Hong Kong The Central Clearing and
Settlement System
Central Money Markets Unit
Hungary The Central Depository and Clearing
House (Budapest) Ltd. (KELER)
[Mandatory for Gov't Bonds only;
SSB does not use for other securities]
India The National Securities Depository Limited
Indonesia Bank Indonesia
Ireland Central Bank of Ireland
Securities Settlement Office
Israel The Tel Aviv Stock Exchange Clearing
House Ltd.
Bank of Israel
Italy Monte Titoli S.p.A.
Banca d'Italia
* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
<PAGE>
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
Country Mandatory Depositories
Japan Bank of Japan Net System
Kenya Central Bank of Kenya
Republic of Korea Korea Securities Depository Corporation
Lebanon The Custodian and Clearing Center of
Financial Instruments for Lebanon
and the Middle East (MIDCLEAR) S.A.L.
The Central Bank of Lebanon
Malaysia The Malaysian Central Depository Sdn. Bhd.
Bank Negara Malaysia,
Scripless Securities Trading and Safekeeping
System
Mexico S.D. INDEVAL, S.A. de C.V.
(Instituto para el Deposito de
Valores)
Morocco Maroclear
The Netherlands Nederlands Centraal Instituut voor
Giraal Effectenverkeer B.V. (NECIGEF)
De Nederlandsche Bank N.V.
New Zealand New Zealand Central Securities
Depository Limited
Norway Verdipapirsentralen (the Norwegian
Registry of Securities)
Pakistan Central Depository Company of Pakistan
Limited
* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
<PAGE>
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
Country Mandatory Depositories
Peru Caja de Valores y Liquidaciones S.A.
(CAVALI)
Philippines The Philippines Central Depository, Inc.
The Registry of Scripless Securities
(ROSS) of the Bureau of the Treasury
Poland The National Depository of Securities
(Krajowy Depozyt Papierow Wartosciowych)
Central Treasury Bills Registrar
Portugal Central de Valores Mobiliarios (Central)
Romania National Securities Clearing, Settlement and
Depository Co.
Bucharest Stock Exchange Registry Division
Singapore The Central Depository (Pte)
Limited
Monetary Authority of Singapore
Slovak Republic Stredisko Cennych Papierov
National Bank of Slovakia
South Africa The Central Depository Limited
Spain Servicio de Compensacion y
Liquidacion de Valores, S.A.
Banco de Espana,
Central de Anotaciones en Cuenta
Sri Lanka Central Depository System
(Pvt) Limited
* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
<PAGE>
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
Country Mandatory Depositories
Sweden Vardepapperscentralen AB
(the Swedish Central Securities Depository)
Switzerland Schweizerische Effekten - Giro AG
Taiwan - R.O.C. The Taiwan Securities Central
Depository Co., Ltd.
Thailand Thailand Securities Depository
Company Limited
Turkey Takas ve Saklama Bankasi A.S.
(TAKASBANK)
Central Bank of Turkey
United Kingdom The Bank of England,
The Central Gilts Office and
The Central Moneymarkets Office
Uruguay Central Bank of Uruguay
Venezuela Central Bank of Venezuela
* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
<PAGE>
SCHEDULE C
MARKET INFORMATION
<TABLE>
<CAPTION>
Publication/Type of Information Brief Description
- ------------------------------- -----------------
<S> <C>
(Frequency)
The Guide to Custody in World Markets An overview of safekeeping and
- -------------------------------------
settlement practices and
(annually) procedures in each market in which State
Street Bank and Trust Company offers
custodial services.
Global Custody Network Review Information relating to the operating history
- -----------------------------
and structure of
(annually) depositories and subcustodians located in the markets
in which State Street Bank and Trust Company offers
custodial services, including transnational
depositories.
Global Legal Survey With respect to each market in which State Street Bank
- -------------------
and
(annually) Trust Company offers custodial services, opinions
relating to whether local law restricts (i) access of a
fund's independent public accountants to books and
records of a Foreign Sub-Custodian or Foreign
Securities System, (ii) the Fund's ability to recover
in the event of bankruptcy or insolvency of a Foreign
Sub-Custodian or Foreign Securities System, (iii) the
Fund's ability to recover in the event of a loss by a
Foreign Sub-Custodian or Foreign Securities System, and
(iv) the ability of a foreign investor to convert cash
and cash equivalents to U.S. dollars.
Subcustodian Agreements Copies of the subcustodian contracts State Street Bank
- -----------------------
and
(annually) Trust Company has entered into with each subcustodian
in the markets in which State Street Bank and Trust
Company offers subcustody services to its US mutual
fund clients.
Network Bulletins (weekly): Developments of interest to investors in the
markets in which State Street Bank and Trust Company
offers custodial services.
Foreign Custody Advisories With respect to markets in which State Street Bank
and Trust
(as necessary): Company offers custodial services which exhibit special
custody risks, developments which may impact State
Street's ability to deliver expected levels of service.
</TABLE>
<PAGE>
SCHEDULE D
LIST OF FUNDS,CONTRACTS AND AGREEMENTS
<TABLE>
<CAPTION>
Fund Name Execution Date
- --------- --------------
<S> <C>
Cash Accumulation Trust December 12, 1997
Command Government Fund July 1, 1990
Command Money Fund July 1, 1990
Command Tax-Free Fund July 1, 1990
The Global Total Return Fund, Inc. September 5, 1990
(formerly The Global Yield Fund, Inc.)
Prudential 20/20 Focus Fund April 14, 1998
Prudential California Municipal Fund August 1, 1990
Prudential Developing Markets Fund June 1, 1998
Prudential Distressed Securities Fund, Inc. February 8, 1996
Prudential Diversified Bond Fund, Inc. January 3, 1995
Prudential Diversified Funds September 2, 1998
Prudential Emerging Growth Fund, Inc. October 21, 1996
Prudential Equity Fund, Inc. August 1, 1990
Prudential Global Limited Maturity Fund, Inc. October 25, 1990
(formerly Prudential Short-Term Global
Income Fund, Inc.)
Prudential Government Income Fund, Inc. July 31, 1990
(formerly Prudential Government Plus Fund)
Prudential Government Securities Trust July 26, 1990
Prudential High Yield Fund, Inc. July 26, 1990
Prudential High Yield Total Return Fund, Inc. May 30, 1997
Prudential International Bond Fund, Inc. January 16, 1996
(formerly The Global Government Plus Fund, Inc.)
The Prudential Investment Portfolios Fund, Inc. October 27, 1995
(formerly Prudential Jennison Series Fund, Inc.)
Prudential Mid-Cap Value Fund April 14, 1998
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Prudential MoneyMart Assets, Inc. July 25, 1990
Prudential Mortgage Income Fund, Inc. August 1, 1990
(formerly Prudential GNMA Fund, Inc.)
Prudential Multi-Sector Fund, Inc. June 1, 1990
Prudential Municipal Series Fund August 1, 1990
Prudential National Municipals Fund, Inc. July 26, 1990
Prudential Pacific Growth Fund, Inc. July 16, 1992
Prudential Real Estate Securities Fund February 18, 1998
Prudential Small Cap Quantum Fund, Inc. August 1, 1997
Prudential Small Company Value Fund, Inc. July 26, 1990
(formerly Prudential Growth Opportunity Fund, Inc.)
Prudential Special Money Market Fund, Inc. January 12, 1990
Prudential Structured Maturity Fund, Inc. July 25, 1989
Prudential Tax-Free Money Fund, Inc. July 26, 1990
Prudential Utility Fund, Inc. June 6, 1990
Prudential World Fund, Inc. June 7, 1990
(formerly Prudential Global Fund, Inc.)
The Target Portfolio Trust November 9, 1992
Global Utility Fund, Inc. December 21, 1989
Nicholas-Applegate Fund, Inc. April 10, 1987
Prudential Balanced Fund September 4, 1987
Prudential Equity Income Fund January 6, 1987
Prudential Global Genesis Fund, Inc. October 21, 1987
Prudential Institutional Liquidity Portfolio, Inc. November 20, 1987
Prudential Intermediate Global Income Fund, Inc. May 19, 1988
Prudential Municipal Bond Fund August 25, 1987
Prudential Natural Resources Fund, Inc. September 18, 1987
Prudential Tax-Managed Equity Fund December 8, 1998
The Asia Pacific Fund April 24, 1987
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Duff & Phelps Utilities Tax-Free Income Fund, Inc. November 21, 1991
First Financial Fund, Inc. May 1, 1986
The High Yield Income Fund, Inc. November 6, 1987
The High Yield Plus Fund, Inc. March 15, 1988
</TABLE>
<PAGE>
Exhibit 99.(h)
TRANSFER AGENCY AND SERVICE AGREEMENT
between
STRATEGIC PARTNERS SERIES
and
PRUDENTIAL MUTUAL FUND SERVICES LLC
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
Article 1 Terms of Appointment; Duties of the Agent ................ 1
Article 2 Fees and Expenses......................................... 5
Article 3 Representations and Warranties of PMFS.................... 5
Article 4 Representations of Warranties of the Fund................. 7
Article 5 Duty of Care and Indemnification.......................... 7
Article 6 Documents and Covenants of the Fund and PMFS.............. 10
Article 7 Termination of Agreement.................................. 11
Article 8 Assignment................................................ 12
Article 9 Affiliations.............................................. 12
Article 10 Amendment................................................. 13
Article 11 Applicable Law............................................ 13
Article 12 Miscellaneous............................................. 13
Article 13 Merger of Agreement....................................... 15
</TABLE>
2
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
-------------------------------------
AGREEMENT made as of the __th day of ____________, 2000_ by and
between STRATEGIC PARTNERS SERIES, a Delaware business trust having its
principal office and place of business at Gateway Center Three, 100 Mulberry
Street, Newark, New Jersey 07102 (the Fund), and PRUDENTIAL MUTUAL FUND SERVICES
LLC, a New Jersey limited liability corporation, having its principal office and
place of business at Raritan Plaza One, Edison, New Jersey 08837 (the Agent or
PMFS).
WHEREAS, the Fund desires to appoint PMFS as its transfer agent,
dividend disbursing agent and shareholder servicing agent in connection with
certain other activities, and PMFS desires to accept such appointment;
NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
Article 1 Terms of Appointment; Duties of PMFS
------------------------------------
1.01 Subject to the terms and conditions set forth in this
Agreement, the Fund hereby employs and appoints PMFS to act as, and PMFS agrees
to act as, the transfer agent for the authorized and issued shares of beneficial
interest of each series of the Trust, $.001 par value (Shares), dividend
disbursing agent and shareholder servicing agent in connection with any
accumulation, open-account or similar plans provided to the shareholders of the
Fund or any series thereof (Shareholders) and set out in the currently effective
prospectuses and statement of additional information (prospectus) of the Fund,
including without limitation any periodic investment plan or periodic withdrawal
program.
3
<PAGE>
1.02 PMFS agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund and PMFS, PMFS shall:
(i) Receive for acceptance, orders for the purchase of Shares, and
promptly deliver payment and appropriate documentation therefor to the Custodian
of the Fund authorized pursuant to the Declaration of Trust of the Fund (the
Custodian) ;
(ii) Pursuant to purchase orders, issue the appropriate number of Shares
and hold such Shares in the appropriate Shareholder account;
(iii) Receive for acceptance redemption requests and redemption directions
and deliver the appropriate documentation therefor to the Custodian;
(iv) At the appropriate time as and when it receives monies paid to it by
the Custodian with respect to any redemption, pay over or cause to be paid over
in the appropriate manner such monies as instructed by the redeeming
Shareholders;
(v) Effect transfers of Shares by the registered owners thereof upon
receipt of appropriate instructions;
(vi) Prepare and transmit payments for dividends and distributions
declared by the Fund;
(vii) Calculate any sales charges payable by a Shareholder on purchases
and/or redemptions of Shares of the Fund as such charges may be reflected in the
prospectus;
(viii) Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing; and
(ix) Record the issuance of Shares of the Fund and maintain pursuant to
Rule 17Ad-10(e) under the Securities Exchange Act of 1934 (1934 Act) a record of
the total number of Shares of the Fund
4
<PAGE>
which are authorized, based upon data provided to it by the Fund, and issued and
outstanding. PMFS shall also provide to the Fund on a regular basis the total
number of Shares which are authorized, issued and outstanding and shall notify
the Fund in case any proposed issue of Shares by the Fund would result in an
overissue. In case any issue of Shares would result in an overissue, PMFS shall
refuse to issue such Shares and shall not countersign and issue any certificates
requested for such Shares. When recording the issuance of Shares, PMFS shall
have no obligation to take cognizance of any Blue Sky laws relating to the issue
or sale of such Shares, which functions shall be the sole responsibility of the
Fund.
(b) In addition to and not in lieu of the services set forth in the above
paragraph (a), PMFS shall: (i) perform all of the customary services of a
transfer agent, dividend disbursing agent and, as relevant, shareholder
servicing agent in connection with accumulation, open-account or similar plans
(including without limitation any periodic investment plan or periodic
withdrawal program), including but not limited to, maintaining all Shareholder
accounts, preparing Shareholder meeting lists, mailing proxies, receiving and
tabulating proxies, mailing Shareholder reports and prospectuses to current
Shareholders, withholding taxes on non-resident alien accounts, preparing and
filing appropriate forms required with respect to dividends and distributions by
federal tax authorities for all Shareholders, preparing and mailing confirmation
forms and statements of account to Shareholders for all purchases and
redemptions of Shares and other confirmable transactions in Shareholder
accounts, preparing and mailing activity statements for Shareholders and
providing Shareholder account information and (ii) provide a system which will
enable the Fund to monitor the total number of Shares sold in each State or
other jurisdiction.
(c) In addition, the Fund shall (i) identify to PMFS in writing those
transactions and assets to be treated as exempt from Blue Sky notice for each
State and (ii) verify the establishment of transactions for each State on the
system prior to activation and thereafter monitor the daily activity for each
State. The
5
<PAGE>
responsibility of PMFS for the Fund's registration status under the Blue Sky or
securities laws of any State or other jurisdiction is solely limited to the
initial establishment of transactions subject to Blue Sky compliance by the Fund
and the reporting of such transactions to the Fund as provided above and as
agreed from time to time by the Fund and PMFS.
PMFS may also provide such additional services and functions not
specifically described herein as may be mutually agreed between PMFS and the
Fund and set forth in Schedule B hereto.
Procedures applicable to certain of these services may be established from
time to time by agreement between the Fund and PMFS.
Article 2 Fees and Expenses
-----------------
2.01 For performance by PMFS pursuant to this Agreement, the
Fund agrees to pay PMFS an annual maintenance fee for each Shareholder account
and certain transactional fees as set out in the fee schedule attached hereto as
Schedule A. Such fees and out-of-pocket expenses and advances identified under
Section 2.02 below may be changed from time to time subject to mutual written
agreement between the Fund and PMFS.
2.02 In addition to the fees paid under Section 2.01 above, the
Fund agrees to reimburse PMFS for out-of-pocket expenses or advances incurred by
PMFS for the items set out in Schedule A attached hereto. In addition, any other
expenses incurred by PMFS at the request or with the consent of the Fund will be
reimbursed by the Fund.
2.03 The Fund agrees to pay all fees and reimbursable expenses
within a reasonable period of time following the mailing of the respective
billing notice. Postage for mailing of dividends, proxies, Fund reports and
other mailings to all Shareholder accounts shall be advanced to PMFS by the Fund
upon request prior to the mailing date of such materials.
6
<PAGE>
Article 3 Representations and Warranties of PMFS
--------------------------------------
PMFS represents and warrants to the Fund that:
3.01 It is a corporation duly organized and existing and in good
standing under the laws of New Jersey and it is duly qualified to carry on its
business in New Jersey.
3.02 It is and will remain registered with the U.S. Securities
and Exchange Commission (SEC) as a Transfer Agent pursuant to the requirements
of Section 17A of the 1934 Act.
3.03 It is empowered under applicable laws and by its charter
and By-Laws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
3.05 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
Article 4 Representations and Warranties of the Fund
------------------------------------------
The Fund represents and warrants to PMFS that:
4.01 It is a business trust duly organized and existing and in
good standing under the laws of Delaware.
4.02 It is empowered under applicable laws and by its
Declaration of Trust and By-Laws to enter into and perform this Agreement.
4.03 All proceedings required by said Declaration of Trust and
By-Laws have been taken to authorize it to enter into and perform this
Agreement.
4.04 It is an investment company registered or to be registered
with the SEC under the Investment Company Act of 1940, as amended (the 1940
Act).
7
<PAGE>
4.05 A registration statement under the Securities Act of 1933
(the 1933 Act) is currently effective or is anticipated to become effective, and
will remain effective, and appropriate state securities law notice filings have
been made and will continue to be made, with respect to all Shares of the Fund
being offered for sale.
Article 5 Duty of Care and Indemnification
--------------------------------
5.01 PMFS shall not be responsible for, and the Fund shall
indemnify and hold PMFS harmless from and against, any and all losses, damages,
costs, charges, counsel fees, payments, expenses and liability arising out of or
attributable to:
(a) All actions of PMFS or its agents or subcontractors required to be
taken pursuant to this Agreement, provided that such actions are taken in good
faith and without negligence or willful misconduct.
(b) The Fund's refusal or failure to comply with the terms of this
Agreement, or which arise out of the Fund's lack of good faith, negligence or
willful misconduct or which arise out of the breach of any representation or
warranty of the Fund hereunder.
(c) The reliance on or use by PMFS or its agents or subcontractors of
information, records and documents which (i) are received by PMFS or its agents
or subcontractors and furnished to it by or on behalf of the Fund, and (ii) have
been prepared and/or maintained by the Fund or any other person or firm on
behalf of the Fund.
(d) The reliance on, or the carrying out by PMFS or its agents or
subcontractors of, any instructions or requests of the Fund.
(e) The offer or sale of Shares in violation of any requirement under the
federal securities laws or regulations or the securities or Blue Sky laws of any
State or other jurisdiction that notice of such Shares be filed in such State or
other jurisdiction or in violation of any stop order or other determination or
ruling by
8
<PAGE>
any federal agency or any State or other jurisdiction with respect to the offer
or sale of such Shares in such State or other jurisdiction.
5.02 PMFS shall indemnify and hold the Fund harmless from and
against any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liability arising out of or attributable to any action or failure
or omission to act by PMFS as a result of PMFS' lack of good faith, negligence
or willful misconduct.
5.03 At any time PMFS may apply to any officer of the Fund for
instructions, and may consult with legal counsel, with respect to any matter
arising in connection with the services to be performed by PMFS under this
Agreement, and PMFS and its agents or subcontractors shall not be liable and
shall be indemnified by the Fund for any action taken or omitted by it in
reliance upon such instructions or upon the opinion of such counsel. PMFS, its
agents and subcontractors shall be protected and indemnified in acting upon any
paper or document furnished by or on behalf of the Fund, reasonably believed to
be genuine and to have been signed by the proper person or persons, or upon any
instruction, information, data, records or documents provided to PMFS or its
agents or subcontractors by machine readable input, telex, CRT data entry or
other similar means authorized by the Fund, and shall not be held to have notice
of any change of authority of any person, until receipt of written notice
thereof from the Fund. PMFS, its agents and subcontractors shall also be
protected and indemnified in recognizing stock certificates which are reasonably
believed to bear the proper manual or facsimile signature of the officers of the
Fund, and the proper countersignature of any former transfer agent or registrar,
or of a co-transfer agent or co-registrar.
5.04 In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of God, strikes,
equipment or transmission failure or damage reasonably beyond its control, or
other causes reasonably beyond its control, such party shall not be liable for
9
<PAGE>
damages to the other for any damages resulting from such failure to perform or
otherwise from such causes.
5.05 Neither party to this Agreement shall be liable to the
other party for consequential damages under any provision of this Agreement or
for any act or failure to act hereunder.
5.06 In order that the indemnification provisions contained in
this Article 5 shall apply, upon the assertion of a claim for which either party
may be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
Article 6 Documents and Covenants of the Fund and PMFS
--------------------------------------------
6.01 The Fund shall promptly furnish to PMFS the following:
(a) A certified copy of the resolution of the Board of Trustees
of the Fund authorizing the appointment of PMFS and the execution and delivery
of this Agreement;
(b) A certified copy of the Declaration of Trust and By-Laws of
the Fund and all amendments thereto;
(c) The current registration statements and any amendments and
supplements thereto filed with the SEC pursuant to the requirements of the 1933
Act and the 1940 Act;
(d) A specimen of the certificates for Shares of the Fund in the
forms approved by the Board of Trustees, with a certificate of the Secretary of
the Fund as to such approval;
10
<PAGE>
(e) All account application forms or other documents relating to
Shareholder accounts and/or relating to any plan program or service offered or
to be offered by the Fund; and
(f) Such other certificates, documents or opinions as the Agent
deems to be appropriate or necessary for the proper performance of its duties.
6.02 PMFS hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Fund for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such certificates,
forms and devices.
6.03 PMFS shall prepare and keep records relating to the
services to be performed hereunder, in the form and manner as it may deem
advisable. To the extent required by Section 31 of the 1940 Act, and the Rules
and Regulations thereunder, PMFS agrees that all such records prepared or
maintained by PMFS relating to the services to be performed by PMFS hereunder
are the property of the Fund and will be preserved, maintained and made
available in accordance with such Section 31 of the 1940 Act, and the Rules and
Regulations thereunder, and will be surrendered promptly to the Fund on and in
accordance with its request.
6.04 PMFS and the Fund agree that all books, records,
information and data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or the carrying out of this
Agreement shall remain confidential and shall not be voluntarily disclosed to
any other person except as may be required by law or with the prior consent of
PMFS and the Fund.
6.05 In case of any requests or demands for the inspection of
the Shareholder records of the Fund, PMFS will endeavor to notify the Fund and
to secure instructions from an authorized officer of the Fund as to such
inspection. PMFS reserves the right, however, to exhibit the Shareholder records
to any
11
<PAGE>
person whenever it is advised by its counsel that it may be held liable for the
failure to exhibit the Shareholder records to such person.
Article 7 Termination of Agreement
------------------------
7.01 This Agreement may be terminated by either party upon one
hundred twenty (120) days written notice to the other.
7.02 Should the Fund exercise its right to terminate, all
out-of-pocket expenses associated with the movement of records and other
materials will be borne by the Fund. Additionally, PMFS reserves the right to
charge for any other reasonable fees and expenses associated with such
termination.
Article 8 Assignment
----------
8.01 Except as provided in Section 8.03 below, neither this
Agreement nor any rights or obligations hereunder may be assigned by either
party without the written consent of the other party.
8.02 This Agreement shall inure to the benefit of and be binding
upon the parties and their respective permitted successors and assigns.
8.03 PMFS may, in its sole discretion and without further
consent by the Fund, subcontract, in whole or in part, for the performance of
its obligations and duties hereunder with any person or entity including but not
limited to: (i) Prudential Securities Incorporated (Prudential Securities), a
registered broker-dealer, (ii) The Prudential Insurance Company of America
(Prudential), (iii) Pruco Securities Corporation, a registered broker-dealer,
(iv) any Prudential Securities or Prudential subsidiary or affiliate duly
registered as a broker-dealer and/or a transfer agent pursuant to the 1934 Act
or (v) any other Prudential Securities or Prudential affiliate or subsidiary;
provided, however, that PMFS shall be as fully responsible to the Fund for the
acts and omissions of any agent or subcontractor as it is for its own acts and
omissions.
12
<PAGE>
8.04 PMFS may enter into agreements with Prudential or any
subsidiary or affiliate of Prudential whereby PMFS will maintain an omnibus
account and the Fund will reimburse PMFS for amounts paid by PMFS to Prudential,
or such subsidiary or affiliate, in an amount not in excess of the annual
maintenance fee for each beneficial shareholder account and transactional fees
and expenses with respect to such beneficial shareholder account as if each
beneficial shareholder account were maintained by PMFS on the Fund's records,
subject to the fee schedule attached hereto as Schedule A. Prudential, its
subsidiary or affiliate, as the case may be, shall maintain records relating to
each beneficial shareholder account that underlies the omnibus account
maintained by PMFS.
Article 9 Affiliations
------------
9.01 PMFS may now or hereafter, without the consent of or notice
to the Fund, function as Transfer Agent and/or Shareholder Servicing Agent for
any other investment company registered with the SEC under the 1940 Act,
including without limitation any investment company whose adviser,
administrator, sponsor or principal underwriter is or may become affiliated with
Prudential Securities and/or Prudential or any of its or their direct or
indirect subsidiaries or affiliates.
