Prudential Utility Fund, Inc.
(Class Z Shares)
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Prospectus dated March 1, 1996 as supplemented on September 12, 1996
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Prudential Utility Fund, Inc. (the Fund) is an open-end, diversified, management
investment company. Its investment objective is to seek high current income and
moderate capital appreciation through investment in equity and debt securities
of utility companies. Utility companies include electric, gas, gas pipeline,
telephone, telecommunications, water, cable, airport, seaport and toll road
companies. In normal circumstances, the Fund intends to invest at least 80% of
its assets in such securities. The Fund may also purchase and sell certain
derivatives, including options on equity securities and stock index options,
futures contracts and options thereon, forward foreign currency exchange
contracts, and options on foreign currencies pursuant to limits described
herein. There can be no assurance that the Fund's investment objective will be
achieved. 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.
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Class Z shares are offered exclusively for sale to a limited group of investors.
Only Class Z shares are offered through this Prospectus. The Fund also offers
Class A, Class B and Class C shares through the attached Prospectus dated March
1, 1996 (the Retail Class Prospectus), which is a part hereof.
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This Prospectus sets forth concisely the information about the Fund that a
prospective investor should know before investing. Additional information about
the Fund has been filed with the Securities and Exchange Commission in a
Statement of Additional Information, dated March 1, 1996, 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.
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Investors are advised to read this Prospectus and retain it for future
reference.
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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.
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FUND EXPENSES
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Shareholder Transaction Expenses Class Z Shares
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Maximum Sales Load Imposed on Purchases (as a percentage of
offering price) ............................................. None
Maximum Sales Load or Deferred Sales Load Imposed on
Reinvested Dividends ........................................ None
Deferred Sales Load (as a percentage of original purchase
price or redemption proceeds, whichever is lower) ........... None
Redemption Fees .............................................. None
Exchange Fee ................................................. None
Annual Fund Operating Expenses*
(as a percentage of average net assets) Class Z Shares
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Management Fees .............................................. .41%
12b-1 Fees ................................................... None
Other Expenses ............................................... .22%
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Total Fund Operating Expenses ................................ .63%
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Example
1 year 3 years 5 years 10 years
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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 Z ................................. $6 $20 $35 $79
The above example is based on expenses expected to have been incurred if Class Z
shares had been in existence throughout the fiscal year ended December 31, 1995.
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 Class Z shares of 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 and transfer agency and custodian
fees.
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*Estimated based on expenses expected to have been incurred if Class Z shares
had been in existence throughout the fiscal year ended December 31, 1995.
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2
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THE FOLLOWING INFORMATION SUPPLEMENTS "HOW THE FUND IS MANAGED-DISTRIBUTOR" IN
THE RETAIL CLASS PROSPECTUS:
Prudential Securities Incorporated (Prudential Securities) serves as the
Distributor of Class Z shares and incurs the expenses of distributing the Fund's
Class Z shares under a Distribution Agreement with the Fund, none of which is
reimbursed by or paid for by the Fund.
THE FOLLOWING INFORMATION SUPPLEMENTS "HOW THE FUND VALUES ITS SHARES" IN THE
RETAIL CLASS PROSPECTUS:
The NAV of Class Z shares will generally be higher than the NAV of Class A,
Class B or Class C shares as a result of the fact that Class Z shares are not
subject to any distribution or service fee. It is expected, however, that the
NAV of the four classes will tend to converge immediately after the recording of
dividends, which will differ by approximately the amount of the
distribution-related expense accrual differential among the classes.
THE FOLLOWING INFORMATION SUPPLEMENTS "TAXES, DIVIDENDS AND
DISTRIBUTIONS-TAXATION OF SHAREHOLDERS" IN THE RETAIL CLASS PROSPECTUS:
The Fund has obtained opinions of counsel to the effect that neither (i) the
conversion of Class B shares into Class A shares nor (ii) the exchange of any
class of the Fund's shares for any other class of its shares constitutes a
taxable event for federal income tax purposes. However, such opinions are not
binding on the Internal Revenue Service.
