<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 6, 1994
REGISTRATION NO. 2-68723
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 18 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 19 /X/
(Check appropriate box or boxes)
------------------------
PRUDENTIAL-BACHE GROWTH OPPORTUNITY FUND, INC.
(doing business as Prudential Growth Opportunity Fund)
(Exact name of registrant as specified in charter)
ONE SEAPORT PLAZA,
NEW YORK, NEW YORK 10292
(Address of Principal Executive Offices)(Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 214-1250
S. JANE ROSE, ESQ.
ONE SEAPORT PLAZA
NEW YORK, NEW YORK 10292
(Name and Address of Agent for Service of Process)
Approximate date of proposed public offering:
As soon as practicable after the effective
date of the Registration Statement.
It is proposed that this filing will become effective
(check appropriate box):
/ / immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/X/ 60 days after filing pursuant to paragraph (a)
/ / on (date) pursuant to paragraph (a), of Rule 485.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant
has previously registered an indefinite number of shares of its Common Stock,
par value $.01 per share. The Registrant filed a notice under such Rule for its
fiscal year ended September 30, 1993 on November 22, 1993.
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<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 495)
<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
- ----------------------------------------------- ----------------------------------
<S> <C> <C> <C>
PART A
Item 1. Cover Page........................ Cover Page
Item 2. Synopsis.......................... Fund Expenses
Item 3. Condensed Financial Information... Fund Expenses; Financial
Highlights; How the Fund
Calculates Performance
Item 4. General Description of Cover Page; Fund Highlights; How
Registrant........................ the Fund Invests; General
Information
Item 5. Management of the Fund............ Financial Highlights; How the Fund
is Managed
Item 6. Capital Stock and Other Taxes, Dividends and
Securities........................ Distributions; General Information
Item 7. Purchase of Securities Being Shareholder Guide; How the Fund
Offered........................... Values its Shares
Item 8. Redemption or Repurchase.......... Shareholder Guide; How the Fund
Values its Shares; General
Information
Item 9. Pending Legal Proceedings......... Not Applicable
PART B
Item 10. Cover Page........................ Cover Page
Item 11. Table of Contents................. Table of Contents
Item 12. General Information and History... General Information
Item 13. Investment Objectives and Investment Objective and Policies;
Policies.......................... Investment Restrictions
Item 14. Management of the Fund............ Directors and Officers; Manager;
Distributor
Item 15. Control Persons and Principal Not Applicable
Holders of Securities.............
Item 16. Investment Advisory and Other Manager; Distributor; Custodian,
Services.......................... Transfer and Dividend Disbursing
Agent and Independent Accountants
Item 17. Brokerage Allocation and Other Portfolio Transactions and
Practices......................... Brokerage
Item 18. Capital Stock and Other Not Applicable
Securities........................
Item 19. Purchase, Redemption and Pricing Purchase and Redemption of Fund
of Securities Being Offered....... Shares; Shareholder Investment
Account; Net Asset Value
Item 20. Tax Status........................ Taxes
Item 21. Underwriters...................... Distributor
Item 22. Calculation of Performance Data... Performance Information
Item 23. Financial Statements.............. Financial Statements
PART C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Post-Effective Amendment
to the Registration Statement.
</TABLE>
<PAGE>
PRUDENTIAL
GROWTH OPPORTUNITY FUND, INC.
- ------------------------------------------
PROSPECTUS DATED , 1994
- ----------------------------------------------------------------
Prudential Growth Opportunity Fund, Inc. (the Fund) is an open-end, diversified
management investment company whose objective is capital growth. The Fund
intends to invest principally in a carefully selected portfolio of common
stocks--generally small company stocks having prospects of a high return on
equity, increasing earnings, increasing dividends (or an expectation of
dividends) and price-earnings ratios which are not excessive. The Fund's
purchase and sale of put and call options and related short-term trading may
result in a high portfolio turnover rate. These activities may be considered
speculative and may result in higher risks and costs to the Fund. The Fund may
also buy and sell stock index futures for the purpose of hedging its securities
portfolio and may buy and sell options on stock indices, in each case in
accordance with limits described herein. See "How the Fund Invests--Investment
Objective and Policies." The Fund's address is One Seaport Plaza, New York, New
York 10292, and its telephone number is (800) 225-1852.
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing. Additional information
about the Fund has been filed with the Securities and Exchange Commission in a
Statement of Additional Information, dated , 1994, which information is
incorporated herein by reference (is legally considered a part of this
Prospectus) and is available without charge upon request to the Fund, at the
address or telephone number noted above.
- --------------------------------------------------------------------------------
INVESTORS ARE ADVISED TO READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE
REFERENCE.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
FUND HIGHLIGHTS
The following summary is intended to highlight certain information contained
in this Prospectus and is qualified in its entirety by the more detailed
information appearing elsewhere herein.
WHAT IS PRUDENTIAL GROWTH OPPORTUNITY FUND, INC.?
Prudential Growth Opportunity Fund, Inc. is a mutual fund. A mutual fund pools
the resources of investors by selling its shares to the public and investing the
proceeds of such sale in a portfolio of securities designed to achieve its
investment objective. Technically, the Fund is an open-end, diversified
management investment company.
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund's investment objective is capital growth. It seeks to achieve this
objective by investing primarily in a carefully selected portfolio of common
stocks--generally small company stocks having prospects of a high return on
equity, increasing earnings, increasing dividends (or an expectation of
dividends), and price-earnings ratios which are not excessive. See "How the Fund
Invests--Investment Objective and Policies" at page 7.
WHAT ARE THE FUND'S SPECIAL CHARACTERISTICS AND RISKS?
In seeking to achieve its investment objective, the Fund has generally
invested in common stocks with smaller market capitalizations than those of the
stocks included in the Dow Jones Industrial Average or the largest stocks
included in the Standard & Poor's 500 Composite Stock Index. As a result, the
Fund's portfolio has generally been made up of common stocks issued by smaller,
less well known companies selected by the investment adviser on the basis of
fundamental investment analysis. See "How the Fund Invests--Investment Objective
and Policies" at page 7.
WHO MANAGES THE FUND?
Prudential Mutual Fund Management, Inc. (PMF or the Manager) is the Manager of
the Fund and is compensated for its services at an annual rate of .70 of 1% of
the Fund's average daily net assets. As of March 31, 1994, PMF served as manager
or administrator to [66] investment companies, including [37] mutual funds, with
aggregate assets of approximately $[49] billion. The Prudential Investment
Corporation (PIC or the Subadviser) furnishes investment advisory services in
connection with the management of the Fund under a Subadvisory Agreement with
PMF. See "How the Fund is Managed--Manager" at page 11.
WHO DISTRIBUTES THE FUND'S SHARES?
Prudential Mutual Fund Distributors, Inc. (PMFD) acts as the Distributor of
the Fund's Class A shares and is currently paid for its services at an annual
rate of .25 of 1% of the average daily net assets of the Class A shares.
Prudential Securities Incorporated (Prudential Securities or PSI), a major
securities underwriter and securities and commodities broker, acts as the
Distributor of the Fund's Class B and Class C shares and is paid for its
services at an annual rate of 1% of the average daily net assets of each of the
Class B and Class C shares.
See "How the Fund is Managed--Distributor" at page 11.
2
<PAGE>
WHAT IS THE MINIMUM INVESTMENT?
The minimum initial investment for Class A and Class B shares is $1,000 per
class and $5,000 for Class C shares. The minimum subsequent investment is $100
for all classes. There is no minimum investment requirement for certain
retirement and employee savings plans or custodial accounts for the benefit of
minors. For purchases made through the Automatic Savings Accumulation Plan, the
minimum initial and subsequent investment is $50. See "Shareholder Guide--How to
Buy Shares of the Fund" at page 16 and "Shareholder Guide--Shareholder Services"
at page 24.
HOW DO I PURCHASE SHARES?
You may purchase shares of the Fund through Prudential Securities, Pruco
Securities Corporation (Prusec) or directly from the Fund, through its transfer
agent, Prudential Mutual Fund Services, Inc. (PMFS or the Transfer Agent) at the
net asset value per share (NAV) next determined after receipt of your purchase
order by the Transfer Agent or Prudential Securities plus a sales charge which
may be imposed either (i) at the time of purchase (Class A shares) or (ii) on a
deferred basis (Class B or Class C shares). See "How the Fund Values its Shares"
at page 13 and "Shareholder Guide--How to Buy Shares of the Fund" at page 16.
WHAT ARE MY PURCHASE ALTERNATIVES?
The Fund offers three classes of shares:
-Class A Shares: Sold with an initial sales charge of up to 5% of
the offering price.
-Class B Shares: Sold without an initial sales charge but are
subject to a contingent deferred sales charge or
CDSC (declining from 5% to zero of the lower of the
amount invested or the redemption proceeds) which
will be imposed on certain redemptions made within
six years of purchase. Although Class B shares are
subject to higher ongoing distribution-related
expenses than Class A shares, Class B shares will
automatically convert to Class A shares (which are
subject to lower ongoing expenses) approximately
seven years after purchase.
-Class C Shares: Sold without an initial sales charge and, for one
year after purchase, are subject to a 1% CDSC on
redemptions. Like Class B shares, Class C shares
are subject to higher ongoing distribution-related
expenses than Class A shares but do not convert to
another class.
See "Shareholder Guide--Alternative Purchase Plan" at page 17.
HOW DO I SELL MY SHARES?
You may redeem your shares at any time at the NAV next determined after
Prudential Securities or the Transfer Agent receives your sell order. However,
the proceeds of redemptions of Class B and Class C shares may be subject to a
CDSC. See "Shareholder Guide--How to Sell Your Shares" at page 20.
HOW ARE DIVIDENDS AND DISTRIBUTIONS PAID?
The Fund expects to pay dividends of net investment income, if any,
semi-annually and make distributions of any net capital gains at least annually.
Dividends and distributions will be automatically reinvested in additional
shares of the Fund at NAV without a sales charge unless you request that they be
paid to you in cash. See "Taxes, Dividends and Distributions" at page 14.
3
<PAGE>
FUND EXPENSES
<TABLE>
<CAPTION>
CLASS A
SHAREHOLDER TRANSACTION EXPENSES+ SHARES CLASS B SHARES CLASS C SHARES
------------- -------------------------- ---------------------
<S> <C> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)..... 5% None None
Maximum Sales Load or Deferred Sales Load
Imposed on Reinvested Dividends......... None None None
Deferred Sales Load (as a percentage of
original purchase price or redemption
proceeds, whichever is lower)........... None 5% during the first year, 1% on redemptions
decreasing by 1% annually made within one year
to 1% in the fifth and of purchase
sixth years and 0% the
seventh year*
Redemption Fees.......................... None None None
Exchange Fee............................. None None None
<CAPTION>
ANNUAL FUND OPERATING EXPENSES CLASS A CLASS B SHARES CLASS C SHARES**
SHARES -------------------------- ---------------------
-------------
<S> <C> <C> <C>
(as a percentage of average net assets)
Management Fees.......................... .70% .70% .70%
12b-1 Fees............................... .25++ 1.00 1.00
Other Expenses........................... .27 .27 .27
------------- -------------------------- ---------------------
Total Fund Operating Expenses............ 1.22% 1.97% 1.97%
------------- -------------------------- ---------------------
------------- -------------------------- ---------------------
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------- ------- -------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming (1) 5% annual return
and (2) redemption at the end of each time period:
Class A............................................................................... $ 62 $ 87 $ 114 $ 190
Class B............................................................................... $ 70 $ 92 $ 116 $ 201
Class C**............................................................................. $ 30 $ 62 $ 106 $ 230
You would pay the following expenses on the same investment, assuming no redemption:
Class A............................................................................... $ 62 $ 87 $ 114 $ 192
Class B............................................................................... $ 20 $ 62 $ 106 $ 201
Class C**............................................................................. $ 20 $ 62 $ 106 $ 230
The above example with respect to Class A and Class B shares is based on restated (Class A only) data for the Fund's fiscal year
ended September 30, 1993. The above example with respect to Class C shares is based on expenses expected to have been incurred
if Class C shares had been in existence during the fiscal year ended September 30, 1993. THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The purpose of this table is to assist investors in understanding the various costs and expenses that an investor in the Fund
will bear, whether directly or indirectly. For more complete descriptions of the various costs and expenses, see "How the Fund
is Managed." "Other Expenses" includes operating expenses of the Fund, such as directors' and professional fees, registration
fees, reports to shareholders, transfer agency and custodian fees and franchise taxes.
<FN>
------------------
*Class B shares will automatically convert to Class A shares approximately
seven years after purchase. See "Shareholder Guide--Conversion
Feature--Class B Shares."
**Estimated based on expenses expected to have been incurred if Class C
shares had been in existence during the fiscal year ended September 30,
1993.
+Pursuant to rules of the National Association of Securities Dealers,
Inc., the aggregate initial sales charges, deferred sales charges and
asset-based sales charges on shares of the Fund may not exceed 6.25% of
total gross sales, subject to certain exclusions. This 6.25% limitation
is imposed on the Fund rather than on a per shareholder basis. Therefore,
long-term Class B and Class C shareholders of the Fund may pay more in
total sales charges than the economic equivalent of 6.25% of such
shareholders' investment in such shares. See "How the Fund is
Managed--Distributor."
++Although the Class A Distribution and Service Plan provides that the Fund
may pay a distribution fee of up to .30 of 1% per annum of the average
daily net assets of the Class A shares, the Distributor has agreed to
limit its distribution fees with respect to Class A shares of the Fund to
no more than .25 of 1% of the average daily net assets of the Class A
shares for the fiscal year ending September 30, 1994. See "How the Fund
is Managed--Distributor."
</TABLE>
4
<PAGE>
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH OF THE INDICATED PERIODS)
(CLASS A SHARES)
The following financial highlights (with the exception of the six months
ended March 31, 1994) have been audited by Price Waterhouse, independent
accountants, whose report thereon was unqualified. This information should be
read in conjunction with the financial statements and notes thereto, which
appear in the Statement of Additional Information. The following financial
highlights contain selected data for a Class A share of common stock
outstanding, total return, ratios to average net assets and other supplemental
data for the periods indicated. The information is based on data contained in
the financial statements. No Class C shares were outstanding during the
periods indicated.
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------------
JANUARY 22,
SIX MONTHS 1990*
ENDED MARCH 31, YEAR ENDED SEPTEMBER 30, THROUGH
1994 -------------------------------- SEPTEMBER 30,
(UNAUDITED) 1993*** 1992*** 1991 1990
--------------- -------- -------- -------- ---------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:+
Net asset value, beginning of
period............................. $ $ 11.25 $ 10.16 $ 7.36 $ 8.55
--------------- -------- -------- -------- ---------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income............... .03 .02 .05 .09
Net realized and unrealized gain
(loss) on investment
transactions....................... 3.14 1.47 2.82 (1.20)
--------------- -------- -------- -------- ---------------
Total from investment
operations....................... 3.17 1.49 2.87 (1.11)
LESS DISTRIBUTIONS
Dividends from net investment
income............................. -- -- (.07) (.08)
Distributions from net realized
capital gains...................... (1.36) (.40) -- --
--------------- -------- -------- -------- ---------------
Total distributions................. (1.36) (.40) (.07) (.08)
--------------- -------- -------- -------- ---------------
Net asset value, end of period...... $ $ 13.06 $ 11.25 $ 10.16 $ 7.36
--------------- -------- -------- -------- ---------------
--------------- -------- -------- -------- ---------------
TOTAL RETURN++:..................... 30.42% 15.39% 39.39% (13.19)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..... $ $94,842 $44,845 $25,165 $ 17,222
Ratios to average net assets:
Expenses, including distribution
fees............................. %** 1.17% 1.33% 1.50% 1.61%**
Expenses, excluding distribution
fees............................. %** .97% 1.13% 1.30% 1.42%**
Net investment income (loss)...... %** .26% .19% .59% 1.54%**
Portfolio turnover.................. %** 68% 99% 111% 79%
<FN>
---------------
*Commencement of offering of Class A shares.
**Annualized.
***Calculated based upon weighted average shares outstanding during the
period.
+Restated to reflect 3-for-2 stock split paid to shareholders of record on
September 17, 1993.
++Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
</TABLE>
5
<PAGE>
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH OF THE INDICATED PERIODS)
(CLASS B SHARES)
The following financial highlights, with respect to the five-year period
ended September 30, 1993, have been audited by Price Waterhouse, independent
accountants, whose report thereon was unqualified. This information should be
read in conjunction with the financial statements and notes thereto, which
appear in the Statement of Additional Information. The following financial
highlights contain selected data for a Class B share of common stock
outstanding, total return, ratios to average net assets and other supplemental
data for the periods indicated. The information is based on data contained in
the financial statements. No Class C shares were outstanding during the
periods indicated.
<TABLE>
<CAPTION>
CLASS B
----------------
SIX MONTHS ENDED
MARCH 31, 1994
(UNAUDITED)
----------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:+
Net asset value, beginning of
period.............................. $
--------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss).........
Net realized and unrealized gain
(loss) on investment transactions...
--------
Total from investment operations...
--------
LESS DISTRIBUTIONS
Dividends from net investment
income..............................
Distributions from net realized
capital gains.......................
--------
Total distributions..................
--------
Net asset value, end of period....... $
--------
--------
TOTAL RETURN ++:.....................
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000)........ $
Ratios to average net assets:
Expenses, including distribution
fees.............................. %***
Expenses, excluding distribution
fees.............................. %***
Net investment income (loss)....... %***
Portfolio turnover................... %***
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------------------------------
1993** 1992** 1991 1990 1989* 1988 1987 1986 1985 1984
------- ------- ------- ------ ------ ------- ------ -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:+
Net asset value, beginning of
period.............................. $ 11.08 $ 10.11 $ 7.34 $ 9.11 $ 7.47 $ 9.58 $ 9.09 $ 8.30 $ 8.03 $ 9.67
------- ------- ------- ------ ------ ------- ------ -------- --------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)......... (.06) (.07) (.02) .07 .06 .08++ -- .02++ .04 .07
Net realized and unrealized gain
(loss) on investment transactions... 3.08 1.44 2.82 (1.75) 1.65 (1.34) 2.40 1.89 .37 (1.51)
------- ------- ------- ------ ------ ------- ------ -------- --------- -------
Total from investment operations... 3.02 1.37 2.80 (1.68) 1.71 (1.26) 2.40 1.91 .41 (1.44)
------- ------- ------- ------ ------ ------- ------ -------- --------- -------
LESS DISTRIBUTIONS
Dividends from net investment
income.............................. -- -- (.03) (.09) (.07) (.03) -- (.02) (.06) --
Distributions from net realized
capital gains....................... (1.36) (.40) -- -- -- (.82) (1.91) (1.10) (.08) (.20)
------- ------- ------- ------ ------ ------- ------ -------- --------- -------
Total distributions.................. (1.36) (.40) (.03) (.09) (.07) (.85) (1.91) (1.12) (.14) (.20)
------- ------- ------- ------ ------ ------- ------ -------- --------- -------
Net asset value, end of period....... $ 12.74 $ 11.08 $ 10.11 $ 7.34 $ 9.11 7.47 9.58 9.09 $ 8.30 $ 8.03
------- ------- ------- ------ ------ ------- ------ -------- --------- -------
------- ------- ------- ------ ------ ------- ------ -------- --------- -------
TOTAL RETURN ++:..................... 29.40% 14.27% 38.33% (18.63)% 23.20% (10.72)% 31.61% 26.22% 5.14% (15.06)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000)........ $376,068 $172,018 $118,660 $86,440 $160,995 $143,263 $186,655 $87,844 $58,449 $61,152
Ratios to average net assets:
Expenses, including distribution
fees.............................. 1.97% 2.13% 2.30% 2.18% 1.79% 1.66%++ 1.61% 1.40%++ 1.32% 1.32%
Expenses, excluding distribution
fees.............................. .97% 1.13% 1.30% 1.28% 1.17% 1.05%++ 1.07% 1.16%++ 1.32% 1.32%
Net investment income (loss)....... (.54)% (.61)% (.21)% .91% .74% 1.07%++ .08% .18%++ .40% .84%
Portfolio turnover................... 68% 99% 111% 79% 79% 76% 113% 139% 110% 69%
<FN>
------------------
*On January 31, 1989, Prudential Mutual Fund Management, Inc. succeeded The
Prudential Insurance Company of America as investment adviser and since
then has acted as manager of the Fund. See "Manager" in the Statement of
Additional Information.
**Calculated based upon weighted average shares outstanding during the year.
***Annualized.
+Restated to reflect 3 for 2 stock split paid to shareholders of record on
September 17, 1993.
++Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on
the last day of each period reported and includes reinvestment of
dividends and distributions.
++Net of expense reimbursement.
</TABLE>
6
<PAGE>
HOW THE FUND INVESTS
INVESTMENT OBJECTIVE AND POLICIES
THE FUND'S INVESTMENT OBJECTIVE IS CAPITAL GROWTH. THE FUND WILL ATTEMPT TO
ACHIEVE THIS OBJECTIVE BY INVESTING PRINCIPALLY IN A CAREFULLY SELECTED
PORTFOLIO OF COMMON STOCKS. INVESTMENT INCOME IS OF INCIDENTAL IMPORTANCE, AND
THE FUND MAY INVEST IN SECURITIES WHICH DO NOT PRODUCE ANY INCOME. HOWEVER,
THERE MAY BE PERIODS WHEN, IN THE JUDGMENT OF THE FUND'S INVESTMENT ADVISER,
MARKET OR GENERAL ECONOMIC CONDITIONS JUSTIFY A DEFENSIVE POSITION. THERE CAN BE
NO ASSURANCE THAT SUCH OBJECTIVE WILL BE ACHIEVED. See "Investment Objective and
Policies" in the Statement of Additional Information.
The stocks which the Fund's investment adviser generally expects to select for
the Fund's portfolio are those which, in the investment adviser's judgment, have
prospects of a high return on equity, increasing earnings, increasing dividends
(or an expectation of dividends) and price-earnings ratios that are not
excessive. These criteria are not rigid, and other stocks may be included in the
Fund's portfolio if they are expected to help the Fund attain its objective.
These criteria can be changed by the Fund's Board of Directors.
THE FUND MAY ALSO INVEST IN PREFERRED STOCKS AND BONDS, WHICH HAVE EITHER
ATTACHED WARRANTS OR A CONVERSION PRIVILEGE INTO COMMON STOCKS. IN ADDITION, THE
FUND MAY PURCHASE PUT OPTIONS ON STOCKS THAT THE FUND HOLDS AS PROTECTION
AGAINST A SIGNIFICANT PRICE DECLINE, MAY PURCHASE AND SELL STOCK INDEX OPTIONS
AND FUTURES TO HEDGE OVERALL MARKET RISK AND THE INVESTMENT OF CASH FLOWS AND
WRITE LISTED PUT AND LISTED COVERED CALL OPTIONS.
IN SEEKING TO ACHIEVE ITS INVESTMENT OBJECTIVE, THE FUND HAS GENERALLY
INVESTED IN COMMON STOCKS WITH SMALLER MARKET CAPITALIZATIONS THAN THOSE OF THE
STOCKS INCLUDED IN THE DOW JONES INDUSTRIAL AVERAGE OR THE LARGEST STOCKS
INCLUDED IN THE STANDARD & POOR'S 500 COMPOSITE STOCK INDEX. As a result, the
Fund's portfolio has generally been made up of common stocks issued by smaller,
less well known companies (with market capitalizations typically less than $1
billion) selected by the investment adviser on the basis of fundamental
investment analysis. The Fund may, however, invest in the securities of any
issuer without regard to its size or the market capitalization of its common
stock.
THE FUND MAY ALSO INVEST IN MONEY MARKET INSTRUMENTS (A) WHEN CONDITIONS
DICTATE A DEFENSIVE STRATEGY, (B) UNTIL THE PROCEEDS FROM THE SALE OF THE FUND'S
SHARES HAVE BEEN INVESTED OR (C) WHEN CASH IS OTHERWISE AVAILABLE. Such
instruments may include commercial paper of domestic corporations, certificates
of deposit, repurchase agreements, bankers' acceptances and other obligations of
domestic banks, and obligations issued or guaranteed by the U.S. Government, its
instrumentalities or its agencies.
THE FUND'S INVESTMENT OBJECTIVE IS A FUNDAMENTAL POLICY AND, THEREFORE, MAY
NOT BE CHANGED WITHOUT THE APPROVAL OF THE HOLDERS OF A MAJORITY OF THE FUND'S
OUTSTANDING VOTING SECURITIES AS DEFINED IN THE INVESTMENT COMPANY ACT OF 1940,
AS AMENDED (THE INVESTMENT COMPANY ACT). FUND POLICIES THAT ARE NOT FUNDAMENTAL
MAY BE MODIFIED BY THE BOARD OF DIRECTORS.
HEDGING AND INCOME ENHANCEMENT STRATEGIES
THE FUND MAY ALSO ENGAGE IN VARIOUS PORTFOLIO STRATEGIES TO REDUCE CERTAIN
RISKS OF ITS INVESTMENTS AND TO ATTEMPT TO ENHANCE INCOME, BUT NOT FOR
SPECULATION. These strategies include the purchase and sale of put and call
options, and the purchase and sale of stock index futures and combinations
thereof. The Manager will use such techniques as market conditions
7
<PAGE>
warrant. The Fund's ability to use these strategies may be limited by market
conditions, regulatory limits and tax considerations and there can be no
assurance that any of these strategies will succeed. See "Investment Objective
and Policies" in the Statement of Additional Information. New financial products
and risk management techniques continue to be developed and the Fund may use
these new investments and techniques to the extent consistent with its
investment objective and policies.
OPTIONS TRANSACTIONS
THE FUND MAY PURCHASE AND WRITE (I.E., SELL) PUT AND CALL OPTIONS ON EQUITY
SECURITIES OR STOCK INDICES THAT ARE TRADED ON NATIONAL SECURITIES EXCHANGES.
A CALL OPTION ON EQUITY SECURITIES GIVES THE PURCHASER, IN EXCHANGE FOR A
PREMIUM PAID, THE RIGHT FOR A SPECIFIED PERIOD OF TIME TO PURCHASE THE
SECURITIES 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, depending upon the terms of
the option contract, the underlying securities 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 securities in excess of the exercise price
of the option during the period that the option is open.
A PUT OPTION ON EQUITY SECURITIES GIVES THE PURCHASER, IN RETURN FOR A
PREMIUM, THE RIGHT, FOR A SPECIFIED PERIOD OF TIME, TO SELL THE SECURITIES
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 securities underlying the option at
the exercise price. The Fund as the writer of a put option might, therefore, be
obligated to purchase underlying securities for more than their current market
price.
OPTIONS ON STOCK INDICES ARE SIMILAR TO OPTIONS ON EQUITY SECURITIES EXCEPT
THAT, rather than the right to take or make delivery of stock at a specified
price, an option on a stock index gives the holder the right, in return for a
premium paid, to receive, upon exercise of the option, an amount of cash if the
closing level of the stock index upon which the option is based is greater than,
in the case of a call, or less than, in the case of a put, the exercise price of
the option. The writer of an index option, in return for a premium, is obligated
to pay the amount of cash due upon exercise of the option.
THE FUND WILL WRITE ONLY "COVERED" OPTIONS. An option is covered if, so long
as the Fund is obligated under the option, it owns an offsetting position in the
underlying securities or maintains cash, U.S. Government securities or other
liquid high-grade debt obligations with a value sufficient at all times to cover
its obligations in a segregated account. See "Investment Objective and
Policies--Limitation on Purchase and Sale of Stock Options, Options on Stock
Indices and Stock Index Futures" in the Statement of Additional Information.
THERE IS NO LIMITATION ON THE AMOUNT OF CALL OPTIONS THE FUND MAY WRITE. THE
FUND MAY ONLY WRITE COVERED PUT OPTIONS TO THE EXTENT THAT COVER FOR SUCH
OPTIONS DOES NOT EXCEED 25% OF THE FUND'S NET ASSETS. THE FUND WILL NOT PURCHASE
AN OPTION IF, AS A RESULT OF SUCH PURCHASE, MORE THAN 20% OF ITS TOTAL ASSETS
WOULD BE INVESTED IN PREMIUMS FOR SUCH OPTIONS.
STOCK INDEX FUTURES
THE FUND MAY PURCHASE AND SELL STOCK INDEX FUTURES WHICH ARE TRADED ON A
COMMODITIES EXCHANGE OR BOARD OF TRADE FOR CERTAIN HEDGING AND RISK MANAGEMENT
PURPOSES IN ACCORDANCE WITH REGULATIONS OF THE COMMODITY FUTURES TRADING
COMMISSION.
A STOCK INDEX FUTURES CONTRACT IS AN AGREEMENT IN WHICH ONE PARTY AGREES TO
DELIVER TO ANOTHER AN AMOUNT OF CASH EQUAL TO A SPECIFIC DOLLAR AMOUNT TIMES THE
DIFFERENCE BETWEEN 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.
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THE FUND MAY NOT PURCHASE OR SELL STOCK INDEX FUTURES IF, IMMEDIATELY
THEREAFTER, MORE THAN ONE-THIRD OF ITS NET ASSETS WOULD BE HEDGED. IN ADDITION,
EXCEPT IN THE CASE OF A CALL WRITTEN AND HELD ON THE SAME INDEX, THE FUND WILL
WRITE CALL OPTIONS ON INDICES OR SELL STOCK INDEX FUTURES ONLY IF THE AMOUNT
RESULTING FROM THE MULTIPLICATION OF THE THEN CURRENT LEVEL OF THE INDEX (OR
INDICES) UPON WHICH THE OPTIONS OR FUTURES CONTRACT(S) IS BASED, THE APPLICABLE
MULTIPLIER(S), AND THE NUMBER OF FUTURES OR OPTIONS CONTRACTS WHICH WOULD BE
OUTSTANDING WOULD NOT EXCEED ONE-THIRD OF THE VALUE OF THE FUND'S NET ASSETS.
THE FUND'S SUCCESSFUL USE OF STOCK INDEX FUTURES CONTRACTS AND OPTIONS ON
INDICES DEPENDS UPON ITS ABILITY TO PREDICT THE DIRECTION OF THE MARKET AND IS
SUBJECT TO VARIOUS ADDITIONAL RISKS. The correlation between movements in the
price of the stock index future and the price of the securities being hedged is
imperfect and there is a risk that the value of the securities being hedged may
increase or decrease at a greater rate than the related futures contract,
resulting in losses to the Fund. Certain futures exchanges or boards of trade
have established daily limits on the amount that the price of a futures contract
or related options may vary, either up or down, from the previous day's
settlement price. These daily limits may restrict the Fund's ability to purchase
or sell certain futures contracts or related options on any particular day. In
addition, if the Fund purchases futures to hedge against market advances before
it can invest in common stock in an advantageous manner and the market declines,
the Fund might create a loss on the futures contract. In addition, the ability
of the Fund to close out a futures position or an option depends on a liquid
secondary market. There is no assurance that liquid secondary markets will exist
for any particular futures contract or option at any particular time. See
"Investment Objective and Policies" in the Statement of Additional Information.
THE FUND'S ABILITY TO ENTER INTO STOCK INDEX FUTURES AND LISTED OPTIONS IS
LIMITED BY THE REQUIREMENTS OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
(THE INTERNAL REVENUE CODE), FOR QUALIFICATION AS A REGULATED INVESTMENT
COMPANY. See "Taxes" in the Statement of Additional Information.
SPECIAL RISKS OF HEDGING AND INCOME ENHANCEMENT STRATEGIES
PARTICIPATION IN THE OPTIONS OR FUTURES MARKETS INVOLVES INVESTMENT RISKS AND
TRANSACTION COSTS TO WHICH THE FUND WOULD NOT BE SUBJECT ABSENT THE USE OF THESE
STRATEGIES. If the investment adviser's prediction of movements in the direction
of the securities markets is 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 options and stock index futures include (1)
dependence on the investment adviser's ability to predict correctly movements in
the direction of specific securities being hedged or the movement in stock
indicies; (2) imperfect correlation between the price of options and stock index
futures and options thereon and movements in the prices of the securities 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; and (5) the
possible need to defer closing out certain hedged positions to avoid adverse tax
consequences. See "Investment Objective and Policies" and "Taxes" in the
Statement of Additional Information.
OTHER INVESTMENTS AND POLICIES
REPURCHASE AGREEMENTS
The Fund may on occasion enter into repurchase agreements whereby the seller
of a security agrees to repurchase that security from the Fund at a mutually
agreed-upon time and price. The period of maturity 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 security. The Fund's repurchase agreements will at all times be
fully collateralized in an amount at least equal to the purchase price,
including accrued interest earned on the underlying securities. The instruments
held as collateral are valued daily, and if the value of instruments declines,
the Fund will
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require additional collateral. If the seller defaults and the value of the
collateral securing the repurchase agreement declines, the Fund may incur a
loss. The Fund participates in a joint repurchase account with other investment
companies managed by Prudential Mutual Fund Management, Inc. pursuant to an
order of the Securities and Exchange Commission (SEC).
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
The Fund may purchase or sell securities on a 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 maintain, in a segregated account of the
Fund, cash, U.S. Government securities or other liquid high-grade debt
obligations having a value equal to or greater than the Fund's purchase
commitments; the Custodian will likewise segregate securities sold on a delayed
delivery basis. The securities so purchased are subject to market fluctuation
and no interest accrues to the 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.
BORROWING
The Fund may borrow an amount equal to no more than 20% of the value of its
total assets (calculated when the loan is made) from banks for temporary,
emergency or extraordinary purposes or for the clearance of transactions. The
Fund may pledge up to 20% of its total assets to secure these borrowings.
However, the Fund will not purchase portfolio securities when borrowings exceed
5% of the value of the Fund's total assets.