9.02 It is understood and agreed that the trustees, officers,
employees, agents and Shareholders of the Fund, and the directors, officers,
employees, agents and shareholders of the Fund's investment adviser and/or
distributor, are or may be interested in the Agent as directors, officers,
employees, agents, shareholders or otherwise, and that the directors, officers,
employees, agents or shareholders of the Agent may be interested in the Fund as
trustees, officers, employees, agents, Shareholders or otherwise, or in the
investment adviser and/or distributor as officers, directors, employees, agents,
shareholders or otherwise.
13
<PAGE>
Article 10 Amendment
---------
10.01 This Agreement may be amended or modified by a written
agreement executed by both parties and authorized or approved by a resolution of
the Board of Trustees of the Fund.
Article 11 Applicable Law
--------------
11.01 This Agreement shall be construed and the provisions
thereof interpreted under and in accordance with the laws of the State of New
Jersey.
Article 12 Miscellaneous
-------------
12.01 In the event of an alleged loss or destruction of any
Share certificate, no new certificate shall be issued in lieu thereof, unless
there shall first be furnished to PMFS an affidavit of loss or non-receipt by
the holder of Shares with respect to which a certificate has been lost or
destroyed, supported by an appropriate bond satisfactory to PMFS and the Fund
issued by a surety company satisfactory to PMFS, except that PMFS may accept an
affidavit of loss and indemnity agreement executed by the registered holder (or
legal representative) without surety in such form as PMFS deems appropriate
indemnifying PMFS and the Fund for the issuance of a replacement certificate, in
cases where the alleged loss is in the amount of $1000 or less.
12.02 In the event that any check or other order for payment of
money on the account of any Shareholder or new investor is returned unpaid for
any reason, PMFS will (a) give prompt notification to the Fund's distributor
(Distributor) of such non-payment; and (b) take such other action, including
imposition of a reasonable processing or handling fee, as PMFS may, in its sole
discretion, deem appropriate or as the Fund and the Distributor may instruct
PMFS.
12.03 Any notice or other instrument authorized or required by
this Agreement to be given in writing to the Fund or to PMFS shall be
sufficiently given if addressed to that party and received by
14
<PAGE>
it at its office set forth below or at such other place as it may from time to
time designate in writing.
To the Fund:
Strategic Partners Series
Gateway Center Three
100 Mulberry Street
Newark, New Jersey 07102
Attention: President
To PMFS:
Prudential Mutual Fund Services LLC
100 Mulberry Street
Newark, New Jersey 07102
Attention: President
Article 13 Merger of Agreement
-------------------
13.01 This Agreement constitutes the entire agreement between
the parties hereto and supersedes any prior agreement with respect to the
subject matter hereof whether oral or written.
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in their names and on their behalf under their seals by and through
their duly authorized officers, as of the day and year first above written.
ATTEST: STRATEGIC PARTNERS SERIES
______________________ By: _____________________________________
David F. Connor John R. Strangfeld
Secretary President
ATTEST: PRUDENTIAL MUTUAL
FUND SERVICES LLC
______________________ By: _____________________________________
William V. Healey Brian Henderson
Secretary President
16
<PAGE>
Schedule A
----------
Prudential Mutual Fund Services LLC
Fee Schedule
Fee Information for Services as
Transfer Agent, Dividend Disbursing Agent
and Shareholder Servicing Agent
______________________
General - Fees are based on an annual per shareholder account charge for account
- -------
maintenance plus out-of-pocket expenses. In addition, there is a one time set-up
charge per account for manually established accounts and a monthly charge for
inactive zero balance accounts. The effective period of this fee schedule is
____________, 2000 through December 31, 2000 and shall continue thereafter from
year to year, unless otherwise amended.
Annual Maintenance Charges - The annual maintenance charge includes the
- --------------------------
processing of all transactions and correspondence. The fee is billable on a
monthly basis at the rate of 1/12 of the annual fee. A charge is made for an
account in the month that an account opens or closes.
Annual Maintenance Per Account Fee $9.00
Other Charges
- -------------
New Account Set-up Fee for Manually $2.00
Established Accounts
Monthly Inactive Zero Balance Account Fee $ .20
Out-of -Pocket Expenses - out-of-pocket expenses include but are not limited to:
- -----------------------
postage, stationery and printing, allocable communication costs, microfilm,
microfiche, and expenses incurred at the specific direction of the Trust.
Payment - An invoice will be presented to the Fund on a monthly basis assessing
- -------
the Fund the appropriate fee and out-of-pocket expenses.
17
<PAGE>
STRATEGIC PARTNERS SERIES PRUDENTIAL MUTUAL FUND
SERVICES LLC
NAME: ___________________________ NAME: _______________________________
TITLE: __________________________ TITLE: ______________________________
DATE: __________________________ DATE: _______________________________
18
<PAGE>
EXHIBIT 99(i)
MORRIS, NICHOLS, ARSHT & TUNNELL
1201 N. Market Street
P.O. Box 1347
Wilmington, DE 19899-1347
(302)658-9200
Telecopy No. (302)658-3989
March 24, 2000
Strategic Partners Series
100 Mulberry Street
Gateway Center
Newark, NJ 07102-4077
Re: Strategic Partners Series
-------------------------
Ladies and Gentlemen:
We have acted as special Delaware counsel to Strategic Partners
Series, a Delaware business trust (the "Trust"), in connection with the
formation of the Trust and certain matters relating to the proposed issuance of
Shares of the Trust. Capitalized terms used herein and not otherwise herein
defined are used as defined in the Agreement and Declaration of Trust of the
Trust dated January 26, 2000 (the "Governing Instrument").
In rendering this opinion, we have examined copies of the following
documents, each in the form provided to us: the Certificate of Trust of the
Trust as filed in the Office of the Secretary of State of the State of Delaware
(the "State Office") on January 28, 2000 (the "Certificate"); the Governing
Instrument; the By-laws of the Trust; a Unanimous Written Consent of the Board
of Trustees of the Trust dated January 28, 2000 (the "Consent"); the
Notification of Registration Filed Pursuant to Section 8(a) of the Investment
Company Act of 1940 on Form N-8A of the Trust to be filed with the Securities
and Exchange Commission on February 1, 2000; the Registration Statement on Form
N-1A of the Trust filed with the Securities and Exchange Commission on February
1, 2000, as amended by Pre-Effective Amendment No. 1 thereto to be filed with
the Securities and Exchange Commission on or about the date hereof (as amended,
the "Registration Statement" and, together with the Governing Instrument, the
By-laws of the Trust and the Consent, the "Operative Documents"); and a
certification of good standing of the Trust obtained as of a recent date from
the State Office. In such examinations, we have assumed the genuineness of all
signatures, the conformity to original documents of all documents submitted to
us as copies or drafts of documents to be executed, and the legal capacity of
natural persons to complete the execution of documents. We have further assumed
for the purpose of this opinion: (i) the due adoption, authorization, execution
and delivery by, or on behalf of, each of the parties thereto of the above-
referenced resolutions, instruments, certificates and other
<PAGE>
Strategic Partners Series
March 24, 2000
Page 2
documents, and of all documents contemplated by the Operative Documents to be
executed by investors acquiring Shares; (ii) the payment of consideration for
Shares, and the application of such consideration, as provided in the Operative
Documents, and compliance with the other terms, conditions and restrictions set
forth in the Operative Documents in connection with the issuance of Shares
(including, without limitation, the taking of all appropriate action by the
Trustees to designate Series of Shares and the rights and preferences
attributable thereto as contemplated by the Governing Instrument); (iii) that
appropriate notation of the names and addresses of, the number of Shares held
by, and the consideration paid by, Shareholders will be maintained in the
appropriate registers and other books and records of the Trust in connection
with the issuance, redemption or transfer of Shares; (iv) that no event has
occurred subsequent to the filing of the Certificate that would cause a
termination or reorganization of the Trust under Section 2 or Section 3 of
Article VIII of the Governing Instrument; (v) that the activities of the Trust
have been and will be conducted in accordance with the terms of the Governing
Instrument and the Delaware Business Trust Act, 12 Del. C. (S)(S) 3801 et seq.
---- -- -- ----
(the "Delaware Act"); and (vi) that each of the documents examined by us is in
full force and effect, expresses the entire understanding of the parties thereto
with respect to the subject matter thereof and has not been amended,
supplemented or otherwise modified. No opinion is expressed herein with respect
to the requirements of, or compliance with, federal or state securities or blue
sky laws. Further, we have not participated in the preparation of the
Registration Statement or any other offering documentation relating to the Trust
or the Shares and we assume no responsibility for their contents. As to any
facts material to our opinion, other than those assumed, we have relied without
independent investigation on the above-referenced documents and on the accuracy,
as of the date hereof, of the matters therein contained.
Based on and subject to the foregoing, and limited in all respects to
matters of Delaware law, it is our opinion that:
1. The Trust is a duly formed and validly existing business trust in
good standing under the laws of the State of Delaware.
2. The issuance of the Shares has been duly authorized on behalf of
the Trust and, when issued to Shareholders in accordance with the terms,
conditions, requirements and procedures and for the consideration set forth in
the Operative Documents, will constitute legally issued, fully paid and non-
assessable Shares of beneficial interest in the Trust
3. Under the Delaware Act and the terms of the Governing Instrument,
each Shareholder of the Trust, in such capacity, will be entitled to the same
limitation of personal liability as that extended to stockholders of private
corporations for profit organized under the general corporation law of the State
of Delaware; provided, however, that we express no opinion with respect to the
liability of any Shareholder who is, was or may become a named Trustee of the
Trust. Neither the existence nor exercise of the voting rights granted to
Shareholders under the Governing Instrument will, of itself, cause a Shareholder
to be deemed a trustee of the Trust under the Delaware Act. Notwithstanding the
foregoing or the opinion expressed in paragraph 2 above, we note that, pursuant
<PAGE>
Strategic Partners Series
March 24, 2000
Page 3
to Section 5 of Article IV of the Governing Instrument, the Trustees have the
power to cause Shareholders, or Shareholders of a particular Series, to pay
certain custodian, transfer, servicing or similar agent charges by setting off
the same against declared but unpaid dividends or by reducing Share ownership
(or by both means).
We hereby consent to the filing of a copy of this opinion with the
Securities and Exchange Commission with the Registration Statement. In giving
this consent, we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder. This opinion speaks only as of the date hereof and is
based on our understandings and assumptions as to present facts and our review
of the above referenced documents and the application of Delaware law as the
same exist on the date hereof, and we undertake no obligation to update or
supplement this opinion after the date hereof for the benefit of any person or
entity with respect to any facts or circumstances that may hereafter come to our
attention or any changes in facts or law that may hereafter occur or take
effect. Except as provided in this paragraph, the opinion set forth above is
expressed solely for the benefit of the addressee hereof in connection with the
matters contemplated hereby and may not be relied upon for any other purpose or
by any other person or entity without our prior written consent.
Sincerely,
MORRIS, NICHOLS, ARSHT & TUNNELL
<PAGE>
Exhibit 99.(J)
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the use in this Registration Statement on Form N-1A of our
report dated March 21, 2000, relating to the financial statements of Prudential
Strategic Partners Focused Growth Fund, which appear in such Registration
Statement. We also consent to the references to us under the headings "Other
Service Providers" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
New York, New York
March 21, 2000
<PAGE>
Exhibit 99.(m)(1)
STRATEGIC PARTNERS SERIES
Strategic Partners Focused Growth Fund
Distribution and Service Plan
(Class A Shares)
--------------
Introduction
------------
The Distribution and Service Plan (the Plan) set forth below which is
designed to conform to the requirements of Rule 12b-1 under the Investment
Company Act of 1940 (the Investment Company Act) and Rule 2830 of the Conduct
Rules of the National Association of Securities Dealers, Inc. (NASD) has been
adopted by Strategic Partners Series (the Company), on behalf of its series,
Strategic Partners Focused Growth Fund (the Fund), and by Prudential Investment
Management Services LLC, the Fund's distributor (the Distributor).
The Company has entered into a distribution agreement pursuant to which the
Fund will employ the Distributor to distribute Class A shares issued by the Fund
(Class A shares). Under the Plan, the Fund intends to pay to the Distributor, as
compensation for its services, a distribution and service fee with respect to
Class A shares.
A majority of the Board of Trustees of the Company, including a majority of
those Trustees who are not "interested persons" of the Company (as defined in
the Investment Company Act) and who have no direct or indirect financial
interest in the operation of this Plan or any agreements related to it (the Rule
12b-1 Trustees), have determined by votes cast in person at a meeting called for
the purpose of voting on this Plan that there is a reasonable likelihood that
adoption of this Plan will benefit the Fund and its shareholders. Expenditures
under this Plan
1
<PAGE>
by the Fund for Distribution Activities (defined below) are primarily intended
to result in the sale of Class A shares of the Fund within the meaning of
paragraph (a)(2) of Rule 12b-1 promulgated under the Investment Company Act.
The purpose of the Plan is to create incentives to the Distributor and/or
other qualified broker-dealers and their account executives to provide
distribution assistance to their customers who are investors in the Fund, to
defray the costs and expenses associated with the preparation, printing and
distribution of prospectuses and sales literature and other promotional and
distribution activities and to provide for the servicing and maintenance of
shareholder accounts.
The Plan
--------
The material aspects of the Plan are as follows:
1. Distribution Activities
-----------------------
The Fund shall engage the Distributor to distribute Class A shares of the
Fund and to service shareholder accounts using all of the facilities of the
Distributor's distribution network, including sales personnel and branch office
and central support systems, and also using such other qualified broker-dealers
and financial institutions as the Distributor may select, including Prudential
Securities Incorporated (Prudential Securities) and Pruco Securities Corporation
(Prusec). Services provided and activities undertaken to distribute Class A
shares of the Fund are referred to herein as "Distribution Activities."
2
<PAGE>
2. Payment of Service Fee
-----------------------
The Fund shall pay to the Distributor as compensation for providing
personal service and/or maintaining shareholder accounts a service fee of .25 of
1% per annum of the average daily net assets of the Class A shares (service
fee). The Fund shall calculate and accrue daily amounts payable by the Class A
shares of the Fund hereunder and shall pay such amounts monthly or at such other
intervals as the Board of Trustees may determine.
3. Payment for Distribution Activities
-----------------------------------
The Fund shall pay to the Distributor as compensation for its services a
distribution fee, together with the service fee (described in Section 2 hereof),
of .30 of 1% per annum of the average daily net assets of the Class A shares of
the Fund for the performance of Distribution Activities. The Fund shall
calculate and accrue daily amounts payable by the Class A shares of the Fund
hereunder and shall pay such amounts monthly or at such other intervals as the
Board of Trustees may determine. Amounts payable under the Plan shall be subject
to the limitations of Rule 2830 of the NASD Conduct Rules.
Amounts paid to the Distributor by the Class A shares of the Fund will not
be used to pay the distribution expenses incurred with respect to any other
class of shares of the Fund except that distribution expenses attributable to
the Fund as a whole will be allocated to the Class A shares according to the
ratio of the sales of Class A shares to the total sales of the Fund's shares
over the Fund's fiscal year or such other allocation method approved by the
Board of Trustees. The allocation of distribution expenses among classes will be
subject to the review of
3
<PAGE>
the Board of Trustees.
The Distributor shall spend such amounts as it deems appropriate on
Distribution Activities which include, among others:
(a) sales commissions and trailer commissions paid to, or on account of,
account executives of the Distributor;
(b) indirect and overhead costs of the Distributor associated with
Distribution Activities, including central office and branch expenses;
(c) amounts paid to Prudential Securities or Prusec for performing
services under a selected dealer agreement between Prudential
Securities or Prusec and the Distributor for sale of Class A shares of
the Fund, including sales commissions, trailer commissions paid to, or
on account of, agents and indirect and overhead costs associated with
Distribution Activities;
(d) advertising for the Fund in various forms through any available
medium, including the cost of printing and mailing Fund prospectuses,
statements of additional information and periodic financial reports
and sales literature to persons other than current shareholders of the
Fund; and
(e) sales commissions (including trailer commissions) paid to, or on
account of, broker-dealers and financial institutions (other than
Prudential Securities or Prusec) which have entered into selected
dealer agreements with the Distributor with respect to Class A shares
of the Fund.
4. Quarterly Reports; Additional Information
-----------------------------------------
An appropriate officer of the Company will provide to the Board of Trustees
of the Company for review, at least quarterly, a written report specifying in
reasonable detail the amounts expended for Distribution Activities (including
payment of the service fee) and the purposes for which such expenditures were
4
<PAGE>
made in compliance with the requirements of Rule 12b-1. The Distributor will
provide to the Board of Trustees of the Company such additional information as
the Board shall from time to time reasonably request, including information
about Distribution Activities undertaken or to be undertaken by the Distributor.
The Distributor will inform the Board of Trustees of the Company of the
commissions and account servicing fees to be paid by the Distributor to account
executives of the Distributor and to broker-dealers and financial institutions
which have selected dealer agreements with the Distributor.
5. Effectiveness; Continuation
---------------------------
The Plan shall not take effect until it has been approved by a vote of a
majority of the outstanding voting securities (as defined in the Investment
Company Act) of the Class A shares of the Fund.
If approved by a vote of a majority of the outstanding voting securities of
the Class A shares of the Fund, the Plan shall, unless earlier terminated in
accordance with its terms, continue in full force and effect thereafter for so
long as such continuance is specifically approved at least annually by a
majority of the Board of Trustees of the Company and a majority of the Rule 12b-
1 Trustees by votes cast in person at a meeting called for the purpose of voting
on the continuation of the Plan.
6. Termination
-----------
This Plan may be terminated at any time, without the payment of any
penalty, by a majority of the Rule 12b-1 Trustees, or by vote of a majority of
the outstanding voting securities (as defined in the Investment Company Act) of
the
5
<PAGE>
Class A shares of the Fund.
7. Amendments
----------
The Plan may not be amended to change the combined service and distribution
fees to be paid as provided for in Sections 2 and 3 hereof so as to increase
materially the amounts payable under this Plan unless such amendment shall be
approved by the vote of a majority of the outstanding voting securities (as
defined in the Investment Company Act) of the Class A shares of the Fund. All
material amendments of the Plan shall be approved by a majority of the Board of
Trustees of the Company and a majority of the Rule 12b-1 Trustees by votes cast
in person at a meeting called for the purpose of voting on the Plan.
8. Rule 12b-1 Trustees
-------------------
While the Plan is in effect, the selection and nomination of the Trustees
shall be committed to the discretion of the Rule 12b-1 Trustees.
9. Records
-------
The Company shall preserve copies of the Plan and any related agreements
and all reports made pursuant to Section 4 hereof, for a period of not less than
six years from the date of effectiveness of the Plan, such agreements or
reports, and for at least the first two years in an easily accessible place.
Dated: _________________, 2000
6
<PAGE>
Exhibit 99.(m)(2)
STRATEGIC PARTNERS SERIES
Strategic Partners Focused Growth Fund
Distribution and Service Plan
(Class B Shares)
--------------
Introduction
------------
The Distribution and Service Plan (the Plan) set forth below which is
designed to conform to the requirements of Rule 12b-1 under the Investment
Company Act of 1940 (the Investment Company Act) and Rule 2830 of the Conduct
Rules of the National Association of Securities Dealers, Inc. (NASD) has been
adopted by Strategic Partners Series (the Company), on behalf of its series,
Strategic Partners Focused Growth Fund (the Fund), and by Prudential Investment
Management Services LLC, the Fund's distributor (the Distributor).
The Company has entered into a distribution agreement pursuant to which the
Fund will employ the Distributor to distribute Class B shares issued by the Fund
(Class B shares). Under the Plan, the Fund intends to pay to the Distributor, as
compensation for its services, a distribution and service fee with respect to
Class B shares.
A majority of the Board of Trustees of the Company, including a majority
who are not "interested persons" of the Company (as defined in the Investment
Company Act) and who have no direct or indirect financial interest in the
operation of this Plan or any agreements related to it (the Rule 12b-1
Trustees), have determined by votes cast in person at a meeting called for the
purpose of voting on this Plan that there is a reasonable likelihood that
adoption of this Plan will
1
<PAGE>
benefit the Fund and its shareholders. Expenditures under this Plan by the Fund
for Distribution Activities (defined below) are primarily intended to result in
the sale of Class B shares of the Fund within the meaning of paragraph (a)(2) of
Rule 12b-1 promulgated under the Investment Company Act.
The purpose of the Plan is to create incentives to the Distributor and/or
other qualified broker-dealers and their account executives to provide
distribution assistance to their customers who are investors in the Fund, to
defray the costs and expenses associated with the preparation, printing and
distribution of prospectuses and sales literature and other promotional and
distribution activities and to provide for the servicing and maintenance of
shareholder accounts.
The Plan
--------
The material aspects of the Plan are as follows:
1. Distribution Activities
-----------------------
The Fund shall engage the Distributor to distribute Class B shares of the
Fund and to service shareholder accounts using all of the facilities of the
Distributor's distribution network including sales personnel and branch office
and central support systems, and also using such other qualified broker-dealers
and financial institutions as the Distributor may select, including Prudential
Securities Incorporated (Prudential Securities) and Pruco Securities Corporation
(Prusec). Services provided and activities undertaken to distribute Class B
shares of the Fund are referred to herein as "Distribution Activities."
2
<PAGE>
2. Payment of Service Fee
----------------------
The Fund shall pay to the Distributor as compensation for providing
personal service and/or maintaining shareholder accounts a service fee of .25 of
1% per annum of the average daily net assets of the Class B shares (service
fee). The Fund shall calculate and accrue daily amounts payable by the Class B
shares of the Fund hereunder and shall pay such amounts monthly or at such other
intervals as the Board of Trustees may determine.
3. Payment for Distribution Activities
-----------------------------------
The Fund shall pay to the Distributor as compensation for its services a
distribution fee of .75 of 1% per annum of the average daily net assets of the
Class B shares of the Fund for the performance of Distribution Activities. The
Fund shall calculate and accrue daily amounts payable by the Class B shares of
the Fund hereunder and shall pay such amounts monthly or at such other intervals
as the Board of Trustees may determine. Amounts payable under the Plan shall be
subject to the limitations of Rule 2830 of the NASD Conduct Rules.
Amounts paid to the Distributor by the Class B shares of the Fund will not
be used to pay the distribution expenses incurred with respect to any other
class of shares of the Fund except that distribution expenses attributable to
the Fund as a whole will be allocated to the Class B shares according to the
ratio of the sale of Class B shares to the total sales of the Fund's shares over
the Fund's fiscal year or such other allocation method approved by the Board of
Trustees. The allocation of distribution expenses among classes will be subject
to the review of the Board of
3
<PAGE>
Trustees. Payments hereunder will be applied to distribution expenses in the
order in which they are incurred, unless otherwise determined by the Board of
Trustees.
The Distributor shall spend such amounts as it deems appropriate on
Distribution Activities which include, among others:
(a) sales commissions (including trailer commissions) paid to, or on
account of, account executives of the Distributor;
(b) indirect and overhead costs of the Distributor associated with
performance of Distribution Activities including central office and
branch expenses;
(c) amounts paid to Prudential Securities or Prusec for performing
services under a selected dealer agreement between Prudential
Securities or Prusec and the Distributor for sale of Class B shares of
the Fund, including sales commissions and trailer commissions paid to,
or on account of, agents and indirect and overhead costs associated
with Distribution Activities;
(d) advertising for the Fund in various forms through any available
medium, including the cost of printing and mailing Fund prospectuses,
statements of additional information and periodic financial reports
and sales literature to persons other than current shareholders of the
Fund; and
(e) sales commissions (including trailer commissions) paid to, or on
account of, broker-dealers and other financial institutions (other
than Prudential Securities or Prusec) which have entered into selected
dealer agreements with the Distributor with respect to Class B shares
of the Fund.
4. Quarterly Reports; Additional Information
-----------------------------------------
An appropriate officer of the Company will provide to the Board of Trustees
of the Company for review, at least quarterly, a written report specifying in
reasonable detail the amounts expended for Distribution Activities (including
4
<PAGE>
payment of the service fee) and the purposes for which such expenditures were
made in compliance with the requirements of Rule 12b-1. The Distributor will
provide to the Board of Trustees of the Company such additional information as
they shall from time to time reasonably request, including information about
Distribution Activities undertaken or to be undertaken by the Distributor.
The Distributor will inform the Board of Trustees of the Company of the
commissions and account servicing fees to be paid by the Distributor to account
executives of the Distributor and to broker-dealers and other financial
institutions which have selected dealer agreements with the Distributor.