THE FOLLOWING INFORMATION SUPPLEMENTS "SHAREHOLDER GUIDE-HOW TO BUY SHARES OF
THE FUND" AND "SHAREHOLDER GUIDE-HOW TO SELL YOUR SHARES" IN THE RETAIL CLASS
PROSPECTUS:
Class Z shares of the Fund are available for purchase by the following
categories of investors:
(i) pension, profit-sharing or other employee benefit plans qualified under
Section 401 of the Internal Revenue Code, deferred compensation and annuity
plans under Sections 457 and 403(b)(7) of the Internal Revenue Code, and
non-qualified plans for which the Fund is an available option (collectively,
Benefit Plans), provided such Benefit Plans (in combination with other plans
sponsored by the same employer or group of related employers) have at least $50
million in defined contribution assets; (ii) participants in any fee-based
program sponsored by Prudential Securities or its affiliates which includes
mutual funds as investment options and for which the Fund is an available
option; and (iii) investors who are, or have executed a letter of intent to
become, shareholders of any series of The Prudential Institutional Fund
(Institutional Fund) on or before one or more series of Institutional Fund
reorganize or who on that date have investments in certain products for which
Institutional Fund provides exchangeability. After a Benefit Plan qualifies to
purchase Class Z shares, all subsequent purchases will be for Class Z shares.
In connection with the sale of Class Z shares, the Manager, the Distributor
or one of their affiliates may pay dealers, financial advisers and other persons
which distribute shares a finders' fee based on a percentage of the net asset
value of shares sold by such persons.
THE FOLLOWING INFORMATION SUPPLEMENTS "SHAREHOLDER GUIDE-HOW TO EXCHANGE YOUR
SHARES" IN THE RETAIL CLASS PROSPECTUS:
Class Z shareholders of the Fund may exchange their Class Z shares for Class
Z shares of other Prudential Mutual Funds on the basis of relative net asset
value. Shareholders who qualify to purchase Class Z shares (other than
participants in any fee-based program) will have their Class B and Class C
shares which are not subject to contingent deferred sales charges and their
Class A shares exchanged for Class Z shares on a quarterly basis. Participants
in any fee-based program for which the Fund is an available option will have
their Class A shares, if any, exchanged for Class Z shares when they elect to
have those assets become a part of the fee-based program. Upon leaving the
program (whether voluntarily or not), such Class Z shares (and, to the extent
provided for in the program, Class Z shares acquired through participation in
the program) will be exchanged for Class A shares at net asset value. Similarly,
participants in the PSI 401(k) Plan, an employee benefit plan sponsored by
Prudential Securities (the PSI 401(k) Plan) for which the Fund's Class Z shares
are an available option and who wish to transfer their Class Z shares out of the
PSI 401(k) Plan following separation from service (i.e., voluntary or
involuntary termination of employment or retirement) will have their Class Z
shares exchanged for Class A shares at net asset value. See "Shareholder
Guide-How to Exchange Your Shares-Special Exchange Privilege."
THE INFORMATION ABOVE ALSO SUPPLEMENTS THE INFORMATION UNDER "FUND HIGHLIGHTS"
IN THE RETAIL CLASS PROSPECTUS AS APPROPRIATE.
3
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(Left Column)
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 an 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.
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TABLE OF CONTENTS
Page
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FUND HIGHLIGHTS ............................. 2
Risk Factors and Special Characteristics ... 2
FUND EXPENSES ............................... 4
FINANCIAL HIGHLIGHTS ........................ 5
HOW THE FUND INVESTS ........................ 8
Investment Objectives and Policies ......... 8
Hedging and
Return Enhancement Strategies ............. 9
Other Investments and Policies ............. 13
Investment Restrictions .................... 14
HOW THE FUND IS MANAGED ..................... 14
Manager .................................... 15
Distributor ................................ 15
Portfolio Transactions ..................... 17
Custodian and Transfer and
Dividend Disbursing Agent ................. 17
HOW THE FUND VALUES ITS SHARES .............. 18
HOW THE FUND CALCULATES PERFORMANCE ......... 18
TAXES, DIVIDENDS AND DISTRIBUTIONS .......... 19
GENERAL INFORMATION ......................... 20
Description of Common Stock ................ 20
Additional Information ..................... 21
SHAREHOLDER GUIDE ........................... 21
How to Buy Shares of the Fund .............. 21
Alternative Purchase Plan .................. 22
How to Sell Your Shares .................... 25
Conversion FeatureClass B Shares ........... 28
How to Exchange Your Shares ................ 29
Shareholder Services ....................... 30
THE PRUDENTIAL MUTUAL FUND FAMILY ........... A-1
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MF105Z 440133D
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CUSIP No.: Class Z: 743911-406
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(Right Column)
Prudential
Utility Fund,
Inc.