SHORT SALES AGAINST-THE-BOX
The Fund may make short sales of securities or maintain a short position,
provided that at all times when a short position is open the Fund owns an equal
amount of such securities or securities convertible into or exchangeable,
without payment of any further consideration, for an equal amount of the
securities of the same issuer as the securities sold short (a short sale
against-the-box), and that not more than 25% of the Fund's net assets
(determined at the time of the short sale) may be subject to such sales. Short
sales will be made primarily to defer realization of gain or loss for federal
tax purposes. The Fund does not intend to have more than 5% of its net assets
(determined at the time of the short sale) subject to short sales
against-the-box during the coming year.
ILLIQUID SECURITIES
The Fund may invest up to 5% of its net assets in illiquid securities,
including 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. Restricted
securities eligible for resale pursuant to Rule 144A under the Securities Act of
1933, as amended (the Securities Act), that have a readily available market are
not considered illiquid for purposes of this limitation. The investment adviser
will monitor the liquidity of such restricted securities under the supervision
of the Board of Directors. Repurchase agreements subject to demand are deemed to
have a maturity equal to the applicable notice period.
The staff of the SEC has taken the position that purchased over-the-counter
options and the assets used as "cover" for written over-the-counter options are
illiquid securities unless the Fund and the counterparty have provided for the
Fund, at the Fund's election, to unwind the over-the-counter option. The
exercise of such an option ordinarily would involve the payment by the Fund of
an amount designed to reflect the counterparty's economic loss from an early
termination, but does allow the Fund to treat the assets used as "cover" as
"liquid."
INVESTMENT RESTRICTIONS
The Fund is subject to certain investment restrictions which, like its
investment objective, constitute fundamental policies. Fundamental policies
cannot be changed without the approval of the holders of a majority of the
Fund's outstanding voting securities, as defined in the Investment Company Act.
See "Investment Restrictions" in the Statement of Additional Information.
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HOW THE FUND IS MANAGED
THE FUND HAS A BOARD OF DIRECTORS WHICH, IN ADDITION TO OVERSEEING THE ACTIONS
OF THE FUND'S MANAGER, SUBADVISER AND DISTRIBUTOR, AS SET FORTH BELOW, DECIDES
UPON MATTERS OF GENERAL POLICY. THE FUND'S MANAGER CONDUCTS AND SUPERVISES THE
DAILY BUSINESS OPERATIONS OF THE FUND. THE FUND'S SUBADVISER FURNISHES DAILY
INVESTMENT ADVISORY SERVICES.
For the fiscal year ended September 30, 1993, the Fund's total expenses as a
percentage of average net assets for the Fund's Class A and Class B shares were
1.17% and 1.97%, respectively. See "Financial Highlights." No Class C shares
were outstanding during the fiscal year ended September 30, 1993.
MANAGER
PRUDENTIAL MUTUAL FUND MANAGEMENT, INC. (PMF OR THE MANAGER), ONE SEAPORT
PLAZA, NEW YORK, NEW YORK 10292, IS THE MANAGER OF THE FUND AND IS COMPENSATED
FOR ITS SERVICES AT AN ANNUAL RATE OF .70 OF 1% OF THE FUND'S AVERAGE DAILY NET
ASSETS. It was incorporated in May 1987 under the laws of the State of Delaware.
For the fiscal year ended September 30, 1993, the Fund paid management fees to
PMF of .70% of the Fund's average net assets. See "Manager" in the Statement of
Additional Information.
As of March 31, 1994, PMF served as the manager to [37] open-end investment
companies, constituting all of the Prudential Mutual Funds, and as manager or
administrator to [29] closed-end investment companies with aggregate assets of
approximately $[49] billion.
UNDER THE MANAGEMENT AGREEMENT WITH THE FUND, PMF MANAGES THE INVESTMENT
OPERATIONS OF THE FUND AND ALSO ADMINISTERS THE FUND'S CORPORATE AFFAIRS. See
"Manager" in the Statement of Additional Information.
UNDER A SUBADVISORY AGREEMENT BETWEEN PMF AND THE PRUDENTIAL INVESTMENT
CORPORATION (PIC OR THE SUBADVISOR), PIC FURNISHES INVESTMENT ADVISORY SERVICES
IN CONNECTION WITH THE MANAGEMENT OF THE FUND AND IS REIMBURSED BY PMF FOR ITS
REASONABLE COSTS AND EXPENSES INCURRED IN PROVIDING SUCH SERVICES. Under the
Management Agreement, PMF continues to have responsibility for all investment
advisory services and supervises PIC's performance of such services.
The current portfolio manager of the Fund is Robert P. Fetch, a Managing
Director of Prudential Investment Advisors, a unit of PIC. Mr. Fetch has
responsibility for the day-to-day management of the Fund's portfolio. Mr. Fetch
has managed the Fund's portfolio since May 1984 and has been employed by PIC as
a portfolio manager since 1983.
PMF and PIC are indirect, wholly-owned subsidiaries of The Prudential
Insurance Company of America (Prudential), a major diversified insurance and
financial services company.
DISTRIBUTOR
PRUDENTIAL MUTUAL FUND DISTRIBUTORS, INC. (PMFD), ONE SEAPORT PLAZA, NEW YORK,
NEW YORK 10292, IS A CORPORATION ORGANIZED UNDER THE LAWS OF THE STATE OF
DELAWARE AND SERVES AS THE DISTRIBUTOR OF CLASS A SHARES OF THE FUND. IT IS A
WHOLLY-OWNED SUBSIDIARY OF PMF.
PRUDENTIAL SECURITIES INCORPORATED (PRUDENTIAL SECURITIES OR PSI), ONE SEAPORT
PLAZA, NEW YORK, NEW YORK 10292, IS A CORPORATION ORGANIZED UNDER THE LAWS OF
THE STATE OF DELAWARE AND SERVES AS THE DISTRIBUTOR OF THE CLASS B AND CLASS C
SHARES OF THE FUND. IT IS AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF PRUDENTIAL.
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<PAGE>
UNDER SEPARATE DISTRIBUTION AND SERVICE PLANS (THE CLASS A PLAN, THE CLASS B
PLAN AND THE CLASS C PLAN, COLLECTIVELY, THE PLANS) ADOPTED BY THE FUND UNDER
RULE 12B-1 UNDER THE INVESTMENT COMPANY ACT AND SEPARATE DISTRIBUTION AGREEMENTS
(THE DISTRIBUTION AGREEMENTS), PMFD AND PRUDENTIAL SECURITIES (COLLECTIVELY, THE
DISTRIBUTOR) INCUR 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), an affiliated broker-dealer, commissions and
account servicing fees paid to, or on account of, other broker-dealers or
financial institutions (other than national banks) 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. The State
of Texas requires that shares of the Fund may be sold in that state only by
dealers or other financial institutions which are registered there as
broker-dealers.
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.
UNDER THE CLASS A PLAN, THE FUND MAY PAY PMFD 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 (i) 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 (ii) 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. PMFD has 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 September 30, 1994.
For the fiscal year ended September 30, 1993, PMFD received payments of
$139,602, under the Class A Plan as reimbursement of expenses related to the
distribution of Class A shares. This amount was primarily expended for payment
of account servicing fees to financial advisers and other persons who sell Class
A shares. For the fiscal year ended September 30, 1993, PMFD also received
approximately $835,000 in initial sales charges.
UNDER THE CLASS B AND CLASS C PLANS, THE FUND PAYS PRUDENTIAL SECURITIES 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 AND
CLASS C SHARES. The Class B and Class C Plans provide for the payment to
Prudential Securities of (i) 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, and (ii) 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. Prudential Securities also receives
contingent deferred sales charges from certain redeeming shareholders. See
"Shareholder Guide--How to Sell Your Shares--Contingent Deferred Sales Charges."
For the fiscal year ended September 30, 1993, Prudential Securities incurred
distribution expenses of approximately $6,227,200 under the Class B Plan and
received $2,786,595 from the Fund under the Class B Plan. In addition,
Prudential Securities received approximately $436,000 in contingent deferred
sales charges from redemptions of Class B shares during this period. No Class C
shares were outstanding during the fiscal year ending September 30, 1994.
For the fiscal year ended September 30, 1993, the Fund paid distribution
expenses of .20% and 1.00% of the average net assets of the Class A and Class B
shares, respectively. The Fund records all payments made under the Plans as
expenses in the calculation of net investment income. No Class C shares were
outstanding during the fiscal year ended September 30, 1993.
Distribution expenses attributable to the sale of shares of the Fund will be
allocated to each class based upon the ratio of sales of each class to the sales
of all 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.
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Each Plan provides that it shall continue in effect from year to year provided
that a majority of the Board of Directors of the Fund, including a majority of
the Directors who are not "interested persons" of the Fund (as defined in the
Investment Company Act) and who have no direct or indirect financial interest in
the operation of the Plan or any agreement related to the Plan (the Rule 12b-1
Directors), vote annually to continue the Plan. Each Plan may be terminated at
any time by vote of a majority of the Rule 12b-1 Directors or of a majority of
the outstanding shares of the applicable class of the Fund. The Fund will not be
obligated to pay expenses incurred under any plan if it is terminated or not
continued.
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 and other persons who distribute shares of the Fund. Such
payments may be calculated by reference to the net asset value of shares sold by
such persons or otherwise.
The Distributor is subject to the rules of the National Association of
Securities Dealers, Inc. governing maximum sales charges. See "Distributor" in
the Statement of Additional Information.
PORTFOLIO TRANSACTIONS
Prudential Securities may act as a broker or futures commission merchant for
the Fund, provided that the commissions, fees or other remuneration it receives
are fair and reasonable. See "Portfolio Transactions and Brokerage" in the
Statement of Additional Information.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company, One Heritage Drive, North Quincy,
Massachusetts 02171, serves as Custodian for the Fund's portfolio securities and
cash and, in that capacity, maintains certain financial and accounting books and
records pursuant to an agreement with the Fund. Its mailing address is P.O. Box
1713, Boston, Massachusetts 02105.
Prudential Mutual Fund Services, Inc. (PMFS), Raritan Plaza One, Edison, New
Jersey 08837, serves as Transfer Agent and Dividend Disbursing Agent and, in
those capacities, maintains certain books and records for the Fund. PMFS is a
wholly-owned subsidiary of PMF. Its mailing address is P.O. Box 15005, New
Brunswick, New Jersey 08906-5005.
HOW THE FUND VALUES ITS SHARES
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
BOARD OF DIRECTORS HAS FIXED THE SPECIFIC TIME OF DAY FOR THE COMPUTATION OF THE
FUND'S NAV TO BE AS OF 4:15 P.M., NEW YORK TIME.
Portfolio securities are valued based on market quotations or, if not readily
available, at fair value as determined in good faith under procedures
established by the Fund's Board of Directors. See "Net Asset Value" in the
Statement of Additional Information.
The Fund will compute its NAV once daily on days that the New York Stock
Exchange is open for trading except on days on which no orders to purchase, sell
or redeem shares have been received by the Fund or days on which changes in the
value of the Fund's portfolio securities do not materially affect the NAV. The
New York Stock Exchange is closed on the following holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
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. It is expected, however, that the
NAV of the three classes will tend to converge immediately after the recording
of dividends, which will differ by approximately the amount of the
distribution-related expense accrual differential among the classes.
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HOW THE FUND CALCULATES PERFORMANCE
FROM TIME TO TIME THE FUND MAY ADVERTISE ITS TOTAL RETURN (INCLUDING "AVERAGE
ANNUAL" TOTAL RETURN AND "AGGREGATE" TOTAL RETURN) AND YIELD IN ADVERTISEMENTS
OR SALES LITERATURE. TOTAL RETURN AND YIELD ARE CALCULATED SEPARATELY FOR CLASS
A, CLASS B AND CLASS C SHARES. THESE FIGURES ARE BASED ON HISTORICAL EARNINGS
AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. The "total return" shows
how much an investment in the Fund would have increased (decreased) over a
specified period of time (I.E., one, five or ten years or since inception of the
Fund) assuming that all distributions and dividends by the Fund were reinvested
on the reinvestment dates during the period and less all recurring fees. The
"aggregate" total return reflects actual performance over a stated period of
time. "Average annual" total return is a hypothetical rate of return that, if
achieved annually, would have produced the same aggregate total return if
performance had been constant over the entire period. "Average annual" total
return smooths out variations in performance and takes into account any
applicable initial or contingent deferred sales charges. Neither "average
annual" total return nor "aggregate" total return takes into account any federal
or state income taxes which may be payable upon redemption. The "yield" refers
to the income generated by an investment in the Fund over a one-month or 30-day
period. This income is then "annualized;" that is, the amount of income
generated by the investment during that 30-day period is assumed to be generated
each 30-day period for twelve periods and is shown as a percentage of the
investment. The income earned on the investment is also assumed to be reinvested
at the end of the sixth 30-day period. The Fund also may include comparative
performance information in advertising or marketing the Fund's shares. Such
performance information may include data from Lipper Analytical Services, Inc.,
other industry publications, business periodicals and market indices. See
"Performance Information" in the Statement of Additional Information. The Fund
will include performance data for each class of shares of the Fund in any
advertisement or information including performance data of the Fund. Further
performance information is contained in the Fund's annual and semi-annual
reports to shareholders, which may be obtained without charge. See "Shareholder
Guide--Shareholder Services--Reports to Shareholders."
TAXES, DIVIDENDS AND DISTRIBUTIONS
TAXATION OF THE FUND
THE FUND HAS ELECTED TO QUALIFY AND INTENDS TO REMAIN QUALIFIED AS A REGULATED
INVESTMENT COMPANY UNDER THE INTERNAL REVENUE CODE. ACCORDINGLY, THE FUND WILL
NOT BE SUBJECT TO FEDERAL INCOME TAXES ON ITS NET INVESTMENT INCOME AND CAPITAL
GAINS, IF ANY, THAT IT DISTRIBUTES TO ITS SHAREHOLDERS. See "Taxes" in the
Statement of Additional Information.
TAXATION OF SHAREHOLDERS
All dividends out of net investment income, together with distributions of
short-term capital gains, will be taxable as ordinary income to the shareholder
whether or not reinvested. Any net long-term capital gains (I.E., the excess of
net long-term capital gains over net short-term capital losses) distributed to
shareholders will be taxable as such to the shareholders, whether or not
reinvested and regardless of the length of time a shareholder has owned his or
her shares. The maximum long-term capital gains rate for individuals is 28%. The
maximum long-term capital gains rate for corporate shareholders is currently the
same as the maximum tax rate for ordinary income.
Dividends paid by the Fund will be eligible for the 70% dividends-received
deduction for corporate shareholders to the extent that the Fund's income is
derived from certain dividends received from domestic corporations. Capital
gains distributions are not eligible for the 70% dividends-received deduction.
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Any gain or loss realized upon a sale or redemption of Fund shares by a
shareholder who is not a dealer in securities will be treated as a long-term
capital gain or loss if the shares have been held for more than one year and
otherwise as a short-term capital gain or loss. Any such loss, however, on
shares that are held for six months or less, will be treated as a long-term
capital loss to the extent of any capital gain distributions received by the
shareholder.
The Fund has obtained an opinion of counsel to the effect that the conversion
of Class B shares into Class A shares does not constitute a taxable event for
U.S. income tax purposes. However, such opinion is not binding on the Internal
Revenue Service.
Shareholders are advised to consult their own tax advisers regarding specific
questions as to federal, state or local taxes.
WITHHOLDING TAXES
Under the Internal Revenue Code, the Fund is required to withhold and remit to
the U.S. Treasury 31% of dividends, capital gain distributions and redemption
proceeds payable to individuals and certain noncorporate shareholders who fail
to furnish correct tax identification numbers on IRS Form W-9 (or IRS Form W-8
in the case of certain foreign shareholders) or who are otherwise subject to
backup withholding. Dividends of net investment income and short-term capital
gains to a foreign shareholder will generally be subject to U.S. withholding tax
at the rate of 30% (or lower treaty rate).
DIVIDENDS AND DISTRIBUTIONS
THE FUND EXPECTS TO PAY DIVIDENDS OF NET INVESTMENT INCOME, IF ANY,
SEMI-ANNUALLY AND MAKE DISTRIBUTIONS AT LEAST ANNUALLY OF ANY NET CAPITAL GAINS.
Dividends paid by the Fund with respect to each class of shares, to the extent
any dividends are paid, will be calculated in the same manner, at the same time,
on the same day and will be in the same amount except that each class will bear
its own distribution charges, generally resulting in lower dividends for Class B
and Class C shares. Distributions of net capital gains, if any, will be paid in
the same amount for each class of shares. See "How the Fund Values its Shares."
DIVIDENDS AND DISTRIBUTIONS WILL BE PAID IN ADDITIONAL FUND SHARES BASED ON
THE NAV OF EACH CLASS ON THE RECORD DATE, OR SUCH OTHER DATE AS THE BOARD OF
DIRECTORS MAY DETERMINE, UNLESS THE SHAREHOLDER ELECTS IN WRITING NOT LESS THAN
FIVE BUSINESS DAYS PRIOR TO THE RECORD DATE TO RECEIVE SUCH DIVIDENDS AND
DISTRIBUTIONS IN CASH. Such election should be submitted to Prudential Mutual
Fund Services, Inc., Attention: Account Maintenance, P.O. Box 15015, New
Brunswick, New Jersey 08906-5015. The Fund will notify each shareholder after
the close of the Fund's taxable year of both the dollar amount and the taxable
status of that year's dividends and distributions on a per share basis. If you
hold shares through Prudential Securities, you should contact your financial
adviser to elect to receive dividends and distributions in cash.
WHEN THE FUND GOES "EX-DIVIDEND," THE NAV OF EACH CLASS IS REDUCED BY THE
AMOUNT OF THE DIVIDEND OR DISTRIBUTION ALLOCABLE TO EACH CLASS. IF YOU BUY
SHARES JUST PRIOR TO THE EX-DIVIDEND DATE (WHICH GENERALLY OCCURS FOUR BUSINESS
DAYS PRIOR TO THE RECORD DATE), THE PRICE YOU PAY WILL INCLUDE THE DIVIDEND OR
DISTRIBUTION AND A PORTION OF YOUR INVESTMENT WILL BE RETURNED TO YOU AS A
TAXABLE DIVIDEND OR DISTRIBUTION. YOU SHOULD, THEREFORE, CONSIDER THE TIMING OF
DIVIDENDS AND DISTRIBUTIONS WHEN MAKING YOUR PURCHASES.
GENERAL INFORMATION
DESCRIPTION OF COMMON STOCK
THE FUND WAS INCORPORATED IN MARYLAND ON JULY 28, 1980. THE FUND IS AUTHORIZED
TO ISSUE 500 MILLION SHARES OF COMMON STOCK, $.01 PAR VALUE PER SHARE, DIVIDED
INTO THREE CLASSES, DESIGNATED CLASS A, CLASS B AND CLASS C COMMON STOCK, EACH
OF WHICH CONSISTS OF 166 2/3 MILLION AUTHORIZED SHARES. Each class of common
stock represents an interest in the same assets of the Fund and is identical in
all respects except that (i) each class bears different distribution expenses,
(ii) each class has exclusive voting rights with respect to its distribution and
service plan (except that the Fund has
15
<PAGE>
agreed with the SEC in connection with the offering of a conversion feature on
Class B shares to submit any amendment of the Class A Plan to both Class A and
Class B shareholders), (iii) each class has a different exchange privilege and
(iv) only Class B shares have a conversion feature. See "How the Fund is
Managed--Distributor." The Fund has received an order from the SEC permitting
the issuance and sale of multiple classes of common stock. Currently, the Fund
is offering three classes, designated Class A, Class B and Class C shares. In
accordance with the Fund's Articles of Incorporation, the Board of Directors may
authorize the creation of additional series of common stock and classes within
such series, with such preferences, privileges, limitations and voting and
dividend rights as the Board may determine.
The Board of Directors may increase or decrease the number of authorized
shares without the approval of shareholders. 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 as described under "Shareholder Guide--How to Sell Your
Shares." Each share of each class of common stock is equal as to earnings,
assets and voting privileges, except as noted above, and each class 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 common
stock 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. The Fund's shares do not have cumulative voting
rights for the election of Directors.
THE FUND DOES NOT INTEND TO HOLD ANNUAL MEETINGS OF SHAREHOLDERS UNLESS
OTHERWISE REQUIRED BY LAW. THE FUND WILL NOT BE REQUIRED TO HOLD MEETINGS OF
SHAREHOLDERS UNLESS, FOR EXAMPLE, THE ELECTION OF DIRECTORS 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 A VOTE OF 10% OF THE
FUND'S OUTSTANDING SHARES FOR THE PURPOSE OF VOTING ON THE REMOVAL OF ONE OR
MORE DIRECTORS OR TO TRANSACT ANY OTHER BUSINESS.
ADDITIONAL INFORMATION
This Prospectus, including the Statement of Additional Information which has
been incorporated by reference herein, does not contain all the information set
forth in the Registration Statement filed by the Fund with the SEC under the
Securities Act of 1933. Copies of the Registration Statement may be obtained at
a reasonable charge from the SEC or may be examined, without charge, at the
office of the SEC in Washington, D.C.
SHAREHOLDER GUIDE
HOW TO BUY SHARES OF THE FUND
YOU MAY PURCHASE SHARES OF THE FUND THROUGH PRUDENTIAL SECURITIES, PRUSEC OR
DIRECTLY FROM THE FUND, THROUGH ITS TRANSFER AGENT, PRUDENTIAL MUTUAL FUND
SERVICES, INC. (PMFS OR THE TRANSFER AGENT), ATTENTION: INVESTMENT SERVICES,
P.O. BOX 15020, NEW BRUNSWICK, NEW JERSEY 08906-5020. The minimum initial
investment for Class A and Class B shares is $1,000 per class and $5,000 for
Class C shares. The minimum subsequent investment is $100 for all classes. All
minimum investment requirements are waived for certain retirement and employee
savings plans or custodial accounts for the benefit of minors. For purchases
made through the Automatic Savings Accumulation Plan, the minimum initial and
subsequent investment is $50. See "Shareholder Services" below.
THE PURCHASE PRICE IS THE NAV NEXT DETERMINED FOLLOWING RECEIPT OF AN ORDER BY
THE TRANSFER AGENT OR PRUDENTIAL SECURITIES PLUS A SALES CHARGE WHICH, AT YOUR
OPTION, MAY BE IMPOSED EITHER (I) AT THE TIME OF PURCHASE (CLASS A SHARES) OR
(II) ON A DEFERRED BASIS (CLASS B OR CLASS C SHARES). SEE "ALTERNATIVE PURCHASE
PLAN" BELOW. SEE ALSO "HOW THE FUND VALUES ITS SHARES."
16
<PAGE>
Application forms can be obtained from PMFS, Prudential Securities or Prusec.
If a stock certificate is desired, it must be requested in writing for each
transaction. Certificates are issued only for full shares. Shareholders who hold
their shares through Prudential Securities will not receive stock certificates.
The Fund reserves the right to reject any purchase order (including an
exchange) or to suspend or modify the continuous offering of its shares. See
"How to Sell Your Shares" below.
Your dealer is responsible for forwarding payment promptly to the Fund. The
Distributor reserves the right to cancel any purchase order for which payment
has not been received by the fifth business day following the investment.
Transactions in Fund shares may be subject to postage and handling charges
imposed by your dealer.
PURCHASE BY WIRE. For an initial purchase of shares of the Fund by wire, you
must first telephone PMFS at (800) 225-1852 (toll-free) to receive an account
number. 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, Boston,
Massachusetts, Custody and Shareholder Services Division, Attention: Prudential
Growth Opportunity Fund, Inc., specifying on the wire the account number
assigned by PMFS and your name and identifying the sales charge alternative
(Class A, Class B or Class C shares).
If you arrange for receipt by State Street of Federal Funds prior to 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 Prudential Growth
Opportunity Fund, Inc., Class A, Class B or Class C 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.
ALTERNATIVE PURCHASE PLAN
THE FUND OFFERS THREE CLASSES OF SHARES (CLASS A, CLASS B AND CLASS C SHARES)
WHICH ALLOWS YOU TO CHOOSE THE MOST BENEFICIAL SALES CHARGE STRUCTURE FOR YOUR
INDIVIDUAL CIRCUMSTANCES GIVEN THE AMOUNT OF THE PURCHASE, THE LENGTH OF TIME
YOU EXPECT TO HOLD THE SHARES AND OTHER RELEVANT CIRCUMSTANCES (ALTERNATIVE
PURCHASE PLAN).
<TABLE>
<CAPTION>
ANNUAL 12B-1 FEES
(AS A % OF AVERAGE
DAILY
SALES CHARGE NET ASSETS) OTHER INFORMATION
-------------------------------------- ----------------------- --------------------------------------
<S> <C> <C> <C>
CLASS A Maximum initial sales charge of 5% of .30 of 1% (Currently Initial sales charge waived or reduced
the public offering price being charged at a rate for certain purchases
of .25 of 1%)
CLASS B Maximum contingent deferred sales 1% Shares convert to Class A shares
charge or CDSC of 5% of the lesser of approximately seven years after
the amount invested or the redemption purchase
proceeds; declines to zero after six
years
CLASS C Maximum CDSC of 1% of the lesser of 1% Shares do not convert to another class
the amount invested or the redemption
proceeds on redemptions made within
one year of purchase
</TABLE>
The three classes of shares represent an interest in the same portfolio of
investments of the Fund and have the same rights, except that (i) each class
bears the separate expenses of its Rule 12b-1 distribution and service plan,
(ii) each class has exclusive voting rights with respect to its plan (except as
noted under the heading "General Information--Description of Common Stock"),
17
<PAGE>
and (iii) only Class B shares have a conversion feature. The three classes also
have separate exchange privileges. See "How to Exchange Your Shares" below. The
income attributable to each class and the dividends payable on the shares of
each class will be reduced by the amount of the distribution fee of each class.
Class B and Class C shares bear the expenses of a higher distribution fee which
will generally cause them to have higher expense ratios and to pay lower
dividends than the Class A shares.
Financial advisers and other sales agents who sell shares of the Fund will
receive different compensation for selling Class A, Class B and Class C shares
and will generally receive more compensation initially for selling Class A and
Class B shares than for selling Class C shares.
IN SELECTING A PURCHASE ALTERNATIVE, YOU SHOULD CONSIDER, AMONG OTHER THINGS,
(1) the length of time you expect to hold your investment, (2) the amount of any
applicable sales charge (whether imposed at the time of purchase or redemption)
and distribution-related fees, as noted above, (3) whether you qualify for any
reduction or waiver of any applicable sales charge, (4) the various exchange
privileges among the different classes of shares (see "How to Exchange Your
Shares" below) and (5) the fact that Class B shares automatically convert to
Class A shares approximately seven years after purchase (see "Conversion
Feature--Class B Shares" below).
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 7 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 [7] years or more and do not qualify
for a reduced sales charge on Class A shares, since Class B shares convert to
Class A shares approximately [7] years after purchase and because all of your
money would be invested initially in the case of Class B shares, you should
consider purchasing Class B shares over either Class A or 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 and Class C 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 Class C shares for the
higher cumulative annual distribution-related fee on those shares to exceed the
initial sales charge plus 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 net asset value, the effect of the return on the
investment over this period of time or redemptions during which the CDSC is
applicable.
18
<PAGE>
ALL PURCHASES OF $1 MILLION OR MORE, EITHER AS PART OF A SINGLE INVESTMENT OR
UNDER RIGHTS OF ACCUMULATION OR LETTERS OF INTENT, MUST BE FOR CLASS A SHARES.
SEE "REDUCTION AND WAIVER OF INITIAL SALES CHARGES" BELOW.
CLASS A SHARES
The offering price of Class A shares for investors choosing the initial sales
charge alternative is the next determined NAV plus a sales charge (expressed as
a percentage of the offering price and of the amount invested) as shown in the
following table:
<TABLE>
<CAPTION>
SALES CHARGE AS SALES CHARGE AS DEALER CONCESSION
PERCENTAGE OF PERCENTAGE OF AS PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
- ------------------------- ----------------- ----------------- -------------------
<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
$1,000,000 and above None None None
</TABLE>
Selling dealers may be deemed to be underwriters, as that term is defined in
the Securities Act.
REDUCTION AND WAIVER OF INITIAL SALES CHARGES._Reduced sales charges are
available through Rights of Accumulation and Letters of Intent. Shares of the
Fund and shares of other Prudential Mutual Funds (excluding money market funds
other than those acquired pursuant to the exchange privilege) may be aggregated
to determine the applicable reduction. See "Reduction and Waiver of Initial
Sales Charges--Class A shares" in the Statement of Additional Information.
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 and deferred compensation and
annuity plans under Sections 457 and 403(b)(7) of the Internal Revenue Code
(Benefit Plans), provided that the plan has existing assets of at least $1
million invested in shares of Prudential Mutual Funds (excluding money market
funds other than those acquired pursuant to the exchange privilege) or 1,000
eligible employees or members. In the case of Benefit Plans whose accounts are
held directly with the Transfer Agent and for which the Transfer Agent does
individual account record keeping (Direct Account Benefit Plans) and Benefit
Plans sponsored by PSI or its subsidiaries (PSI or Subsidiary Prototype Benefit
Plans), Class A shares may be purchased at NAV by participants who are repaying
loans made from such plans to the participant. Additional information concerning
the reduction and waiver of initial sales charges is set forth in the Statement
of Additional Information.
In addition, Class A shares may be purchased at NAV, through Prudential
Securities or the Transfer Agent, by the following persons: (a) Directors and
officers of the Fund and other Prudential Mutual Funds, (b) employees of
Prudential Securities and PMF and their subsidiaries and members of the families
of such persons who maintain an "employee related" account at Prudential
Securities or the Transfer Agent, (c) 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, (d) registered
representatives and employees of dealers who have entered into a selected dealer
agreement with Prudential Securities provided that purchases at NAV are
permitted by such person's employer and (e) investors who have a business
relationship with a financial adviser who joined Prudential Securities from
another investment firm, provided that (i) the purchase is made within 90 days
of the commencement of the financial adviser's employment at Prudential
Securities, (ii) 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) on which no deferred sales load, fee or other charge was
imposed on redemption and (iii) the financial adviser served as the client's
broker on the previous purchases.
You must notify the Fund's Transfer Agent either directly or through
Prudential Securities or Prusec that you are entitled to the reduction or waiver
of the sales charge. The reduction or waiver will be granted subject to
confirmation of your entitlement. No
19
<PAGE>
initial sales charges are imposed upon Class A shares purchased upon the
reinvestment of dividends and distributions. See "Purchase and Redemption of
Fund Shares--Reduction and Waiver of Initial Sales Charges--Class A Shares" in
the Statement of Additional Information.
CLASS B AND CLASS C SHARES
The offering price of Class B and Class C shares for investors choosing one of
the deferred sales charge alternatives is the NAV next determined following
receipt of an order by the Transfer Agent or Prudential Securities. Although
there is no sales charge imposed at the time of purchase, redemptions of Class B
and Class C shares may be subject to a CDSC. See "How to Sell Your
Shares--Contingent Deferred Sales Charges."
HOW TO SELL YOUR 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 BY THE TRANSFER AGENT OR
PRUDENTIAL SECURITIES. SEE "HOW THE FUND VALUES ITS SHARES." In certain cases,
however, redemption proceeds will be reduced by the amount of any applicable
contingent deferred sales charge, as described below. See "Contingent Deferred
Sales Charges" below.
IF YOU HOLD SHARES OF THE FUND THROUGH PRUDENTIAL SECURITIES, YOU MUST REDEEM
YOUR SHARES BY CONTACTING YOUR PRUDENTIAL SECURITIES FINANCIAL ADVISER. 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 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, Inc., Attention: Redemption
Services, P.O. Box 15010, New Brunswick, New Jersey 08906-5010.
If the proceeds of the redemption (a) exceed $50,000, (b) are to be paid to a
person other than the record owner, (c) are to be sent to an address other than
the address on the Transfer Agent's records, or (d) are to be paid to a
corporation, partnership, trust or fiduciary, 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. For clients of Prusec, a signature
guarantee may be obtained from the agency or office manager of most Prudential
Insurance and Financial Services or Preferred Services offices.
PAYMENT FOR SHARES PRESENTED FOR REDEMPTION WILL BE MADE BY CHECK WITHIN SEVEN
DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE CERTIFICATE AND/OR WRITTEN
REQUEST, EXCEPT AS INDICATED BELOW. Such payment may be postponed or the right
of redemption suspended at times (a) when the New York Stock Exchange is closed
for other than customary weekends and holidays, (b) when trading on such
Exchange is restricted, (c) 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 (d) during any other period when the SEC, by order, so
permits; provided that applicable rules and regulations of the SEC shall govern
as to whether the conditions prescribed in (b), (c) or (d) exist.
PAYMENT FOR REDEMPTION OF RECENTLY PURCHASED SHARES WILL BE DELAYED UNTIL THE
FUND OR ITS TRANSFER AGENT HAS BEEN ADVISED THAT THE PURCHASE CHECK HAS BEEN
HONORED, UP TO 10 CALENDAR DAYS FROM THE TIME OF RECEIPT OF THE PURCHASE CHECK
BY THE TRANSFER AGENT. SUCH DELAY MAY BE AVOIDED BY PURCHASING SHARES BY WIRE OR
BY CERTIFIED OR OFFICIAL BANK CHECK.
REDEMPTION IN KIND. If the Board of Directors determines 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
20
<PAGE>
the SEC. Securities will be readily marketable and will be valued in the same
manner as in a regular redemption. See "How the Fund Values its Shares." 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 net asset value
of the Fund during any 90-day period for any one shareholder.
INVOLUNTARY REDEMPTION. In order to reduce expenses of the Fund, the Board of
Directors 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 contingent deferred sales charge
will be imposed on any involuntary redemption.
30-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 30 days after the date of the
redemption. No sales charge will apply to such repurchases. You will receive PRO
RATA credit for any contingent deferred sales charge paid in connection with the
redemption of your shares. You must notify the Fund's Transfer Agent, either
directly or through Prudential Securities or Prusec, at the time the repurchase
privilege is exercised that you are entitled to credit for the contingent
deferred sales charge previously paid. Exercise of the repurchase privilege will
generally not affect federal income tax treatment of any gain realized upon
redemption. If the redemption resulted in a loss, some or all of the loss,
depending on the amount reinvested, will generally not be allowed for federal
income tax purposes.