5. Effectiveness; Continuation
---------------------------
The Plan shall not take effect until it has been approved by a vote of a
majority of the outstanding voting securities (as defined in the Investment
Company Act) of the Class B shares of the Fund.
If approved by a vote of a majority of the outstanding voting securities of
the Class B shares of the Fund, the Plan shall, unless earlier terminated in
accordance with its terms, continue in full force and effect thereafter for so
long as such continuance is specifically approved at least annually by a
majority of the Board of Trustees of the Company and a majority of the Rule 12b-
1 Trustees by votes cast in person at a meeting called for the purpose of voting
on the continuation of the Plan.
5
<PAGE>
6. Termination
-----------
This Plan may be terminated at any time, without the payment of any
penalty, by a majority of the Rule 12b-1 Trustees, or by vote of a majority of
the outstanding voting securities (as defined in the Investment Company Act) of
the Class B shares of the Fund.
7. Amendments
----------
The Plan may not be amended to change the combined service and distribution
expenses to be paid as provided for in Sections 2 and 3 hereof so as to increase
materially the amounts payable under this Plan unless such amendment shall be
approved by the vote of a majority of the outstanding voting securities (as
defined in the Investment Company Act) of the Class B shares of the Fund. All
material amendments of the Plan shall be approved by a majority of the Board of
Trustees of the Company and a majority of the Rule 12b-1 Trustees by votes cast
in person at a meeting called for the purpose of voting on the Plan.
8. Rule 12b-1 Trustees
-------------------
While the Plan is in effect, the selection and nomination of the Rule 12b-1
Trustees shall be committed to the discretion of the Rule 12b-1 Trustees.
9. Records
-------
The Company shall preserve copies of the Plan and any related agreements
and all reports made pursuant to Section 4 hereof, for a period of not less than
six
6
<PAGE>
years from the date of effectiveness of the Plan, such agreements or reports,
and for at least the first two years in an easily accessible place.
Dated: __________________, 2000
7
<PAGE>
Exhibit 99.(m)(3)
STRATEGIC PARTNERS SERIES
Strategic Partners Focused Growth Fund
Distribution and Service Plan
(Class C Shares)
--------------
Introduction
------------
The Distribution and Service Plan (the Plan) set forth below which is
designed to conform to the requirements of Rule 12b-1 under the Investment
Company Act of 1940 (the Investment Company Act) and Rule 2830 of the Conduct
Rules of the National Association of Securities Dealers, Inc. (NASD) has been
adopted by Strategic Partners Series (the Company), on behalf of its series,
Strategic Partners Focused Growth Fund (the Fund), and by Prudential Investment
Management Services LLC, the Fund's distributor (the Distributor).
The Company has entered into a distribution agreement pursuant to which the
Fund will employ the Distributor to distribute Class C shares issued by the Fund
(Class C shares). Under the Plan, the Fund intends to pay to the Distributor, as
compensation for its services, a distribution and service fee with respect to
Class C shares.
A majority of the Board of Trustees of the Company, including a majority
who are not "interested persons" of the Company (as defined in the Investment
Company Act) and who have no direct or indirect financial interest in the
operation of this Plan or any agreements related to it (the Rule 12b-1
Trustees), have determined by votes cast in person at a meeting called for the
purpose of voting on this Plan that there is a reasonable likelihood that
adoption of this Plan will
1
<PAGE>
benefit the Fund and its shareholders. Expenditures under this Plan by the Fund
for Distribution Activities (defined below) are primarily intended to result in
the sale of Class C shares of the Fund within the meaning of paragraph (a)(2) of
Rule 12b-1 promulgated under the Investment Company Act.
The purpose of the Plan is to create incentives to the Distributor and/or
other qualified broker-dealers and their account executives to provide
distribution assistance to their customers who are investors in the Fund, to
defray the costs and expenses associated with the preparation, printing and
distribution of prospectuses and sales literature and other promotional and
distribution activities and to provide for the servicing and maintenance of
shareholder accounts.
The Plan
--------
The material aspects of the Plan are as follows:
1. Distribution Activities
-----------------------
The Fund shall engage the Distributor to distribute Class C shares of the
Fund and to service shareholder accounts using all of the facilities of the
Distributor's distribution network including sales personnel and branch office
and central support systems, and also using such other qualified broker-dealers
and financial institutions as the Distributor may select, including Prudential
Securities Incorporated (Prudential Securities) and Pruco Securities Corporation
(Prusec). Services provided and activities undertaken to distribute Class C
shares of the Fund are referred to herein as "Distribution Activities."
2
<PAGE>
2. Payment of Service Fee
----------------------
The Fund shall pay to the Distributor as compensation for providing
personal service and/or maintaining shareholder accounts a service fee of .25 of
1% per annum of the average daily net assets of the Class C shares (service
fee). The Fund shall calculate and accrue daily amounts payable by the Class C
shares of the Fund hereunder and shall pay such amounts monthly or at such other
intervals as the Board of Trustees may determine.
3. Payment for Distribution Activities
-----------------------------------
The Fund shall pay to the Distributor as compensation for its services a
distribution fee of .75 of 1% per annum of the average daily net assets of the
Class C shares of the Fund for the performance of Distribution Activities. The
Fund shall calculate and accrue daily amounts payable by the Class C shares of
the Fund hereunder and shall pay such amounts monthly or at such other intervals
as the Board of Trustees may determine. Amounts payable under the Plan shall be
subject to the limitations of Rule 2830 of the NASD Conduct Rules.
Amounts paid to the Distributor by the Class C shares of the Fund will not
be used to pay the distribution expenses incurred with respect to any other
class of shares of the Fund except that distribution expenses attributable to
the Fund as a whole will be allocated to the Class C shares according to the
ratio of the sale of Class C shares to the total sales of the Fund's shares over
the Fund's fiscal year or such other allocation method approved by the Board of
Trustees. The allocation of distribution expenses among classes will be subject
to the review of the Board
3
<PAGE>
of Trustees. Payments hereunder will be applied to distribution expenses in the
order in which they are incurred, unless otherwise determined by the Board of
Trustees.
The Distributor shall spend such amounts as it deems appropriate on
Distribution Activities which include, among others:
(a) sales commissions (including trailer commissions) paid to, or on
account of, account executives of the Distributor;
(b) indirect and overhead costs of the Distributor associated with
performance of Distribution Activities including central office and
branch expenses;
(c) amounts paid to Prudential Securities or Prusec for performing
services under a selected dealer agreement between Prudential
Securities or Prusec and the Distributor for sale of Class C shares of
the Fund, including sales commissions and trailer commissions paid to,
or on account of, agents and indirect and overhead costs associated
with Distribution Activities;
(d) advertising for the Fund in various forms through any available
medium, including the cost of printing and mailing Fund prospectuses,
statements of additional information and periodic financial reports
and sales literature to persons other than current shareholders of the
Fund; and
(e) sales commissions (including trailer commissions) paid to, or on
account of, broker-dealers and other financial institutions (other
than Prudential Securities or Prusec) which have entered into selected
dealer agreements with the Distributor with respect to Class C shares
of the Fund.
4. Quarterly Reports; Additional Information
-----------------------------------------
An appropriate officer of the Company will provide to the Board of Trustees
of the Company for review, at least quarterly, a written report specifying in
reasonable detail the amounts expended for Distribution Activities (including
4
<PAGE>
payment of the service fee) and the purposes for which such expenditures were
made in compliance with the requirements of Rule 12b-1. The Distributor will
provide to the Board of Trustees of the Company such additional information as
they shall from time to time reasonably request, including information about
Distribution Activities undertaken or to be undertaken by the Distributor.
The Distributor will inform the Board of Trustees of the Company of the
commissions and account servicing fees to be paid by the Distributor to account
executives of the Distributor and to broker-dealers and other financial
institutions which have selected dealer agreements with the Distributor.
5. Effectiveness; Continuation
---------------------------
The Plan shall not take effect until it has been approved by a vote of a
majority of the outstanding voting securities (as defined in the Investment
Company Act) of the Class C shares of the Fund.
If approved by a vote of a majority of the outstanding voting securities of
the Class C shares of the Fund, the Plan shall, unless earlier terminated in
accordance with its terms, continue in full force and effect thereafter for so
long as such continuance is specifically approved at least annually by a
majority of the Board of Trustees of the Company and a majority of the Rule 12b-
1 Trustees by votes cast in person at a meeting called for the purpose of voting
on the continuation of the Plan.
5
<PAGE>
6. Termination
-----------
This Plan may be terminated at any time, without the payment of any
penalty, by a majority of the Rule 12b-1 Trustees, or by vote of a majority of
the outstanding voting securities (as defined in the Investment Company Act) of
the Class C shares of the Fund.
7. Amendments
----------
The Plan may not be amended to change the combined service and distribution
expenses to be paid as provided for in Sections 2 and 3 hereof so as to increase
materially the amounts payable under this Plan unless such amendment shall be
approved by the vote of a majority of the outstanding voting securities (as
defined in the Investment Company Act) of the Class C shares of the Fund. All
material amendments of the Plan shall be approved by a majority of the Board of
Trustees of the Company and a majority of the Rule 12b-1 Trustees by votes cast
in person at a meeting called for the purpose of voting on the Plan.
8. Rule 12b-1 Trustees
-------------------
While the Plan is in effect, the selection and nomination of the Rule 12b-1
Trustees shall be committed to the discretion of the Rule 12b-1 Trustees.
9. Records
-------
The Company shall preserve copies of the Plan and any related agreements
and all reports made pursuant to Section 4 hereof, for a period of not less than
six
6
<PAGE>
years from the date of effectiveness of the Plan, such agreements or reports,
and for at least the first two years in an easily accessible place.
Dated: March 1, 2000
7
<PAGE>
Exhibit 99.(n)
STRATEGIC PARTNERS SERIES
(the Fund)
PLAN PURSUANT TO RULE 18F-3
The Fund hereby adopts this plan pursuant to Rule 18f-3 under the
Investment Company Act of 1940 (the 1940 Act), setting forth the separate
arrangement and expense allocation of each class of shares in each investment
portfolio (each a Portfolio). Any material amendment to this plan is subject to
prior approval of the Board of Trustees, including a majority of the independent
Trustees.
CLASS CHARACTERISTICS
CLASS A SHARES: Class A shares are subject to a high initial sales charge
- -------------- and a distribution and/or service fee pursuant to Rule 12b-1
under the 1940 Act (Rule 12b-1 fee) not to exceed .30 of 1%
per annum of the average daily net assets of the class. The
initial sales charge is waived or reduced for certain
eligible investors.
CLASS B SHARES: Class B shares are not subject to an initial sales charge
- -------------- but are subject to a high contingent deferred sales charge
(declining from 5% to zero over a six-year period) which
will be imposed on certain redemptions and a Rule 12b-1 fee
not to exceed 1% per annum of the average daily net assets
of the class. The contingent deferred sales charge is waived
for certain eligible investors. Class B shares automatically
convert to Class A shares approximately seven years after
purchase.
CLASS C SHARES: Class C shares are subject to a low initial sales charge and
- -------------- a 1% contingent deferred sales charge which will be imposed
on certain redemptions within the first 18 months after
purchase and a Rule 12b-1 fee not to exceed 1% per annum of
the average daily net assets of the class.
CLASS Z SHARES: Class Z shares are not subject to either an initial or
- -------------- contingent deferred sales charge, nor are they subject to
any Rule 12b-1 fee.
<PAGE>
INCOME AND EXPENSE ALLOCATIONS
Income, any realized and unrealized capital gains and losses, and expenses
not allocated to a particular class of a Portfolio will be allocated to
each class of such Portfolio on the basis of the net asset value of that
class in relation to the net asset value of the Portfolio.
DIVIDENDS AND DISTRIBUTIONS
Dividends and other distributions paid by each Portfolio to each class of
shares, to the extent paid, will be paid on the same day and at the same
time, and will be determined in the same manner and will be in the same
amount, except that the amount of the dividends and other distributions
declared and paid by a particular class of the Portfolio may be different
from that paid by another class of the Portfolio because of Rule 12b-1 fees
and other expenses borne exclusively by that class.
EXCHANGE PRIVILEGE
Holders of Class A Shares, Class B Shares, Class C Shares and Class Z
Shares shall have such exchange privileges as set forth in the Fund's
current prospectus. Exchange privileges may vary among classes and among
holders of a Class.
CONVERSION FEATURES
Class B shares will automatically convert to Class A shares on a quarterly
basis approximately seven years after purchase. Conversions will be
effected at relative net asset value without the imposition of any
additional sales charge.
GENERAL
A. Each class of shares shall have exclusive voting rights on any matter
submitted to shareholders that relates solely to its arrangement and shall
have separate voting rights on any matter submitted to shareholders in
which the interests of one class differ from the interests of any other
class.
B. On an ongoing basis, the Directors, pursuant to their fiduciary
responsibilities under the 1940 Act and otherwise, will monitor the Fund
for the existence of any material conflicts among the interests of its
several classes. The Trustees, including a majority of the independent
Trustees, shall take such action as is reasonably necessary to eliminate
any such conflicts that may develop. Prudential Investments Fund Management
LLC,
2
<PAGE>
the Fund's Manager, will be responsible for reporting any potential or
existing conflicts to the Trustees.
C. For purposes of expressing an opinion on the financial statements of each
Portfolio of the Fund, the methodology and procedures for calculating the
net asset value and dividends/distributions of the Fund's several classes
and the proper allocation of income and expenses among such classes will be
examined annually by the Fund's independent auditors who, in performing
such examination, shall consider the factors set forth in the relevant
auditing standards adopted, from time to time, by the American Institute of
Certified Public Accountants.
Date: March 1, 2000
3
<PAGE>
EXHIBIT 99.(P)(1)
STRATEGIC PARTNERS SERIES
(the Fund)
Code of Ethics Adopted Pursuant to Rule 17j-1
Under the Investment Company Act of 1940
(the Code)
1. Purposes
--------
The Code has been adopted by the Board of Directors/Trustees of the Fund,
in accordance with Rule 17j-1(c) under the Investment Company Act of 1940 (the
Act) and in accordance with the following general principles:
(1) The duty at all times to place the interests of shareholders
first.
Investment company personnel should scrupulously avoid serving
their own personal interests ahead of shareholders' interests in any
decision relating to their personal investments.
(2) The requirement that all personal securities transactions be
conducted consistent with the Code and in such a manner as to avoid
any actual or potential conflict of interest or any abuse of an
individual's position of trust and responsibility.
Investment company personnel must not only seek to achieve
technical compliance with the Code but should strive to abide by its
spirit and the principles articulated herein.
(3) The fundamental standard that investment company personnel should
not take inappropriate advantage of their positions.
Investment company personnel must avoid any situation that might
compromise, or call into question, their exercise of fully independent
judgment in the interest of shareholders, including, but not limited
to the receipt of unusual investment opportunities, perquisites, or
gifts of more than a de minimis value from persons doing or seeking
business with the Fund.
<PAGE>
Rule 17j-1 under the Act generally proscribes fraudulent or manipulative
practices with respect to a purchase or sale of a security held or to be
acquired (as such term is defined in Section 2.) by an investment company, if
effected by an associated person of such company.
The purpose of the Code is to establish procedures consistent with the Act
and Rule 17j-1 to give effect to the following general prohibitions as set forth
in Rule 17j-1(b) as follows:
(a) It shall be unlawful for any affiliated person of or Principal
Underwriter for a registered investment company, or any affiliated person
of an investment adviser of or principal underwriter for a registered
investment company in connection with the purchase or sale, directly or
indirectly, by such person of a security held or to be acquired, by such
registered investment company:
(1) To employ any device, scheme or artifice to defraud such
registered investment company;
(2) To make to such registered investment company any untrue
statement of a material fact or omit to state to such registered
investment company a material fact necessary in order to make the
statements made, in light of the circumstances under which they are
made, not misleading;
(3) To engage in any act, practice, or course of business which
operates or would operate as a fraud or deceit upon any such
registered investment company; or
(4) To engage in any manipulative practice with respect to such
registered investment company.
2. Definitions
-----------
(a) "Access Person" means any director/trustee, officer, general
partner or Advisory Person (including any Investment Personnel, as that
term is defined herein) of the Fund, the Manager, the Adviser/Subadviser,
or the Principal Underwriter.
2
<PAGE>
(b) "Adviser/Subadviser" means the Adviser or Subadviser of the Fund
or both as the context may require.
(c) "Advisory Person" means (i) any employee of the Fund, Manager or
Adviser/Subadviser (or of any company in a control relationship to the
Fund, Manager or Adviser/Subadviser) who, in connection with his or her
regular functions or duties, makes, participates in, or obtains information
regarding the purchase or sale of a security by the Fund, or whose
functions relate to the making of any recommendations with respect to such
purchases or sales; and (ii) any natural person in a control relationship
to the Fund who obtains information concerning recommendations made to the
Fund with regard to the purchase or sale of a security.
(d) "Beneficial Ownership" will be interpreted in the same manner as
it would be under Securities Exchange Act Rule 16a-1(a)(2) in determining
which security holdings of a person are subject to the reporting and short-
swing profit provisions of Section 16 of the Securities Exchange Act of
1934 and the rules and regulations thereunder, except that the
determination of direct or indirect beneficial ownership will apply to all
securities which an Access Person has or acquires (Exhibit A).
---------
(e) "Complex" means the group of registered investment companies for
which Prudential Investments Fund Management LLC serves as Manager;
provided, however, that with respect to Access Persons of the Subadviser
(including any unit or subdivision thereof), "Complex" means the group of
registered investment companies in the Complex advised by the Subadviser or
unit or subdivision thereof.
(f) "Compliance Officer" means the person designated by the Manager,
the Adviser/Subadviser, or Principal Underwriter (including his or her
designee) as having responsibility for compliance with the requirements of
the Code.
(g) "Control" will have the same meaning as that set forth in Section
2(a)(9) of the Act.
(h) "Disinterested Director/Trustee" means a Director/ Trustee of the
Fund who is not an "interested person" of the Fund within the meaning of
Section 2(a)(19) of the Act.
An interested Director/Trustee who would not otherwise be deemed to be
an Access Person, shall be treated as a Disinterested Director/Trustee for
purposes of compliance with the provisions of the
3
<PAGE>
Code.
(i) "Initial Public Offering" means an offering of securities
registered under the Securities Act of 1933, the issuer of which,
immediately before the registration, was not subject to the reporting
requirements of sections 13 or 15(d) of the Securities Exchange Act of
1934.
(j) "Investment Personnel" means: (a) Portfolio Managers and other
Advisory Persons who provide investment information and/or advice to the
Portfolio Manager(s) and/or help execute the Portfolio Manager's(s')
investment decisions, including securities analysts and traders ; and (b)
any natural person in a control relationship to the Fund who obtains
information concerning recommendations made to the Fund with regard to the
purchase or sale of a security.
(k) "Manager" means Prudential Investments Fund Management, LLC.
(l) "Portfolio Manager" means any Advisory Person who has the direct
responsibility and authority to make investment decisions for the Fund.
(m) "Private placement" means a limited offering that is exempt from
registration under the Securities Act of 1933 pursuant to section 4(2) or
section 4(6) or pursuant to rule 504, rule 505 or rule 506 under such
Securities Act.
(n) "Security" will have the meaning set forth in Section 2(a)(36) of
the Act, except that it will not include shares of registered open-end
investment companies, direct obligations of the Government of the United
States, , short-term debt securities which are "government securities"
within the meaning of Section 2(a)(16) of the Act, bankers' acceptances,
bank certificates of deposit, commercial paper and such other money market
instruments as are designated by the Compliance Officer. For purposes of
the Code, an "equivalent Security" is one that has a substantial economic
relationship to another Security. This would include, among other things,
(1) a Security that is exchangeable for or convertible into another
Security, (2) with respect to an equity Security, a Security having the
same issuer (including a private issue by the same issuer) and any
derivative, option or warrant relating to that Security and (3) with
respect to a fixed-income Security, a Security having the same issuer,
maturity, coupon and rating.
(o) "Security held or to be acquired" means any Security or any
equivalent Security which, within the most recent 15 days: (1) is or has
4
<PAGE>
been held by the Fund; or (2) is being considered by the Fund or its
investment adviser for purchase by the Fund.
3. Applicability
-------------
The Code applies to all Access Persons and the Compliance Officer shall
provide each Access Person with a copy of the Code. The prohibitions described
below will only apply to a transaction in a Security in which the designated
Access Person has, or by reason of such transaction acquires, any direct or
indirect Beneficial Ownership. The Compliance Officer will maintain a list of
all Access Persons who are currently, and within the past five years, subject to
the Code.
4. Prohibited Purchases and Sales
------------------------------
A. Initial Public Offerings
No Investment Personnel may acquire any Securities in an initial public
offering. For purposes of this restriction, "Initial Public Offerings" shall
not include offerings of government and municipal securities.
B. Private Placements
No Investment Personnel may acquire any Securities in a private placement
without prior approval.
(i) Prior approval must be obtained in accordance with the
preclearance procedure described in Section 6 below. Such approval will
take into account, among other factors, whether the investment opportunity
should be reserved for the Fund and its shareholders and whether the
opportunity is being offered to the Investment Personnel by virtue of his
or her position with the Fund. The Adviser/Subadviser shall
5
<PAGE>
maintain a record of such prior approval and reason for same, for at least
5 years after the end of the fiscal year in which the approval is granted.
(ii) Investment Personnel who have been authorized to acquire
Securities in a private placement must disclose that investment to the
chief investment officer (including his or her designee) of the
Adviser/Subadviser (or of any unit or subdivision thereof) or the
Compliance Officer when they play a part in any subsequent consideration of
an investment by the Fund in the issuer. In such circumstances, the Fund's
decision to purchase Securities of the issuer will be subject to an
independent review by appropriate personnel with no personal interest in
the issuer.
C. Blackout Periods
(i) Except as provided in Section 5 below, Access Persons are
prohibited from executing a Securities transaction on a day during which
any investment company in the Complex has a pending "buy" or "sell" order
in the same or an equivalent Security and until such time as that order is
executed or withdrawn; provided, however, that this prohibition shall not
apply to Disinterested Directors/Trustees except if they have actual
knowledge of trading by any fund in the Complex and, in any event, only
with respect to those funds on whose boards they sit.
This prohibition shall also not apply to Access Persons of the
Subadviser who do not, in the ordinary course of fulfilling his or her
official duties, have
6
<PAGE>
access to information regarding the purchase and sale of Securities for the
Fund and are not engaged in the day-to-day operations of the Fund; provided
that Securities investments effected by such Access Persons during the
proscribed period are not effected with knowledge of the purchase or sale
of the same or equivalent Securities by any fund in the Complex.
A "pending 'buy' or 'sell' order" exists when a decision to purchase
or sell a Security has been made and communicated.
(ii) Portfolio Managers are prohibited from buying or selling a
Security within seven calendar days before or after the Fund trades in the
same or an equivalent Security. Nevertheless, a personal trade by any
Investment Personnel shall not prevent a Fund in the same Complex from
trading in the same or an equivalent security. However, such a transaction
shall be subject to independent review by the Compliance Officer.
(iii) If trades are effected during the periods proscribed in (i) or
(ii) above, except as provided in (iv) below with respect to (i) above, any
profits realized on such trades will be promptly required to be disgorged
to the Fund.
(iv) A transaction by Access Persons (other than Investment
Personnel) inadvertently effected during the period proscribed in (i) above
will not be considered a violation of the Code and disgorgement will not be
required so long as the transaction was effected in accordance with the
preclearance procedures described in Section 6 below and without prior
knowledge of trading by any fund
7
<PAGE>
in the Complex in the same or an equivalent Security.
D. Short-Term Trading Profits
Except as provided in Section 5 below, Investment Personnel are prohibited
from profiting from a purchase and sale, or sale and purchase, of the same or an
equivalent Security within any 60 calendar day period. If trades are effected
during the proscribed period, any profits realized on such trades will be
immediately required to be disgorged to the Fund.
E. Short Sales
No Access Person may sell any security short which is owned by any Fund in
the Complex. Access Persons may, however make short sales when he/she owns an
equivalent amount of the same security.
F. Options
No Access Person may write a naked call option or buy a naked put option on
a security owned by any Fund in the Complex. Access Persons may purchase options
on securities not held by any Fund in the Complex, or purchase call options or
write put options on securities owned by any Fund in the Complex, subject to
preclearance and the same restrictions applicable to other Securities. Access
Persons may write covered call options or buy covered put options on a Security
owned by any Fund in the Complex at the discretion of the Compliance Officer.