(Class Z Shares)
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PROSPECTUS
March 1, 1996
as supplemented
on September 12,
1996
Prudential Mutual Funds
BUILDING YOUR FUTURE
ON OUR STRENGTH
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PRUDENTIAL UTILITY FUND, INC.
Supplement dated September 12, 1996 to
Prospectus dated March 1, 1996
THE FOLLOWING INFORMATION SUPPLEMENTS "GENERAL INFORMATION-DESCRIPTION OF COMMON
STOCK" IN THE PROSPECTUS:
The Fund is authorized to issue 2 billion shares of common stock, $.01 par
value per share, divided into four classes of shares, designated Class A, Class
B, Class C and Class Z shares, consisting of 500 million shares of Class A
common stock, 700 million shares of Class B common stock, 400 million shares of
Class C common stock and 400 million shares of Class Z common stock. Each class
represents an interest in the same assets of the Fund and is identical in all
respects except that (i) each class is subject to different sales charges and
distribution and/or service fees (except for Class Z shares which are not
subject to any sales charges and distribution and/or service fees), which may
affect performance, (ii) each class has exclusive voting rights on any matter
submitted to shareholders that relates solely to its arrangement and has
separate voting rights on any matters submitted to shareholders in which the
interests of one class differ from the interests of any other class, (iii) each
class has a different exchange privilege, (iv) only Class B shares have a
conversion feature and (v) Class Z shares are offered exclusively for sale to a
limited group of investors. For more information about Class Z shares, contact
your Prudential Securities financial adviser or Prusec representative or
telephone the Fund at (800) 225-1852. Participants in programs sponsored by
Prudential Retirement Services should contact their client representative for
more information about Class Z shares. Since Class B and Class C shares
generally bear higher distribution expenses than Class A shares, the liquidation
proceeds to shareholders of those classes are likely to be lower than to Class A
shareholders and to Class Z shareholders, whose shares are not subject to any
distribution and/or service fee. In accordance with the Fund's Articles of
Incorporation, the Board of Directors may authorize the creation of additional
series and classes within such series, with such preferences, privileges,
limitations and voting and dividend rights as the Board of Directors may
determine.
THE FOLLOWING INFORMATION SUPPLEMENTS "HOW THE FUND CALCULATES PERFORMANCE" IN
THE PROSPECTUS:
The Fund may include comparative performance information in advertising or
marketing the Fund's shares. The Fund may include performance information about
each of the Fund's classes and is no longer required to include performance data
for all classes of shares in any advertisement or other information including
performance data of the Fund. See "How the Fund Calculates Performance."
MF105C-1 (9/12/96)
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PRUDENTIAL UTILITY FUND, INC.
Supplement dated September 12, 1996 to
statement of Additional Information dated
March 1, 1996
THE FOLLOWING INFORMATION SUPPLEMENTS "PURCHASE AND REDEMPTION OF FUND SHARES"
IN THE STATEMENT OF ADDITIONAL INFORMATION:
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). Class Z shares of the Fund
are offered to a limited group of investors at net asset value without any sales
charges. See "Shareholder Guide-How to Buy Shares of the Fund" in the
Prospectus.
Each class represents an interest in the same assets of the Fund and is
identical in all respects except that (i) each class is subject to different
sales charges and distribution and/or service fees (except for Class Z shares
which are not subject to any sales charges and distribution and/or service
fees), which may affect performance, (ii) each class has exclusive voting rights
on any matter submitted to shareholders that relates solely to its arrangement
and has separate voting rights on any matters submitted to shareholders in which
the interests of one class differ from the interests of any other class, (iii)
each class has a different exchange privilege, (iv) only Class B shares have a
conversion feature and (v) Class Z shares are offered exclusively for sale to a
limited group of investors. See "Distributor" and "Shareholder Investment
Account-Exchange Privilege."
THE FOLLOWING INFORMATION SUPPLEMENTS "SHAREHOLDER INVESTMENT ACCOUNT-EXCHANGE
PRIVILEGE" IN THE STATEMENT OF ADDITIONAL INFORMATION:
CLASS Z. Class Z shares may be exchanged for Class Z shares of other
Prudential Mutual Funds.
MF105C-2 (9/12/96)