CONTINGENT DEFERRED SALES CHARGES
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 one year 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 one year, 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 purchased
through reinvestment of dividends or distributions are not subject to a CDSC.
The amount of any contingent deferred sales charge will be paid to and retained
by the Distributor. See "How the Fund is Managed--Distributor" and "Waiver of
the Contingent Deferred Sales Charges" below.
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.
21
<PAGE>
The following table sets forth the rates of the CDSC applicable to redemptions
of Class B shares:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES
CHARGE AS A PERCENTAGE
OF THE DOLLARS
YEAR SINCE PURCHASE 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 net asset value above the total amount of
payments for the purchase of Fund shares made during the preceding six years
(five years for Class B shares purchased prior to January 22, 1990); then of
amounts representing the cost of shares held beyond the applicable CDSC period;
then of amounts representing the cost of shares acquired prior to July 1, 1985;
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 decided to
redeem $500 of your investment. Assuming at the time of the redemption the net
asset value 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 THE CONTINGENT DEFERRED SALES CHARGES--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. The waiver is available for total or partial
redemptions of shares owned by a person, either individually or in joint tenancy
(with rights of survivorship), 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)(7)
custodial account. These distributions include a lump-sum or other distribution
after retirement, or for an IRA or Section 403(b) custodial account, after
attaining age 59 1/2, 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. In the case of Direct Account and PSI
or Subsidiary Prototype Benefit Plans, the CDSC will be waived on redemptions
which represent borrowings from such plans. 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.
In addition, the CDSC will be waived on redemptions of shares held by a
Director of the Fund.
22
<PAGE>
You must notify the Fund's Transfer Agent either directly or through
Prudential Securities or Prusec, at the time of redemption, that you are
entitled to waiver of the CDSC. The waiver will be granted subject to
confirmation of your entitlement.
A quantity discount may apply to redemptions of Class B shares purchased prior
to __________, 1994. See "Purchase and Redemption of Fund Shares--Quantity
Discount--Class B Shares Purchased Prior to ______________, 1994" in the
Statement of Additional Information.
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 occur during
the month following each calendar quarter and will be effected at relative net
asset value without the imposition of any additional sales charge. It is
currently anticipated that conversions will occur on the first Friday of the
month following each calendar quarter, or, if not a business day, on the next
Friday of the month.
__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: (i)
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 (ii) multiplied by the total
number of Class B shares then 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 (i.e., $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 net asset value 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. See "How the Fund Values its Shares."
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 will 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. It is
currently anticipated that the first conversion of Class B shares will occur in
or about January, 1995. At that time all amounts representing Class B shares
then outstanding beyond the applicable conversion period will automatically
convert to Class A shares together with all shares or amounts representing Class
B shares acquired through the automatic reinvestment of dividends and
distributions then held in your account.
The conversion feature may be subject to the continuing availability of
opinions of counsel or rulings of the Internal Revenue Service (i) that the
dividends and other distributions paid on Class A, Class B, and Class C shares
will not constitute "preferential
23
<PAGE>
dividends" under the Internal Revenue Code and (ii) 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.
HOW TO EXCHANGE YOUR SHARES
AS A SHAREHOLDER OF THE FUND YOU HAVE AN EXCHANGE PRIVILEGE WITH CERTAIN OTHER
PRUDENTIAL MUTUAL FUNDS, INCLUDING ONE OR MORE SPECIFIED MONEY MARKET FUNDS,
SUBJECT TO THE MINIMUM INVESTMENT REQUIREMENTS OF SUCH FUNDS. CLASS A, CLASS B
AND CLASS C SHARES MAY BE EXCHANGED FOR CLASS A, CLASS B AND CLASS C SHARES,
RESPECTIVELY, OF ANOTHER FUND ON THE BASIS OF THE RELATIVE NAV. Any applicable
CDSC payable upon the redemption of shares exchanged 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. Class B and Class C shares may not be
exchanged into money market funds other than Prudential Special Money Market
Fund. For purposes of calculating the holding period applicable to the Class B
conversion feature, the time period during which Class B shares were held in a
money market fund will be excluded. See "Conversion Feature -- Class B Shares"
above. If your investment in shares of Prudential Mutual Funds (excluding money
market funds other than those acquired pursuant to the exchange privilege)
reaches $1 million and you then hold Class B and/or Class C shares of the Fund
which are free of CDSC, you will be so notified and offered the opportunity to
exchange those shares for Class A shares of the Fund without the imposition of
any sales charge. In the case of tax-exempt shareholders, if no response is
received within 60 days of the mailing of such notice, eligible Class B and/or
Class C shares will be automatically exchanged for Class A shares. All other
shareholders must affirmatively elect to have their eligible Class B and/or
Class C shares exchanged for Class A shares. An exchange will be treated as a
redemption and purchase for tax purposes. See "Shareholder Investment
Account--Exchange Privilege" in the Statement of Additional Information.
IN ORDER TO EXCHANGE SHARES BY TELEPHONE, YOU MUST AUTHORIZE TELEPHONE
EXCHANGES ON YOUR INITIAL APPLICATION FORM OR BY WRITTEN NOTICE TO THE TRANSFER
AGENT AND HOLD SHARES IN NON-CERTIFICATE FORM. Fund at (800) 225-1852 to execute
a telephone exchange of shares, on weekdays, except holidays, between the hours
of 8:00 A.M. and 6:00 P.M., New York time. For your protection and to prevent
fraudulent exchanges, your telephone call will be recorded and you will be asked
to provide your personal identification number. A written confirmation of the
exchange transaction will be sent to you. NEITHER THE FUND NOR ITS AGENTS WILL
BE LIABLE FOR ANY LOSS, LIABILITY OR COST WHICH RESULTS FROM ACTING UPON
INSTRUCTIONS REASONABLY BELIEVED TO BE GENUINE UNDER THE FOREGOING PROCEDURES.
All exchanges will be made on the basis of the relative NAV of the two funds
next determined after the request is received in good order. The Exchange
Privilege is available only in states where the exchange may legally be made.
IF YOU HOLD SHARES THROUGH PRUDENTIAL SECURITIES, YOU MUST EXCHANGE YOUR
SHARES BY CONTACTING YOUR PRUDENTIAL SECURITIES FINANCIAL ADVISER.
IF YOU HOLD CERTIFICATES, THE CERTIFICATES, SIGNED IN THE NAME(S) SHOWN ON THE
FACE OF THE CERTIFICATES, MUST BE RETURNED IN ORDER FOR THE SHARES TO BE
EXCHANGED. SEE "HOW TO SELL YOUR SHARES" ABOVE.
You may also exchange shares by mail by writing to Prudential Mutual Fund
Services, Inc., Attention: Exchange Processing, P.O. Box 15010, New Brunswick,
New Jersey 08906-5010.
IN PERIODS OF SEVERE MARKET OR ECONOMIC CONDITIONS THE TELEPHONE EXCHANGE OF
SHARES MAY BE DIFFICULT TO IMPLEMENT AND YOU SHOULD MAKE EXCHANGES BY MAIL BY
WRITING TO PRUDENTIAL MUTUAL FUND SERVICES, INC., AT THE ADDRESS NOTED ABOVE.
The Exchange Privilege may be modified or terminated at any time on 60 days'
notice to shareholders.
24
<PAGE>
SHAREHOLDER SERVICES
In addition to the exchange privilege, as a shareholder in the Fund, you can
take advantage of the following additional services and privileges:
- AUTOMATIC REINVESTMENT OF DIVIDENDS AND/OR DISTRIBUTIONS WITHOUT A SALES
CHARGE. For your convenience, all dividends and distributions are automatically
reinvested in full and fractional shares of the Fund at NAV without a sales
charge. You may direct the Transfer Agent in writing not less than 5 full
business days prior to the record date to have subsequent dividends and/or
distributions sent in cash rather than reinvested. If you hold shares through
Prudential Securities, you should contact your financial adviser.
- AUTOMATIC SAVINGS ACCUMULATION PLAN (ASAP). Under ASAP you may make regular
purchases of the Fund's shares in amounts as little as $50 via an automatic
debit to a bank account or Prudential Securities account (including a Command
Account). For additional information about this service, you may contact your
Prudential Securities financial adviser, Prusec registered representative or the
Transfer Agent directly.
- TAX-DEFERRED RETIREMENT PLANS. Various tax-deferred retirement plans,
including a 401(k) plan, self-directed individual retirement accounts and
"tax-sheltered accounts" under Section 403(b)(7) of the Internal Revenue Code
are available through the Distributor. These plans are for use by both
self-employed individuals and corporate employers. These plans permit either
self-direction of accounts by participants, or a pooled account arrangement.
Information regarding the establishment of these plans, the administration,
custodial fees and other details is available from Prudential Securities or the
Transfer Agent. If you are considering adopting such a plan, you should consult
with your own legal or tax adviser with respect to the establishment and
maintenance of such a plan.
- SYSTEMATIC WITHDRAWAL PLAN. A systematic withdrawal plan is available to
shareholders which provides for monthly or quarterly checks. Withdrawals of
Class B and Class C shares may be subject to a CDSC. See "How to Sell Your
Shares-- Contingent Deferred Sales Charges."
- REPORTS TO SHAREHOLDERS. The Fund will send you annual and semi-annual
reports. The financial statements appearing in annual reports are audited by
independent accountants. In order to reduce duplicate mailing and printing
expenses, the Fund will provide one annual and semi-annual shareholder report
and annual prospectus per household. You may request additional copies of such
reports by calling (800) 225-1852 or by writing to the Fund at One Seaport
Plaza, New York, New York 10292. In addition, monthly unaudited financial data
are available upon request from the Fund.
- SHAREHOLDER INQUIRIES. Inquiries should be addressed to the Fund at One
Seaport Plaza, New York, New York 10292, or by telephone at (800) 225-1852
(toll-free) or, from outside the U.S.A., at (908) 417-7555 (collect).
For additional information regarding the services and privileges described
above, see "Shareholder Investment Account" in the Statement of Additional
Information.
25
<PAGE>
THE PRUDENTIAL MUTUAL FUND FAMILY
Prudential Mutual Fund Management offers a broad range of mutual funds
designed to meet your individual needs. We welcome you to review the investment
options available through our family of funds. For more information on the
Prudential Mutual Funds, including charges and expenses, contact your Prudential
Securities financial adviser or Prusec registered representative or telephone
the Funds at (800) 225-1852 for a free prospectus. Read the prospectus carefully
before you invest or send money.
TAXABLE BOND FUNDS
Prudential Adjustable Rate Securities Fund, Inc.
Prudential GNMA Fund, Inc.
Prudential Government Income Fund, Inc.
Prudential Government Securities Trust
Intermediate Term Series
Prudential High Yield Fund, Inc.
Prudential Structured Maturity Fund, Inc.
Income Portfolio
Prudential U.S. Government Fund
The BlackRock Government Income Trust
TAX-EXEMPT BOND FUNDS
Prudential California Municipal Fund
California Series
California Income Series
Prudential Municipal Bond Fund
High Yield Series
Insured Series
Modified Term Series
Prudential Municipal Series Fund
Arizona Series
Florida Series
Georgia Series
Maryland Series
Massachusetts Series
Michigan Series
Minnesota Series
New Jersey Series
New York Series
North Carolina Series
Ohio Series
Pennsylvania Series
Prudential National Municipals Fund, Inc.
GLOBAL FUNDS
Prudential Global Fund, Inc.
Prudential Global Genesis Fund, Inc.
Prudential Global Natural Resources Fund, Inc.
Prudential Intermediate Global Income Fund, Inc.
Prudential Pacific Growth Fund, Inc.
Prudential Short-Term Global Income Fund, Inc.
Global Assets Portfolio
Short-Term Global Income Portfolio
Global Utility Fund, Inc.
EQUITY FUNDS
Prudential Equity Fund, Inc.
Prudential Equity Income Fund
Prudential Allocation Fund
Conservatively Managed Portfolio
Strategy Portfolio
Prudential Growth Opportunity Fund, Inc.
Prudential IncomeVertible-R- Fund, Inc.
Prudential Multi-Sector Fund, Inc.
Prudential Strategist Fund, Inc.
Prudential Utility Fund, Inc.
Nicholas-Applegate Fund, Inc.
Nicholas-Applegate Growth Equity Fund
MONEY MARKET FUNDS
-TAXABLE MONEY MARKET FUNDS
Prudential Government Securities Trust
Money Market Series
U.S. Treasury Money Market Series
Prudential Special Money Market Fund
Money Market Series
Prudential MoneyMart Assets
-TAX-FREE MONEY MARKET FUNDS
Prudential Tax-Free Money Fund
Prudential California Municipal Fund
California Money Market Series
Prudential Municipal Series Fund
Connecticut Money Market Series
Massachusetts Money Market Series
New Jersey Money Market Series
New York Money Market Series
-COMMAND FUNDS
Command Money Fund
Command Government Fund
Command Tax-Free Fund
-INSTITUTIONAL MONEY MARKET FUNDS
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
A-1
<PAGE>
No dealer, sales representative or any other person has been authorized to give
any information or to make any representations, other than those contained in
this Prospectus, in connection with the offer contained herein, and, if given or
made, such other information or representations must not be relied upon as
having been authorized by the Fund or the Distributor. This Prospectus does not
constitute an offer by the Fund or by the Distributor to sell or a solicitation
of any offer to buy any of the securities offered hereby in any jurisdiction to
any person to whom it is unlawful to make such offer in such jurisdiction.
-------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---
<S> <C>
FUND HIGHLIGHTS................................. 2
FUND EXPENSES................................... 4
FINANCIAL HIGHLIGHTS............................ 5
HOW THE FUND INVESTS............................ 7
Investment Objective and Policies............. 7
Hedging and Income Enhancement Strategies..... 7
Other Investments and Policies................ 9
Investment Restrictions....................... 10
HOW THE FUND IS MANAGED......................... 11
Manager....................................... 11
Distributor................................... 11
Portfolio Transactions........................ 13
Custodian and Transfer and Dividend Disbursing
Agent........................................ 13
HOW THE FUND VALUES ITS SHARES.................. 13
HOW THE FUND CALCULATES PERFORMANCE............. 14
TAXES, DIVIDENDS AND DISTRIBUTIONS.............. 14
GENERAL INFORMATION............................. 15
Description of Common Stock................... 15
Additional Information........................ 16
SHAREHOLDER GUIDE............................... 16
How to Buy Shares of the Fund................. 16
Alternative Purchase Plan..................... 17
How to Sell Your Shares....................... 20
Conversion Feature--Class B Shares............ 22
How to Exchange Your Shares................... 23
Shareholder Services.......................... 24
THE PRUDENTIAL MUTUAL FUND FAMILY............... A-1
</TABLE>
- -------------------------------------------
109A 44401I
74435E 10
Class A: 9
74435E 20
CUSIP Nos.: Class B: 8
Class C:
PRUDENTIAL
GROWTH OPPORTUNITY
FUND, INC.
- ---------------------
[LOGO]
<PAGE>
PRUDENTIAL GROWTH OPPORTUNITY FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
, 1994
Prudential Growth Opportunity Fund, Inc. (the Fund), is an open-end
diversified management investment company whose objective is capital growth. The
Fund intends to invest principally in a carefully selected portfolio of common
stocks, generally stocks having prospects of a high return on equity, increasing
earnings, increasing dividends (or an expectation of dividends), and price
earnings ratios which are not excessive. The Fund's purchase and sale of put and
call options and related short-term trading may result in a high portfolio
turnover rate. These activities may be considered speculative and may result in
higher risks and costs to the Fund. The Fund may also buy and sell stock index
futures for the purpose of hedging its securities portfolio and may buy and sell
options on stock indices, in each case pursuant to limits described herein. See
"Investment Objective and Policies."
The Fund's address is One Seaport Plaza, New York, New York 10292, 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 Fund's Prospectus, dated , 1994. A copy of the
Prospectus may be obtained from the Fund upon request.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
CROSS-REFERENCE
TO PAGE IN
PAGE PROSPECTUS
---- ---------------
<S> <C> <C>
General Information................................... B-2 15
Investment Objective and Policies..................... B-2 7
Investment Restrictions............................... B-6 10
Directors and Officers................................ B-7 11
Manager............................................... B-9 11
Distributor........................................... B-11 11
Portfolio Transactions and Brokerage.................. B-13 13
Purchase and Redemption of Fund Shares................ B-14 16
Shareholder Investment Account........................ B-17 25
Net Asset Value....................................... B-20 13
Performance Information............................... B-21 14
Taxes................................................. B-23 14
Custodian, Transfer and Dividend Disbursing Agent and
Independent Accountants.............................. B-24 13
Financial Statements.................................. B-25 --
Report of Independent Accountants..................... B-34 --
</TABLE>
- --------------------------------------------------------------------------------
109B 444081A
<PAGE>
GENERAL INFORMATION
At a special meeting held on June 23, 1994, shareholders approved an
amendment to the Fund's Articles of Incorporation to change the Fund's name from
Prudential-Bache Growth Opportunity Fund, Inc. to Prudential Growth Opportunity
Fund, Inc.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is capital growth. It attempts to achieve
such objective by investing principally in a carefully selected portfolio of
common stocks. See "How the Fund Invests--Investment Objective and Policies" in
the Prospectus.
The investment adviser believes that, in seeking to attain capital
appreciation, it is important to attempt to minimize losses. Accordingly, the
investment adviser will attempt to anticipate periods when stock prices
generally decline. When, in the investment adviser's judgment, such a period is
imminent, the Fund will take defensive measures, such as investing all or part
of the Fund's assets in money market instruments during this period. The Fund
may also purchase put options on stocks that the Fund holds as protection
against a significant price decline and may purchase and sell stock index
options and futures to hedge overall market risk and the investment of cash
flows.
The Fund may invest in money market instruments (a) when conditions dictate
a defensive strategy, (b) until the proceeds from the sale of the Fund's shares
have been invested or (c) when cash is otherwise available. Such instruments may
include commercial paper of domestic corporations, certificates of deposit,
repurchase agreements, bankers' acceptances and other obligations of domestic
banks, and obligations issued or guaranteed by the United States Government, its
instrumentalities or its agencies.
LIMITATIONS ON PURCHASE AND SALE OF STOCK OPTIONS, OPTIONS ON STOCK INDICES AND
STOCK INDEX FUTURES
The Fund may write put and call options on stocks only if they are covered,
and such options must remain covered so long as the Fund is obligated as a
writer. The Fund will not write put options on indices. The Fund has undertaken
with certain state securities commissions that, so long as shares of the Fund
are registered in those states, it will not (a) write puts having aggregate
exercise prices greater than 25% of total net assets; or (b) purchase (i) put
options on stocks not held in the Fund's portfolio, (ii) put options on stock
indices or (iii) call options on stocks or stock indices if, after any such
purchase, the aggregate premiums paid for such options would exceed 20% of the
Fund's total net assets.
CALL OPTIONS ON STOCK. The Fund may, from time to time, write call options
on its portfolio securities. The Fund may write only call options which are
"covered," meaning that the Fund either owns the underlying security or has an
absolute and immediate right to acquire that security, without additional cash
consideration, upon conversion or exchange of other securities currently held in
its portfolio. In addition, the Fund will not permit the call to become
uncovered prior to the expiration of the option or termination through a closing
purchase transaction as described below. If the Fund writes a call option, the
purchaser of the option has the right to buy (and the Fund has the obligation to
sell) the underlying security at the exercise price throughout the term of the
option. The amount paid to the Fund by the purchaser of the option is the
"premium." The Fund's obligation to deliver the underlying security against
payment of the exercise price would terminate either upon expiration of the
option or earlier if the Fund were to effect a "closing purchase transaction"
through the purchase of an equivalent option on an exchange. There can be no
assurance that a closing purchase transaction can be effected.
The Fund would not be able to effect a closing purchase transaction after it
had received notice of exercise. In order to write a call option, the Fund is
required to comply with the rules of The Options Clearing Corporation and the
various exchanges with respect to collateral requirements. The Fund may not
purchase call options except in connection with a closing purchase transaction.
It is possible that the cost of effecting a closing purchase transaction may be
greater than the premium received by the Fund for writing the option.
Generally, the investment adviser intends to write listed covered call
options during periods when it anticipates declines in the market values of
portfolio securities because the premiums received may offset to some extent the
decline in the Fund's net asset value occasioned by such declines in market
value. Except as part of the "sell discipline" described below, the investment
adviser will generally not write listed covered call options when it anticipates
that the market values of the Fund's portfolio securities will increase.
B-2
<PAGE>
One reason for the Fund to write call options is as part of a "sell
discipline." If the investment adviser decides that a portfolio security would
be overvalued and should be sold at a certain price higher than the current
price, the Fund could write an option on the stock at the higher price. Should
the stock subsequently reach that price and the option be exercised, the Fund
would, in effect, have increased the selling price of that stock, which it would
have sold at that price in any event, by the amount of the premium. In the event
the market price of the stock declined and the option were not exercised, the
premium would offset all or some portion of the decline. It is possible that the
price of the stock could increase beyond the exercise price; in that event, the
Fund would forego the opportunity to sell the stock at that higher price.
In addition, call options may be used as part of a different strategy in
connection with sales of portfolio securities. If, in the judgment of the
investment adviser, the market price of a stock is overvalued and it should be
sold, the Fund may elect to write a call option with an exercise price
substantially below the current market price. As long as the value of the
underlying security remains above the exercise price during the term of the
option, the option will, in all probability, be exercised, in which case the
Fund will be required to sell the stock at the exercise price. If the sum of the
premium and the exercise price exceeds the market price of the stock at the time
the call option is written, the Fund would, in effect, have increased the
selling price of the stock. The Fund would not write a call option in these
circumstances if the sum of the premium and the exercise price were less than
the current market price of the stock.
PUT OPTIONS ON STOCK. The Fund may also write listed put options. If the
Fund writes a put option, it is obligated to purchase a given security at a
specified price at any time during the term of the option.
Writing listed put options is a useful portfolio investment strategy when
the Fund has cash or other reserves available for investment as a result of
sales of Fund shares or, more importantly, because the investment adviser
believes a more defensive and less fully invested position is desirable in light
of market conditions. If the Fund wishes to invest its cash or reserves in a
particular security at a price lower than current market value, it may write a
put option on that security at an exercise price which reflects the lower price
it is willing to pay. The buyer of the put option generally will not exercise
the option unless the market price of the underlying security declines to a
price near or below the exercise price. If the Fund writes a listed put, the
price of the underlying stock declines and the option is exercised, the premium,
net of transaction charges, will reduce the purchase price paid by the Fund for
the stock. The price of the stock may decline by an amount in excess of the
premium, in which event the Fund would have foregone an opportunity to purchase
the stock at a lower price.
If, prior to the exercise of a put option, the investment adviser determines
that it no longer wishes to invest in the stock on which the put option had been
written, the Fund may be able to effect a closing purchase transaction on an
exchange by purchasing a put option of the same series as the one which it has
previously written. The cost of effecting a closing purchase transaction may be
greater than the premium received on writing the put option and there is no
guarantee that a closing purchase transaction can be effected.
At the time a put option is written, the Fund will be required to establish,
and will maintain until the put is exercised or has expired, a segregated
account with its custodian consisting of cash, short-term U. S. Government
securities or other high-grade short-term debt obligations equal in value to the
amount the Fund will be obligated to pay upon exercise of the put option.
STOCK INDEX OPTIONS. Except as described below, the Fund will write call
options on indices 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, one or more "qualified securities"
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 or put into escrow with its Custodian, or pledge to a broker as
collateral for the option, at least ten "qualified securities," which are
securities of an issuer 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 securities 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
25% of the amount so segregated, pledged or escrowed. If at the close of
business on any day the market value of such qualified securities so segregated,
escrowed or pledged falls below 100% of the current index value times the
multiplier times the number of contracts, the Fund will so segregate, escrow or
pledge an amount in cash, Treasury bills or other high-grade short-term
obligations 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
B-3
<PAGE>
pledge to the broker as collateral cash, short-term U.S. Government securities
or other high-grade short-term debt obligations 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 the National Association of Securities Dealers
Automated Quotation System 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 maintained by the Fund in cash, Treasury bills or other
high-grade short-term obligations in a segregated account with its Custodian, it
will not be subject to the requirements described in this paragraph.
STOCK INDEX FUTURES. The Fund will engage in transactions in stock index
futures contracts as a hedge against changes resulting from market conditions in
the values of securities which are held in the Fund's portfolio or which it
intends to purchase. The Fund will 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 not purchase or sell stock index futures
if, immediately thereafter, more than one-third of its net assets would be
hedged and, in addition, except as described above in the case of a call written
and held on the same index, will write call options on indices or sell stock
index futures only if the amount resulting from the multiplication of the then
current level of the index (or indices) upon which the option or future
contract(s) is based, the applicable multiplier(s), and the number of futures or
options contracts which would be outstanding, would not exceed one-third of the
value of the Fund's net assets. In instances involving the purchase of stock
index futures contracts by the Fund, an amount of cash, short-term
U.S.Government securities or other high-grade short-term debt obligations, equal
to the market value of the futures contracts, will be deposited in a segregated
account with the Fund's Custodian and/or in a margin account with a broker to
collateralize the position and thereby insure that the use of such futures is
unleveraged.
Under regulations of the Commodity Exchange Act, investment companies
registered under the Investment Company Act of 1940, as amended (the Investment
Company Act), are exempt from the definition of "commodity pool operator,"
provided all of the Fund's commodity futures or commodity options transactions
constitute BONA FIDE hedging transactions within the meaning of the CFTC's
regulations. The Fund will use stock index futures and options on futures as
described herein in a manner consistent with this requirement.
RISKS OF TRANSACTIONS IN STOCK OPTIONS. Writing options involves the risk
that there will be no market in which to effect a closing transaction. An option
position may be closed out only on an exchange which provides a secondary market
for an option of the same series. Although the Fund will generally 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 may exist. 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.
RISKS OF OPTIONS ON INDICES. The Fund's purchase and sale of options on
indices will be subject to risks described above under "Risks of Transactions in
Stock Options." In addition, the distinctive characteristics of options on
indices create certain risks that are not present with stock options.
Because the value of an index option depends upon movements in the level of
the index rather than the price of a particular stock, 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 stock prices in the stock market generally or in
an industry or market segment rather than movements in the price of a particular
stock. Accordingly, successful use by the Fund of options on indices would be
subject to the investment adviser's ability to predict correctly movements in
the direction of the stock market generally or of a particular industry. This
requires different skills and techniques than predicting changes in the price of
individual stocks.
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 indices which include a number of stocks sufficient to
minimize the likelihood of a trading halt in the index.
B-4
<PAGE>
Trading in index options commenced in April 1983 with the S&P 100 option
(formerly called the CBOE 100). Since that time a number of additional index
option contracts have been introduced including options on industry indices.
Although the markets for certain index option contracts have developed rapidly,
the markets for other index options are still relatively illiquid. 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 the investment
adviser's opinion, the market for such options has developed sufficiently that
such risk in connection with such transactions is no greater than such risk in
connection with options on stocks.
SPECIAL RISKS OF WRITING CALLS ON INDICES. 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 indices only under the
circumstances described above under "Limitations on Purchase and Sale of Stock
Options, Options on Stock Indices, Stock Index Futures and Options on Stock
Index Futures."
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 (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 stock portfolio in order to make settlement in cash,
and the price of such stocks 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.
SPECIAL RISKS OF PURCHASING PUTS AND CALLS ON INDICES. 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
multiple) to the assigned writer. Although the Fund may be able to minimize this
risk by withholding exercise instructions until just before the daily cut off
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 cut off 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.
The Fund anticipates that its annual portfolio turnover rate will not exceed
150% in normal circumstances. For the years ended September 30, 1992 and 1993,
the Fund's portfolio turnover rate was 99% and 68%, respectively.
B-5
<PAGE>
INVESTMENT RESTRICTIONS
The investment restrictions listed below have been adopted by the Fund as
fundamental policies, except as otherwise indicated. Under the Investment
Company Act of 1940, as amended (the Investment Company Act), a fundamental
policy may not be changed without the vote of a majority of the outstanding
voting securities of the Fund. As defined in the Investment Company Act, a
"majority of the Fund's outstanding voting securities" means the lesser of (i)
67% of the shares represented at a meeting at which more than 50% of the
outstanding shares are present in person or represented by proxy or (ii) more
than 50% of the outstanding shares. For purposes of the following limitations:
(i) all percentage limitations apply immediately after a purchase or initial
investment; and (ii) any subsequent change in any applicable percentage
resulting from market fluctuations does not require elimination of any security
from the portfolio.
The Fund may not:
(1) With respect to 75% of the Fund's total assets, invest more than 5% of
the value of its total assets in the securities of any one issuer (other than
obligations issued or guaranteed by the United States Government, its agencies
or instrumentalities). It is the current policy (but not a fundamental policy)
of the Fund not to invest more than 5% of the value of its total assets in
securities of any one issuer.
(2) Purchase more than 10% of the outstanding voting securities of any one
issuer.
(3) Invest more than 25% of the value of its total assets in securities of
issuers in any one industry. This restriction does not apply to obligations
issued or guaranteed by the United States Government or its agencies or
instrumentalities.
(4) Invest more than 5% of the value of its total assets in securities of
issuers having a record, together with predecessors, of less than three years of
continuous operation. This restriction shall not apply to any obligation issued
or guaranteed by the United States Government, its agencies or
instrumentalities.
(5) Purchase or sell real estate or interests therein, although the Fund may
purchase securities of issuers which engage in real estate operations and
securities which are secured by real estate or interests therein.
(6) Purchase or sell commodities or commodity futures contracts, except
financial futures contracts as described under "Investment Objective and
Policies" in the Prospectus and this Statement of Additional Information.
(7) Purchase oil, gas or other mineral leases, rights or royalty contracts
or exploration or development programs, except that the Fund may invest in the
securities of companies which operate, invest in or sponsor such programs.
(8) Purchase securities of other investment companies except in connection
with a merger, consolidation, reorganization or acquisition of assets.
(9) Issue senior securities, borrow money or pledge its assets, except that
the Fund may borrow up to 20% of the value of the 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. Secured borrowings may take the form of
reverse repurchase agreements, pursuant to which the Fund would sell portfolio
securities for cash and simultaneously agree to repurchase them at a specified
date for the same amount of cash plus an interest component. For purposes of
this restriction, obligations of the Fund to Directors pursuant to deferred
compensation arrangements, the purchase and sale of securities on a when-issued
or delayed delivery basis, the purchase and sale of financial futures contracts
and options and collateral arrangements with respect to margins for financial
futures contracts and with respect to options are not deemed to be the issuance
of a senior security or a pledge of assets.
(10) Make loans of money or securities, except by the purchase of debt
obligations in which the Fund may invest consistently with its investment
objective and policies or by investment in repurchase agreements.
(11) Make short sales of securities except short sales against-the-box.
(12) Purchase securities on margin, except for such short-term loans as are
necessary for the clearance of purchases of portfolio securities. (For the
purpose of this restriction, the deposit or payment by the Fund of initial or
maintenance margin in connection with financial futures contracts is not
considered the purchase of a security on margin.)
(13) Engage in the underwriting of securities, except insofar as the Fund
may be deemed an underwriter under the Securities Act of 1933, as amended (the
"Securities Act"), in disposing of a portfolio security.
B-6
<PAGE>
(14) Invest for the purpose of exercising control or management of any other
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.
In order to comply with certain state "blue sky" restrictions, the Fund will
not as a matter of operating policy:
1. Purchase warrants if as a result the Fund would then have more than 5% of
its net assets (determined at the time of investment) invested in warrants.
Warrants will be valued at the lower of cost or market and investment in
warrants which are not listed on the New York Stock Exchange or American Stock
Exchange will be limited to 2% of the Fund's net assets (determined at the time
of investment). For the purpose of this limitation, warrants acquired in units
or attached to securities are deemed to be without value.
2. Purchase the securities of any one issuer if, to the knowledge of the
Fund, any officer or director of the Fund or the Manager or Subadviser owns more
than 1/2 of 1% of the outstanding securities of such issuer, and such officers
and directors who own more than 1/2 of 1% own in the aggregate more than 5% of
the outstanding securities of such issuer.
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
POSITION PRINCIPAL OCCUPATIONS
NAME AND ADDRESS WITH FUND DURING PAST FIVE YEARS
- --------------------------- ----------------------- -----------------------------------------------------------------
<S> <C> <C>
Delayne Dedrick Gold Director Marketing and Management Consultant.
c/o Prudential Mutual Fund
Management, Inc.
One Seaport Plaza
New York, New York
Arthur Hauspurg Director Trustee and former President, Chief Executive Officer and
c/o Prudential Mutual Fund Chairman of the Board of Consolidated Edison Company of New
Management, Inc. York, Inc.; Director of COMSAT Corp.
One Seaport Plaza
New York, New York
*Harry A. Jacobs, Jr. Director Senior Director (since January 1986) of Prudential Securities
One Seaport Plaza Incorporated (Prudential Securities); formerly Interim Chairman
New York, NY and Chief Executive Officer of Prudential Mutual Fund
Management, Inc. (PMF), (June-September 1993); formerly Chairman
of the Board of Prudential Securities (1982-1985) and Chairman
of the Board and Chief Executive Officer of Bache Group Inc.
(1977-1982); Director of The First Australia Fund, Inc., The
First Australia Prime Income Fund, Inc., The Global Government
Plus Fund, Inc. and The Global Yield Fund, Inc., and the Center
for National Policy; Trustee of The Trudeau Institute.
Thomas J. McCormack Director Chairman, Chief Executive Officer and Editorial Director (since
175 Fifth Avenue 1987) and President (1970-1987), St. Martin's Press, Inc.;
New York, NY Director of Macmillan Publishers Limited (London) and Pan Books
Limited (London).
</TABLE>
<TABLE>
<S> <C> <C>
<FN>
- ------------------------
* "Interested" director, as defined in the Investment Company Act, by reason of his affiliation
with Prudential Securities or PMF.