G. Investment Clubs
No Access Person may participate in an investment club.
8
<PAGE>
5. Exempted Transactions
---------------------
Subject to preclearance in accordance with Section 6 below with respect to
subitems (b), (e), (f), (g) and (i) hereof, the prohibitions of Sections 4(C)
and 4(D) will not apply to the following:
(a) Purchases or sales of Securities effected in any account over
which the Access Person has no direct or indirect influence or control or
in any account of the Access Person which is managed on a discretionary
basis by a person other than such Access Person and with respect to which
such Access Person does not in fact influence or control such transactions.
(b) Purchases or sales of Securities (or their equivalents) which are
not eligible for purchase or sale by any fund in the Complex.
(c) Purchases or sales of Securities which are non-volitional on the
part of either the Access Person or any fund in the Complex.
(d) Purchases of Securities which are part of an automatic dividend
reinvestment plan.
(e) Purchases effected upon the exercise of rights issued by an issuer
pro rata to all holders of a class of its Securities, to the extent such
--- ----
rights were acquired from such issuer, and sales of such rights so
acquired.
(f) Any equity Securities transaction, or series of related
transactions effected over a 30 calendar day period, involving 500 shares
or less in the aggregate, if (i) the Access Person has no prior knowledge
of activity in such security by any fund in the Complex and (ii) the issuer
is listed on The New York Stock Exchange or has a market capitalization
(outstanding shares multiplied by the current price per share) greater than
$1 billion (or a corresponding market capitalization in foreign markets).
(g) Any fixed-income Securities transaction, or series of related
transactions effected over a 30 calendar day period, involving 100 units
($100,000 principal amount) or less in the aggregate, if the Access Person
has no prior knowledge of transactions in such Securities by any fund in
the Complex.
(h) Any transaction in index options effected on a broad-based
9
<PAGE>
index (See Exhibit B.)/1/
(i) Purchases or sales of Securities which receive the prior approval
of the Compliance Officer (such person having no personal interest in such
purchases or sales), based on a determination that no abuse is involved and
that such purchases and sales are not likely to have any economic impact on
any fund in the Complex or on its ability to purchase or sell Securities of
the same class or other Securities of the same issuer.
(j) Purchases or sales of Unit Investment Trusts.
6. Preclearance
------------
Access Persons (other than Disinterested Directors/Trustees) must preclear
all personal Securities investments with the exception of those identified in
subparts (a), (c), (d), (h) and (j) of Section 5 above.
All requests for preclearance must be submitted to the Compliance Officer
for approval. All approved orders must be executed no later than 5:00 p.m.
local time on the business day following the date preclearance is granted. If
any order is not timely executed, a request for preclearance must be
resubmitted.
7. Reporting
---------
(a) Disinterested Directors/Trustees shall report to the Secretary of the
Fund or the Compliance Officer the information described in Section 7(b) hereof
with respect to transactions in any Security in which such Disinterested
Director/Trustee has, or by reason of such transaction acquires, any direct or
indirect Beneficial Ownership in the Security only if such Disinterested
----
Director/Trustee, at the time of that transaction knew or, in the ordinary
course of fulfilling his or her official duties as a Director/Trustee of the
________________________________
/1/ Exhibit B will be amended by the Compliance Officer as necessary.
10
<PAGE>
Fund, should have known that, during the 15-day period immediately preceding or
subsequent to the date of the transaction in a Security by such
Director/Trustee, such Security is or was purchased or sold by the Fund or was
being considered for purchase or sale by the Fund, the Manager or
Adviser/Subadviser; provided, however, that a Disinterested Director/Trustee is
not required to make a report with respect to transactions effected in any
account over which such Director/Trustee does not have any direct or indirect
influence or control or in any account of the Disinterested Director/Trustee
which is managed on a discretionary basis by a person other than such
Director/Trustee and with respect to which such Director/Trustee does not in
fact influence or control such transactions. The Secretary of the Fund or the
Compliance Officer shall maintain such reports and such other records to the
extent required by Rule 17j-1 under the Act.
(b) Every report required by Section 7(a) hereof shall be made not later
than ten days after the end of the calendar quarter in which the transaction to
which the report relates was effected, and shall contain the following
information:
(i) The date of the transaction, the title and the number of shares, and
the principal amount of each Security involved;
(ii) The nature of the transaction (i.e., purchase, sale or any other type
----
of acquisition or disposition);
(iii) The price at which the transaction was effected;
(iv) The name of the broker, dealer or bank with or through whom the
transaction was effected; and
(v) The date that the report is submitted.
(c) Any such report may contain a statement that the report shall not be
11
<PAGE>
construed as an admission by the person making such report that he or she has
any direct or indirect Beneficial Ownership in the Security to which the report
relates.
8. Records of Securities Transactions and Post-Trade Review
--------------------------------------------------------
Access Persons (other than Disinterested Directors/Trustees) are required
to direct their brokers to supply, on a timely basis, duplicate copies of
confirmations of all personal Securities transactions and copies of periodic
statements for all Securities accounts in which such Access Persons have a
Beneficial Ownership interest to the Compliance Officer. Such instructions must
be made upon becoming an Access Person and promptly as new accounts are
established, but no later than ten days after the end of a calendar quarter,
with respect to any account established by the Access Person in which any
securities were held during the quarter for the direct or indirect beneficial
interest of the Access Person. Notification must be made in writing and a copy
of the notification must be submitted to Compliance. This notification will
include the broker, dealer or bank with which the account was established and
the date the account was established.
Compliance with this Code requirement will be deemed to satisfy the
reporting requirements imposed on Access Persons under Rule 17j-1(d), provided,
however, that such confirmations and statements contain all the information
required by Section 7. b. hereof and are furnished within the time period
required by such section.
The Compliance Officer will periodically review the personal investment
activity and holdings reports of all Access Persons (including Disinterested
Directors/Trustees with respect to Securities transactions reported pursuant to
Section 7 above).
12
<PAGE>
9. Disclosure of Personal Holdings
-------------------------------
Within ten days after an individual first becomes an Access Person and
thereafter on an annual basis, each Access Person (other than Disinterested
Directors/Trustees) must disclose all personal Securities holdings. Such
disclosure must be made in writing and be as of the date the individual first
became an Access Person with respect to the initial report and by January 30 of
each year, including holdings information as of December 31, with respect to the
annual report. All such reports shall include the following: title, number of
shares and principal amount of each security held, name of broker, dealer or
bank with whom these securities are held and the date of submission by the
Access Person.
10. Gifts
-----
Access Persons are prohibited from receiving any gift or other thing of
more than $100 in value from any person or entity that does business with or on
behalf of the Fund. Occasional business meals or entertainment (theatrical or
sporting events, etc.) are permitted so long as they are not excessive in number
or cost.
11. Service As a Director
---------------------
Investment Personnel are prohibited from serving on the boards of directors
of publicly traded companies, absent prior authorization based upon a
determination that the board service would be consistent with the interests of
the Fund and its shareholders. In the limited instances that such board service
is authorized, Investment Personnel will be isolated from those making
investment decisions affecting transactions in Securities issued by any publicly
traded company on whose board such
13
<PAGE>
Investment Personnel serves as a director
through the use of "Chinese Wall" or other procedures designed to address the
potential conflicts of interest.
12. Certification of Compliance with the Code
-----------------------------------------
Access Persons are required to certify annually as follows:
(i) that they have read and understood the Code;
(ii) that they recognize that they are subject to the Code;
(iii) that they have complied with the requirements of the Code; and
(iv) that they have disclosed or reported all personal Securities
transactions required to be disclosed or reported pursuant to the
requirements of the Code.
13. Code Violations
---------------
All violations of the Code will be reported to the Board of
Directors/Trustees of the Fund on a quarterly basis. The Board of
Directors/Trustees may take such action as it deems appropriate.
14. Review by the Board of Directors/Trustees
-----------------------------------------
The Board of Directors/Trustees will be provided with an annual report
which at a minimum:
(i) certifies to the Board that the Fund, Manager, Investment
Adviser/Subadviser, and Principal Underwriter has adopted procedures reasonably
necessary to prevent its Access persons from violating its Code.
(ii) summarizes existing procedures concerning personal investing and any
changes in the procedures made during the preceding year;
14
<PAGE>
(iii) identifies material Code or procedural violations and sanctions
imposed in response to those material violations; and
(iv) identifies any recommended changes in existing restrictions or
procedures based upon the Fund's experience under the Code, evolving industry
practices, or developments in applicable laws and regulations.
The Board will review such report and determine if any further action is
required.
15
<PAGE>
Explanatory Notes to Code
-------------------------
1. No comparable Code requirements have been imposed upon Prudential
Mutual Fund Services LLC, the Fund's transfer agent, or those of its directors
or officers who are not Directors/Trustees or Officers of the Fund since they
are deemed not to constitute Access Persons or Advisory Persons as defined in
paragraphs (e)(1) and (2) of Rule 17j-1.
Dated: February 29, 2000
16
<PAGE>
Exhibit A
---------
Definition of Beneficial Ownership
----------------------------------
The term "beneficial ownership" of securities would include not only
ownership of securities held by an access person for his or her own
benefit,whether in bearer form or registered in his or her own name or
otherwise, but also ownership of securities held for his or her benefit by other
(regardless of whether or how they are registered) such as custodians, brokers,
executors, administrators, or trustees (including trusts in which he or she has
only a remainder interest), and securities held for his or her account by
pledges, securities owned by a partnership in which he or she should regard as a
personal holding corporation. Correspondingly, this term would exclude
securities held by an access person for the benefit of someone else.
Ordinarily, this term would not include securities held by executors or
administrators in estates in which an access person is a legatee or beneficiary
unless there is a specific legacy to such person of such securities or such
person is the sole legatee or beneficiary and there are other assets in the
estate sufficient to pay debts ranking ahead of such legacy, or the securities
are held in the estate more than a year after the decedent's death.
Securities held in the name of another should be considered as
"beneficially" owned by an access person where such person enjoys "benefits
substantially equivalent to ownership". The SEC has said that although the
final determination of beneficial ownership is a question to be determined in
the light of the facts of the particular case, generally a person is regarded as
the beneficial owner of securities held in the name of his or her spouse and
their minor children. Absent special circumstances such relationship ordinarily
results in such person obtaining benefits substantially equivalent to ownership,
e.g., application of the income derived from such securities to maintain a
common home, to meet expenses which such person otherwise would meet from other
sources, or the ability to exercise a controlling influence over the purchase,
sale or voting of such securities.
An access person also may be regarded as the beneficial owner of securities
held in the name of another person, if by reason of any contact, understanding,
relationship, agreement or other arrangement, he obtains therefrom benefits
substantially equivalent to those of ownership. Moreover, the fact that the
holder is a relative or relative of a spouse and sharing the same home as an
access person may in itself indicate that the access person would obtain
benefits substantially equivalent to those of ownership from securities held in
the name of such relative. Thus, absent countervailing facts, it is expected
that securities held by relatives who share the same home as an access person
will be treated as being beneficially owned by the access person.
An access person also is regarded as the beneficial owner of securities
held in the name of a spouse, minor children or other person, even though he
does not obtain therefrom the aforementioned benefits of ownership, if he can
vest or revest title in himself at once or at some future time.
<PAGE>
Exhibit B
---------
INDEX OPTIONS ON A BROAD-BASED INDEX
TICKER SYMBOL DESCRIPTION
- --------------------------------------------------------------------------------
NIK Nikkei 300 Index CI/Euro
- --------------------------------------------------------------------------------
OEX S&P 100 Close/Amer Index
- --------------------------------------------------------------------------------
OEW S&P 100 Close/Amer Index
- --------------------------------------------------------------------------------
OEY S&P 100 Close/Amer Index
- --------------------------------------------------------------------------------
SPB S&P 500 Index
- --------------------------------------------------------------------------------
SPZ S&P 500 Open/Euro Index
- --------------------------------------------------------------------------------
SPX S&P 500 Open/Euro Index
- --------------------------------------------------------------------------------
SXZ S&P 500 (Wrap)
- --------------------------------------------------------------------------------
SXB S&P 500 Open/Euro Index
- --------------------------------------------------------------------------------
RUZ Russell 2000 Open/Euro Index
- --------------------------------------------------------------------------------
RUT Russell 2000 Open/Euro Index
- --------------------------------------------------------------------------------
MID S&P Midcap 400 Open/Euro Index
- --------------------------------------------------------------------------------
NDX NASDAQ- 100 Open/Euro Index
- --------------------------------------------------------------------------------
NDU NASDAQ- 100 Open/Euro Index
- --------------------------------------------------------------------------------
NDZ NASDAQ- 100 Open/Euro Index
- --------------------------------------------------------------------------------
NDV NASDAQ- 100 Open/Euro Index
- --------------------------------------------------------------------------------
NCZ NASDAQ- 100 Open/Euro Index
- --------------------------------------------------------------------------------
SML S&P Small Cap 600
- --------------------------------------------------------------------------------
TPX U.S. Top 100 Sector
- --------------------------------------------------------------------------------
SPL S&P 500 Long-Term Close
- --------------------------------------------------------------------------------
ZRU Russell 2000 L-T Open./Euro
- --------------------------------------------------------------------------------
VRU Russell 2000 Long-Term Index
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 99.(P)(2)
Prudential Investment Corporation
Prudential Investments Fund Management LLC
Prudential Investment Management Services LLC
Code of Ethics Adopted Pursuant to Rule 17j-1
Under the Investment Company Act of 1940
(the Code)
1. Purposes
--------
The Code has been adopted by the Board of Directors/Trustees or the Duly
Appointed Officer-In-Charge of the Prudential Mutual Fund (hereinafter, referred
to as the "Fund"), the Manager, the Adviser/Subadviser, and the Principal
Underwriter in accordance with Rule 17j-1(c) under the Investment Company Act of
1940 (the Act) and in accordance with the following general principles:
(1) The duty at all times to place the interests of shareholders
first.
Investment company personnel should scrupulously avoid serving
their own personal interests ahead of shareholders' interests in any
decision relating to their personal investments.
(2) The requirement that all personal securities transactions be
conducted consistent with the Code and in such a manner as to avoid
any actual or potential conflict of interest or any abuse of an
individual's position of trust and responsibility.
Investment company personnel must not only seek to achieve
technical compliance with the Code but should strive to abide by its
spirit and the principles articulated herein.
(3) The fundamental standard that investment company personnel should
not take inappropriate advantage of their positions.
Investment company personnel must avoid any situation that might
compromise, or call into question, their exercise of fully independent
<PAGE>
judgment in the interest of shareholders, including, but not limited
to the receipt of unusual investment opportunities, perquisites, or
gifts of more than a de minimis value from persons doing or seeking
business with the Fund.
Rule 17j-1 under the Act generally proscribes fraudulent or manipulative
practices with respect to a purchase or sale of a security held or to be
acquired (as such term is defined in Section 2.) by an investment company, if
effected by an associated person of such company.
The purpose of the Code is to establish procedures consistent with the Act
and Rule 17j-1 to give effect to the following general prohibitions as set forth
in Rule 17j-1(b) as follows:
(a) It shall be unlawful for any affiliated person of or Principal
Underwriter for a registered investment company, or any affiliated person
of an investment adviser of or principal underwriter for a registered
investment company in connection with the purchase or sale, directly or
indirectly, by such person of a security held or to be acquired, by such
registered investment company:
(1) To employ any device, scheme or artifice to defraud such
registered investment company;
(2) To make to such registered investment company any untrue
statement of a material fact or omit to state to such registered
investment company a material fact necessary in order to make the
statements made, in light of the circumstances under which they are
made, not misleading;
(3) To engage in any act, practice, or course of business which
operates or would operate as a fraud or deceit upon any such
registered investment company; or
2
<PAGE>
(4) To engage in any manipulative practice with respect to such
registered investment company.
2. Definitions
-----------
(a) "Access Person" means any director/trustee, officer, general
partner or Advisory Person (including any Investment Personnel, as that
term is defined herein) of the Fund, the Manager, the Adviser/Subadviser,
or the Principal Underwriter.
(b) "Adviser/Subadviser" means the Adviser or Subadviser of the Fund
or both as the context may require.
(c) "Advisory Person" means (i) any employee of the Fund, Manager or
Adviser/Subadviser (or of any company in a control relationship to the
Fund, Manager or Adviser/Subadviser) who, in connection with his or her
regular functions or duties, makes, participates in, or obtains information
regarding the purchase or sale of a security by the Fund, or whose
functions relate to the making of any recommendations with respect to such
purchases or sales; and (ii) any natural person in a control relationship
to the Fund who obtains information concerning recommendations made to the
Fund with regard to the purchase or sale of a security.
(d) "Beneficial Ownership" will be interpreted in the same manner as
it would be under Securities Exchange Act Rule 16a-1(a)(2) in determining
which security holdings of a person are subject to the reporting and short-
swing profit provisions of Section 16 of the Securities Exchange Act of
1934 and the rules and regulations thereunder, except that the
determination of direct or indirect beneficial ownership will apply to all
securities which an Access Person has or acquires (Exhibit A).
---------
(e) "Complex" means the group of registered investment companies for
which Prudential Investments Fund Management LLC serves as Manager;
provided, however, that with respect to Access Persons of the Subadviser
(including any unit or subdivision thereof), "Complex" means the group of
registered investment companies in the Complex advised by the Subadviser or
unit or subdivision thereof.
(f) "Compliance Officer" means the person designated by the Manager,
the Adviser/Subadviser, or Principal Underwriter (including his or her
designee) as having responsibility for compliance with the requirements of
the Code.
3
<PAGE>
(g) "Control" will have the same meaning as that set forth in Section
2(a)(9) of the Act.
(h) "Disinterested Director/Trustee" means a Director/ Trustee of the
Fund who is not an "interested person" of the Fund within the meaning of
Section 2(a)(19) of the Act.
An interested Director/Trustee who would not otherwise be deemed to be
an Access Person, shall be treated as a Disinterested Director/Trustee for
purposes of compliance with the provisions of the Code.
(i) "Initial Public Offering" means an offering of securities
registered under the Securities Act of 1933, the issuer of which,
immediately before the registration, was not subject to the reporting
requirements of sections 13 or 15(d) of the Securities Exchange Act of
1934.
(j) "Investment Personnel" means: (a) Portfolio Managers and other
Advisory Persons who provide investment information and/or advice to the
Portfolio Manager(s) and/or help execute the Portfolio Manager's(s')
investment decisions, including securities analysts and traders ; and (b)
any natural person in a control relationship to the Fund who obtains
information concerning recommendations made to the Fund with regard to the
purchase or sale of a security.
(k) "Manager" means Prudential Investments Fund Management, LLC.
(l) "Portfolio Manager" means any Advisory Person who has the direct
responsibility and authority to make investment decisions for the Fund.
(m) "Private placement" means a limited offering that is exempt from
registration under the Securities Act of 1933 pursuant to section 4(2) or
section 4(6) or pursuant to rule 504, rule 505 or rule 506 under such
Securities Act.
(n) "Security" will have the meaning set forth in Section 2(a)(36) of
the Act, except that it will not include shares of registered open-end
investment companies, direct obligations of the Government of the United
States, , short-term debt securities which are "government securities"
within the meaning of Section 2(a)(16) of the Act, bankers' acceptances,
bank certificates of deposit, commercial paper and such other money
4
<PAGE>
market instruments as are designated by the Compliance Officer. For
purposes of the Code, an "equivalent Security" is one that has a
substantial economic relationship to another Security. This would include,
among other things, (1) a Security that is exchangeable for or convertible
into another Security, (2) with respect to an equity Security, a Security
having the same issuer (including a private issue by the same issuer) and
any derivative, option or warrant relating to that Security and (3) with
respect to a fixed-income Security, a Security having the same issuer,
maturity, coupon and rating.
(o) "Security held or to be acquired" means any Security or any
equivalent Security which, within the most recent 15 days: (1) is or has
been held by the Fund; or (2) is being considered by the Fund or its
investment adviser for purchase by the Fund.
3. Applicability
-------------
The Code applies to all Access Persons and the Compliance Officer shall
provide each Access Person with a copy of the Code. The prohibitions described
below will only apply to a transaction in a Security in which the designated
Access Person has, or by reason of such transaction acquires, any direct or
indirect Beneficial Ownership. The Compliance Officer will maintain a list of
all Access Persons who are currently, and within the past five years, subject to
the Code.
4. Prohibited Purchases and Sales
------------------------------
A. Initial Public Offerings
No Investment Personnel may acquire any Securities in an initial public
offering. For purposes of this restriction, "Initial Public Offerings" shall
not include offerings of government and municipal securities.
B. Private Placements
No Investment Personnel may acquire any Securities in a private placement
5
<PAGE>
without prior approval.
(i) Prior approval must be obtained in accordance with the
preclearance procedure described in Section 6 below. Such approval will
take into account, among other factors, whether the investment opportunity
should be reserved for the Fund and its shareholders and whether the
opportunity is being offered to the Investment Personnel by virtue of his
or her position with the Fund. The Adviser/Subadviser shall maintain a
record of such prior approval and reason for same, for at least 5 years
after the end of the fiscal year in which the approval is granted.
(ii) Investment Personnel who have been authorized to acquire
Securities in a private placement must disclose that investment to the
chief investment officer (including his or her designee) of the
Adviser/Subadviser (or of any unit or subdivision thereof) or the
Compliance Officer when they play a part in any subsequent consideration of
an investment by the Fund in the issuer. In such circumstances, the Fund's
decision to purchase Securities of the issuer will be subject to an
independent review by appropriate personnel with no personal interest in
the issuer.
C. Blackout Periods
(i) Except as provided in Section 5 below, Access Persons are
prohibited from executing a Securities transaction on a day during which
any investment
6
<PAGE>
company in the Complex has a pending "buy" or "sell" order in the same or
an equivalent Security and until such time as that order is executed or
withdrawn; provided, however, that this prohibition shall not apply to
Disinterested Directors/Trustees except if they have actual knowledge of
trading by any fund in the Complex and, in any event, only with respect to
those funds on whose boards they sit.
This prohibition shall also not apply to Access Persons of the
Subadviser who do not, in the ordinary course of fulfilling his or her
official duties, have access to information regarding the purchase and sale
of Securities for the Fund and are not engaged in the day-to-day operations
of the Fund; provided that Securities investments effected by such Access
Persons during the proscribed period are not effected with knowledge of the
purchase or sale of the same or equivalent Securities by any fund in the
Complex.
A "pending 'buy' or 'sell' order" exists when a decision to purchase
or sell a Security has been made and communicated.
(ii) Portfolio Managers are prohibited from buying or selling a
Security within seven calendar days before or after the Fund trades in the
same or an equivalent Security. Nevertheless, a personal trade by any
Investment Personnel shall not prevent a Fund in the same Complex from
trading in the same or an equivalent security. However, such a transaction
shall be subject to independent review by the Compliance Officer.
(iii) If trades are effected during the periods proscribed in (i) or
(ii)
7
<PAGE>
above, except as provided in (iv) below with respect to (i) above, any
profits realized on such trades will be promptly required to be disgorged
to the Fund.
(iv) A transaction by Access Persons (other than Investment
Personnel) inadvertently effected during the period proscribed in (i) above
will not be considered a violation of the Code and disgorgement will not be
required so long as the transaction was effected in accordance with the
preclearance procedures described in Section 6 below and without prior
knowledge of trading by any fund in the Complex in the same or an
equivalent Security.
D. Short-Term Trading Profits
Except as provided in Section 5 below, Investment Personnel are prohibited
from profiting from a purchase and sale, or sale and purchase, of the same or an
equivalent Security within any 60 calendar day period. If trades are effected
during the proscribed period, any profits realized on such trades will be
immediately required to be disgorged to the Fund.
E. Short Sales
No Access Person may sell any security short which is owned by any Fund in
the Complex. Access Persons may, however make short sales when he/she owns an
equivalent amount of the same security.
F. Options
No Access Person may write a naked call option or buy a naked put option on
a security owned by any Fund in the Complex. Access Persons may purchase options
on securities not held by any Fund in the Complex, or purchase call options or
write put
8
<PAGE>
options on securities owned by any Fund in the Complex, subject to preclearance
and the same restrictions applicable to other Securities. Access Persons may
write covered call options or buy covered put options on a Security owned by any
Fund in the Complex at the discretion of the Compliance Officer.
G. Investment Clubs
No Access Person may participate in an investment club.
5. Exempted Transactions
---------------------
Subject to preclearance in accordance with Section 6 below with respect to
subitems (b), (e), (f), (g) and (i) hereof, the prohibitions of Sections 4(C)
and 4(D) will not apply to the following:
(a) Purchases or sales of Securities effected in any account over
which the Access Person has no direct or indirect influence or control or
in any account of the Access Person which is managed on a discretionary
basis by a person other than such Access Person and with respect to which
such Access Person does not in fact influence or control such transactions.
(b) Purchases or sales of Securities (or their equivalents) which are
not eligible for purchase or sale by any fund in the Complex.
(c) Purchases or sales of Securities which are non-volitional on the
part of either the Access Person or any fund in the Complex.
(d) Purchases of Securities which are part of an automatic dividend
reinvestment plan.
(e) Purchases effected upon the exercise of rights issued by an issuer
pro rata to all holders of a class of its Securities, to the extent such
--- ----
rights were acquired from such issuer, and sales of such rights so
acquired.
(f) Any equity Securities transaction, or series of related
transactions effected over a 30 calendar day period, involving 500 shares
or less in the aggregate, if (i) the Access Person has no prior knowledge
9
<PAGE>
of activity in such security by any fund in the Complex and (ii) the issuer
is listed on The New York Stock Exchange or has a market capitalization
(outstanding shares multiplied by the current price per share) greater than
$1 billion (or a corresponding market capitalization in foreign markets).
(g) Any fixed-income Securities transaction, or series of related
transactions effected over a 30 calendar day period, involving 100 units
($100,000 principal amount) or less in the aggregate, if the Access Person
has no prior knowledge of transactions in such Securities by any fund in
the Complex.
(h) Any transaction in index options effected on a broad-based index
(See Exhibit B.)/1/
(i) Purchases or sales of Securities which receive the prior approval
of the Compliance Officer (such person having no personal interest in such
purchases or sales), based on a determination that no abuse is involved and
that such purchases and sales are not likely to have any economic impact on
any fund in the Complex or on its ability to purchase or sell Securities of
the same class or other Securities of the same issuer.
(j) Purchases or sales of Unit Investment Trusts.
6. Preclearance
------------
Access Persons (other than Disinterested Directors/Trustees) must preclear
all personal Securities investments with the exception of those identified in
subparts (a), (c), (d), (h) and (j) of Section 5 above.
All requests for preclearance must be submitted to the Compliance Officer
for approval. All approved orders must be executed no later than 5:00 p.m.
local time on the business day following the date preclearance is granted. If
any order is not timely executed, a request for preclearance must be
resubmitted.
7. Reporting
---------
10
<PAGE>
(a) Disinterested Directors/Trustees shall report to the Secretary of the
Fund or the Compliance Officer the information described in Section 7(b) hereof
with respect to transactions in any Security in which such Disinterested
Director/Trustee has, or by reason of such transaction acquires, any direct or
indirect Beneficial Ownership in the Security only if such Disinterested
----
Director/Trustee, at the time of that transaction knew or, in the ordinary
course of fulfilling his or her official duties as a Director/Trustee of the
Fund, should have known that, during the 15-day period immediately preceding or
subsequent to the date of the transaction in a Security by such
Director/Trustee, such Security is or was purchased or sold by the Fund or was
being considered for purchase or sale by the Fund, the Manager or
Adviser/Subadviser; provided, however, that a Disinterested Director/Trustee is
not required to make a report with respect to transactions effected in any
account over which such Director/Trustee does not have any direct or indirect
influence or control or in any account of the Disinterested Director/Trustee
which is managed on a discretionary basis by a person other than such
Director/Trustee and with respect to which such Director/Trustee does not in
fact influence or control such transactions. The Secretary of the Fund or the
Compliance Officer shall maintain such reports and such other records to the
extent required by Rule 17j-1 under the Act.
(b) Every report required by Section 7(a) hereof shall be made not later
than ten days after the end of the calendar quarter in which the transaction to
which the report relates was effected, and shall contain the following
information:
________________________________________________________________________________
/1/ Exhibit B will be amended by the Compliance Officer as necessary.
11
<PAGE>
(i) The date of the transaction, the title and the number of shares, and
the principal amount of each Security involved;
(ii) The nature of the transaction (i.e., purchase, sale or any other type
----
of acquisition or disposition);
(iii) The price at which the transaction was effected;
(iv) The name of the broker, dealer or bank with or through whom the
transaction was effected; and
(v) The date that the report is submitted.
(c) Any such report may contain a statement that the report shall not be
construed as an admission by the person making such report that he or she has
any direct or indirect Beneficial Ownership in the Security to which the report
relates.
8. Records of Securities Transactions and Post-Trade Review
--------------------------------------------------------
Access Persons (other than Disinterested Directors/Trustees) are required
to direct their brokers to supply, on a timely basis, duplicate copies of
confirmations of all personal Securities transactions and copies of periodic
statements for all Securities accounts in which such Access Persons have a
Beneficial Ownership interest to the Compliance Officer. Such instructions must
be made upon becoming an Access Person and promptly as new accounts are
established, but no later than ten days after the end of a calendar quarter,
with respect to any account established by the Access Person in which any
securities were held during the quarter for the direct or indirect beneficial
interest of the Access Person. Notification must be made in writing and a copy
of the notification must be submitted to Compliance. This notification will
include the broker, dealer or bank with which the account was established and
the date the account was established.
12
<PAGE>
Compliance with this Code requirement will be deemed to satisfy the
reporting requirements imposed on Access Persons under Rule 17j-1(d), provided,
however, that such confirmations and statements contain all the information
required by Section 7. b. hereof and are furnished within the time period
required by such section.
The Compliance Officer will periodically review the personal investment
activity and holdings reports of all Access Persons (including Disinterested
Directors/Trustees with respect to Securities transactions reported pursuant to
Section 7 above).
9. Disclosure of Personal Holdings
-------------------------------
Within ten days after an individual first becomes an Access Person and
thereafter on an annual basis, each Access Person (other than Disinterested
Directors/Trustees) must disclose all personal Securities holdings. Such
disclosure must be made in writing and be as of the date the individual first
became an Access Person with respect to the initial report and by January 30 of
each year, including holdings information as of December 31, with respect to the
annual report. All such reports shall include the following: title, number of
shares and principal amount of each security held, name of broker, dealer or
bank with whom these securities are held and the date of submission by the
Access Person.
10. Gifts
-----
Access Persons are prohibited from receiving any gift or other thing of
more than $100 in value from any person or entity that does business with or on
behalf of the Fund. Occasional business meals or entertainment (theatrical or
sporting events, etc.) are permitted so long as they are not excessive in number
or cost.
13
<PAGE>
11. Service As a Director
---------------------
Investment Personnel are prohibited from serving on the boards of directors
of publicly traded companies, absent prior authorization based upon a
determination that the board service would be consistent with the interests of
the Fund and its shareholders. In the limited instances that such board service
is authorized, Investment Personnel will be isolated from those making
investment decisions affecting transactions in Securities issued by any publicly
traded company on whose board such Investment Personnel serves as a director
through the use of "Chinese Wall" or other procedures designed to address the
potential conflicts of interest.
12. Certification of Compliance with the Code
-----------------------------------------
Access Persons are required to certify annually as follows:
(i) that they have read and understood the Code;
(ii) that they recognize that they are subject to the Code;
(iii) that they have complied with the requirements of the Code; and
(iv) that they have disclosed or reported all personal Securities
transactions required to be disclosed or reported pursuant to the
requirements of the Code.
13. Code Violations
---------------
All violations of the Code will be reported to the Board of
Directors/Trustees of the Fund on a quarterly basis. The Board of
Directors/Trustees may take such action as it deems appropriate.
14. Review by the Board of Directors/Trustees
-----------------------------------------
14
<PAGE>
The Board of Directors/Trustees will be provided with an annual report
which at a minimum:
(i) certifies to the Board that the Fund, Manager, Investment
Adviser/Subadviser, and Principal Underwriter has adopted procedures reasonably
necessary to prevent its Access persons from violating its Code.
(ii) summarizes existing procedures concerning personal investing and any
changes in the procedures made during the preceding year;
(iii) identifies material Code or procedural violations and sanctions
imposed in response to those material violations; and
(iv) identifies any recommended changes in existing restrictions or
procedures based upon the Fund's experience under the Code, evolving industry
practices, or developments in applicable laws and regulations.
The Board will review such report and determine if any further action is
required.
15
<PAGE>
Explanatory Notes to Code
-------------------------
1. No comparable Code requirements have been imposed upon Prudential
Mutual Fund Services LLC, the Fund's transfer agent, or those of its directors
or officers who are not Directors/Trustees or Officers of the Fund since they
are deemed not to constitute Access Persons or Advisory Persons as defined in
paragraphs (e)(1) and (2) of Rule 17j-1.
Dated: February 29, 2000
16
<PAGE>
Exhibit A
---------
Definition of Beneficial Ownership
----------------------------------
The term "beneficial ownership" of securities would include not only
ownership of securities held by an access person for his or her own benefit,
whether in bearer form or registered in his or her own name or otherwise, but
also ownership of securities held for his or her benefit by other (regardless of
whether or how they are registered) such as custodians, brokers, executors,
administrators, or trustees (including trusts in which he or she has only a
remainder interest), and securities held for his or her account by pledges,
securities owned by a partnership in which he or she should regard as a personal
holding corporation. Correspondingly, this term would exclude securities held
by an access person for the benefit of someone else.
Ordinarily, this term would not include securities held by executors or
administrators in estates in which an access person is a legatee or beneficiary
unless there is a specific legacy to such person of such securities or such
person is the sole legatee or beneficiary and there are other assets in the
estate sufficient to pay debts ranking ahead of such legacy, or the securities
are held in the estate more than a year after the decedent's death.
Securities held in the name of another should be considered as
"beneficially" owned by an access person where such person enjoys "benefits
substantially equivalent to ownership". The SEC has said that although the
final determination of beneficial ownership is a question to be determined in
the light of the facts of the particular case, generally a person is regarded as
the beneficial owner of securities held in the name of his or her spouse and
their minor children. Absent special circumstances such relationship ordinarily
results in such person obtaining benefits substantially equivalent to ownership,
e.g., application of the income derived from such securities to maintain a
common home, to meet expenses which such person otherwise would meet from other
sources, or the ability to exercise a controlling influence over the purchase,
sale or voting of such securities.
An access person also may be regarded as the beneficial owner of securities
held in the name of another person, if by reason of any contact, understanding,
relationship, agreement or other arrangement, he obtains therefrom benefits
substantially equivalent to those of ownership. Moreover, the fact that the
holder is a relative or relative of a spouse and sharing the same home as an
access person may in itself indicate that the access person would obtain
benefits substantially equivalent to those of ownership from securities held in
the name of such relative. Thus, absent countervailing facts, it is expected
that securities held by relatives who share the same home as an access person
will be treated as being beneficially owned by the access person.
An access person also is regarded as the beneficial owner of securities
held in the name of a spouse, minor children or other person, even though he
does not obtain therefrom the aforementioned benefits of ownership, if he can
vest or revest title in himself at once or at some future time.
<PAGE>
Exhibit B
---------
INDEX OPTIONS ON A BROAD-BASED INDEX
TICKER SYMBOL DESCRIPTION
- --------------------------------------------------------------------------------
NIK Nikkei 300 Index CI/Euro
- --------------------------------------------------------------------------------
OEX S&P 100 Close/Amer Index
- --------------------------------------------------------------------------------
OEW S&P 100 Close/Amer Index
- --------------------------------------------------------------------------------
OEY S&P 100 Close/Amer Index
- --------------------------------------------------------------------------------
SPB S&P 500 Index
- --------------------------------------------------------------------------------
SPZ S&P 500 Open/Euro Index
- --------------------------------------------------------------------------------
SPX S&P 500 Open/Euro Index
- --------------------------------------------------------------------------------
SXZ S&P 500 (Wrap)
- --------------------------------------------------------------------------------
SXB S&P 500 Open/Euro Index
- --------------------------------------------------------------------------------
RUZ Russell 2000 Open/Euro Index
- --------------------------------------------------------------------------------
RUT Russell 2000 Open/Euro Index
- --------------------------------------------------------------------------------
MID S&P Midcap 400 Open/Euro Index
- --------------------------------------------------------------------------------
NDX NASDAQ- 100 Open/Euro Index
- --------------------------------------------------------------------------------
NDU NASDAQ- 100 Open/Euro Index
- --------------------------------------------------------------------------------
NDZ NASDAQ- 100 Open/Euro Index
- --------------------------------------------------------------------------------
NDV NASDAQ- 100 Open/Euro Index
- --------------------------------------------------------------------------------
NCZ NASDAQ- 100 Open/Euro Index
- --------------------------------------------------------------------------------
SML S&P Small Cap 600
- --------------------------------------------------------------------------------
TPX U.S. Top 100 Sector
- --------------------------------------------------------------------------------
SPL S&P 500 Long-Term Close
- --------------------------------------------------------------------------------
ZRU Russell 2000 L-T Open./Euro
- --------------------------------------------------------------------------------
VRU Russell 2000 Long-Term Index
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 99.(P)(3)
August 1999
ALLIANCE CAPITAL MANAGEMENT L.P.
--------------------------------
Code of Ethics and Statement of Policy and Procedures Regarding
Personal Securities Transactions
1. Purposes
--------
(a) Alliance Capital Management L.P. ("Alliance", "we" or "us") is a
registered investment adviser and acts as investment manager or
adviser to investment companies and other Clients. In this capacity,
we serve as fiduciaries and owe our Clients an undivided duty of
loyalty. We must avoid even the appearance of a conflict that may
compromise the trust Clients have placed in us and must insist on
strict adherence to fiduciary standards and compliance with all
applicable federal and state securities laws. Adherence to this Code
of Ethics and Statement of Policy and Procedures Regarding Personal
Securities Transactions (the "Code and Statement") is a fundamental
condition of service with us, any of our subsidiaries or our general
partner (the "Alliance Group").
(b) The Code and Statement is intended to comply with Rule 17j-1 under the
Investment Company Act which applies to us because we serve as an
investment adviser to registered investment companies. Rule 17j-1
specifically requires us to adopt a code of ethics that contains
provisions reasonably necessary to prevent our "access persons"
(defined in Rule 17j-1 to cover persons such as officers, directors,
portfolio managers, traders, research analysts and others) from
engaging in fraudulent conduct, including insider trading. Each
investment company we advise has also adopted a code of ethics with
respect to its access persons. As set forth in Section 3 below, our
Code and Statement applies to all Employees and all other individuals
who are Access Persons. The Code and Statement is also intended to
comply with the provisions of Rule 204-2 under the Investment Advisers
Act of 1940 (the "Advisers Act") which requires us to maintain records
of securities transactions in which certain of our personnel have any
Beneficial Ownership.
(c) All Employees and all other individuals who are Access Persons
(collectively, "you") also serve as fiduciaries with respect to our
Clients and in this capacity you owe an undivided duty of loyalty to
our Clients. As part of this duty and as expressed throughout the
Code and Statement, you must at all times:
(i) Place the interests of our Clients first;
(ii) Conduct all personal securities transactions consistent with
this Code and Statement and in such a manner that avoids any
actual or potential
<PAGE>
conflict of interest or any abuse of your responsibility and
position of trust; and
(iii) Abide by the fundamental standard that you not take
inappropriate advantage of your position.
(d) This Code and Statement does not attempt to identify all possible
conflicts of interests and literal compliance with each of the
specific procedures will not shield you from liability for personal
trading or other conduct which violates your fiduciary duties to our
Clients. In addition to the specific prohibitions contained in this
Code and Statement, you are also subject to a general requirement not
to engage in any act or practice that would defraud our Clients. This
general prohibition includes, in connection with the purchase or sale
of a Security held or to be acquired or sold (as this phrase is
defined below in Section 2(k)) by a Client:
(i) Making any untrue statement of a material fact;
(ii) Creating materially misleading impressions by omitting to state
or failing to provide any information necessary to make any
statements made, in light of the circumstances in which they
are made, not misleading;
(iii) Making investment decisions, changes in research ratings and
trading decisions other than exclusively for the benefit of and
in the best interest of our Clients;
(iv) Using information about investment or trading decisions or
changes in research ratings (whether considered, proposed or
made) to benefit or avoid economic injury to you or anyone
other than our Clients;
(v) Taking, delaying or omitting to take any action with respect to
any research recommendation, report or rating or any investment
or trading decision for a Client in order to avoid economic
injury to you or anyone other than our Clients;
(vi) Purchasing or selling a Security on the basis of knowledge of a
possible trade by or for a Client;
(vii) Revealing to any other person (except in the normal course of
your duties on behalf of a Client) any information regarding
Securities transactions by any Client or the consideration by
any Client of Alliance of any such Securities transactions; or
(viii) Engaging in any manipulative practice with respect to any
Client.
-2-
<PAGE>
(e) The provisions contained in this Code and Statement must be followed
----
when making a personal securities transaction. These policies and
procedures, which must be followed, are considerably more restrictive
and time-consuming than those applying to investments in the mutual
funds and other Clients we advise. If you are not prepared to comply
with these policies and procedures, you must forego personal trading.
2. Definitions
-----------
The following definitions apply for purposes of the Code and Statement in
addition to the definitions contained in the text itself.
(a) "Access Person" means any director or officer of the general partner
of Alliance, as well as any of the following persons:
(i) any Employee who, in connection with his or her regular functions
or duties --
(A) makes, participates in, or obtains information regarding the
purchase or sale of a Security by a Client, or whose
functions relate to the making of any recommendations with
respect to such purchases or sales;
(B) obtains information from any source regarding any change, or
consideration of any change in Alliance's internal research
coverage, a research rating or an internally published view
on a Security or issuer; or
(C) obtains information from any source regarding the placing or
execution of an order for a Client account; and
(ii) any natural person having the power to exercise a controlling
influence over the management or policies of Alliance (unless
that power is solely the result of his or her position with
Alliance) who:
(A) obtains information concerning recommendations made to a
Client with regard to the purchase or sale of a Security;
(B) obtains information from any source regarding any change, or
consideration of any change in research coverage, research
rating or a published view on a Security or issuer; and
(C) obtains information from any source regarding the placing or
execution of an order for a Client account.
-3-
<PAGE>
(b) A Security is "being considered for purchase or sale" when:
(i) an Alliance research analyst issues research information
(including as part of the daily morning call) regarding initial
coverage of, or changing a rating with respect to, a Security;
(ii) a portfolio manager has indicated (during the daily morning call
or otherwise) his or her intention to purchase or sell a
Security;
(iii) a portfolio manager places an order for a Client; or
(iv) a portfolio manager gives a trader discretion to execute an
order for a Client over a specified period of time.
(c) "Beneficial Ownership" is interpreted in the same manner as in
determining whether a person is subject to the provisions of Section
16 of the Securities Exchange Act of 1934 ("Exchange Act"), Rule 16a-1
and the other rules and regulations thereunder and includes ownership
by any person who, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise, has or shares a
direct or indirect pecuniary interest in a Security. For example, an
individual has an indirect pecuniary interest in any Security owned by
the individual's spouse. Beneficial Ownership also includes,
directly or indirectly, through any contract, arrangement,
understanding, relationship, or otherwise, having or sharing "voting
power" or "investment power," as those terms are used in Section 13(d)
of the Exchange Act and Rule 13d-3 thereunder.
(d) "Client" means any person or entity, including an investment company,
for which Alliance serves as investment manager or adviser.
(e) "Compliance Officer" refers to Alliance's Compliance Officer.
(f) "Employee" refers to any person who is an employee of any member of
the Alliance Group, including both part-time employees, as well as
consultants (acting in the capacity of a portfolio manager, trader or
research analyst) under the control of Alliance who, but for their
status as consultants, would otherwise come within the definition of
Access Person.
(g) "Investment Personnel" refers to any Employee who:
(i) acts in the capacity of a portfolio manager, research analyst or
trader;
(ii) assists someone acting in the capacity of a portfolio manager,
research analyst or trader and as an assistant has access to
information generated or used by portfolio managers, research
analysts and traders (including,
-4-
<PAGE>
for example, assistants who have access to the Alliance
Investment Review or the Alliance International Investment
Review); or
(iii) receives the Alliance Investment Review or the Alliance
International Investment Review.
(h) "Personal Account" refers to any account (including, without
limitation, a custody account, safekeeping account and an account
maintained by an entity that may act in a brokerage or a principal
capacity) in which an Access Person or Employee has any Beneficial
Ownership and any such account maintained by or for a financial
dependent. For example, this definition includes Personal Accounts
of:
(i) an Access Person's or Employee's spouse, including a legally
separated or divorced spouse who is a financial dependent,
(ii) financial dependents residing with the Access Person or
Employee, and
(iii) any person financially dependent on an Access Person or
Employee who does not reside with that person, including
financially dependent children away at college.
(i) "Purchase or Sale of a Security" includes, among other transactions,
the writing or purchase of an option to sell a Security and any short
sale of a Security.
(j) "Security" has the meaning set forth in Section 2(a)(36) of the
Investment Company Act and any derivative thereof, commodities,
options or forward contracts, except that it shall not include shares
of open-end investment companies registered under the Investment
Company Act, securities issued by the Government of the United States,
short-term debt securities that are government securities within the
meaning of Section 2(a)(16) of the Investment Company Act, bankers'
acceptances, bank certificates of deposit, commercial paper, and such
other money market instruments as are designated by the Compliance
Officer.
(k) "Security held or to be acquired or sold" means:
(i) any Security which, within the most recent 15 days (1) is or has
been held by a Client or (2) is being or has been considered by a
Client (to the extent known by Alliance) or Alliance for purchase
by the Client; and
(ii) any option to purchase or sell, and any Security convertible into
or exchangeable for, a Security.
-5-
<PAGE>
(l) "Subsidiary" refers to either of the following types of entities with
respect to which Alliance, directly or indirectly, through the
ownership of voting securities, by contract or otherwise has the power
to direct or cause the direction of management or policies of such
entity:
(i) any U.S. entity engaged in money management; and
(ii) any non-U.S. entity engaged in money management for U.S.
accounts.
3. Application
-----------
(a) This Code and Statement applies to all Employees and to all other
individuals who are Access Persons. Please note that certain
provisions apply to all Employees while other provisions apply only to
Access Persons and others apply only to certain categories of Access
Persons who are also Investment Personnel (e.g., portfolio managers
and research analysts).
(b) Alliance will provide a copy of this Code and Statement to all
Employees and all individuals who are Access Persons. In addition,
the Compliance Officer will maintain lists of Access Persons and
Investment Personnel, including a separate list of portfolio managers
and research analysts.
4. Limitations on Personal Securities Transactions
-----------------------------------------------
(a) All Employees
-------------
It is the responsibility of each Employee to ensure that all personal
securities transactions are made in strict compliance with the
restrictions and procedures in the Code and Statement and otherwise
comply with all applicable legal and regulatory requirements.
Employees must hold all Securities in a Personal Account. This
requirement applies to all types of personal securities transactions
including, for example, the purchase of Securities in a private
placement or other direct investment. In addition, Employees may not
take physical possession of certificates or other formal evidence of
ownership.
Personal securities transactions for Employees may be effected only in
a Personal Account and in accordance with the following provisions:
(i) Designated Brokerage Accounts
-----------------------------
All Personal Accounts of an Employee that are maintained as
brokerage accounts must be held only at the following designated
broker-dealers:
-6-
<PAGE>
Donaldson, Lufkin & Jenrette, Merrill Lynch & Co., and Charles
Schwab.
(ii) Securities Being Considered for Client Purchase or Sale
-------------------------------------------------------
An Employee may not purchase or sell a Security, or engage in any
short sale of a Security, in a Personal Account if, at the time
of the transaction, the Security is being considered for purchase
or sale for a Client or is being purchased or sold for a Client.
The following non-exhaustive list of examples illustrates this
restriction:
. An Alliance research analyst issues research
information (including as part of the daily morning call)
regarding initial coverage of, or changing a rating with
respect to, a Security.
. A portfolio manager has, during the daily morning
call, indicated his or her intention to purchase or sell a
Security.
. A portfolio manager places an order in the Security to
purchase or sell the Security for a Client.
. An open order in the Security exists on the trading
desk.
. An open limit order exists on the trading desk, and it
is reasonably likely that the Security will reach that limit
price in the near future.
(iii) Restricted List
---------------
A Security may not be purchased or sold in a Personal Account
if, at the time of the transaction, the Security appears on the
Alliance Daily Restricted List and is restricted for Employee
transactions. The Daily Restricted List is made available each
business day to all Employees via Lotus Notes and the Alliance
Alert.