</TABLE>
B-7
<PAGE>
<TABLE>
<CAPTION>
POSITION PRINCIPAL OCCUPATIONS
NAME AND ADDRESS WITH FUND DURING PAST FIVE YEARS
- --------------------------- ----------------------- -----------------------------------------------------------------
<S> <C> <C>
*Lawrence C. McQuade President and Vice Chairman of PMF (since 1988); Managing
One Seaport Plaza Director Director, Investment Banking, Prudential Securities
New York, NY (1988-1991); Director of Quixote Corporation (since
February 1992), BUNZL, P .L.C. (since June 1991);
formerly Director of Crazy Eddie Inc. (1987-1990)
and Kaiser Tech., Ltd. and Kaiser Aluminum and
Chemical Corp. (March 1987-November 1988); formerly
Executive Vice President and Director of WR Grace &
Company; President and Director of The High Yield
Income Fund, Inc., The Global Government Plus Fund,
Inc. and The Global Yield Fund, Inc.
Stephen P. Munn Director Chairman (since January 1994), Director and
101 South Salina President (since 1988) and Chief Executive Officer
Street (1988-December 1993) of Carlisle Companies
Syracuse, NY Incorporated.
Louis A. Weil, III Director Publisher and Chief Executive Officer, Phoenix
120 East Van Buren Newspapers, Inc. (since August 1991); Director of
Phoenix, AZ Central Newspapers, Inc. (since September 1991);
prior thereto, Publisher Time Magazine (May
1989-March 1991); formerly, President, Publisher
and Chief Executive Officer, The Detroit News
(February 1986-August 1989); formerly member of the
Advisory Board, Chase Manhattan Bank-Westchester;
Director of The Global Government Plus Fund,Inc.
*Richard A. Redeker Director President, Chief Executive Officer and Director
One Seaport Plaza (since October 1993), Prudential Mutual Fund
New York, NY Management, Inc. (PMF); Executive Vice President,
Director and Member of the Operating Committee
(since October 1993), Prudential Securities
Incorporated (Prudential Securities); Director
(since October 1993) of Prudential Securities
Group, Inc.; formerly Senior Executive Vice
President and Director of Kemper Financial
Services, Inc. (September 1978-September 1993);
Director of The Global Government Plus Fund, Inc.
and The High Yield Income Fund, Inc.
David W. Drasnin Vice President Vice President and Branch Manager of Prudential
39 Public Square Suite Securities.
500
Wilkes-Barre, PA
Robert F. Gunia Vice President Chief Administrative Officer (since July 1990),
One Seaport Plaza Director (since January 1989), Executive Vice
New York, NY President, Treasurer and Chief Financial Officer
(since June 1987) of PMF; Senior Vice President
(since March 1987) of Prudential Securities; Vice
President and Director of The Asia Pacific Fund,
Inc. (since May 1989).
Susan C. Cote Treasurer Senior Vice President (since January 1989) and First
One Seaport Plaza Vice President (June 1987-December 1988) of PMF;
New York, NY Senior Vice President (since January 1992) and Vice
President (January 1986-December 1991) of
Prudential Securities.
</TABLE>
<TABLE>
<S> <C> <C>
<FN>
- ------------------------
* "Interested" director, as defined in the Investment Company Act, by reason of his affiliation
with Prudential Securities or PMF.
</TABLE>
B-8
<PAGE>
<TABLE>
<CAPTION>
POSITION PRINCIPAL OCCUPATIONS
NAME AND ADDRESS WITH FUND DURING PAST FIVE YEARS
- --------------------------- ----------------------- -----------------------------------------------------------------
<S> <C> <C>
S. Jane Rose Secretary Senior Vice President (since January 1991), Senior
One Seaport Plaza Counsel (since June 1987) and First Vice President
New York, NY (June 1987-December 1990) of PMF; Senior Vice
President, and Senior Counsel of Prudential
Securities (since July 1992); formerly, Vice
President and Associate General Counsel of
Prudential Securities.
Ronald Amblard Assistant First Vice President (since January 1994) and
One Seaport Plaza Secretary Associate General Counsel (since January 1992) of
New York, NY PMF; Vice President and Associate General Counsel
of Prudential Securities (since January 1992);
formerly, Assistant General Counsel (August
1988-December 1991), Associate Vice President
(January 1989-December 1990) and Vice President
(January 1991-December 1993) of PMF.
</TABLE>
Directors and officers of the Fund are also trustees, directors and officers
of some or all of the other investment companies distributed by Prudential
Securities or Prudential Mutual Fund Distributors, Inc. (PMFD).
The officers conduct and supervise the daily business operations of the
Fund, while the Directors, in addition to their functions set forth under
"Manager" and "Distributor," review such actions and decide on general policy.
The Fund pays each of its Directors who is not an affiliated person of PMF
annual compensation of $6,000, in addition to certain out-of-pocket expenses.
The Chairman of the Audit Committee receives an additional $200 per year.
Directors may receive their Director's fees pursuant to a deferred fee
agreement with the Fund. Under the terms of the agreement, the Fund accrues
daily the amount of such Director's fee 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 an SEC 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
Director. The Fund's obligation to make payments of deferred Director's fees,
together with interest thereon, is a general obligation of the Fund.
As of March 31, 1994, the Directors and officers of the Fund, as a group,
owned less than 1% of the outstanding common stock of the Fund.
As of March 31, 1994, Prudential Securities was the record holder for other
beneficial owners of 2,457,870 Class A shares (or 30% of the outstanding Class A
shares) and 25,394,055 Class B shares (or 75% of the outstanding Class B shares)
of the Fund. In the event of any meetings of shareholders, Prudential Securities
will forward, or cause the forwarding of, proxy materials to the beneficial
owners for which it is the record holder.
MANAGER
The manager of the Fund is Prudential Mutual Fund Management, Inc. (PMF or
the Manager), One Seaport Plaza, New York, New York 10292. PMF serves as manager
to all of the other open-end management investment companies that, together with
the Fund, comprise the Prudential Mutual Funds. See "How the Fund Is
Managed--Manager" in the Prospectus. As of March 31, 1994, PMF managed and/or
administered open-end and closed-end management investment companies with assets
of approximately $[49] billion. According to the Investment Company Institute,
as of December 31, 1993, the Prudential Mutual Funds were the 12th largest
family of mutual funds in the United States.
Pursuant to the Management Agreement with the Fund (the Management
Agreement), PMF, subject to the supervision of the Fund's Board of Directors 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. In connection
therewith, PMF is obligated to keep certain books and records of the Fund. PMF
also administers the Fund's corporate 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, and
B-9
<PAGE>
Prudential Mutual Fund Services, Inc. (PMFS or the Transfer Agent), the Fund's
transfer and dividend disbursing agent. The management services of PMF for the
Fund are not exclusive under the terms of the Management Agreement and PMF is
free to, and does, render management services to others.
For its services, PMF receives, pursuant to the Management Agreement, a fee
at an annual rate of .70 of 1% of the Fund's average daily net assets. The fee
is computed daily and payable monthly. The Management Agreement also provides
that, in the event the expenses of the Fund (including the fees of PMF, but
excluding interest, taxes, brokerage commissions, distribution fees and
litigation and indemnification expenses and other extraordinary expenses not
incurred in the ordinary course of the Fund's business) for any fiscal year
exceed the lowest applicable annual expense limitation established and enforced
pursuant to the statutes or regulations of any jurisdiction in which the Fund's
shares are qualified for offer and sale, the compensation due to PMF will be
reduced by the amount of such excess. Reductions in excess of the total
compensation payable to PMF will be paid by PMF to the Fund. No such reductions
were required during the fiscal year ended September 30, 1993. Currently, the
Fund believes that the most restrictive expense limitation of state securities
commissions is 2 1/2% of the Fund's average daily net assets up to $30 million,
2% of the next $70 million of such assets and 1 1/2% of such assets in excess of
$100 million.
In connection with its management of the corporate affairs of the Fund, PMF
bears the following expenses:
(a) the salaries and expenses of all of its and the Fund's personnel except
the fees and expenses of Directors who are not affiliated persons of PMF or the
Fund's investment adviser;
(b) all expenses incurred, by PMF 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
(PIC) pursuant to the subadvisory agreement between PMF and PIC (the Subadvisory
Agreement).
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 Directors who are not affiliated persons of the Manager or
the Fund's investment adviser, (c) the fees and certain expenses of the
Custodian and Transfer and Dividend Disbursing Agent, including the cost of
providing records to the Manager in connection with its obligation of
maintaining required records of the 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 stock
certificates representing shares of the Fund, (i) the cost of fidelity and
liability insurance, (j) 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 and qualifying its shares under state
securities laws, including the preparation and printing of the Fund's
registration statements and prospectuses for such purposes, (k) allocable
communications expenses with respect to investor services and all expenses of
shareholders' and Directors' 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 PMF 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 inconformity with the Investment Company Act. The Management Agreement
was last approved by the Board of Directors of the Fund, including all of the
Directors who are not parties to the contract or interested persons of any such
party as defined in the Investment Company Act on May 2, 1994 and by
shareholders of the Fund on April 28, 1988.
For the fiscal years ended September 30, 1993, 1992 and 1991, the Fund paid
management fees to PMF of $2,439,222, $1,334,281 and $876,107, respectively.
PMF has entered into the Subadvisory Agreement with PIC (the Subadviser).
The Subadvisory Agreement provides that PIC will furnish investment advisory
services in connection with the management of the Fund. In connection therewith,
PIC is
B-10
<PAGE>
obligated to keep certain books and records of the Fund. PMF continues to have
responsibility for all investment advisory services pursuant to the Management
Agreement and supervises PIC's performance of such services. PIC is reimbursed
by PMF for the reasonable costs and expenses incurred by PIC in furnishing those
services.
The Subadvisory Agreement was last approved by the Board of Directors,
including a majority of the Directors who are not interested persons of the Fund
and who have no direct or indirect financial interest in the Subadvisory
Agreement, on May 2, 1994, and by shareholders of the Fund on April 28, 1988.
The Subadvisory Agreement provides that it will terminate in the event of
its assignment (as defined in the Investment Company Act) or upon the
termination of the Management Agreement. The Subadvisory Agreement may be
terminated by the Fund, PMF or PIC upon not more than 60 days', nor less than 30
days', written notice. The Subadvisory Agreement provides that it 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.
The Manager and the Subadviser (The Prudential Investment Corporation) are
subsidiaries of The Prudential Insurance Company of America (Prudential) which,
as of December 31, 1993, is one of the largest financial institutions in the
world and the largest insurance company in North America. Prudential has been
engaged in the insurance business since 1875. [In July 1993, INSTITUTIONAL
INVESTOR ranked Prudential the third largest institutional money manager of the
300 largest money management organizations in the United States as of December
31, 1992.]
DISTRIBUTOR
Prudential Mutual Fund Distributors, Inc. (PMFD), One Seaport Plaza, New
York, New York 10292, acts as the distributor of the Class A shares of the Fund.
Prudential Securities Incorporated, One Seaport Plaza, New York, New York 10292
(Prudential Securities), acts as the distributor of the Class B and Class C
shares of the Fund.
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 Fund
under Rule 12b-1 under the Investment Company Act and separate distribution
agreements (the Distribution Agreements), PMFD and Prudential Securities
(collectively, the Distributor) incur the expenses of distributing the Fund's
Class A, Class B and Class C shares. See "How the Fund is Managed--Distributor"
in the Prospectus.
Prior to January 22, 1990, the Fund offered only one class of shares (the
then existing Class B shares). On October 6, 1989, the Board of Directors,
including a majority of the Directors who are not interested persons of the Fund
and who have no direct or indirect financial interest in the operation of the
Class A or Class B Plan or in any agreement related to either Plan (the Rule
12b-1 Directors), at a meeting called for the purpose of voting on each Plan,
adopted a new plan of distribution for the Class A shares of the Fund (the Class
A Plan) and approved an amended and restated plan of distribution with respect
to the Class B shares of the Fund (the Class B Plan). On February 8, 1993, the
Board of Directors, including a majority of the Rule 12b-1 Directors, at a
meeting called for the purpose of voting on each Plan, approved modifications to
the Fund's Class A and Class B Plans and Distribution Agreements to conform them
to recent amendments to the National Association of Securities Dealers, Inc.
(NASD) maximum sales charge rule described below. As so modified, the Class A
Plan provides that (i) 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 the maintenance of
shareholder accounts (service fee) and (ii) total distribution fees (including
the service fee of .25 of 1%) may not exceed .30 of 1%. As so modified, the
Class B Plan provides that (i) up to .25 of 1% of the average daily net assets
of the Class B shares may be paid as a service fee and (ii) up to.75 of 1% (not
including the service fee) of the average daily net assets of the Class B shares
(asset-based sales charge) may be used as reimbursement for distribution-related
expenses with respect to the Class B shares. On May 3, 1993, the Board of
Directors, including a majority of the Rule 12b-1 Directors, at a meeting called
for the purpose of voting on each Plan, adopted a plan of distribution for the
Class C shares of the Fund and approved further amendments to the plans of
distribution for the Fund's Class A and Class B shares changing them from
reimbursement type plans to compensation type plans. The Plans were last
approved by the Board of Directors, including a majority of the Rule 12b-1
Directors, on May 2, 1994. The Class A Plan, as amended, was approved by Class A
and Class B shareholders, and the Class B Plan, as amended, was approved by
Class B shareholders on June 23, 1994. The Class C Plan was approved by the sole
shareholder of Class C shares on_________, 1994.
B-11
<PAGE>
CLASS A PLAN. For the fiscal year ended September 30, 1993 PMFD received
payments of $139,602 under the Class A Plan as reimbursement of expenses related
to the distribution of Class A shares. This amount was primarily expended for
payment of account servicing fees to financial advisers and other persons who
sell Class A shares. For the fiscal year ended September 30, 1993, PMFD also
received approximately $835,000 in initial sales charges.
CLASS B PLAN. For the fiscal year ended September 30, 1993, Prudential
Securities received $2,786,595 from the Fund under the Class B Plan and spent
approximately $6,227,200 in distributing the Fund's Class B shares. It is
estimated that of the latter amount, approximately $57,000 (0.9%) was spent on
printing and mailing of prospectuses to other than current shareholders;
$111,000 (1.8%) on interest and/or carrying costs; $620,000 (10.0%) on
compensation to Pruco Securities Corporation, an affiliated broker-dealer, for
commissions to its financial advisers and other expenses, including an
allocation on account of overhead and other branch office distribution-related
expenses, incurred by it for distribution of Fund shares; and $5,439,200 (87.3%)
on the aggregate of (i) payments of commissions and account servicing fees to
financial advisers ($2,119,400 or 34.0%) and (ii) an allocation on account of
overhead and other branch office distribution-related expenses ($3,319,800 or
53.3%). The term "overhead and other branch office distribution-related
expenses" represents (a) the expenses of operating Prudential Securities' branch
offices in connection with the sale of Fund shares, including lease costs, the
salaries and employee benefits of operations and sales support personnel,
utility costs, communications costs and the costs of stationery and supplies,
(b) the costs of client sales seminars, (c) expenses of mutual fund sales
coordinators to promote the sale of Fund shares; and (d) other incidental
expenses relating to branch promotion of Fund shares.
Prudential Securities also receives the proceeds of contingent deferred
sales charges paid by investors upon certain redemptions of Class B shares. See
"Shareholder Guide--How to Sell Your Shares--Contingent Deferred Sales Charges"
in the Prospectus. For the fiscal year ended September 30, 1993, Prudential
Securities received approximately $436,000 in contingent deferred sales charges.
CLASS C PLAN. Prudential Securities receives the proceeds of contingent
deferred sales charges paid by investors upon certain redemptions of Class C
shares. See "Shareholder Guide--How to Sell Your Shares--Contingent Deferred
Sales Charges" in the Prospectus. Prior to the date of this Statement of
Additional Information, no distribution expenses were incurred under the Class C
Plan.
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 Directors, including a majority vote of the Rule 12b-1 Directors,
cast in person at a meeting called for the purpose of voting on such
continuance. The Plans may each be terminated at any time, without penalty, by
the vote of a majority of the Rule 12b-1 Directors or by the vote of the holders
of a majority of the outstanding shares of the applicable class on not more than
30 days' written notice to any other party to the Plans. 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
(by both Class A and Class B shareholders, voting separately, in the case of
material amendments to the Class A Plan), and all material amendments are
required to be approved by the Board of Directors in the manner described above.
Each Plan will automatically terminate in the event of its assignment. The Fund
will not be contractually obligated to pay expenses incurred under any Plan if
it is terminated or not continued.
Pursuant to each Plan, the Board of Directors 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 the Rule
12b-1 Directors shall be committed to the Rule 12b-1 Directors.
Pursuant to each Distribution Agreement, the Fund has agreed to indemnify
PMFD and Prudential Securities to the extent permitted by applicable law against
certain liabilities under the Securities Act of 1933, as amended. Each
Distribution Agreement was last approved by the Board of Directors, including a
majority of the Rule 12b-1 Directors, on May 2, 1994.
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. In the case of Class B shares, interest charges on unreimbursed
distribution expenses 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 on shares of the Fund may not exceed .75 of 1%
per class. The 6.25% limitation applies to 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.
B-12
<PAGE>
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Manager is responsible for decisions to buy and sell securities, options
on securities and futures contracts for the Fund, the selection of brokers,
dealers and futures commission merchants to effect the transactions and the
negotiation of brokerage commissions, if any. For purposes of this section, the
term "Manager" includes the "Subadviser." Purchases and sales of securities or
futures contracts on a securities exchange or board of trade are effected
through brokers or futures commission merchants who charge a commission for
their services. 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 exchanges or boards of trade are subject
to negotiation between the Adviser and the broker or futures commission
merchant.
In the over-the-counter market, 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 may be purchased directly from an issuer, in which case no
commissions or discounts are paid. The Fund will not deal with Prudential
Securities in any transaction in which Prudential Securities acts as principal.
Thus it will not deal in over-the-counter securities 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 or futures contracts of the Fund, the Manager is required
to give primary consideration to obtaining the most favorable price and
efficient execution. Within the framework of this policy, the Manager will
consider the research and investment services provided by brokers, dealers or
futures commission merchants who effect or are parties to portfolio transactions
of the Fund, the Manager or the Manager's other clients. Such research and
investment services are those which brokerage houses customarily provide to
institutional investors and include statistical and economic data and research
reports on particular companies and industries. Such services are used by the
Manager in connection with all of its investment activities, and some of such
services obtained in connection with the execution of transactions for the Fund
may be used in managing other investment accounts. Conversely, brokers, dealers
or futures commission merchants furnishing such services may be selected for the
execution of transactions of such other accounts, whose aggregate assets are far
larger than the Fund, and the services furnished by such brokers, dealers or
futures commission merchants may be used by the Manager in providing investment
management for the Fund. Commission rates are established pursuant to
negotiations with the broker, dealer or futures commission merchant based on the
quality and quantity of execution services provided by the broker, dealer or
futures commission merchant in the light of generally prevailing rates. The
Manager's policy is to pay higher commissions to brokers, other than Prudential
Securities, for particular transactions than might be charged if a different
broker had been selected, on occasions when, in the Manager's opinion, this
policy furthers the objective of obtaining best price and execution. In
addition, the Manager is authorized to pay higher commissions on brokerage
transactions for the Fund to brokers, dealers or futures commission merchants
other than Prudential Securities in order to secure research and investment
services described above, subject to review by the Fund's Board of Directors
from time to time as to the extent and continuation of this practice. The
allocation of orders among brokers, dealers and futures commission merchants and
the commission rates paid are reviewed periodically by the Fund's Board of
Directors. 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 SEC. 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, the Manager may use Prudential
Securities as a 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 brokers or futures
commission merchants in connection with comparable transactions involving
similar securities or futures being purchased or sold on a securities or
commodities 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 broker or
futures commission merchant in a commensurate arm's-length transaction.
Furthermore, the Board of Directors of the Fund, including a majority of the
Rule 12b-1 Directors, 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
B-13
<PAGE>
Section 11(a) under 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.
Transactions in options by the Fund will be subject to limitations
established by each of the exchanges governing the maximum number of options
which may be written or held by a single investor or group of investors acting
in concert, regardless of whether the options are written or held on the same or
different exchanges or are written or held in one or more accounts or through
one or more brokers. Thus, the number of options which the Fund may write or
hold may be affected by options written or held by the Manager and other
investment advisory clients of the Manager. An exchange may order the
liquidation of positions found to be in excess of these limits, and it may
impose certain other sanctions.
The table presented below shows certain information regarding the payment of
commissions by the Fund, including the amount of such commissions paid to
Prudential Securities for the three-year period ended September 30, 1993.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Total brokerage commissions paid by the
Fund................................... $889,308 $641,051 $508,421
Total brokerage commissions paid to
Prudential Securities.................. $ 10,875 $ 18,268 $ 19,790
Percentage of total brokerage
commissions paid to Prudential
Securities............................. 1.22% 2.85% 3.89%
</TABLE>
The Fund effected approximately .01% of the total dollar amounts of its
transactions involving the payment of commissions through Prudential Securities
during the fiscal year ended September 30, 1993. Of the total brokerage
commissions paid by the Fund for the fiscal year ended September 30, 1993,
approximately $733,516 (81.74% of gross brokerage transactions) was paid to
firms which provided research, statistical or other services provided to PMF.
PMF has not separately identified a portion of such brokerage commissions as
applicable to the provision of such research, statistical or other service.
PURCHASE AND REDEMPTION OF FUND SHARES
Shares of the Fund may be purchased at a price equal to the next determined
net asset value per share plus a sales charge which, at the election of the
investor, may be imposed either (i) at the time of purchase (Class A shares) or
(ii) on a deferred basis (Class B or Class C shares). See "Shareholder
Guide--How to Buy Shares of the Fund" in the Prospectus.
Each class of shares represents an interest in the same portfolio of
investments of the Fund and has the same rights, except that (i) each class
bears the separate expenses of its Rule 12b-1 distribution and service plan,
(ii) each class has exclusive voting rights with respect to its plan, (except
that the Fund has agreed with the SEC in connection with the offering of a
conversion feature on Class B shares to submit any amendment of the Class A
distribution and service plan to both Class A and Class B shareholders) and
(iii) only Class B shares have a conversion feature. See "Distributor." Each
class also has separate exchange privileges. See "Shareholder Investment
Account--Exchange Privilege."
B-14
<PAGE>
SPECIMEN PRICE MAKE-UP
Under the current distribution arrangements between the Fund and the
Distributor, Class A shares are sold at a maximum sales charge of 5% and Class
B* and Class C* shares are sold at net asset value. Using the Fund's net asset
value at September 30, 1993, the maximum offering price of the Fund's shares is
as follows:
<TABLE>
<S> <C>
CLASS A
Net asset value and redemption price per Class A share.................. $ 13.06
Maximum sales charge (5% of offering price)............................. .69
---------
Offering price to public................................................ $ 13.75
---------
---------
CLASS B
Net asset value, offering price and redemption price per Class B
share*................................................................. $ 12.74
---------
---------
CLASS C
Net asset value, offering price and redemption price per Class C
share*................................................................. $ 12.74
---------
---------
<FN>
--------------------
* Class B and Class C shares are subject to a contingent deferred sales
charge on certain redemptions. See "Shareholder Guide--How to Sell Your
Shares--Contingent Deferred Sales Charges" in the Prospectus.
</TABLE>
REDUCTION AND WAIVER OF INITIAL SALES CHARGES--CLASS A SHARES
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 series of the Fund or other Prudential
Mutual Funds, the purchases may be combined to take advantage of the reduced
sales charges applicable to larger purchases. See the table of breakpoints under
"Shareholder Guide--How to Buy Shares of The Fund" in the Prospectus.
An eligible group of related Fund investors includes any combination of the
following:
(a) an individual;
(b) the individual's spouse, their children and their parents;
(c) the individual's and spouse's Individual Retirement Account (IRA);
(d) any company controlled by the individual (a person, entity or group that
holds 25% or more of the outstanding voting securities of a corporation will be
deemed to control the corporation, and a partnership will be deemed to be
controlled by each of its general partners);
(e) a trust created by the individual, the beneficiaries of whichare the
individual, his or her spouse, parents or children;
(f) a Uniform Gifts to Minors Act/Uniform Transfers to Minors Act account
created by the individual or the individual's spouse; and
(g) one or more employee benefit plans of a company controlled by an
individual.
[In addition, 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 Distributor must be notified at the time of purchase that the investor
is entitled to a reduced sales charge. The reduced sales charges 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
retirement and group plans described above under "Retirement and Group Plans."
B-15
<PAGE>
RIGHTS OF ACCUMULATION. Reduced sales charges are also available through
Rights of Accumulation, under which an investor or an eligible group of related
investors, as described above under "Combined Purchase and Cumulative Purchase
Privilege," may aggregate the value of their existing holdings of shares of the
Fund and shares of other Prudential Mutual Funds (excluding money market funds
other than those acquired pursuant to the exchange privilege) to determine the
reduced sales charge. However, the value of shares held directly with the
Transfer Agent and through Prudential Securities will not be aggregated to
determine the reduced sales charge. All shares must be held either directly with
the Transfer Agent or through Prudential Securities. The value of existing
holdings for purposes of determining the reduced sales charge is calculated
using the maximum offering price (net asset value plus maximum sales charge) as
of the previous business day. See "How the Fund Values its Shares" in the
Prospectus. The Distributor must be notified at the time of purchase that the
investor is entitled to a reduced sales charge. The reduced sales charges will
be granted subject to confirmation of the investor's holdings. Rights of
accumulation are not available to individual participants in any retirement or
group plans.
LETTERS OF INTENT. Reduced sales charges are also 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 and shares of other Prudential Mutual Funds. 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 Prudential Securities will not be aggregated to determine the
reduced sales charge. All shares must be held either directly with the Transfer
Agent or through Prudential Securities. The Distributor must be notified at the
time of purchase that the investor is entitled to a reduced sales charge. The
reduced sales charges will be granted subject to confirmation of the investor's
holdings. Letters of Intent are not available to individual participants in any
retirement or group plans.
A Letter of Intent permits a purchaser to establish a total investment goal
to be achieved by any number of investments over a thirteen-month period. Each
investment made during the period will receive the reduced sales charge
applicable to the amount represented by the goal, as if it were a single
investment. 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. The effective date of a Letter of Intent 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 Letter of Intent does not obligate the investor to purchase, nor the
Fund to sell, the indicated amount. In the event the Letter of Intent goal is
not achieved within the thirteen-month period, the purchaser is required to pay
the difference between the sales charge otherwise applicable to the purchases
made during this period and sales charges 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.
QUANTITY DISCOUNT--CLASS B SHARES PURCHASED PRIOR TO ___________, 1994
The CDSC is reduced on redemptions of Class B shares of the Fund purchased
prior to __________, 1994 if immediately after a purchase of such shares, the
aggregate cost of all Class B shares of the Fund owned by you in a single
account exceeded $500,000. For example, if you purchased $100,000 of Class B
shares of the Fund and the following year purchase an additional $450,000 of
Class B shares with the result that the aggregate cost of your Class B shares of
the Fund following the second purchase was $550,000, the quantity discount would
be available for the second purchase of $450,000 but not for the first purchase
of $100,000. The quantity discount will be imposed at the following rates
depending on whether the aggregate value exceeded $500,000 or $1 million:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES CHARGE
AS A PERCENTAGE OF DOLLARS INVESTED
OR REDEMPTION PROCEEDS
YEAR SINCE PURCHASE ------------------------------------------
PAYMENT MADE $500,001 TO $1 MILLION OVER $1 MILLION
- ------------------------- ----------------------- ----------------
<S> <C> <C>
First.................... 3.0% 2.0%
Second................... 2.0% 1.0%
Third.................... 1.0% 0%
Fourth and thereafter.... 0% 0%
</TABLE>
B-16
<PAGE>
You must notify the Fund's Transfer Agent either directly or through
Prudential Securities or Prusec, at the time of redemption, that you are
entitled to the reduced CDSC. The reduced CDSC will be granted subject to
confirmation of your holdings.
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 stock 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. Whenever a transaction takes place
in the Shareholder Investment Account, the shareholder will be mailed a
statement showing the transaction and the status of the Account. The Fund makes
available to the shareholders the following privileges and plans.
AUTOMATIC REINVESTMENT OF DIVIDENDS AND/OR 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 5 full business days
prior to the record date to have subsequent dividends and/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 dealer. Any shareholder who receives a cash
payment representing a dividend or distribution may reinvest such distribution
at net asset value 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 net
asset value per share next determined after receipt of the check or proceeds by
the Transfer Agent. Such shareholder will receive credit for any contingent
deferred sales charge paid in connection with the amount of proceeds being
reinvested.
EXCHANGE PRIVILEGE
The Fund makes available to its shareholders the privilege of exchanging
their shares of the Fund for shares of certain other Prudential Mutual Funds,
including one or more specified money market funds, subject in each case to the
minimum investment requirements of such funds. Shares of such other Prudential
Mutual Funds may also be exchanged for shares of the Fund. All exchanges are
made on the basis of relative net asset value next determined after receipt of
an order in proper form. An exchange will be treated as a redemption and
purchase for tax purposes. Shares may be exchanged for shares of another fund
only if shares of such fund may legally be sold under applicable state laws. For
retirement and group plans having a limited menu of Prudential Mutual Funds, the
Exchange Privilege is available for those funds eligible for investment in the
particular program.
It is contemplated that the exchange privilege may be applicable to new
mutual funds whose shares may be distributed by the Distributor.
CLASS A. Shareholders of the Fund may exchange their Class A shares for
Class A shares of certain other Prudential Mutual Funds, shares of Prudential
Government Securities Trust (Intermediate Term Series) and shares of the money
market funds specified below. No fee or sales load will be imposed upon the
exchange. Shareholders of money market funds who acquired such shares upon
exchange of Class A shares may use the Exchange Privilege only to acquire Class
A shares of the Prudential Mutual Funds participating in the Exchange Privilege.
B-17
<PAGE>
The following money market funds participate in the Class A Exchange
Privilege:
Prudential California Municipal Fund
(California Money Market Series)
Prudential Government Securities Trust
(Money Market Series)
(U.S. Treasury Money Market Series)
Prudential Municipal Series Fund
(Connecticut Money Market Series)
(Massachusetts Money Market Series)
(New Jersey Money Market Series)
(New York Money Market Series)
Prudential MoneyMart Assets
Prudential Tax-Free Money Fund
CLASS B AND CLASS C. Shareholders of the Fund may exchange their Class B and
Class C shares for Class B and Class C shares, respectively, of certain other
Prudential Mutual Funds and shares of Prudential Special Money Market Fund, a
money market fund. No CDSC will be payable upon such exchange, but a CDSC may be
payable upon the redemption of the Class B and Class C shares acquired as a
result of an exchange. The applicable sales charge will be that imposed by the
fund in which shares were initially purchased and the purchase date will be
deemed to be the first day of the month after the initial purchase, rather than
the date of the exchange.
Class B and Class C shares of the Fund may also be exchanged for shares of
Prudential Special Money Market Fund without imposition of any CDSC at the time
of exchange. Upon subsequent redemption from such money market fund or after re-
exchange into the Fund, such shares will be subject to the CDSC calculated by
excluding the time such shares were held in the money market fund. In order to
minimize the period of time in which shares are subject to a CDSC, shares
exchanged out of the money market fund will be exchanged on the basis of their
remaining holding periods, with the longest remaining holding periods being
transferred first. [In measuring the time period shares are held in a money
market fund and "tolled" for purposes of calculating the CDSC holding period,
exchanges are deemed to have been made on the last day of the month.] Thus, if
shares are exchanged into the Fund from a money market fund during the month
(and are held in the Fund at the end of the month), the entire month will be
included in the CDSC holding period. Conversely, if shares are exchanged into a
money market fund prior to the last day of the month (and are held in the money
market fund on the last day of the month), the entire month will be excluded
from the CDSC holding period. For purposes of calculating the seven year holding
period applicable to the Class B conversion feature, the time period during
which Class B shares were held in a money market fund will be excluded.
At any time after acquiring shares of other funds participating in the Class
B or Class C exchange privilege, a shareholder may again exchange those shares
(and any reinvested dividends and distributions) for Class B or Class C shares
of the Fund, respectively, without subjecting such shares to any CDSC. Shares of
any fund participating in the Class B or Class C exchange privilege that were
acquired through reinvestment of dividends or distributions may be exchanged for
Class B or Class C shares of other funds, respectively, without being subject to
any CDSC.
Additional details about the Exchange Privilege and prospectuses for each of
the Prudential Mutual Funds are available from the Fund's Transfer Agent,
Prudential Securities or Prusec. The Exchange Privilege may be modified,
terminated or suspended on sixty days' notice, and any fund, including the Fund,
or the Distributor, has the right to reject any exchange application relating to
such fund's shares.
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
B-18
<PAGE>
around $14,000 at a private college and around $4,800 at a public university.
Assuming these costs increase at a rate of 7% a year, as has been projected, for
the freshman class of 2007, the cost of four years at a private college could
reach $163,000 and over $97,000 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.......................................................... $ 110 $ 165 $ 220 $ 275
20 Years.......................................................... 176 264 352 440
15 Years.......................................................... 296 444 592 740
10 Years.......................................................... 555 833 1,110 1,388
5 Years.......................................................... 1,371 2,057 2,742 3,428
See "Automatic Savings Accumulation Plan."
<FN>
- ------------------------
(1)Source information concerning the costs of education at public
universities is available from The College Board Annual Survey of Colleges,
1992. Information about the costs of private colleges is from the Digest of
Education Statistics, 1992; The National Center for Educational Statistics; and
the U.S. Department of Education. Average costs for private institutions include
tuition, fees, room and board.
(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.
</TABLE>
AUTOMATIC SAVINGS ACCUMULATION PLAN (ASAP)
Under ASAP, 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
Prudential Securities account (including a Command 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 ASAP participants.
Further information about this program and an application form can be
obtained from the Transfer Agent, Prudential Securities or Prusec.