(iv) Preclearance Requirement
------------------------
An Employee may not purchase or sell, directly or indirectly, any
Security in which the Employee has (or after such transaction
would have) any Beneficial Ownership unless the Employee obtains
the prior written approval to the transaction from the Compliance
Department
-7-
<PAGE>
and, in the case of Investment Personnel, the head of the
business unit in which the Employee works. A request for
preclearance must be made in writing in advance of the
contemplated transaction and must state:
a. the name of the Security involved,
b. the number of shares or principal amount to be purchased or
sold, and
c. a response to all questions contained in the appropriate
pre-clearance form.
Preclearance requests will be acted on only between the hours of
10:00 a.m. and 3:30 p.m. Any approval given under this paragraph
will remain in effect only until the end of the trading day on
which the approval was granted.
When a Security is being considered for purchase or sale for a
Client or is being purchased or sold for a Client following the
approval on the same day of a personal trading request form with
respect to the same security, the Compliance Department is
authorized to cancel the personal order if (x) it has not been
executed and the order exceeds a market value of $50,000 or (y)
the Compliance Department determines, after consulting with the
trading desk and the appropriate business unit head (if
available), that the order, based on market conditions, liquidity
and other relevant factors, could have an adverse impact on a
Client or on a Client's ability to purchase or sell the Security
or other Securities of the issuer involved.
(v) Amount of Trading
-----------------
No more than an aggregate of 20 securities transactions may occur
in an Employee's Personal Accounts in any consecutive thirty-day
period.
(vi) Dissemination of Research Information
-------------------------------------
An Employee may not buy or sell any Security that is the
subject of "significantly new" or "significantly changed"
research during a forty-eight hour period commencing with the
first publication or release of the research. The terms
"significantly new" and "significantly changed" include:
a. the initiation of coverage by an Alliance research analysts;
-8-
<PAGE>
b. any change in a research rating or position by an Alliance
research analyst (unless the research analyst who makes the
change advises the Compliance Department in writing that the
change is the result of an unanticipated widely disseminated
announcement or market event, e.g., the announcement of a
major earnings warning as opposed to the research analysts
independently rethinking his or her subjective assessment of
the security); and
c. any other rating, view, opinion, or advice from an Alliance
research analyst, the issuance (or reissuance) of which in
the opinion of such research analyst or head of research
would be reasonably likely to have a material effect on the
price of the security.
(b) Access Persons
--------------
In addition to the requirements set forth in paragraph (a) of this
Section 4, the following restrictions apply to all Access Persons:
(i) Short Sales
-----------
No Access Person shall engage in any short sale of a Security if,
at the time of the transaction, any Client has a long position in
such Security (except that an Access Person may engage in short
sales against the box and covered call writing provided that
these personal securities transactions do not violate the
prohibition against short-term trading).
(ii) Short-Term Trading
------------------
All Access Persons are subject to a mandatory buy and hold of all
Securities for 60 calendar days. An Access Person may, however,
after 30 calendar days, sell a Security if the sale price is
lower than the original purchase price (i.e., at a loss on the
original investment). Any trade made in violation of this
paragraph shall be unwound, or, if that is not practicable, all
profits from the short-term trading must be disgorged as directed
by the Compliance Officer.
(iii) Non-Employee Access Persons
---------------------------
Any non-Employee Access Person with actual knowledge that a
Security is being considered for purchase or sale for a Client
may not purchase or sell such Security.
(c) Investment Personnel
--------------------
-9-
<PAGE>
In addition to the requirements set forth in paragraphs (a) and (b) of
this Section 4, the following restrictions apply to all Investment
Personnel:
(i) Initial Public Offerings
------------------------
No Investment Personnel shall acquire any direct or indirect
Beneficial Ownership in any Securities in any initial public
offering.
-10-
<PAGE>
(ii) Private Placements
------------------
No Investment Personnel shall acquire any Beneficial Ownership in
any Securities in any private placement of Securities unless the
Compliance Officer and the business unit head give express prior
written approval and document the basis for granting or denying
approval after due inquiry. The Compliance Officer, in
determining whether approval should be given, will take into
account, among other factors, whether the investment opportunity
should be reserved for a Client and whether the opportunity is
being offered to the individual by virtue of his or her position
with the Alliance Group. Investment Personnel so authorized to
acquire Securities in a private placement must disclose that
investment when they play a part in any Client's subsequent
consideration of an investment in the issuer, and in such a case,
the decision of Alliance to purchase Securities of that issuer
for a Client will be subject to an independent review by
Investment Personnel with no personal interest in such issuer.
(iii) Board Member or Trustee
-----------------------
No Investment Personnel shall serve on any board of directors or
trustees or in any other management capacity of any private or
public company without prior written authorization from the
Compliance Officer based upon a determination that such service
would not be inconsistent with the interests of any Client. This
prohibition does not include non-profit corporations, charities
or foundations; however, approval from the Investment Personnel's
supervisor is necessary.
(iv) Receipt of Gifts
----------------
No Investment Personnel shall receive any gift or other thing of
more than de minimis value from any person or entity, other than
a member of the Alliance Group, that does business with Alliance
on behalf of a Client, provided, however, that receipt of the
following shall not be prohibited:
a. an occasional breakfast, luncheon, dinner or reception,
ticket to a sporting event or the theater, or comparable
entertainment, that is not so frequent, so costly, nor so
extensive as to raise any question of impropriety;
b. a breakfast, luncheon, dinner, reception or cocktail party
in conjunction with a bona fide business meeting; and
-11-
<PAGE>
c. a gift approved in writing by the Compliance Officer.
(d) Portfolio Managers
------------------
In addition to the requirements set forth in paragraphs (a), (b) and
(c) of this Section 4, the following restrictions apply to all persons
acting in the capacity of a portfolio manager of a Client account:
(i) Blackout Periods
----------------
No person acting in the capacity of a portfolio manager shall buy
or sell a Security for a Personal Account within seven calendar
days before and after a Client trades in that Security. In the
case of Client accounts managed by more than one portfolio
manager, this restriction will apply to the portfolio manager who
makes the decision to purchase or sell the relevant Security. If
a portfolio manager engages in such a personal securities
transaction during a blackout period, the Compliance Officer will
break the trade or, if the trade cannot be broken, the Compliance
Officer will direct that any profit realized on the trade be
disgorged.
(ii) Actions During Blackout Periods
-------------------------------
No person acting in the capacity of a portfolio manager shall
delay or accelerate a Client trade due to a previous purchase or
sale of a Security for a Personal Account. In the event that a
portfolio manager determines that it is in the best interest of a
Client to buy or sell a Security for the account of the Client
within seven days of the purchase or sale of the same Security in
a Personal Account, the portfolio manager should contact the
Compliance Officer immediately who may direct that the trade in
the Personal Account be canceled or take other appropriate
relief.
(iii) Transactions Contrary to Client Positions
-----------------------------------------
No person acting in the capacity of a portfolio manager shall
purchase or sell a Security in a Personal Account contrary to
investment decisions made on behalf of a Client, unless the
portfolio manager represents and warrants in the personal trading
request form that (x) it is appropriate for the Client account to
buy, sell or continue to hold that Security and (y) the decision
to purchase or sell the Security for the Personal Account arises
from the need to raise or invest cash or some other valid reason
specified by the portfolio manager and approved by the Compliance
Officer and is not otherwise based on the portfolio manager's
view of how the Security is likely to perform.
-12-
<PAGE>
(e) Research Analysts
-----------------
In addition to the requirements set forth in paragraphs (a), (b), (c)
of this Section 4, the following restrictions apply to all persons
acting in the capacity of a research analyst:
(i) Blackout Periods
----------------
No person acting as a research analyst shall buy or sell a
Security within seven calendar days before and after making a
change in a rating or other published view with respect to that
Security. If a research analyst engages in such a personal
securities transaction during a blackout period, the Compliance
Officer will break the trade or, if the trade cannot be broken,
the Compliance Officer will direct that any profit realized on
the trade be disgorged.
(ii) Actions During Blackout Periods
-------------------------------
No person acting as a research analyst shall delay or accelerate
a rating or other published view with respect to any Security
because of a previous purchase or sale of a Security in such
person's Personal Account. In the event that a research analyst
determines that it is appropriate to make a change in a rating or
other published view within seven days of the purchase or sale of
the same Security in a Personal Account, the research analyst
should contact the Compliance Officer immediately who may direct
that the trade in the Personal Account be canceled or take other
appropriate relief.
(iii) Actions Contrary to Ratings
---------------------------
No person acting as a research analyst shall purchase or sell a
Security (to the extent such Security is included in the research
analyst's research universe) contrary to an outstanding rating or
a pending ratings change, unless (x) the research analyst
represents and warrants in the personal trading request form that
(as applicable) there is no reason to change the outstanding
rating and (y) the research analyst's personal trade arises from
the need to raise or invest cash or some other valid reason
specified by the research analyst and approved by the Compliance
Officer and is not otherwise based on the research analyst's view
of how the security is likely to perform.
-13-
<PAGE>
5. Exempted Transactions
---------------------
(a) The pre-clearance requirements, as described in Section 4(a)(iv) of
this Code and Statement, do not apply to:
(i) Non-Volitional Transactions
---------------------------
Purchases or sales that are non-volitional (including, for
example, any Security received as part of an individual's
compensation) on the part of an Employee (and any Access Person
who is not an Employee) or are pursuant to a dividend
reinvestment plan (up to an amount equal to the cash value of a
regularly declared dividend, but not in excess of this amount).
(ii) Exercise of Pro Rata Issued Rights
----------------------------------
Purchases effected upon the exercise of rights issued by an
issuer pro rata to all holders of a class of the issuer's
Securities, to the extent such rights were acquired from such
issuer, and sales of such rights so acquired. This exemption
applies only to the exercise or sale of rights that are issued in
connection with a specific upcoming public offering on a
specified date, as opposed to rights acquired from the issuer
(such as warrants or options), which may be exercised from time-
to-time up until an expiration date. This exemption does not
apply to the sale of stock acquired pursuant to the exercise of
rights.
(b) The restrictions on effecting transactions in a (1) Security being
considered for purchase or sale, as described in Sections 4(a)(ii) and
4(b)(iii) or (2) that is the subject of "significantly new" or
"significantly changed" research, as described in Section 4(a)(vi) of
this Code and Statement, do not apply to:
(i) Non-Volitional Transactions
---------------------------
Purchases or sales that are non-volitional (including, for
example, any Security received as part of an individual's
compensation) on the part of an Access Person or are pursuant to
a dividend reinvestment plan (up to an amount equal to the cash
value of a regularly declared dividend, but not in excess of
this amount).
(ii) Exercise of Pro Rata Issued Rights
----------------------------------
Purchases effected upon the exercise of rights issued by an
issuer pro rata to all holders of a class of the issuer's
Securities, to the extent such rights were acquired from such
issuer, and sales of such rights so acquired. This exemption
applies only to the exercise or sale of rights
-14-
<PAGE>
that are issued in connection with a specific upcoming public
offering on a specified date, as opposed to rights acquired from
the issuer (such as warrants or options), which may be exercised
from time-to-time up until an expiration date. This exemption
does not apply to the sale of stock acquired pursuant to the
exercise of rights.
(iii) De Minimis Transactions -- Fixed Income Securities
--------------------------------------------------
Any of the following Securities, if at the time of the
transaction, the Access Person has no actual knowledge that the
Security is being considered for purchase or sale by a Client,
that the Security is being purchased or sold by the Client or
that the Security is the subject of significantly new or
significantly changed research:
a. Fixed income securities transaction involving no more than
100 units or having a principal amount not exceeding
$25,000; or
b. Non-convertible debt securities and non-convertible
preferred stocks which are rated by at least one nationally
recognized statistical rating organization ("NRSRO") in one
of the three highest investment grade rating categories.
(iv) De Minimis Transactions -- Equity Securities
--------------------------------------------
Any equity Securities transaction, or series of related
transactions, involving shares of common stock and excluding
options, warrants, rights and other derivatives, provided
a. any orders are entered after 10:00 a.m. and before 3:00
p.m. and are not designated as "market on open" or "market
on close";
b. the aggregate value of the transactions do not exceed (1)
$10,000 for securities with a market capitalization of less
than $1 billion; (2) $25,000 for securities with a market
capitalization of $1 billion to $5 billion and (3) $50,000
for securities with a market capitalization of greater than
$5 billion; and
c. the Access Person has no actual knowledge that the Security
is being considered for purchase or sale by a Client, that
the Security is being purchased or sold by or for the
Client or that the Security is the subject of significantly
new or significantly changed research.
(c) Non-Employee Access Persons
---------------------------
-15-
<PAGE>
The restrictions on Employees and Access Persons, as described in
Sections 4(a) and 4(b) of this Code and Statement, do not apply to
non-Employee Access Persons, if at the time of the transaction
involved, such person has no actual knowledge that the Security
involved is being considered for purchase or sale.
(d) Extreme Hardship
----------------
In addition to the exceptions contained in Section 5(a) and (b), the
Compliance Officer may, in very limited circumstances, grant other
exceptions under any Section of the Code and Statement on a case-by-
case basis, provided:
(i) The individual seeking the exception furnishes to the Compliance
Officer:
a. a written statement detailing the efforts made to comply
with the requirement from which the individual seeks an
exception;
b. a written statement containing a representation and warranty
that (1) compliance with the requirement would impose a
severe undue hardship on the individual and (2) the
exception would not, in any manner or degree, harm or
defraud the Client or compromise the individual's or
Alliance's fiduciary duty to any Client; and
c. any supporting documentation that the Compliance Officer may
request;
(ii) The Compliance Officer conducts an interview with the individual
or takes such other steps the Compliance Officer deems
appropriate in order to verify that granting the exception will
not in any manner or degree, harm or defraud the Client or
compromise the individual's or Alliance's fiduciary duty to any
Client; and
(iii) The Compliance Officer maintains, along with statements
provided by the individual, a written record that contains:
a. the name of the individual;
b. the specific requirement of Section 4 from which the
individual sought an exception;
c. the name of the Security involved, the number of shares or
principal amount purchased or sold, and the date or dates on
which the Securities were purchased or sold;
-16-
<PAGE>
d. the reason(s) the individual sought an exception from the
requirements of Section 4;
e. the efforts the individual made to comply with the
requirements of Section 4 from which the individual sought
to be excepted; and
f. the independent basis upon which the Compliance Officer
believes that the exemption should be granted.
(e) Any Employee or Access Person who acquires an interest in any private
investment fund (including a "hedge fund") or any other Security that
cannot be purchased and held in a Personal Account shall be excepted
from the requirement that all Securities be held in a Personal
Account, as described in Section 4(a) of this Code and Statement.
Such Employee or Access Person shall provide the Compliance Officer
with a written statement detailing the reason why such Security cannot
be purchased and held in a Personal Account. Transactions in these
Securities nevertheless remain subject to all other requirements of
this Code and Statement, including applicable private placement
procedures, preclearance requirements and blackout period trading
restrictions.
6. Reporting
---------
(a) Disclosure of Personal Accounts and Beneficially Owned Securities
-----------------------------------------------------------------
Upon commencement of employment with a member of the Alliance Group,
an Employee must:
(i) file with the Compliance Officer a list of all Personal Accounts
by completing the Employee Compliance Statement (a copy of which
is attached as Appendix A), and while so employed maintain the
list on a current basis; and
(ii) Disclose to the Compliance Officer all Securities holdings in
which the Employee has any Beneficial Ownership, and thereafter
on an annual basis, to the extent these Securities do not appear
on the Employee's account statements.
(b) Access Persons who are not Employees of Alliance
------------------------------------------------
Every Access Person who is not an Employee of Alliance, shall report
to the Compliance Officer the information described in Section 6(d)
below with respect to transactions in any Security in which such
Access Person has, or by reason of such transaction acquires, any
Beneficial Ownership in the Security; provided, however, that such
Access Person is not required to make a report with respect to
transactions effected in any account over which the Access Person does
not
-17-
<PAGE>
have any direct or indirect influence or control, including such an
account in which an Access Person has any Beneficial Ownership.
(c) Report Contents
---------------
Every report of a non-Employee Access Person required by Section 6(b)
above shall be in writing and shall be delivered not later than ten
days after the end of the calendar quarter in which a transaction to
which the report relates was effected, and shall contain the following
information:
(i) the date of the transaction, the title and the number of shares,
and the principal amount of each Security involved;
(ii) the nature of the transaction (i.e., purchase, sale or any other
type of acquisition or disposition);
(iii) the price at which the transaction was effected; and
(iv) the name of the broker, dealer or bank with or through whom the
transaction was effected.
(d) Report Representations
----------------------
Any such report may contain a statement that the report is not to be
construed as an admission by the person making the report that he or
she has any direct or indirect Beneficial Ownership in the Security to
which the report relates.
(e) Maintenance of Reports
----------------------
The Compliance Officer shall maintain the statements required by
paragraph (a) above, the reports required by paragraph (c) above and
such other records, if any, as are required by Rule 17j-1 under the
Investment Company Act and Rule 204-2 under the Advisers Act. All
reports furnished pursuant to this Section will be kept confidential,
subject to the rights of inspection by the Compliance Officer, the
Transaction Compliance Committee, the Securities and Exchange
Commission and by other third parties pursuant to applicable law.
7. Annual Verifications
--------------------
Each person subject to this Code and Statement must certify annually that
he or she has read and understands this Code and Statement, recognizes that
he or she is subject thereto and has complied with its provisions and
disclosed or reported all personal Securities transactions required to be
disclosed or reported by this Code and Statement. Such certificates and
reports are to be given to the Compliance Officer.
-18-
<PAGE>
8. Sanctions
---------
Upon learning of a violation of this Code and Statement, any member of the
Alliance Group, with the advice of the Compliance Officer, may impose such
sanctions as it deems appropriate, including, among other things, censure,
suspension or termination of service. Individuals subject to this Code and
Statement who fail to comply with this Code and Statement may also be
violating the federal securities laws or other federal and state laws. Any
such person who is suspected of violating this Code and Statement should be
reported immediately to the Compliance Officer.
-19-
<PAGE>
Certification
-------------
I hereby acknowledge receipt of the Code of Ethics and Statement of Policy
and Procedures Regarding Personal Securities Transactions (the "Code and
Statement") of Alliance Capital Management L.P. and its Subsidiaries. I certify
that I have read and understand the Code and Statement and recognize that I am
subject to its provisions. I also certify that I have complied with the
requirements of the Code and Statement and have disclosed or reported all
personal securities transactions required to be disclosed or reported pursuant
to the Code and Statement.
Name
_________________________________________
(please print)
Signature
_________________________________________
Date
_________________________________________
-20-
<PAGE>
APPENDIX A
ALLIANCE CAPITAL MANAGEMENT L.P.
---------------------------------
EMPLOYEE COMPLIANCE STATEMENT
I hereby certify that I have read and understand the Code of Ethics
and Statement of Policy and Procedures Regarding Personal Securities
Transactions (the "Code and Statement"), dated August 1999 and hereby agree, in
consideration of my continued employment by Alliance Capital Management L.P. or
one of its subsidiaries, to comply with the policies and procedures contained in
the Code and Statement.
1 . In connection therewith, I agree to:
a. file with the Compliance Officer and maintain on a current basis a
list of all Personal Accounts (as defined in paragraph 2(h) of the
---
Code and Statement);
b. arrange to have duplicate trade confirmations and periodic statements
for each Personal Account submitted to the Compliance Officer directly
----
by the securities firm maintaining the Account(s); and
c. be personally responsible for determining if any security transaction
for my Personal Account(s) is prohibited by the Code and Statement or
any other Alliance policy statement.
2. The following Personal Account(s) are maintained at the broker-dealer(s)
and/or financial institution(s) named below (if none write "none"):
a. registered in my name at the following broker-dealer(s) and/or
financial institution(s):
======================================================================
======================================================================
======================================================================
b. registered in the name of my spouse at the following broker-dealer(s)
and/or financial institution(s):
======================================================================
======================================================================
======================================================================
-21-
<PAGE>
c. registered in the name of a family member who resides with me at the
following broker-dealer(s) and/or financial institution(s):
name of family member name of broker-dealer and/or financial
institution(s)
===============================
===============================
===============================
===============================
===============================
===============================
d. registered in the name of any other person who resides with me and is
financially dependent on me at the following broker-dealer(s) and/or
financial institution(s):
name of person name of broker-dealer and/or financial
institution(s)
===============================
===============================
===============================
===============================
===============================
===============================
e. registered in the name of any other person who does not reside with
me, but who is financially dependent on me, at the following broker-
dealer(s) and/or financial institution(s):
name of person name of broker-dealer and/or financial
institution(s)
===============================
===============================
===============================
===============================
===============================
===============================
3. I have investment discretion over the following other account(s) at the
following broker-dealer(s) and/or financial institution(s) (do not list
---
Client accounts):
name and description of account name of broker-dealer and/or
financial institution(s)
===============================
===============================
===============================
===============================
-22-
<PAGE>
===============================
===============================
4. I will notify the Compliance Officer if a Personal Account is opened or
closed. If the answers to paragraphs a through e of Section 2 above are all
"none", I certify that neither I nor any member of my family who resides with
me, any other person who resides with me currently and is financially dependent
on me, or any other person who is financially dependent on me maintains a
brokerage account or other type of financial account.
____________________ ___________________________________
Date Employee Signature
___________________________________
Type or print name
-23-
<PAGE>
EXHIBIT 99.(P)(4)
JENNISON ASSOCIATES LLC
CODE OF ETHICS,
POLICY ON INSIDER TRADING
AND
PERSONAL TRADING POLICY
As Amended December 6, 1999
---------------------------
1
<PAGE>
SECTION I
CODE OF ETHICS
FOR
JENNISON ASSOCIATES LLC
This Code sets forth rules, regulations and standards of conduct for the
employees of Jennison Associates LLC. It bears the approval of the Corporation's
Board of Directors and applies to Jennison Associates and all subsidiaries.
The Code incorporates The Prudential Insurance Company of America's ethics
policies as well as additional policies specific to Jennison Associates LLC.
Prudential's Code of Ethics, "Making the Right Choices", may be found as Exhibit
Q in Jennison Associates' Compliance Manual.
The prescribed guidelines assure that the high ethical standards long
maintained by Jennison continue to be applied. The purpose of the Code is to
preclude circumstances which may lead to or give the appearance of conflicts of
interest, insider trading, or unethical business conduct. The rules prohibit
certain activities and personal financial interests as well as require
disclosure of personal investments and related business activities of all
directors, officers and employees.
ERISA and the federal securities laws define an investment advisor as a
fiduciary who owes his clients a duty of undivided loyalty, who shall not engage
in any activity in conflict with the interests of the client. As a fiduciary,
our personal and corporate ethics must be above reproach. Actions which expose
any of us or the organization to even the appearance of impropriety must not
occur.
The excellent name of our firm continues to be a direct reflection of the
conduct of each of us in everything we do.
Being fully aware of and strictly adhering to the Code of Ethics is the
responsibility of each Jennison Associates employee.
2
<PAGE>
CONFIDENTIAL INFORMATION
Employees may become privy to confidential information (information not
generally available to the public) concerning the affairs and business
transactions of Jennison, companies researched by us for investment, our present
and prospective clients, suppliers, officers and other staff members.
Confidential information also includes trade secrets and other proprietary
information of the Corporation such as business or product plans, systems,
methods, software, manuals and client lists. Safeguarding confidential
information is essential to the conduct of our business. Caution and discretion
are required in the use of such information and in sharing it only with those
who have a legitimate need to know.
A) Personal Use: Confidential information obtained or developed as a result
of employment with the Corporation is not to be used or disclosed for the
purpose of furthering any private interest or as a means of making any personal
gain. Use or disclosure of such information could result in civil or criminal
penalties against the Corporation or the individual responsible for disclosing
such information.
Further guidelines pertaining to confidential information are contained in
the "Policy Statement on Insider Trading." (Set forth on page 8 in the section
dedicated specifically to Insider Trading.)
B) Release of Client Information: Information concerning a client which has
been requested by third persons, organizations or governmental bodies may only
be released with the consent of the client involved. All requests for
information concerning a client (other than routine credit inquiries), including
requests pursuant to the legal process (such as subpoenas or court orders) must
be promptly referred to Karen E. Kohler. No information may be released, nor
should the client involved be contacted, until so directed by Karen E. Kohler.
In order to preserve the rights of our clients and to limit the firm's
liability concerning the release of client proprietary information, care must be
taken to:
* Limit use and discussion of information obtained on the job to normal
business activities.