SYSTEMATIC WITHDRAWAL PLAN
A systematic withdrawal plan is available to shareholders through Prudential
Securities or the Transfer Agent. 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. See "Shareholder Guide-- How to Sell Your
Shares--Contingent Deferred Sales Charges" in the Prospectus.
In the case of shares held through the Transfer Agent (i) a $10,000 minimum
account value applies, (ii) withdrawals may not be for less than $100 and (iii)
the shareholder must elect to have all dividends and/or distributions
automatically reinvested in additional full and fractional shares at net asset
value on shares held under this plan. See "Shareholder Investment Account--
Automatic Reinvestment of Dividends and/or Distributions."
Prudential Securities and the Transfer Agent act as agents 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 generally be recognized for federal income tax
purposes. In addition, withdrawals made concurrently with purchases of
additional shares are
B-19
<PAGE>
inadvisable because of the sales charge applicable to (i) the purchase of Class
A shares and (ii) the withdrawal 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 systematic withdrawal plan, particularly if used in connection with a
retirement plan.
TAX-DEFERRED RETIREMENT PLANS
Various tax-deferred retirement plans, including a 401(k) plan,
self-directed individual retirement accounts and "tax-sheltered accounts" under
Section 403(b)(7) of the Internal Revenue Code are available through the
Distributor. These plans are for use by both self-employed individuals and
corporate employers. These plans permit either self-direction of accounts by
participants, or a pooled account arrangement. Information regarding the
establishment of these plans, the administration, custodial fees and other
details is available from Prudential-Bache or the Transfer Agent.
Investors who are considering the adoption of such a plan should consult
with their own legal counsel or tax adviser with respect to the establishment
and maintenance of any such 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.
<TABLE>
<CAPTION>
TAX-DEFERRED COMPOUNDING(1)
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
<FN>
- ------------------------
(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
the IRA account will be subject to tax when withdrawn from the account.
</TABLE>
NET ASSET VALUE
[The net asset value per share is the net worth of the Fund (assets,
including securities at value, minus liabilities) divided by the number of
shares outstanding. Net asset value is calculated separately for each class. The
value of securities, other than options listed on national securities exchanges,
is based on the last sale prices on national securities exchanges as of the
close of the New York Stock Exchange (which is currently 4:00 P.M., New York
time), or, in the absence of recorded sales, at the average of readily closing
bid and asked prices on such exchanges or over-the-counter. If no quotations are
available, securities will be valued at fair value as determined in good faith
by the Board of Directors. Options on stocks and stock indices traded on
national securities exchanges are valued as of the close of options trading on
such exchanges (which is currently 4:10 P.M., New York time), and stock index
futures and options thereon, which are traded on commodities exchanges, are
valued at their last sale price as of the close of such commodities exchanges
(which is currently 4:15 P.M., New York time). If there was no sale on the
applicable options or commodities exchange, options on stocks and stock indices
and stock index futures and options thereon are valued at the average of the
quoted bid and asked prices as of the close of the respective exchange.
Short-term investments which mature in 60 days or less are valued at amortized
cost, if their original maturity was 60 days or less, or by amortizing their
value on the 61st day prior to maturity if their original maturity when acquired
by the Fund was more than 60 days, unless this is determined not to represent
fair value by the Board of Directors. The Fund will compute its net asset value
once daily as of 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
B-20
<PAGE>
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 the net asset
value. The New York Stock Exchange is closed on the following holidays: New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day.]
In the event that the New York Stock Exchange or the national securities
exchanges on which stock options are traded adopt different trading hours on
either a permanent or temporary basis, the Board of Directors of the Fund will
reconsider the time at which net asset value is computed. In addition, the Fund
may compute its net asset value as of any time permitted pursuant to any
exemption, order or statement of the Securities and Exchange Commission or its
staff.
The net asset value of Class B and Class C shares will generally be lower
than the net asset value of Class A shares as a result of the larger
distribution-related fee to which Class B and Class C shares are subject. It is
expected, however, that the net asset value per share of each class will tend to
converge immediately after the recording of dividends which will differ by
approximately the amount of the distribution expense accrual differential among
the classes.
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 and Class C shares. See "How the Fund Calculates
Performance" in the Prospectus.
Average annual total return is computed according to the following formula:
P(1+T)to the power of n = ERV
Where: P = a hypothetical initial payment of $1000.
T = average annual total return.
n = number of years.
ERV = Ending Redeemable Value at the end of the 1, 5 or 10 year periods
(or fractional portion thereof) of a hypothetical $1000 payment
made at the beginning of the 1, 5 or 10 year periods.
Average annual total return takes into account any applicable initial or
contingent deferred sales charges but does not take into account any federal or
state income taxes that maybe payable upon redemption.
The average annual total return for Class A shares for the one year and
since inception periods ended September 30,1993 was 23.57% and 15.95%,
respectively. The average annual total return for Class B shares for the one,
five and ten year periods ended on September 30, 1993 was 24.40%, 15.35% and
10.50%, respectively. During these periods, no Class C shares were outstanding.
Without the expense reimbursement (resulting from state expense limitations) the
average annual total return with respect to the Class B shares of the Fund for
these periods would have been 24.40%, 15.35% and 10.49%, respectively.
AGGREGATE TOTAL RETURN. The Fund may also advertise its aggregate total
return. Aggregate total return is determined separately for Class A, Class B and
Class C shares. See "How the Fund Calculates Performance" in the Prospectus.
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
Where: P = a hypothetical initial payment of $1000.
ERV = Ending Redeemable Value at the end of the 1, 5, or 10 year
periods (or fractional portion thereof) of a hypothetical $1000
investment made at the beginning of the 1, 5 or 10 year
periods.
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.
B-21
<PAGE>
The aggregate total return for Class A shares for the one and three year and
since inception periods ended on September 30, 1993 was 30.42% and 82.22%,
respectively. The aggregate total return for Class B shares for the one, five
and ten year periods ended on September 30, 1993 was 29.40%, 105.21% and
171.32%, respectively. During these periods, no Class C shares were outstanding.
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 and Class C
shares. This 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)to the power of 6 - 1]
cd
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.
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.
The Fund's 30-day yields for the period ended September 30, 1993 were 0.04%
and -0.94% for Class A and Class B shares, respectively. During this period, no
Class C shares were outstanding.
From time to time, the performance of the Fund may be measured against
various indices. 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)
[GRAPHIC]
(1)Source: Ibbotson Associates, "Stocks, Bonds, Bills and Inflation--1993
Yearbook" (annually updates the work of Roger G. Ibbotson and Rex A.
Sinquefield). Common stock returns are based on the Standard & Poor's 500 Stock
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.
B-22
<PAGE>
TAXES
The Fund expects to pay dividends of net investment income, if any,
semi-annually. The Board of Directors of the Fund will determine at least once a
year whether to distribute any net long-term capital gains in excess of any net
short-term capital losses. In determining amounts of capital gains to be
distributed, any capital loss carryforwards from prior years will offset capital
gains. Distributions will be paid in additional Fund shares based on the net
asset value at the close of business on the record date, unless the shareholder
elects in writing not less than five full business days prior to the record date
to receive such distributions in cash.
The Fund is qualified and intends to remain qualified as a regulated
investment company under Subchapter M of the Internal Revenue Code.
Qualification as a regulated investment company under the Internal Revenue Code
requires, among other things, that (a) at least 90% of the Fund's annual gross
income (without offset for losses from the sale or other disposition of
securities or foreign currencies) from dividends, interest, proceeds from loans
of securities and gains from the sale or other disposition of securities or
foreign currencies and certain financial futures, options and forward contracts;
(b) the Fund derives less than 30% of its gross income from gains (without
offset for losses) from the sale or other disposition of securities or options
thereon held for less than three months; and (c) the Fund diversify its holdings
so that, at the end of each quarter of the taxable year, (i) at least 50% of the
market value of the Fund's assets is represented by cash, government securities
and other securities limited in respect of any one issuer to an amount not
greater than 5% of the Fund's assets and 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of its assets
is invested in the securities of any one issuer (other than government
securities). In addition, in order not to be subject to federal income tax, the
Fund must distribute to its shareholders as ordinary dividends at least 90% of
its net investment income other than net long-term capital gains earned in each
year. A 4% nondeductible excise tax will be imposed on the Fund to the extent
the Fund does not meet certain minimum distribution requirements by the end of
each calendar year. For this purpose, any income or gain retained by the Fund
which is subject to tax will be considered to have been distributed by year-end.
In addition, dividends declared in October, November and December payable to
shareholders of record on a specified date in October, November and December and
paid in the following January will be treated as having been paid by the Fund
and received by each shareholder in such prior year. Under this rule, therefore,
a shareholder may be taxed in one year on dividends or distributions actually
received in January of the following year.
Gains or losses on sales of securities by the Fund will be 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.
Other gains or losses on the sale of securities will be short-term capital gains
or losses. If an option written by the Fund lapses or is terminated through a
closing transaction, such as a repurchase by the Fund of the option from its
holder, the Fund will realize a short-term capital gain or loss, depending on
whether the premium income is greater or less than the amount paid by the Fund
in the closing transaction. If securities are sold by the Fund pursuant to the
exercise of a call option written by it, the Fund will add the premium received
to the sale price of the securities delivered in determining the amount of gain
or loss on the sale. If securities are purchased by the Fund pursuant to the
exercise of a put option written by it, the Fund will subtract the premium
received from its cost basis in the securities purchased. The requirement that
the Fund derive less than 30% of its gross income from gains from the sale of
securities held for less than three months may limit the Fund's ability to write
options.
Certain futures contracts and certain listed options held by the Fund will
be required to be "marked to market" for federal income tax purposes, i.e.,
treated as having been sold at their fair market value on the last day of the
Fund's taxable year (referred to as Section 1256 Contracts). 60% of any gain or
loss recognized on actual or deemed sales of such Section 1256 Contracts will be
treated as long-term capital gain or loss, and 40% of such gain or loss will be
treated as short-term capital gain or loss. The Fund may be required to defer
the recognition of losses on securities and options and futures contracts to the
extent of any recognized gain on offsetting positions held by the Fund.
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 or distribution will
constitute a replacement of shares.
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.
B-23
<PAGE>
The per share dividends on Class B and Class C shares, if any, will be lower
than the per share dividends on Class A shares as a result of the higher
distribution-related fee applicable with 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 and Class C shares. See "Net Asset Value."
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. Prior to purchasing shares of the Fund,
therefore, the investor should carefully consider the impact of dividends or
capital gains distributions which are expected to be or have been announced.
Dividends and distributions may also be subject to state and local taxes.
PENNSYLVANIA PERSONAL PROPERTY TAX. The Fund has received a written letter
of determination from the Pennsylvania Department of Revenue that the Fund will
be subject to the Pennsylvania foreign franchise and corporate net income tax.
Accordingly, it is believed that Fund shares are exempt from Pennsylvania
personal property taxes. The Fund anticipates that it will continue such
business activities but reserves the right to suspend them at any time,
resulting in the termination of the exemption.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT
AND INDEPENDENT ACCOUNTANTS
State Street Bank and Trust Company, One Heritage Drive, North Quincy,
Massachusetts 02171, serves as Custodian for the Fund's portfolio securities and
cash and, in that capacity, maintains certain financial and accounting books and
records pursuant to an agreement with the Fund. See "How the Fund Is
Managed--Custodian and Transfer and Dividend Disbursing Agent" in the
Prospectus.
Prudential Mutual Fund Services, Inc. (PMFS), Raritan Plaza One, Edison, New
Jersey 08837, serves as the Transfer and Dividend Disbursing Agent of the Fund.
It is a wholly-owned subsidiary of PMF. 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, a new
account set-up fee for each manually-established account and a monthly inactive
zero balance account fee per shareholder account. PMFS is also reimbursed for
its out-of-pocket expenses, including, but not limited to, postage, stationery,
printing, allocable communications expenses and other costs. For the fiscal year
ended September 30,1993, the Fund incurred fees of approximately $423,000 for
the services of PMFS.
Price Waterhouse, 1177 Avenue of the Americas, New York, New York 10036,
serves as the Fund's independent accountants and in that capacity examines the
Fund's annual financial statements.
B-24
<PAGE>
- --------------------------------------------------------------------------------
PRUDENTIAL GROWTH OPPORTUNITY FUND PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
- --------- --------------------------------- ---------------
<C> <S> <C>
LONG-TERM INVESTMENTS--95.6%
COMMON STOCKS--95.6%
AUTOMOTIVE--2.0%
75,000 Automotive Industries Holding,
Inc.*........................ $ 2,184,375
17,900 Durakon Industries, Inc.*...... 241,650
220,000 Mascotech, Inc................. 4,840,000
62,400 Walbro Corp.................... 2,028,000
---------------
9,294,025
---------------
BANKING--12.5%
195,000 Bank South Corp................ 2,998,125
115,000 Charter One Financial, Inc..... 4,211,875
100,000 Citfed Bancorp, Inc.*.......... 2,375,000
220,000 Citizens First Bancorp,
Inc.*........................ 1,512,500
110,000 Commerce Bancshares, Inc....... 3,437,500
85,000 Commercial Federal Corp.*...... 2,087,812
270,000 Community First Bankshares,
Inc.......................... 3,881,250
70,900 Constellation Bancorp*......... 784,331
60,000 Cullen Frost Bankers, Inc...... 2,160,000
125,000 Dauphin Dep. Corp.............. 3,062,500
75,000 First Eastern Corp.*........... 1,870,312
95,000 First Security Corp............ 2,671,875
62,700 First United Bank Group,
Inc.......................... 1,700,738
90,000 First Virginia Banks, Inc...... 3,622,500
125,000 Hawkeye Bancorporation......... 2,484,375
145,000 SouthTrust Corp................ 2,845,625
145,000 Summit Bancorporation.......... 3,298,750
85,000 TCF Financial Corp............. 3,378,750
65,000 Union Planters Corp............ 1,885,000
320,000 Washington Mutual Savings Bank
of Seattle................... 8,640,000
---------------
58,908,818
---------------
CABLE & PAY TV SYSTEMS--2.6%
235,000 Comcast, Corp.................. 7,299,687
197,800 TCA Cable TV, Inc.............. 5,105,713
---------------
12,405,400
---------------
COMMERCIAL SERVICES--1.7%
179,500 Borg Warner Security Corp.*.... 3,545,125
240,700 Pinkertons, Inc.*.............. 4,302,512
---------------
7,847,637
---------------
COMPUTER HARDWARE--3.5%
244,600 Adaptec, Inc.*................. 6,818,225
75,000 EMC Corp.*..................... 2,643,750
130,000 Hutchinson Technology, Inc.*... 3,087,500
94,800 Telxon Corp.................... 959,850
110,000 Verifone, Inc.*................ 3,107,500
---------------
16,616,825
---------------
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
- --------- --------------------------------- ---------------
<C> <S> <C>
COMPUTER SOFTWARE & SERVICES--3.6%
145,000 American Management Systems,
Inc.*........................ $ 2,483,125
45,000 Business Records Corp. Holding
Co.*......................... 1,203,750
100,000 Cadence Design Systems, Inc.*.. 1,050,000
190,000 LEGENT Corp.*.................. 4,108,750
170,400 Primark Corp.*................. 1,959,600
268,400 Structural Dynamics Research
Corp.*....................... 3,807,925
287,600 Technology Solutions Co.*...... 2,372,700
---------------
16,985,850
---------------
CONSTRUCTION--0.7%
110,700 Butler Manufacturing Co.*...... 3,307,163
---------------
CONSUMER PRODUCTS--0.9%
90,700 Kimball International, Inc..... 2,664,312
81,100 Sealright Co., Inc............. 1,378,700
---------------
4,043,012
---------------
DRUGS & MEDICAL SUPPLIES--1.6%
61,300 Acuson Corp.*.................. 727,938
100,000 Carter Wallace, Inc............ 3,175,000
130,000 Endosonics Corp.*.............. 747,500
44,200 Stryker Corp................... 1,221,025
58,500 Sybron Corp.*.................. 1,630,688
---------------
7,502,151
---------------
ELECTRICAL EQUIPMENT--0.4%
162,800 Thomas Industries, Inc......... 1,750,100
---------------
ELECTRONICS--7.8%
195,000 Altera Corp.*.................. 6,008,438
123,000 Augat, Inc..................... 2,598,375
75,000 Dynatech Corp.*................ 1,753,125
325,000 Laser Precision Corp.*......... 2,193,750
258,500 Marshall Industries, Inc.*..... 12,763,437
373,400 Methode Eletronics Inc......... 4,294,100
210,000 Tridex Corp.*.................. 2,178,750
197,900 VLSI Technology, Inc.*......... 3,376,669
99,000 Woodhead Industries, Inc....... 1,534,500
---------------
36,701,144
---------------
ENVIRONMENTAL SERVICES--0.6%
131,700 Air & Water Technologies
Corp.*....................... 1,810,875
72,700 Calgon Carbon Corp............. 817,875
---------------
2,628,750
---------------
FINANCIAL SERVICES--4.6%
297,950 Edwards (A.G.), Inc............ 8,789,525
210,000 McDonald & Co. Investments,
Inc.......................... 3,281,250
156,000 Piper Jaffray, Inc............. 5,187,000
70,050 Quick & Reilly Group, Inc.*.... 2,539,312
33,000 T. Rowe Price Associates,
Inc.......................... 2,017,125
---------------
21,814,212
---------------
</TABLE>
B-25 See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
PRUDENTIAL GROWTH OPPORTUNITY FUND(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
- --------- --------------------------------- ---------------
FOOD & BEVERAGES--2.9%
<C> <S> <C>
330,000 Brunos, Inc.................... $ 3,671,250
70,000 Dreyers Grand Ice Cream,
Inc.......................... 1,942,500
63,000 Performance Food Group Co...... 1,039,500
296,500 Rykoff S E & Co................ 5,225,812
110,000 Savannah Foods & Industries,
Inc.......................... 1,787,500
---------------
13,666,562
---------------
FOREST PRODUCTS--0.6%
130,000 Mosinee Paper Corp............. 2,990,000
---------------
HEALTH CARE SERVICES--0.6%
65,000 Living Centers of America,
Inc.*........................ 1,356,875
157,100 Multicare Cos, Inc............. 1,688,825
---------------
3,045,700
---------------
HOUSEHOLD PRODUCTS--0.8%
138,000 Libbey, Inc.................... 1,983,750
200,000 Mr Coffee, Inc................. 1,700,000
---------------
3,683,750
---------------
INDUSTRIALS--8.0%
144,600 Amcast Industrial Corp......... 2,711,250
110,000 Amtrol, Inc.................... 2,186,250
256,000 Carlisle Companies, Inc........ 8,000,000
38,000 Core Industries, Inc........... 504,400
119,000 Diebold, Inc................... 6,902,000
50,100 ESSEF Corp.*................... 594,938
20,000 Harmon Industries, Inc......... 373,750
81,000 Insituform Mid-America, Inc.... 1,053,000
28,600 Kenetech Corp.................. 436,150
230,006 Mark IV Industries, Inc........ 5,778,901
13,600 Moorco International, Inc...... 236,300
75,000 Schulman, Inc.................. 2,109,375
80,600 Thermotrex Corp.*.............. 1,894,100
25,000 Tyco Labs, Inc................. 1,081,250
83,700 Varlen Corp.................... 3,201,525
30,700 Whittaker Corp................. 414,450
---------------
37,477,639
---------------
INSURANCE--6.8%
80,600 Allied Group, Inc.............. 2,508,675
27,500 Allmerica Property & Casualty
Cos., Inc.................... 1,650,000
48,600 Berkley (W. R.) Corp........... 2,077,650
85,800 CCP Insurance, Inc............. 2,681,250
26,300 Crawford & Co.................. 420,800
70,000 Equitable of Iowa Cos., Inc.... 2,695,000
110,000 First Colony Corp.............. 3,313,750
105,000 Guaranty National Corp......... 2,441,250
78,400 Horace Mann Educators Corp..... 2,067,800
375,000 I. C. H. Corp.*................ 2,484,375
55,000 Mercury General Corp........... 2,117,500
221,400 Philadelphia Consolidated
Holding Corp................. 2,878,200
125,500 SCOR U.S. Corp................. 2,102,125
28,800 Statesman Group, Inc........... 401,400
100,000 UniCare Financial Corp.*....... 2,200,000
---------------
32,039,775
---------------
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
- --------- --------------------------------- ---------------
<C> <S> <C>
LEISURE--1.2%
160,000 Regis Corp.*................... $ 1,900,000
514,300 Topps Co....................... 3,857,250
---------------
5,757,250
---------------
MACHINERY & EQUIPMENT--5.5%
80,000 Brenco, Inc.................... 985,000
170,000 Gerber Scientific, Inc......... 2,316,250
95,000 Kaydon Corp.................... 1,888,125
125,000 Lufkin Industries, Inc......... 2,250,000
315,000 Measurex Corp.................. 5,670,000
8,100 Nordson Corp................... 423,225
199,400 Regal Beloit Corp.............. 4,336,950
40,000 Roper Industries............... 1,415,000
70,000 Thermo Electron Corp.*......... 4,445,000
50,000 Watts Industries, Inc.......... 2,181,250
---------------
25,910,800
---------------
NATURAL RESOURCES--0.4%
17,200 Minerals Technologies, Inc.*... 494,500
270,500 Nord Resources Corp.*.......... 1,284,875
---------------
1,779,375
---------------
OFFICE EQUIPMENT & SUPPLIES--0.1%
26,200 Tokheim Corp................... 314,400
---------------
OIL & GAS EXPLORATION & PRODUCTION--5.3%
325,800 American Oil & Gas Corp.*...... 3,787,425
15,000 Cabot Oil & Gas Corp........... 371,250
120,000 Diamond Shamrock, Inc.......... 2,910,000
110,000 Dreco Energy Services Ltd...... 2,282,500
825,000 Energy Service, Inc.*.......... 2,681,250
10,800 Enterra Corp................... 267,300
36,400 Gerrity Oil & Gas Corp.*....... 518,700
100,000 Helmerich & Payne, Inc......... 3,400,000
48,750 Mitchell Energy & Dev. Corp.,
Class A...................... 1,322,344
134,350 Mitchell Energy & Dev. Corp.,
Class B...................... 3,358,750
90,000 Sonat Offshore Drilling,
Inc.......................... 1,901,250
87,000 USX - Delhi Group.............. 2,044,500
---------------
24,845,269
---------------
PUBLISHING--2.5%
62,300 Lee Enterprises, Inc........... 1,954,662
637,000 Western Publishing Group,
Inc.*........................ 9,913,313
---------------
11,867,975
---------------
RAILROADS--4.0%
452,800 Kansas City Southern Industries,
Inc............................. 19,074,200
---------------
REALTY INVESTMENT TRUST--0.9%
91,000 Manufactured Home Community,
Inc.......................... 4,060,875
---------------
</TABLE>
B-26 See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
PRUDENTIAL GROWTH OPPORTUNITY FUND(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
- --------- --------------------------------- ---------------
RESTAURANTS--1.5%
<C> <S> <C>
110,000 Luby's Cafeterias, Inc......... $ 2,420,000
104,400 Sbarro, Inc.................... 4,580,550
---------------
7,000,550
---------------
RETAIL--1.1%
126,000 Babbage's, Inc.*............... 3,622,500
4,500 Brauns Fashions Corp........... 44,156
167,500 Sound Advice, Inc.*............ 1,109,687
23,700 Younkers, Inc.*................ 553,988
---------------
5,330,331
---------------
SPECIALTY CHEMICALS--4.1%
130,000 Cabot Corp..................... 7,215,000
108,300 Ferro Corp..................... 3,249,000
99,700 Fuller ( H. B.) Co............. 3,327,487
140,077 Lawter International, Inc...... 1,856,020
98,700 LeaRonal, Inc.................. 1,443,487
38,000 Lesco, Inc. Ohio............... 532,000
24,000 Raychem Corp................... 1,023,000
21,100 Vigoro Corp.................... 532,775
---------------
19,178,769
---------------
STEEL--3.4%
55,000 Huntco, Inc.................... 1,588,125
100,000 Quanex Corp.................... 1,937,500
337,500 Trinity Industries, Inc........ 12,529,688
---------------
16,055,313
---------------
TELECOMMUNICATIONS EQUIPMENT--2.7%
48,100 ADC Telecommunications, Inc.*.. 1,887,925
19,000 Allen Group, Inc............... 1,099,625
60,400 Andrew Corp.*.................. 2,340,500
123,380 LDDS Communications, Inc.*..... 6,153,578
20,000 Tellabs, Inc.*................. 1,255,000
---------------
12,736,628
---------------
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
- --------- --------------------------------- ---------------
<C> <S> <C>
TRANSPORTATION--0.7%
16,100 Expeditors International of
Washington, Inc.............. $ 452,813
205,000 OMI Corp....................... 1,358,125
416,200 WorldCorp, Inc.*............... 1,560,750
---------------
3,371,688
---------------
Total common stock
(cost $372,091,999)............. 449,991,936
---------------
SHORT-TERM INVESTMENTS--4.3%
<CAPTION>
CONTRACTS# PUT OPTIONS PURCHASED--0.1%
- ---------
<C> <S> <C>
S & P 500 Index
November 1993
293,750
500 (cost $395,250)................
<CAPTION>
PRINCIPAL
AMOUNT
(000)
- ---------
<C> <S> <C>
REPURCHASE AGREEMENT--4.2%
Joint Repurchase Agreement
Account, 3.30%, 10/1/93,
(Note 5)
$ 19,955 (cost $19,955,000)........... 19,955,000
---------------
TOTAL INVESTMENTS--99.9%
(cost $392,442,249; Note 4).. 470,240,686
Other assets in excess of
liabilities--0.1%............... 669,006
---------------
NET ASSETS--100%................. $ 470,909,692
---------------
---------------
<FN>
- ----------
* Non-income producing security.
# One contract relates to 100 units.
</TABLE>
B-27 See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
PRUDENTIAL GROWTH OPPORTUNITY FUND
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30,
ASSETS 1993
--------------
<S> <C>
Investments, at value (cost $392,442,249).................................... $ 470,240,686
Cash......................................................................... 31,297
Receivable for investments sold.............................................. 6,416,725
Receivable for Fund shares sold.............................................. 2,141,724
Dividends and interest receivable............................................ 517,677
Other assets................................................................. 6,346
--------------
Total assets............................................................... 479,354,455
--------------
LIABILITIES
Payable for investments purchased............................................ 6,523,387
Payable for Fund shares reacquired........................................... 1,148,200
Due to Distributors.......................................................... 316,871
Due to Manager............................................................... 264,223
Accrued expenses............................................................. 192,082
--------------
Total liabilities.......................................................... 8,444,763
--------------
NET ASSETS................................................................... $ 470,909,692
--------------
--------------
Net assets were comprised of:
Common stock, at par....................................................... $ 367,917
Paid-in capital in excess of par........................................... 368,218,089
--------------
368,586,006
Accumulated net investment income.......................................... 374,147
Accumulated net realized gains............................................. 24,151,102
Net unrealized appreciation................................................ 77,798,437
--------------
Net assets, September 30, 1993............................................... $ 470,909,692
--------------
--------------
Class A:
Net asset value and redemption price per share ($94,842,126 DIVIDED BY
7,263,528 shares of common stock issued and outstanding)................. $13.06
Maximum sales charge (5.25% of offering price)............................. .72
--------------
Maximum offering price to public........................................... $13.78
--------------
--------------
Class B:
Net asset value, offering price and redemption price per share
($376,067,566 DIVIDED BY 29,528,178 shares of common stock issued and
outstanding)............................................................. $12.74
--------------
--------------
</TABLE>
B-28 See Notes to Financial Statements.
<PAGE>
- ----------------------------------------------
PRUDENTIAL GROWTH OPPORTUNITY FUND
STATEMENT OF OPERATIONS
- ----------------------------------------------
- ----------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER
30,
NET INVESTMENT INCOME 1993
-----------
<S> <C>
Income
Dividends........................... $ 4,278,439
Interest............................ 725,979
Total income...................... 5,004,418
-----------
Expenses
Distribution fee--Class A........... 139,602
Distribution fee--Class B........... 2,786,595
Management fee...................... 2,439,222
Transfer agent's fees and
expenses.......................... 556,000
Custodian's fees and expenses....... 188,000
Registration fees................... 81,000
Audit fee........................... 51,000
Franchise taxes..................... 32,000
Directors' fees..................... 30,200
Miscellaneous....................... 12,217
-----------
Total expenses.................... 6,315,836
-----------
Net investment loss................... (1,311,418)
-----------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Net realized gain on investment
transactions........................ 23,835,926
Net increase in unrealized
appreciation of investments......... 64,901,994
-----------
Net gain on investments............... 88,737,920
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS..................... $87,426,502
-----------
-----------
</TABLE>
- ---------------------------------------------------
PRUDENTIAL GROWTH OPPORTUNITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
INCREASE (DECREASE) ----------------------------
IN NET ASSETS 1993 1992
------------- -------------
<S> <C> <C>
Operations
Net investment loss... $ (1,311,418) $ (866,396)
Net realized gain on
investment
transactions........ 23,835,926 30,931,321
Net change in
unrealized
appreciation of
investments......... 64,901,994 (5,813,471)
------------- -------------
Net increase in net
assets resulting
from operations..... 87,426,502 24,251,454
------------- -------------
Net equalization
credits............... 90,512....... 77,338
------------- -------------
Distributions to
shareholders from net
realized gain
(Note 1)
Class A................. (5,979,973) (1,123,970)
Class B................. (24,035,427) (5,108,906)
------------- -------------
(30,015,400) (6,232,876)
------------- -------------
Fund share transactions
(Note 6)
Net proceeds from shares
subscribed............ 453,141,309 191,903,901
Net asset value of
shares issued in
reinvestment of
distributions....... 28,283,287 5,861,357
Cost of shares
reacquired.......... (284,879,535) (142,823,741)
------------- -------------
Net increase in net
assets from Fund
share
transactions........ 196,545,061 54,941,517
------------- -------------
Total increase.......... 254,046,675 73,037,433
NET ASSETS
Beginning of year....... 216,863,017 143,825,584
------------- -------------
End of year............. $ 470,909,692 $ 216,863,017
------------- -------------
------------- -------------
</TABLE>
See Notes to Financial Statements.
B-29
<PAGE>
- --------------------------------------------------------------------------------
PRUDENTIAL GROWTH OPPORTUNITY FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Prudential Growth Opportunity Fund (the "Fund") is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company. The investment objective of the Fund is to achieve capital growth,
consistent with reasonable risk, by investing in a carefully selected portfolio
of common stocks having prospects of a high return on equity, increasing
earnings, increasing dividends and ratios which are not excessive.
NOTE 1. ACCOUNTING POLICIES
The following is a summary of significant accounting
policies followed by the Fund in the preparation of its
financial statements.
SECURITIES VALUATIONS: Investments traded on a national securities exchange are
valued at the last reported sales price on the primary exchange on which they
are traded. Securities traded in the over-the-counter market (including
securities listed on exchanges whose primary market is believed to be
over-the-counter) and listed securities for which no sale was reported on that
date are valued at the mean between the last reported bid and asked prices.
Short-term securities which mature in more than 60 days are valued based upon
current market quotations. Short-term securities which mature in 60 days or less
are valued at amortized cost.
In connection with transactions in repurchase agreements with U.S. financial
institutions, it is the Fund's policy that its custodian takes possession of the
underlying collateral securities, the value of which exceeds the principal
amount of the repurchase transaction, including accrued interest. If the seller
defaults and the value of the collateral declines or if bankruptcy proceedings
are commenced with respect to the seller of the security, realization of the
collateral by the Fund may be delayed or limited.
All securities are valued as of 4:15 P.M., New York time.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on the trade date. Realized gains and losses on sales of investments
are calculated on the identified cost basis. Dividend income is recorded on the
ex-dividend date; interest income is recorded on the accrual basis.
Net investment income (loss) (other than distribution fees) and unrealized and
realized gains or losses are allocated daily to each class of shares of the Fund
based upon the relative proportion of net assets of each class at the beginning
of the day.
FEDERAL INCOME TAXES: It is the Fund's policy to continue to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable net income to its shareholders.
Therefore, no federal income tax provision is required.
EQUALIZATION: The Fund follows the accounting practice known as equalization, by
which a portion of the proceeds from sales and costs of reacquisitions of Fund
shares, equivalent on a per share basis to the amount of distributable net
investment income on the date of the transaction, is credited or charged to
undistributed net investment income. As a result, undistributed net investment
income per share is unaffected by sales or reacquisitions of the Fund's shares.
DIVIDENDS AND DISTRIBUTIONS: The Fund expects to pay dividends of net investment
income, if any, semi-annually and make distributions at least annually of any
net capital gains. Dividends and distributions are recorded on the ex-dividend
date.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles.
RECLASSIFICATION OF CAPITAL ACCOUNTS: Effective October 1, 1992, the Fund began
accounting and reporting for distributions to shareholders in accordance with
Statement of Position 93-2: Determination, Disclosure, and Financial Statement
Presentation of Income, Capital Gain, and Return of Capital Distributions by
Investment Companies. The effect caused by adopting this statement was to
decrease paid-in capital and increase accumulated net investment income by
$710,937 compared to amounts previously reported through September 30, 1992.
During the fiscal year ended September 30, 1993, the Fund reclassified an
additional $1,311,418 of net operating losses as a charge to paid-in capital.
Net investment income, net realized gains, and net assets were not affected by
this change.
NOTE 2. AGREEMENTS
The Fund has a management agreement with Prudential
Mutual Fund Management, Inc. ("PMF"). Pursuant to this agreement, PMF has
responsibility for all investment advisory services and supervises the
subadviser's performance of such services. PMF has entered into a subadvisory
agreement with The Prudential Investment Corporation ("PIC"); PIC furnishes
investment advisory services in connection with the management of the Fund. PMF
pays for the cost of the subadviser's services, the compensation of officers of
the Fund, occupancy and certain clerical and bookkeeping costs of the Fund. The
Fund bears all other costs and expenses.
B-30
<PAGE>
The management fee paid PMF is computed daily and payable monthly, at an
annual rate of .70 of 1% of the Fund's average daily net assets.
The Fund has distribution agreements with Prudential Mutual Fund Distributors,
Inc. ("PMFD"), which acts as the distributor of the Class A shares of the Fund,
and with Prudential Securities Incorporated ("PSI"), which acts as distributor
of the Class B shares of the Fund (collectively the "Distributors"). To
reimburse the Distributors for their expenses incurred in distributing the
Fund's Class A and B shares, the Fund, pursuant to plans of distribution, pays
the Distributors a reimbursement accrued daily and payable monthly.
Pursuant to the Class A Plan, the Fund reimburses PMFD for its 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. Such expenses under the Class A Plan
were .20 of 1% of the average daily net assets of the Class A shares for the
fiscal year ended September 30, 1993. PMFD pays various broker-dealers including
PSI and Pruco Securities Corporation ("Prusec"), affiliated broker-dealers, for
account servicing fees and other expenses incurred by such broker-dealers.
Pursuant to the Class B Plan, the Fund reimburses PSI for its
distribution-related expenses with respect to Class B shares at an annual rate
of up to 1% of the average daily net assets of the Class B shares.
The Class B distribution expenses include commission credits for payment of
commissions and account servicing fees to financial advisers and an allocation
for overhead and other distribution-related expenses, interest and/or carrying
charges, the cost of printing and mailing prospectuses to potential investors
and of advertising incurred in connection with the distribution of shares.
The Distributors recover the distribution expenses and service fees incurred
through the receipt of reimbursement payments from the Fund under the plans and
the receipt of initial sales charges (Class A only) and contingent deferred
sales charges (Class B only) from shareholders.
PMFD has advised the Fund that it has received approximately $835,000 in
front-end sales charges resulting from sales of Class A shares during the fiscal
year ended September 30, 1993. From these fees, PMFD paid such sales charges to
dealers (PSI and Prusec) which in turn paid commissions to salesperson.s
With respect to the Class B Plan, at any given time the amount of expenses
incurred by PSI in distributing the Fund's shares and not recovered through the
imposition of contingent deferred sales charges in connection with certain
redemptions of shares may exceed the total payments made by the Fund pursuant to
the Class B Plan. PSI advised the Fund that for the fiscal year ended September
30, 1993, it received approximately $436,000 in contingent deferred sales
charges imposed upon certain redemptions by investors. PSI, as distributor, has
also advised the Fund that at September 30, 1993, the amount of distribution
expenses incurred by PSI and not yet reimbursed by the Fund or recovered through
contingent deferred sales charges approximated $4,548,000. This amount may be
recovered through future payments under the Class B Plan or contingent deferred
sales charges.
In the event of termination or noncontinuation of the Class B Plan, the Fund
would not be contractually obligated to pay PSI, as distributor, for any
expenses not previously reimbursed or recovered through contingent deferred
sales charges.
PMFD is a wholly-owned sudsidiary of PMF; PSI, PMF and PIC are indirect
wholly-owned subsidiaries of The Prudential Insurance Company of America.
NOTE 3. OTHER TRANSACTIONS WITH AFFILIATES
Prudential Mutual Fund Services, Inc. ("PMFS"), a
wholly-owned subsidiary of PMF, serves as the Fund's
transfer agent. During the fiscal year ended September 30, 1993, the Fund
incurred fees of approximately $423,000 for the services of PMFS. As of
September 30, 1993, approximately $106,000 of such fees were due to PMFS.
For the fiscal year ended September 30, 1993, PSI earned approximately $11,000
in brokerage commissions from portfolio transactions executed on behalf of the
Fund.
NOTE 4. PORTFOLIO SECURITIES
Purchases and sales of investment securities, other than
short-term investments, for the fiscal year ended
September 30, 1993 were $375,955,175 and $223,400,210, respectively.
The federal income tax basis of the Fund's investments at September 30, 1993
was substantially the same as the basis for financial reporting purposes and,
accordingly, net unrealized appreciation for federal income tax purposes was
$77,798,437 (gross unrealized appreciation--$89,217,610 gross unrealized
depreciation--$11,419,173).
NOTE 5. JOINT REPURCHASE AGREEMENT ACCOUNT
The Fund, along with other affiliated registered
investment companies, transfers uninvested cash balances
into a single joint account, the daily aggregate balance
of which is invested in one or more repurchase agreements collateralized by U.S.
Treasury or Federal agency obligations. As of September 30, 1993, the Fund had a
2.1% undivided interest in the repurchase agreements in the joint account. The
undivided interest for the Fund
B-31
<PAGE>
represented $19,955,000 in principal amount. As of such date, each repurchase
agreement in the joint account and the collateral therefor were as follows:
Bear, Stearns & Co., Inc., 3.35%, dated 9/30/93, in the principal amount of
$260,000,000, repurchase price $260,024,194, due 10/1/93; collateralized by
$14,430,000 U.S. Treasury Notes, 5.125%, due 3/31/98; $22,000,000 U.S. Treasury
Notes, 7.625%, due 5/31/96; $36,275,000 U.S. Treasury Notes, 8.50%, due 3/31/94;
$45,000,000 U.S. Treasury Notes, 6.875%, due 8/15/94; $91,570,000 U.S. Treasury
Bills, 3.35%, due 12/30/93 and $49,100,000 U.S. Treasury Notes, 5.375%, due
5/31/98; aggregate value including interest--$265,533,343.
Morgan Stanley & Co., Inc., 3.30%, dated 9/30/93, in the principal amount of
$275,000,000, repurchase price $275,025,208, due 10/1/93; collateralized by
$200,000,000 U.S. Treasury Notes, 8.50%, due 8/15/95 and $61,405,000 U.S.
Treasury Notes, 3.875%, due 3/31/95; aggregate value including
interest--$280,760,268.
Kidder, Peabody & Co., Inc., 3.40%, dated 9/30/93, in the principal amount of
$75,406,000, repurchase price $75,413,122, due 10/1/93; collateralized by
$15,385,000 U.S. Treasury Bonds, 8.750%, due 11/15/08 and $50,000,000 U.S.
Treasury Bonds, 7.250%, due 5/15/16; aggregate value including
interest--$77,089,431.
Merrill Lynch, Pierce, Fenner & Smith, Inc., 3.20%, dated 9/30/93, in the
principal amount of $150,000,000, repurchase price $150,013,333, due 10/1/93;
collateralized by $49,000,000 U.S. Treasury Notes, 8.50%, due 3/31/94,
$48,000,000 U.S. Treasury Notes, 7.875%, due 4/15/98, and $41,005,000 U.S.
Treasury Notes, 7.875%, due 1/15/98; aggregate value including accrued
interest--$153,247,629.
Morgan (J.P.) Securities, Inc., 3.25%, dated 9/30/93, in the principal amount
of $200,000,000, repurchase price $200,018,056, due 10/1/93; collateralized by
$150,000,000 U.S.Treasury Notes, 8.50%, due 7/15/97 and $30,890,000 U.S.
Treasury Notes, 3.875% due 3/31/95; aggregate value including
interest--$204,579,885.
NOTE 6. CAPITAL
The Fund offers both Class A and Class B shares. Class A
shares are sold with a front-end sales charge of up to 5.25%. Class B shares are
sold with a contingent deferred sales charge which declines from 5% to zero
depending on the period of time the shares are held. Both classes of shares have
equal rights as to earnings, assets and voting privileges except that each class
bears different distribution expenses and has exclusive voting rights with
respect to its distribution plan.
The Board of Directors approved an amendment to the Fund's Articles of
Incorporation increasing the number of authorized shares to 500 million at $.01
par value per share. The shares are divided into two classes, designated Class A
and Class B common stock, each of which consists of 250 million authorized
shares.
Transactions in shares of common stock for the fiscal years ended September
30, 1993 and 1992 were as follows:
<TABLE>
<CAPTION>
CLASS A SHARES AMOUNT
- ---------------------------- ----------- --------------
<S> <C> <C>
Year ended September 30,
1993:
Shares sold................. 7,753,935 $ 136,609,388
Shares issued in
reinvestment of
distributions.............. 350,531 5,794,272
Shares issued as a result of
3 for 2 stock split........ 2,387,650 --
Shares reacquired........... (5,886,921) (104,383,394)
Net increase in shares
outstanding................ 4,605,195 $ 38,020,266
----------- --------------
----------- --------------
Year ended September 30,
1992:
Shares sold................. 1,622,695 $ 26,713,658
Shares issued in
reinvestment of
distributions.............. 77,504 1,104,440
Shares reacquired........... (692,699) (11,444,964)
----------- --------------
Net increase in shares
outstanding................ 1,007,500 $ 16,373,134
----------- --------------
----------- --------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B SHARES AMOUNT
- -------------------------- ------------- ---------------
<S> <C> <C>
Year ended September 30,
1993:
Shares sold............... 18,585,281 $ 316,531,921
Shares issued in
reinvestment of
distributions............ 1,382,238 22,489,015
Shares issued as a result
of 3 for 2 stock split... 9,826,606 --
Shares reacquired......... (10,612,911) (180,496,141)
------------- ---------------
Net increase in shares
outstanding.............. 19,181,214 $ 158,524,795
------------- ---------------
------------- ---------------
Year ended September 30,
1992:
Shares sold............... 10,278,606 $ 165,190,243
Shares issued in
reinvestment of
distributions............ 337,131 4,756,917
Shares reacquired......... (8,098,135) (131,378,777)
------------- ---------------
Net increase in shares
outstanding.............. 2,517,602 $ 38,568,383
------------- ---------------
------------- ---------------
</TABLE>
B-32
<PAGE>
- --------------------------------------------------------------------------------
PRUDENTIAL GROWTH OPPORTUNITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
------------------------------------------ CLASS B
JANUARY -------------------------------------------------------------------
22, 1990+
YEAR ENDED SEPTEMBER 30, THROUGH YEAR ENDED SEPTEMBER 30,
------------------------------ SEPTEMBER -------------------------------------------------------------------
1993** 1992** 1991 30, 1990 1993** 1992** 1991 1990 1989
-------- -------- -------- --------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE
OPERATING
PERFORMANCE++:
Net asset
value,
beginning of
period........ $ 11.25 $ 10.16 $ 7.36 $ 8.55 $ 11.08 $ 10.11 $ 7.34 $ 9.11 $ 7.47
-------- -------- -------- --------- ----------- ----------- ----------- ----------- -----------
INCOME FROM
INVESTMENT
OPERATIONS
Net investment
income
(loss)........ .03 .02 .05 .09 (.06) (.07) (.02) .07 .06
Net realized
and unrealized
gain (loss) on
investment
transactions... 3.14 1.47 2.82 (1.20) 3.08 1.44 2.82 (1.75) 1.65
-------- -------- -------- --------- ----------- ----------- ----------- ----------- -----------
Total from
investment
operations... 3.17 1.49 2.87 (1.11) 3.02 1.37 2.80 (1.68) 1.71
LESS
DISTRIBUTIONS
Dividends from
net investment
income........ -- -- (.07) (.08) -- -- (.03) (.09) (.07)
Distributions
from net
realized
capital
gains......... (1.36) (.40) -- -- (1.36) (.40) -- -- --
-------- -------- -------- --------- ----------- ----------- ----------- ----------- -----------
Total
distributions... (1.36) (.40) (.07) (.08) (1.36) (.40) (.03) (.09) (.07)
-------- -------- -------- --------- ----------- ----------- ----------- ----------- -----------
Net asset
value, end of
period........ $ 13.06 $ 11.25 $ 10.16 $ 7.36 $ 12.74 $ 11.08 $ 10.11 $ 7.34 $ 9.11
-------- -------- -------- --------- ----------- ----------- ----------- ----------- -----------
-------- -------- -------- --------- ----------- ----------- ----------- ----------- -----------
TOTAL
RETURN#:...... 30.42% 15.39% 39.39% (13.19)% 29.40% 14.27% 38.33% (18.63)% 23.20%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end
of period
(000)......... $ 94,842 $ 44,845 $ 25,165 $17,222 $ 376,068 $ 172,018 $ 118,660 $ 86,440 $ 160,995
Average net
assets
(000)......... $ 69,801 $ 36,011 $ 20,650 $132,627 $ 278,659 $ 154,601 $ 104,508 $ 132,622 $ 144,244
Ratios to
average net
assets:
Expenses,
including
distribution
fees....... 1.17% 1.33% 1.50% 1.61%* 1.97% 2.13% 2.30% 2.18% 1.79%
Expenses,
excluding
distribution
fees....... .97% 1.13% 1.30% 1.42%* .97% 1.13% 1.30% 1.28% 1.17%
Net
investment
income
(loss)..... .26% .19% .59% 1.54%* (.54)% (.61)% (.21)% .91% .74%
Portfolio
turnover...... 68% 99% 111% 79% 68% 99% 111% 79% 79%
<FN>
- ------------------------------
* Annualized.
** Calculated based upon weighted average shares outstanding during the
period.
+ Commencement of offering of Class A shares.
# Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
++ Restated to reflect 3 for 2 stock split paid to shareholders of record on
September 17, 1993.
</TABLE>
See Notes to Financial Statements.
B-33
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
Prudential Growth Opportunity Fund
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Prudential Growth Opportunity Fund
(the "Fund") at September 30, 1993, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at September 30, 1993 by correspondence with the
custodian and brokers, and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE
New York, New York
November 8, 1993
B-34
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS:
(1) The Financial Statements in Parts A and B, as applicable, to this
Post-Effective Amendment to the Registration Statement on Form N-1A (File
No. 2-68723).
Financial Highlights for the ten year period ended September 30,
1993 (Part A).
Portfolio of Investments at September 30, 1993 (Part B).
Statement of Assets and Liabilities at September 30, 1993 (Part
B).
Statement of Operations for the Year ended September 30, 1993
(Part B).
Statement of Changes in Net Assets for each of the two years in
the period ended September 30, 1993 (Part B).
Notes to Financial Statements (Part B).
Financial Highlights for each of the five years in the period
ended September 30, 1993 (Part B).
Report of Independent Accountants (Part B).
(B) EXHIBITS:
1. (a) Amended and Restated Articles of Incorporation. Incorporated by
reference to Exhibit 1(e) to Post-Effective Amendment No. 17 to the
Registration Statement filed on Form N-1A via EDGAR filed on November 29,
1993 (File No. 2-68723).
(b)_Form of Amended and Restated Articles of Incorporation.*
2. Amended and Restated By-Laws. Incorporated by reference to Exhibit 2(d)
to Post-Effective Amendment No. 17 to the Registration Statement on Form
N-1A via EDGAR filed on November 29, 1993 (File No. 2-68723).
4. Instruments defining rights of holders of the securities being offered.
Incorporated by reference to Exhibit 4(c) to Post-Effective Amendment No.
17 to the Registration Statement filed on form N-1A via EDGAR filed on
November 29, 1993 (File No. 2-68723).
5. (a) Management Agreement between the Registrant and Prudential Mutual
Fund Management Inc. Incorporated by reference to Exhibit No. 5(a) to
Post-Effective Amendment No. 13 to the Registration Statement on Form
N-1A (File No. 2-68723).
(b) Subadvisory Agreement between Prudential Mutual Fund Management,
Inc. and The Prudential Investment Corporation, incorporated by reference
to Exhibit No. 5(b) to Post-Effective Amendment No. 13 to the
Registration Statement on Form N-1A (File No. 2-68723).
6. (a) Distribution Agreement between the Registrant and Prudential Mutual
Fund Distributors, Inc. for Class A shares dated July 1, 1993.
Incorporated by reference to Exhibit No. 6(d) to Post-Effective Amendment
17 to the Registration Statement on Form N-1A via EDGAR filed on November
29, 1993 (File No. 2-68723).
(b) Distribution Agreement between the Registrant and Prudential
Securities Incorporated for Class B shares dated July 1, 1993.
Incorporated by reference to Exhibit No. 6(e) to Post-Effective Amendment
17 to the Registration Statement on Form N-1A via EDGAR filed on November
29, 1993 (File No. 2-68723).
(c) Form of Distribution and Service Agreement for Class A shares.*
(d) Form of Distribution and Service Agreement for Class B shares.*
(e) Form of Distribution and Service Agreement for Class C shares.*
C-1
<PAGE>
8. (a) Custodian Contract between the Registrant and State Street Bank and
Trust Company, dated July 13, 1984, incorporated by reference to Exhibit
No. 8 to Post-Effective Amendment No. 6 to the Registration Statement on
Form N-1A (File No. 2-68723).
(b) Amended Custodian Agreement between the Registrant and State Street
Bank and Trust Company. Incorporated by reference to Exhibit No. 8(b) to
Post-Effective Amendment 14 to the Registration Statement on Form N-1A
(File No. 2-68723).
9. Transfer Agency Agreement between the Registrant and Prudential Mutual
Fund Services, Inc., dated January 1, 1988. Incorporated by reference to
Exhibit No. 9 to Post-Effective Amendment No. 10 to the Registration
Statement on Form N-1A (File No. 2-68723).
10. Opinion of Sullivan & Cromwell. Incorporated by reference to Exhibit No.
10 to Post-Effective Amendment No. 1 to the Registration Statement on
Form N-1A (File No. 2-68723).
11. Consent of Independent Accountants.*
13. Purchase Agreement. Incorporated by reference to Exhibit No. 13 to
Post-Effective Amendment No. 1 to the Registration Statement on Form N-1A
(File No. 2-68723).
15. (a) Distribution and Service Plan for Class A shares dated July 1, 1993.
Incorporated by reference to Exhibit No. 15(d) to Post-Effective
Amendment 17 to the Registration Statement on Form N-1A via EDGAR filed
on November 29, 1993 (File No. 2-68723).
(b) Distribution and Service Plan for Class B shares dated July 1, 1993.
Incorporated by reference to Exhibit No. 15(e) to Post-Effective
Amendment 17 to the Registration Statement on Form N-1A via EDGAR filed
on November 29, 1993 (File No. 2-68723).
(c) Form of Distribution and Service Plan for Class A shares.*
(d) Form of Distribution and Service Plan for Class B shares.*
(e) Form of Distribution and Service Plan for Class C shares.*
16. (a) Schedule of Computation of Performance Quotations. Incorporated by
reference to Exhibit No. 16 to Post-Effective Amendment No. 13 to
Registration Statement on Form N-1A (File No. 2-68723).
(b) Schedule of Computation of 30-day yield. Incorporated by reference
to Exhibit No. 16(b) to Post-Effective Amendment 17 to the Registration
Statement on Form N-1A via EDGAR filed on November 29, 1993 (File No.
2-68723).
Other Exhibits
Power of Attorney for:
Delayne Dedrick Gold**
Arthur Hauspurg**
Harry A. Jacobs, Jr.**
Thomas J. McCormack**
Lawrence C. McQuade**
- ------------------------
*Filed herewith.
**Incorporated by reference to Post-Effective Amendment No. 12 to Registration
Statement on Form N-1A (File No. 2-68723)
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
C-2
<PAGE>
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
As of March 31, 1994 there were 3,896 and 20,946 record holders of Class A
and Class B common stock, $.01 par value per share, of the Registrant,
respectively.
ITEM 27. INDEMNIFICATION.
As permitted by Sections 17(h) and (i) of the Investment Company Act of 1940
(the 1940 Act) and pursuant to Article VI of the Fund's By-Laws (Exhibit 2 to
the Registration Statement), officers, directors, employees and agents of the
Registrant will not be liable to the Registrant, any stockholder, officer,
director, employee, agent or other person for any action or failure to act,
except for bad faith, willful misfeasance, gross negligence or reckless
disregard of duties, and those individuals may be indemnified against
liabilities in connection with the Registrant, subject to the same exceptions.
Section 2-418 of Maryland General Corporation Law permits indemnification of
directors who acted in good faith and reasonably believed that the conduct was
in the best interests of the Registrant. As permitted by Section 17(i) of the
1940 Act, pursuant to Section 10 of each Distribution Agreement (Exhibits 6(b)
and (c) to the Registration Statement), each 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 (Securities Act) may be permitted to directors, 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 director, 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 director,
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 has purchased an insurance policy insuring its officers and
directors against liabilities, and certain costs of defending claims against
such officers and directors, to the extent such officers and directors 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 directors under certain circumstances.
Section 9 of the Management Agreement (Exhibit 5(a) to the Registration
Statement) and Section 4 of the Subadvisory Agreement (Exhibit 5(b) to the
Registration Statement) limit the liability of Prudential Mutual Fund
Management, Inc. (PMF) and The Prudential Investment Corporation (PIC),
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 each 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 Sections 17(h) and 17(i) of such Act remain
in effect and are consistently applied.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
(a) Prudential Mutual Fund Management, Inc.
See "How the Fund is Managed" in the Prospectus constituting Part A of this
Registration Statement and "Manager" in the Statement of Additional Information
constituting Part B of this Registration Statement.
The business and other connections of the officers of PMF are listed in
Schedules A and D of Form ADV of PMF as currently on file with the Securities
and Exchange Commission, the text of which is hereby incorporated by reference
(File No. 801-31104, filed in October 1993).
The business and other connections of PMF's directors and principal
executive officers are set forth below. Except as otherwise indicated, the
address of each person is One Seaport Plaza, New York, NY 10292.
C-3
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH PMF PRINCIPAL OCCUPATIONS
- ------------------------- --------------------- ----------------------------------------------------------------
<S> <C> <C>
Brendan D. Boyle Executive Vice Executive Vice President and Director of Marketing, PMF
President and
Director of Marketing
John D. Brookmeyer, Jr. Director Senior Vice President, The Prudential Insurance Company of
Two Gateway Center America (Prudential) Senior Vice President (PIC);
Newark, NJ 07102
Susan C. Cote Senior Vice President Senior Vice President, PMF; Senior Vice President, Prudential
Securities
Fred A. Fiandaca Executive Vice Executive Vice President, Chief Operating Officer and Director,
Raritan Plaza One President, Chief PMF; Chairman, Chief Operating Officer and Director,
Edison, NJ 08847 Operating Officer and Prudential Mutual Fund Services, Inc.
Director
Stephen P. Fisher Senior Vice President Senior Vice President, PMF; Senior Vice President, Prudential
Securities
Frank W. Giordano Executive Vice Executive Vice President, General Counsel and Secretary, PMF;
President, General Senior Vice President, Prudential Securities
Counsel and Secretary
Robert F. Gunia Executive Vice Executive Vice President, Chief Administrative Officer, Chief
President, Chief Financial Officer and Director, PMF; Senior Vice President,
Administrative Prudential Securities
Officer, Chief
Financial Officer and
Director
Eugene B. Heimberg Director Senior Vice President, Prudential; President, Director and Chief
Prudential Plaza Investment Officer, PIC
Newark, NJ 07101
Lawrence C. McQuade Vice Chairman Vice Chairman, PMF
Leland B. Paton Director Executive Vice President and Director, Prudential Securities;
Director, Prudential Securities Group, Inc. (PSG)
Richard A. Redeker President, Chief President, Chief Executive Officer and Director, PMF; Executive
Executive Officer and Vice President, Director and Member of Operating Committee,
Director Prudential Securities; Director, PSG
S. Jane Rose Senior Vice Senior Vice President, Senior Counsel and Assistant Secretary,
President, Senior PMF; Senior Vice President and Senior Counsel, Prudential
Counsel and Assistant Securities
Secretary
Donald G. Southwell Director Senior Vice President, Prudential; Director, PSG
213 Washington Street
Newark, NJ 07102
</TABLE>
(b) Prudential Investment Corporation (PIC)
See "How the Fund is Managed -- Subadviser" in the Prospectus constituting
Part A of this Registration Statement and "Subadviser" 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 07101.
C-4
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH PIC PRINCIPAL OCCUPATIONS
- ------------------------- --------------------- ----------------------------------------------------------------
<S> <C> <C>
Martin A. Berkowitz Senior Vice Senior Vice President, Chief Financial Officer and Chief
President, Chief Compliance Officer, PIC; Vice President, Prudential
Financial Officer and
Chief Compliance
Officer
William M. Bethke Senior Vice President Senior Vice President, Prudential; Senior Vice President, PIC
Two Gateway Center
Newark, NJ 07102
John D. Brookmeyer, Jr. Senior Vice President Senior Vice President, Prudential; Senior Vice President, PIC
Two Gateway Center
Newark, NJ 07102
Eugene B. Heimberg President, Director Senior Vice President, Prudential; President, Director and Chief
and Chief Investment Investment Officer, PIC
Officer
Garnett L. Keith, Jr. Director Vice Chairman and Director, Prudential; Director, PIC
Harry E. Knapp, Jr. Vice President Vice President, Prudential; Vice President, PIC
Four Gateway Center
Newark, NJ 07102
William P. Link Senior Vice President Executive Vice President, Prudential; Senior Vice President, PIC
Four Gateway Center
Newark, NJ 07102
Robert E. Riley Executive Vice Executive Vice President, Prudential; Executive Vice President,
800 Boylston Avenue President PIC; Director, PSG
Boston, MA 02199
James W. Stevens Executive Vice Executive Vice President, Prudential; Executive Vice President,
Four Gateway Center President PIC; Director, PSG
Newark, NJ 07102
Robert C. Winters Director Chairman of the Board and Chief Executive Officer, Prudential;
Director, PIC; Chairman of the Board and Director, PSG
Claude J. Zinngrabe, Jr. Executive Vice Vice President, Prudential; Executive Vice President, PIC
President
</TABLE>
ITEM 29. PRINCIPAL UNDERWRITERS.
(a)(i) Prudential Securities Incorporated
Prudential Securities is distributor for Prudential Government Securities
Trust (Intermediate Term Series), The Target Portfolio Trust and for Class B
shares of Prudential Adjustable Rate Securities, Inc., Prudential California
Municipal Fund (California Series), Prudential Equity Fund, Inc., Prudential
Equity Income Fund, Prudential FlexiFund, Prudential Global Fund, Inc.,
Prudential-Bache Global Genesis Fund, Inc. (d/b/a Prudential Global Genesis
Fund), Prudential-Bache Global Natural Resources Fund, Inc. (d/b/a Prudential
Global Natural Resources Fund), Prudential-Bache GNMA Fund, Inc. (d/b/a
Prudential GNMA Fund), Prudential-Bache Government Plus Fund, Inc. (d/b/a
Prudential Government Plus Fund), Prudential Growth Fund, Inc., Prudential-Bache
Growth Opportunity Fund, Inc. (d/b/a Prudential Growth Opportunity Fund),
Prudential-Bache High Yield Fund, Inc. (d/b/a Prudential High Yield Fund),
Prudential IncomeVertible (R) Fund, Inc., Prudential Intermediate Global Income
Fund, Inc., Prudential Multi-Sector Fund, Inc., Prudential Municipal Bond Fund,
Prudential Municipal Series Fund (except New York Money Market Series,
Connecticut Money Market Series, Massachusetts Money Market Series, New Jersey
Money Market Series and Florida Series), Prudential-Bache National Municipals
Fund, Inc. (d/b/a Prudential National Municipals Fund), Prudential Pacific
Growth Fund, Inc., Prudential Short-Term Global Income Fund, Inc., Prudential
U.S. Government Fund,
C-5
<PAGE>
Prudential-Bache Utility Fund, Inc. (d/b/a Prudential Utility Fund), Global
Utility Fund, Inc., Nicholas-Applegate Fund, Inc. (Nicholas-Applegate Growth
Equity Fund) and The BlackRock Government Income Trust. Prudential Securities is
also a depositor for the following unit investment trusts:
The Corporate Income Fund
Corporate Investment Trust Fund
Equity Income Fund
Government Securities Income Fund
International Bond Fund
Municipal Investment Trust
Prudential Equity Trust Shares
National Equity Trust
Prudential Unit Trusts
Government Securities Equity Trust
National Municipal Trust
(ii) Prudential Mutual Fund Distributors, Inc.
Prudential Mutual Fund Distributors, Incorporated is distributor for Command
Government Fund, Command Money Fund, Command Tax-Free Fund, Prudential
California Municipal Fund (California Money Market Series, California Income
Series and Class A Shares of the California Series), Prudential Institutional
Liquidity Portfolio, Prudential Intermediate Global Income Fund, Inc.,
Prudential-Bache Special Money Market Fund, Inc. (d/b/a Prudential Special Money
Market Fund), Prudential-Bache Structured Maturity Fund, Inc. (d/b/a Prudential
Structured Maturity Fund), Prudential-Bache Tax-Free Money Fund, Inc. (d/b/a
Prudential Tax-Free Money Fund), and for Class A shares of Prudential Adjustable
Rate Securities, Inc., Prudential Equity Fund, Inc., Prudential Equity Income
Fund, Prudential FlexiFund, Prudential Global Fund, Inc., Prudential-Bache
Global Genesis Fund, Inc. (d/b/a Prudential Global Genesis Fund),
Prudential-Bache Global Natural Resources Fund, Inc. (d/b/a Prudential Global
Natural Resources Fund), Prudential-Bache GNMA Fund, Inc. (d/b/a Prudential GNMA
Fund), Prudential-Bache Government Plus Fund, Inc. (d/b/a Prudential Government
Plus Fund), Prudential Government Securities Trust (Money Market Series and U.S.
Treasury Money Market Series), Prudential Growth Fund, Inc., Prudential-Bache
Growth Opportunity Fund, Inc. (d/b/a Prudential Growth Opportunity Fund),
Prudential-Bache High Yield Fund, Inc. (d/b/a Prudential High Yield Fund),
Prudential IncomeVertible(R) Fund, Inc., Prudential Intermediate Global Income
Fund, Inc., Prudential-Bache MoneyMart Assets Inc. (d/b/a Prudential MoneyMart
Assets Fund), Prudential Multi-Sector Fund, Inc., Prudential Municipal Bond
Fund, Prudential Municipal Series Fund (Connecticut Money Market Series,
Massachusetts Money Market Series, New York Money Market Series, New Jersey
Money Market Series, Florida Series and Class A Shares of all other Series),
Prudential-Bache National Municipals Fund, Inc. (d/b/a Prudential National
Municipals Fund), Prudential Pacific Growth Fund, Inc., Prudential Short-Term
Global Income Fund, Inc., Prudential U.S. Government Fund, Prudential-Bache
Utility Fund, Inc. (d/b/a Prudential Utility Fund), Global Utility Fund, Inc.,
Nicholas-Applegate Fund, Inc. (Nicholas-Applegate Growth Equity Fund) and The
BlackRock Government Income Trust.
(b)(i) Information concerning the officers and directors of Prudential
Securities Incorporated is set forth below.
<TABLE>
<CAPTION>
POSITIONS AND POSITIONS AND
OFFICES WITH OFFICES WITH
NAME* UNDERWRITER REGISTRANT
- --------------------------------------- -------------------------------------------------------------- --------------
<S> <C> <C>
Alan D. Hogan.......................... Executive Vice President, Chief Administrative Officer and None
Director
Howard A. Knight....................... Executive Vice President, Director, Corporate Strategy and New None
Business Development
George A. Murray....................... Executive Vice President and Director None
John P. Murray......................... Executive Vice President and Director of Risk Management None
Leland B. Paton........................ Executive Vice President and Director None
Richard A. Redeker..................... Director None
Hardwick Simmons....................... Chief Executive Officer, President and Director None
Lee Spencer............................ Interim General Counsel None
<FN>
- ------------------------
* The address of each person named in One Seaport Plaza, New York, NY 10292
</TABLE>
C-6
<PAGE>
(ii) Information concerning the officers and directors of Prudential Mutual
Fund Distributors, Inc. is set forth below.
<TABLE>
<CAPTION>
POSITIONS AND POSITIONS AND
OFFICES WITH OFFICES WITH
NAME (1) UNDERWRITER REGISTRANT
- --------------------------------------- -------------------------------------------------------------- --------------
<S> <C> <C>
Joanne Accurso-Soto.................... Vice President None
Dennis Annarumma....................... Vice President, Assistant Treasurer and Assistant Comptroller None
Phyllis J. Berman...................... Vice President None
Fred A. Fiandaca....................... President, Chief Executive Officer and Director None
Raritan Plaza One
Edison, NJ 08847
Stephen P. Fisher...................... Vice President None
Frank W. Giordano...................... Executive Vice President, General Counsel, Secretary and None
Director
Robert F. Gunia........................ Executive Vice President, Treasurer, Comptroller and Director Vice President
Andrew J. Varley....................... Vice President None
Anita L. Whelan........................ Vice President and Assistant Secretary None
<FN>
- ------------------------
(1) The address of each person named is One Seaport Plaza, New York, NY 10292
unless otherwise indicated.
</TABLE>
(c) Registrant has no principal underwriter who is not an affiliated person
of the Registrant.
ITEM 30. 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, the Registrant, One Seaport Plaza, New
York, New York, and Prudential Mutual Fund Services, Inc., Raritan Plaza One,
Edison, New Jersey. Documents required by Rules 31a-1(b)(5), (6), (7), (9), (10)
and (11) and 31a-1(f) will be kept at Three Gateway Center, documents required
by Rules 31a-1(b)(4) and (11) and 31a-1(d) at One Seaport Plaza 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, Inc.
ITEM 31. MANAGEMENT SERVICES.
Other than as set forth under the captions "How the Fund is Managed --
Manager" and "How the Fund is Managed -- Distributor" in the Prospectus and the
captions "Manager" and "Distributor" 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 32. UNDERTAKINGS.
The Registrant hereby undertakes to furnish each person to whom a Prospectus
is delivered with a copy of Registrant's latest annual report to shareholders
upon request and without charge.
C-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
and State of New York, on the 5th day of May, 1994.
PRUDENTIAL-BACHE GROWTH OPPORTUNITY FUND, INC.
(doing business as Prudential Growth Opportunity Fund)
/s/ Lawrence C. McQuade
---------------------------------------------------------------------------
(LAWRENCE C. MCQUADE, PRESIDENT)
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the 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/ Lawrence C. McQuade President and Director May 5, 1994
- ------------------------------------
LAWRENCE C. MCQUADE
/s/ Delayne Dedrick Gold Director May 5, 1994
- ------------------------------------
DELAYNE DEDRICK GOLD
/s/ Arthur Hauspurg Director May 5, 1994
- ------------------------------------
ARTHUR HAUSPURG
/s/ Harry A. Jacobs, Jr. Director May 5, 1994
- ------------------------------------
HARRY A. JACOBS, JR.