* Request and use only information which is related to our business needs.
* Restrict access to records to those with proper authorization and
legitimate business needs.
* Include only pertinent and accurate data in files which are used as a
basis for taking action or making decisions.
3
<PAGE>
CONFLICTS OF INTEREST
You should avoid actual or apparent conflicts of interest - that is, any
personal interest outside the Company which could be placed ahead of your
obligations to our clients, Jennison Associates or The Prudential Insurance
Company of America. Conflicts may exist even when no wrong is done. The
opportunity to act improperly may be enough to create the appearance of a
conflict.
We recognize and respect an employee's right of privacy concerning personal
affairs, but we must require a full and timely disclosure of any situation which
could result in a conflict of interest or even the appearance of a conflict.
Whether or not a conflict exists will be determined by the Company, not by the
employee involved.
To reinforce our commitment to the avoidance of potential conflicts of
interest, the following rules have been adopted:
1) YOU MAY NOT, without first having secured prior approval from the Board
of Directors, serve as a director, officer, employee, partner or trustee - nor
hold any other position of substantial interest - in any outside business
enterprise. You do not need prior approval, however, if the following three
conditions are met: one, the enterprise is a family firm owned principally by
other members of your family; two, the family business is not doing business
with Jennison or The Prudential; and three, the services required will not
interfere with your duties or your independence of judgment. Significant
involvement by employees in outside business activity is generally unacceptable.
In addition to securing prior approval for outside business activities, you will
be required to disclose all relationships with outside enterprises annually.
* Note - The above deals only with positions in business enterprises. It
does not effect Jennison's practice of permitting employees to be associated
with governmental, educational, charitable, religious or other civic
organizations. These activities may be entered into without prior consent, but
must still be disclosed on an annual basis.
2) YOU MAY NOT act on behalf of Jennison in connection with any transaction
in which you have a personal interest. This rule does not apply to any personal
interest resulting from your participation in any Jennison or Prudential plan in
the nature of incentive compensation, or in the case of a plan which provides
for direct participation in specific transactions by Jennison's Board of
Directors.
3) YOU MAY NOT, without prior approval from the Board of Directors, have a
substantial interest in any outside business which, to your knowledge, is
involved currently in a business transaction with Jennison or The Prudential, or
is engaged in businesses similar to any business engaged in by Jennison. A
substantial interest includes any investment in the outside business involving
an amount greater than 10 percent of your gross assets, or $10,000 if that
amount is larger, or involving an ownership interest greater than 2 percent of
the outstanding equity interests. You do not need approval to invest in open-
ended registered investment companies such as investments in mutual funds and
similar enterprises which are publicly owned.
4
<PAGE>
4) YOU MAY NOT, without prior approval of the Board of Directors, engage in
any transaction involving the purchase of products and/or services from
Jennison, except on the same terms and conditions as they are offered to the
public. Plans offering services to employees approved by the Board of Directors
are exempt from this rule.
5.) YOU MAY NOT purchase an equity interest in any competitor. Employees
and their immediate families are also prohibited from investing in securities of
a client or supplier with whom the staff member regularly deals even if the
securities are widely traded.
OTHER BUSINESS ACTIVITIES
ISSUES REGARDING THE RETENTION OF SUPPLIERS: The choice of our suppliers
must be based on quality, reliability, price, service, and technical advantages.
GIFTS: Jennison employees and their immediate families should not solicit,
accept, retain or provide any gifts or favors which might influence decisions
you or the recipient must make in business transactions involving Jennison or
which others might reasonably believe could influence those decisions. Even a
nominal gift should not be accepted if, to a reasonable observer, it might
appear that the gift would influence your business decisions.
Modest gifts and favors, which would not be regarded by others as improper,
may be accepted or given on an occasional basis. Examples of such gifts are
those received as normal business courtesies (i.e. meals or golf games); non-
cash gifts of nominal value (such as received at Holiday time); gifts received
because of kinship, marriage or social relationships entirely beyond and apart
from an organization in which membership or an official position is held as
approved by the Corporation. Entertainment which satisfies these requirements
and conforms to generally accepted business practices also is permissible.
Please reference the Gifts and Entertainment section of Jennison Associates'
Compliance Manual for a more detailed explanation of Jennison's policy towards
gifts and entertainment.
IMPROPER PAYMENTS - KICKBACKS: In the conduct of the Corporation's
business, no bribes, kickbacks, or similar remuneration or consideration of any
kind are to be given or offered to any individual or organization or to any
intermediaries such as agents, attorneys or other consultants, for the purpose
of influencing such individual or organization in obtaining or retaining
business for, or directing business to, the Corporation.
BOOKS, RECORDS AND ACCOUNTS: The integrity of the accounting records of the
Corporation is essential. All receipts and expenditures, including personal
expense statements must be supported by documents that accurately and properly
describe such expenses. Staff members responsible for approving expenditures or
for keeping books, records and accounts for the Corporation are required to
approve and record all expenditures and other entries based upon proper
supporting documents so that the accounting records of the Corporation are
maintained in reasonable detail, reflecting accurately and fairly all
transactions of the Corporation including the
5
<PAGE>
disposition of its assets and liabilities. The falsification of any book, record
or account of the Corporation, the submission of any false personal expense
statement, claim for reimbursement of a non-business personal expense, or false
claim for an employee benefit plan payment are prohibited. Disciplinary action
will be taken against employees who violate these rules, which may result in
dismissal.
LAWS AND REGULATIONS: The activities of the Corporation must always be in
full compliance with applicable laws and regulations. It is the Company's policy
to be in strict compliance with all laws and regulations applied to our
business. We recognize, however, that some laws and regulations may be ambiguous
and difficult to interpret. Good faith efforts to follow the spirit and intent
of all laws is expected. To ensure compliance, the Corporation intends to
educate its employees on laws related to Jennison's activities which may include
periodically issuing bulletins, manuals and memoranda. Staff members are
expected to read all such materials and be familiar with their content.
OUTSIDE ACTIVITIES & POLITICAL AFFILIATIONS: Jennison Associates does not
contribute financial or other support to political parties or candidates for
public office except where lawfully permitted and approved in advance in
accordance with procedures adopted by Jennison's Board of Directors. Employees
may, of course, make political contributions, but only on their own behalf; they
will not be reimbursed by the Company for such contributions.
Legislation generally prohibits the Corporation or anyone acting on its
behalf from making an expenditure or contribution of cash or anything else of
monetary value which directly or indirectly is in connection with an election to
political office; as, for example granting loans at preferential rates or
providing non-financial support to a political candidate or party by donating
office facilities. Otherwise, individual participation in political and civic
activities conducted outside of normal business hours is encouraged, including
the making of personal contributions to political candidates or activities.
Employees are free to seek and hold an elective or appointive public
office, provided you do not do so as a representative of the Company. However,
you must conduct campaign activities and perform the duties of the office in a
manner that does not interfere with your responsibilities to the firm.
6
<PAGE>
COMPLIANCE WITH THE CODE & CONSEQUENCES IF VIOLATION
OF THE CODE OCCURS:
Each year all employees will be required to complete a form certifying that
they have read this booklet, understand their responsibilities, and are in
compliance with the requirements set forth in this statement.
This process should remind us of the Company's concern with ethical issues
and its desire to avoid conflicts of interest or their appearance. It should
also prompt us to examine our personal circumstances in light of the Company's
philosophy and policies regarding ethics.
Certain key employees will be required to complete a form verifying that
they have complied with all company procedures and filed disclosures of
significant personal holdings and corporate affiliations.
If any staff member has reason to believe that any situation may have
resulted in a violation of any provision of the Code of Ethics, whether by that
staff member or by another, the matter must be reported promptly to Karen E.
Kohler.
Violation of any provision of the Code of Ethics by any staff member may
constitute grounds for disciplinary action, including dismissal.
7
<PAGE>
SECTION II
INSIDER TRADING
As a result of recent legislative events, particularly the enactment of the
Insider Trading and Securities Fraud Enforcement Act of 1988, the Securities
Exchange Acts and the Investment Advisors Act of 1940 require that all
investment advisors establish, maintain and enforce policies and supervisory
procedures designed to prevent the misuse of material, non-public information by
such investment advisor, and any associated person.
This section of the Code sets forth Jennison Associates' policy statement
on insider trading. It explains some of the terms and concepts associated with
insider trading, as well as the civil and criminal penalties for insider trading
violations. In addition, it sets forth the necessary procedures required to
implement Jennison Associates' Insider Trading Policy Statement.
This policy applies to all Jennison Associates' employees, as well as the
employees of all affiliated companies.
8
<PAGE>
JENNISON ASSOCIATES' POLICY STATEMENT
AGAINST INSIDER TRADING
When contemplating a transaction for your personal account, or an account
in which you may have a direct or indirect personal or family interest, we must
be certain that such transaction is not in conflict with the interests of our
clients. Specific rules in this area are difficult, and in the final analysis,
each of us must make our own determination as to whether a transaction is in
conflict with client interests. Although it is not possible to anticipate all
potential conflicts of interest, we have tried to set a standard that protects
the firm's clients, yet is also practical for our employees. The Company
recognizes the desirability of giving its corporate personnel reasonable freedom
with respect to their investment activities, on behalf of themselves, their
families, and in some cases non-client accounts (i.e. charitable or educational
organizations on whose boards of directors corporate personnel serve). However,
personal investment activity may conflict with the interests of the Company's
clients. In order to avoid such conflicts -- or even the appearance of conflicts
- -- the Company has adopted the following policy:
Jennison Associates LLC forbids any director, officer or employee from
trading, either personally or on behalf of clients or others, on material, non-
public information or communicating material, non-public information to others
in violation of the law. Said conduct is deemed to be "insider trading." Such
policy applies to every director, officer and employee and extends to activities
within and outside their duties at Jennison Associates.
Every director, officer, and employee is required to read and retain this
policy statement. Questions regarding Jennison Associates' Insider Trading
policy and procedures should be referred to Karen E. Kohler or John H. Hobbs.
EXPLANATION OF RELEVANT TERMS AND CONCEPTS
Although insider trading is illegal, Congress has not defined "insider",
"material" or "non-public information". Instead the courts have developed
definitions of these terms. Set forth below are very general descriptions of
these terms. However, it is usually not easily determined whether information is
"material" or "non-public" and, therefore, whenever you have any questions as to
whether information is material or non-public, consult with Karen E. Kohler. Do
not make this decision yourself.
1) Who is an Insider?
-----------------
9
<PAGE>
The concept of an "insider" is broad. It includes officers, directors and
employees of a company. A person may be a "temporary insider" if he or she
enters into a special confidential relationship in the conduct of a company's
affairs and as a result is given access to information solely for the company's
purposes. Examples of temporary insiders are the company's attorneys,
accountants, consultants and bank lending officers, as well as the employees of
such organizations. Jennison Associates and its employees may become "temporary
insiders" of a company in which we invest, in which we advise, or for which we
perform any other service. An outside individual may be considered an insider,
according to the Supreme Court, if the company expects the outsider to keep the
disclosed non-public information confidential or if the relationship suggests
such a duty of confidentiality.
2) What is Material Information?
-----------------------------
Trading on inside information is not a basis for liability unless the
information is material. Material Information is defined, as:
* Information, for which there is a substantial likelihood, that a
reasonable investor would consider important in making his or her investment
decisions, or
* Information that is reasonably certain to have a substantial effect on
the price of a company's securities.
Information that directors, officers and employees should consider material
includes, but is not limited to: dividend changes, earnings estimates, changes
in previously released earnings estimates, a significant increase or decline in
orders, significant new products or discoveries, significant merger or
acquisition proposals or agreements, major litigation, liquidation problems, and
extraordinary management developments.
In addition, knowledge about Jennison Associates' trading information and
patterns may be deemed material.
3) What is Non-public Information?
-------------------------------
Information is "non-public" until it has been effectively communicated to
the market place. One must be able to point to some fact to show that the
information is generally available to the public. For example, information found
in a report filed with the SEC, or appearing in Dow Jones, Reuters Economics
------- ---------
Services, The Wall Street Journal or other publications of general circulation
- -------- --- ---- ------ -------
would be considered public.
4) Misappropriation Theory
-----------------------
Under the "misappropriation" theory liability is established when trading
occurs on material non-public information that is stolen or misappropriated from
any other person. In U.S. v. Carpenter, a columnist defrauded The Wall Street
---- -- --------- --- ---- ------
Journal by stealing non-public information from the Journal and using it for
- ------- -------
trading in the securities markets. Note that the misappropriation
10
<PAGE>
theory can be used to reach a variety of individuals not previously thought to
be encompassed under the fiduciary duty theory.
5) Who is a controlling person?
----------------------------
"Controlling persons" include not only employers, but any person with power
to influence or control the direction of the management, policies or activities
of another person. Controlling persons may include not only the Company, but its
directors and officers.
PENALTIES FOR INSIDER TRADING VIOLATIONS
Penalties for trading on or communicating material non-public information
are more severe than ever. The individuals involved in such unlawful conduct may
be subject to both civil and criminal penalties. A controlling person may be
subject to civil or criminal penalties for failing to establish, maintain and
enforce Jennison Associates' Policy Statement against Insider Trading and/or if
such failure permitted or substantially contributed to an insider trading
violation.
Individuals can be subject to some or all of the penalties below even if he
or she does not personally benefit from the violation. Penalties include:
a. CIVIL INJUNCTIONS
b. TREBLE DAMAGES
c. DISGORGEMENT OF PROFITS
d. JAIL SENTENCES - Under the new laws, the maximum jail sentences for
criminal securities law violations increased from 5 years to 10 years.
e. CIVIL FINES - Persons who committed the violation may pay up to three
times the profit gained or loss avoided, whether or not the person actually
benefited.
f. CRIMINAL FINES - The employer or other "controlling persons" may pay up
to $2,500,000.
g. Violators will be barred from the securities industry.
11
<PAGE>
SECTION III
-----------
IMPLEMENTATION PROCEDURES & POLICY
The following procedures have been established to assist the officers,
directors and employees of Jennison Associates in preventing and detecting
insider trading as well as to impose sanctions against insider trading. Every
officer, director and employee must follow these procedures or risk serious
sanctions, including possible dismissal, substantial personal liability and
criminal penalties. If you have any questions about these procedures you should
consult Karen E. Kohler or John H. Hobbs.
1) Identifying Inside Information
------------------------------
Before trading for yourself or others, including client accounts managed by
Jennison Associates, in the securities of a company about which you may have
potential inside information, ask yourself the following questions:
i. Is the information material? *Would an investor consider this
----------------------------
information important in making his or her investment decisions? ** Would this
information substantially effect the market price of the securities if generally
disclosed?
ii. Is the information non-public? * To whom has this information been
------------------------------
provided? ** Has the information been effectively communicated to the
marketplace by being published in Reuters, The Wall Street Journal, or other
------- -----------------------
publications of general circulation?
If, after consideration of the above, you believe that the information is
material and non-public, or if you have questions as to whether the information
is material and non-public, you should take the following steps:
i. Report the matter immediately to Karen E. Kohler or John H. Hobbs. If
neither are available you should contact Mr. Louis Begley, our attorney at
Debevoise and Plimpton ((212)909-6000).
ii. Do not repurchase or sell the securities on behalf of yourself or
others, including client accounts managed by Jennison Associates.
iii. Do not communicate the information inside or outside Jennison
Associates, other than to Karen E. Kohler, John H. Hobbs, or Mr. Begley our
outside counsel.
iv. After Karen E. Kohler, John H. Hobbs, or Mr. Begley has reviewed the
issue, you will be instructed to continue the prohibitions against trading and
communication, or you will be allowed to trade and communicate the information.
12
<PAGE>
2) Restricting Access to Material Non-public Information
-----------------------------------------------------
Information that you identify as material and non-public may not be
communicated to anyone, including persons within Jennison Associates LLC, except
as provided above. In addition, care should be taken so that such information
is secure. For example, files containing material non-public information should
be locked; access to computer files containing non-public information should be
restricted.
Jennison employees have no obligation to the clients of Jennison Associates
to trade or recommend trading on the basis of material, non-public (inside)
information in their possession. Jennison's fiduciary responsibility to its
clients requires that the firm and its employees regard the limitations imposed
by Federal securities laws.
3) Allocation of Brokerage
-----------------------
To supplement its own research and analysis, to corroborate data compiled
by its staff, and to consider the views and information of others in arriving at
its investment decisions, Jennison Associates, consistent with its efforts to
secure best price and execution, allocates brokerage business to those broker-
dealers in a position to provide such services.
It is the firm's policy not to allocate brokerage in consideration of the
attempted furnishing of material non-public (inside) information. Employees, in
recommending the allocation of brokerage to broker-dealers, should not give
consideration to the provision of any material non-public (inside) information.
The policy of Jennison Associates as set forth in this statement should be
brought to the attention of such broker-dealer.
4) Resolving Issues Concerning Insider Trading
-------------------------------------------
If doubt remains as to whether information is material or non-public, or if
there is any unresolved question as to the applicability or interpretation of
the foregoing procedures and standards, or as to the propriety of any action, it
must be discussed with Karen E. Kohler or John H. Hobbs before trading or
communicating the information to anyone.
This code will be distributed to all Jennison Associates personnel.
Periodically or upon request, Karen E. Kohler will meet with such personnel to
review this statement of policy, including any developments in the law and to
answer any questions of interpretation or application of this policy.
From time to time this statement of policy will be revised in the light of
developments in the law, questions of interpretation and application, and
practical experience with the procedures contemplated by the statement.
13
<PAGE>
SECTION IV
----------
JENNISON ASSOCIATES PERSONAL TRADING POLICY
1. GENERAL POLICY AND PROCEDURES
- --------------------------------
The management of Jennison Associates is fully aware of and in no way
wishes to deter the security investments of its individual employees. The
securities markets, whether equity, fixed income, international or domestic,
offer individuals alternative methods of enhancing their personal investments.
Due to the nature of our business and our fiduciary responsibility to our
client funds, we must protect the firm and its employees from the possibilities
of both conflicts of interest and illegal insider trading in regard to their
personal security transactions.
We have adopted the following policies and procedures on employee personal
trading to insure against violations of the law. These policies and procedures
are in addition to those set forth in the Code of Ethics and the Policy
Statement Against Insider Trading.
2. RECORDKEEPING REQUIREMENTS
- -----------------------------
Jennison Associates, as an investment advisor, is required by Rule 204-2 of
the under the Investment Advisers Act of 1940, to keep records of every
transaction in securities in which any of its personnel has any direct or
indirect beneficial ownership, except transactions effected in any account over
which neither the investment adviser nor any advisory representative of the
investment adviser has any direct or indirect influence or control and
transactions in securities which are direct obligations of the United States,
mutual funds and high-quality short-term instruments. This includes
transactions for the personal accounts of an employee, as well as, transactions
for the accounts of other members of their immediate family (including the
spouse, minor children, and adults living in the same household with the
officer, director, or employee) for which they or their spouse have any direct
or indirect influence or control and trusts of which they are trustees or other
accounts in which they have any direct or indirect beneficial interest or direct
or indirect influence or control, unless the investment decisions for the
account are made by an independent investment manager in a fully discretionary
account. Jennison recognizes that some of its employees may, due to their
living arrangements, be uncertain as to their obligations under this Personal
Trading Policy. If an employee has any question or doubt as to whether they
have direct or indirect influence or control over an account, he or she must
consult with the Compliance Department as to their status and obligations with
respect to the account in question.
In addition, Jennison, as a subadviser to investment companies
registered under the Investment Company Act of 1940 (e.g., mutual funds), is
required by Rule 17j-1 under the
14
<PAGE>
Investment Company Act to review and keep records of personal investment
activities of "access persons" of these funds, unless the access person does not
have direct or indirect influence or control of the accounts. An "access person"
is defined as any director, officer, general partner or Advisory Person of a
Fund or Fund's Investment Adviser. "Advisory Person" is defined as any employee
of the Fund or investment adviser (or of any company in a control relationship
to the Fund or investment adviser) who, in connection with his or her regular
functions or duties, makes, participates in, or obtains information regarding
the purchase or sale of investments by a Fund, or whose functions relate to the
making of any recommendations with respect to the purchases or sales. Therefore,
Jennison's "access persons" and "advisory persons" include the following:
portfolio managers, investment analysts, traders, officers and directors.
1) Access Persons: Portfolio Managers, Investment Analysts, Traders, and other
---------------------------------------------------------------------------
Jennison Officers and Directors
-------------------------------
Access Persons are required to provide the Compliance Department with the
following:
A) Initial Holdings Reports:
Within 10 days of commencement of employment, an initial holdings report
detailing all personal investments (including private placements, and index
futures contracts and options thereon, but excluding US Treasury
securities, mutual fund shares, and short-term high quality debt
instruments). The report should contain the following information:
1. the title, number of shares and principal amount of each investment
in which the Access Person had any direct or indirect beneficial
ownership;
2. The name of any broker, dealer or bank with whom the Access Person
maintained an account in which any securities were held for the direct
or indirect benefit of the Access Person; and
3. The date that the report is submitted by the Access Person.
B) Quarterly Reports:
1. Transaction Reporting:Within 10 days after the end of a calendar
quarter, with respect to any transaction during the quarter in
investments in which the Access Person had any direct or indirect
beneficial ownership:
a. The date of the transaction, the title, the interest rate and
maturity date (if applicable), the number of shares and the
principal amount of each investment involved;
b. The nature of the transaction (i.e., purchase, sale or any other
type of acquisition or disposition);
c. The price of the investment at which the transaction was effected;
d. The name of the broker, dealer or bank with or through which the
transaction was effected; and
e. The date that the report is submitted by the Access Person.
15
<PAGE>
2. Personal Securities Account Reporting:Within 10 days after the end
of a calendar quarter, with respect to any account established by
the Access Person in which any securities were held during the
quarter for the direct or indirect benefit of the Access Person:
a. The name of the broker, dealer or bank with whom the Access
Person established the account;
b. The date the account was established; and
c. The date that the report is submitted by the Access Person.
To facilitate compliance with this reporting requirement, Jennison
Associates requires that a duplicate copy of all trade confirmations and
brokerage statements be supplied directly to Jennison Associates'
Compliance Department and to the Prudential's Corporate Compliance
Department. In addition, the Compliance Department must also be notified
immediately upon the creation of any new personal investment accounts.
C) Annual Holdings Reports
Annually, the following information (which information must be current
as of a date no more than 30 days before the report is submitted):
1. The title, number of shares and principal amount of each investment
in which the Access Person had any direct or indirect beneficial
ownership;
2. The name of any broker, dealer or bank with whom the Access Person
maintains an account in which any securities are held for the direct
or indirect benefit of the Access Person; and
3. The date that the report is submitted by the Access Person.
D) A copy of all discretionary investment advisory contracts or agreements
between the officer, director or employee and his investment advisors.
E) A copy of Schedule B, Schedule D, and Schedule E from federal income
tax returns on an annual basis.
2) All Other Employees of Jennison Associates
- ---------------------------------------------
In order to ensure compliance with these regulations, all other
employees of Jennison Associates shall submit to the Compliance
Department:
A.) Upon commencement of employment and no less than annually
thereafter, a report of all personal securities holdings and a
report of every personal brokerage account in which they have any
direct or indirect beneficial interest. The Compliance Department
must also be notified immediately upon the creation of any new
personal investment accounts.
16
<PAGE>
The report must disclose the following material:
* Name and type of account - single, joint, trust, partnership, etc.
* A statement disclosing the general purpose of the account (e.g.,
as a trustee of XYZ College, I have agreed in accordance with the
school's Board of Directors to invest funds on behalf of XYZ for
the benefit of its annual scholarship fund).
* The institution, bank, or otherwise, where the account is
maintained.
B.) A report, including confirmation and quarter-end brokerage
statements, of every security transaction in which they, their
immediate families (including the spouse, minor children, and adults
living in the same household with the officer, director, or employee)
for which they or their spouse have any direct or indirect influence
or control), and trusts of which they are trustees or any other
account in which they have a beneficial interest and have
participated or direct or indirect influence or control.
To facilitate this aspect of employee securities trading, Jennison
Associates requires that a duplicate copy of all trade confirmations
and brokerage statements be supplied directly to Jennison Associates'
Compliance Department and to the Prudential's Corporate Compliance
Department.
C.) A copy of all discretionary investment advisory contracts or
agreements between the officer, director or employee and his
investment advisors.
D.) A copy of Schedule B, Schedule D, and Schedule E from federal
income tax returns on an annual basis.