/s/ Thomas J. McCormack Director May 5, 1994
- ------------------------------------
THOMAS J. MCCORMACK
/s/ Stephen P. Munn Director May 5, 1994
- ------------------------------------
STEPHEN P. MUNN
/s/ Richard A. Redeker Director May 5, 1994
- ------------------------------------
RICHARD A. REDEKER
/s/ Louis A. Weil, III Director May 5, 1994
- ------------------------------------
LOUIS A. WEIL, III
/s/ Susan C. Cote Treasurer and Principal May 5, 1994
- ------------------------------------ Financial and Accounting
SUSAN C. COTE Officer
</TABLE>
<PAGE>
EXHIBIT INDEX
(B) EXHIBITS:
1. (a)_Amended and Restated Articles of Incorporation. Incorporated by
reference to Exhibit 1(e) to Post-Effective Amendment No. 17 to the
Registration Statement filed on Form N-1A via EDGAR filed on November 29,
1993 (File No. 2-68723).
(b)_Form of Amended and Restated Articles of Incorporation.*
2. Amended and Restated By-Laws. Incorporated by reference to Exhibit 2(d)
to Post-Effective Amendment No. 17 to Registration Statement on Form N-1A
via EDGAR filed on November 29, 1993 (File No. 2-68723).
4. Instruments defining rights of holders of the securities being offered.
Incorporated by reference to Exhibit 4(c) to Post-Effective Amendment No.
17 to the Registration Statement filed on form N-1A via EDGAR filed on
November 29, 1993 (File No. 2-68723).
5. (a)_Management Agreement between the Registrant and Prudential Mutual
Fund Management Inc. Incorporated by reference to Exhibit No. 5(a) to
Post-Effective Amendment No. 13 to the Registration Statement on Form
N-1A (File No. 2-68723).
(b)_Subadvisory Agreement between Prudential Mutual Fund Management,
Inc. and The Prudential Investment Corporation, incorporated by reference
to Exhibit No. 5(b) to Post-Effective Amendment No. 13 to the
Registration Statement on Form N-1A (File No. 2-68723).
6. (a)_Distribution Agreement between the Registrant and Prudential Mutual
Fund Distributors, Inc. for Class A shares dated July 1, 1993.
Incorporated by reference to Exhibit No. 6(d) to Post-Effective Amendment
17 to the Registration Statement on Form N-1A via EDGAR filed on November
29, 1993 (File No. 2-68723).
(b)_Distribution Agreement between the Registrant and Prudential
Securities Incorporated for Class B shares dated July 1, 1993.
Incorporated by reference to Exhibit No. 6(e) to Post-Effective Amendment
17 to the Registration Statement on Form N-1A via EDGAR filed on November
29, 1993 (File No. 2-68723).
(c)_Form of Distribution and Service Agreement for Class A shares.*
(d)_Form of Distribution and Service Agreement for Class B shares.*
(e)_Form of Distribution and Service Agreement for Class C shares.*
8. (a)_Custodian Contract between the Registrant and State Street Bank and
Trust Company, dated July 13, 1984, incorporated by reference to Exhibit
No. 8 to Post-Effective Amendment No. 6 to the Registration Statement on
Form N-1A (File No. 2-68723).
(b)_Amended Custodian Agreement between the Registrant and State Street
Bank and Trust Company. Incorporated by reference to Exhibit No. 8(b) to
Post-Effective Amendment 14 to the Registration Statement on Form N-1A
(File No. 2-68723).
9. Transfer Agency Agreement between the Registrant and Prudential Mutual
Fund Services, Inc., dated January 1, 1988. Incorporated by reference to
Exhibit No. 9 to Post-Effective Amendment No. 10 to the Registration
Statement on Form N-1A (File No. 2-68723).
10. Opinion of Sullivan & Cromwell. Incorporated by reference to Exhibit No.
10 to Post-Effective Amendment No. 1 to the Registration Statement on
Form N-1A (File No. 2-68723).
11. Consent of Independent Accountants.*
13. Purchase Agreement. Incorporated by reference to Exhibit No. 13 to
Post-Effective Amendment No. 1 to the Registration Statement on Form N-1A
(File No. 2-68723).
15. (a)_Distribution and Service Plan for Class A shares dated July 1, 1993.
Incorporated by reference to Exhibit No. 15(d) to Post-Effective
Amendment 17 to the Registration Statement on Form N-1A via EDGAR filed
on November 29, 1993 (File No. 2-68723).
<PAGE>
(b)_Distribution and Service Plan for Class B shares dated July 1, 1993.
Incorporated by reference to Exhibit No. 15(e) to Post-Effective
Amendment 17 to the Registration Statement on Form N-1A via EDGAR filed
on November 29, 1993 (File No. 2-68723).
(c)_Form of Distribution and Service Plan for Class A shares.*
(d)_Form of Distribution and Service Plan for Class B shares.*
(e)_Form of Distribution and Service Plan for Class C shares.*
16. (a)_Schedule of Computation of Performance Quotations. Incorporated by
reference to Exhibit No. 16 to Post-Effective Amendment No. 13 to
Registration Statement on Form N-1A (File No. 2-68723).
(b)_Schedule of Computation of 30-day yield. Incorporated by reference
to Exhibit No. 16(b) to Post-Effective Amendment 17 to the Registration
Statement on Form N-1A via EDGAR filed on November 29, 1993 (File No.
2-68723).
Other Exhibits
Power of Attorney for:
Delayne Dedrick Gold**
Arthur Hauspurg**
Harry A. Jacobs, Jr.**
Thomas J. McCormack**
Lawrence C. McQuade**
- ------------------------
*Filed herewith.
**Incorporated by reference to Post-Effective Amendment No. 12 to Registration
Statement on Form N-1A (File No. 2-68723)
<PAGE>
Exhibit 1(b)
PRUDENTIAL-BACHE GROWTH OPPORTUNITY FUND, INC.
ARTICLES OF AMENDMENT AND RESTATEMENT
Prudential-Bache Growth Opportunity Fund, Inc., a Maryland corporation,
having its principal office in the city of Baltimore (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland, that:
FIRST: The Corporation desires to amend and restate its charter as
currently in effect and the charter of the Corporation is amended by deleting
Articles I through IX in their entirety and substituting new Articles I through
IX and, as so amended, is restated as follows:
"Article I
NAME
The name of the corporation (hereinafter called the "Corporation") is
Prudential-Bache Growth Opportunity Fund, Inc.
Article II
PURPOSES
The purpose for which the Corporation is formed is to act as an open-end
investment company of the management type registered as such with the Securities
and Exchange Commission pursuant to the Investment Company Act of 1940 and to
exercise and generally to enjoy all of the powers, rights and privileges granted
to, or conferred upon, corporations by the General Laws of the State of Maryland
now or hereafter in force.
<PAGE>
Article III
ADDRESS IN MARYLAND
The post office address of the place at which the principal office of the
Corporation in the State of Maryland is located is c/o CT Corporation System, 32
South Street, Baltimore, Maryland 21202.
The name of the Corporation's resident agent is The Corporation Trust
Incorporated, and its post office address is 32 South Street, Baltimore,
Maryland 21202. Said resident agent is a corporation of the State of Maryland.
Article IV
COMMON STOCK
Section 1. The total number of shares of capital stock which the
Corporation shall have authority to issue is 750,000,000 shares of the par value
of $.01 per share and of the aggregate par value of $7,500,000 to be divided
initially into three classes, consisting of 250,000,000 shares of Class A Common
Stock, 250,000,000 shares of Class B Common Stock and 250,000,000 of Class C
Common Stock.
(a) Each share of Class A, Class B and Class C Common Stock of the
Corporation shall represent the same interest in the Corporation and have
identical voting, dividend, liquidation and other rights except that (i)
Expenses related to the distribution of each class of shares shall be borne
solely by such class; (ii) The bearing of such expenses solely by shares of
each class shall be appropriately reflected (in
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the manner determined by the Board of Directors) in the net asset value,
dividends, distribution and liquidation rights of the shares of such class;
(iii) The Class A Common Stock shall be subject to a front-end sales load
and Rule 12b-1 distribution fee as determined by the Board of Directors
from time to time; (iv) The Class B Common Stock shall be subject to a
contingent deferred sales charge and a Rule 12b-1 distribution fee as
determined by the Board of Directors from time to time; and (v) The Class C
Common Stock shall not be subject to either an initial or a contingent
deferred sales charge but shall be subject to a Rule 12b-1 distribution fee
as determined by the Board of Directors from time to time. All shares of
each particular class shall represent an equal proportionate interest in
that class, and each share of any particular class shall be equal to each
other share of that class.
(b) Each share of the Class B Common Stock of the Corporation, shall
be converted automatically, and without any action or choice on the part of
the holder thereof, into shares (including fractions thereof) of the Class
A Common Stock of the Corporation (computed in the manner hereinafter
described), at the applicable net asset value of each Class, at the time of
the calculation of the net asset value of such Class B Common Stock at such
times, which may vary between shares originally issued for cash and shares
purchased through the automatic reinvestment of dividends and distributions
with
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respect to Class B Common Stock (each "Conversion Date"), determined by the
Board of Directors in accordance with applicable laws, rules, regulations
and interpretations of the Securities and Exchange Commission and the
National Association of Securities Dealers, Inc. and pursuant to such
procedures as may be established from time to time by the Board of
Directors and disclosed in the Corporation's then current prospectus for
such Class A and Class B Common Stock.
(c) The number of shares of the Class A Common Stock of the
Corporation into which a share of the Class B Common Stock is converted
pursuant to Paragraph (1)(b) hereof shall equal the number (including for
this purpose fractions of a share) obtained by dividing the net asset value
per share of the Class B Common Stock for purposes of sales and redemptions
thereof at the time of the calculation of the net asset value on the
Conversion Date by the net asset value per share of the Class A Common
Stock for purposes of sales and redemptions thereof at the time of the
calculation of the net asset value on the Conversion Date.
(d) On the Conversion Date, the shares of the Class B Common
Stock of the Corporation converted into shares of the Class A Common
Stock will cease to accrue dividends and will no longer be outstanding
and the rights of the holders thereof will cease (except the right to
receive declared but unpaid dividends to the Conversion Date).
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(e) The Board of Directors shall have full power and authority to
adopt such other terms and conditions concerning the conversion of
shares of the Class B Common Stock to shares of the Class A Common
Stock as they deem appropriate; provided such terms and conditions are
not inconsistent with the terms contained in this Section 1 and
subject to any restrictions or requirements under the Investment
Company Act of 1940 and the rules, regulations and interpretations
thereof promulgated or issued by the Securities and Exchange
Commission or any conditions or limitations contained in an order
issued by the Securities and Exchange Commission applicable to the
Corporation, or any restrictions or requirements under the Internal
Revenue Code of 1986, as amended, and the rules, regulations and
interpretations promulgated or issued thereunder.
Section 2. The Board of Directors may, in its discretion, classify and
reclassify any unissued shares of the capital stock of the Corporation into one
or more additional or other classes or series by setting or changing in any one
or more respects the designations, conversion or other rights, restrictions,
limitations as to dividends, qualifications or terms or conditions of redemption
of such shares and pursuant to such classification or reclassification to
increase or decrease the number of authorized shares of any existing class or
series. If designated by the Board of Directors, particular classes or series
of capital stock may
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relate to separate portfolios of investments.
Section 3. Unless otherwise expressly provided in the charter of the
Corporation, including any Articles Supplementary creating any class or series
of capital stock, the holders of each class and series of capital stock of the
Corporation shall be entitled to dividends and distributions in such amounts and
at such times as may be determined by the Board of Directors, and the dividends
and distributions paid with respect to the various classes or series of capital
stock may vary among such classes or series. Expenses related to the
distribution of, and other identified expenses that should properly be allocated
to, the shares of a particular class or series of capital stock may be charged
to and borne solely by such class or series and the bearing of expenses solely
by a class or series may be appropriately reflected (in a manner determined by
the Board of Directors) and cause differences in the net asset value
attributable to, and the dividend, redemption and liquidation rights of, the
shares of each such class or series of capital stock.
Section 4. Unless otherwise expressly provided in the charter of the
Corporation, including any Articles Supplementary creating any class or series
of capital stock, on each matter submitted to a vote of stockholders, each
holder of a share of capital stock of the Corporation shall be entitled to one
vote for each share standing in such holder's name on the books of the
Corporation, irrespective of the class or series thereof, and all shares of all
classes and series shall vote together as a single
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class; provided, however, that (a) as to any matter with respect to which a
separate vote of any class or series is required by the Investment Company Act
of 1940, as amended, and in effect from time to time, or any rules, regulations
or orders issued thereunder, or by the Maryland General Corporation Law, such
requirement as to a separate vote by that class or series shall apply in lieu of
a general vote of all classes and series as described above; (b) in the event
that the separate vote requirements referred to in (a) above apply with respect
to one or more classes or series, then subject to paragraph (c) below, the
shares of all other classes and series not entitled to a separate vote shall
vote together as a single class; and (c) as to any matter which in the judgment
of the Board of Directors (which shall be conclusive) does not affect the
interest of a particular class or series, such class or series shall not be
entitled to any vote and only the holders of shares of the one or more affected
classes and series shall be entitled to vote.
Section 5. Unless otherwise expressly provided in the charter of the
Corporation, including any Articles Supplementary creating any class or series
of capital stock, in the event of any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, holders of shares of capital
stock of the Corporation shall be entitled, after payment or provision for
payment of the debts and other liabilities of the Corporation (as such
liabilities may affect one or more of the classes of shares of capital stock of
the Corporation), to share ratably in the
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remaining net assets of the Corporation; provided, however, that in the event
the capital stock of the Corporation shall be classified or reclassified into
series, holders of any shares of capital stock within such series shall be
entitled to share ratably out of assets belonging to such series pursuant to the
provisions of Section 7(c) of this Article IV.
Section 6. Each share of any class of the capital stock of the
Corporation, and in the event the capital stock of the Corporation shall be
classified or reclassified into series, each share of any class of Capital Stock
of the Corporation within such series shall be subject to the following
provisions:
(a) The net asset value of each outstanding share of capital
stock of the Corporation (or of a class or series, in the event the
capital stock of the Corporation shall be so classified or
reclassified into series), subject to subsection (b) of this Section
6, shall be the quotient obtained by dividing the value of the net
assets of the Corporation (or the net assets of the Corporation
attributable or belonging to that class or series as designated by the
Board of Directors pursuant to Articles Supplementary) by the total
number of outstanding shares of capital stock of the Corporation (or
of such class or series, in the event the capital stock of the
Corporation shall be classified or reclassified into series). Subject
to subsection (b) of this Section 6, the value of the net assets of
the Corporation (or of such class or
8
<PAGE>
series, in the event the capital stock of the Corporation shall be
classified or reclassified into series) shall be determined pursuant to the
procedures or methods (which procedures or methods, in the event the
capital stock of the Corporation shall be classified or reclassified into
series, may differ from class to class or from series to series) prescribed
or approved by the Board of Directors in its discretion, and shall be
determined at the time or times (which time or times may, in the event the
capital stock of the Corporation shall be classified into classes or
series, differ from series to series) prescribed or approved by the Board
of Directors in its discretion. In addition, subject to subsection (b) of
this Section 6, the Board of Directors, in its discretion, may suspend the
daily determination of net asset value of any share of any series or class
of capital stock of the Corporation.
(b) The net asset value of each share of the capital stock of
the Corporation or any class or series thereof shall be determined in
accordance with any applicable provision of the Investment Company Act
of 1940, as amended (the "Investment Company Act"), any applicable
rule, regulation or order of the Securities and Exchange Commission
thereunder, and any applicable rule or regulation made or adopted by
any securities association registered under the Securities Exchange
Act
9
<PAGE>
of 1934.
(c) All shares now or hereafter authorized shall be subject to
redemption and redeemable at the option of the stockholder pursuant to
the applicable provisions of the Investment Company Act and laws of
the State of Maryland, including any applicable rules and regulations
thereunder. Each holder of a share of any class or series, upon
request to the Corporation (if such holder's shares are certificated,
such request being accompanied by surrender of the appropriate stock
certificate or certificates in proper form for transfer), shall be
entitled to require the Corporation to redeem all or any part of such
shares outstanding in the name of such holder on the books of the
Corporation (or as represented by share certificates surrendered to
the Corporation by such redeeming holder) at a redemption price per
share determined in accordance with subsection (a) of this Section 6.
(d) Notwithstanding subsection (c) of this Section 6, the Board
of Directors of the Corporation may suspend the right of the holders
of shares of any or all classes or series of capital stock to require
the Corporation to redeem such shares or may suspend any purchase of
such shares:
(i) for any period (A) during which the New York Stock
Exchange is closed, other than
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<PAGE>
customary weekend and holiday closing, or (B) during which trading on
the New York Stock Exchange is restricted;
(ii) for any period during which an emergency, as
defined by the rules of the Securities and Exchange
Commission or any successor thereto, exists as a result of
which (A) disposal by the Corporation of securities owned by
it and belonging to the affected series of capital stock (or
the Corporation, if the shares of capital stock of the
Corporation have not been classified or reclassified into
series) is not reasonably practicable, or (B) it is not
reasonably practicable for the Corporation fairly to
determine the value of the net assets of the affected series
of capital stock; or
(iii) for such other periods as the Securities and
Exchange Commission or any successor thereto may by order
permit for the protection of the holders of shares of
capital stock of the Corporation.
(e) All shares of the capital stock of the Corporation now or
hereafter authorized shall be subject to redemption and redeemable at
the option of the Corporation. The Board of Directors may by
resolution
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<PAGE>
from time to time authorize the Corporation to require the redemption of
all or any part of the outstanding shares of any class or series upon the
sending of written notice thereof to each holder whose shares are to be
redeemed and upon such terms and conditions as the Board of Directors, in
its discretion, shall deem advisable, out of funds legally available
therefor, at the net asset value per share of that class or series
determined in accordance with subsections (a) and (b) of this Section 6 and
take all other steps deemed necessary or advisable in connection therewith.
(f) The Board of Directors may by resolution from time to time
authorize the purchase by the Corporation, either directly or through
an agent, of shares of any class or series of the capital stock of the
Corporation upon such terms and conditions and for such consideration
as the Board of Directors, in its discretion, shall deem advisable out
of funds legally available therefor at prices per share not in excess
of the net asset value per share of that class or series determined in
accordance with subsections (a) and (b) of this Section 6 and to take
all other steps deemed necessary or advisable in connection therewith.
(g) Except as otherwise permitted by the Investment Company Act
of 1940, payment of the redemption price of shares of any class or
series of the capital stock of the
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Corporation surrendered to the Corporation for redemption pursuant to the
provisions of subsection (c) of this Section 6 or for purchase by the
Corporation pursuant to the provisions of subsection (e) or (f) of this
Section 6 shall be made by the Corporation within seven days after
surrender of such shares to the Corporation for such purpose. Any such
payment may be made in whole or in part in portfolio securities or in cash,
as the Board of Directors, in its discretion, shall deem advisable, and no
stockholder shall have the right, other than as determined by the Board of
Directors, to have his or her shares redeemed in portfolio securities.
(h) In the absence of any specification as to the purposes for
which shares are redeemed or repurchased by the Corporation, all
shares so redeemed or repurchased shall be deemed to be acquired for
retirement in the sense contemplated by the laws of the State of
Maryland. Shares of any class or series retired by repurchase or
redemption shall thereafter have the status of authorized but unissued
shares of such class or series.
Section 7. In the event the Board of Directors shall authorize the
classification or reclassification of shares into classes or series, the Board
of Directors may (but shall not be obligated to) provide that each class or
series shall have the following powers, preferences and voting or other special
rights, and the qualifications, restrictions and limitations thereof shall
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<PAGE>
be as follows:
(a) All consideration received by the Corporation for the issue
or sale of shares of capital stock of each series, together with all
income, earnings, profits, and proceeds received thereon, including
any proceeds derived from the sale, exchange or liquidation thereof,
and any funds or payments derived from any reinvestment of such
proceeds in whatever form the same may be, shall irrevocably belong to
the series with respect to which such assets, payments or funds were
received by the Corporation for all purposes, subject only to the
rights of creditors, and shall be so handled upon the books of account
of the Corporation. Such assets, payments and funds, including any
proceeds derived from the sale, exchange or liquidation thereof, and
any assets derived from any reinvestment of such proceeds in whatever
form the same may be, are herein referred to as "assets belonging to"
such series.
(b) The Board of Directors may from time to time declare and pay
dividends or distributions, in additional shares of capital stock of
such series or in cash, on any or all series of capital stock, the
amount of such dividends and the means of payment being wholly in the
discretion of the Board of Directors.
(i) Dividends or distributions on shares of any series
shall be paid only out of earned
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surplus or other lawfully available assets belonging to such series.
(ii) Inasmuch as one goal of the Corporation is to
qualify as a "regulated investment company" under the
Internal Revenue Code of 1986, as amended, or any successor
or comparable statute thereto, and Regulations promulgated
thereunder, and inasmuch as the computation of net income
and gains for federal income tax purposes may vary from the
computation thereof on the books of the Corporation, the
Board of Directors shall have the power, in its discretion,
to distribute in any fiscal year as dividends, including
dividends designated in whole or in part as capital gains
distributions, amounts sufficient, in the opinion of the
Board of Directors, to enable the Corporation to qualify as
a regulated investment company and to avoid liability for
the Corporation for federal income tax in respect of that
year. In furtherance, and not in limitation of the
foregoing, in the event that a series has a net capital loss
for a fiscal year, and to the extent that the net capital
loss offsets net capital gains from such series, the amount
to
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<PAGE>
be deemed available for distribution to that series with the net
capital gain may be reduced by the amount offset.
(c) In the event of the liquidation or dissolution of the
Corporation, holders of shares of capital stock of each series shall
be entitled to receive, as a series, out of the assets of the
Corporation available for distribution to such holders, but other than
general assets not belonging to any particular series, the assets
belonging to such series; and the assets so distributable to the
holders of shares of capital stock of any series shall be distributed,
subject to the provisions of subsection (d) of this Section 7, among
such stockholders in proportion to the number of shares of such series
held by them and recorded on the books of the Corporation. In the
event that there are any general assets not belonging to any
particular series and available for distribution, such distribution
shall be made to the holders of all series in proportion to the net
asset value of the respective series determined in accordance with the
charter of the Corporation.
(d) The assets belonging to any series shall be charged with the
liabilities in respect to such series, and shall also be charged with
its share of the general liabilities of the Corporation, in proportion
to the asset value of the respective series determined in
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accordance with the charter of the Corporation. The determination of the
Board of Directors shall be conclusive as to the amount of liabilities,
including accrued expenses and reserves, as to the allocation of the same
as to a given series, and as to whether the same or general assets of the
Corporation are allocable to one or more classes.
Section 8. Any fractional shares shall carry proportionately all the
rights of a whole share, excepting any right to receive a certificate evidencing
such fractional share, but including, without limitation, the right to vote and
the right to receive dividends.
Section 9. No holder of shares of Common Stock of the Corporation
shall, as such holder, have any pre-emptive right to purchase or subscribe for
any shares of the Common Stock of the Corporation of any class or series which
it may issue or sell (whether out of the number of shares authorized by the
Articles of Incorporation, or out of any shares of the Common Stock of the
Corporation acquired by it after the issue thereof, or otherwise).
Section 10. All persons who shall acquire any shares of capital stock of
the Corporation shall acquire the same subject to the provisions of the charter
and By-Laws of the Corporation. All shares of Common Stock of the Corporation
issued on or before the date of the filing of this amendment to the Articles of
Incorporation shall without further act of the Board of Directors or the holders
of such shares be deemed to be shares of Class B
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Common Stock.
Section 11. Notwithstanding any provision of law requiring action to be
taken or authorized by the affirmative vote of the holders of a designated
proportion greater than a majority of the shares of common stock, such action
shall be valid and effective if taken or authorized by the affirmative vote of
the holders of a majority of the total number of shares of common stock
outstanding and entitled to vote thereupon pursuant to the provisions of these
Articles of Incorporation.
Article V
DIRECTORS
The number of directors of the Corporation shall be eight, and the names of
those who shall act as such until their successors are duly elected and qualify
are as follows:
Delayne D. Gold
Arthur Hauspurg
Harry A. Jacobs, Jr.
Thomas J. McCormack
Lawrence C. McQuade
Stephen P. Munn
Richard A. Redeker
Louis A. Weil, III
The By-Laws of the Corporation may fix the number of directors at a number
other than eight and may authorize the Board of Directors, by the vote of a
majority of the entire Board of Directors, to increase or decrease the number of
directors within a limit specified in the By-Laws, provided that in no case
shall the number of directors be less than three, and to fill the vacancies
created by any such increase in the number of directors. Unless otherwise
provided by the By-Laws of the Corporation, the
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directors of the Corporation need not be stockholders.
The By-Laws of the Corporation may divide the Directors of the Corporation
into classes and prescribe the tenure of office of the several classes; but no
class shall be elected for a period shorter than that from the time of the
election of such class until the next annual meeting and thereafter for a period
shorter than the interval between annual meetings or for a longer period than
five years, and the term of office of at least one class shall expire each year.
Article VI
INDEMNIFICATION OF DIRECTORS AND OFFICERS
A director or officer of the Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director or officer, except to the extent such exemption from
liability or limitation thereof is not permitted by law (including the
Investment Company Act of 1940) as currently in effect or as the same may
hereafter be amended.
No amendment, modification or repeal of this Article VI shall adversely
affect any right or protection of a director or officer that exists at the time
of such amendment, modification or repeal.
Article VII
MISCELLANEOUS
The following provisions are inserted for the management of the business
and for the conduct of the affairs of the Corporation, and for creating,
defining, limiting and regulating the powers of the Corporation, the directors
and the stockholders.
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Section 1. The Board of Directors shall have the management and control
of the property, business and affairs of the Corporation and is hereby vested
with all the powers possessed by the Corporation itself so far as is not
inconsistent with law or these Articles of Incorporation. In furtherance and
without limitation of the foregoing provisions, it is expressly declared that,
subject to these Articles of Incorporation, the Board of Directors shall have
power:
(a) To make, alter, amend or repeal from time to time the By-
Laws of the Corporation except as such power may otherwise be limited
in the By-Laws.
(b) To issue shares of any class or series of the capital stock
of the Corporation.
(c) To authorize the purchase of shares of any class or series
in the open market or otherwise, at prices not in excess of their net
asset value for shares of that class, series or class within such
series determined in accordance with subsections (a) and (b) of
Section 6 of Article IV hereof, provided that the Corporation has
assets legally available for such purpose, and to pay for such shares
in cash, securities or other assets then held or owned by the
Corporation.
(d) To declare and pay dividends and distributions from funds
legally available therefor on shares of such class or series, in such
amounts, if any, and in such manner (including declaration by means of
a formula or
20
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other similar method of determination whether or not the amount of the
dividend or distribution so declared can be calculated at the time of such
declaration) and to the holders of record as of such date, as the Board of
Directors may determine.
(e) To take any and all action necessary or appropriate to
maintain a constant net asset value per share for shares of any class,
series or class within such series.
Section 2. Any determination made in good faith and, so far as
accounting matters are involved, in accordance with generally accepted
accounting principles applied by or pursuant to the direction of the Board of
Directors or as otherwise required or permitted by the Securities and Exchange
Commission, shall be final and conclusive, and shall be binding upon the
Corporation and all holders of shares, past, present and future, of each class
or series, and shares are issued and sold on the condition and undertaking,
evidenced by acceptance of certificates for such shares by, or confirmation of
such shares being held for the account of, any stockholder, that any and all
such determinations shall be binding as aforesaid.
Nothing in this Section 2 shall be construed to protect any director or
officer of the Corporation against liability to the Corporation or its
stockholders to which such director or officer would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties
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involved in the conduct of his or her office.
Section 3. The directors of the Corporation may receive compensation
for their services, subject, however, to such limitations with respect thereto
as may be determined from time to time by the holders of shares of capital stock
of the Corporation.
Section 4. Except as required by law, the holders of shares of capital
stock of the Corporation shall have only such right to inspect the records,
documents, accounts and books of the Corporation as may be granted by the Board
of Directors of the Corporation.
Section 5. Any vote of the holders of shares of capital stock of the
Corporation authorizing liquidation of the Corporation or proceedings for its
dissolution may authorize the Board of Directors to determine, as provided
herein, or if provision is not made herein, in accordance with generally
accepted accounting principles, which assets are the assets belonging to the
Corporation or any series thereof available for distribution to the holders of
the Corporation or any series thereof (pursuant to the provisions of Section 7
of Article IV hereof) and may divide, or authorize the Board of Directors to
divide, such assets among the stockholders of the shares of capital stock of the
Corporation or any series thereof in such manner as to ensure that each such
holder receives an amount from the proceeds of such liquidation or dissolution
that such holder is entitled to, as determined pursuant to the provisions of
Sections 3 and 7 of Article IV hereof.
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Article VIII
DEFINITIONS
Section 1. As used in these Articles of Incorporation and in the By-Laws
of the Corporation, the following terms shall have the meanings indicated:
"Gross Assets" shall mean the total value of the assets of the
Corporation determined as provided in Section 3 below.
"Person" shall mean a natural person, corporation, joint stock
company, firm, association, partnership, trust, syndicate,
combination, organization, government or agency or subdivision
thereof.
"Securities" shall mean any stock, shares, bonds, debentures,
notes, mortgages or other obligations, and any certificates, receipts,
warrants or other instruments representing rights to receive, purchase
or subscribe for the same, or evidencing or representing any other
rights or interests therein, or in any property or assets created or
issued by any Person.
Section 2. Net asset value shall be determined by dividing:
(a) The total value of the assets of the Corporation determined as
provided in Section 3 below less, to the extent determined by or pursuant to the
direction of the Board of Directors in accordance with generally accepted
accounting principles, all debts, obligations and liabilities of the Corporation
(which debts, obligations and liabilities shall
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include, without limitation of the generality of the foregoing, any and all
debts, obligations, liabilities or claims, of any and every kind and nature,
fixed, accrued or unmatured, including the estimated accrued expense of
investment advisory and administrative services, and any reserves or charges for
any or all of the foregoing, whether for taxes, expenses, contingencies, or
otherwise, and the price of common stock redeemed but not paid for) but
excluding the Corporation's liability upon its shares and its surplus, by
(b) The total number of shares of the Corporation outstanding (shares sold
by the Corporation whether or not paid for being treated as outstanding and
shares purchased or redeemed by the Corporation whether or not paid for and
treasury shares being treated as not outstanding).
Section 3. In determining for the purposes of these Articles of
Incorporation the total value of the assets of the Corporation at any time,
securities shall be taken at their market value or, in the absence of readily
available market quotations, at fair value, both as determined pursuant to
methods approved by the Board of Directors and in accordance with applicable
statutes and regulations, and all other assets at fair value determined in such
manner as may be approved from time to time by or pursuant to the direction of
the Board of Directors.
Section 4. Any determination made in good faith and, so far as accounting
matters are involved, in accordance with generally accepted accounting
principles by or pursuant to the direction of
24
<PAGE>
the Board of Directors, shall be final and conclusive, and shall be binding upon
the Corporation and all holders of its shares, past, present and future, and
shares of the Corporation are issued and sold on the condition and undertaking,
evidenced by acceptance of certificates for such shares by, or confirmation of
such shares being held for the account of any stockholder, that any and all such
determinations shall be binding as aforesaid.
Nothing in this Section 4 shall be construed to protect any director or
officer of the Corporation against any liability to the Corporation or its
stockholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
Article IX
AMENDMENTS
From time to time any of the provisions of these Articles of Incorporation
may be amended, altered or repealed (including any amendment that changes the
terms of any of the outstanding stock by classification, reclassification or
otherwise), and other provisions that may, under the statutes of the State of
Maryland at the time in force, be lawfully contained in articles of
incorporation may be added or inserted, upon the vote of the holders of a
majority of the shares of common stock of the Corporation at the time
outstanding and entitled to vote, and all rights at any time conferred upon the
stockholders of the Corporation by these Articles of Incorporation are subject
to the
25
<PAGE>
provisions of this Article IX.
_________________________________
The term "Articles of Incorporation" as used herein and in the By-Laws of
the Corporation shall be deemed to mean these Articles of Incorporation as from
time to time amended and restated.
___________________________________"
FOURTH: The amendment and restatement of the Articles of Incorporation of
the Corporation does not increase or decrease the total number of shares of
stock of all classes which the Corporation has authority to issue or the
aggregate par value of all shares having a par value.
FIFTH: The Corporation's principal office in the state of Maryland is c/o
CT Corporation System, 32 South Street, Baltimore, Maryland 21202. The name and
address of the Corporation's resident agent is The Corporation Trust
Incorporated, 32 South Street, Baltimore, Maryland 21202.
SIXTH: The foregoing amendment and restatement of the Articles of
Incorporation has been approved by a majority of the entire Board of Directors.
26
<PAGE>
IN WITNESS WHEREOF, PRUDENTIAL-BACHE GROWTH OPPORTUNITY FUND, INC. has
caused these presents to be signed in its name and on its behalf by its
President and attested by its Secretary on November 15, 1993.
PRUDENTIAL-BACHE GROWTH OPPORTUNITY FUND, INC.
By
------------------------
Lawrence C. McQuade
President
Attest:
------------------------
S. Jane Rose
Secretary
27
<PAGE>
The undersigned, President of PRUDENTIAL-BACHE GROWTH OPPORTUNITY FUND,
INC., who executed on behalf of said corporation the foregoing Articles of
Amendment and Restatement of which this certificate is made a part, hereby
acknowledges in the name and on behalf of said corporation, the foregoing
Articles of Amendment and Restatement to be the corporate act of said
corporation and further certifies that, to the best of his knowledge,
information and belief, the matters and facts set forth therein with respect to
the approval thereof are true in all material respects, under the penalties of
perjury.