3) Non-Employee Directors
----------------------
A.) Jennison recognizes that a director not employed by Jennison (i.e.,
directors designated by The Prudential Insurance Company of America
to sit on Jennison's Board of Directors) is subject to his or her
employer's own code of ethics, a copy of which and any amendments
thereto shall have been made available to Jennison's Compliance
Department. The Compliance Department of the non-employee director's
employer must represent quarterly to the Jennison Compliance
Department that the non-employee director has complied with the
recordkeeping and other procedures of its code of ethics during the
most recent calendar quarter. Such representation shall also state
that such policies and procedures shall be deemed adequate for
compliance with both Prudential's and Jennison's Codes of Ethics. If
there have been any violations of the employer's code of ethics by
such non-employee director, the employer's Compliance Department must
submit a detailed report of such violations and what remedial action,
if any was taken.
17
<PAGE>
B.) Non-employee directors shall be exempt from supplying a copy of
Schedule B, D, and Schedule E from their federal income tax returns.
C.) Additionally, all non-employee directors shall be exempt from the
pre-clearance procedures as described below.
3. PRE-CLEARANCE PROCEDURES
- ---------------------------
All directors, officers, and employees of Jennison Associates may need to
obtain clearance from the Personal Investment Committee prior to effecting any
securities transaction in which they or their immediate families (including the
spouse, minor children, and adults living in the same household with the
officer, director, or employee) for which they or their spouse have any direct
or indirect influence or control, have a beneficial interest on behalf of a
trust of which they are trustee, or for any other account in which they have a
beneficial interest or direct or indirect influence or control. Determination
as to whether or not a particular transaction requires pre-approval should be
made by consulting the "Compliance and Reporting of Personal Transactions
Matrix" found on Exhibit A.
Please note, voluntary tender offers are a recent addition to the
"Compliance and Reporting of Personal Transactions" matrix. They are both a
reportable transaction and one that requires pre-approval. Approval of
tendering shares into a tender offer shall be determined on a case-by-case basis
by the Personal Investment Committee.
The Personal Investment Committee will make its decision of whether to
clear a proposed trade on the basis of the personal trading restrictions set
forth -below. A member of the Compliance Department shall promptly notify the
officer, director, or employee of approval or denial to trade the requested
security. Notification of approval or denial to trade may be verbally given as
soon as possible; however, it shall be confirmed in writing within 24 hours of
the verbal notification. Please note that the approval granted will be valid
only for that day in which the approval has been obtained; provided, however,
- ----
that approved orders for securities traded in certain foreign markets may be
executed within 2 business days from the date pre-clearance is granted,
depending on the time at which approval is granted and the hours of the markets
on which the security is traded are open. In other words, if a trade was not
effected on the day for which approval was originally sought, a new approval
form must be re-submitted on each subsequent day in which trading may occur.
Or, if the security for which approval has been granted is traded on foreign
markets, approval is valid for an additional day (i.e., the day for which
approval was granted and the day following the day for which approval was
granted).
Only transactions where the investment decisions for the account are made
by an independent investment manager in a fully discretionary account will be
exempt from the pre-clearance procedures. Copies of the agreement of such
discretionary accounts, as well as transaction statements or another comparable
portfolio report, must be submitted on a quarterly basis to the Compliance
Department for review and record retention.
18
<PAGE>
Written notice of your intended securities activities must be filed for
-----------------------------------------------------------------------
approval prior to effecting any transaction for which prior approval is
- -----------------------------------------------------------------------
required. The name of the security, the date, the nature of the transaction
- ---------
(purchase or sale), the price, the name and relationship to you of the account
holder (self, son, daughter, spouse, father, etc.), and the name of the broker-
dealer or bank involved in the transaction must be disclosed in such written
notice. Such written notice should be submitted on the Pre-Clearance
Transaction Request Forms (Equity/Fixed Income) which can be obtained from the
Compliance Department. If proper procedures are not complied with, action will
be taken against the employee. All violations shall go before the Personal
Investment Committee and Jennison's Compliance Committee. The violators may be
asked to reverse the transaction and/or transfer the security or profits gained
over to the accounts of Jennison Associates. In addition, penalties for
personal trading violations shall be determined in accordance with the penalties
schedule set forth in Section 5, "Penalties for Violating Jennison Associates'
Personal Trading Policies." Each situation and its relevance will be given due
weight. If non-compliance with the pre-clearance procedure becomes repetitive,
dismissal, by the Board of Directors, of the employee can result.
4. PERSONAL TRADING POLICY
- --------------------------
The following rules, regulations and restrictions have been set forth by
the Board of Directors and apply to the personal security transactions of all
employees. These rules will govern whether clearance for a proposed transaction
will be granted. These rules also apply to the sale of securities once the
purchase of a security has been pre-approved and completed.
No director, officer or employee of the Company may effect for himself, an
immediate family member (including the spouse, minor children, and adults
living in the same household with the officer, director, or employee) for which
they or their spouse have any direct or indirect influence or control, or any
trust of which they are trustee, or any other account in which they have a
beneficial interest or direct or indirect influence or control any transaction
in a security, or recommend any such transaction in a security, of which, to
his/her knowledge, the Company has effected the same for any of its clients, if
such transaction would in any way conflict with, or be detrimental to, the
interests of such client, or if such transaction was effected with prior
knowledge of material, non-public information.
Except in particular cases in which the Personal Investment Committee has
determined in advance that proposed transactions would not conflict with the
foregoing policy, the following rules shall govern all transactions (and
recommendations) by all corporate personnel for their own accounts, for their
immediate family's accounts (including accounts of the spouse, minor children,
and adults living in the same household with the officer, director, or employee)
for which they or their spouse have any direct or indirect influence or control,
and any trust of which they are trustee, or any other account in which they
have a beneficial interest or direct or indirect influence or control. The
provisions of the following paragraphs do not necessarily imply that the
Personal Investment Committee will conclude that the transactions or
recommendations to which they
19
<PAGE>
relate are in violation of the foregoing policy, but rather are designed to
indicate the transactions for which prior approval should be obtained to
----- --------
ensure that no conflict occurs.
A. Personal Trading by All Employee Directors, Officers, and Employees
(1.) Neither any security recommended, or proposed to be recommended to
any client for purchase, nor any security purchased or proposed to be
purchased for any client may be purchased by any corporate personnel
if such purchase will interfere in any way with the orderly purchase
of such security by any client.
(2.) Neither any security recommended, or proposed to be recommended to
any client for sale, nor any security sold, or proposed to be sold,
for any client may be sold by any corporate personnel if such sale
will interfere in any way with the orderly sale of such security by
any client.
(3.) No security may be sold after being recommended to any client for
purchase or after being purchased for any client, and no security may
be purchased after being recommended to any client for sale or after
being sold for any client, if the sale or purchase is effected with a
view to making a profit on the anticipated market action of the
security resulting from such recommendation, purchase or sale.
(4.) In order to prevent even the appearance of a violation of this rule
or a conflict of interest with a client account , you should refrain
------------------
from trading in the seven (7) calendar days before and after Jennison
------------------------------------------------------------
trades in that security.
If an employee trades during a blackout period, disgorgement may be
required. For example, if an Employee's trade is pre-approved and
executed and subsequently, within seven days of the transaction, the
Firm trades on behalf of Jennison's clients, the Jennison Personal
Investment Committee shall review the personal trade in light of firm
trading activity and determine on a case by case basis the appropriate
action. If the Personal Investment Committee finds that a client is
disadvantaged by the personal trade, the trader may be required to
reverse the trade and disgorge to the firm any difference due to any
--------------------------------------------------------------------
incremental price advantage over the client's transaction.
----------------------------------------------------------
B. Short-Term Trading Profits
All directors (both employees and non-employees), officers, and
employees of Jennison Associates are prohibited from profiting in
their own accounts and the accounts of their immediate families
(including the spouse, minor children, and adults living in the same
household with the officer, director, or employee) for which they or
their spouse have any direct or indirect influence or control or any
trust of which they are a trustee, or for any other account in which
they have a beneficial interest or direct or indirect influence or
control from the purchase and
20
<PAGE>
sale, or the sale and purchase of the same or equivalent securities
within 60 calendar days . Any profits realized from the purchase and
sale or the sale and purchase of the same (or equivalent) securities
within the 60 day restriction period shall be disgorged to the firm,
net of taxes.
"Profits realized" shall be calculated consistent with
interpretations under section 16(b) of the Securities Exchange Act of
1934, as amended, and the regulations thereunder, which require
matching any purchase and sale that occur with in a 60 calendar day
period across all accounts over which a Jennison director, officer or
employee has a direct or indirect beneficial interest (including
accounts that hold securities held by members of a person's immediate
family sharing the same household) over which the person has direct or
indirect control or influence without regard to the order of the
purchase or the sale during the period. As such, a person who sold a
security and then repurchased the same (or equivalent) security would
need to disgorge a profit if matching the purchase and the sale would
result in a profit. Conversely, if matching the purchase and sale
would result in a loss, profits would not be disgorged.
The prohibition on short-term trading profits shall not apply to
trading of index options and index futures contracts and options on
index futures contracts on broad based indices. However, such
transactions remain subject to the pre-clearance procedures and other
applicable procedures. A list of broad-based indices is provided on
Exhibit B.
C. No purchase of a security by any of the corporate personnel shall be
made if the purchase would deprive any of Jennison's clients of an
investment opportunity, after taking into account (in determining
whether such purchase would constitute an investment opportunity) the
client's investments and investment objectives and whether the
opportunity is being offered to corporate personnel by virtue of his
or her position at Jennison.
D. None of the corporate personnel may purchase new issues of either
common stock or convertible securities except in accordance with item
E below. This prohibition does not apply to new issues of shares of
open-end investment companies. All corporate personnel shall also
obtain prior written approval of the Personal Investment Committee in
the form of a completed "Request to Buy or Sell Securities" form
before effecting any purchase of securities on a `private placement'
basis. Such approval will take into account, among other factors,
whether the investment opportunity should be reserved for Jennison's
clients and whether the opportunity is being offered to corporate
personnel by virtue of his or her position at Jennison.
E. Subject to the pre-clearance and reporting procedures, corporate
personnel may purchase securities on the date of issuance, provided
that such securities are acquired in the secondary market. Upon
requesting approval of such transactions, employees must acknowledge
that he or she is aware that such request for approval may not be
submitted until after the security has been issued to the public and
-----
is trading at prevailing market prices in the secondary market.
Requests for
21
<PAGE>
approval of such transactions must be accompanied by a copy of the
final prospectus. Additionally, trade confirmations of executions of
such transaction must be received by the Compliance Department no
later than the close of business on the day following execution of
such trade. If such trade confirmation is not received, the employee
may be requested to reverse (subject to pre-approval) the trade, and
any profits or losses avoided must be disgorged to the firm.
F. Subject to the preclearance and reporting procedures, corporate
personnel may effect purchases upon the exercise of rights issued by
an issuer pro rata to all holders of a class of its securities, to the
extent that such rights were acquired from such issuer, and sales of
such rights so acquired. In the event that approval to exercise such
rights is denied, subject to preclearance and reporting procedures,
corporate personnel may obtain permission to sell such rights on the
-------
last day that such rights may be traded.
G. Any transactions in index futures contracts and index options,
including those effected on a broad-based index, are subject to the
preclearance and reporting requirements.
H. No director, officer, or employee of Jennison Associates may profit in
their personal securities accounts or the accounts of their immediate
families (including the spouse, minor children, and adults living in
the same household with the officer, director, or employee) for which
they or their spouse have any direct or indirect influence or control
or any trust of which they are a trustee, or for any other account in
which they have a beneficial interest or direct or indirect influence
or control by short selling or purchasing put options on securities
that represent a position in any portfolios managed by Jennison on
behalf of its clients. Any profits realized from such transactions
shall be disgorged to the Firm, net of taxes. Put options, short
sales and short sales against the box are subject to the preclearance
rules.
I. No employee, director, or officer of Jennison Associates may
participate in investment clubs.
J. While participation in employee stock purchase plans and employee
stock option plans need not be pre-approved, copies of the terms of
the plans should be provided to the Compliance Department as soon as
possible so that the application of the various provisions of the
Personal Trading Policy may be determined (e.g., pre-approval,
reporting, short-term trading profits ban). Corporate personnel must
obtain pre-approval for any discretionary disposition of securities or
discretionary exercise of options acquired pursuant to participation
in an employee stock purchase or employee stock option plan.
Nondiscretionary dispositions of securities or exercise are not
subject to pre-approval. Additionally, corporate personnel should
report holdings of such securities and options on an annual basis.
22
<PAGE>
K. Subject to pre-clearance, long-term investing through direct stock
purchase plans is permitted. The terms of the plan, the initial
investment, and any purchases through automatic debit must be provided
to and approved by the Personal Investment Committee. Any changes to
the original terms of approval, e.g., increasing, decreasing, or
termination of participation in the plan, as well as any sales or
discretionary purchase of securities in the plan must be submitted for
pre-clearance. Provided that the automatic monthly purchases have been
approved by the Personal Investment Committee, each automatic monthly
purchase need not be submitted for pre-approval. "Profits realized"
for purposes of applying the ban on short-term trading profits will be
determined by matching the proposed discretionary purchase or sale
transaction against the most recent discretionary purchase or sale, as
applicable, not the most recent automatic purchase or sale (if
applicable). Additionally, holdings should be disclosed quarterly.
Exceptions to the Personal Trading Policy
Notwithstanding the foregoing restrictions, exceptions to certain
provisions (e.g., blackout period, pre-clearance procedures, and short-term
trading profits) of the Personal Trading Policy may be granted on a case by case
basis when no abuse is involved and the equities of the situation strongly
support an exception to the rule.
Investments in the following instruments are not bound to the rules and
restrictions as set forth above and may be made without the approval of the
Investment Compliance Committee: governments, agencies, money markets,
repurchase orders, reverse repurchase orders and open-ended registered
investment companies.
All employees, on a quarterly basis, must sign a statement that they,
during said period, have been in full compliance with all personal and insider
trading rules and regulations set forth within Jennison Associates' Code of
Ethics, Policy Statement on Insider Trading and Personal Trading Policy.
23
<PAGE>
5. PENALTIES FOR VIOLATIONS OF JENNISON ASSOCIATES' PERSONAL TRADING POLICIES
--------------------------------------------------------------------------
Violations of Jennison's Personal Trading Policy and Procedures, while in
most cases may be inadvertent, must not occur. It is important that every
employee abide by the policies established by the Board of Directors. Penalties
will be assessed in accordance with the schedules set forth below. These,
however, are minimum penalties. THE FIRM RESERVES THE RIGHT TO TAKE ANY OTHER
APPROPRIATE ACTION, INCLUDING TERMINATION.
All violations and penalties imposed will be reported to Jennison's
Compliance Committee on a monthly basis. In addition, the Compliance Committee
will provide the Board of Directors with an annual report which at minimum:
(1) summarizes existing procedures concerning personal investing and
any changes in procedures made during the preceding year;
(2) identifies any violations requiring significant remedial action
during the preceding year; and
(3) identifies any recommended changes in existing restrictions or
procedures based upon Jennison's experience under its policies
and procedures, evolving industry practices, or developments in
applicable laws and regulations.
TYPE OF VIOLATION
- -----------------
A. Penalties for Failure to Secure Pre-Approval
The minimum penalties for failure to pre-clear personal securities
transactions include possible reversal of the trade, possible disgorgement of
profits, as well as the imposition of additional cash penalties. Please note
that subsections 2 and 3 have been applied retroactively from its effective
date.
1. Failure to Pre-clear Purchase
-----------------------------
Depending on the circumstances of the violation, the individual may be
asked to reverse the trade (i.e., the securities must be sold). Any
profits realized from the subsequent sale, net of taxes must be turned
over to the firm. Please note: The sale or reversal of such trade must
be submitted for pre-approval.
2. Failure to Pre-clear Sales that result in long-term capital gains
-----------------------------------------------------------------
Depending on the circumstances of the violation, the firm may require
that profits realized from the sale of securities that are defined as
"long-term capital gains" by Internal Revenue Code (the "IRC") section 1222
and the rules thereunder, as amended, to be turned over to the firm,
subject to the following maximum amounts:
24
<PAGE>
<TABLE>
<CAPTION>
JALLC Position Disgorgement Penalty
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
Senior Vice Presidents and above Realized long-term capital gain, net of
taxes, up to $10,000.00
- ----------------------------------------------------------------------------------------------------------------
Vice Presidents and Assistant Vice Presidents Realized long-term capital gain, net of
taxes, up to $5,000.00
- ----------------------------------------------------------------------------------------------------------------
All other JALLC Personnel 25% of the realized long-term gain,
irrespective of taxes, up to $3,000.00
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
3. Failure to Pre-clear Sales that result in short-term capital gains
--------------------------------------------------------------------
Depending on the nature of the violation, the firm may require that
all profits realized from sales that result in profits that are defined as
"short-term capital gains" by IRC section 1222 and the rules thereunder, as
amended. Please note, however, any profits that result from violating the
ban on short-term trading profits are addressed in section 5.C. "Penalties
for Violation of Short-Term Trading Profit Rule."
4. Additional Cash Penalties
<TABLE>
<CAPTION>
VP's and Above Other JALLC Personnel
------------------------------------ -------------------------------------
<S> <C> <C>
First Offense None/Warning None/Warning
Second Offense $1000 $200
Third Offense $2000 $300
Fourth Offense $3000 $400
Fifth Offense $4000 & Automatic Notification of $500 & Automatic Notification of the
Board of Directors Board of Directors
</TABLE>
Notwithstanding the foregoing, Jennison reserves the right to notify the Board
of Directors for any violation.
Penalties shall be assessed over a rolling three year period. For example, if
over a three year period (year 1 through year 3), a person had four violations,
two in year 1, and one in each of the following years, the last violation in
year 3 would be considered a fourth offense. However, if in the subsequent year
(year 4), the person only had one violation of the policy, this violation would
be penalized at the third offense level because over the subsequent three year
period (from year 2 through year 4), there were only three violations. Thus, if
a person had no violations over a three year period, a subsequent offense would
be considered a first offense, notwithstanding the fact that the person may have
violated the policy prior to the three year period.
B. Failure to Comply with Recordkeeping Requirements
Such violations occur if Jennison does not receive a broker confirmation within
ten (10) business days following the end of the quarter in which a transaction
occurs or if JACC does not routinely receive brokerage statements. Evidence of
written notices to brokers of Jennison's requirement and assistance in resolving
problems will be taken into consideration in determining the appropriateness of
penalties.
25
<PAGE>
<TABLE>
<CAPTION>
VP's and Above Other JALLC Personnel
------------------------------- -------------------------------
<S> <C> <C>
First Offense None/Warning None/Warning
Second Offense $200 $ 50
Third Offense $500 $100
Fourth Offense $600 $200
Fifth Offense $700& Automatic Notification $300 & Automatic Notification
of the Board of the Board
</TABLE>
Notwithstanding the foregoing, Jennison reserves the right to notify the Board
of Directors for any violation.
C. Penalty for Violation of Short-Term Trading Profit Rule
Any profits realized from the purchase and sale or the sale and purchase
of the same (or equivalent) securities within 60 calendar days shall be
disgorged to the firm, net of taxes. "Profits realized" shall be
calculated consistent with interpretations under section 16(b) of the
Securities Exchange Act of 1934, as amended, which requires matching any
purchase and sale that occur with in a 60 calendar day period without
regard to the order of the purchase or the sale during the period. As
such, a person who sold a security and then repurchased the same (or
equivalent) security would need to disgorge a profit if matching the
purchase and the sale would result in a profit. Conversely, if matching
the purchase and sale would result in a loss, profits would not be
disgorged.
D. Other policy infringements will be dealt with on a case by case basis.
Penalties will be commensurate with the severity of the violation.
Serious violations would include:
A. Failure to abide by the determination of the Personal Committee.
B. Failure to submit pre-approval for securities in which Jennison
actively trades.
E. Disgorged Profits
Profits disgorged to the firm shall be donated to a charitable organization
selected by the firm in the name of the firm. Such funds may be donated to
such organization at such time as the firm determines.
26
<PAGE>
EXHIBIT A
COMPLIANCE AND REPORTING OF PERSONAL TRANSACTIONS MATRIX
<TABLE>
<CAPTION>
Investment Sub-Category Required Reportable If reportable,
Category/Method ------------- Pre-Approval (Y/N) minimum
- -------------- (Y/N) ------ reporting
------ frequency
====================================================================================================================================
<S> <C> <C> <C> <C>
BONDS Treasury Bills, Notes, Bonds N N N/A
Agency N Y Quarterly
Corporates Y Y Quarterly
MBS N Y Quarterly
ABS N Y Quarterly
CMO's Y Y Quarterly
Municipals N Y Quarterly
Convertibles Y Y Quarterly
STOCKS Common Y Y Quarterly
Preferred Y Y Quarterly
Rights Y Y Quarterly
Warrants Y Y Quarterly
Automatic Dividend Reinvestments N N N/A
Optional Dividend Reinvestments Y Y Quarterly
Direct Stock Purchase Plans with automatic Y Y Quarterly
investments
Employee Stock Purchase/Option Plan Y* Y *
OPEN-END MUTUAL FUNDS
Affiliated Investments: N N N/A
Non-Affiliated Funds N N N/A
CLOSED END FUNDS & UNIT INVESTMENT
TRUSTS
All Affiliated & Non-Affiliated Funds N Y Quarterly
US Funds (including SPDRs, NASDAQ 100 Index N Y Quarterly
Tracking Shares)
Foreign Funds N Y Quarterly
DERIVATIVES Any exchange traded, NASDAQ, or OTC option or
futures contract, including, but not limited to:
Financial Futures ** Y Quarterly
Commodity Futures N Y Quarterly
Options on Futures ** Y Quarterly
Options on Securities ** Y Quarterly
Non-Broad Based Index Options Y Y Quarterly
Non Broad Based Index Futures Contracts and Y Y Quarterly
Options on Non-Broad Based Index Futures
Contracts
Broad Based Index Options N Y Quarterly
Broad Based Index Futures Contracts and Options N Y Quarterly
on Broad Based Index Futures Contracts
LIMITED PARTNERSHIPS, PRIVATE
PLACEMENTS, & PRIVATE INVESTMENTS
Y Y Quarterly
VOLUNTARY TENDER OFFERS Y Y Quarterly
</TABLE>
* Pre-approval of sales of securities or exercises of options acquired through
employee stock purchase or employee stock option plans are required. Holdings
are required to be reported annually; transactions subject to pre-approval are
required to be reported quarterly. Pre-approval is not required to participate
in such plans.
** Pre-approval of a personal derivative securities transaction is required if
the underlying security requires pre-approval.
27
<PAGE>
EXHIBIT B
BROAD-BASED INDICES
<TABLE>
<CAPTION>
Nikkei 300 Index CI/Euro
- -------------------------------------------------------------------------
<S> <C>
S&P 100 Close/Amer Index
- -------------------------------------------------------------------------
S&P 100 Close/Amer Index
- -------------------------------------------------------------------------
S&P 100 Close/Amer Index
- -------------------------------------------------------------------------
S&P 500 Index
- -------------------------------------------------------------------------
S&P 500 Open/Euro Index
- -------------------------------------------------------------------------
S&P 500 Open/Euro Index
- -------------------------------------------------------------------------
S&P 500 (Wrap)
- -------------------------------------------------------------------------
S&P 500 Open/Euro Index
- -------------------------------------------------------------------------
Russell 2000 Open/Euro Index
- -------------------------------------------------------------------------
Russell 2000 Open/Euro Index
- -------------------------------------------------------------------------
S&P Midcap 400 Open/Euro Index
- -------------------------------------------------------------------------
NASDAQ- 100 Open/Euro Index
- -------------------------------------------------------------------------
NASDAQ- 100 Open/Euro Index
- -------------------------------------------------------------------------
NASDAQ- 100 Open/Euro Index
- -------------------------------------------------------------------------
NASDAQ- 100 Open/Euro Index
- -------------------------------------------------------------------------
NASDAQ- 100 Open/Euro Index
- -------------------------------------------------------------------------
S&P Small Cap 600
- -------------------------------------------------------------------------
U.S. Top 100 Sector
- -------------------------------------------------------------------------
S&P 500 Long-Term Close
- -------------------------------------------------------------------------
Russell 2000 L-T Open./Euro
- -------------------------------------------------------------------------
Russell 2000 Long-Term Index
- -------------------------------------------------------------------------
</TABLE>
28