------------------------------
Lawrence C. McQuade
<PAGE>
Exhibit 6(c)
PRUDENTIAL GROWTH OPPORTUNITY FUND
Form of
Distribution Agreement
(CLASS A SHARES)
Agreement made as of _____________199_, between Prudential Growth
Opportunity Fund a Maryland Corporation (the Fund) and Prudential Mutual Fund
Distributors, Inc., a Delaware Corporation (the Distributor).
WITNESSETH
WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended (the Investment Company Act), as a diversified, open-end,
management investment company and it is in the interest of the Fund to offer its
Class A shares for sale continuously;
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 Class A
shares from and after the date hereof in order to promote the growth of the Fund
and facilitate the distribution of its Class A shares; and
WHEREAS, upon approval by the Class A shareholders of the Fund it is
contemplated that the Fund will adopt a plan of distribution pursuant to Rule
12b-1 under the Investment Company Act (the Plan) authorizing payments by the
Fund to the Distributor with respect to the distribution of Class A shares of
the Fund and the maintenance of Class A 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 Class A shares of the Fund to sell Class A shares to the
public and the Distributor hereby accepts such appointment and agrees to act
hereunder. The Fund hereby agrees during the term of this Agreement to sell
Class A shares of the Fund to the Distributor on the terms and conditions set
forth below.
<PAGE>
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 Class A shares,
except that:
2.1 The exclusive rights granted to the Distributor to purchase Class
A shares from the Fund shall not apply to Class A 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 Class A shares issued by
the Fund pursuant to reinvestment of dividends or capital gains distributions.
2.3 Such exclusive rights shall not apply to Class A 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 of the Fund. The term "Prospectus" shall mean
the Prospectus and Statement of Additional Information 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 CLASS A SHARES FROM THE FUND
3.1 The Distributor shall have the right to buy from the Fund the
Class A shares needed, but not more than the Class A shares needed (except for
clerical errors in transmission) to fill unconditional orders for Class A shares
placed with the Distributor by investors or registered and qualified securities
dealers and other financial institutions (selected dealers). The price which
the Distributor shall pay for the Class A shares so purchased from the Fund
shall be the net asset value, determined as set forth in the Prospectus.
3.2 The Class A shares are to be resold 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.
2
<PAGE>
3.3 The Fund shall have the right to suspend the sale of its Class A
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 of
Directors. The Fund shall also have the right to suspend the sale of its Class
A shares if a banking moratorium shall have been declared by federal or New York
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 Class A 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 Class A 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 Class A 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 CLASS A SHARES BY THE FUND
4.1 Any of the outstanding Class A shares may be tendered for
redemption at any time, and the Fund agrees to repurchase or redeem the Class A
shares so tendered in accordance with its Articles of Incorporation 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 Class A 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 calendar day subsequent to its having received the
notice of redemption in proper form. The proceeds of any redemption of Class A
shares shall be paid by the Fund to or for the account of the redeeming
shareholder, in each case in accordance with applicable provisions of the
Prospectus.
4.3 Redemption of Class A 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 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,
3
<PAGE>
so permits.
Section 5. DUTIES OF THE FUND
5.1 Subject to the possible suspension of the sale of Class A shares
as provided herein, the Fund agrees to sell its Class A shares so long as it has
Class A shares 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 Class A 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 of Directors and the shareholders, all necessary
action to fix the number of authorized Class A shares and such steps as may be
necessary to register the same under the Securities Act, to the end that there
will be available for sale such number of Class A 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 qualify and maintain the
qualification of any appropriate number of its Class A shares for sales under
the securities laws of such states as the Distributor and the Fund may approve;
provided that the Fund shall not be required to amend its Articles of
Incorporation 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 Class A 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 Class
A shares. Any such qualification may be withheld, terminated or withdrawn by
the Fund at any time in its discretion. As provided in Section 9.1 hereof, the
expense of qualification and maintenance of qualification 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 qualifications.
4
<PAGE>
Section 6. DUTIES OF THE DISTRIBUTOR
6.1 The Distributor shall devote reasonable time and effort to effect
sales of Class A shares of the Fund, but shall not be obligated to sell any
specific number of Class A shares. Sales of the Class A 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 Class A 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 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 Class A shares, provided
that the Fund shall approve the forms of such agreements. Within the United
States, the Distributor shall offer and sell Class A shares only to such
selected dealers as are members in good standing of the NASD. Class A 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
The Distributor shall receive and may retain any portion of any
front-end sales charge which is imposed on sales of Class A shares and not
reallocated to selected dealers as set forth in the Prospectus, subject to the
limitations of Article III, Section 26 of the NASD Rules of Fair Practice.
Payment of these amounts to the Distributor is not contingent upon the adoption
or continuation of the Plan.
Section 8. PAYMENT OF THE DISTRIBUTOR UNDER THE PLAN
8.1 The Fund shall pay to the Distributor as compensation for
services under the Distribution and Service Plan and this Agreement a fee of .30
of 1% (including an asset-based sales charge of .05 of 1% and a service fee of
.25 of 1%) per annum
5
<PAGE>
of the average daily net assets of the Class A shares of the Fund. Amounts
payable under the Plan shall be accrued daily and paid monthly or at such other
intervals as Directors may determine. Amounts payable under the Plan shall be
subject to the limitations of Article III, Section 26 of the NASD Rules of Fair
Practice.
8.2 So long as the Plan or any amendment thereto is in effect, the
Distributor shall inform the Board of Directors 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 dealer
agreements with the Distributor. So long as the Plan (or any amendment thereto)
is in effect, at the request of the Board of Directors 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.
8.3 Expenses of distribution with respect to the Class A shares of
the Fund include, among others:
(a) amounts paid to Prudential Securities for performing
services under a selected dealer agreement between
Prudential Securities and the Distributor for sale of Class
A shares of the Fund, including sales commissions and
trailer commissions paid to, or on account of, account
executives and indirect and overhead costs associated with
distribution activities, including central office and branch
expenses;
(b) amounts paid to Prusec for performing services under a
selected dealer agreement between Prusec and the Distributor
for sale of Class A 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;
(c) sales commissions and trailer commissions paid to, or on
account of, broker-dealers and financial institutions (other
than Prudential Securities and Prusec) which have entered
into selected dealer agreements with the Distributor with
respect to Class A shares of the Fund.
(d) amounts paid to, or an account of, account executives of
Prudential Securities, Prusec, or of other broker-dealers or
financial
6
<PAGE>
institutions for personal service and/or the maintenance of
shareholder accounts; and
(e) advertising for the Fund in various forms through any
available medium, including the cost of printing and mailing
Fund Prospectuses, and periodic financial reports and sales
literature to persons other than current shareholders of the
Fund.
Indirect and overhead costs referred to in clauses (a) and (b) of the
foregoing sentence include (i) lease expenses, (ii) salaries and benefits of
personnel including operations and sales support personnel, (iii) utility
expenses, (iv) communications expenses, (v) sales promotion expenses, (vi)
expenses of postage, stationery and supplies and (vii) general overhead.
Section 9. ALLOCATION OF EXPENSES
9.1 The Fund shall bear all costs and expenses of the continuous
offering of its Class A shares, 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 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 of
expenses of qualification of the Class A 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 cost and
expense payable to each such state for continuing qualification therein until
the Fund decides to discontinue such qualification pursuant to Section 5.4
hereof. As set forth in Section 8 above, the Fund shall also bear the expenses
it assumes pursuant to the Plan with respect to Class A shares, so long as the
Plan is in effect.
Section 10. INDEMNIFICATION
10.1 The Fund agrees to indemnify, defend and hold the Distributor,
its officers and directors 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
counsel fees incurred in connection therewith) which the Distributor, its
officers, directors 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
7
<PAGE>
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 in writing 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, director, 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 directors 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
directors 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 directors or, 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 it or any of its
officers or directors in connection with the issue and sale of any Class A
shares.
10.2 The Distributor agrees to indemnify, defend and hold the Fund,
its officers and Directors 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 counsel fees incurred in connection therewith) which the Fund, its
officers and Directors 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 Directors 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 in writing 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
8
<PAGE>
make such information not misleading. The Distributor's agreement to indemnify
the Fund, its officers and Directors 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 for two years from the date hereof and
thereafter, but only so long as such continuance is specifically approved at
least annually by (a) the Board of Directors of the Fund, or by the vote of a
majority of the outstanding voting securities of the Class A shares of the Fund,
and (b) by the vote of a majority of those Directors 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 the Fund's
Plan or in any agreement related thereto (Rule 12b-1 Directors), 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 Rule 12b-1 Directors or by vote of
a majority of the outstanding voting securities of the Class A shares 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.
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 Directors of the Fund, or by the vote
of a majority of the outstanding voting securities of the Class A shares of the
Fund, and (b) by the vote of a majority of the Rule 12b-1 Directors cast in
person at a meeting called for the purpose of voting on such amendment.
Section 13. GOVERNING LAW
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of New York 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 York, or any of the provisions herein,
conflict
9
<PAGE>
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 Mutual Fund
Distributors, Inc.
By: ________________________
_______________________
(Title)
Prudential Growth Opportunity Fund
By: _______________________
(Name)
(Title)
[mc]cla-gof.agr
10
<PAGE>
Exhibit 6(d)
PRUDENTIAL GROWTH OPPORTUNITY FUND
Form of
Distribution Agreement
(CLASS B SHARES)
Agreement made as of ______ __, 199_, between Prudential Growth
Opportunity Fund, a Maryland Corporation (the Fund) and Prudential Securities
Incorporated, a Delaware Corporation (the Distributor).
WITNESSETH
WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended (the Investment Company Act), as a diversified, open-end,
management investment company and it is in the interest of the Fund to offer its
Class B shares for sale continuously;
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 Class B
shares from and after the date hereof in order to promote the growth of the Fund
and facilitate the distribution of its Class B shares; and
WHEREAS, the Fund has adopted a distribution and service plan pursuant
to Rule 12b-1 under the Investment Company Act (the Plan) authorizing payments
by the Fund to the Distributor with respect to the distribution of Class B
shares of the Fund and the maintenance of Class B 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 Class B shares of the Fund to sell Class B shares to the
public and the Distributor hereby accepts such appointment and agrees to act
hereunder. The Fund hereby agrees during the term of this Agreement to sell
Class B shares of the Fund to the Distributor on the terms and conditions set
forth below.
1
<PAGE>
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 Class B shares,
except that:
2.1 The exclusive rights granted to the Distributor to purchase Class
B shares from the Fund shall not apply to Class B 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 Class B shares issued by
the Fund pursuant to reinvestment of dividends or capital gains distributions.
2.3 Such exclusive rights shall not apply to Class B 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 of the Fund. The term "Prospectus" shall mean
the Prospectus and Statement of Additional Information 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 (the Securities Act), and the Investment Company Act, as
such Registration Statement is amended from time to time.
Section 3. PURCHASE OF CLASS B SHARES FROM THE FUND
3.1 The Distributor shall have the right to buy from the Fund the
Class B shares needed, but not more than the Class B shares needed (except for
clerical errors in transmission) to fill unconditional orders for Class B shares
placed with the Distributor by investors or registered and qualified securities
dealers and other financial institutions (selected dealers). The price which
the Distributor shall pay for the Class B shares so purchased from the Fund
shall be the net asset value, determined as set forth in the Prospectus.
3.2 The Class B shares are to be resold 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.
2
<PAGE>
3.3 The Fund shall have the right to suspend the sale of its Class B
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 of
Directors. The Fund shall also have the right to suspend the sale of its Class
B shares if a banking moratorium shall have been declared by federal or New York
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 Class B 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 Class B 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 Class B 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 CLASS B SHARES BY THE FUND
4.1 Any of the outstanding Class B shares may be tendered for
redemption at any time, and the Fund agrees to repurchase or redeem the Class B
shares so tendered in accordance with its Articles of Incorporation 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 Class B 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 Class B shares
shall be paid by the Fund as follows: (a) any applicable contingent deferred
sales charge shall be paid to the Distributor and (b) 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.
4.3 Redemption of Class B 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 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
3
<PAGE>
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 Class B shares
as provided herein, the Fund agrees to sell its Class B shares so long as it has
Class B shares 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 Class B 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 of Directors and the shareholders, all necessary
action to fix the number of authorized Class B shares and such steps as may be
necessary to register the same under the Securities Act, to the end that there
will be available for sale such number of Class B 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 qualify and maintain the
qualification of any appropriate number of its Class B shares for sales under
the securities laws of such states as the Distributor and the Fund may approve;
provided that the Fund shall not be required to amend its Articles of
Incorporation 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 Class B 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 Class
B shares. Any such qualification may be withheld, terminated or withdrawn by
the Fund at any time in its discretion. As provided in Section 9.1 hereof, the
expense of qualification and maintenance of qualification 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 qualifications.
4
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Section 6. DUTIES OF THE DISTRIBUTOR
6.1 The Distributor shall devote reasonable time and effort to effect
sales of Class B shares of the Fund, but shall not be obligated to sell any
specific number of Class B shares. Sales of the Class B 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 Class B 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 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 Class B shares, provided
that the Fund shall approve the forms of such agreements. Within the United
States, the Distributor shall offer and sell Class B shares only to such
selected dealers as are members in good standing of the NASD. Class B 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
The Distributor shall receive and may retain any contingent deferred
sales charge which is imposed with respect to repurchases and redemptions of
Class B shares as set forth in the Prospectus, subject to the limitations of
Article III, Section 26 of the NASD Rules of Fair Practice. Payment of these
amounts to the Distributor is not contingent upon the adoption or continuation
of the Plan.
Section 8. PAYMENT OF THE DISTRIBUTOR UNDER THE PLAN
8.1 The Fund shall pay to the Distributor as compensation for
services under the Distribution and Service Plan and this Agreement a fee of 1%
(including an asset-based sales
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charge of .75 of 1% and a service fee of .25 of 1%) per annum of the average
daily net assets of the Class B shares of the Fund. Amounts payable under the
Plan shall be accrued daily and paid monthly or at such other intervals as
Directors may determine. Amounts payable under the Plan shall be subject to the
limitations of Article III, Section 26 of the NASD Rules of Fair Practice.
8.2 So long as the Plan or any amendment thereto is in effect, the
Distributor shall inform the Board of Directors of the commissions (including
trailer 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. So
long as the Plan (or any amendment thereto) is in effect, at the request of the
Board of Directors 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.
8.3 Expenses of distribution with respect to the Class B shares of
the Fund 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 Prusec for performing services under a
selected dealer agreement between 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) sales commissions (including trailer commissions) paid to,
or on account of, broker-dealers and financial institutions
(other than Prusec) which have entered into selected dealer
agreements with the Distributor with respect to Class B
shares of the Fund;
(e) amounts paid to, or an account of, account executives of the
Distributor or of other broker-dealers or financial
institutions for
6
<PAGE>
personal service and/or the maintenance of shareholder accounts; and
(f) advertising for the Fund in various forms through any
available medium, including the cost of printing and mailing
Fund Prospectuses, and periodic financial reports and sales
literature to persons other than current shareholders of the
Fund.
Indirect and overhead costs referred to in clauses (b) and (c) of the
foregoing sentence include (i) lease expenses, (ii) salaries and benefits of
personnel including operations and sales support personnel, (iii) utility
expenses, (iv) communications expenses, (v) sales promotion expenses, (vi)
expenses of postage, stationery and supplies and (vii) general overhead.
Section 9. ALLOCATION OF EXPENSES
9.1 The Fund shall bear all costs and expenses of the continuous
offering of its Class B shares, 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 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 of
expenses of qualification of the Class B 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 cost and
expense payable to each such state for continuing qualification therein until
the Fund decides to discontinue such qualification pursuant to Section 5.4
hereof. As set forth in Section 8 above, the Fund shall also bear the expenses
it assumes pursuant to the Plan with respect to Class B shares, so long as the
Plan is in effect.
Section 10. INDEMNIFICATION
10.1 The Fund agrees to indemnify, defend and hold the Distributor,
its officers and Directors 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
counsel fees incurred in connection therewith) which the Distributor, its
officers, Directors 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
7
<PAGE>
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 in writing 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, Director 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 Directors 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
Directors 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 Directors, or any such controlling person, such
notification to be given in writing 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 it or any of its officers
or Directors in connection with the issue and sale of any Class B shares.
10.2 The Distributor agrees to indemnify, defend and hold the Fund,
its officers and Directors 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 counsel fees incurred in connection therewith) which the Fund, its
officers and Directors 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 Directors 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 in writing 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
8
<PAGE>
make such information not misleading. The Distributor's agreement to indemnify
the Fund, its officers and Directors 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 to be given to the Distributor in
writing 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 for two years from the date hereof and
thereafter, but only so long as such continuance is specifically approved at
least annually by (a) the Board of Directors of the Fund, or by the vote of a
majority of the outstanding voting securities of the Class B shares of the Fund,
and (b) by the vote of a majority of those Directors 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 the Fund's
Plan or in any agreement related thereto (Rule 12b-1 Directors), 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 Rule 12b-1 Directors or by vote of
a majority of the outstanding voting securities of the Class B shares 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.
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 Directors of the Fund, or by the vote
of a majority of the outstanding voting securities of the Class B shares of the
Fund, and (b) by the vote of a majority of the Rule 12b-1 Board of Directors
cast in person at a meeting called for the purpose of voting on such amendment.
Section 13. GOVERNING LAW
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of New York 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 York, or any of the provisions herein,
conflict
9
<PAGE>
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 Securities
Incorporated
By: ________________________
________________________
(Title)
Prudential Growth Opportunity
Fund
By: _______________________
(Name)
(Title)
[mc]clb-gof.agr
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<PAGE>
Exhibit 6(e)
PRUDENTIAL GROWTH OPPORTUNITY FUND
Form of
Distribution Agreement
(CLASS C SHARES)
Agreement made as of ______ __, 199_, between Prudential Growth
Opportunity Fund, a Maryland Corporation (the Fund) and Prudential Securities
Incorporated, a Delaware Corporation (the Distributor).
WITNESSETH
WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended (the Investment Company Act), as a diversified, open-end,
management investment company and it is in the interest of the Fund to offer its
Class C shares for sale continuously;
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 Class C
shares from and after the date hereof in order to promote the growth of the Fund
and facilitate the distribution of its Class C shares; and
WHEREAS, the Fund has adopted a distribution and service plan pursuant
to Rule 12b-1 under the Investment Company Act (the Plan) authorizing payments
by the Fund to the Distributor with respect to the distribution of Class C
shares of the Fund and the maintenance of Class C 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 Class C shares of the Fund to sell Class C shares to the
public and the Distributor hereby accepts such appointment and agrees to act
hereunder. The Fund hereby agrees during the term of this Agreement to sell
Class C shares of the Fund to the Distributor on the terms and conditions set
forth below.
1
<PAGE>
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 Class C shares,
except that:
2.1 The exclusive rights granted to the Distributor to purchase Class
C shares from the Fund shall not apply to Class C 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 Class C shares issued by
the Fund pursuant to reinvestment of dividends or capital gains distributions.
2.3 Such exclusive rights shall not apply to Class C 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 of the Fund. The term "Prospectus" shall mean
the Prospectus and Statement of Additional Information 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 (the Securities Act), and the Investment Company Act, as
such Registration Statement is amended from time to time.
Section 3. PURCHASE OF CLASS C SHARES FROM THE FUND
3.1 The Distributor shall have the right to buy from the Fund the
Class C shares needed, but not more than the Class C shares needed (except for
clerical errors in transmission) to fill unconditional orders for Class C shares
placed with the Distributor by investors or registered and qualified securities
dealers and other financial institutions (selected dealers). The price which
the Distributor shall pay for the Class C shares so purchased from the Fund
shall be the net asset value, determined as set forth in the Prospectus.
3.2 The Class C shares are to be resold 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.
2
<PAGE>
3.3 The Fund shall have the right to suspend the sale of its Class C
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 of
Directors. The Fund shall also have the right to suspend the sale of its Class
C shares if a banking moratorium shall have been declared by federal or New York
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 Class C 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 Class C 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 Class C 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 CLASS C SHARES BY THE FUND
4.1 Any of the outstanding Class C shares may be tendered for
redemption at any time, and the Fund agrees to repurchase or redeem the Class C
shares so tendered in accordance with its Articles of Incorporation 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 Class C 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 Class C shares
shall be paid by the Fund as follows: (a) any applicable contingent deferred
sales charge shall be paid to the Distributor and (b) 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.
4.3 Redemption of Class C 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 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
3
<PAGE>
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 Class C shares
as provided herein, the Fund agrees to sell its Class C shares so long as it has
Class C shares 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 Class C 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 of Directors and the shareholders, all necessary
action to fix the number of authorized Class C shares and such steps as may be
necessary to register the same under the Securities Act, to the end that there
will be available for sale such number of Class C 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 qualify and maintain the
qualification of any appropriate number of its Class C shares for sales under
the securities laws of such states as the Distributor and the Fund may approve;
provided that the Fund shall not be required to amend its Articles of
Incorporation 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 Class C 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 Class
C shares. Any such qualification may be withheld, terminated or withdrawn by
the Fund at any time in its discretion. As provided in Section 9.1 hereof, the
expense of qualification and maintenance of qualification 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 qualifications.
4
<PAGE>
Section 6. DUTIES OF THE DISTRIBUTOR
6.1 The Distributor shall devote reasonable time and effort to effect
sales of Class C shares of the Fund, but shall not be obligated to sell any
specific number of Class C shares. Sales of the Class C 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 Class C 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 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 Class C shares, provided
that the Fund shall approve the forms of such agreements. Within the United
States, the Distributor shall offer and sell Class C shares only to such
selected dealers as are members in good standing of the NASD. Class C 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
The Distributor shall receive and may retain any contingent deferred
sales charge which is imposed with respect to repurchases and redemptions of
Class C shares as set forth in the Prospectus, subject to the limitations of
Article III, Section 26 of the NASD Rules of Fair Practice. Payment of these
amounts to the Distributor is not contingent upon the adoption or continuation
of the Plan.
Section 8. PAYMENT OF THE DISTRIBUTOR UNDER THE PLAN
8.1 The Fund shall pay to the Distributor as compensation for
services under the Distribution and Service Plan and this Agreement a fee of 1%
(including an asset-based sales
5
<PAGE>
charge of .75 of 1% and a service fee of .25 of 1%) per annum of the average
daily net assets of the Class C shares of the Fund. Amounts payable under the
Plan shall be accrued daily and paid monthly or at such other intervals as
Directors may determine. Amounts payable under the Plan shall be subject to the
limitations of Article III, Section 26 of the NASD Rules of Fair Practice.
8.2 So long as the Plan or any amendment thereto is in effect, the
Distributor shall inform the Board of Directors of the commissions (including
trailer 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. So
long as the Plan (or any amendment thereto) is in effect, at the request of the
Board of Directors 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.
8.3 Expenses of distribution with respect to the Class C shares of
the Fund 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 Prusec for performing services under a
selected dealer agreement between 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) sales commissions (including trailer commissions) paid to,
or on account of, broker-dealers and financial institutions
(other than Prusec) which have entered into selected dealer
agreements with the Distributor with respect to Class C
shares of the Fund;
(e) amounts paid to, or an account of, account executives of the
Distributor or of other broker-dealers or financial
institutions for
6
<PAGE>
personal service and/or the maintenance of shareholder
accounts; and
(f) advertising for the Fund in various forms through any
available medium, including the cost of printing and mailing
Fund Prospectuses, and periodic financial reports and sales
literature to persons other than current shareholders of the
Fund.
Indirect and overhead costs referred to in clauses (b) and (c) of the
foregoing sentence include (i) lease expenses, (ii) salaries and benefits of
personnel including operations and sales support personnel, (iii) utility
expenses, (iv) communications expenses, (v) sales promotion expenses, (vi)
expenses of postage, stationery and supplies and (vii) general overhead.
Section 9. ALLOCATION OF EXPENSES
9.1 The Fund shall bear all costs and expenses of the continuous
offering of its Class C shares, 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 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 of
expenses of qualification of the Class C 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 cost and
expense payable to each such state for continuing qualification therein until
the Fund decides to discontinue such qualification pursuant to Section 5.4
hereof. As set forth in Section 8 above, the Fund shall also bear the expenses
it assumes pursuant to the Plan with respect to Class C shares, so long as the
Plan is in effect.
Section 10. INDEMNIFICATION
10.1 The Fund agrees to indemnify, defend and hold the Distributor,
its officers and Directors 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
counsel fees incurred in connection therewith) which the Distributor, its
officers, Directors 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
7
<PAGE>
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 in writing 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, Director 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 Directors 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
Directors 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 Directors, or any such controlling person, such
notification to be given in writing 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 it or any of its officers
or Directors in connection with the issue and sale of any Class C shares.
10.2 The Distributor agrees to indemnify, defend and hold the Fund,
its officers and Directors 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 counsel fees incurred in connection therewith) which the Fund, its
officers and Directors 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 Directors 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 in writing 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
8
<PAGE>
make such information not misleading. The Distributor's agreement to indemnify
the Fund, its officers and Directors 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 to be given to the Distributor in
writing 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 for two years from the date hereof and
thereafter, but only so long as such continuance is specifically approved at
least annually by (a) the Board of Directors of the Fund, or by the vote of a
majority of the outstanding voting securities of the Class C shares of the Fund,
and (b) by the vote of a majority of those Directors 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 the Fund's
Plan or in any agreement related thereto (Rule 12b-1 Directors), 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 Rule 12b-1 Directors or by vote of
a majority of the outstanding voting securities of the Class C shares 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.
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 Directors of the Fund, or by the vote
of a majority of the outstanding voting securities of the Class C shares of the
Fund, and (b) by the vote of a majority of the Rule 12b-1 Board of Directors
cast in person at a meeting called for the purpose of voting on such amendment.
Section 13. GOVERNING LAW
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of New York 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 York, or any of the provisions herein,
conflict
9
<PAGE>
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 Securities
Incorporated
By: ________________________
________________________
(Title)
Prudential Growth Opportunity
Fund
By: _______________________
(Name)
(Title)
[mc]clc-gof.agr
10
<PAGE>
EXHIBIT 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 18 to the Registration
Statement on Form N-1A (the "Registration Statement") of our report dated
November 8, 1993, relating to the financial statements and financial highlights
of Prudential Growth Opportunity Fund, which appears in such Statement of
Additional Information, and to the incorporation by reference of our report into
the Prospectus which constitutes part of this Registration Statement. We also
consent to the reference to us under the heading "Custodian, Transfer and
Dividend Disbursing Agent and Independent Accountants" in such Statement of
Additional Information and to the reference to us under the heading "Financial
Highlights" in such Prospectus.
PRICE WATERHOUSE
1177 Avenue of the Americas
New York, New York 10036
May 6, 1994
<PAGE>
Exhibit 15(c)
PRUDENTIAL GROWTH OPPORTUNITY FUND
Form of
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 Article III, Section 26 of
the Rules of Fair Practice of the National Association of Securities Dealers,
Inc. (NASD) has been adopted by Prudential Growth Opportunity Fund (the Fund)
and by Prudential Mutual Fund Distributors, Inc., the Fund's distributor (the
Distributor).
The Fund 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 Directors of the Fund, including a majority of
those Directors who are not "interested persons" of the Fund (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
Directors), 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
<PAGE>
its shareholders. Expenditures under this Plan 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
distribution networks of Prudential Securities Incorporated (Prudential
Securities) and Pruco Securities Corporation (Prusec), 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. 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 Directors 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 Directors may determine. Amounts payable under the Plan shall be
subject to the limitations of Article III, Section 26 of the NASD Rules of Fair
Practice.
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
3
<PAGE>
over the Fund's fiscal year or such other allocation method approved by the
Board of Directors. The allocation of distribution expenses among classes will
be subject to the review of the Board of Directors.
The Distributor shall spend such amounts as it deems appropriate on
Distribution Activities which include, among others:
(a) amounts paid to Prudential Securities for performing
services under a selected dealer agreement between
Prudential Securities and the Distributor for sale of Class
A shares of the Fund, including sales commissions and
trailer commissions paid to, or on account of, account
executives and indirect and overhead costs associated with
Distribution Activities, including central office and branch
expenses;
(b) amounts paid to Prusec for performing services under a
selected dealer agreement between Prusec and the Distributor
for sale of Class A 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;
(c) 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
(d) sales commissions (including trailer commissions) paid to,
or on account of, broker-dealers and financial institutions
(other than Prudential Securities and Prusec) which have
entered into selected dealer agreements with the Distributor
with respect to shares of the Fund.
4
<PAGE>
4. QUARTERLY REPORTS; ADDITIONAL INFORMATION
An appropriate officer of the Fund will provide to the Board of Directors
of the Fund 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
made in compliance with the requirements of Rule 12b-1. The Distributor will
provide to the Board of Directors of the Fund such additional information as the
Board of Directors 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 Directors of the Fund 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
5
<PAGE>
majority of the Board of Directors of the Fund and a majority of the Rule 12b-1
Directors 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 by vote of a majority of the Rule
12b-1 Directors, or by vote of a majority of the outstanding voting securities
(as defined in the Investment Company Act) of the 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
Directors of the Fund and a majority of the Rule 12b-1 Directors by votes cast
in person at a meeting called for the purpose of voting on the Plan.
8. RULE 12b-1 DIRECTORS
While the Plan is in effect, the selection and nomination of the Rule 12b-1
Directors shall be committed to the discretion of the Rule 12b-1 Directors.
9. RECORDS
The Fund 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
6
<PAGE>
effectiveness of the Plan, such agreements or reports, and for at least the
first two years in an easily accessible place.
Dated:
[mc]cla-gof.pln
7
<PAGE>
Exhibit 15(d)
PRUDENTIAL GROWTH OPPORTUNITY FUND
Form of
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 Article III, Section 26 of
the Rules of Fair Practice of the National Association of Securities Dealers,
Inc. (NASD) has been adopted by Prudential Growth Opportunity Fund, (the Fund)
and by Prudential Securities Incorporated (Prudential Securities), the Fund's
distributor (the Distributor).
The Fund has entered into a distribution agreement pursuant to which
the Fund will continue to employ the Distributor to distribute Class B shares
issued by the Fund (Class B shares). Under the Plan, the Fund wishes 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 Directors of the Fund including a majority who
are not "interested persons" of the Fund (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 Directors), 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
<PAGE>
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
Prudential Securities 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
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 Directors 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 Directors may determine. Amounts payable under the Plan shall
be subject to the limitations of Article III, Section 26 of the NASD Rules of
Fair Practice.
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
Directors. The allocation of distribution expenses among
3
<PAGE>
classes will be subject to the review of the Board of Directors.
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 Prusec for performing services under a selected
dealer agreement between 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 Prusec) which have entered into selected dealer agreements with
the Distributor with respect to shares of the Fund.
4. QUARTERLY REPORTS; ADDITIONAL INFORMATION
An appropriate officer of the Fund will provide to the Board of Directors
of the Fund 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
made in compliance with the requirements of Rule 12b-1. The Distributor will
provide to the Board of Directors of the Fund such additional information as
they shall from time to time reasonably request, including
4
<PAGE>
information about Distribution Activities undertaken or to be undertaken by the
Distributor.
The Distributor will inform the Board of Directors of the Fund 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 Directors of the Fund and a majority of the Rule 12b-1
Directors 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 by vote of a majority of the Rule
12b-1 Directors, 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.
5
<PAGE>
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 B shares of the Fund. All
material amendments of the Plan shall be approved by a majority of the Board of
Directors of the Fund and a majority of the Rule 12b-1 Directors by votes cast
in person at a meeting called for the purpose of voting on the Plan.
8. RULE 12b-1 DIRECTORS
While the Plan is in effect, the selection and nomination of the Rule 12b-1
Directors shall be committed to the discretion of the Rule 12b-1 Directors.
9. RECORDS
The Fund 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:
[mc]clb-gof.pln
6
<PAGE>
Exhibit 15(e)
PRUDENTIAL GROWTH OPPORTUNITY FUND
Form of
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 Article III, Section 26 of
the Rules of Fair Practice of the National Association of Securities Dealers,
Inc. (NASD) has been adopted by Prudential Growth Opportunity Fund, (the Fund)
and by Prudential Securities Incorporated (Prudential Securities), the Fund's
distributor (the Distributor).
The Fund has entered into a distribution agreement pursuant to which
the Fund will continue to employ the Distributor to distribute Class C shares
issued by the Fund (Class C shares). Under the Plan, the Fund wishes 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 Directors of the Fund including a majority who
are not "interested persons" of the Fund (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 Directors), 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
<PAGE>
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
Prudential Securities 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
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 Directors 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 Directors may determine. Amounts payable under the Plan shall
be subject to the limitations of Article III, Section 26 of the NASD Rules of
Fair Practice.
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
Directors. The allocation of distribution expenses among
3
<PAGE>
classes will be subject to the review of the Board of Directors.
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 Prusec for performing services under a selected
dealer agreement between 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 Prusec) which have entered into selected dealer agreements with
the Distributor with respect to shares of the Fund.
4. QUARTERLY REPORTS; ADDITIONAL INFORMATION
An appropriate officer of the Fund will provide to the Board of Directors
of the Fund 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
made in compliance with the requirements of Rule 12b-1. The Distributor will
provide to the Board of Directors of the Fund such additional information
4
<PAGE>
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 Directors of the Fund 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 Directors of the Fund and a majority of the Rule 12b-1
Directors 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 by vote of a majority of the Rule
12b-1 Directors, 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.
5
<PAGE>
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 C shares of the Fund. All
material amendments of the Plan shall be approved by a majority of the Board of
Directors of the Fund and a majority of the Rule 12b-1 Directors by votes cast
in person at a meeting called for the purpose of voting on the Plan.
8. RULE 12b-1 DIRECTORS
While the Plan is in effect, the selection and nomination of the Rule 12b-1
Directors shall be committed to the discretion of the Rule 12b-1 Directors.
9. RECORDS
The Fund 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:
[mc]clc-gof.pln
6
